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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
--------------------------------------------
MEADOWCRAFT, INC.
(Name of Subject Company)
SRB-MWI, L.L.C.
MWI ACQUISITION, CO.
SAMUEL R. BLOUNT
(Bidders)
<TABLE>
<S> <C>
COMMON STOCK, 58320410
PAR VALUE $.01 PER SHARE (CUSIP Number of Class of Securities)
(Title of Class of Securities)
</TABLE>
SAMUEL R. BLOUNT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MWI ACQUISITION CO.
4700 PINSON VALLEY PARKWAY
BIRMINGHAM, ALABAMA 35215
TELEPHONE: (205) 853-2220
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
Copy to:
PAUL S. BIRD, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 909-6000
--------------------------------------------
CALCULATION OF FILING FEE
<TABLE>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$53,157,190 $10,631.44
</TABLE>
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* Calculated by multiplying $10.00, the per share tender offer price, by
5,315,719 shares of Common Stock sought in the Offer.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:
-----------------
Form or Registration No.:
-----------------
Filing Party:
---------------------------
Date Filed:
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<PAGE> 2
This Tender Offer Statement on Schedule 14D-1 relates to the offer by
MWI Acquisition Co., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of SRB-MWI, L.L.C., a Nevada limited liability company ("Parent") of
which Samuel R. Blount is a member and the sole Manager, to purchase all of the
outstanding shares of common stock, par value $.01 per share (the "Shares"), of
Meadowcraft, Inc., a Delaware corporation (the "Company"), at a purchase price
of $10.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated May 19, 1999 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
the Offer to Purchase, collectively constitute the "Offer"), copies of which are
attached as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Meadowcraft, Inc. The principal
executive offices of the Company are located at 4700 Pinson Valley Parkway,
Birmingham, Alabama 35215.
(b) The exact title of the class of equity securities being sought in
the Offer is Common Stock, par value per share $.01, of the Company. Information
regarding the number of Shares outstanding, the amount of Shares being sought
and the consideration being offered therefor is set forth under "Introduction"
in the Offer to Purchase and is incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market is set forth under the heading "The Tender Offer--Price Range of Shares;
Dividends" in the Offer to Purchase and is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) and (g) This Statement is filed by Parent, Purchaser and Samuel
R. Blount. The information concerning the name, state of organization, principal
business and address of the principal office of each of Parent and Purchaser
respectively, and the information regarding the name, business address, present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment or occupation
is conducted, material occupations, positions, offices or employments during the
last five years and the citizenship of each of the executive officers and
directors of each of Parent and Purchaser is set forth under the headings
"Introduction" and "The Tender Offer--Certain Information Concerning Parent and
Purchaser" of the Offer to Purchase and is incorporated herein by reference.
<PAGE> 3
(e) and (f) During the last five years, neither Parent nor Purchaser
nor, to the best knowledge of Parent or Purchaser, any executive officer or
director of Purchaser or any manager of Parent (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) The information set forth under the headings "Special Factors--
Background of the Offer," "Special Factors--The Merger Agreement," "Special
Factors--Interests of Certain Persons in the Offer and the Merger" and "The
Tender Offer--Certain Information Concerning Parent and Purchaser" in the Offer
to Purchase is incorporated herein by reference. Except as set forth under such
headings in the Offer to Purchase, since April 29, 1996, there have been no
transactions which would be required to be disclosed under this Item 3(a)
between either Parent or Purchaser or, to the best knowledge of Parent and
Purchaser, any executive officer or director of Purchaser or any manager of
Parent and the Company or any of its executive officers, directors or
affiliates.
(b) The information set forth under the headings "Introduction,"
"Special Factors--Background of the Offer," "Special Factors--Purpose and
Structure of the Offer and the Merger; Reasons of Parent for the Offer and the
Merger," "Special Factors--Plans for the Company after the Offer and the
Merger," "Special Factors--The Merger Agreement" and "The Tender Offer--Certain
Information Concerning Parent and Purchaser" in the Offer to Purchase is
incorporated herein by reference. Except as set forth under such headings in the
Offer to Purchase, since April 29, 1996, there have been no contacts,
negotiations or transactions which would be required to be disclosed under this
Item 3(b) between either Parent or Purchaser or any of their respective
subsidiaries or, to the best knowledge of the Parent and Purchaser, any
executive officer or director of Purchaser or any manager of Parent and the
Company or its affiliates concerning a merger, consolidation or acquisition, a
tender offer or other acquisition of securities, an election of directors or a
sale or other transfer of a material amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth under the heading "The Tender
Offer--Financing of the Offer and the Merger" in the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
2
<PAGE> 4
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a) - (e) The information set forth under the headings "Introduction,"
"Special Factors--Background of the Offer," "Special Factors--Purpose and
Structure of the Offer and the Merger; Reasons of Parent for the Offer and the
Merger," "Special Factors--Plans for the Company after the Offer and the
Merger," "Special Factors--The Merger Agreement," "The Tender Offer--Financing
of the Offer and the Merger" and "The Tender Offer--Dividends and Distributions"
in the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth under the headings "Special
Factors--Plans for the Company after the Offer and the Merger" and "The Tender
Offer--Certain Effects of the Offer" of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
The information set forth under the headings "Introduction," "Special
Factors--Interests of Certain Persons in the Offer and the Merger," "The Tender
Offer--Certain Information Concerning the Company" and "The Tender
Offer--Certain Information Concerning Parent and Purchaser" in the Offer to
Purchase and Schedule I to the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES
The information set forth under the headings "Introduction," "Special
Factors--Background of the Offer," "Special Factors--Purpose and Structure of
the Offer and the Merger; Reasons of Parent for the Offer and the Merger,"
"Special Factors--Plans for the Company after the Offer and the Merger,"
"Special Factors--The Merger Agreement," "Special Factors--Interests of Certain
Persons in the Offer and the Merger," "The Tender Offer--Certain Information
Concerning the Company" and "The Tender Offer--Certain Information Concerning
Parent and Purchaser" in the Offer to Purchase is incorporated herein by
reference. Except as set forth under such headings in the Offer to Purchase,
neither Parent nor Purchaser, nor, to the best knowledge of Parent or
Purchaser, any executive officer or director of Purchaser or any manager of
Parent, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company (including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loans or
option arrangements, puts or calls, guarantees of loans, guarantee agreements
or any giving or withholding of proxies).
3
<PAGE> 5
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under the headings "Introduction," "Special
Factors--Opinion of Financial Advisor to the Special Committee" and "The Tender
Offer--Fees and Expenses" in the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
(a) Not applicable.
(b) and (c) The information set forth under the heading "The Tender
Offer--Certain Legal Matters" in the Offer to Purchase is incorporated herein
by reference.
(d) The information set forth under the heading "The Tender
Offer--Certain Effects of the Offer" in the Offer to Purchase is incorporated
herein by reference.
(e) The information set forth under the heading "The Tender Offer--
Certain Litigation" is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, and the information set forth in the Agreement and Plan
of Merger, dated as of May 13, 1999, among the Company, Parent and Purchaser,
copies of which are attached hereto as Exhibits (a)(1), (a)(2), and (c)(1),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
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(a)(1) Offer to Purchase dated May 19, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from D.F. King & Co., Inc. to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published in The New York Times on May 19, 1999.
</TABLE>
4
<PAGE> 6
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(a)(8) Press Release issued jointly by Purchaser and the Company on
May 13, 1999.
(a)(9) Press Release issued by Purchaser on May 19, 1999.
(b)(1) Commitment Letter (including the related Term Sheet), dated May 10,
1999, from NationsBank, N.A. and Nationsbanc Montgomery Securities
LLC to Parent and Purchaser.
(c)(1) Agreement and Plan of Merger, dated as of May 13, 1999, among Parent,
Purchaser and the Company (attached as Annex A to the Offer to Purchase)
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Complaint filed in Andra V. Blount et al. (Court of Chancery of the
State of Delaware in and for New Castle County, filed on or about
May 14, 1999).
</TABLE>
5
<PAGE> 7
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
SRB-MWI, L.L.C.
By: /s/ Samuel R. Blount
---------------------------------
Name: Samuel R. Blount
-------------------------------
Title: Manager
------------------------------
MWI ACQUISITION CO.
By: /s/ Samuel R. Blount
---------------------------------
Name: Samuel R. Blount
-------------------------------
Title: Chairman and Chief Executive
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Officer
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Samuel R. Blount
/s/ Samuel R. Blount
------------------------------------
Date: May 19, 1999
<PAGE> 8
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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(a)(1) Offer to Purchase dated May 19, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter from D.F. King & Co., Inc. to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9
(a)(7) Summary Advertisement as published in The New York Times on May 19, 1999
(a)(8) Press Release issued jointly by Purchaser and the Company on May 13, 1999
(a)(9) Press Release issued by Purchaser on May 19, 1999.
(b)(1) Commitment Letter, dated May 10, 1999, from NationsBank, N.A. and
Nationsbanc Montgomery Securities LLC to Parent and Purchaser
(c)(1) Agreement and Plan of Merger, dated as of May 13, 1999, among
Parent, Purchaser and the Company (attached as Annex A to the Offer
to Purchase)
(g)(1) Complaint filed in Andra v. Blount et al. (Court of Chancery of the State
of Delaware in and for New Castle County, filed on or about May 14, 1999)
</TABLE>
<PAGE> 1
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
MEADOWCRAFT, INC.
at
$10.00 Net Per Share
by
MWI ACQUISITION CO.,
A Wholly-Owned Subsidiary of SRB-MWI, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 17, 1999,
UNLESS THE OFFER IS EXTENDED
---------------------
THE BOARD OF DIRECTORS OF MEADOWCRAFT, INC. (THE "COMPANY"), BASED ON THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF NON-EMPLOYEE INDEPENDENT
DIRECTORS OF THE COMPANY, HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER (AS DEFINED HEREIN) ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF THE COMPANY (OTHER THAN SRB-MWI, L.L.C. ("PARENT") AND ITS
AFFILIATES), HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT (AS DEFINED HEREIN)
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
"INTRODUCTION," AND "THE TENDER OFFER -- CERTAIN CONDITIONS OF THE OFFER." THE
OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED, AND
NEITHER THE OFFER NOR THE MERGER IS SUBJECT TO ANY FINANCING CONDITION.
---------------------
IMPORTANT
Any stockholder who desires to tender all or any portion of such
stockholder's Shares (as defined herein) should either (1) complete and sign the
Letter of Transmittal that accompanies this Offer to Purchase (or a facsimile
thereof) in accordance with the instructions in such Letter of Transmittal, have
such stockholder's signature thereon guaranteed if required by Instruction 1 to
such Letter of Transmittal, mail or deliver the Letter of Transmittal (or such
facsimile) and any other required documents to the Depositary (at the
Depositary's address set forth on the back cover of this Offer to Purchase), and
either deliver the certificates for such Shares to the Depositary along with the
Letter of Transmittal or tender such stockholder's Shares pursuant to the
procedure for book-entry transfer set forth in "The Tender Offer -- Procedures
for Accepting the Offer and Tendering Shares" or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, bank, trust company or other nominee if they desire
to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer described in this Offer to Purchase 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 under the caption "The Tender Offer -- Procedures
for Accepting the Offer and Tendering Shares."
Questions or requests for assistance may be directed to D.F. King & Co.,
Inc. (the "Information Agent") at its address and telephone number set forth on
the back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal and other related materials may be obtained
from the Information Agent.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
---------------------
The Information Agent for the Offer is:
D.F. KING & CO., INC.
The date of this Offer to Purchase is May 19, 1999
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION................................................ 1
SPECIAL FACTORS............................................. 4
Background of the Offer................................... 4
Recommendation of the Special Committee and the Company
Board;
Fairness of the Offer and the Merger................... 7
Recommendation of the Special Committee and the Company
Board................................................. 7
Fairness of the Offer and the Merger................... 7
Opinion of Financial Advisor to the Special Committee..... 10
Position of Parent and Purchaser Regarding Fairness of the
Offer and the Merger................................... 15
Purpose and Structure of the Offer and the Merger;
Reasons of Parent for the Offer and the Merger......... 15
Plans for the Company after the Offer and the Merger...... 16
Rights of Stockholders in the Offer and the Merger........ 16
The Merger Agreement...................................... 17
The Offer.............................................. 17
The Merger............................................. 18
Representations and Warranties......................... 18
Covenants.............................................. 18
Conditions of the Offer................................ 20
Conditions to the Merger............................... 20
Termination............................................ 20
Effect of Termination.................................. 21
Certain Fees and Expenses.............................. 21
Amendments and Waivers................................. 21
Interests of Certain Persons in the Offer and the
Merger................................................. 21
Beneficial Ownership of the Shares..................... 21
Management of Parent After the Merger.................. 21
Fees of the Special Committee.......................... 22
Aggregate Annual Compensation of the Executive Officers
of the Company........................................ 22
THE TENDER OFFER............................................ 23
Terms of the Offer; Expiration Date....................... 23
Acceptance for Payment and Payment for Shares............. 24
Procedures for Accepting the Offer and Tendering Shares... 25
Book-Entry Transfer.................................... 26
Signature Guarantees................................... 26
Guaranteed Delivery.................................... 26
Determination of Validity.............................. 27
Other Requirements..................................... 27
Withdrawal Rights......................................... 28
Certain Federal Income Tax Consequences................... 28
Price Range of Shares; Dividends.......................... 29
Certain Information Concerning the Company................ 30
General................................................ 30
Transaction with Director.............................. 30
Financial Information.................................. 31
Certain Projections.................................... 32
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i
<PAGE> 3
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PAGE
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Purchases of Shares by the Company..................... 33
Certain Information Concerning Parent and Purchaser....... 33
Financing of the Offer and the Merger..................... 34
Dividends and Distributions............................... 36
Certain Effects of the Offer.............................. 37
Market for the Shares.................................. 37
Stock Quotation........................................ 37
Exchange Act Registration.............................. 37
Margin Regulations..................................... 38
Increased Interest in Net Book Value and Net Earnings
of the Company........................................ 38
Certain Conditions of the Offer........................... 38
Certain Legal Matters..................................... 39
General................................................ 39
Antitrust.............................................. 40
State Takeover Laws.................................... 40
Certain Litigation........................................ 41
Fees and Expenses......................................... 41
Miscellaneous............................................. 42
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SCHEDULES AND ANNEXES
SCHEDULE I -- Directors and Executive Officers of the Company
ANNEX A -- Agreement and Plan of Merger
ANNEX B -- Opinion of Wachovia Securities, Inc.
ANNEX C -- Rights of Dissenting Stockholders under the Delaware General
Corporation Law
ANNEX D -- Audited Financial Statements (and Related Notes) for the
Company for the Fiscal Years Ended July 31, 1997 and July
31, 1998
ANNEX E -- Unaudited Financial Statements (and Related Notes) for the
Company for the Thirteen-Week and Six-Month Periods Ended
January 31, 1999
</TABLE>
ii
<PAGE> 4
TO THE HOLDERS OF COMMON STOCK OF MEADOWCRAFT, INC.:
INTRODUCTION
MWI Acquisition Co. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of SRB-MWI, L.L.C., a Nevada limited liability company
("Parent"), hereby offers to purchase any and all issued and outstanding shares
(the "Shares") of common stock, par value $.01 per share (the "Common Stock"),
of Meadowcraft, Inc. (the "Company"), a Delaware corporation, at a price of
$10.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares by Purchaser pursuant to the
Offer. However, any tendering stockholder or other payee who fails to complete
and sign the Substitute Form W-9 that is included in the Letter of Transmittal
may be subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such stockholder or other payee pursuant to the Offer.
See "The Tender Offer -- Certain Federal Income Tax Consequences." Purchaser
will pay all charges and expenses of American Stock Transfer and Trust Company,
as Depositary (in such capacity, the "Depositary"), and D.F. King & Co., Inc.,
as Information Agent (in such capacity, the "Information Agent"), incurred in
connection with the Offer. For a description of the fees and expenses to be paid
by Purchaser, see "The Tender Offer -- Fees and Expenses."
As of May 18, 1999, Parent beneficially owned 14,392,931 of the 19,708,750
outstanding Shares, and Samuel R. Blount, the sole Manager of Parent, Chairman
and Chief Executive Officer of Purchaser and Chairman of the Company,
beneficially owned an additional 100 Shares, representing in the aggregate
approximately 73% of the Shares then outstanding.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BASED ON THE
UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF NON-EMPLOYEE INDEPENDENT
DIRECTORS OF THE COMPANY (THE "SPECIAL COMMITTEE"), HAS UNANIMOUSLY DETERMINED
THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF THE COMPANY (OTHER THAN PARENT AND ITS AFFILIATES), HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Wachovia Securities, Inc. ("Wachovia Securities"), financial advisor to the
Special Committee, has delivered a written opinion to the Special Committee,
dated May 13, 1999 (the "Wachovia Securities Opinion"), to the effect that, as
of that date, the consideration to be paid to the stockholders (other than
Parent and its affiliates) in the Offer and the Merger is fair from a financial
point of view to such stockholders. See "Special Factors -- Opinion of Financial
Advisor to the Special Committee." THE FULL TEXT OF THE WACHOVIA SECURITIES
OPINION IS ATTACHED HERETO AS ANNEX B. STOCKHOLDERS ARE URGED TO READ SUCH
OPINION CAREFULLY AND IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS OF THE REVIEW OF WACHOVIA SECURITIES AND TO READ THE DESCRIPTION OF
SUCH OPINION UNDER THE CAPTION "SPECIAL FACTORS -- OPINION OF FINANCIAL ADVISOR
TO THE SPECIAL COMMITTEE."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to stockholders herewith.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 13, 1999 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Offer is not conditioned on obtaining financing or on any minimum
number of Shares being tendered. The Offer is conditioned upon, among other
things, the satisfaction or waiver of certain conditions as more fully set forth
herein. See "The Tender Offer --
<PAGE> 5
Certain Conditions of the Offer." The Merger Agreement provides that, among
other things, as promptly as practicable after the purchase of Shares pursuant
to the Offer and the satisfaction (or waiver, to the extent permissible under
the Merger Agreement) of the other conditions set forth in the Merger Agreement,
in accordance with the Delaware General Corporation Law (the "DGCL"), Purchaser
will be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation (the "Surviving Corporation"). At the
effective time of the Merger (the "Effective Time"), subject to the terms and
conditions of the Merger Agreement, each Share outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company,
Shares owned by Parent or its affiliates or Shares as to which appraisal rights
have been exercised) shall be converted into the right to receive the per Share
price paid in the Offer in cash, without interest (the "Merger Consideration").
The Merger Agreement is more fully described in "Special Factors -- The Merger
Agreement."
The Merger is subject to the satisfaction or waiver of certain conditions,
including, if required by the DGCL, the approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company. See "Special
Factors -- The Merger Agreement." The Merger is not conditioned on obtaining
financing. Under the DGCL, the affirmative vote of the holders of a majority of
the outstanding Shares is required to approve and adopt the Merger Agreement and
the Merger. Since Parent and its affiliates currently own a majority of the
outstanding Shares, Parent and Purchaser have sufficient voting power to and
would approve the Merger without the affirmative vote of any other stockholder
of the Company, regardless of whether any Shares are tendered and purchased
pursuant to the Offer. If Parent, Mr. Blount and Purchaser own 90% or more of
the outstanding Shares as a result of the Offer or otherwise, Parent and Mr.
Blount will contribute all Shares owned by them to Purchaser, and Purchaser will
effect the Merger pursuant to the short-form merger provisions of the DGCL,
without prior notice to, or any action by, any other stockholder of the Company.
The Company has informed Purchaser that, as of May 18, 1999, all of the
executive officers and directors of the Company as a group owned 8,400 Shares
(excluding the 14,393,031 Shares owned by Parent and its affiliates, including
Mr. Blount) and held options to purchase 238,686 Shares (33,916 of which are
exercisable within 60 days of May 18, 1999). The Company has advised Purchaser
that, to the best of the Company's knowledge, and subject to applicable
securities laws, all directors and executive officers of the Company (other than
Mr. Blount) presently intend to tender pursuant to the Offer all Shares owned by
such persons. See "Special Factors -- Interests of Certain Persons in the Offer
and the Merger."
No appraisal rights are available in connection with the Offer; however,
stockholders of the Company who have not tendered their Shares in the Offer will
have certain rights to dissent and demand appraisal of their Shares in
connection with the Merger regardless of whether the Merger is consummated with
or without a vote of the Company's stockholders. Such appraisal rights are
described in "Special Factors -- Rights of Stockholders in the Offer and the
Merger."
The information contained in this Offer to Purchase concerning the Company
was supplied by the Company. Purchaser takes no responsibility for the accuracy
of such information. The information contained in this Offer to Purchase
concerning the Offer, the Merger, Parent and Purchaser was supplied by
Purchaser. The Company takes no responsibility for the accuracy of such
information.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WOULD BE MADE ONLY PURSUANT TO
SEPARATE SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTIONS
14(a) OR 14(c) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT").
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THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION ABOUT THE OFFER THAT SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER. ALSO SEE "THE TENDER
OFFER -- MISCELLANEOUS" FOR INFORMATION REGARDING CERTAIN ADDITIONAL DOCUMENTS
FILED WITH THE COMMISSION IN CONNECTION WITH THE OFFER.
The Offer will expire at 12:00 midnight New York City time, on Thursday,
June 17, 1999, unless extended.
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<PAGE> 7
SPECIAL FACTORS
BACKGROUND OF THE OFFER
The Company was incorporated in 1985 as Sam Blount Company, Inc. and
changed its name to Meadowcraft, Inc. in 1994. In November of 1997, the Company
completed an initial public offering (the "IPO"), selling 3,708,750 shares of
Common Stock for $13.00 per share. Upon completion of the IPO, the Company
terminated its subchapter S election under the Internal Revenue Code and made a
distribution from the proceeds of the IPO to persons holding Common Stock prior
to the IPO (including Mr. Blount) in an amount equal to the Company's
undistributed earnings from October 1, 1986 through the end of fiscal 1997
(approximately $32.7 million). The balance of the net proceeds of the IPO
(approximately $11.6 million) was used to fund capital expenditures by the
Company.
Following the IPO, Mr. Samuel R. Blount (the Chairman of the Company) and
members of his immediate family owned approximately 73% of the Common Stock. (In
late 1998, Mr. Blount and certain members of his family contributed their shares
of Common Stock to Parent.)
In August 1998, Mr. Blount and Mr. William J. McCanna, President, Chief
Operating Officer and a director of the Company at that time, were approached by
senior executives of a large New York Stock Exchange, Inc. ("NYSE") listed
company concerning the possibility of acquiring the Company. During the fall of
1998, Messrs. Blount and McCanna met on several occasions with executives of the
potential acquiror to discuss the Company's business and possible terms of such
a transaction.
In early November 1998, the potential acquiror indicated that it was
prepared to commence a due diligence investigation of the Company and to engage
in substantive discussions with the Company regarding a proposed transaction in
which (i) the Company's public stockholders would have received $16.00 in cash
for each share of Common Stock and (ii) Parent and Mr. McCanna would have
exchanged their shares of Common Stock for shares of common stock of the
acquiror having a value of $13.00 per share, plus the right to receive pursuant
to an "earn-out" arrangement up to an additional $3.00 per share of Common Stock
so exchanged if the Company achieved certain pre-tax income targets over a
three-year period following the consummation of the transaction. Parent and Mr.
McCanna also would have received certain share price protection in respect of
shares exchanged for common stock of the acquiring company. Because the terms of
the proposed transaction provided that Parent and Mr. McCanna be treated
differently from the public stockholders, on November 10, 1998, the Board of
Directors of the Company formed a special committee composed of the Company's
three non-employee directors. The special committee engaged special Alabama and
Delaware legal counsel and Interstate/Johnson Lane Corporation (a predecessor of
Wachovia Securities), an investment banking firm with special expertise in the
furniture industry, as its financial advisor.
During November and December of 1998, representatives of the Company and
the special committee engaged in negotiations with the proposed acquiror and
regularly informed the special committee of the progress of the negotiations.
During the first week of January 1999, the potential acquiror advised the
Company and its representatives that it did not believe the parties would be
able to reach a definitive agreement and that it was therefore terminating
negotiations with the Company. During the following week, Mr. Blount and Mr.
McCanna each met with senior executives of the potential acquiror to determine
whether there was a basis for continuing negotiations for a proposed
transaction. In response to these overtures, the potential acquiror declined to
continue discussions.
On February 10, 1999, the Company issued a press release stating that its
results for its second quarter ended January 31, 1999 would be lower than the
comparable period a year earlier. On March 10, 1999, the Company confirmed its
earlier warning, reporting that net sales were 21% lower than the second quarter
in 1997, due primarily to difficulty factoring receivables from certain mass
market customers, and that gross margins declined $4.1 million to $4.7 million
from $8.8 million in the comparable period in the prior year, due to higher
production costs.
On March 23, 1999, the Company issued a press release stating that Mr.
McCanna was retiring as President, Chief Operating Officer and a director of the
Company and that Timothy M. LeRoy, formerly vice-
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<PAGE> 8
president of sales and marketing, had been appointed President and Chief
Operating Officer and elected to take Mr. McCanna's seat on the Company Board.
On April 9, 1999, Mr. Blount convened a special meeting of the Company
Board and delivered a letter setting forth his proposal to acquire the
outstanding shares of Common Stock not currently owned by Parent for $8.00 per
share in cash. The letter indicated that the proposed offer represented a
premium of approximately 32% over the closing price per share of Common Stock on
April 8, 1999 and a 46% premium over the average closing price per share of
Common Stock over the 30 trading days through April 8, 1999. In his letter, Mr.
Blount stated that he did not have any interest in selling his stock in the
Company.
At the April 9 meeting, the Company Board formed the Special Committee,
comprised of T. Morris Hackney, James M. Scott and Reese H. McKinney, Jr., and
authorized the Special Committee to engage financial and legal advisors to
negotiate with Parent. At the meeting, Mr. Blount indicated his willingness to
negotiate the terms and conditions of the proposed transaction with the Special
Committee and its advisors.
Immediately after its appointment, the Special Committee, acting by
unanimous consent, appointed the law firms of Ritchie & Rediker, L.L.C. and
Richards, Layton & Finger as its legal advisors. During the week of April 12,
1999, T. Morris Hackney, Chairman of the Special Committee, engaged in
discussions with representatives of two investment banking firms, including
Wachovia Securities, to discuss such firms' interest in representing the Special
Committee as its financial advisor and to request a proposal from such firms
regarding their possible engagement by the Special Committee. On April 13, 1999,
counsel for Parent and Purchaser distributed a preliminary draft of the proposed
Merger Agreement.
On April 20, 1999, the Special Committee met by conference telephone with
its legal advisors to discuss the proposals for engagement received by Mr.
Hackney from prospective financial advisors. The Special Committee selected
Wachovia Securities as its financial advisor based on its experience in the
furniture manufacturing industry and its expertise in the evaluation of
transactions similar to the proposed Merger. The Special Committee considered
Wachovia Securities' specific knowledge of, and familiarity with, the business,
financial condition and results of operations of the Company in connection with
the Special Committee's December 1998 engagement of Interstate/Johnson Lane
Corporation, a predecessor of Wachovia Securities, as described above. On behalf
of the Special Committee, Mr. Hackney subsequently executed an engagement letter
with Wachovia Securities and requested Wachovia Securities to analyze the price
at which Purchaser proposed to purchase the Shares, and to advise the Special
Committee of its preliminary analyses. At its meeting on April 20, the Special
Committee also discussed the structure of the proposed transaction and the legal
advisors to the Special Committee provided the members of the Special Committee
with some preliminary comments regarding the draft of the proposed Merger
Agreement.
On April 30, 1999, the Special Committee met by conference telephone with
its financial and legal advisors to receive a preliminary oral report from
Wachovia Securities regarding its analysis of the proposed purchase price of
$8.00 per Share and to discuss the draft of the proposed Merger Agreement.
Wachovia Securities discussed with the Special Committee its preliminary
analysis with respect to the proposed price of $8.00 and the prospects of
negotiating a higher price per Share. The Special Committee determined that Mr.
Hackney should engage in discussions with representatives of Parent to seek a
higher offer, taking into account the information and analyses furnished orally
to the Special Committee by Wachovia Securities to support the request for a
higher offer. The Special Committee also determined that it would be in the best
interests of the stockholders of the Company for the Special Committee to
explore whether unaffiliated third parties had an interest in the possible
acquisition of the Company; accordingly, the Special Committee instructed
Wachovia Securities to communicate with several potential acquirors in order to
ascertain their interest, if any, in the Company. At its April 30 meeting the
Special Committee also instructed its legal advisors to provide comments on the
draft of the proposed Merger Agreement to counsel for Parent and Purchaser.
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<PAGE> 9
On April 30, the Special Committee's legal advisors sent to Parent's legal
advisors a mark-up of the initial draft Merger Agreement reflecting the Special
Committee's comments. During the week of May 3, the legal advisors for the
Special Committee and Parent negotiated various provisions of the Merger
Agreement. The principal points of negotiation included (i) the nature and scope
of certain representations and warranties of the Purchaser and (ii) certain
conditions to the consummation of the Offer and the Merger.
On May 3 and May 4, 1999, Wachovia Securities contacted seven unaffiliated
third parties (including the potential acquiror with whom the Company had
engaged in discussions during 1998) regarding their interest, if any, in
considering a possible transaction with the Company. Wachovia Securities
informed all such parties of the proposed $8.00 per Share price offered by
Parent and Purchaser, and also that Parent had stated that it was not willing to
sell its Shares. Of the seven parties contacted by Wachovia Securities, two
expressed an interest in receiving certain information concerning the Company
and engaging in further discussions. Wachovia Securities subsequently delivered
to these two parties certain public information concerning the Company.
Notwithstanding the public announcement of Parent's $8.00 per Share offer, the
Company did not receive any other expressions of interest from third parties in
acquiring the Company.
On May 4, 1999, Parent's legal advisors sent to the Special Committee's
legal advisors a revised draft of the proposed Merger Agreement, reflecting the
changes to the proposed Merger Agreement to which Parent had agreed. Counsel for
the Special Committee subsequently distributed a copy of the revised draft to
the members of the Special Committee.
On May 5, 1999, Mr. Hackney, on behalf of the Special Committee, contacted
Mr. Blount to advise the Parent that the Special Committee considered the price
of $8.00 per Share too low and had instructed him to negotiate for a higher
price per Share. Following further discussion and negotiation between Mr.
Hackney and Mr. Blount, Mr. Blount contacted Mr. Hackney and stated that Parent
was willing to raise the per Share price to $10.00, subject to Parent and the
Special Committee reaching final agreement on the terms of the Merger Agreement.
Mr. Blount reiterated that Parent still had no interest in selling its Shares
and that $10.00 was the highest price per Share that Parent was willing to pay.
On May 7, 1999, Wachovia Securities contacted the two interested parties to
inform them of the increase by Parent in the per Share price and to reiterate
the fact that it again had been advised that Parent had no interest in selling
its Shares. One of the two potential acquirors stated that it had no further
interest. Wachovia Securities left several telephone messages for, and sent a
letter by facsimile to, the other prospective acquiror but did not receive a
response.
A meeting of the Special Committee was scheduled for May 13, and a meeting
of the Company Board was scheduled for the same day subsequent to the Special
Committee meeting, in order to consider the Merger Agreement. On May 11 and 12,
counsel for the Special Committee and the Parent substantially completed certain
revisions to the proposed Merger Agreement, principally relating to certain
conditions to the consummation of the Offer, and counsel for Parent provided
counsel for the Special Committee with a copy of the Commitment Letter described
elsewhere herein.
On May 13, 1999, the Special Committee and its legal and financial advisors
held a meeting. At this meeting, counsel advised the Special Committee that
final comments to the Merger Agreement had been appropriately resolved. The
Special Committee members also concluded that $10.00 per Share was the highest
price Parent was willing to offer and that further negotiations would not result
in an increase in the price offered by Parent. The Special Committee's legal
advisors and Wachovia Securities each gave presentations to the Special
Committee and the Special Committee also received the opinion from Wachovia
Securities, which was delivered orally and subsequently confirmed in writing,
that as of May 13, 1999, the per Share consideration to be received in the Offer
and the Merger is fair, from a financial point of view, to holders of Shares
(other than Parent and its affiliates). After considerable discussion the
Special Committee temporarily adjourned the meeting and the members thereof
agreed to reconvene by telephone conference call later that day.
Prior to the time at which the Special Committee meeting reconvened on May
13, Wachovia Securities was contacted by a representative of the financial
advisor for the remaining interested unaffiliated third party,
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<PAGE> 10
who expressed an interest in the Company on behalf of such third party. The
Special Committee's advisors made Mr. Blount's advisors aware of this continued
interest. Mr. Blount contacted the financial advisor for such third party and
stated to such financial advisor that Parent had no interest in selling its
Shares. Such financial advisor did not indicate that the remaining third party
was thereafter interested in making an offer for the Company.
Later that day, the Special Committee, with all members thereof, as well as
the legal advisors to the Special Committee participating by conference
telephone, reconvened the meeting of the Special Committee and unanimously (a)
determined that the terms of the Offer and the Merger are advisable, fair to,
and in the best interests of the stockholders of the Company other than Parent
and its affiliates; (b) recommended that the Company Board approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger; and (c) determined that the Company Board should recommend that the
stockholders of the Company accept the Offer and tender their Shares pursuant
thereto.
The Special Committee meeting was followed immediately by a meeting of the
Company Board by conference telephone, to consider the Offer and the Merger. The
Special Committee, with its legal advisors participating, reported to the
Company Board on its review of the Offer, the Merger and the Merger Agreement
and its recommendation of the proposed transaction as fair to the holders of
Shares (other than Parent and its affiliates). After receiving the
recommendation of the Special Committee, the Company Board unanimously (a)
determined that the terms of the Offer, the Merger and the Merger Agreement are
advisable, fair to, and in the best interests of the stockholders (other than
Parent and its affiliates); (b) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger; and (c)
recommended that the stockholders of the Company accept the Offer and tender
their Shares pursuant thereto.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD;
FAIRNESS OF THE OFFER AND THE MERGER
Recommendation of the Special Committee and the Company Board
As described above, the Special Committee has unanimously (a) determined
that the terms of the Offer and the Merger are advisable, fair to, and in the
best interests of the stockholders of the Company other than Parent and its
affiliates; (b) recommended that the Company Board approve the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger;
and (c) determined that the Company Board should recommend that the stockholders
of the Company accept the Offer and tender their Shares pursuant thereto.
The Company Board has unanimously (a) determined that the terms of the
Offer, the Merger and the Merger Agreement are advisable, fair to, and in the
best interests of the stockholders (other than Parent and its affiliates); (b)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger; and (c) recommended that the stockholders of
the Company accept the Offer and tender their Shares pursuant thereto.
Fairness of the Offer and the Merger
In recommending approval of the Merger Agreement and the transactions
contemplated thereby, and recommending that the holders of Shares other than
Parent, Purchaser and their affiliates tender their Shares pursuant to the
Offer, the Special Committee considered a number of factors, including:
(i) The results of operations, financial condition, assets,
liabilities, business strategy and prospects of the Company and the nature
of the industry in which the Company competes. The members of the Special
Committee also had discussions with members of the Company's management
regarding such business, conditions and prospects.
(ii) The opinion of Wachovia Securities dated May 13, 1999 that, as of
the date of such opinion and based upon and subject to certain factors and
assumptions stated therein, the consideration to be paid in the Offer and
the Merger is fair from a financial point of view to the holders of Shares
(other than the
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<PAGE> 11
Parent, Purchaser and their affiliates). THE FULL TEXT OF THE WACHOVIA
SECURITIES OPINION IS ATTACHED AS ANNEX B TO THIS OFFER TO PURCHASE AND IS
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THE
WACHOVIA SECURITIES OPINION IN ITS ENTIRETY AND TO READ THE DESCRIPTION OF
SUCH OPINION UNDER THE CAPTION "SPECIAL FACTORS -- OPINION OF FINANCIAL
ADVISOR TO THE SPECIAL COMMITTEE," WHICH IS INCORPORATED HEREIN BY
REFERENCE.
(iii) Current and historical market prices and trading history of the
Shares, including the relatively low trading volume of the Shares.
(iv) The relationship of the Offer Price to the current market price
and the historical market prices for the Common Stock and the fact that the
Offer Price represents a premium of approximately 65% over the per Share
closing price of the Common Stock on April 8, 1999, the trading day prior
to the public announcement of Parent's proposal, and a premium of
approximately 67% and 78% over the per share closing price of the Common
Stock on the trading days which were one week and four weeks, respectively,
prior to the public announcement of Parent's proposal. The historical
market prices of the Common Stock during the time the Common Stock has been
publicly traded are deemed relevant because they indicate the arms'-length
trading prices of the Common Stock for that period as determined in the
open market.
(v) The fact that Parent has advised the Company that it is not aware
of any current offer from any other person regarding the acquisition of the
Company and that, since the date of the announcement of Parent's proposal,
no person or entity has publicly communicated such an offer.
(vi) The fact that the Merger Agreement includes an obligation on the
part of Parent and Purchaser to make a first-step cash tender offer,
thereby enabling stockholders who tender their Shares to receive cash
consideration without waiting for the Merger to be consummated. In
addition, stockholders who do not tender their Shares pursuant to the Offer
would receive in the Merger the same cash price per share paid by Parent in
the Offer (unless such stockholders elect to exercise their statutory
appraisal rights).
(vii) The fact that the per Share price to be received in the Offer
and the Merger is payable in cash, thereby eliminating any uncertainties in
valuing the consideration to be received by the stockholders.
(viii) The availability of judicial appraisal rights under Section 262
of the Delaware General Corporation Law to stockholders of the Company who
dissent from the Merger.
(ix) The unlikelihood that the Company would be able to effect a
transaction for the sale of the Company without the cooperation of Parent,
as well as the unlikelihood that a prospective acquiror would make a
serious offer for the Common Stock not owned by Parent and its affiliates
without also entering into an agreement with Parent. The Special Committee
concluded that, in view of Parent's stated unwillingness to sell its Shares
to a third party, and the unsuccessful negotiations with a third party in
December 1998 and January 1999 regarding a potential business combination
transaction, it was not likely that any party other than Parent would
propose a transaction that was more favorable to the Company and its
stockholders; however, the Special Committee determined that it would
nevertheless be in the best interests of the stockholders of the Company
for the Special Committee, through its advisors, to make confidential
inquiries of certain potential interested parties, as described above. In
the event that the Company should receive a proposal from a third party,
the terms of the Merger Agreement permit the Company Board to modify or
withdraw its recommendation to the stockholders if the Company Board
determines, on the advice of counsel, that its failure to take such action
would reasonably be expected to result in a breach of its fiduciary duties
under applicable law.
(x) The fact that the terms of the Merger Agreement do not provide for
the survival of the representations and warranties made by the Company, nor
do they require any portion of the Merger Consideration to be set aside or
held in escrow for the purpose of satisfying indemnity provisions.
(xi) The Special Committee's recognition that consummation of the
Merger will preclude current stockholders of the Company, other than
Parent, from participating in any future growth of the Company;
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however, in the view of the Special Committee, this loss of opportunity was
adequately reflected in the Offer Price of $10.00 per Share.
(xii) The Special Committee's consideration of the likelihood of the
consummation of the proposed transaction in light of (a) the fact that the
consummation of neither the Offer nor the Merger is subject to any
financing condition, that Parent has represented that the funds necessary
to consummate the Offer and the Merger will be available and that Parent
has provided the Special Committee with copies of a written financing
commitment with respect to the Offer and the Merger, (b) the limited nature
of the other conditions to the Offer and the Merger, (c) the significant
percentage of Common Stock owned by Parent, (d) the proposed structure of
the transaction and anticipated closing date and (e) the impact on the
Company of a delay or further uncertainty with respect to the market for
the Common Stock.
(xiii) The arm's-length negotiations between the Special Committee and
its representatives and Parent and its representatives, including that the
negotiations resulted in (a) an increase in the price at which Parent is
prepared to acquire the Shares, (b) certain additional representations and
warranties by Parent in the Merger Agreement and (c) the Special
Committee's belief, confirmed by Mr. Blount in his discussions with Mr.
Hackney, that $10.00 was the highest price that could be obtained from
Parent under the circumstances.
(xiv) The terms of the Offer, the Merger and the Merger Agreement,
including provisions that without the consent of the Company and the
Special Committee (a) the Merger Agreement may not be amended and (b) the
Purchaser may not reduce the Offer Price or the number of Shares to be
purchased, modify the form of consideration to be paid in the Offer, impose
additional conditions to the Offer or amend or modify any other material
term of the Offer in a manner materially adverse to the holders of Shares
(other than Parent and its affiliates).
(xv) The fact that the Merger is not structured to require the
approval of the holders of a majority of the Shares not owned by Parent and
its affiliates, and that Parent through its Share ownership has sufficient
voting power to approve the Merger without the affirmative vote of any
other stockholder of the Company; however, the Special Committee recognized
that Parent is required pursuant to the Merger Agreement to vote its Shares
in favor of the Merger.
(xvi) The nature of the financing commitment received by Parent and
Purchaser with respect to the Offer and the Merger, including the identity
of the institutions providing such commitment, their knowledge of the
Company and their proven experience in consummating transactions such as
the Offer and the Merger and the conditions to the obligations of such
institutions to fund such commitment, as well as the fact that consummation
of the Offer and the Merger will not be dependent on the ability of Parent
and the Purchaser to raise funds through the high yield debt or other
securities market.
(xvii) The fact that the Merger Agreement contains a representation
and warranty on behalf of Parent that Parent has no present plan or
intention to liquidate the Company, to merge the Company with or into
another entity or to sell or otherwise dispose of all or substantially all
of the business or assets of the Company to be acquired by the Parent in
the Merger, except for dispositions in the ordinary course of business.
The foregoing discussion of the information and factors considered by the
Special Committee is not meant to be exhaustive but includes the material
factors considered by the Special Committee in reaching its conclusions and
recommendations. In view of the variety of factors considered in its reaching a
determination, 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 its conclusions and recommendations. In addition,
individual members of the Special Committee may have given different weights to
different factors.
In reaching its determinations referred to above, the Company Board
considered the following factors, each of which, in the view of the Company
Board, supported such determinations:
(i) The conclusions and recommendations of the Special Committee.
(ii) The factors referred to above as having been taken into account
by the Special Committee.
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(iii) The fact that the Offer Price and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations among the
Special Committee, the Company and Parent and their respective advisors.
The Company Board, including the members of the Special Committee, also
believes that the Offer and the Merger are procedurally fair because, among
other things:
(i) The Special Committee consisted of three non-employee independent
directors appointed to represent the interests of the Company's
stockholders other than Parent, Purchaser and their affiliates.
(ii) The Special Committee retained and received advice from
independent legal counsel.
(iii) The Special Committee retained and received an opinion from
Wachovia Securities as its independent financial advisor to assist it in
evaluating a potential transaction with Parent and Purchaser.
(iv) The Offer Price and the other terms and conditions of the Merger
Agreement resulted from active arm's-length bargaining between
representatives of the Special Committee, on the one hand, and
representatives of Parent and Purchaser, on the other hand.
(v) The Special Committee, through its advisors, solicited indications
of interest from potential interested parties unaffiliated with the
Company, Parent or Purchaser and none of the unaffiliated parties
approached made a competing offer.
Under Delaware law, a plan of merger requires the affirmative vote of the
holders of a majority of all outstanding shares entitled to vote thereon in
order to be adopted. The Company Board and the Special Committee recognized
that, although the Merger is not structured to require the approval of the
holders of a majority of Shares other than those held by Parent and its
affiliates and that Parent and its affiliates have sufficient voting power to
approve the Merger and the Merger Agreement, the terms of the Merger Agreement
and the Offer require the Purchaser (assuming the conditions to the Offer are
satisfied) to purchase all Shares tendered by stockholders.
The Company Board recognized that consummation of the Offer and the Merger
will deprive current stockholders of the opportunity to participate in the
future growth prospects of the Company, and, therefore, in reaching its
conclusion to approve the Offer and the Merger, determined that the historical
results of the operations and future prospects of the Company are adequately
reflected in the Offer Price. The members of the Company Board, including the
members of the Special Committee, evaluated the Parent's proposal, 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. In light of the number and variety of factors that the Company Board
considered in connection with their evaluation of the Offer and the Merger, the
Company Board did not find it practicable to assign relative weights to any of
the foregoing factors.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
The Special Committee engaged Wachovia Securities to act as its financial
advisor in connection with evaluating the proposed Offer and Merger. On May 13,
1999, at a meeting of the Special Committee held to evaluate the proposed Offer
and Merger, Wachovia Securities delivered to the Special Committee an oral
opinion (subsequently confirmed by delivery of a written opinion dated May 13,
1999) to the effect that, as of such date and based upon and subject to certain
factors and assumptions stated in such opinion, the consideration to be paid in
the Offer and the Merger is fair, from a financial point of view, to the holders
of Shares (other than Parent and its affiliates). No limitations were imposed by
the Special Committee with respect to the investigations made or the procedures
followed by Wachovia Securities in rendering its opinion.
Wachovia Securities has consented to the inclusion of the Wachovia
Securities Opinion in this Offer to Purchase.
THE FULL TEXT OF THE WACHOVIA SECURITIES OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B HERETO AND IS INCORPORATED HEREIN BY
REFERENCE. THE SUMMARY OF THE WACHOVIA SECURITIES OPINION SET FORTH HEREIN IS
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION IN ANNEX
B. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE WACHOVIA SECURITIES OPINION
IN ITS ENTIRETY. THE WACHOVIA SECURITIES ANALYSES AND OPINION WERE PREPARED FOR
AND ADDRESSED TO THE SPECIAL COMMITTEE AND ARE DIRECTED ONLY TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF SHARES OTHER THAN PARENT AND ITS AFFILIATES IN THE OFFER AND THE
MERGER AND DO NOT CONSTITUTE AN OPINION AS TO THE MERITS OF THE OFFER OR MERGER
OR A RECOMMENDATION TO ANY SUCH STOCKHOLDER OF THE COMPANY AS TO HOW TO VOTE IN
CONNECTION WITH THE MERGER.
Wachovia Securities is a nationally recognized investment banking firm and
was selected by the Company based on the firm's reputation and general
investment banking experience, including its experience in the furniture
industry and in rendering fairness opinions. Wachovia Securities, as part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
In arriving at its opinion, Wachovia Securities, among other things, (i)
reviewed the May 13, 1999 draft of the Merger Agreement; (ii) solicited the
interest of certain unaffiliated third parties in submitting a competing offer
for the acquisition of the Company; (iii) reviewed annual audited financial
statements for the Company for each of the three fiscal years ended July 31,
1998, May 3, 1997 and April 28, 1996 and interim unaudited financial statements
through January 31, 1999; (iv) reviewed such publicly available information on
the Company including recent Securities and Exchange Commission filings,
stockholder communications and recent press releases, as it deemed appropriate;
(v) reviewed financial forecasts for the Company prepared by the Company's
management; (vi) met with members of the Company's senior management to review
and discuss the business, financial condition, operating results and projected
financial results of the Company; (vii) engaged in discussions with members of
the Special Committee; (viii) compared certain financial and stock market data
for the Company with similar data for selected publicly held companies which it
deemed relevant; (ix) reviewed the financial terms of certain recent merger and
acquisition transactions which it deemed relevant; (x) reviewed the premiums
paid in certain recent merger and acquisition transactions which it deemed
relevant; (xi) reviewed historical market price and volume data for the Common
Stock of the Company; (xii) performed a discounted cash flow analysis for the
Company; (xiii) reviewed various published research reports and investment
opinions on the Company; and (xiv) performed such other financial studies and
analyses as it deemed appropriate.
The following is a summary of the material financial analyses performed by
Wachovia Securities in connection with delivering its opinion to the Special
Committee on May 13, 1999. Such summary does not purport to be a complete
description of the analyses performed by Wachovia Securities. The preparation of
a fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or a summary description. The Wachovia Securities Opinion was
one of several factors considered by the Special Committee in its evaluation of
the Offer and the Merger and should not be viewed as a determination of the
views of the Special Committee with respect to the Offer or the Merger.
Comparable Companies Analysis. Based on publicly available information and
First Call consensus earnings estimates, Wachovia Securities reviewed and
compared actual and estimated selected financial, operating and stock market
information and financial ratios of the Company based upon the closing price of
the Common Stock on April 8, 1999, one day prior to the Parent's announcement of
the proposed offer, and based upon the Offer Price, to a group of seven
furniture companies. (First Call compiles earnings estimates published by
selected research analysts for use by the investment community.) The Company was
compared to a group of seven furniture companies consisting of: Bush Industries,
Inc.; Chromcraft Revington, Inc.; Flexsteel Industries, Inc.; Pulaski Furniture
Corporation; The Rowe Companies; Stanley Furniture Company, Inc.; and WinsLoew
Furniture, Inc. (the "Selected Comparable Companies"). The historical financial
information and ratios analyzed for the Company and each of the Selected
Comparable Companies were as of its respective most recent reported twelve month
period (the "LTM") or balance sheet date (the "LBD"). Earnings estimates and
price-to-forward-earnings multiples for the Company and the Selected Comparable
Companies were shifted to reflect calendar year ends.
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Wachovia Securities' observations included, among other things, the
following: the Company had a compound annual growth rate in sales over the past
three years of 17.5% compared to the median of 10.7% for the Selected Comparable
Companies. The Company had an EBITDA margin, an EBIT margin and a net income
margin for the LTM of 21.7%, 17.3% and 9.1%, respectively, compared to the
medians of 10.2%, 8.3% and 5.1%, respectively, for the Selected Comparable
Companies for the LTM. (EBITDA equals earnings before interest, taxes,
depreciation and amortization; EBIT equals earnings before interest and taxes.)
The Company had a return on equity for the LTM of 28.4% compared to the median
of 16.4% for the Selected Comparable Companies for the LTM. The Company had a
total debt to book value of total capital ratio for the LBD of 35.0% compared to
the median of 29.7% for the Selected Comparable Companies. (Total debt equals
long-term debt; book value of total capital equals stockholders' equity plus
total debt.)
Wachovia Securities also observed, among other things, the following: the
Company had a market value of capitalization based upon the closing price of the
Common Stock on April 8, 1999, one day prior to the Parent's announcement of the
proposed offer, to sales for the LTM multiple of 0.9 times compared to the
median of 0.8 times for the Selected Comparable Companies. (Market value of
capitalization equals the market value of stockholders' equity plus net debt;
net debt equals long-term debt less cash and equivalents.) The Company, as of
April 8, 1999, had a market value of capitalization to EBITDA multiple for the
LTM of 4.3 times compared to the median of 5.6 times for the Selected Comparable
Companies. The Company, as of April 8, 1999, had a market value of
capitalization to EBIT multiple for the LTM of 5.4 times compared to the median
of 7.4 times for the Selected Comparable Companies. The Company, as of April 8,
1999, had a market value of equity to book value of equity for the LBD multiple
of 2.4 times compared to the median of 1.8 times for the Selected Comparable
Companies. The Company, as of April 8, 1999, had a Common Stock price per share
to earnings per share multiple for the LTM, for estimated 1999 and for estimated
2000 of 7.8 times, 9.5 times and 8.0 times, respectively, compared to the
medians of 11.6 times, 10.4 times and 9.5 times, respectively, for the Selected
Comparable Companies for the same time periods.
Wachovia Securities also observed, among other things, the following: the
Company had a market value of capitalization based upon the proposed offer price
of $10.00 per share to sales for the LTM multiple of 1.4 times compared to the
median of 0.8 times for the Selected Comparable Companies. (Market value of
capitalization equals the market value of stockholders' equity plus net debt;
net debt equals long-term debt less cash and equivalents.) The Company, based on
the proposed offer price, had a market value of capitalization to EBITDA
multiple for the LTM of 6.6 times compared to the median of 5.6 times for the
Selected Comparable Companies. The Company, based on the proposed offer price,
had a market value of capitalization to EBIT multiple for the LTM of 8.2 times
compared to the median of 7.4 times for the Selected Comparable Companies. The
Company, based on the proposed offer price, had a market value of equity to book
value of equity for the LBD multiple of 3.9 times compared to the median of 1.8
times for the Selected Comparable Companies. The Company, based on the proposed
offer price, had a Common Stock price per share to earnings per share multiple
for the LTM, for estimated calendar year 1999 and for estimated calendar year
2000 of 12.8 times, 15.6 times and 13.2 times, respectively, compared to the
medians of 11.6 times, 10.4 times and 9.5 times, respectively, for the Selected
Comparable Companies for the same time periods.
Although the Selected Comparable Companies were used for comparative
purposes, none of such companies is directly comparable to the Company.
Accordingly, an analysis of the results of such a comparison is not purely
mathematical but involves complex considerations and judgments concerning
differences in historical and projected financial and operating characteristics
of the companies and other factors that could affect the public trading values
of the companies.
Comparable Transactions Analysis. Wachovia Securities reviewed certain
information relating to five announced or completed mergers and acquisitions
between November 1, 1998 and May 7, 1999 in which a furniture company acquired,
was acquired or was merged into another entity. The furniture companies involved
in such transactions (the "Selected Furniture Company Transactions") were
Trivest Furniture Corporation's acquisition of WinsLoew Furniture, Inc., which
was announced on January 18, 1999; Pulaski Furniture Corporation's acquisition
of Dawson Furniture Company, Inc., which was announced on September 21, 1998;
Warburg Pincus & Co.'s acquisition of Knoll, Inc., which was announced on March
24, 1999; Bruckmann, Rosser, Sherrill & Co.'s acquisition of Cort Business
Services Corp., which was announced on
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<PAGE> 16
March 26, 1999; and Falcon Products, Inc.'s acquisition of Shelby Williams
Industries, Inc., which was announced on May 6, 1999. Such analysis indicated
that the multiples of enterprise value to net sales, to operating cash flow and
to operating income for the LTM for the proposed transaction were 1.4 times, 6.6
times and 8.2 times, respectively, compared to the median multiples of 1.2
times, 6.0 times and 8.0 times, respectively, for the Selected Furniture Company
Transactions (enterprise value equals equity value plus net debt). The multiples
of equity value to net income for the LTM and to book value of equity for the
LBD for the proposed transaction were 13.8 times and 3.9 times, respectively,
compared to the median multiples of 12.7 times and 2.2 times, respectively, for
the Selected Furniture Company Transactions.
Wachovia Securities also reviewed certain information relating to six
announced or completed "going private" transactions between November 1, 1998 and
May 7, 1999. The companies involved in such transactions (the "Selected Going
Private Transactions") were Vestar Capital Group's acquisition of St. John
Knits, which was announced on December 8, 1998; Trivest Furniture Corporation's
acquisition of WinsLoew Furniture, Inc., which was announced on January 18,
1999; RB Capital Inc.'s acquisition of Rock Bottom Brewery, which was announced
on January 27, 1999; Warburg Pincus & Co.'s acquisition of Knoll, Inc., which
was announced on March 24, 1999; Vestar Capital Group's acquisition of Sheridan
Healthcare, Inc., which was announced on March 25, 1999; and Bruckmann, Rosser,
Sherrill & Co.'s acquisition of Cort Business Services Corp., which was
announced on March 26, 1999. Such analysis indicated that the multiples of
enterprise value to net sales, to operating cash flow and to operating income
for the LTM for the proposed transaction were 1.4 times, 6.6 times and 8.2
times, respectively, compared to the median multiples of 1.3 times, 5.8 times
and 8.0 times, respectively, for the Selected Going Private Transactions. The
multiples of equity value to net income for the LTM and to book value of equity
for the LBD for the proposed transaction were 13.8 times and 3.9 times,
respectively, compared to the median multiples of 12.8 times and 2.5 times,
respectively, for the Selected Going Private Transactions.
Premiums Paid Analysis. Wachovia Securities reviewed certain information
relating to the Selected Furniture Company Transactions in which a public
company was acquired or merged into another entity. The resulting group of four
companies (the "Selected Premiums Paid Furniture Transactions"), which comprised
Trivest Furniture Corporation's acquisition of WinsLoew Furniture, Inc., which
was announced January 18, 1999; Warburg Pincus & Co.'s acquisition of Knoll,
Inc., which was announced March 24, 1999; Bruckmann, Rosser, Sherrill & Co.'s
acquisition of Cort Business Services Corp., which was announced March 26, 1999
and Falcon Products, Inc.'s acquisition of Shelby Williams Industries, Inc.,
which was announced May 6, 1999, was analyzed to determine the premiums paid
relative to the seller's stock price 12 weeks, four weeks, one week and one day
prior to the public announcement of the acquisition of the acquired company. The
premiums to be paid for 12 weeks, four weeks, one week and one day prior to
Parent's announcement of the proposed transaction are (12.1%), 77.8%, 66.7% and
64.9%, respectively, compared to the median premiums paid of 19.0%, 47.8%, 35.9%
and 43.5%, respectively, for the Selected Premiums Paid Furniture Transactions
for the comparable time periods.
Wachovia Securities also reviewed certain information relating to the
Selected Going Private Transactions described above and an additional
transaction, SHP Acquisition, LLC's acquisition of Sunstone Hotel Investors,
which was announced April 5, 1999, that was not included in the Comparable
Transactions Analysis due to the difference in accounting treatment for REITs
and manufacturing companies, making comparisons not meaningful. The resulting
group of seven companies (the "Selected Premiums Paid Going Private
Transactions") was analyzed to determine the premiums paid relative to the
seller's stock price 12 weeks, four weeks, one week and one day prior to the
public announcement of the acquisition of the acquired company. The premiums to
be paid for 12 weeks, four weeks, one week and one day prior to Parent's
announcement of the proposed offer are (12.1%), 77.8%, 66.7% and 64.9%,
respectively, compared to the median premiums paid of 10.4%, 35.6%, 36.3% and
42.9%, respectively, for the Selected Premiums Paid Going Private Transactions
for the comparable time periods.
Discounted Cash Flow Analysis. Wachovia Securities performed a discounted
cash flow analysis to determine a range of present values for the Company
assuming it was sold at the end of fiscal 2004. Based on the fiscal 1999 and
fiscal 2000 projections provided by the Company and additional information
supplied by management, Wachovia Securities assumed net sales would increase by
5% per year from fiscal 2000 to 2004
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and gross margins would improve 1% per year from fiscal 2000 to 2004. In
addition, Wachovia Securities assumed operating expenses would increase 2.5% per
year from fiscal 2000 to 2004. For the terminal value, Wachovia Securities
assumed that the Company would be sold at the end of fiscal 2004 at an EBITDA
multiple in line with those seen in the Selected Comparable Companies (5.5 times
to 7.0 times) or a net income multiple in line with those seen in the Selected
Comparable Companies (11.5 times to 13.0 times). The operating cash flow streams
and terminal values were presently valued using a range of discount rates from
13% to 17%. The free cash flow streams and terminal values were presently valued
using a range of discount rates from 15% to 19%. After applying the above ranges
of multiples and discount rates, the analysis indicated an equity value for the
Company ranging from approximately $167.9 million to approximately $246.4
million.
Other Analyses. Wachovia Securities reviewed various published research
reports on the Company and, among other things, the investment opinions, stock
price targets and earnings estimates contained therein. In addition, Wachovia
Securities reviewed and analyzed the historical trading prices and volumes for
the Common Stock.
Other Considerations. Wachovia Securities' considerations also included
the results of the solicitation of interest from certain unaffiliated third
parties in submitting a competing offer for the acquisition of the Company as
described above. See "Special Factors; Background of the Offer."
The summary set forth above describes the material analyses that Wachovia
Securities performed, but does not purport to be a complete description of such
analyses or the analyses performed. A copy of the written materials distributed
by Wachovia Securities to the Special Committee on May 13, 1999 in connection
with Wachovia Securities' analyses and the Wachovia Securities Opinion has been
filed as an exhibit to the Transaction Statement on Schedule 13E-3 filed by the
Company, Parent, Purchaser and Mr. Blount with the Commission, and may be
inspected, copied and obtained in the manner specified in "The Tender Offer --
Certain Information Concerning Parent and Purchaser."
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or a summary description. Wachovia
Securities believes that its analyses must be considered as a whole and that
selecting portions of its analyses without considering all factors and analyses
would create an incomplete view of the analyses and processes underlying its
opinion. Wachovia Securities did not attribute any particular weight to any
analysis or factor considered by it but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. In its analyses,
Wachovia Securities relied upon numerous assumptions made by the Company with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company, although
Wachovia Securities believes such assumptions to be reasonable. Analyses based
on forecasts of future results are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. No company or transaction used as a comparison in the analysis is
identical to the Company or to the proposed transaction. Additionally, estimates
of the value of businesses do not purport to be appraisals or necessarily
reflective of the prices at which businesses actually may be sold. Because such
estimates are inherently subject to uncertainty, Wachovia Securities does not
assume responsibility for the accuracy of such estimates, although Wachovia
Securities believes such estimates to be reasonable. Wachovia Securities'
analyses were prepared solely for purposes of its opinion rendered to the
Special Committee regarding the fairness from a financial point of view of the
per Share consideration to be received in the Offer and the Merger by the
holders of Shares (other than Parent and its affiliates). Furthermore, Wachovia
Securities is not expressing any opinion as to the range of prices at which the
Common Stock would trade if the proposed transaction was not consummated.
For the services provided by Wachovia Securities as financial advisor to
the Special Committee and in connection with the delivery of its opinion to the
Special Committee, Wachovia Securities received a fee of $525,000. No portion of
Wachovia Securities' fee has been or is contingent upon the consummation of the
Offer or the Merger. If the Special Committee requests that Wachovia Securities
deliver a bring-down opinion, an additional fee in the amount of $50,000 will be
payable to Wachovia Securities upon delivery of such bring-down opinion. In
addition, the Company has agreed to reimburse Wachovia Securities for its
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reasonable out-of-pocket expenses incurred in connection with the proposed
transaction, but not to exceed $20,000 without the Company's prior consent and
to indemnify Wachovia Securities against certain liabilities, including certain
liabilities arising under the federal securities laws, arising out of Wachovia
Securities' engagement.
Wachovia Securities has advised the Company that, in the ordinary course of
its business as a full-service securities firm, Wachovia Securities may, subject
to certain restrictions, actively trade the equity securities of the Company for
its own account or for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities. Wachovia Securities
has also informed the Company, that in the ordinary course of business, Wachovia
Securities and its affiliates (including Wachovia Bank, N.A.) may have and may
in the future have investment and commercial banking, trust and other
relationships with the Company, Parent and other parties that may have an
interest in the proposed transaction.
POSITION OF PARENT AND PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER
Parent and Purchaser believe that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger is fair to such
stockholders. Parent and Purchaser base their belief on the following facts: (i)
the fact that the Special Committee concluded that the Offer and the Merger are
fair to, advisable and in the best interests of, the Company's stockholders
(other than Parent and its affiliates), (ii) notwithstanding the fact that
Wachovia Securities' opinion was addressed to the Special Committee and that
neither Parent nor Purchaser is entitled to rely on such opinion, the fact that
the Special Committee received an opinion from Wachovia Securities that, as of
the date of such opinion and based on and subject to certain matters stated in
such opinion, the consideration to be paid in the Offer and the Merger is fair
to the holders of Shares (other than Parent and its affiliates) from a financial
point of view, (iii) the historical financial performance of the Company and its
financial results, which included a decrease in net sales of 12.7% and a
decrease in gross profit of 70.8% in the first six months of fiscal year 1999
compared with the first six months of the 1998 fiscal year, (iv) the fact that
the per Share price to be paid in the Offer and the Merger represents a premium
of approximately 65% over the closing price of the Shares on April 8, 1999 and a
premium of approximately 67% over the closing price of the Shares on the trading
day one week prior to the public announcement of Parent's proposal, and a
premium of approximately 78% over the closing price of the Shares on the trading
day four weeks prior to such announcement, (v) the fact that the same
consideration will be paid in both the Offer and the Merger, (vi) the Offer and
the Merger will each provide consideration to the Company's stockholders
entirely in cash and (vii) the other factors enumerated by the Special Committee
as supporting their recommendation of the Offer and the Merger. Parent and
Purchaser did not find it practicable to assign, nor did they assign, relative
weights to the individual factors considered in reaching its conclusion as to
fairness.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER;
REASONS OF PARENT FOR THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is for Parent and Purchaser to
increase Parent's and Purchaser's aggregate ownership of Shares from
approximately 73% to 100%. Upon consummation of the Merger, the Company will
become a direct wholly-owned subsidiary of Parent. The acquisition of the Shares
not owned by Parent and its affiliates has been structured as a cash tender
offer followed by a cash merger in order to effect a prompt and orderly transfer
of ownership of the Shares of the Company not owned by Parent or its affiliates
from the Company's public stockholders to Parent and Purchaser and to provide
such stockholders with cash for all of their Shares.
Under the DGCL, the approval of the Company Board and the affirmative vote
of the holders of a majority of the issued and outstanding Shares are required
to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger. The Company Board has approved and adopted the
Merger Agreement and the transactions contemplated thereby, and the only
remaining required corporate action of the Company is the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the Shares.
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In the Merger Agreement, the Company has agreed, if required, to cause a
meeting of its stockholders to be held as soon as reasonably practicable after
consummation of the Offer for the purpose of voting on the approval and adoption
of the Merger and the Merger Agreement and to use its commercially reasonable
best efforts to obtain such approval and adoption. Since Parent and Purchaser
currently own a majority of the outstanding Shares regardless of whether any
Shares are tendered and purchased pursuant to the Offer, Parent and Purchaser
would have sufficient voting power to, and would, approve the Merger and the
Merger Agreement without the affirmative vote of any other stockholder of the
Company. If Parent, Mr. Blount and Purchaser own 90% or more of the outstanding
Shares as a result of the Offer or otherwise, Parent and Mr. Blount will
contribute all Shares owned by them to Purchaser and Purchaser will effect the
Merger pursuant to the short-form merger provisions of the DGCL, without prior
notice to, or any action by, any other stockholder of the Company. Parent, Mr.
Blount and Purchaser have agreed to vote their Shares in favor of the Merger.
Parent decided to pursue the transaction at this time for several reasons.
Parent believes that, in light of its small public float and the low trading
volume for the Company's Common Stock, the benefits to the Company of having
publicly traded securities have not outweighed the expenses and other
requirements imposed on the Company as a result of having publicly traded
shares. Parent believes that the Company's small public float and the short term
focus of certain market participants and analysts has caused volatility in the
Company's stock price that is disruptive to the efficient operation of the
Company. As a result, taking into account the size and nature of the Company's
business at this stage of its development, Parent believes that the Company will
be better able as a private company than as a public company to deploy its
resources for the Company's business and operations. Parent believes that the
Merger advances these objectives.
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER
Pursuant to the Merger Agreement, upon completion of the Offer, Parent and
Purchaser intend to effect the Merger in accordance with the terms of the Merger
Agreement. See "Special Factors -- The Merger Agreement."
After the Merger, it is expected that all of the Company's current
executive officers will continue in their present positions and all of the
Company's current directors will remain members of the Company Board.
Except as otherwise described in this Offer to Purchase and except for the
transactions contemplated by the Merger Agreement, Parent has no current plans
or proposals which relate to or would result in: (a) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving the
Company; (b) a sale or transfer of a material amount of assets of the Company or
any of its subsidiaries; (c) any change in the management of the Company or any
change in any material term of the employment contract of any executive officer;
or (d) any other material change in the Company's corporate structure or
business. Parent and Purchaser intend to seek to cause the Company to have the
Shares delisted from the NYSE and to make a certification to effect the
termination of registration of the Shares under the Exchange Act as soon as
possible after the Offer. See "The Tender Offer -- Certain Effects of the
Offer."
RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of the Company who have not
tendered their Shares in the Offer will have certain rights under the DGCL to
dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. Stockholders who perfect such rights by complying with
the procedures set forth in Section 262 of the DGCL ("Section 262") shall be
entitled to have the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) determined
by the Delaware Court of Chancery and receive a cash payment equal to such fair
value from the Company, as the surviving corporation in the Merger (the
"Surviving Corporation"). In addition, such dissenting stockholders may be
entitled to receive payment of interest from the date of consummation of the
Merger on the amount determined to be the fair value of their Shares. In
determining the fair value of the Shares, the court is required to take into
account all relevant factors. Accordingly, such determination could be based
upon considerations other than, or in
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addition to, the market value of the Shares, including, among other things, the
Company's asset values and earning capacity. The value so determined could be
more or less than the per Share consideration to be paid in the Offer and the
Merger.
THE FOREGOING SUMMARY IS NOT A COMPLETE STATEMENT OF APPRAISAL RIGHTS UNDER
THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262
INCLUDED HEREWITH IN ANNEX C. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION
262 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX A TO THIS OFFER TO PURCHASE. THE
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT.
STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
The Offer
The Merger Agreement provides for the commencement of the Offer as promptly
as practicable after the date thereof, but in no event later than five business
days following the public announcement of the execution of the Merger Agreement.
The Merger Agreement also provides that the obligation of Purchaser to accept
for payment and pay for Shares tendered pursuant to the Offer is subject to the
satisfaction or waiver of certain conditions that are described in "The Tender
Offer -- Certain Conditions of the Offer." Pursuant to the Merger Agreement,
Purchaser generally has the right to waive any condition to the Offer and to
make any change in the terms or conditions of the Offer. However, Purchaser has
agreed in the Merger Agreement that, without the prior written consent of the
Company (acting through the Special Committee) Purchaser will not make any
change in the Offer which changes the form of consideration to be paid or
decreases the price per Share or the number of Shares sought in the Offer, which
imposes conditions to the Offer in addition to those set forth in "The Tender
Offer -- Certain Conditions of the Offer" or which amends or modifies any other
material term of the Offer in a manner materially adverse to the holders of
Shares (other than Parent and its affiliates). Purchaser has also agreed in the
Merger Agreement that if on any scheduled expiration date of the Offer all
conditions to the Offer shall not have been satisfied or waived, upon written
request of the Company (acting through the Special Committee) it will extend the
Offer until at least the 60th day after commencement of the Offer. In addition,
Parent, Purchaser and the Company have agreed that no Shares held by Parent,
Purchaser, any affiliate of Parent or Purchaser, the Company or any subsidiary
thereof will be tendered in the Offer.
The Company has agreed in the Merger Agreement that Purchaser may, without
the consent of the Company, (i) extend the expiration date from time to time if
all conditions to the Offer have not been satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Commission applicable to the Offer and (iii) extend the Offer
for any reason on one or more occasions for an aggregate period of not more than
forty (40) business days beyond the latest Expiration Date that would otherwise
be permitted under clauses (i) or (ii) of this sentence.
Pursuant to the terms of the Merger Agreement, the Board of Directors of
the Company will not withdraw, or modify in a manner adverse to Parent and
Purchaser, its recommendation to shareholders unless the Board of Directors
determines in good faith by a majority vote, on the basis of the advice of
outside counsel to the Company that its failure to take such action would
reasonably be expected to result in a breach of its fiduciary duties under
applicable law.
The Merger Agreement also provides that the Company will use its
commercially reasonable best efforts to ensure that all of the members of the
Company Board and the Special Committee as of the date hereof who are not
employees of the Company will remain members of the Company Board and the
Special Committee.
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The Merger
The Merger Agreement provides that as promptly as practicable after the
Offer has been consummated and all conditions to the Merger set forth therein
have been satisfied or, to the extent permitted thereunder, waived, Purchaser
will be merged with and into the Company in accordance with the DGCL. As a
result of the Merger, the separate existence of Purchaser will cease and the
Company will continue as the Surviving Corporation. At the Effective Time, each
Share outstanding immediately prior to the Effective Time (other than Shares
held in the treasury of the Company, Shares owned by Parent and its affiliates,
which will be canceled and retired without any payment with respect thereto, or
Shares as to which appraisal rights have been properly exercised) will be
converted into the right to receive the Merger Consideration. The directors and
the officers of the Company at the Effective Time will be the officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties of the parties thereto. These include representations and warranties
of the Company with respect to corporate existence and power, capitalization,
corporate authorization relative to the Merger Agreement, compliance with law,
governmental consents and approvals, the accuracy of financial statements and
filings with the Commission, the absence of undisclosed material liabilities,
documents relating to the Offer and the Merger, and other matters. Parent and
Purchaser have also made certain representations and warranties with respect to
corporate existence and power, corporate authorization relative to the Merger
Agreement, governmental consents and approvals, documents relating to the Offer
and the Merger, financing of the Offer and the Merger, certain matters relating
to the Company's compliance with law and its obligations under the Merger
Agreement, Parent's intentions regarding the Company, the solvency of the
Surviving Corporation upon consummation of the Merger, and other matters.
Covenants
The Merger Agreement contains various customary covenants of the parties
thereto. A description of certain of these covenants follows:
Conduct of Business Covenant. The Company has agreed that, prior to
the acceptance for payment and purchase of Shares pursuant to the Offer,
unless Purchaser shall otherwise agree in writing, or as shall have
otherwise been approved by the chief executive officer of the Company, or
as otherwise contemplated in the Merger Agreement, (i) the business of the
Company and its subsidiaries will be conducted only in the ordinary and
usual course (taking into account the Company's current financial
condition, results of operations and cash flow), (ii) the Company will not
(a) sell or pledge or agree to sell or pledge any stock owned by it in any
of its subsidiaries, (b) amend its Certificate of Incorporation or Bylaws,
or (c) split, combine or reclassify the outstanding Shares or declare, set
aside or pay any dividend payable in cash, stock or property with respect
to the Shares, and (iii) neither the Company nor any of its subsidiaries
will (a) issue or agree to issue any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class other than
Shares issuable pursuant to presently outstanding Options, or (b) enter
into any contract, agreement, commitment or arrangement with respect to any
of the foregoing.
Company Stockholder Meeting. Pursuant to the Merger Agreement, the
Company will, if required by applicable law in order to consummate the
Merger, cause a meeting of its stockholders (the "Company Stockholder
Meeting") to be duly called and held as soon as reasonably practicable
after consummation of the Offer for the purpose of voting on the approval
and adoption of the Merger Agreement and the Merger. Parent has agreed to
vote all Shares beneficially owned by it in favor of adoption of the Merger
Agreement at the Company Stockholder Meeting. If Purchaser shall acquire at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, the
parties to the Merger Agreement have agreed, at the request of Parent or
Purchaser, to take all necessary and appropriate action to cause the Merger
to be effective as soon as practicable after the acceptance for payment and
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purchase of Shares by Purchaser pursuant to the Offer without a meeting of
stockholders of the Company in accordance with Section 253 of the DGCL.
Indemnification and Insurance. The Merger Agreement provides that
Parent will cause the Surviving Corporation to, and the Surviving
Corporation will, indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions
occurring prior to the Effective Time to the fullest extent permitted under
the Company's certificate of incorporation and bylaws in effect on the date
of the Merger Agreement. The Merger Agreement also provides that, for six
years after the Effective Time, Parent will cause the Surviving Corporation
to use its best efforts to provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective
Time covering each such person currently covered by the Company's officers'
and directors' liability insurance policy (the "Covered Employees") on
terms with respect to coverage and amount no less favorable than those of
such policy in effect on the date of the Merger Agreement; provided that in
satisfying its obligation under this paragraph, the Surviving Corporation
will not be obligated to pay, and Parent will not be obligated to cause the
Surviving Corporation to pay, premiums in excess of 200% of the amount per
annum the Company paid in its last full fiscal year. The parties to the
Merger Agreement have agreed, subject to the fiduciary duties of the
respective directors of the Company, Parent and Purchaser, in the event
that any action, suit, proceeding or investigation relating to the Merger
Agreement or the transactions contemplated thereby is commenced by a third
party before or after the Effective Time, to cooperate and use all
reasonable efforts to defend against and respond to such action, suit,
proceeding or investigation. In addition, the Merger Agreement provides
that if Parent or any of its successors or assigns (i) merges with or into,
or consolidates with, any other corporation or entity and is not the
surviving or continuing corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any individual, corporation or other entity, then in each such
case, proper provisions shall be made so that the successors or assigns of
Parent assume the obligations set forth in this paragraph. The parties to
the Merger Agreement have agreed that the provisions of this paragraph are
for the benefit of and may be enforced after the Effective Time by the
Covered Employees.
Notification of Certain Matters. The Merger Agreement provides that
the Company will give prompt written notice to Parent and Purchaser, and
Parent and Purchaser will give prompt written notice to the Company of (a)
the occurrence, or failure to occur, of any event, which occurrence or
failure would cause any representation or warranty contained in the Merger
Agreement to be untrue or inaccurate in any material respect at any time,
(b) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
under the Merger Agreement and (c) any act, omission to act, event, or
occurrence that, with notice, passage of time, or otherwise, would result
in a material adverse effect on the business or condition (financial or
otherwise), properties or assets of the Company and its subsidiaries taken
as a whole. No such notification will affect the representations or
warranties of the parties or the conditions to the obligations of the
parties under the Merger Agreement. The Merger Agreement also provides that
Parent will notify the Company of any information it obtains which would
make certain of its representations and warranties untrue or inaccurate in
any material respect. In addition, the Merger Agreement provides that
Parent and Purchaser will provide to the Company any opinions (and
supporting documentation) regarding the solvency of the Surviving
Corporation upon consummation of the Merger as are provided to any banks or
other lenders in connection with the Merger at the same time that they are
provided to such banks or other lenders.
Best Efforts. Pursuant to the terms and conditions of the Merger
Agreement and subject to the fiduciary duties under applicable law of the
directors of the Company or of the directors constituting the Special
Committee, each party to the Merger Agreement has agreed to use its best
efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary or proper and advisable under applicable laws
and regulations to consummate the transactions contemplated by the Merger
Agreement.
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Public Announcements. The Merger Agreement provides that Parent and
the Company will consult with each other before issuing any press release
or making any public statement with respect to the Merger Agreement and the
transactions contemplated thereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange (in which case the party proposing to issue such press release or
make such statement will use all reasonable efforts to consult in good
faith with the other party), will not issue any such press release or make
any such public statement prior to such consultation.
Conditions of the Offer
See "The Tender Offer -- Certain Conditions of the Offer."
Conditions to the Merger
The Merger Agreement provides that the obligations of the Company, Parent
and Purchaser to consummate the Merger are subject to the satisfaction of the
following conditions: (a) Purchaser shall have purchased such Shares as are
validly tendered and not withdrawn pursuant to the Offer; (b) if required by the
DGCL, the Merger Agreement and the Merger shall have been approved and adopted
by the stockholders of the Company in accordance with the DGCL; (c) any
governmental or third party consents or approvals required to consummate the
Merger shall have been obtained (except where the failure to obtain such
consents or approvals would not have a material adverse effect on (i) the
Company and its subsidiaries, taken as a whole, or (ii) Parent's ability to
consummate the transactions contemplated by the Merger Agreement), and (d) there
shall not be in effect any statute, rule or regulation enacted, promulgated or
deemed applicable by any governmental authority of competent jurisdiction that
making consummation of the Merger illegal and no temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
Merger shall be in effect.
Termination
The Merger Agreement provides that the Merger Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of the Merger Agreement by the stockholders of the
Company):
(a) by mutual written consent of the Company or taken any other action
restraining, permanently (with the approval of the Special Committee) and
Parent;
(b) by either the Company (with the approval of the Special Committee)
or Parent, if any court of competent jurisdiction shall have issued an
order, decree or ruling enjoining or otherwise prohibiting the Offer or the
Merger and such order, decree or other ruling shall have become final and
nonappealable;
(c) by either the Company (with the approval of the Special Committee)
or Parent, if Shares have not been accepted for payment pursuant to the
Offer on or prior to the date 60 days after commencement of the Offer;
provided that (i) neither party will have the right to terminate the Merger
Agreement under this provision during any extension period referred to
under "The Offer" above; and (ii) the right to terminate the Merger
Agreement pursuant to this provision shall not be available to any party
whose failure to fulfill any of its obligations under the Merger Agreement
results in the failure of the Offer to be consummated;
(d) by either Parent or the Company (with the approval of the Special
Committee) if the Offer shall expire or terminate in accordance with its
terms without any Shares having been purchased thereunder and, in the case
of termination by Parent, the Purchaser shall not have been required by the
terms of the Offer or the Merger Agreement to purchase any Shares pursuant
to the Offer; or
(e) by Parent, if the Board of Directors of the Company or the Special
Committee shall have withdrawn or modified in a manner adverse to Parent or
Purchaser its approval or recommendation of the Merger Agreement or the
transactions contemplated thereby, including the Offer or the Merger.
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Effect of Termination
The Merger Agreement provides that if the Merger Agreement is terminated,
no party to the Merger Agreement will have any liability or further obligation
to any other party to the Merger Agreement, except for liability resulting from
breach of any covenant or agreement contained in the Merger Agreement and,
except that the agreements described in this paragraph and under "Certain Fees
and Expenses" and those relating to governing law will survive the termination
of the Merger Agreement.
Certain Fees and Expenses
Regardless of whether the Merger is consummated, all costs and expenses
incurred in connection with the Offer, the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such cost or expense,
except that the allocable share of each of Parent and Purchaser on the one hand,
and the Company, on the other hand, of expenses incurred in connection with (i)
any proxy statement required with respect to the Merger and (ii) the Schedule
13E-3 to be filed with the Commission in connection with the proposed
transaction shall be one-half.
Amendments and Waivers
Any provision of the Merger Agreement may be amended, modified,
supplemented or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment,
modification or supplement, by the Company, Parent and Purchaser or, in the case
of a waiver, by the party against whom the waiver is to be effective; provided
that after the adoption of the Merger Agreement by the Company's stockholders,
if required under applicable law, no such amendment or waiver shall, without the
further approval of such stockholders, reduce the amount or change form of
consideration to be received in exchange for Shares or otherwise materially and
adversely affect the rights of the Company's shareholders under the Merger
Agreement. The approval of the Special Committee shall be required for any
amendment or modification of the Merger Agreement, any extension by the Company
of the time for the performance of any obligations or other acts of Parent or
Purchaser other than as set forth in the Merger Agreement and any waiver of any
of the Company's rights under the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Company Board, stockholders of the
Company should be aware that certain members of the Company Board have certain
interests that present actual or potential conflicts of interest in connection
with the Offer and the Merger. The Special Committee and the Company Board were
aware of these actual or potential conflicts of interest and considered them in
connection with such recommendation.
The Company has informed Purchaser that, to the best of the Company's
knowledge, and subject to applicable securities laws, all directors and
executive officers of the Company (other than Mr. Blount) presently intend to
tender pursuant to the Offer all Shares owned by such persons, which total 8,400
Shares.
Beneficial Ownership of the Shares
Schedule I of this Offer to Purchase sets forth information concerning
beneficial ownership of Shares as of May 18, 1999 by each of the directors and
executive officers of the Company and Parent and Purchaser, respectively.
Information regarding beneficial ownership of Shares as of May 18, 1999 by
Samuel R. Blount, the sole Manager of Parent and the sole director and executive
officer of Purchaser is set forth under the heading "The Tender Offer -- Certain
Information Concerning Parent and Purchaser" in this Offer to Purchase and on
Schedule I hereto.
Management of Parent After the Merger
After the Merger, it is expected that the current executive officers of
Parent will continue in their present positions.
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Fees of the Special Committee
None of Messrs. McKinney, Hackney and Scott, the three members of the
Special Committee, has earned or will earn any fee as compensation for his
service on the Special Committee.
Aggregate Annual Compensation of the Executive Officers of the Company
As of the date of this Offer to Purchase, the aggregate annual base salary
of the executive officers of the Company was $637,250. The aggregate expected
bonus payment to be made to the executive officers of the Company for fiscal
year 1999 is approximately $233,175.
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THE TENDER OFFER
TERMS OF THE OFFER; EXPIRATION DATE
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not theretofore withdrawn in
accordance with the provisions set forth in "The Tender Offer -- Withdrawal
Rights." The term "Expiration Date" shall mean 12:00 midnight, New York City
time, on Thursday, June 17, 1999, unless and until Purchaser, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement, see
"Special Factors -- The Merger Agreement"), shall from time to time have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, Purchaser may increase the Offer Price
and may make any other changes in the terms and conditions of the Offer,
provided that, unless previously approved by the Company (acting through the
Special Committee) in writing, Purchaser may not (i) decrease the Offer Price,
(ii) change the form of consideration payable in the Offer, (iii) decrease the
number of Shares sought pursuant to the Offer, (iv) add additional conditions to
the Offer, or (v) amend or modify any other material term of the Offer in a
manner materially adverse to the holders of Shares (other than Parent and its
affiliates).
Purchaser may, without the Special Committee's consent, (i) from time to
time extend the Offer if at the scheduled Expiration Date of the Offer any
conditions to the Offer shall not have been satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Commission applicable to the Offer and (iii) extend the Offer
for any reason on one or more occasions for an aggregate period of not more than
ten business days beyond the latest Expiration Date that would otherwise be
permitted under clauses (i) or (ii) of this sentence. In addition, if at any
scheduled Expiration Date any of the conditions to the Offer have not been
satisfied or waived by Purchaser, but are capable of being satisfied in the
reasonable, good faith judgment of Purchaser, then, on the written request of
the Company (acting through the Special Committee), Purchaser shall from time to
time extend the Offer for up to ten business days from the then-scheduled
Expiration Date of the Offer, provided that Purchaser has no obligation to
extend the Offer beyond the date that is 60 days after the commencement of the
Offer. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act. Purchaser confirms that its right to
delay payment for Shares that it has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after the
termination or withdrawal of a tender offer.
Subject to the applicable rules and regulations of the Commission,
Purchaser expressly reserves the right, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement; see "Special Factors -- The
Merger Agreement"), at any time and from time to time, upon the failure to be
satisfied of any of the conditions to the Offer, to (i) terminate or amend the
Offer, (ii) extend the Offer and postpone acceptance for payment of any Shares,
or (iii) waive any condition, by giving oral or written notice of such
termination, amendment, extension or waiver to the Depositary. During any such
extension all Shares previously tendered and not properly withdrawn will remain
subject to any such extension and will remain subject to the Offer, subject to
the right of a tendering stockholder to withdraw such stockholder's Shares. In
the event that Purchaser waives any of the conditions set forth in "The Tender
Offer -- Certain Conditions of the Offer", the Commission may, if the waiver is
deemed to constitute a material change to the information previously provided to
the stockholders, require that the Offer remain open for an additional period of
time and/or that Purchaser disseminate information concerning such waiver.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may retain
tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn
except to the extent tendering stockholders are entitled to withdrawal rights as
described in "The Tender Offer -- Withdrawal Rights."
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However, as described above, the ability of Purchaser to delay payment for
Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under
the Exchange Act.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials (including by
public announcement as set forth above) and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Such
rules generally provide that the minimum period during which a tender offer must
remain open following a material change 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 or a change in the dealer's soliciting fee, will depend upon
the facts and circumstances, including the relative materiality of the changes
in the terms or information. In the Commission's view, an offer should remain
open for a minimum of five business days from the date a material change is
first published, sent or given to securityholders, and, if material changes are
made with respect to information that approaches the significance of price and
share levels, a minimum of ten business days may be required to allow for
adequate dissemination and investor response. With respect to a change in price
or a change in percentage of securities sought or a change in the dealer's
soliciting fee, a minimum ten business day period is generally required to allow
for adequate dissemination to stockholders and for investor response.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
The Company has provided Purchaser with the Company stockholder list, a
nonobjecting beneficial owners list and security position listings for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase
and the Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment, and will pay for, all Shares
validly tendered prior to the Expiration Date and not properly withdrawn,
promptly after the latest to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions to the Offer set forth in "The Tender
Offer -- Certain Conditions of the Offer."
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (A) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depositary Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in "The Tender Offer -- Procedures for Accepting the Offer
and Tendering Shares," (B) the 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) in
lieu of the Letter of Transmittal and (C) any other documents required under the
Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written
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notice to the Depositary of Purchaser's acceptance for payment of such Shares
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON
THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "The Tender Offer -- Procedures for Accepting the Offer and
Tendering Shares," such Shares will be credited to an account maintained at such
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration shall be paid to all holders of Shares that are
purchased pursuant to the Offer, whether or not such Shares were tendered prior
to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such
transaction or assignment will not relieve Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES
In order for a holder of Shares to tender validly Shares pursuant to the
Offer, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase and either (i) the Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the Depositary
(including an Agent's Message if the tendering stockholder has not delivered a
Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the
tendering stockholder must comply with the guaranteed delivery procedures
described below. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Purchaser may enforce
such agreement against such participant.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
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Book-Entry Transfer
The Depositary will establish accounts with respect to the Shares at the
Book-Entry Transfer Facilities for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that is
a participant in the system of any Book-Entry Transfer Facility may make a
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer at a Book-Entry Transfer Facility, either the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must, in any
case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees
Signatures on all Letters of Transmittal must be guaranteed by a firm which
is a member of the Medallion Signature Guarantee Program, or by any other
"eligible guarantor institution," as such term is defined in Rule 17Ad-15 under
the Exchange Act (each of the foregoing referred to as an "Eligible
Institution"), except in cases where Shares are tendered (i) by a registered
holder of Shares who has not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. If a Share
Certificate is registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made, or a Share Certificate not
accepted for payment or not tendered is to be returned, to a person other than
the registered holder(s), then the Share Certificate must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Share Certificate, with the
signature(s) on such Share Certificate or stock powers guaranteed by an Eligible
Institution. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery
If a stockholder desires to tender Shares pursuant to the Offer and the
Share Certificates evidencing such stockholder's Shares are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered; provided that all the
following conditions are satisfied:
(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 made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three NYSE trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry
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Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by the Letter of
Transmittal.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination shall be final and
binding on all parties. Purchaser reserves the absolute right to reject any and
all tenders determined by it not to be in proper form or the acceptance for
payment of which may, in the opinion of its counsel, be unlawful. Subject to the
terms of the Merger Agreement, Purchaser also reserves the absolute right to
waive any condition 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 and irregularities
have been cured or waived. None of 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. 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.
Other Requirements
By executing the Letter of Transmittal as set forth above, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser. All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such Shares
(and such other Shares and securities) will be revoked without further action,
and no subsequent proxies may be given nor any subsequent written consent
executed by such stockholder (and, if given or executed, will not be deemed to
be effective) with respect thereto. The designees of Purchaser will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
In order to prevent "backup withholding" of Federal income tax on payments
of cash pursuant to the Offer or the Merger (including cash paid pursuant to the
exercise of appraisal rights), a Stockholder surrendering Shares in the Offer or
the Merger must provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under penalty
of perjury that such TIN is correct and that such stockholder is not subject to
backup withholding. Certain stockholders (including, among others, all
corporations and certain foreign individuals and entities) are not subject to
backup withholding. If a stockholder does not provide its correct TIN or fails
to provide the certifications described above, the Internal Revenue Service may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer or the Merger may be subject to backup withholding of 31%.
All stockholders surrendering Shares pursuant to the Offer or the Merger should
complete and sign the main signature form and the Substitute Form W-9 included
as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary). Noncorporate foreign stockholders should complete and sign the main
signature form and a Form W-8, Certificate of Foreign
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<PAGE> 31
Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 9 to the Letter of Transmittal.
WITHDRAWAL RIGHTS
Tenders of the Shares made pursuant to the Offer are irrevocable except
that such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after July 18, 1999. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described herein.
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 page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares," any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with the Book-Entry
Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of Purchaser,
the Depositary, the Information Agent or any other person will be under duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "The Tender Offer -- Procedures for Accepting the Offer
and Tendering Shares."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of Federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law as
currently in effect. The tax consequences to each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States and stockholders who acquired their Shares
through the exercise of an employee stock option or otherwise in connection with
the performance of services. Special tax consequences may also apply to
stockholders who own (or are related to or affiliated with a person who owns)
options to acquire Shares. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND
ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX
LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for Federal income tax purposes under the Code, and may
also be a taxable transaction under applicable state, local or foreign income
and other tax laws. Generally, for Federal income tax purposes, a tendering
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<PAGE> 32
stockholder will recognize gain or loss in an amount equal to the difference
between the cash received by the stockholder pursuant to the Offer (or to be
received pursuant to the Merger) and the stockholder's adjusted tax basis in the
Shares tendered by the stockholder and purchased pursuant to the Offer (or
canceled pursuant to the Merger). Gain or loss will be calculated separately for
each block of Shares tendered and purchased pursuant to the Offer (or canceled
pursuant to the Merger). For Federal income tax purposes, such gain or loss will
be a capital gain or loss if the Shares are a capital asset in the hands of the
stockholder, which will be long-term capital gain or loss if the tendered
stockholder's holding period for the Shares exceeds one year. Stockholders are
urged to consult with their own tax advisors concerning the treatment of capital
gain or loss for Federal income tax purposes (including the limitations on the
deductibility of capital loss).
A stockholder that tenders Shares may be subject to 31% backup withholding
unless the stockholder provides its Taxpayer Identification Number ("TIN") and
certifies that such number is correct or properly certifies that it is awaiting
a TIN, or unless an exemption applies. A stockholder who does not furnish its
TIN may be subject to a penalty imposed by the IRS. See "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares -- Other
Requirements."
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding; provided that the required information is given to the IRS. If
backup withholding results in an over payment of tax, a refund can be obtained
by the stockholder upon filing an appropriate income tax return.
PRICE RANGE OF SHARES; DIVIDENDS
The NYSE is the principal market on which the Shares are traded (under the
symbol MWI). The following table indicates the high and low sale prices for
Common Stock as reported on the NYSE Composite Tape and Common Stock dividends
declared for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICE
--------------
HIGH LOW
----- -----
<S> <C> <C>
August 1, 1997 -- July 31, 1998
Second Quarter (beginning November 25, 1997).............. $14 $ 9 3/4
Third Quarter............................................. 17 1/8 9 15/16
Fourth Quarter............................................ 16 3/4 10 3/4
August 1, 1998 -- July 31, 1999
First Quarter............................................. $13 3/16 $ 7 1/4
Second Quarter............................................ 11 7/8 7
Third Quarter............................................. 10 1/2 4
Fourth Quarter (through May 18, 1999)..................... 9 3/4 4 1/16
</TABLE>
The Company's Common Stock began trading on the NYSE on November 25, 1997
in connection with the Company's initial public offering.
On May 17, 1999 there were approximately 30 holders of record of Common
Stock and 19,708,750 outstanding Shares.
On May 13, 1999, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the closing price of
Common Stock on the NYSE Composite Tape was $7.00 per Share. On May 18, 1999,
the last full day of trading before the commencement of the Offer, the closing
price of Common Stock on the NYSE Composite Tape was $9.69 per Share.
Stockholders are urged to obtain a current market quotation for the Shares.
The Company has not declared or paid any dividends on its Common Stock
since the IPO, other than dividends paid in connection with the Company's
termination of its subchapter S election. See "Special Factors -- Background of
the Offer" and "-- Certain Information Concerning the Company." The policy of
the Board of Directors of the Company is to retain earnings for the expansion
and development of the
29
<PAGE> 33
Company's business. The Credit Facilities (as defined herein) will contain a
number of financial covenants that may limit the ability of Parent or the
Company to pay dividends. See "-- Financing of the Offer and the Merger."
CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources.
General
The Company is a Delaware corporation with its principal offices located at
4700 Pinson Valley Parkway, Birmingham, Alabama 35215. The Company is a leading
domestic producer of casual outdoor furniture and is the largest manufacturer of
wrought iron furniture in the United States. The Company designs, manufactures,
and distributes a variety of consumer products, including outdoor and indoor
furniture and accessories, outdoor cushions and umbrellas, and garden products
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Company and certain other information are set forth in Schedule
I hereto.
On November 25, 1997, the Company completed the IPO, selling 3,708,750
shares of Common Stock for $13.00 per share. Upon completion of the IPO, the
Company terminated its subchapter S election under the Internal Revenue Code and
made a distribution from the proceeds of the IPO to persons holding Common Stock
prior to the IPO (including Mr. Blount) in an amount equal to the Company's
undistributed earnings from October 1, 1986 through the termination of the S
corporation election (approximately $32.7 million). The balance of the IPO net
proceeds (approximately $11.6 million) was used to fund capital expenditures by
the Company.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from the
Commission by telephoning 1-800-SEC-0330. The Company's filings are also
available to the public on the SEC Internet site (http://www.sec.gov). Copies of
such materials may also 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. Certain reports and other information concerning the Company may also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
Transaction with Director
On July 1, 1987, the Company entered into an Assignment of Sublease with
Champion International Corporation, a New York corporation ("CIC"), and Pinson
Partners, an Alabama partnership, with respect to the substitution of the
Company as sublessee under a Sublease dated January 31, 1977 (the "Sublease")
between CIC and Birmingham Ornamental Iron Company, Inc., an Alabama corporation
("BIOC"). Under the terms of the Sublease, the Company subleases the Meadowcraft
Road property from CIC for use as a manufacturing facility. The current rental
rate is approximately $32,100 per month, all of which is currently payable to
Pinson Partners. Mr. T. Morris Hackney, a Director and member of the Special
Committee, and his wife, Brenda Hackney, own a 40% interest in Pinson Partners
which entitles them to approximately $12,840 per month of the rental payments
made by the Company to Pinson Partners. In addition, pursuant to a letter dated
December 8, 1998, from the owner of the remaining 60% interest in Pinson
Partners to the Company, beginning with the payment due January 1, 1999 and
continuing through the expiration of the
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<PAGE> 34
Sublease in August 2000, Mr. Hackney also receives the remaining $19,260 of the
monthly rental payment due to Pinson Partners. The Company believes that the
terms of the underlying lease, including the monthly rental rate, are at least
as favorable to the Company as those which could have been negotiated with an
unaffiliated third party. The members of the Special Committee and the Company
Board are aware of the transaction with Mr. Hackney and the potential conflict
of interest posed thereby.
Financial Information
Set forth below is certain selected financial information relating to the
Company which has been excerpted or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1998 (the "Form 10-K") and the unaudited financial
statements contained in the Company's January 31, 1999 Form 10-Q, which
financial statements are attached hereto as Annex D and Annex E, respectively.
The financial information that follows is qualified in its entirety by reference
to such reports and other documents may be examined and copies may be obtained
from the offices of the Commission in the manner set forth above.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------ -------------------------
MAY 3, JULY 31,
1997 1998 JANUARY 31, JANUARY 31,
(53 WEEKS) (52 WEEKS) 1998 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
(AUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales........................................... $141,945 $162,201 $35,462 $30,973
Operating income (loss)............................. 30,652 34,610 2,779 (4,470)
-------- -------- ------- -------
Net income -- historical............................ 25,378 26,310 3,426 (3,889)
======== ======== ======= =======
Pro forma net income (loss)......................... 15,939 22,259 4,076 (3,889)
======== ======== ======= =======
Pro forma net income (loss) excluding benefit
related to change in tax status................... 15,939 19,059 874 (3,889)
======== ======== ======= =======
Earnings (loss) per Share:
Basic and diluted -- historical................... 1.59 1.42 0.20 (0.20)
======== ======== ======= =======
Basic and diluted -- pro forma.................... 1.00 1.20 0.24 (0.20)
======== ======== ======= =======
Basic and diluted -- pro forma excluding benefit
related to a change in tax status.............. 1.00 1.03 0.05 (0.20)
======== ======== ======= =======
At end of period:
Working capital................................... 12,853 18,981 13,710 15,222
Total assets...................................... 127,061 110,151 142,274 137,173
Long-term debt.................................... 15,320 26,513 26,959 25,218
Shareholders' equity.............................. 39,328 54,831 48,229 50,257
</TABLE>
During Fiscal 1997, the Company changed its reporting period to a fiscal
year ending on the Saturday closest to the last day of April. As a result of
this change, Fiscal 1997 includes 53 weeks of operations versus 52 weeks in
Fiscal 1996. Subsequent to the completion of the Company's initial public
offering and termination of the S Corporation election, the Company changed its
financial reporting year end to July 31.
Prior to November 25, 1997, the Company elected to be taxed as an S
Corporation and, as a result, the periods prior to November 25, 1997 do not
reflect historical income tax provisions. On November 25, 1997, the Company
terminated its S Corporation election in connection with the IPO and became a
taxable C Corporation. In connection with this termination, the Company recorded
a deferred tax asset and a credit to income tax provision in the amount of
$3,200,000. Additionally, the Company has allocated its income for the 12 months
ended May 3, 1998 (the end of the tax year), between the nontaxable S
Corporation and the taxable C Corporation based on the number of days in the
12-month period ended May 3, 1998, in which the Company was an S Corporation and
C Corporation, respectively. The effect on the allocation was that a portion of
the income for the nine months ended May 3, 1998 was attributable to the C
Corporation with the remainder being attributable to the S Corporation.
Subsequent to May 3, 1998, the Company was taxed entirely as a C Corporation.
The income attributable to the C Corporation resulted in a historical tax
provision
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of $4,038,000 for the 12 months ended July 31, 1998 which included the effects
of the recording of the net deferred tax asset of $3,200,000. The pro forma
provision gives effect to income taxes that would have been reported had the
Company's income been attributable to the C Corporation for the entire period.
The pro forma income tax provision reflects an overall effective tax rate of 37%
in fiscal 1997 and 1998, before considering the effect of the one time credit
income tax provision of $3,200,000 in fiscal 1998 related to the initial
recording of the net deferred tax asset.
The ratio of earnings to fixed charges for the Company's fiscal years 1998
and 1997 was 7.424 and 5.750, respectively. The ratio of earnings to fixed
charges for the Company's six months ended January 31, 1999 and three months
ended January 31, 1999 was (2.569) and 0.334, respectively. As of July 31, 1998
and January 31, 1999, the book value of the Company per Share was $2.78 and
$2.55, respectively.
Certain Projections
The Company does not, as a matter of course, make public any forecasts as
to its future financial performance. However, in connection with Parent's review
of the transactions contemplated by the Offer and the Merger, the Company has
provided Parent with certain non-public information concerning the Company and
its subsidiaries. Such information included, among other things, the Company's
projections of consolidated net sales, net earnings before interest, taxes,
depreciation and amortization ("EBITDA") and net income for the Company for the
fiscal years 1999 and 2000.
The information provided to Parent by the Company (the "Projections")
discloses, among other things, the following:
<TABLE>
<CAPTION>
FORECAST FORECAST
FY 1999 FY 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net Sales................................................... $141,212 $162,938
Net Income.................................................. 9,718 15,395
EBITDA...................................................... 26,935 35,785
</TABLE>
The Projections reflect the Company's forecast of its consolidated net
sales, EBITDA and net income on a stand-alone basis, without giving effect to
the Offer, the Merger or the assumption by the Company of Purchaser's
obligations under the Credit Facilities (as defined below) and otherwise as the
Surviving Corporation in the Merger, and without reflecting any potential cost
savings from the acquisition of the Company by Parent and Purchaser.
The Projections were prepared solely for internal use and not with a view
to public disclosure or compliance with the published guidelines of the
Commission or the American Institute of Certified Public Accountants regarding
projections and were not prepared with the assistance of, or reviewed by,
independent accountants. Such projections are included by Purchaser in this
Offer to Purchase solely because such information was furnished to Parent and
Purchaser by the Company. None of Parent, Purchaser, the Company, Wachovia
Securities or any other party to whom the projections were provided assumes any
responsibility for the validity, reasonableness, accuracy or completeness of the
projections. The projections were not prepared in accordance with generally
accepted accounting principles and were not audited or reviewed by any
independent accounting firm, nor did any such firm perform any other services
with respect thereto. While presented with numerical specificity, the
projections are based on a variety of assumptions relating to the businesses of
the Company, industry performance, general business and economic conditions and
other matters which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the Company's control. These assumptions
involve judgments with respect to, among other things, future economic and
competitive conditions, inflation rates and future business conditions.
Therefore, such projections are inherently imprecise and there can be no
assurance that they will prove to be reliable. Also, actual future results may
vary materially from those shown in the projections. None of Parent, Purchaser,
the Company or Wachovia Securities is under any obligation to or has any
intention to update the projections at any future time.
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<PAGE> 36
Purchases of Shares by the Company
The Company has not purchased any Shares since November 25, 1997.
CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
Parent is a Nevada limited liability company with its principal offices
located at 4700 Pinson Valley Parkway, Birmingham, Alabama 35215. Parent is a
holding company that conducts no business other than owning and holding shares
of the Company's Common Stock.
Purchaser is a Delaware corporation established on April 7, 1999 solely to
effect the Offer and the Merger, has not carried on any activities other than
the execution of the Merger Agreement and the Commitment Letter and the Fee
Letter (each as defined below; see "-- Financing of the Offer and the Merger")
and will not conduct any activities other than those required to effect the
Offer and the Merger. Its principal offices are located at 4700 Pinson Valley
Parkway, Birmingham, Alabama 35215. Purchaser is a direct wholly-owned
subsidiary of Parent.
Samuel R. Blount is the sole Manager of Parent and has served in such
position since Parent's formation in 1998. Mr. Blount is the sole director and
the Chief Executive Officer, Secretary and Treasurer of Purchaser and has served
in such capacities since Purchaser's formation in 1999. Mr. Blount has served as
a director and the Chairman of the Board of Directors of the Company since the
Company's formation in 1985. Mr. Blount has over 19 years of experience with the
Company and its predecessor. Prior to the formation of the Company, Mr. Blount
served as President of HBC, Incorporated, a holding company that owned several
manufacturing businesses. Mr. Blount is a citizen of the United States, and his
business address is 4700 Pinson Valley Parkway, Birmingham, Alabama 35215.
As of May 18, 1999, Parent beneficially owned 14,392,931 of the 19,708,750
outstanding Shares, and Samuel R. Blount, the sole Manager of Parent, Chairman
and Chief Executive Officer of Purchaser and Chairman of the Company,
beneficially owned an additional 100 Shares, representing in the aggregate
approximately 73% of the Shares then outstanding.
Of the 14,392,931 Shares of which Parent was the record owner as of May 18,
1999, 2,402,860 Shares are pledged to National Bank of Commerce of Birmingham
("National Bank") to secure certain lines of credit available to Mr. Blount and
certain affiliates of Mr. Blount. Upon the occurrence of certain events of
default contained in the agreements relating to such lines of credit, National
Bank would have the power to direct the voting or disposition of such
securities. To the knowledge of Parent, no such event of default has occurred
and is now continuing.
Except as described in this Offer to Purchase, (i) neither Parent nor
Purchaser, nor any executive officer, director, manager or associate or
majority-owned subsidiary of Parent or Purchaser beneficially owns or has any
right to acquire, directly or indirectly, any Shares and (ii) none of Parent,
Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons
or entities referred to above nor any director, executive officer, manager or
associate or majority-owned subsidiary of any of the foregoing has effected any
transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement or as otherwise described in
this Offer to Purchase, neither Parent nor Purchaser, nor any executive officer,
director or manager of Parent or Purchaser, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guaranties against loss, guaranties of
profits, division of profits or loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, since August 1, 1996, none of
Parent, Purchaser, nor any executive officer, director or manager of Parent or
Purchaser, has had any business relationship or transaction with the Company or
any of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer. Except as set forth in this Offer to Purchase, since August 1, 1996,
there have been no contacts, negotiations or transactions between Parent or any
of its subsidiaries, on the one hand, and the Company or its affiliates, on
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<PAGE> 37
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
FINANCING OF THE OFFER AND THE MERGER
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$56 million. The Offer and the Merger are not conditioned on obtaining
financing. Parent and Purchaser have received a letter (together with the
related term sheet, the "Commitment Letter"), dated May 10, 1999, from
NationsBank, N.A. ("NationsBank") and Nationsbanc Montgomery Securities LLC
("NMS") pursuant to which (i) NationsBank has committed to provide Parent and
Purchaser with financing in an aggregate principal amount of $56 million to
finance the Offer and up to $3 million of related fees and expenses (the "Tender
Offer Facility") and to provide the Surviving Corporation, upon consummation of
the Merger, with up to $56 million of a $150 million permanent credit facility
(the "Permanent Facility" and, together with the Tender Offer Facility, the
"Credit Facilities") to refinance the Tender Offer Facility and certain existing
indebtedness and letters of credit of the Company, finance the Merger and
related fees and expenses in an aggregate amount together with the fees and
expenses financed under the Tender Offer Facility not to exceed $3 million, and
to provide for on-going working capital needs and general corporate purposes,
and (ii) NMS has advised Parent and Purchaser of its willingness to act as
arranger and book manager and to form a syndicate of lenders for the Credit
Facilities. The commitments under the Commitment Letter will terminate (i) on
August 31, 1999, unless the Tender Offer Facility is closed by such time, and
(ii) if the Tender Offer Facility is closed in a timely manner, then on
September 30, 1999, unless the Permanent Facility is closed by such time. A copy
of the Commitment Letter is filed as an exhibit to the Schedule 14D-1 and
incorporated herein by reference, and the following summary of the Commitment
Letter is qualified in its entirety by reference thereto. As used in this
summary, the term "Borrower" refers (i) prior to the Merger to Purchaser and
(ii) subsequent to the Merger to the Surviving Company.
The Tender Offer Facility consists of a single term loan available upon
consummation of the Tender Offer, and availability under the Tender Offer
Facility is subject to compliance with Regulation U. The commitments under the
Tender Offer Facility will terminate on the earlier to occur of the closing of
the Merger or August 31, 1999, and borrowings thereunder will mature upon the
earliest of (i) consummation of the Merger, (ii) the date 60 days from the
funding of the loan thereunder or (iii) September 30, 1999. The Permanent
Facility includes an $80 million revolving credit facility (the "Tranche A
Seasonal Revolving Credit Facility") and a $70 million reducing revolving credit
facility (the "Tranche B Revolving Credit Facility"). The Tranche A Revolving
Credit Facility will include a $5 million sublimit for the making of swingline
loans. The Tranche B Revolving Credit Facility, which will be subject to annual
commitment reductions in the amount of $5 million on the first anniversary of
the closing of the Permanent Facility and in the amount of $10 million on each
of the second, third and fourth anniversaries thereof, will include a $15
million sublimit for the issuance of standby letters of credit. Availability of
the aggregate committed amount for the Tranche A Seasonal Revolving Credit
Facility will be determined by reference to a borrowing base to be determined.
The Permanent Facility will terminate, and any outstanding borrowings thereunder
will mature, five years from the closing of the Permanent Facility.
Outstanding borrowings under the Tender Offer Facility are currently
expected to bear interest at the Federal Funds rate plus 2.000%. Outstanding
borrowings under the Permanent Facility are currently expected to bear interest
at a rate equal to either, at the Borrower's option, (i) the Alternate Base Rate
(defined as the higher of (x) the NationsBank prime rate and (y) the Federal
Funds rate plus 0.500%) plus the applicable margin or (ii) LIBOR plus the
applicable margin. Subject to availability, the Borrower may select interest
periods of 1, 2, 3 or 6 months for LIBOR loans. The applicable margin on LIBOR
loans under the Permanent Facility is currently expected to vary between 1.000%
and 2.250%, and the applicable margin on Alternate Base Rate loans under the
Permanent Facility is currently expected to vary between 0% and 0.500%,
depending on the Borrower's funded debt to EBITDA ratio. In addition, the
Borrower is currently expected pay a facility fee on the revolving credit
commitment, irrespective of usage, that is currently expected to vary between
0.200% and 0.500% depending on the Borrower's funded debt to EBITDA ratio.
Initial pricing under
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<PAGE> 38
the Permanent Facility will be set at the highest level at least until the end
of the fiscal quarter ending July 31, 1999. A penalty rate will apply on all
amounts not paid when due at a rate per annum of 2% above the applicable
interest rate or letter of credit fee. The credit agreements relating to the
Credit Facilities will contain customary representations, warranties and
covenants.
The initial borrowings under each of the Credit Facilities will be subject
to the satisfaction of certain conditions precedent, including: (a) the absence
of any material adverse change since January 31, 1999 in the business, assets,
liabilities, operations or financial condition of the Borrower and its
subsidiaries or in the facts and information regarding such entities as
represented or otherwise known to NationsBank prior to the date of the
Commitment Letter; (b) the receipt by NationsBank, and reasonable satisfaction
of NationsBank with, certain monthly financial information with respect to the
Company and such other information with respect to the Company, its
subsidiaries, the Offer, the Merger and related transactions, including the
refinancing of certain existing indebtedness of the Company; (c) the absence of
any action, suit, investigation or proceeding pending in any court or before any
arbitrator or governmental authority that would reasonably be expected to have a
material adverse effect on the financial condition of the Company and its
subsidiaries taken as a whole or on the ability of the Company and the
Guarantors (as defined below) taken as a whole to perform their respective
obligations under the documents to be executed in connection with the Credit
Facilities; and (d) the compliance of the Company and its subsidiaries with all
existing financial obligations (after giving effect to the consummation of the
Offer and the Merger), except such noncompliance as would not, individually or
in the aggregate, have a material adverse effect on the business, financial
condition, properties or assets of the Company and its subsidiaries taken as a
whole.
The initial borrowings under the Tender Offer Facility will also be subject
to the satisfaction of certain additional conditions precedent, including: (a)
receipt by NationsBank of evidence of the consummation of the Offer upon the
satisfaction or, with the consent of NationsBank, waiver of any material
conditions thereof; (b) a purchase price for Shares in the Offer not exceeding
$10.00 per Share; and (c) the satisfaction of conditions substantially similar
to the conditions of the Offer described in "The Tender Offer -- Certain
Conditions of the Offer."
The initial borrowings under the Permanent Facility will also be subject to
the satisfaction of certain additional conditions precedent, including: (a) the
consummation of the Merger and the refinancing of certain existing funded
indebtedness of the Company in all material respects in accordance with the
terms of the Merger Agreement and in compliance with applicable law and
regulatory approvals and the satisfaction or, with the consent of NationsBank,
waiver of all of the conditions precedent to the obligations of Parent and
Purchaser under the Merger Agreement; (b) the absence of any material
alterations, amendments, changes or supplements to the Merger Agreement, and of
any waiver of any material condition thereof, other than those to which
NationsBank gave its prior written consent; (c) the receipt by NationsBank of,
and reasonable satisfaction of NationsBank with, certain pro forma financial
information concerning the Borrower; (d) receipt by NationsBank of a solvency
certificate from the chief financial officer of the Borrower as to the financial
condition and solvency of each of the Borrower and the Guarantors (after giving
effect to the consummation of the Offer and the Merger and the incurrence of
indebtedness related thereto); (e) the absence of any temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or any other legal restraint or prohibition which remains
in effect and prevents the consummation of the Merger; and (f) evidence of the
receipt of all governmental, shareholder and other, if any, consents and
approvals necessary in connection with the consummation of the Merger and the
related financings and other transactions contemplated by the Commitment Letter,
except where the failure to obtain such consents or approvals would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, liabilities, operations or financial condition of the Company
and its subsidiaries taken as a whole or a material adverse effect on Parent's
ability to consummate the Merger or the related transactions, and the absence of
any statute, rule or regulation enacted, promulgated or deemed applicable by any
governmental authority of competent jurisdiction which remains in effect and
that makes consummation of the Merger illegal. In addition, the commitments with
respect to the Permanent Facility are contingent upon there not having occurred
and being continuing since the date hereof a material adverse change in the
market
35
<PAGE> 39
for syndicated bank credit facilities which NationsBank and NMS determine in
their reasonable discretion could have a material adverse effect on the
syndication of the Credit Facilities
The Tender Offer Facility will be guaranteed by Parent and by Mr. Blount.
Upon consummation of the Merger, the guarantees of Parent and Mr. Blount will be
released and the Permanent Facility will be guaranteed by all existing and
hereafter acquired direct and indirect domestic subsidiaries of the Borrower
(such domestic subsidiaries are referred to in this description of the
Commitment Letter as the "Guarantors"). The obligations of Purchaser under the
Tender Offer Facility will be secured at the time of the initial funding to
finance the purchase of Shares pursuant to the Offer by a pledge (the "Share
Pledge") to NationsBank, on behalf of the lenders for the Tender Offer Facility,
of (i) all of the Shares currently owned by Parent and its affiliates (including
Mr. Blount) not otherwise pledged or encumbered (but not less than 12 million
Shares) and (ii) all of the Shares purchased pursuant to the Offer. The Share
Pledge will be released upon the closing of the Permanent Facility and the
refinancing of the Tender Offer Facility with the initial borrowings thereunder.
Upon closing of the Permanent Facility and concurrently with the consummation of
the Merger, NationsBank, on behalf of the lenders for the Permanent Facility,
will receive a pledge of (i) all of the issued and outstanding capital stock of
each direct and indirect domestic subsidiary of the Borrower, (ii) 65% of the
issued and outstanding capital stock (or such greater percentage which would not
result in material adverse tax consequences) of each direct foreign subsidiary
of the Borrower or any of its domestic subsidiaries, and (iii) substantially all
other present and future assets and properties of the Borrower and the
Guarantors, subject to permitted liens and, in the case of certain arrangements
requiring consent of third parties thereto, subject to and only to the extent
that any such consents are actually obtained.
The documentation relating to the Tender Offer Facility will contain usual
and customary covenants for tender offer facilities of this type. The
documentation relating to the Permanent Facility will contain usual and
customary covenants for permanent secured credit facilities of this type
(subject to materiality limitations, baskets and carve-outs to be negotiated),
including: (i) compliance with laws; (ii) payment of taxes; (iii) maintenance of
insurance; (iv) limitation on liens and negative pledges; (v) limitations on
mergers, consolidations and sales of assets; (vi) limitations on incurrence of
debt; (vii) limitations on cash dividends and stock redemptions and the
redemption and/or prepayment of other debt; (viii) limitations on investments
and acquisitions; (ix) ERISA; (x) limitation on transactions with affiliates;
and (xi) limitation on capital expenditures. The documentation relating to the
Permanent Facility will also contain certain financial covenants, including: (i)
maintenance on a rolling four quarter basis of a maximum leverage ratio of total
funded debt to EBITDA as of the end of each fiscal month and quarter initially
not to exceed 3.25:1.0, with certain step-downs; (ii) maintenance on a rolling
four quarter basis of a certain debt service coverage ratio, with step-ups to be
determined; (iii) maintenance at all times of a minimum net worth, with step-ups
to be determined; and (iv) annual capital expenditure limits to be determined.
Parent and Purchaser anticipate that Purchaser's obligations under the
Tender Offer Facility will be repaid with a portion of the initial borrowings
under the Permanent Facility. Parent anticipates that obligations under the
Permanent Facilities will be repaid from a variety of sources, including,
without limitation, funds generated internally by the Company and its
subsidiaries following the Merger and bank refinancing. The source and
allocation of various methods of repayment will be determined and may be
modified by Parent based on market conditions and such other factors as Parent
may deem appropriate.
DIVIDENDS AND DISTRIBUTIONS
If, subsequent to the date of the Merger Agreement but prior to the
Effective Time, the Company changes the number of Shares outstanding as a result
of any stock split, stock dividend, recapitalization or similar transaction,
then appropriate adjustments shall be made in all amounts payable pursuant to
the Merger Agreement, including, without limitation, the Offer Price and the
Merger Consideration.
The Company has not declared or paid any dividends on its Common Stock
since the IPO, other than dividends paid in connection with the Company's
termination of its Subchapter S election. In connection with such termination of
the Company's Subchapter S election, the Company has made three distributions
(each, an "S Corporation Distribution") to persons holding Common Stock prior to
the IPO (including Mr. Blount).
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<PAGE> 40
In November 1997, the Company made an S Corporation Distribution in the amount
of the Company's undistributed earnings from October 1, 1986 through the end of
fiscal 1997. In June and October 1998, the Company made additional S Corporation
Distributions based upon the Company's S Corporation earnings attributable to
the period from the end of fiscal 1997 (May 4, 1997) to the date of termination
of the S Corporation election (November 25, 1997) in the respective approximate
amounts of $16.2 million and $0.7 million. In order to determine the S
Corporation earnings attributable to this period, the Company prorated its
taxable income for the 12-month period ending May 3, 1998, based on the number
of days in the 12-month period in which the Company was an S Corporation. See
"Special Factors -- Background of the Offer" and "-- Certain Information
Concerning the Company." The policy of the Board of Directors of the Company is
to retain earnings for the expansion and development of the Company's business.
Future dividend policy and the payment of dividends, if any, will be determined
by the Board of Directors of the Company in light of circumstances then
existing, including the Company's earnings, financial condition, contractual
restrictions and other factors deemed relevant by the Company Board.
CERTAIN EFFECTS OF THE OFFER
Market for the Shares
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
Stock Quotation
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on the NYSE.
According to the NYSE's published guidelines, the Shares would not be eligible
for continued listing if, among other things, the number of Shares publicly held
falls below 600,000, the number of beneficial holders of Shares falls below
1,200 (holding at least 100 Shares) or the aggregate market value of such
publicly held Shares does not exceed $5,000,000. If, as a result of the purchase
of Shares pursuant to the Offer or otherwise the Shares no longer meet the
requirements of the NYSE for continued listing, the listing of the Shares might
be discontinued and, in such event, the market for the Shares could be adversely
affected. In the event the Shares were no longer eligible for listing on the
NYSE, quotations might still be available from other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of such Shares remaining at such
time, the interest in maintaining a market in such Shares on the part of
securities firms, the possible termination of registration of such Shares under
the Exchange Act as described below and other factors.
Exchange Act Registration
The Shares are currently registered under Section 12(b) of 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 and held by 300 or more holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the Commission, would suspend the Company's obligations
under Section 15(d) of the Exchange Act to file with the Commission the annual,
quarterly, current and other reports required by Section 13(a) of the Exchange
Act, and would make certain provisions of the Exchange Act no longer applicable
to the Company, such as the short-swing profit recovery provisions of Section
16(b) of the Exchange Act, the requirement of furnishing a proxy statement
pursuant to Section 14(a) of the Exchange Act in connection with stockholders'
meetings and the related requirement of furnishing an annual report to
stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, may be impaired or eliminated. If registration
of the Shares under the Exchange Act were terminated, the Shares would no longer
be "margin securities" or be eligible for
37
<PAGE> 41
listing on the NYSE. Parent and Purchaser currently intend to seek to cause the
Company to terminate the registration of the Shares under the Exchange Act as
soon after consummation of the Offer as the requirements for termination of
registration are met.
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. In
any event, the Shares will cease to be "margin securities" if registration of
the Shares under the Exchange Act is terminated.
Increased Interest in Net Book Value and Net Earnings of the Company
If the Offer is consummated, the direct and indirect interest of Parent in
the Company's net book value and net earnings will increase from 73% in
proportion to the number of Shares acquired in the Offer. Following consummation
of the Merger, Parent's direct and indirect interest in such items will increase
from 73% to 100%, and the Company will be a wholly owned subsidiary of Parent.
Accordingly, Parent and its subsidiaries will be entitled to all benefits
resulting from that interest, including all income generated by the Company's
operations, and any future increase in the Company's value and the right to
elect all members of the Company Board. Similarly, Parent will also bear the
risk of losses generated by the Company's operations and any decrease in the
value of the Company after the Merger. Furthermore, after the Merger, pre-Merger
stockholders (other than Parent) will not have the opportunity to participate
directly in the earnings and growth of the Company and will not face the risk of
losses generated by the Company's operations or decline in the value of the
Company.
Had the Offer and the Merger been consummated at January 31, 1999, Parent's
beneficial interest in the net book value (shareholders' equity) at January 31,
1999 and net earnings of the Company for the six months ended January 31, 1999,
as reflected in the Company's January 31, 1999 Form 10-Q, would have increased
from 73% to 100% or from $36,688,000 and $(2,839,000) to $50,257,000 and
$(3,889,000), respectively.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment, or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered shares after
the termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer, and (subject to the terms of the Merger Agreement) may
amend or terminate the Offer or postpone the acceptance for payment, the
purchase of, and/or (subject to any such applicable rules and regulations of the
Commission) payment for, Shares if at any time on or after the date of the
Merger Agreement and at or before the time of payment for any such Shares
(whether or not any Shares shall theretofore have been accepted for payment or
paid pursuant to the Offer) any of the following conditions exists:
(a) there shall be pending any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before
any governmental authority, administrative agency or court of competent
jurisdiction, domestic or foreign, or there shall be in effect any
judgment, decree or order of any governmental authority, administrative
agency or court of competent jurisdiction, or any other legal restraint,
preventing or seeking to prevent consummation of the Offer, the Merger or
the other transactions contemplated by the Merger Agreement, prohibiting or
seeking to prohibit or limiting or seeking to limit Parent or the Company
from exercising any material rights and privileges pertaining to the
ownership of the Shares or compelling or seeking to compel any party or any
of its subsidiaries to dispose of or hold separate all or any portion of
the business or assets of Parent or the Company or any of their respective
subsidiaries that
38
<PAGE> 42
is material in relation to the consolidated business or assets of Parent
and its subsidiaries or the Company and its subsidiaries, in each case as a
result of the Offer, the Merger or the other transactions contemplated by
the Merger Agreement;
(b) there shall have occurred, or Purchaser shall have become aware of
any fact that has had, or could reasonably be expected to have, a Material
Adverse Effect;
(c) there shall have occurred any general suspension of trading in, or
limitation on prices for, securities on the NYSE or in the over-the-counter
market, an aggregate decline of at least 15% in either the Dow Jones
Average of Industrial Stocks or the Standard & Poor's 500 index from that
existing at the close of business on May 12, 1999, any declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, any material limitation by any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency in the United States that
materially affects the extension of credit generally by lenders that
regularly participate in the United States market in loans to large
corporations, any commencement of a war involving the United States or any
commencement of armed hostilities or other national or international
calamity involving the United States (other than any hostilities existing
as of the date of the Merger Agreement) that has a material adverse effect
on bank syndication or financial markets in the United States or in the
case of any of the foregoing occurrences existing on or at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of
such determination;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(g) the Board of Directors of the Company shall have withdrawn or
modified its recommendation of the Offer or the Merger; or
(h) any material approval, permit, authorization, consent or waiting
period of any domestic, foreign or supranational governmental,
administrative or regulatory agency (federal, state, local, provincial or
otherwise) located or having jurisdiction within the United States or any
country or economic region in which either the Company or Parent, directly
or indirectly, has material assets or operations, shall not have been
obtained or satisfied on terms satisfactory to Parent in its reasonable
discretion;
which, in the reasonable good faith judgment of Purchaser with respect to each
and every matter referred to above and regardless of the circumstances
(including any action or inaction by Purchaser or any of its affiliates not
inconsistent with the terms hereof) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment of or
payment for Shares or to proceed with the Merger.
CERTAIN LEGAL MATTERS
General
Except as described in this Section, based on its review of publicly
available filings of the Company with the Commission and other publicly
available information regarding the Company, neither Parent nor Purchaser is
aware of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by Purchaser's acquisitions of Shares (and/or the indirect
acquisition of the stock of the Company's subsidiaries) as contemplated herein
or of any approval or other action by or with any domestic, foreign, or
international government authority or administrative or regulatory agency that
would be required for the acquisition of ownership of the Shares
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<PAGE> 43
(and/or the indirect acquisition of the stock of the Company's subsidiaries) by
Purchaser. Should any such approval or other action be required, Parent and
Purchaser currently contemplate that such approval or other action will be
sought. While, except as otherwise expressly described in this Section,
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained without substantial conditions or that failure to
obtain any such approval or other action might not result in consequences
adverse to the Company's business or that certain parts of the Company's
business might not have to be divested if such approvals were not obtained or
such other actions were not taken, any of which could cause Purchaser to decline
to accept for payment or pay for any Shares tendered. Purchaser's obligations to
accept for payment or pay for the Shares tendered pursuant to the Offer is
subject to the conditions set forth in this Offer to Purchase, including the
conditions referred to above in this paragraph and certain conditions with
respect to litigation and governmental action. See "The Tender Offer -- Certain
Conditions of the Offer."
Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice and the FTC and certain waiting period
requirements have been satisfied. Since Parent currently holds more than 50% of
the outstanding Shares of the Company, the acquisition of Shares pursuant to the
Offer is exempt from the reporting requirements of the Act as an "intraperson
transaction" pursuant to FTC Rule 802.30. Accordingly, Parent and Purchaser do
not intend to file a Notification and Report Form with respect to the Offer
under the HSR Act.
State Takeover Laws
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the DGCL. Section 203 generally prohibits a corporation which has
voting stock traded on a national securities exchange from engaging in certain
business combinations, including, without limitation, a merger, sale of
substantial assets, loan or substantial issuance of stock, with an interested
stockholder (defined generally as a person beneficially owning 15% or more of
the corporation's voting stock with the exception of any person who owned and
has continued to own shares in excess of the 15% limitation since December 23,
1987), or an interested stockholder's affiliates or associates, for a three-year
period beginning on the date such person became an interested stockholder. The
restrictions on business combinations do not apply if the interested stockholder
owned shares in excess of the 15% limitation prior to the time when the voting
stock began trading on a national securities exchange. The restrictions of
Section 203 are inapplicable to the Offer and the Merger for the foregoing
reasons.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which as a matter of state securities law, make takeovers of
corporations meeting certain requirements more difficult. In 1987, however, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
Purchaser has not currently complied with any such state takeover statute
or regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer
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<PAGE> 44
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant state
authorities, and Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. See "The Tender Offer -- Certain Conditions of the Offer."
CERTAIN LITIGATION
The Company has been named, along with certain current and former executive
officers and members of the Company Board (including Mr. Blount and each of the
members of the Special Committee), as a defendant in a purported class action
lawsuit filed on or about May 14, 1999 by one alleged stockholder of the Company
purportedly on behalf of the stockholders of the Company in the Court of
Chancery in New Castle County, Delaware (the "Delaware Action"). The complaint
in the Delaware Action alleges, among other things, that the $8.00 per Share
price initially offered by Mr. Blount is inadequate, that the members of the
Special Committee have purported conflicts of interest that prevent them from
impartially representing the Company's public stockholders and that the
defendants have breached or are breaching their fiduciary duties. The complaint
in the Delaware Action seeks, among other things, injunctive relief barring the
consummation or closing of the proposed transaction; or, in the event the
proposed buyout is consummated, equitable relief rescinding it and setting it
aside; and compensatory and/or rescissory damages in an unspecified amount. A
copy of the complaint in the Delaware Action has been obtained from the court
and is filed as an exhibit to the Schedule 14D-1 and incorporated herein by
reference, and the foregoing summary of the Delaware Action is qualified in its
entirety by reference thereto. Mr. Blount and the Company believe that the
Delaware Action is without merit.
FEES AND EXPENSES
Except as set forth below, Parent and Purchaser will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Purchaser has retained D.F. King & Co., Inc. to be the Information Agent
and Parent and Purchaser have retained American Stock Transfer and Trust Company
to be the Depositary in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telecopy, telegraph and personal
interview and may request banks, brokers, dealers and other nominee stockholders
to forward materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, D.F. King will be paid a reasonable and customary fee for its services
and will also be reimbursed for certain out-of-pocket expenses and may be
indemnified against certain liabilities and expenses in connection with the
Offer, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including certain liabilities under federal
securities laws. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Purchaser for customary handling and mailing expenses incurred by
them in forwarding material to their customers.
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The following is an estimate of fees and expenses to be incurred in
connection with the Offer and the Merger:
<TABLE>
<S> <C>
Fees and Expenses to Be Paid by Purchaser:
Legal..................................................... $ 300,000
Printing (including certain mailing expenses)............. 60,000
Advertising............................................... 25,000
Filing.................................................... 10,600
Depositary................................................ 8,500
Information Agent (including certain mailing expenses).... 10,000
Financing................................................. 1,116,000
----------
Total............................................. $1,530,100
==========
Fees and Expenses to Be Paid by the Company:
Financial Advisor to Special Committee.................... $ 545,000
Legal..................................................... 50,000
----------
Total............................................. $ 595,000
==========
</TABLE>
MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. 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. To the extent Purchaser becomes
aware of any state law that would limit the class of offerees in the Offer,
subject to the terms of the Merger Agreement, Purchaser will amend the Offer
and, depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior to
the expiration of the Offer. In any jurisdiction the securities, blue sky or
other laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of 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 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.
Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 and a Transaction Statement on Schedule 13E-3, pursuant to Rules
14d-1 and 13e-3, respectively, under the Exchange Act, together with exhibits
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company has filed with the Commission
a Solicitation/Recommendation Statement on Schedule 14D-9, together with
exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the
recommendations of the Company Board and the Special Committee with respect to
the Offer and the reasons for such recommendations and furnishing certain
additional related information. A copy of such documents, and any amendments
thereto, may be examined at, and copies may be obtained from the Commission (but
not the regional offices of the Commission) in the manner set forth under
"-- Certain Information Concerning Parent and Purchaser" above.
MWI ACQUISITION CO.
May 19, 1999
42
<PAGE> 46
SCHEDULES AND ANNEXES
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth (i) the name, current business or residence
address and present principal occupation or employment, (ii) material
occupations, positions, offices or employments and business addresses thereof
for the past five years and (iii) information as to beneficial ownership of
Shares of each director and executive officer of the Company. Each of the
Company's directors and officers is a citizen of the United States. Except as
otherwise indicated, the business address of each director and executive officer
of the Company is 4700 Pinson Valley Parkway, Birmingham, Alabama 35215.
Directors of the Company are indicated with an asterisk.
<TABLE>
<CAPTION>
AMOUNT AND
PRESENT PRINCIPAL OCCUPATION OR NATURE OF PERCENTAGE OF
EMPLOYMENT; MATERIAL POSITIONS HELD BENEFICIAL OUTSTANDING
DURING THE PAST FIVE YEARS OWNERSHIP SHARES
NAME AND BUSINESS ADDRESSES THEREOF OF SHARES OWNED
---- ----------------------------------- ---------- -------------
<S> <C> <C> <C>
*Samuel R. Blount...................... Mr. Blount is a director and 14,393,031(1) 73.0%
Chairman of the Board of Directors
of the Company and has served in
such capacity since the Company's
formation in 1985. Mr. Blount has
over 19 years of experience with
the Company and its predecessor.
Prior to the formation of the
Company, Mr. Blount served as
President of HBC, Incorporated, a
holding company that owned
several manufacturing businesses.
Steven C. Braswell..................... Mr. Braswell is Vice President of 3,200(2) #
Finance, Chief Financial Officer
and Secretary of the Company and
has served in such capacity since
1991. Mr. Braswell has over 25
years of experience in finance
and accounting, including
thirteen years at Hanson
Industries in various financial
positions including Group
Controller and Vice President,
two years as manager of Finance
and Accounting at Perkin Elmer
Corporation in its Interdata
Division and five years with
Price Waterhouse.
*Timothy M. LeRoy...................... Mr. LeRoy is a director and 800(3) #
President and Chief Operating
Officer of the Company and has
served in such capacity since
March 1999. Mr. LeRoy previously
served as Vice President of the
Company since 1991. Prior to
joining the Company, Mr. LeRoy
was with Central Hardware Company
for
</TABLE>
S-1
<PAGE> 47
<TABLE>
<CAPTION>
AMOUNT AND
PRESENT PRINCIPAL OCCUPATION OR NATURE OF PERCENTAGE OF
EMPLOYMENT; MATERIAL POSITIONS HELD BENEFICIAL OUTSTANDING
DURING THE PAST FIVE YEARS OWNERSHIP SHARES
NAME AND BUSINESS ADDRESSES THEREOF OF SHARES OWNED
---- ----------------------------------- ---------- -------------
<S> <C> <C> <C>
eight years as Supervisor, Buyer
and Merchandiser.
Rory S. Rehmert........................ Mr. Rehmert is Vice President of 400(4) #
Sales and Marketing (Specialty
Accounts) of the Company and has
served in such capacity since
1991. Prior to joining
Meadowcraft, Mr. Rehmert served
as National Sales Manager for
Lyon Shaw Furniture Company and
Special Accounts Manager for
Winston Furniture Company and as
Store Manager with Flower City,
Inc.
*T. Morris Hackney..................... Mr. Hackney has served as a 0 0%
director of Meadowcraft since 1997.
He has been Chairman of the Board
of Citation Corporation since
1974.
*James M. Scott........................ Mr. Scott has served as a director 3,000(5) #
of Meadowcraft since 1997. He has
been a Partner, past Chairman of
the Board of Governors and past
Chairman of the Business and Tax
Section of Capell, Howard, Knabe
and Cobbs, P.A., a law firm. Mr.
Scott has been with the firm
since 1964.
*Reese H. McKinney, Jr................. Mr. McKinney has served as a 1,000(6) #
director of Meadowcraft since
1997. He was appointed Probate
Judge for Montgomery County in
1998. Prior to being appointed
Probate Judge, Mr. McKinney
served as the Administrative
Assistant to the Mayor of the
City of Montgomery, Alabama and
served in such capacity since
1978.
All Named Executive Officers and
Directors as a group (7 persons)..... 14,401,431 73.0%
</TABLE>
- ---------------
# Represents less than 1%
(1) Includes 14,392,931 Shares held of record by Parent, of which Mr. Blount is
a Member and the sole Manager.
(2) Includes 3,200 Shares owned by Mr. Braswell at the completion of the IPO.
(3) Includes 700 Shares owned by Mr. LeRoy at the completion of the IPO.
(4) Includes 400 Shares owned by Mr. Rehmert at the completion of the IPO.
(5) Includes 3,000 Shares owned by Mr. Scott.
(6) Includes 1,000 Shares owned by Mr. McKinney.
S-2
<PAGE> 48
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
SRB-MWI, L.L.C.
MWI ACQUISITION CO.
AND
MEADOWCRAFT, INC.
DATED AS OF MAY 13, 1999
- --------------------------------------------------------------------------------
<PAGE> 49
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
(NOT PART OF THE AGREEMENT)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES..................................................... A-1
ARTICLE I THE TENDER OFFER.................................. A-1
1.1 The Offer............................................. A-1
1.2 The Company........................................... A-2
1.3 Board of Directors.................................... A-3
ARTICLE II THE MERGER....................................... A-3
2.1 The Merger............................................ A-3
2.2 Certificate of Incorporation.......................... A-3
2.3 By-Laws............................................... A-3
2.4 Directors and Officers................................ A-4
2.5 Effective Time........................................ A-4
ARTICLE III CONVERSION OF SHARES............................ A-4
3.1 Company Common Stock.................................. A-4
3.2 Dissenting Shares..................................... A-4
3.3 Purchaser Common Stock................................ A-5
3.4 Exchange of Shares.................................... A-5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.... A-6
4.1 Organization.......................................... A-6
4.2 Capitalization........................................ A-6
4.3 Authorization of This Agreement; Recommendation of
Merger................................................. A-6
4.4 Consents and Approvals................................ A-7
4.5 No Conflicts.......................................... A-7
4.6 Compliance............................................ A-7
4.7 Financial Statements and Reports; No Undisclosed
Liabilities............................................ A-7
4.8 Offer Documents; Proxy Statement; Other Information;
Schedule 14D-9......................................... A-8
4.9 Brokers' Fees......................................... A-8
4.10 No Other Representations or Warranties............... A-8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE PURCHASER............................................. A-9
5.1 Organization.......................................... A-9
5.2 Authorization of This Agreement....................... A-9
5.3 Consents and Approvals; No Violations................. A-9
5.4 Offer Documents; Proxy Statement; Other Information... A-10
5.5 Brokers' Fees......................................... A-10
5.6 Financial Ability..................................... A-10
5.7 No Prior Activities................................... A-10
5.8 Company Compliance.................................... A-10
5.9 The Parent's Intentions Regarding the Company......... A-10
5.10 Surviving Corporation Solvency....................... A-10
ARTICLE VI COVENANTS........................................ A-11
6.1 Conduct of the Business of the Company................ A-11
6.2 Shareholder Approval.................................. A-11
</TABLE>
i
<PAGE> 50
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.3 Best Efforts.......................................... A-11
6.4 Public Announcements.................................. A-12
6.5 Indemnification....................................... A-12
6.6 Notification of Certain Matters....................... A-12
ARTICLE VII CLOSING CONDITIONS.............................. A-13
7.1 Conditions to the Obligations of the Parent, the
Purchaser and the Company.............................. A-13
ARTICLE VIII CLOSING........................................ A-13
8.1 Time and Place........................................ A-13
8.2 Filings at the Closing................................ A-13
ARTICLE IX TERMINATION AND ABANDONMENT...................... A-13
9.1 Termination........................................... A-13
9.2 Procedure and Effect of Termination................... A-14
ARTICLE X MISCELLANEOUS..................................... A-14
10.1 Amendment and Modification........................... A-14
10.2 Waiver of Compliance; Consents....................... A-14
10.3 Survival of Warranties............................... A-15
10.4 Notices.............................................. A-15
10.5 Assignment; Parties in Interest...................... A-16
10.6 Expenses............................................. A-16
10.7 Specific Performance................................. A-16
10.8 Governing Law........................................ A-16
10.9 Counterparts......................................... A-16
10.10 Interpretation...................................... A-16
10.11 Entire Agreement.................................... A-16
ANNEX A CERTAIN CONDITIONS OF THE OFFER..................... A-18
</TABLE>
ii
<PAGE> 51
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of May 13, 1999 (the
"Agreement" or the "Merger Agreement"), is entered into by and among SRB-MWI,
L.L.C., a Nevada limited liability company (the "Parent"), MWI Acquisition Co.,
a Delaware corporation that is a wholly-owned subsidiary of the Parent (the
"Purchaser"), and Meadowcraft, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the Purchaser has been formed for the sole purpose of effecting
the transactions contemplated by this Agreement;
WHEREAS, as of the date hereof the Parent and its affiliates own an
aggregate of 14,393,031 of the outstanding shares (the "Shares") of common
stock, par value $.01 per share (the "Common Stock"), of the Company;
WHEREAS, the Parent and the Purchaser wish to consummate the transactions
contemplated by this Agreement, pursuant to which, subject to the terms and
conditions set forth herein, the Purchaser will merge with and into the Company
and the Company will become a wholly-owned subsidiary of the Parent; and
WHEREAS, the Board of Directors of the Company (at a meeting duly called
and held, and acting on the unanimous recommendation of the Special Committee of
the Board of Directors of the Company comprised entirely of non-management
independent directors (the "Special Committee")), has unanimously approved this
Agreement and the transactions contemplated hereby and has unanimously
determined that each of the Offer and the Merger (as defined herein) is fair to,
and in the best interests of, the holders of Shares (other than the Parent and
its affiliates) and recommended the acceptance of the Offer and approval and
adoption of this Agreement by the shareholders of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the Parent, the Purchaser and the Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer. (a) Provided that no event shall have occurred that would
result in a failure to satisfy any of the conditions set forth in Annex A
hereto, the Purchaser shall, as promptly as practicable but in no event later
than five business days following the public announcement of the execution of
this Agreement, commence an offer (the "Offer"), subject to Rules 13e-3 and
14d-1 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to purchase any and all of the Shares of the Company at a price
of $10.00 per share (the "Per Share Amount"), net to the seller in cash. The
Purchaser shall not without prior written consent of the Company (with the
approval of the Special Committee) reduce the Per Share Amount or the number of
Shares sought to be purchased, modify the form of consideration to be received
by holders of the Shares in the Offer, impose additional conditions to the Offer
or amend or modify any other material term of the Offer in a manner materially
adverse to the holders of Shares (other than the Parent and its affiliates).
Subject to the terms and conditions thereof, the Offer shall expire at midnight,
New York City time, on the date that is twenty (20) business days from the date
the Offer is commenced; provided, however, that without the Special Committee's
consent, the Purchaser may (i) from time to time extend the Offer, if at the
scheduled expiration date of the Offer any of the conditions to the Offer shall
not have been satisfied or waived, (ii) extend the Offer for any period which,
in the reasonable judgment of the Purchaser, is required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
("SEC"), and (iii) extend the Offer for any reason on one or more occasions for
an aggregate period of not more than forty (40) business days beyond the latest
expiration date that would otherwise be permitted under clauses (i) and (ii) of
this sentence. In addition, if at any scheduled expiration date of the Offer any
of the conditions of the Offer have not been satisfied or waived by the
Purchaser, but are capable of being satisfied in the reasonable, good faith
judgment of the Purchaser, then, on the written request of the
A-1
<PAGE> 52
Company (acting through the Special Committee), the Purchaser shall from time to
time extend the Offer for up to ten (10) business days from the then-scheduled
expiration date of the Offer; provided, that the Purchaser shall have no
obligation to extend the Offer beyond the date 60 days after commencement of the
Offer. Subject to the terms and conditions of the Offer, the Purchaser shall,
and the Parent shall cause the Purchaser to, pay as promptly as reasonably
practicable after expiration of the Offer, for all of the Shares validly
tendered and not withdrawn pursuant to the Offer that the Purchaser is obligated
to purchase. The Per Share Amount will be paid net to the seller in cash, less
any required withholding taxes, on the terms and subject to the conditions of
the Offer. The Parent, the Purchaser and the Company agree that no Shares held
by the Parent, the Purchaser, any affiliate of the Parent or the Purchaser, the
Company or any subsidiary thereof will be tendered in the Offer.
(b) As soon as practicable on the date the Offer is commenced, the
Purchaser will file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with any and all supplements or amendments thereto, and including all
exhibits, the "Schedule 14D-1"), with respect to the Offer, and a Transaction
Statement on Schedule 13E-3 (together with any and all supplements or amendments
thereto, and including all exhibits, the "Schedule 13E-3"). The Schedule 14D-1,
together with the related offer to purchase and the form of the related letter
of transmittal and any amendments or supplements thereto, are hereinafter
collectively referred to as the "Offer Documents." Each of the Parent, the
Purchaser and the Company agrees promptly to correct any information provided by
it for use in the Offer Documents and the Schedule 13E-3 if and to the extent
that it shall have become false or misleading in any material respect. The
Purchaser agrees to take all steps necessary to cause the Offer Documents and
the Schedule 13E-3 as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Purchaser shall give the Company and its
counsel a reasonable opportunity to review the Offer Documents and the Schedule
13E-3 prior to their being filed with the SEC or disseminated to the
shareholders of the Company. The Purchaser will furnish the Company and its
counsel in writing with any comments that the Purchaser or its counsel may
receive from the SEC or its staff with respect to the Offer Documents or the
Schedule 13E-3, promptly after receipt of such comments.
1.2 The Company. (a) The Company hereby approves of and consents to the
Offer, and represents and warrants that the Board of Directors of the Company
(at a meeting duly called and held at which a quorum was present), acting on the
unanimous recommendation of the Special Committee, unanimously (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to and in the best interests of the shareholders
of the Company (other than the Parent and its affiliates); (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger; and (iii) recommended that the shareholders of the Company accept the
Offer, tender their Shares thereunder to the Purchaser and, if required under
applicable law, approve and adopt this Agreement and the Merger. The Company
shall furnish to the Parent and the Purchaser a copy of such resolutions,
certified by an appropriate officer of the Company. The Company also represents
that Wachovia Securities, Inc., financial advisor to the Special Committee, has
delivered to the Special Committee its written opinion (the "Financial Advisor
Opinion") that, as of May 13, 1999, the Per Share Amount is fair to the
shareholders of the Company (other than the Parent and its affiliates) from a
financial point of view, and that, based on the Financial Advisor Opinion and
such other factors as it deemed relevant, the Board of Directors of the Company,
acting on the unanimous recommendation of the Special Committee, has approved
and authorized this Agreement and the Merger.
(b) Concurrently with the filing of the Schedule 14D-1 by the Parent and
the Purchaser, the Company shall (i) file with the SEC a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any and
all amendments or supplements thereto, and including all exhibits, the "Schedule
14D-9") with respect to the Offer which shall contain the recommendations of the
Special Committee and the Board of Directors in favor of the Offer, the Merger
and the Agreement as described in Section 1.2(a) and (ii) execute, and join in
the filing with the SEC of, the Schedule 13E-3 after review and approval thereof
by the Special Committee and its counsel. The Company shall mail the Schedule
14D-9 promptly after the commencement of the Offer. Each of the Company and the
Purchaser agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 and the Schedule 13E-3 if and to the extent that it
A-2
<PAGE> 53
shall have become false or misleading in any material respect. The Company
agrees to take all steps necessary to cause the Schedule 14D-9 and the Schedule
13E-3, as the case may be, as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Board of Directors of the Company will
not withdraw, or modify in a manner adverse to the Parent and the Purchaser, its
recommendation to shareholders unless the Board of Directors determines in good
faith by a majority vote, on the basis of the advice of outside counsel to the
Company, that its failure to take such action would reasonably be expected to
result in a breach of its fiduciary duties under applicable law. The Purchaser
and its counsel will be given a reasonable opportunity to review the Schedule
14D-9 and all amendments or supplements thereto prior to their filing with the
SEC or dissemination to the holders of Shares. The Company will furnish the
Purchaser and its counsel in writing with any comments that the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
or the Schedule 13E-3, promptly after receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent as promptly as possible to furnish the Purchaser with mailing labels,
security position listings and any available listings or computer files
containing the names and addresses of record holders of the Shares and lists of
securities positions of Shares held in stock depositories in each case true and
correct as of the most recent practicable date, and shall furnish to the
Purchaser such information and assistance as the Purchaser or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of shares. Subject to applicable law and except for such steps as are
necessary to disseminate the Offer Documents, the Parent, the Purchaser and
their affiliates will hold in confidence the information contained in any such
labels, listings, and files, will use such information only in connection with
the Offer and the Merger, and, if this Agreement is terminated, will deliver to
the Company all copies of such information in its possession. The Parent and the
Purchaser agree to reimburse the Company for all expenses incurred by it in
complying with this Section 1.2(c).
1.3 Board of Directors. Prior to the Effective Time (as defined in Section
2.5) the Company shall use its commercially reasonable best efforts to ensure
that all of the members of the Board of Directors as of the date hereof who are
not employees of the Company, and the members of the Special Committee as of the
date hereof, shall remain members of the Board of Directors and the Special
Committee.
ARTICLE II
THE MERGER
2.1 The Merger. (a) Upon the terms and subject to the satisfaction or
waiver, if permissible, of the conditions set forth in Article VII hereof, as
promptly as practicable following the consummation of the Offer, in accordance
with the provisions of this Agreement and the General Corporation Law of the
State of Delaware (the "GCL"), the parties hereto shall cause the Purchaser to
be merged with and into the Company, and the Company shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Delaware. At the
Effective Time, the separate existence of the Purchaser shall cease.
(b) The Surviving Corporation shall retain the name of the Company and
shall possess all the rights, assets, privileges, immunities, powers and
franchises of the Purchaser and the Company and shall by operation of law become
liable for all the debts, liabilities and duties of the Company and the
Purchaser. The Merger shall have the other effects provided for in the
applicable provisions of the GCL.
2.2 Certificate of Incorporation. At the Effective Time, the Certificate
of Incorporation of the Company shall become the Certificate of Incorporation of
the Surviving Corporation until thereafter amended in accordance with provisions
thereof and as provided by law.
2.3 By-Laws. At the Effective Time, the By-Laws of the Company shall
become the By-Laws of the Surviving Corporation until, subject to Section 6.5(a)
hereof, thereafter amended, altered or repealed as provided therein and by law.
A-3
<PAGE> 54
2.4 Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation.
2.5 Effective Time. The Merger shall become effective at the date and time
when a properly executed certificate of merger or certificate of ownership and
merger (either such document being referred to hereinafter as the "Certificate
of Merger"), together with any other documents required by law to effectuate the
Merger, shall be filed with the Secretary of State of the State of Delaware in
accordance with the GCL as soon as practicable after the Closing. The date and
time when the Merger shall become effective is herein referred to as the
"Effective Time."
ARTICLE III
CONVERSION OF SHARES
3.1 Company Common Stock. (a) Each Share issued and outstanding
immediately prior to the Effective Time (except for Shares then owned
beneficially or of record by the Parent, the Purchaser, or any other affiliate
of the Parent or held in the treasury of the Company and except for Dissenting
Shares (as defined in Section 3.2)), shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right to
receive the Per Share Amount (or, if a greater per Share price shall have been
paid in the Offer, such greater price) (the Per Share Amount or such greater
price hereinafter being referred to as the "Merger Consideration") in cash
payable to the holder thereof, without interest thereon, upon surrender of the
certificate representing such Share.
(b) Each Share issued and outstanding immediately prior to the Effective
Time which is then owned beneficially or of record by the Parent or the
Purchaser or any other affiliate of the Parent shall, by virtue of the Merger
and without any action on the part of the holder thereof, be cancelled and
retired and cease to exist, without any conversion thereof or payment therefor.
(c) Each Share issued and held in the Company's treasury immediately prior
to the Effective Time shall, by virtue of the Merger, be cancelled and retired
and cease to exist, without any conversion thereof or payment therefor.
(d) At the Effective Time the holders of certificates representing Shares
shall cease to have any rights as shareholders of the Company and their sole
right shall be the right to receive cash as aforesaid.
3.2 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, in the event that appraisal rights are available in connection with
the Merger pursuant to Section 262 of the GCL, Shares that are issued and
outstanding immediately prior to the Effective Time and that are held by
shareholders who have not voted such Shares in favor of the approval and
adoption of this Agreement or consented thereto in writing and who shall have
complied with all of the relevant provisions of Section 262 of the GCL and
properly demanded appraisal of such Shares in the manner provided therein (the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration, but the holders thereof instead shall
be entitled to payment of the appraised value of such Shares in accordance with
the provisions of Section 262 of the GCL; provided, however, that (i) if any
holder of Dissenting Shares shall have effectively withdrawn his demand for
appraisal of such Shares, or (ii) if any holder fails to establish or perfect
his entitlement to appraisal rights as provided in Section 262 of the GCL, or
(iii) if any such holder shall, for any other reason, become ineligible for or
have lost his right to such appraisal, then such holder shall forfeit the right
to appraisal of such Shares and each such Share shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon. The Company shall give the Parent and the Purchaser (i) prompt
notice of any written demands for appraisal of Shares received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to any such demands. Prior to the Effective Time, the Company shall not, without
prior written consent of the Parent, voluntarily make any payment with respect
to, settle or compromise, or offer to settle or compromise, any claim for
appraisal rights.
A-4
<PAGE> 55
3.3 Purchaser Common Stock. Each share of common stock, par value $.01 per
share ("Purchaser Common Stock"), of the Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one fully paid and non-assessable share of common stock, par
value $.01 per share ("Surviving Corporation Common Stock"), of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. From and after the Effective Time, each outstanding
certificate theretofore representing shares of the Purchaser Common Stock shall
be deemed for all purposes to evidence ownership of and to represent the same
number of shares of Surviving Corporation Common Stock.
3.4 Exchange of Shares. (a) Prior to the Effective Time, the Purchaser
shall, and the Parent shall cause the Purchaser to, deposit in trust with the
depository for the Offer, or with such payment agent as may be designated by the
Purchaser and is reasonably acceptable to the Company (the "Payment Agent"),
cash in an aggregate amount equal to the product of (i) the number of Shares
issued and outstanding immediately prior to the Effective Time (other than any
such Shares owned beneficially or of record by the Parent or the Purchaser or
any other affiliate of the Parent and other than Dissenting Shares), and (ii)
the Merger Consideration (such amount being hereinafter referred to as the
"Payment Fund"). The Payment Agent shall, pursuant to irrevocable instructions,
make the payments provided for in Section 3.1(a) of this Agreement out of the
Payment Fund. The Payment Agent shall invest the Payment Fund as the Parent
directs, provided that substantially all such investments shall be in direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of all principal and interest, commercial paper obligations receiving
the highest rating from either Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $10,000,000,000.
The Payment Fund shall not be used for any other purpose except as provided in
this Agreement.
(b) Promptly after the Effective Time, the Surviving Corporation shall
mail, or cause the Payment Agent to mail, to each record holder (other than the
Parent, the Purchaser or any other affiliate of the Parent) as of the Effective
Time of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates") a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Payment Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the
Payment Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor cash in an amount equal to the product of the number of Shares
represented by such Certificate and the Merger Consideration, less any
applicable withholding tax, and such Certificate shall forthwith be cancelled.
No interest shall be paid or accrued on the cash payable upon the surrender of
the Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Payment Agent and the Surviving Corporation
that such tax has been paid or is not applicable. After the Effective Time,
until surrendered in accordance with the provisions of this Section 3.4, each
Certificate (other than Certificates representing Shares owned beneficially or
of record by the Parent, the Purchaser or any other affiliate of the Parent
(other than the Company) or Shares held in treasury by the Company and other
than Certificates representing Dissenting Shares in respect of which appraisal
rights are perfected) shall represent for all purposes the right to receive the
Merger Consideration in cash multiplied by the number of Shares evidenced by
such Certificate, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for cash as provided in this Article III, subject to applicable
law in the case of Dissenting Shares. At the Effective Time, the stock transfer
books of the Company shall be closed.
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(d) Any portion of the Payment Fund which remains unclaimed by the
shareholders of the Company for 180 days after the Effective Time (including any
interest received with respect thereto) shall be repaid to the Surviving
Corporation, upon demand. Any shareholders of the Company who have not
theretofore complied with Section 3.4(b) shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat or other similar
laws) for payment of their claim for the Merger Consideration per Share, without
any interest thereon, but shall have no greater rights against the Surviving
Corporation than may be accorded to general creditors of the Surviving
Corporation under Delaware law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Disclosure Statements (as defined herein), the
Company hereby represents and warrants to each of the Parent and the Purchaser
as follows:
4.1 Organization. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and
to conduct its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power and
authority would not, individually or in the aggregate, have a material
adverse effect on the business or condition (financial or otherwise),
properties or assets of the Company and its subsidiaries taken as a whole
(a "Material Adverse Effect").
4.2 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock of which, on May 13, 1999,
there were 19,708,750 shares issued and outstanding, 1,000,000 shares
reserved for issuance under the Company's director and employee stock
option plans and 337,965 shares subject to options (the "Options")
outstanding under the Company's stock option plan (67,737 of which were
exercisable). All issued and outstanding Shares are duly authorized,
validly issued, fully paid and nonassessable and have no preemptive rights.
Other than as contemplated in the foregoing sentence, there are not now,
and at the Effective Time there will not be, any outstanding or authorized
options, warrants, calls, subscriptions, preemptive rights or other rights
or other agreements or commitments whatsoever obligating the Company or any
of its subsidiaries to issue, transfer, deliver or sell or cause to be
issued, transferred, delivered or sold any additional shares of capital
stock of the Company or any of its subsidiaries, or obligating the Company
or any of its subsidiaries to grant, extend or enter into any such
agreement or commitment. The Company is, directly or indirectly, the record
and beneficial owner of all of the outstanding shares of capital stock of
each of its subsidiaries (other than qualifying shares), free and clear of
any lien, mortgage, pledge or encumbrance of any kind.
4.3 Authorization of This Agreement; Recommendation of Merger. The
Company has all requisite corporate power and authority to execute and
deliver this Agreement and, subject to approval by the shareholders of the
Company to the extent required by law, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Company's Board of Directors upon
the recommendation of the Special Committee and, except for the adoption of
this Agreement by the shareholders of the Company to the extent required by
law, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company, and subject only to adoption hereof by its
shareholders to the extent required by law, this Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws of
general application affecting the rights of creditors and applicable
principles of equity that may restrict or affect the enforcement of certain
provisions thereof.
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4.4 Consents and Approvals. Except as set forth in Section 4.4 of the
letter delivered by the Company to the Purchaser and the Parent prior to
the execution hereof (the "Disclosure Letter") and except for (i) filings
required under the Exchange Act, and the rules and regulations promulgated
thereunder, (ii) the filing and recordation of appropriate merger documents
as required by the GCL and, if applicable, the laws of other states in
which the Company is qualified to do business, (iii) filings under the
securities or blue sky laws or takeover statutes of the various states,
(iv) the delisting requirements of the New York Stock Exchange ("NYSE") and
(v) filings in connection with any the transfer of applicable federal,
state and local environmental permits and applicable transfer or other
taxes in any applicable jurisdiction, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is
necessary for the consummation by the Company of the transactions
contemplated by this Agreement, the failure to make or obtain which is
reasonably likely to have a Material Adverse Effect or a material adverse
effect on the ability of the Company to consummate the transactions
contemplated hereby.
4.5 No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i)
conflict with or result in any violation of any provision of the
Certificate of Incorporation or the Restated By-Laws of the Company, or the
certificate of incorporation or by-laws (or equivalent instruments) of any
of its subsidiaries, in each case as such instrument is currently in
effect, (ii) except as set forth in Section 4.5 of the Disclosure Letter,
result in a violation or breach of, or constitute a default (or give rise
to any right of termination, cancellation or acceleration) under, any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their properties or assets is bound or (iii)
assuming the truth of the representations and warranties of the Parent and
the Purchaser contained herein and their compliance with all agreements
contained herein and assuming the due making or obtaining of all filings,
permits, authorizations, consents and approvals referred to in the
preceding sentence, violate any statute, rule, regulation, order,
injunction, writ or decree of any public body or authority by which the
Company or any of its subsidiaries or any of their respective assets or
properties is bound, excluding from the foregoing clauses (ii) and (iii)
conflicts, violations, breaches or defaults which, either individually or
in the aggregate, are not reasonably likely to have a Material Adverse
Effect or a material adverse effect on the Company's ability to consummate
the transactions contemplated hereby.
4.6 Compliance. The Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders, franchises and approvals of all
governmental or regulatory authorities necessary for the lawful conduct of
its business ("Permits") except where the failure to so hold would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Section 4.6 of the Disclosure Letter, neither the Company nor
any of its subsidiaries is in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which its or any of their
respective properties are bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, Permit or other instrument
or obligation to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or its or any of their
respective properties are bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate,
reasonably be expected to either have a Material Adverse Effect or prevent
the consummation of the Offer or the Merger.
4.7 Financial Statements and Reports; No Undisclosed Liabilities. (a)
The Company has timely filed all forms, reports and documents with the SEC
required to be filed by it since August 7, 1997, pursuant to the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act") and the Exchange Act and the rules and
regulations promulgated thereunder (collectively, the "Disclosure
Statements"), all of which have complied in all material respects with all
applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated thereunder. None of
such Disclosure Statements, including without limitation, any financial
statements or schedules included therein, at the time filed, contained any
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untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated balance sheets and the related consolidated
statements of income, consolidated cash flows and consolidated retained
earnings (including the notes thereto) of the Company and its subsidiaries
included or incorporated by reference in the Disclosure Statements, have
been prepared from, and are in accordance with, the books and records of
the Company and its consolidated subsidiaries, comply in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared
in conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during periods involved (except as
may be indicated in the notes thereto), and present fairly the consolidated
financial position of the Company and its subsidiaries as of their
respective dates, and the consolidated results of their operations and
their cash flows for the periods presented therein (subject in the case of
any unaudited interim financial statements to normal year-end audit
adjustments and any absence of the footnote disclosures required by GAAP).
(b) There is no liability of the Company or any subsidiary thereof of
any nature, whether absolute, accrued, contingent or otherwise that would
be required to be reflected, reserved for or disclosed under GAAP in the
consolidated financial statements of the Company other than as is disclosed
in the Disclosure Statements or has been incurred in the ordinary course of
business since January 31, 1999.
4.8 Offer Documents; Proxy Statement; Other Information; Schedule
14D-9. (a) Each document required to be filed by the Company with the SEC
in connection with the transactions contemplated by this Agreement (the
"Company Disclosure Documents"), including, without limitation, the
Schedule 14D-9, the Schedule 13E-3 and the proxy or information statement
of the Company (the "Proxy Statement"), if any, to be filed with the SEC in
connection with the Merger, and any amendments or supplements thereto,
will, when filed, comply in all material respects, both as to form and
otherwise, with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
(b) At the time the Proxy Statement, if one is required, or any
amendment or supplement thereto is first mailed to stockholders of the
Company, at the time such stockholders vote on adoption of this Agreement
and the Merger and at the Effective Time, the Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing of
any Company Disclosure Document (other than the Proxy Statement) or any
supplement or amendment thereto and at the time of any distribution
thereof, such Company Disclosure Document will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 4.8(b) will not
apply to statements included in or omissions from the Company Disclosure
Documents in reliance upon and in conformity with information furnished to
the Company in writing by the Parent or the Purchaser specifically for use
therein.
(c) The information with respect to the Company or any of its
subsidiaries that the Company furnishes to the Parent or the Purchaser in
writing specifically for use in the Offer Documents or the Schedule 13E-3
will not, at the time of the filing thereof, at the time of any
distribution thereof and at the time of consummation of the Offer, 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
made therein, in the light of the circumstances under which they were made,
not misleading.
4.9 Brokers' Fees. Except for Wachovia Securities, Inc., a copy of
whose engagement agreement has been provided to the Parent, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Company or any of its
subsidiaries who is entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
4.10 No Other Representations or Warranties. The Company shall not be
deemed to have made to the Parent or the Purchaser any representation or
warranty other than as expressly set forth in this Article
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IV. Without limiting the generality of the foregoing, and notwithstanding
any representations or warranties otherwise expressly made by the Company,
the Company does not make any representation or warranty to the Parent or
the Purchaser with respect to (i) any projections, estimates or budgets
heretofore delivered to or made available to Parent or the Purchaser of
future revenues, expenses, financial condition or results of operations of
the Company; or (ii) except as expressly set forth herein, any other
information or documents (financial or otherwise) made available to the
Parent or the Purchaser or their counsel, accountants or advisors with
respect to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser hereby represent and warrant to the Company as
follows:
5.1 Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, the Parent is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Nevada, and
each of the Purchaser and the Parent has all requisite corporate power and
authority to carry on its business as it is now being conducted. The
Purchaser is a wholly owned subsidiary of the Parent.
5.2 Authorization of This Agreement. Each of the Parent and the
Purchaser has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized and approved by all necessary corporate action. This Agreement
has been duly and validly executed and delivered by each of the Parent and
the Purchaser and constitutes a valid and binding agreement of the Parent
and the Purchaser, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws of general
application affecting the rights of creditors and applicable principles of
equity that may restrict or affect the enforcement of certain provisions
thereof.
5.3 Consents and Approvals; No Violations. Except for (i) filings
required under the Exchange Act and the rules and regulations promulgated
thereunder, (ii) the filing and recordation of appropriate merger documents
as required by the GCL, (iii) filings under the securities or blue sky laws
or takeover statutes of the various states, (iv) filings required under the
delisting requirements of the NYSE and (v) filings in connection with any
applicable transfer or other taxes in any applicable jurisdiction, no
filing with, and no permit, authorization, consent or approval of, any
public body or authority is necessary for the consummation by the Parent
and the Purchaser of the transactions contemplated by this Agreement, the
failure to make or obtain which is reasonably likely to impair the ability
of the Parent or the Purchaser to perform their respective obligations
hereunder or to consummate the transactions contemplated hereby. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by the Parent or the
Purchaser with any of the provisions hereof will (i) conflict with or
result in any violation of any provision of the Certificate of
Incorporation or By-Laws of the Purchaser or the organizational documents
of the Parent, (ii) result in a violation or breach of, or constitute a
default (or give rise to any right of termination, cancellation or
acceleration) under, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Parent or any of
its subsidiaries is a party, or by which any of them or any of their
respective properties or assets is bound, or (iii) assuming the truth of
the representations and warranties of the Company hereunder and its
compliance with all agreements contained herein and assuming the due making
or obtaining of all filings, permits, authorizations, consents and
approvals referred to in the preceding sentence, violate any statute, rule,
regulation, order, injunction, writ or decree of any public body or
authority by which the Parent or any of its subsidiaries or any of their
respective properties or assets is bound, excluding from the foregoing
clauses (ii) and (iii) conflicts, violations, breaches or defaults which,
either individually or in the aggregate, are not reasonably likely to
impair the ability of the Parent or the Purchaser to perform their
respective obligations hereunder or to consummate the transactions
contemplated hereby.
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5.4 Offer Documents; Proxy Statement; Other Information. (a) The
information with respect to the Parent and the Purchaser and its
subsidiaries that the Purchaser furnishes to the Company in writing
specifically for use in any Company Disclosure Document will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (i) in the case of
the Proxy Statement, if such statement is needed, at the time the Proxy
Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time the stockholders vote on the
adoption of this Agreement and the Merger, and at the Effective Time, and
(ii) in the case of any Company Disclosure Document (other than the Proxy
Statement) or any amendment or supplement thereto, at the time of the
filing thereof and at the time of any distribution thereof.
(b) The Offer Documents and the Schedule 13E-3, when filed, will
comply in all material respects, both as to the form and otherwise, with
the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder and will not at the time of the filing
thereof, at the time of any distribution thereof or at the time of
consummation of the Offer, contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, provided that this representation and warranty will not apply
to statements included in or omissions from the Offer Documents or the
Schedule 13E-3 in reliance upon and in conformity with information
furnished to the Parent or the Purchaser in writing by the Company
specifically for use therein.
5.5 Brokers' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on
behalf of the Parent or the Purchaser who is entitled to any fee or
commission in connection with the transactions contemplated by this
Agreement.
5.6 Financial Ability. The Parent has received and delivered to the
Company a written financing commitment with respect to the transactions
contemplated hereby. At (i) the time of acceptance for payment of Shares
pursuant to the Offer and (ii) the Effective Time, the Parent and the
Purchaser will have the funds necessary to consummate the Offer and the
Merger and the transactions contemplated thereby.
5.7 No Prior Activities. Except for liabilities incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
the Purchaser has not incurred any liabilities, and has not engaged in any
business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.
5.8 Company Compliance. To the knowledge of the Parent, as of their
respective dates, the Disclosure Statements did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading. As
of the date hereof, the Parent knows of no event or circumstance that would
limit the Company's compliance with its obligations hereunder.
5.9 The Parent's Intentions Regarding the Company. Neither the Parent
nor the Purchaser has any plan or intention to liquidate the Company, to
merge the Company with or into another entity or to sell or otherwise
dispose of all or substantially all of the business or assets of the
Company to be acquired by the Parent as a result of the transactions
contemplated hereby, except for dispositions in the ordinary course of
business.
5.10 Surviving Corporation Solvency. Immediately after the Effective
Time and after giving effect to any changes in the Surviving Corporation's
assets and liabilities as a result of the Merger and the financing for the
Merger Consideration, the Surviving Corporation will not (i) be insolvent
(either because its financial condition is such that the sum of its debts
is greater than the fair value of its assets or because the fair saleable
value of its assets is less than the amount required to pay its probable
liability on its existing debts as they mature), (ii) have unreasonably
small capital with which to engage in its business, or (iii) have incurred
debts beyond its ability to pay as they become due; provided, that for
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purposes of making the representation and warranty set forth in this
Section 5.10 the Parent and the Purchaser have relied on the accuracy of
all information set forth in the Disclosure Statements.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business of the Company. The Company covenants and
agrees that, during the period from the date of this Agreement to the Effective
Time, unless the Purchaser shall otherwise agree in writing, or as shall have
otherwise been approved by the chairman of the Company, or as otherwise
contemplated by this Agreement:
(a) the businesses of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of its subsidiaries; (ii) amend its
Certificate of Incorporation or By-laws; or (iii) split, combine or
reclassify the outstanding Shares or declare, set aside or pay any dividend
payable in cash, stock or property with respect to the Shares; and
(c) neither the Company nor any of its subsidiaries shall (i) issue or
agree to issue any additional shares of, or rights of any kind to acquire
any shares of, its capital stock of any class other than Shares issuable
pursuant to presently outstanding Options; or (ii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing.
6.2 Shareholder Approval. (a) If required by applicable law in order to
consummate the Merger, as soon as practicable following the purchase of the
Shares pursuant to the Offer, the Company, acting through its Board of Directors
and upon the recommendation of the Special Committee, shall take all steps
necessary duly to call, set a record date for, give notice of, convene and hold
a meeting of its shareholders as soon as practicable following the acceptance
for payment and purchase of Shares pursuant to the Offer for the purpose of
adopting and approving this Agreement and the transactions contemplated hereby.
At such meeting, the Parent, the Purchaser and any affiliate thereof will each
vote, or cause to be voted, all Shares acquired in the Offer or otherwise
beneficially owned by it on the record date for such meeting, in favor of the
approval and adoption of this Agreement and the transactions contemplated
hereby.
(b) The Company will, if required by law for the consummation of the
Merger, prepare and file the Proxy Statement (as defined in Section 4.8) with
the SEC, and shall use its best efforts to obtain and furnish the information
required to be included by it in the Proxy Statement and, after consultation
with the Parent and the Purchaser, to respond promptly to any comments made by
the SEC with respect to the Proxy Statement and any preliminary version thereof
and cause the Proxy Statement to be mailed to its shareholders at the earliest
practicable time following the acceptance for payment and purchase of the Shares
pursuant to the Offer. Subject to the fiduciary duties of the Board of Directors
of the Company as determined by them, acting upon the recommendation of the
Special Committee and after consultation with outside counsel, the Company will
include in the Proxy Statement (i) the recommendation of its Board of Directors
that the shareholders vote in favor of the adoption and approval of this
Agreement and the transactions contemplated hereby and the other matters to be
submitted to shareholders in connection therewith and (ii) use its best efforts
to obtain the necessary approvals by such shareholders of this Agreement and the
transactions contemplated hereby.
(c) Notwithstanding the foregoing, in the event that the Purchaser shall
acquire at least 90 percent of the outstanding Shares pursuant to the Offer or
otherwise, the parties hereto agree, at the request of the Parent or the
Purchaser, to 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 meeting of shareholders of the Company, in accordance with Section 253
of the GCL.
6.3 Best Efforts. Subject to the terms and conditions herein provided and
the fiduciary duties of the Board of Directors of the Company, each of the
parties hereto agrees to use its best efforts consistent with
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applicable legal requirements to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary or proper and advisable under
applicable laws and regulations to ensure that the conditions set forth in Annex
A hereto and Article VII hereof are satisfied and to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using all reasonable efforts to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of the Parent, the Purchaser and
the Company shall take all such necessary action.
6.4 Public Announcements. The Purchaser and the Company will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Offer or 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 law or by obligations pursuant to any listing
agreement with any securities exchange in which case the party proposing to
issue such press release or make any such public statement shall use all
reasonable efforts to consult in good faith with the other party before issuing
such press release or making any such public statements.
6.5 Indemnification. (a) The Parent will cause the Surviving Corporation
to, and the Surviving Corporation shall, indemnify and hold harmless the present
and former officers and directors of the Company in respect of acts or omissions
occurring prior to the Effective Time to the fullest extent permitted under the
Company's certificate of incorporation and bylaws as in effect on the date
hereof. For six years after the Effective Time, the Parent will cause the
Surviving Corporation to use all reasonable efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy (the "Covered
Employees") on terms with respect to coverage and amount no less favorable than
those of such policy in effect on the date hereof; provided that in satisfying
its obligation under this Section 6.5, the Surviving Corporation shall not be
obligated to pay, and the Parent shall not be obligated to cause the Surviving
Corporation to pay, premiums in excess of 200% of the amount per annum the
Company paid in its last full fiscal year. The provisions of this Section 6.5
are for the benefit of and may be enforced after the Effective Time by the
Covered Employees.
(b) In the event any action, suit, proceeding, or investigation relating to
this Agreement or to the transactions contemplated by this Agreement is
commenced by a third party, whether before or after the Effective Time, the
parties to this Agreement agree, subject to the fiduciary duties of the
respective directors of the Company, Parent and Purchaser, to cooperate and use
all reasonable efforts to defend against and respond to such action, suit,
proceeding, or investigation.
(c) If Parent or any of its successors or assigns (i) shall merge or
consolidate with or merge into any other corporation or entity and shall not be
the surviving or continuing corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then in each such case,
proper provisions shall be made so that the successors or assigns of the Parent
shall assume all of the obligations set forth in this Section 6.5.
6.6 Notification of Certain Matters. The Company will give prompt written
notice to the Parent and the Purchaser, and the Parent and the Purchaser will
give prompt written notice to the Company, of (a) the occurrence, or failure to
occur, of any event, which occurrence or failure would cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time, (b) any material failure of the Company, the
Parent, or the Purchaser, as the case may be, or of any affiliate, employee, or
agent of the Company, the Parent, or the Purchaser, as the case may be, to
comply with or satisfy any covenant, condition, or agreement to be complied with
or satisfied by it under this Agreement and (c) any act, omission to act, event,
or occurrence that, with notice, the passage of time, or otherwise, would result
in a Material Adverse Effect. No such notification will affect the
representations or warranties of the parties or the conditions to the
obligations of the parties under this Agreement. The Parent will promptly notify
the Company of any information it obtains that would make the representations
and warranties contained in Sections 5.6, 5.8, 5.9 or 5.10 untrue or inaccurate
in any material respect. The Purchaser and the Parent shall
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provide to the Company any opinions (and supporting documentation) regarding the
matters referred to in Section 5.10 as are provided to any banks or other
lenders in connection with the Merger at the same time that they are provided to
such banks or other lenders.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to the Obligations of the Parent, the Purchaser and the
Company. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) There shall not be in effect any statute, rule or regulation
enacted, promulgated or deemed applicable by any governmental authority of
competent jurisdiction that makes consummation of the Merger illegal and no
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be
in effect.
(b) If required by applicable law, this Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the holders of the requisite number of Shares.
(c) Any governmental and third party consents or approvals required to
consummate the Merger shall have been obtained, except where the failure to
obtain such consents or approvals would not, individually or in the
aggregate, have a Material Adverse Effect or a material adverse effect on
the Purchaser's ability to consummate the transactions contemplated hereby.
(d) The Purchaser shall have purchased such Shares as are validly
tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII
CLOSING
8.1 Time and Place. The closing of the Merger (the "Closing") shall take
place at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New
York, as soon as practicable following satisfaction or waiver, if permissible,
of the conditions set forth in Article VII. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
8.2 Filings at the Closing. At the Closing, the Parent, the Purchaser and
the Company shall cause the Certificate of Merger, together with any other
documents required by law to effectuate the Merger, to be filed with the
Secretary of State of the State of Delaware in accordance with the provisions of
the GCL, and shall take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of the
Company:
(a) by mutual written consent of the Parent and the Company (with the
approval of the Special Committee);
(b) by either the Parent or the Company (with the approval of the
Special Committee) if Shares have not been accepted for payment pursuant to
the Offer on or prior to the date 60 days after the commencement of the
Offer; provided, that (i) neither party will have the right to terminate
this Agreement under this Section 9.1(b) during any extension period
referred to in the second sentence of
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Section 1.1(a); and (ii) the right to terminate this Agreement pursuant to
this Section 9.1(b) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement results in the failure
of the Offer to be consummated;
(c) by either the Parent or the Company (with the approval of the
Special Committee) if the Offer shall expire or terminate in accordance
with its terms without any Shares having been purchased thereunder and, in
the case of termination by the Parent, the Purchaser shall not have been
required by the terms of the Offer or this Agreement to purchase any Shares
pursuant to the Offer;
(d) by either the Parent or the Company (with the approval of the
Special Committee), if any court of competent jurisdiction in the United
States or other governmental agency of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action restraining,
permanently enjoining or otherwise prohibiting the Offer or the Merger, and
such order, decree, ruling or other action shall have become final and
non-appealable; or
(e) by the Parent, if the Board of Directors of the Company or the
Special Committee shall have withdrawn or modified in a manner adverse to
the Parent and the Purchaser its approval or recommendation of this
Agreement or the transactions contemplated hereby, including the Offer or
the Merger.
9.2 Procedure and Effect of Termination. In the event of termination and
abandonment of the Merger by the Parent, the Purchaser or the Company pursuant
to Section 9.1, written notice thereof shall forthwith be given to the others,
and this Agreement shall terminate and the Merger shall be abandoned, without
further action by any of the parties hereto. The Purchaser agrees that any
termination by the Parent shall be conclusively binding upon it, whether given
expressly on its behalf or not, and the Company shall have no further obligation
with respect to it. If this Agreement is terminated as provided herein, no party
hereto shall have any liability or further obligation to any other party to this
Agreement, provided that any termination shall be without prejudice to the
rights of any party hereto arising out of breach by any other party of any
covenant or agreement contained in this Agreement, and provided, further, that
the obligations set forth in Section 1.2(c), this Section 9.2, and in Sections
10.6 and 10.8, shall in any event survive any termination.
ARTICLE X
MISCELLANEOUS
10.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of the
Parent, the Purchaser and the Company at any time prior to the Effective Time
with respect to any of the terms contained herein; provided, that (a) after this
Agreement is adopted by a vote of the Company's shareholders pursuant to Section
6.2, if applicable, no such amendment or modification shall be made that reduces
the amount or changes the form of the Merger Consideration or otherwise
materially and adversely affects the rights of the Company's shareholders
hereunder, without the further approval of such shareholders as required under
applicable law and (b) the approval of the Special Committee shall be required
for any amendment or modification of this Agreement, and extension by the
Company of the time for the performance of any obligations or other acts of the
Parent or the Purchaser and any waiver of any of the Company's rights under this
Agreement.
10.2 Waiver of Compliance; Consents. Any failure of the Parent or the
Purchaser, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Company or the Parent, respectively, only by a written instrument signed by the
party granting such waiver (and, in the case of the Company, approved by the
Special Committee in accordance with the provisions of Section 10.1(b) if
applicable), but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 10.2. The Purchaser
hereby agrees that any consent or waiver of compliance given by the Parent
hereunder shall be conclusively binding upon it, whether given expressly on its
behalf or not.
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10.3 Survival of Warranties. Each and every representation and warranty
made in this Agreement shall expire with, and be terminated and extinguished by,
the Merger, or the termination of this Agreement pursuant to Section 9.1. This
Section 10.3 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after the Closing.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered personally or by overnight
courier, (b) mailed by registered or certified mail, return receipt requested,
postage prepaid, or (c) transmitted by telecopy, and in each case, addressed to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) if to the Parent or the Purchaser, to
SRB-MWI, L.L.C.
4700 Pinson Valley Parkway
Birmingham, Alabama
Telecopy: (205) 853-0790
Attention: Samuel R. Blount
with a copy to
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Paul S. Bird
(b) if to the Company, to
Meadowcraft, Inc.
4700 Pinson Valley Parkway
Birmingham, AL 35215
Telecopy: (205) 853-0790
Attention: President
with a copy to
Special Committee of the
Board of Directors of Meadowcraft, Inc.
c/o T. Morris Hackney, Chairman of the
Special Committee
2 Office Park Circle
Suite One
Birmingham, AL 35213
Telecopy: (205) 870-5146
and to:
Ritchie & Rediker, L.L.C.
312 North 23rd Street
Birmingham, Alabama 35203
Telecopy: (205) 324-7832
Attention: W. Clark Goodwin
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<PAGE> 66
and
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Telecopy: (302) 658-6541
Attention: Anne C. Foster
Any notice so addressed shall be deemed to be given (x) three business days
after being mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid and (y) upon delivery, if transmitted by hand
delivery, overnight courier or telecopy.
10.5 Assignment; Parties in Interest. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties (except that the Purchaser may assign to the Parent or any other
direct or indirect wholly-owned subsidiary of the Parent any and all rights and
obligations of the Purchaser under this Agreement and/or the Purchaser's right
to purchase Shares transferred pursuant to the Offer, provided that any such
assignment will not relieve the Parent or the Purchaser from any of its
obligations under this Agreement). Except for Section 6.5, which is intended for
the benefit of the Covered Employees, this Agreement is not intended to confer
upon any other person except the parties any rights or remedies under or by
reason of this Agreement.
10.6. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses; provided, however, that the allocable share of each of the Parent and
the Purchaser, on the one hand, and the Company, on the other hand, for all
expenses related to printing, filing and mailing the Proxy Statement, if any,
and all SEC and other regulatory fees in connection with the Proxy Statement, if
any, and the Schedule 13E-3 shall be one-half.
10.7. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.8. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
10.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10. Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or agency
thereof; (ii) the terms "affiliate" and "associate" shall have the meanings set
forth in Rule l2b-2 of the General Rules and Regulations promulgated under the
Exchange Act; and (iii) the term "subsidiary" of any specified corporation shall
mean any corporation of which the outstanding securities having ordinary voting
power to elect a majority of the board of directors are directly or indirectly
owned by such specified corporation.
10.11 Entire Agreement. This Agreement, including Annex A and the exhibits
and schedules to this Agreement embody the entire agreement and understanding of
the parties hereto in respect of the subject
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<PAGE> 67
matter contained herein and supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective duly authorized officers as of
the date first above written.
SRB-MWI, L.L.C.
By: /s/ SAMUEL R. BLOUNT
------------------------------------
Name: Samuel R. Blount
Title: Manager
MWI ACQUISITION CO.
By: /s/ SAMUEL R. BLOUNT
------------------------------------
Name: Samuel R. Blount
Title: Chief Executive Officer
MEADOWCRAFT, INC.
By: /s/ TIMOTHY M. LEROY
------------------------------------
Name: Timothy M. LeRoy
Title: President and Chief Operating
Officer
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<PAGE> 68
ANNEX A
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Purchaser shall not
be required to accept for payment, or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, and (subject to the terms of the Merger
Agreement) may amend or terminate the Offer or postpone the acceptance for
payment, the purchase of, and/or (subject to any such applicable rules and
regulations of the Commission) payment for, Shares if at any time on or after
the date of the Merger Agreement and at or before the time of payment for any
such Shares (whether or not any Shares shall theretofore have been accepted for
payment or paid pursuant to the Offer) any of the following conditions exists:
(a) there shall be pending any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before
any governmental authority , administrative agency or court of competent
jurisdiction, domestic or foreign, or there shall be in effect any
judgment, decree or order of any governmental authority, administrative
agency or court of competent jurisdiction, or any other legal restraint,
preventing or seeking to prevent consummation of the Offer, the Merger or
the other transactions contemplated by the Merger Agreement, prohibiting or
seeking to prohibit or limiting or seeking to limit the Parent or the
Company from exercising any material rights and privileges pertaining to
the ownership of the Shares or compelling or seeking to compel any party or
any of its subsidiaries to dispose of or hold separate all or any portion
of the business or assets of the Parent or the Company or any of their
respective subsidiaries that is material in relation to the consolidated
business or assets of the Parent and its subsidiaries or the Company and
its subsidiaries, in each case as a result of the Offer, the Merger or the
other transactions contemplated by the Merger Agreement;
(b) there shall have occurred, or Purchaser shall have become aware of
any fact that has had, or could reasonably be expected to have, a Material
Adverse Effect;
(c) there shall have occurred any general suspension of trading in, or
limitation on prices for, securities on the NYSE or in the over-the-counter
market, an aggregate decline of at least 15% in either the Dow Jones
Average of Industrial Stocks or the Standard and Poor's 500 index from that
existing at the close of business on May 12, 1999, any declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, any material limitation by any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency in the United States that
materially affects the extension of credit generally by lenders that
regularly participate in the United States market in loans to large
corporations, any commencement of a war involving the United States or any
commencement of armed hostilities or other national or international
calamity involving the United States (other than any hostilities existing
as of the date of the Merger Agreement) that has a material adverse effect
on bank syndication or financial markets in the United States or in the
case of any of the foregoing occurrences existing on or at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of
such determination;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
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<PAGE> 69
(g) the Board of Directors of the Company shall have withdrawn or
modified its recommendation of the Offer or the Merger; or
(h) any material approval, permit, authorization, consent or waiting
period of any domestic, foreign or supranational governmental,
administrative or regulatory agency (federal, state, local, provincial or
otherwise) located or having jurisdiction within the United States or any
country or economic region in which either the Company or the Parent,
directly or indirectly, has material assets or operations, shall not have
been obtained or satisfied on terms satisfactory to the Parent in its
reasonable discretion;
which, in the reasonable good faith judgment of Purchaser with respect to each
and every matter referred to above and regardless of the circumstances
(including any action or inaction by Purchaser or any of its affiliates not
inconsistent with the terms hereof) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment of or
payment for Shares or to proceed with the Merger.
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<PAGE> 70
(WACHOVIA LETTERHEAD)
ANNEX B
May 13, 1999
Special Committee of the Board of Directors
Meadowcraft, Inc.
4700 Pinson Valley Parkway
Birmingham, Alabama 35215
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders other than SRB-MWI, L.L.C. (the "Parent") and its
affiliates (the "Public Stockholders") of Meadowcraft, Inc. (the "Company") of
the consideration to be received by the Public Stockholders pursuant to the
Agreement and Plan of Merger, to be dated as of May 13, 1999 (the "Merger
Agreement"), among the Parent, MWI Acquisition Co., a wholly-owned subsidiary of
the Parent (the "Purchaser"), and the Company. The Merger Agreement provides for
a tender offer by the Purchaser, in accordance with Rules 13e-3 and 14d-1
promulgated under the Securities Exchange Act of 1934, as amended (the "Offer")
for any and all of the outstanding shares of common stock of the Company (the
"Common Stock") at a price of $10.00 per share, net to the seller in cash,
followed by the merger of the Purchaser with and into the Company (the "Merger")
whereby any remaining outstanding shares of Common Stock held by the Public
Stockholders will be converted into the right to receive $10.00 in cash, without
interest.
In arriving at our opinion, we, among other things, (i) reviewed the May 13,
1999 draft of the Merger Agreement; (ii) solicited the interest of certain
unaffiliated third parties in submitting a competing offer for the acquisition
of the Company; (iii) reviewed annual audited financial statements for the
Company for the three fiscal years ended July 31, 1998, May 3, 1997 and April
28, 1996 and interim unaudited financial statements through January 31, 1999;
(iv) reviewed such publicly available information concerning the Company,
including recent Securities and Exchange Commission filings, stockholder
communications and recent press releases, as we deemed appropriate; (v) reviewed
financial forecasts for the Company prepared by the Company's management; (vi)
met with members of the Company's senior management to review and discuss the
business, financial condition, operating results and projected financial results
of the Company; (vii) engaged in discussions with members of the Special
Committee of the Board of Directors of the Company (the "Special Committee");
(viii) compared certain financial and stock market data for the Company with
similar data for selected publicly held companies which we deemed relevant; (ix)
reviewed the financial terms of certain recent merger and acquisition
transactions which we deemed relevant; (x) reviewed the premiums paid in certain
recent merger and acquisition transactions which we deemed relevant; (xi)
reviewed historical market price and volume data for the common stock of the
Company; (xii) performed a discounted cash flow analysis for the Company; (xiii)
reviewed various published research reports and investment opinions on the
Company; and (xiv) performed such other financial studies and analyses as we
deemed appropriate.
In rendering this opinion, we have relied, without independent investigation,
upon the accuracy and completeness of all financial and other information
furnished to us by or on behalf of the Company and of all other information,
including, but not limited to, published information, considered by us in our
review or used by us in arriving at our opinion. We were not requested to and
have not undertaken to verify independently the accuracy or completeness of such
information. We have assumed and relied upon the reasonableness of all
<PAGE> 71
Special Committee of the Board of Directors
Meadowcraft, Inc.
Page Two
projected financial information and assumptions to the projections provided to
us by the management of the Company and have assumed that such information was
prepared and such assumptions were derived in accordance with accepted practice
on bases reflecting the best currently available estimates and good faith
judgments of the Company's management. We have not independently verified any
such information or assumptions. Our opinion herein is based upon the
circumstances existing and known to us as of the date hereof, and we have
assumed that there have been no material changes in the assets, financial
condition, results of operations, business or prospects of the Company since the
date of the most recent financial statements made available to us. We have not
made or considered any independent evaluations or appraisals of the assets or
liabilities, contingent or otherwise, of the Company, nor were we furnished with
any such evaluations or appraisals. Consequently, we do not express any opinion
regarding the value of any of the Company's specific individual assets.
Wachovia Securities, Inc., as part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Pursuant to our
engagement as financial advisor to the Special Committee, we will receive fees
for our services, including a fee for the delivery of our opinion, and
reimbursement of our expenses. In addition, the Company has agreed to indemnify
us for certain liabilities which may arise out of our engagement.
The opinion expressed herein is provided to the Special Committee and does not
constitute a recommendation to any stockholder of the Company regarding the
Offer or the Merger. The opinion, and any supporting analysis or other material
supplied by us, may not be quoted, referred to, summarized or used in any public
filing or in any written document without the prior written approval of Wachovia
Securities, Inc., provided that we hereby consent to the inclusion of this
letter in its entirety as an Annex to the Offer to Purchase to be filed as an
exhibit to, or incorporated by reference in, the Tender Offer Statement on
Schedule 14D-1, the Solicitation/Recommendation Statement on Schedule 14D-9 and
the Schedule 13E-3 Transaction Statement, each to be filed with the Securities
and Exchange Commission in connection with the Offer, by the Company, the Parent
or the Purchaser, as the case may be.
Based upon the foregoing considerations and assumptions, and upon our review and
analysis, it is our opinion that as of the date hereof, the consideration to be
received by the Public Stockholders in the Offer and the Merger is fair, from a
financial point of view, to the Public Stockholders of the Company.
Sincerely,
WACHOVIA SECURITIES, INC.
<PAGE> 72
ANNEX C
RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL
In view of the complexity of these provisions of the DGCL, any stockholder
who is considering exercising dissenters' rights should consult his or her legal
advisor.
Statutory Appraisal Procedures. The following is a brief summary of the
statutory procedures to be followed by a holder of Shares at the Effective Time
who does not wish to accept the per Share cash consideration pursuant to the
Merger (a "Remaining Stockholder") in order to dissent from the Merger and
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 THIS ANNEX C 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
BUSINESS COMBINATION) 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 (x) before
the taking of the vote on the approval and adoption of the Merger Agreement if
the Merger is not being effected as a "short-form" merger but, rather, is being
consummated following approval thereof at a meeting of the Company's
stockholders (a "long-form merger") or (y) 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, this
written demand for appraisal of Shares must be in addition to and separate from
any proxy or vote abstaining from or against the approval and 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 hold the Shares for which
appraisal is sought on the date of the making of the demand, continuously hold
such Shares through the Effective Time and otherwise comply with the provisions
of Section 262 of the DGCL.
In the case of both a "short-form" 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 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: Secretary, Meadowcraft, Inc., 4700 Pinson
Valley Parkway, Birmingham, Alabama 35215. 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
C-1
<PAGE> 73
Effective Time to all stockholders who have complied with Section 262 of the
DGCL and have not voted for approval and 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 approval
and adoption of the Merger Agreement or consent thereto in writing. Voting in
favor of the approval and adoption of the Merger Agreement, or delivering a
proxy in connection with the stockholders meeting called to approve the Merger
Agreement (unless the proxy votes against, or expressly abstains from the vote
on, the approval and 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 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.
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 in 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 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 for any purpose the Shares 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 per Share cash consideration pursuant to the Merger. After this
period, such holder may withdraw his or her demand for appraisal only with the
consent of 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 per Share cash consideration pursuant to the Merger.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER (OR ANY SIMILAR BUSINESS COMBINATION) 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.
C-2
<PAGE> 74
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
262. Appraisal Rights
(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 Section 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 Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 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 Section 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
Sections 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.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 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-3
<PAGE> 75
(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 subsections (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 Section
228 or Section 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 20 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 identity 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 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 stockholders 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
C-4
<PAGE> 76
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 publications at
least 1 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 notices 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, 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
C-5
<PAGE> 77
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 or 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.
C-6
<PAGE> 78
ANNEX D
MEADOWCRAFT, INC. AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY
FOR THE FISCAL YEARS ENDED JULY 31, 1997 AND JULY 31, 1998
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Public Accountants.................... D-2
Consolidated Balance Sheets as of July 31, 1997 and 1998.... D-3
Consolidated Statements of Income for the fiscal years ended
April 28, 1996, May 3, 1997, July 31, 1998 and the
thirteen weeks ended July 31, 1996 (unaudited) and July
31, 1997.................................................. D-4
Consolidated Statements of Stockholders' Equity for the
years ended April 28, 1996, May 3, 1997, July 31, 1998 and
the thirteen weeks ended July 31, 1997.................... D-5
Consolidated Statements of Cash Flows for the fiscal years
ended April 28, 1996, May 3, 1997, July 31, 1998 and the
thirteen weeks ended July 31, 1996 (unaudited) and July
31, 1997.................................................. D-6
Notes to Consolidated Financial Statements.................. D-7
</TABLE>
D-1
<PAGE> 79
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Meadowcraft, Inc.:
We have audited the accompanying consolidated balance sheets of
MEADOWCRAFT, INC. (a Delaware Corporation) AND SUBSIDIARIES as of July 31, 1997
and 1998 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the two fiscal years in the period ended May
3, 1997, the thirteen weeks ended July 31, 1997 and the fiscal year ended July
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Meadowcraft, Inc. as of July
31, 1997 and 1998 and the results of its operations and its cash flows for each
of the two fiscal years in the period ended May 3, 1997, the thirteen weeks
ended July 31, 1997 and the fiscal year ended July 31, 1998 in conformity with
generally accepted accounting principles.
Birmingham, Alabama
September 23, 1998
D-2
<PAGE> 80
MEADOWCRAFT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1997 JULY 31, 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Due from factor........................................... $ 10,758,000 $ 14,686,000
Accounts receivable....................................... 5,700,000 6,810,000
Inventories............................................... 11,590,000 21,599,000
Prepaid expenses and other................................ 293,000 359,000
Deferred income taxes..................................... 0 4,334,000
------------ ------------
28,341,000 47,788,000
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT:
Land...................................................... 4,966,000 8,130,000
Buildings................................................. 22,459,000 38,682,000
Machinery and equipment................................... 26,141,000 31,932,000
Leasehold improvements.................................... 1,287,000 1,529,000
Furniture and fixtures.................................... 2,707,000 3,267,000
Construction in process................................... 2,309,000 889,000
------------ ------------
59,869,000 84,429,000
Less accumulated depreciation and amortization............ (17,908,000) (23,039,000)
------------ ------------
41,961,000 61,390,000
------------ ------------
OTHER ASSETS................................................ 770,000 973,000
------------ ------------
$ 71,072,000 $110,151,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 4,550,000 $ 2,990,000
Notes payable............................................. 10,226,000 14,024,000
Accounts payable.......................................... 2,847,000 2,400,000
Accrued expenses and warranty............................. 6,913,000 6,594,000
Income taxes payable...................................... 0 2,799,000
------------ ------------
24,536,000 28,807,000
------------ ------------
LONG-TERM DEBT.............................................. 13,392,000 26,513,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 30,000,000 shares
authorized, 16,000,000 shares issued and outstanding at
July 31, 1997, and 19,708,750 shares issued and
outstanding at July 31, 1998........................... 160,000 197,000
Additional paid-in capital................................ 340,000 44,614,000
Retained earnings......................................... 32,644,000 10,020,000
------------ ------------
33,144,000 54,831,000
------------ ------------
$ 71,072,000 $110,151,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
D-3
<PAGE> 81
MEADOWCRAFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------ THIRTEEN WEEKS ENDED
APRIL 28, MAY 3, JULY 31, --------------------------
1996 1997 1998 JULY 31, JULY 31,
(52 WEEKS) (52 WEEKS) (52 WEEKS) 1996 1997
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.................... $117,419,000 $141,945,000 $162,201,000 $32,233,000 $35,368,000
Cost of Sales................ 87,849,000 98,315,000 112,255,000 24,270,000 25,932,000
------------ ------------ ------------ ----------- -----------
Gross Profit................. 29,570,000 43,630,000 49,946,000 7,963,000 9,436,000
------------ ------------ ------------ ----------- -----------
Operating Expenses:
Selling.................... 6,092,000 6,939,000 7,796,000 1,232,000 1,517,000
General and
administrative.......... 5,906,000 6,039,000 7,540,000 1,332,000 1,442,000
------------ ------------ ------------ ----------- -----------
11,998,000 12,978,000 15,336,000 2,564,000 2,959,000
------------ ------------ ------------ ----------- -----------
Operating Income............. 17,572,000 30,652,000 34,610,000 5,399,000 6,477,000
Interest Expense............. 5,018,000 5,274,000 4,262,000 1,304,000 1,161,000
------------ ------------ ------------ ----------- -----------
Income before provision for
income taxes -- historical. 12,554,000 25,378,000 30,348,000 4,095,000 5,316,000
Provision for income taxes... 0 0 4,038,000 0 0
------------ ------------ ------------ ----------- -----------
Net income -- historical..... $ 12,554,000 $ 25,378,000 $ 26,310,000 $ 4,095,000 $ 5,316,000
============ ============ ============ =========== ===========
Pro Forma Presentation
(unaudited):
Income before provision for
income taxes -- historical. $ 12,554,000 $ 25,378,000 $ 30,348,000 $ 4,095,000 $ 5,316,000
Pro forma income tax:
Provision.................. 4,685,000 9,439,000 11,289,000 1,523,000 1,978,000
Benefit related to change
in tax status........... 0 0 (3,200,000) 0 0
------------ ------------ ------------ ----------- -----------
4,685,000 9,439,000 8,089,000 1,523,000 1,978,000
------------ ------------ ------------ ----------- -----------
Pro forma net income (Note
8)......................... $ 7,869,000 $ 15,939,000 $ 22,259,000 $ 2,572,000 $ 3,338,000
============ ============ ============ =========== ===========
Pro forma net income
excluding benefit related
to change in tax status.... $ 7,869,000 $ 15,939,000 $ 19,059,000 $ 2,572,000 $ 3,338,000
============ ============ ============ =========== ===========
Earnings per share:
Basic and diluted.......... $ 0.78 $ 1.59 $ 1.42 $ 0.26 $ 0.33
============ ============ ============ =========== ===========
Pro forma (unaudited):
Basic and diluted.......... $ 0.49 $ 1.00 $ 1.20 $ 0.16 $ 0.21
============ ============ ============ =========== ===========
Pro forma excluding benefit
related to change in tax
status:
Basic and diluted.......... $ 0.49 $ 1.00 $ 1.03 $ 0.16 $ 0.21
============ ============ ============ =========== ===========
Weighted average shares
outstanding:
Basic................... 16,000,000 16,000,000 18,519,969 16,000,000 16,000,000
============ ============ ============ =========== ===========
Diluted................. 16,000,000 16,000,000 18,523,574 16,000,000 16,000,000
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
D-4
<PAGE> 82
MEADOWCRAFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL
SHARES PAID-IN RETAINED
ISSUED AMOUNT CAPITAL EARNINGS TOTAL
---------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 30, 1995.......... 16,000,000 $160,000 $ 340,000 $ 15,484,000 $ 15,984,000
Net income for the year........ 0 0 0 12,554,000 12,554,000
S corporation distributions.... 0 0 0 (8,338,000) (8,338,000)
---------- -------- ----------- ------------ ------------
BALANCE, APRIL 28, 1996.......... 16,000,000 160,000 340,000 19,700,000 20,200,000
Net income for the year........ 0 0 0 25,378,000 25,378,000
S corporation distributions.... 0 0 0 (6,250,000) (6,250,000)
---------- -------- ----------- ------------ ------------
BALANCE, MAY 3, 1997............. 16,000,000 160,000 340,000 38,828,000 39,328,000
Net income for the period...... 0 0 0 5,316,000 5,316,000
S corporation distributions.... 0 0 0 (11,500,000) (11,500,000)
---------- -------- ----------- ------------ ------------
BALANCE, JULY 31, 1997........... 16,000,000 160,000 340,000 32,644,000 33,144,000
Net income for the year........ 0 0 0 26,310,000 26,310,000
Net proceeds from initial
public offering............. 3,708,750 37,000 44,274,000 0 44,311,000
S corporation distributions.... 0 0 0 (48,934,000) (48,934,000)
---------- -------- ----------- ------------ ------------
BALANCE, JULY 31, 1998........... 19,708,750 $197,000 $44,614,000 $ 10,020,000 $ 54,831,000
========== ======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
D-5
<PAGE> 83
MEADOWCRAFT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------ THIRTEEN WEEKS ENDED
APRIL 28, MAY 3, JULY 31, ---------------------------
1996 1997 1998 JULY 31, JULY 31,
(52 WEEKS) (53 WEEKS) (52 WEEKS) 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 12,554,000 $ 25,378,000 $ 26,310,000 $ 4,095,000 $ 5,316,000
------------ ------------ ------------ ------------ ------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 4,006,000 5,099,000 6,092,000 1,235,000 1,237,000
Deferred income taxes.............. 0 0 (4,334,000) 0 0
Changes in assets and liabilities:
Due from factor.................. 22,736,000 5,518,000 (3,928,000) 30,702,000 24,791,000
Accounts receivable.............. (22,938,000) (4,977,000) (1,110,000) 19,373,000 22,215,000
Inventories...................... 496,000 (2,232,000) (10,009,000) 8,397,000 9,882,000
Prepaid expenses and other....... 4,000 (11,000) (66,000) 0 37,000
Other assets..................... (44,000) 102,000 (173,000) 41,000 (103,000)
Accounts payable................. (4,064,000) (2,157,000) (447,000) (7,696,000) (6,484,000)
Accrued expenses and warranty.... 1,611,000 (618,000) (319,000) (3,191,000) (2,523,000)
Income taxes payable............. 0 0 2,799,000 0 0
------------ ------------ ------------ ------------ ------------
Total adjustments........... 1,807,000 724,000 (11,495,000) 48,861,000 49,052,000
------------ ------------ ------------ ------------ ------------
Net cash provided by
operating activities...... 14,361,000 26,102,000 14,815,000 52,956,000 54,368,000
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............... (15,676,000) (3,406,000) (25,258,000) (1,628,000) (2,070,000)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities................ (15,676,000) (3,406,000) (25,258,000) (1,628,000) (2,070,000)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public
offering......................... 0 0 44,311,000 0 0
Net borrowings (payments) on notes
payable.......................... 2,656,000 (11,632,000) 3,798,000 (45,519,000) (38,670,000)
Proceeds from issuance of long-term
debt............................. 10,500,000 0 13,500,000 974,000 0
Principal payments of long-term
debt............................. (3,255,000) (4,814,000) (1,939,000) (1,283,000) (2,128,000)
Payment of loan costs.............. (248,000) 0 (293,000) 0 0
Payment of S corporation
distributions.................... (8,338,000) (6,250,000) (48,934,000) (5,500,000) (11,500,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
in) financing
activities................ 1,315,000 (22,696,000) 10,443,000 (51,328,000) (52,298,000)
------------ ------------ ------------ ------------ ------------
Net change in cash.......... 0 0 0 0 0
CASH, BEGINNING OF YEAR.............. 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
CASH, END OF YEAR.................... $ 0 $ 0 $ 0 $ 0 $ 0
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest........................... $ 4,736,000 $ 5,395,000 $ 4,265,000 $ 1,059,000 $ 1,207,000
============ ============ ============ ============ ============
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease originated........... $ 3,000,000 $ 0 $ 0 $ 0 $ 0
============ ============ ============ ============ ============
Capital expenditures financed with
debt............................. $ 0 $ 675,000 $ 0 $ 0 $ 0
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
D-6
<PAGE> 84
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Meadowcraft, Inc. and Subsidiaries (the "Company") designs, manufactures
and distributes a variety of wrought iron consumer products, including outdoor
and indoor furniture and accessories, outdoor cushions and umbrellas, and garden
products, which it markets to mass merchandisers and specialty stores primarily
in the United States.
Revenue and expenses are subject to material seasonal variations. The
seasonal nature of the Company's business requires an inventory build-up during
the fall and winter months in order to meet customer demand during the spring
and summer selling seasons. The Company relies upon bank borrowings and cash
flow from operations to finance this production (see Note 3).
On November 25, 1997, the Company completed an initial public offering (the
"Offering") of 3,225,000 shares of common stock at $13.00 per share. On December
10, 1997, the underwriters exercised their over allotment option to purchase an
additional 483,750 shares of common stock from the Company at $13.00 per share.
The net proceeds from the Offering and the over allotment option were
$44,311,787, net of an underwriting discount of $3,374,963 and expenses of
approximately $527,000. The proceeds were used to pay $32,700,000 of the S
Corporation Distribution, with the balance of $11,611,787 used to fund capital
expenditures.
Upon completion of the Offering, the Company terminated its S Corporation
election. The Company made additional S Corporation distributions in the amount
of $16,234,000 in fiscal 1998 and will complete the final S Corporation
Distribution based upon the Company's S Corporation earnings attributable to the
period from May 4, 1997 to the date of termination of the S Corporation election
(November 25, 1997). In order to determine the S Corporation earnings
attributable to this period, the Company prorated its taxable income for the
12-month period ending May 3, 1998, based on the number of days in the 12-month
period in which the Company was an S Corporation. Based on this calculation, the
Company has distributable earnings in the amount of $686,000. This amount has
not been accrued at July 31, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Meadowcraft De Mexico, S.A. De C.V. and
Meadowcraft (UK) Limited. All significant intercompany transactions have been
eliminated in the consolidated financial statements.
FISCAL YEAR END
Prior to fiscal 1997, the Company was on a 52/53 week year with the fiscal
year ending on the Sunday closest to the last day of April. During fiscal 1997,
the Company changed its financial reporting period to a fiscal year ending on
the Saturday closest to the last day of April. As a result of this change, the
year ended May 3, 1997 includes 53 weeks of operations versus 52 weeks in fiscal
1996. As a result of the Offering and termination of the S Corporation election,
the Company changed its financial reporting year end to July 31.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and (2) the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
D-7
<PAGE> 85
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DUE FROM FACTOR
The Company maintains agreements with two financial institutions under
which a substantial portion of its trade accounts receivable are factored. Such
agreements provide for the factoring of accounts receivable without recourse;
therefore, the financial institutions assume all credit risk with respect to
factored customer accounts. The vast majority of the Company's factored accounts
receivable are factored with the bank which provides its $90,000,000 revolving
line of credit (see Note 3). The Company does not factor the receivables related
to four of its customers and the related amounts are reflected in accounts
receivable in the accompanying consolidated balance sheets (see Note 11).
INVENTORIES
Inventories are valued at first-in, first-out ("FIFO") cost, which is not
in excess of market. An analysis of inventories at July 31, 1997 and 1998
follows:
<TABLE>
<CAPTION>
JULY 31, 1997 JULY 31, 1998
------------- -------------
<S> <C> <C>
Raw materials and purchased parts........................... $ 6,273,000 $11,533,000
Work-in-process............................................. 569,000 1,075,000
Finished goods.............................................. 4,748,000 8,991,000
----------- -----------
$11,590,000 $21,599,000
=========== ===========
</TABLE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost less accumulated
depreciation and amortization and include expenditures for major renewals and
betterments that substantially increase the useful lives of existing assets as
well as the net amount of interest cost associated with significant capital
additions. Interest cost incurred during fiscal 1997 and 1998 amounted to
$5,274,000 and $4,502,000, respectively, of which $0 and $240,000, respectively,
were capitalized. Maintenance and repairs are charged to expense as incurred.
Upon sale, retirement, or other disposition of these assets, the cost and
related accumulated depreciation are removed from the respective accounts, and
the related gain or loss is credited or charged to income.
Depreciation is computed using the straight-line method over the estimated
service lives of the depreciable assets as follows:
<TABLE>
<S> <C>
Buildings............... 13 to 28 years
Machinery and 5 to 13 years
equipment.............
Furniture and 3 to 5 years
fixtures..............
Leasehold Shorter of lease term or 13 years
improvements..........
</TABLE>
REVENUE RECOGNITION/WARRANTY AND OTHER RESERVES
The Company recognizes sales when products are shipped. As the Company
offers up to a 36-month limited warranty on certain products, estimated warranty
costs are accrued at the time the products are sold based on a historical
percentage of warranty costs to gross sales. The charge for such accrual is
reflected as returns and allowances, which reduces gross sales to net sales.
Included in the warranty reserve is an estimate for customer credits arising
from co-op advertising programs and purchased volume discounts. These amounts
are accrued based on individual customer agreements or Company rebate programs.
SELF-INSURANCE ACCRUAL
The Company is substantially self insured for workers' compensation and
health care claims. The Company purchases insurance coverage for all workers'
compensation claims in excess of $250,000 per
D-8
<PAGE> 86
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
occurrence with an annual aggregate stop loss limit of $1,000,000 and for all
employee health care claims in excess of $100,000 per occurrence. As self
insurance claims become probable and reasonably estimable, the estimated cost of
such claims is accrued, including related expenses. Management considers the
accrued liabilities for unsettled claims to be adequate; however, there is no
assurance that the amounts accrued will not vary from the ultimate amounts
incurred upon final disposition of all outstanding claims. As a result, periodic
adjustments to the reserves will be made as events occur which indicate changes
are necessary. In the opinion of management, based on current information, these
periodic adjustments will not be material to the Company's financial condition
or results of operations.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company, from time to time, uses interest rate swap contracts ("Swaps")
and interest rate caps ("Caps") to manage interest rate risks arising from
certain of the Company's financing sources, such as the revolving credit line
and certain long-term debt. All Swaps and Caps employed by the Company represent
end-user activities designed as hedges, and, therefore, changes in fair values
of such derivatives are not included in the results of operations. Interest
receivable or payable from such contracts is accrued and recognized as an
adjustment to interest expense related to the specific financing source being
hedged.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments,
management has determined that the carrying amount approximates fair value for
current financial instruments due to the short maturities of those instruments.
The estimated fair values of long-term debt instruments are based upon the
current interest rate environment and remaining term to maturity (See Note 10).
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." This statement is effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement for all prior-period
earnings per share ("EPS") data presented.
SFAS No. 128 simplifies the standards for computing EPS previously found in
APB Opinion No. 15, "Earnings per Share," and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with
the presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for the Company.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. Diluted EPS has been computed based
on the weighted average number of shares outstanding, including the effect of
outstanding stock options, if dilutive, in each respective year. The difference
in the weighted average shares-basic versus weighted average shares-diluted is
due to the effect of stock options.
Additionally, in February 1998, the Securities and Exchange Commission
("SEC") released Staff Accounting Bulletin ("SAB") 98. SAB 98 revised prior
guidance of the SEC to reflect the requirements of SFAS No. 128. As a result of
SFAS No. 128 and SAB 98, the accompanying consolidated statements of income
reflect historical earnings per share, which excludes a tax provision for all
periods in which the Company was an S Corporation. The pro forma earnings per
share amounts reflect a provision for income taxes as if the Company was a
taxable corporation.
D-9
<PAGE> 87
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENDING ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information." SFAS No. 131 requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments and report a measure of segment profit or loss,
certain specific revenue and expense items, and segment assets. This statement
also requires that a public business enterprise report descriptive information
about the way that the operating segments were determined, the products and
services provided by the operating segments, differences between the
measurements used in the reporting segment information and those used in the
enterprise's general purpose financial statements, and changes in the
measurement of segment amounts from period to period. The new rule becomes
effective in fiscal 1999 and is not expected to have a significant impact on the
Company's financial reporting.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pension and Other Postretirement Benefits." SFAS No. 132, which supersedes
SFAS No. 87, 88, and 106, standardizes the disclosure requirements for pensions
and other postretirement benefit obligations and fair values of plan assets that
will facilitate financial analysis, and eliminates certain disclosures that are
no longer useful. The Company will adopt the new rules in fiscal 1999. The new
rules are not expected to have a significant impact on the Company's financial
reporting.
In July 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes the accounting
definition of a derivative, and specifies measurements, recognition, and
disclosure of changes in the fair value of derivatives (hedges) held by a
company. The Company will adopt this standard in fiscal 2000. SFAS No. 133 will
require derivatives designated as hedges to be recorded on the balance sheet at
fair value with the change in fair value of the underlying hedged item. The new
rules are not expected to have a material effect on the Company's results of
operations.
FOREIGN CURRENCY TRANSLATION
In accordance with SFAS No. 52, "Foreign Currency Translation," the assets
and liabilities denominated in foreign currency are translated into U.S. dollars
at the current rate of exchange existing at year end and revenues and expenses
are translated at average monthly exchange rates. Related translation
adjustments and gains or losses resulting from foreign currency transactions
were not material to the consolidated financial statements.
3. NOTES PAYABLE
In order to meet working capital needs, the Company maintains a variable
rate (7.71% at July 31, 1997 and 6.41% at July 31, 1998) revolving line of
credit in the amount of $90,000,000. The revolving line bears interest at the
prime rate with an option of converting the borrowing rate to LIBOR plus .75%
(6.41% at July 31, 1998) for all or a portion of the outstanding balance. The
Company also has the option of converting the revolving line to a federal funds
rate plus 1.50% (7.34% at July 31, 1998). At July 31, 1997 and 1998, $7,526,000
and $14,024,000, respectively, were outstanding under the line of credit. Of the
amounts outstanding at July 31, 1997 and 1998, $3,526,000 and $0, respectively,
were based on the prime rate, and $4,000,000 and $14,024,000, respectively, were
based on the LIBOR rate. At July 31, 1997 and 1998, $17,145,000 and $13,479,000,
respectively, were available to be borrowed. The average borrowings outstanding
during the year ended May 3, 1997 and July 31, 1998 were $30,945,000 and
$26,295,000, and the maximum borrowings outstanding were $59,460,000 and
$59,340,000, respectively. The weighted average interest rate on these
borrowings was approximately 7.53% in fiscal 1997 and 6.44% in fiscal 1998. All
bank borrowings are collateralized by all assets of the Company.
D-10
<PAGE> 88
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1997 the Company also maintained a $3,000,000 variable rate (8.0% at
July 31, 1997) line of credit. Of this amount, $2,700,000 was outstanding at
July 31, 1997. The average borrowings outstanding were $2,700,000. This loan was
repaid during fiscal 1998
The Company maintains an interest rate cap as a hedge against the variable
interest rate exposure on the $90,000,000 line of credit. This interest rate
cap, which expires June 1, 1999, establishes the maximum prime interest rate at
8.0% for all periods presented on varying notional amounts, which range from $0
to $30,000,000, and have been based on expected seasonal borrowings. At July 31,
1997 and 1998, the notional amounts amounted to $0. The counter-party to the
interest rate cap is the Company's primary bank. The Company believes the credit
and liquidity risk of the counter-party failing to meet its obligations is
remote as the Company settles its interest position with the bank on a current
basis. During fiscal years ended April 28, 1996, May 3, 1997, and July 31, 1998
as well as the thirteen weeks ended July 31, 1997, the interest rate cap had no
material effect on interest expense.
4. LONG-TERM DEBT
Long-term debt consists of the following at July 31, 1997 and 1998:
<TABLE>
<CAPTION>
JULY 31, 1997 JULY 31, 1998
------------- -------------
<S> <C> <C>
Term note, variable rate (6.41% at July 31, 1998), subject
to interest rate swaps (see below), due in quarterly
installments of $597,500 until February 1, 2003........... $ 0 $21,003,000
Term note, variable rate (3.70% at July 31, 1998), subject
to an interest rate swap (see below), due in annual
installments of $400,000 until November 6, 2012, secured
by land and buildings with a net book value of
$8,914,000................................................ 0 6,000,000
Capitalized lease obligation in Selma, AL; variable rate
(3.9% and 3.7% at July 31, 1997 and July 31, 1998,
respectively), subject to an interest rate swap (see
below), due in semiannual installments of $100,000 until
February 1, 2011, secured by buildings and equipment with
a net book value of $4,773,000............................ 2,700,000 2,500,000
Term note, 8.33%, repaid in fiscal 1998..................... 6,300,000 0
Term note, 8.89%, repaid in fiscal 1998..................... 4,700,000 0
Promissory notes, variable rates (7.94% at July 31, 1997),
repaid in fiscal 1998..................................... 1,500,000 0
Term note, 7.90%, repaid in fiscal 1998..................... 1,400,000 0
Promissory note, 8.50%, repaid in fiscal 1998............... 717,000 0
Promissory note, 8.00%, repaid in fiscal 1998............... 625,000 0
----------- -----------
17,942,000 29,503,000
Less amounts due within one year............................ (4,550,000) (2,990,000)
----------- -----------
$13,392,000 $26,513,000
=========== ===========
</TABLE>
During fiscal 1998, the Company restructured its various credit facilities
and entered into several interest rate swap agreements which expire in 2004 and
2005 related to the two term notes. Two swaps cover the $21,003,000 term note
and are designed to fix the interest rate at 6.52%. The $6,000,000 term note is
primarily covered by an interest rate swap which fixes the interest rate at
4.99%.
D-11
<PAGE> 89
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 1996, the Company entered into an interest rate swap
agreement, which expires in 2011 related to its capital lease obligation on the
Selma, Alabama facility covering the entire principal balance outstanding on
such obligation. The agreement is designed to fix the interest rate at 5.85%.
The Company's debt agreements, including the notes payable in Note 3,
contain, among other things, certain restrictions relating to net worth, capital
expenditures, the current ratio, and the debt service ratio. The Company was in
compliance with all covenants at July 31, 1997 and 1998.
The Company's total debt obligations maturing in each of the next five
fiscal years at July 31, 1998 are as follows: $2,990,000 in 1999 through 2002
and $12,043,000 in 2003 and $5,500,000 thereafter.
5. OPERATING LEASES
The Company has operating leases for office, plant, and warehouse
facilities and manufacturing and office equipment. Minimum future rental
payments for all operating leases having remaining terms in excess of one year
at July 31, 1998 are as follows:
<TABLE>
<S> <C>
Fiscal year ending in:
1999................................................... $1,956,000
2000................................................... 1,776,000
2001................................................... 950,000
2002................................................... 918,000
2003................................................... 751,000
Thereafter............................................. 1,462,000
----------
$7,813,000
==========
</TABLE>
Total rental expense amounted to $1,400,000, $ 1,361,000 and $ 1,380,000
for the fiscal years ended April 28, 1996, May 3, 1997, and July 31, 1998,
respectively, and $297,000 for the thirteen weeks ended July 31, 1997.
6. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Profit Sharing Plan (the "Plan") for its
salaried employees, which allows these employees to make pretax contributions to
the Plan. The Plan covers all full-time salaried employees who have completed
one year of service and who are at least 21 years of age. Participants of the
Plan may voluntarily contribute from 3% to 10% of their annual compensation
within certain dollar limits as allowed by law. The Company's matching
contribution is 33.3% of the participants' contribution and can be increased or
decreased at the option of the Board of Directors. Company contributions to the
Plan are determined by the Company's Board of Directors and are limited to a
maximum of 10% of the employee's compensation. Contribution expense for the
years ended April 28, 1996, May 3, 1997, and July 31, 1998 amounted to $82,000,
$94,000 and $118,000, respectively, and $26,000 for the thirteen weeks ended
July 31, 1997.
The Company also maintains a defined benefit pension plan covering the
employees of the Birmingham plants. The benefits are based on certain Company
monthly contributions for each year of credited service. The Company's funding
policy is to contribute annually no less than the minimum amount required by
ERISA and no more than the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
D-12
<PAGE> 90
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in Note 2, the Company changed its financial reporting year end to
July 31. However, the Company's pension disclosures remain on the previous year
end. As such, net pension expense for the fiscal years ended April 28, 1996, May
3, 1997, April 30, 1998, and the thirteen weeks ended July 31, 1997, includes
the following components:
<TABLE>
<CAPTION>
THIRTEEN
WEEKS
APRIL 28, MAY 3, APRIL 30, ENDED
1996 1997 1998 JULY 31, 1997
--------- -------- --------- -------------
<S> <C> <C> <C> <C>
Service cost of the current period.......... $130,000 $158,000 $161,000 $ 40,000
Interest cost on the projected benefit
obligation................................ 98,000 115,000 127,000 32,000
Actual return on assets held in the plan.... (52,000) (64,000) (89,000) (29,000)
Net amortization and deferral of prior
service cost, transition liability, and
net gain.................................. (11,000) 4,000 (1,000) 7,000
-------- -------- -------- --------
Net pension expense............... $165,000 $213,000 $198,000 $ 50,000
======== ======== ======== ========
</TABLE>
The following sets forth the funded status of the pension plan at April 28,
1996, May 3, 1997, July 31, 1997, and April 30, 1998:
<TABLE>
<CAPTION>
APRIL 28, MAY 3, JULY 31, APRIL 30,
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Accumulated benefit obligation.......... $1,360,000 $1,529,000 $1,569,000 $1,904,000
========== ========== ========== ==========
Vested accumulated benefit obligation... 1,283,000 1,452,000 1,493,000 1,781,000
========== ========== ========== ==========
Projected benefit obligation............ 1,473,000 1,726,000 1,786,000 2,093,000
Fair value of assets held in the plan... 1,040,000 1,453,000 1,515,000 1,743,000
---------- ---------- ---------- ----------
Excess of projected benefit obligation
over fair value of plan assets........ (433,000) (273,000) (271,000) (350,000)
Unrecognized net loss................... 205,000 210,000 210,000 407,000
Unrecognized initial obligation......... 53,000 44,000 42,000 36,000
Unrecognized prior service cost......... 83,000 149,000 145,000 134,000
---------- ---------- ---------- ----------
Prepaid (accrued) pension cost.......... $ (92,000) $ 130,000 $ 126,000 $ 227,000
========== ========== ========== ==========
</TABLE>
Pension plan assets consist primarily of group annuity policies at April
28, 1996, May 3, 1997, July 31, 1997 and April 30, 1998. The weighted average
discount rate used to measure the projected benefit obligation and the expected
long-term rate of return on assets was 7.50% at April 28, 1996, May 3, 1997, and
July 31, 1997 and 7.0% at April 30, 1998. The Company uses the straight-line
method of amortization for prior service costs and unrecognized gains and
losses.
The Company contributes to the Retail, Wholesale, and Department Store
Union Industry Pension Plan on behalf of each employee of the divisions,
excluding Arizona and Mexico, not covered by the aforementioned pension plan as
prescribed in the Company's collective bargaining agreements. The Company
contributes $2.40 to $3.40 per week for each full-time employee on the active
payroll subject to these agreements. Pension expense under these plans amounted
to approximately $70,000, $88,000, and $81,000 for the fiscal years ended April
28, 1996, May 3, 1997, and July 31, 1998, respectively, and $15,000 for the
thirteen weeks ended July 31, 1997.
The Company also maintains discretionary performance compensation and deferred
compensation plans covering certain management employees as approved by the
Chairman and President of the Company. The Company's discretionary provision for
these plans amounted to $1,143,000, $1,653,000, and $843,000 for the fiscal
years ended April 28, 1996, May 3, 1997, and July 31, 1998, respectively, and
$300,000 for the thirteen weeks ended July 31, 1997.
D-13
<PAGE> 91
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company does not provide any additional post-retirement or
post-employment benefits to its employees.
7. STOCK OPTION PLAN
On July 31, 1997, the Company adopted a Stock Option Plan (the "Plan")
reserving 1,000,000 shares of the Company's common stock for grants to executive
officers, directors and key employees. The Compensation Committee of the Board
of Directors administers and interprets the Plan and is authorized to grant
options to an eligible employee of the Company and non-employee directors. The
Plan provides for both incentive stock options and non-qualified stock options.
Options are granted under the Plan on such terms and at such prices as
determined by the Compensation Committee, except that the per share exercise
price of incentive stock options cannot be less than the fair market value of
the Company's common stock on the date of grant. All options which have been
granted have a term of ten years and vest evenly over five years.
The Company accounts for this plan under APB Opinion No. 25, "Accounting
for Stock Issued to Employees," under which no compensation cost has been
recognized. Had compensation expense for the Company's stock option plan for
awards in fiscal 1998 been determined under SFAS No. 123, "Accounting for
Stock-Based Compensation," based on the fair market value of the options at the
grant date, the Company's net income and income per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED JULY 31, 1998
-------------------
<S> <C>
Pro forma net income -- as reported......................... $22,259,000
Pro forma net income -- adjusted............................ 22,043,000
Diluted pro forma earnings per share -- as reported......... 1.20
Pro forma earnings per share -- adjusted.................... 1.19
</TABLE>
The fair market value was estimated on the date of grant using a
Black-Scholes option pricing model for fiscal 1998 assuming a dividend yield of
0, a risk-free interest rate of 5.5%, a volatility factor for the Company's
common stock of 51.35%, vesting evenly over five years and weighted average
expected and contractual lives of the options of 9.32 years.
The pro forma information is not likely to be representative of the effects
of options on pro forma net income in future years because the Company may award
additional options.
Information with respect to the Company's Plan is as follows:
<TABLE>
<CAPTION>
FISCAL 1998
---------------------------
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
-------- ----------------
<S> <C> <C>
Granted during the year and outstanding at July 31, 1998.... 337,965 $13.16
Exercisable at July 31, 1998................................ 0 0
Weighted average fair value of option granted............... $ 7.50
</TABLE>
The range of exercise prices for options outstanding is $13.00 -- $16.13
8. HISTORICAL AND PRO FORMA PROVISIONS FOR INCOME TAXES
Prior to November 25, 1997, the Company elected to be taxed as an S
Corporation and, as a result, the periods prior to November 25, 1997 do not
reflect historical income tax provisions. On November 25, 1997, the Company
terminated its S Corporation election in connection with the Offering and became
a taxable C Corporation. In connection with this termination, the Company
recorded a deferred tax asset and a credit to income tax provision in the amount
of $3,200,000. Additionally, the Company has allocated its income for the twelve
months ended May 3, 1998 (the end of the tax year), between the nontaxable S
Corporation and the
D-14
<PAGE> 92
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
taxable C Corporation based on the number of days in the 12 month period ended
May 3, 1998, in which the Company was an S Corporation and C Corporation,
respectively. The effect on the allocation was that a portion of the income for
the nine months ended May 3, 1998 was attributable to the C Corporation with the
remainder being attributable to the S Corporation. Subsequent to May 3, 1998,
the Company was taxed entirely as a C Corporation. The income attributable to
the C Corporation resulted in a historical tax provision of $4,038,000 for the
twelve months ended July 31, 1998 which included the effects of the recording of
the net deferred tax asset of $3,200,000. The pro forma provision gives effect
to income taxes that would have been reported had the Company's income been
attributable to the C Corporation for the entire period. The pro forma income
tax provision reflects an overall effective tax rate of 37% in fiscal 1996, 1997
and 1998, before considering the effect of the one time credit income tax
provision of $3,200,000 in fiscal 1998 related to the initial recording of the
net deferred tax asset.
A summary of the components of the pro forma provision for income taxes is
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------- ---------------------------------
APRIL 28, MAY 3, JULY 31, JULY 31, JULY 31,
1996 1997 1998 1996 1997
---------- ---------- ----------- -------------------- ----------
<S> <C> <C> <C> <C> <C>
Federal:
Current............ $4,580,000 $7,658,000 $10,870,000 $1,134,000 $1,453,000
Deferred........... (312,000) 941,000 (3,792,000) 253,000 349,000
---------- ---------- ----------- ---------- ----------
4,268,000 8,599,000 7,078,000 1,387,000 1,802,000
---------- ---------- ----------- ---------- ----------
State:
Current............ 448,000 748,000 1,553,000 111,000 144,000
Deferred........... (31,000) 92,000 (542,000) 25,000 32,000
---------- ---------- ----------- ---------- ----------
417,000 840,000 1,011,000 136,000 176,000
---------- ---------- ----------- ---------- ----------
Pro Forma Provision
for Income Taxes... $4,685,000 $9,439,000 $ 8,089,000 $1,523,000 $1,978,000
========== ========== =========== ========== ==========
</TABLE>
The pro forma provision for income taxes differs from the amounts computed
by applying federal statutory rates due to the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------- -----------------------
APRIL 28, MAY 3, JULY 31, JULY 31, JULY 31,
1996 1997 1998 1996 1997
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Tax provision computed at
the federal statutory rate
(35%)..................... $4,394,000 $8,882,000 $10,622,000 $1,433,000 $1,861,000
Benefit related to change in
tax status................ 0 0 (3,200,000) 0 0
Effect of state income
taxes, net of benefits.... 271,000 546,000 657,000 88,000 114,000
Other....................... 20,000 11,000 10,000 2,000 3,000
---------- ---------- ----------- ---------- ----------
$4,685,000 $9,439,000 $ 8,089,000 $1,523,000 $1,978,000
========== ========== =========== ========== ==========
</TABLE>
D-15
<PAGE> 93
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences which create net deferred tax assets at July 31, 1998
are as follows:
<TABLE>
<S> <C>
Depreciation................................................ $ (726,000)
Inventory................................................... 1,875,000
Warranty reserve............................................ 1,530,000
Payroll-related accrued expenses............................ 1,519,000
Other accrued expenses...................................... 136,000
----------
Pro forma deferred tax assets, net................ $4,334,000
==========
</TABLE>
9. CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to these proceedings will not
materially affect the financial position or results of operations of the
Company.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
The estimated fair value of the Company's on-balance sheet financial
instruments at July 31, 1998 approximated their carrying value at that date. As
of July 31, 1997 and 1998, and as discussed in Notes 3 and 4, the Company is
party to an interest rate cap agreement and several interest rate swap
agreements, all of which are considered derivative financial instruments. The
fair value of these instruments, which are specifically used for hedging
purposes, is the estimated amount that the Company would pay or receive if these
agreements were terminated as of July 31, 1997 and 1998. Such estimates of fair
value take into account current interest rates and the present creditworthiness
of the counterparties. Under the restrictions of the bank credit agreements, the
Company does not expect to cancel these agreements, and expects them to expire
as originally contracted. As of July 31, 1997 and 1998, the carrying amount of
these financial instruments, which represents amounts paid to obtain such
instruments, exceeds the estimated fair value by $203,000 and $968,000,
respectively.
11. MAJOR CUSTOMERS
During the fiscal years ended April 28, 1996, May 3, 1997 and July 31,
1998, three major customers accounted for sales of approximately $55,266,000,
$72,133,000, and $81,744,000, respectively, of total net sales. During the
thirteen weeks ended July 31, 1997, three major customers accounted for sales of
approximately $17,146,000 of total net sales. As of July 31, 1997 and July 31,
1998, the outstanding balances, included in accounts receivable on the
respective consolidated balance sheets, related to these customers were
$5,700,000 and $4,047,000, respectively.
12. STOCKHOLDERS' EQUITY
On July 31, 1998, the Board of Directors approved an amendment to reduce
the Company's total number of authorized shares from 100,000,000 to 30,000,000.
13. BUSINESS COMBINATIONS
Effective August 1, 1997, the Company entered into an asset purchase
agreement with Virco Manufacturing Corporation to acquire all of the assets
located and in possession of Virsan, a Mexican Company and a subsidiary of
Virco, in Sonora, Mexico. The agreement stipulated cash payments for the
purchase of assets, in the amount of $2,175,000 and was funded under the
Company's revolving credit agreement. Pro forma financial information has not
been provided as it would not be meaningful since customers, products and
operations of the Company will differ significantly from that of Virsan.
D-16
<PAGE> 94
ANNEX E
MEADOWCRAFT, INC. AND SUBSIDIARIES
UNAUDITED FINANCIAL STATEMENTS
(AND RELATED NOTES) FOR THE COMPANY
FOR THE THIRTEEN WEEK AND SIX MONTH PERIODS
ENDED JANUARY 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Condensed Consolidated Balance Sheets as of July
31, 1998, January 31, 1998 and January 31, 1999........... E-2
Unaudited Condensed Consolidated Statements of Income for
the Thirteen Weeks and Six Months Ended January 31, 1998
and 1999.................................................. E-3
Unaudited Condensed Consolidated Statements of Cash Flows
for the Six Months Ended January 31, 1998 and 1999........ E-4
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ E-5
</TABLE>
E-1
<PAGE> 95
FINANCIAL INFORMATION
MEADOWCRAFT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
------------ ---------------------------
1998 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Due from factor.................................... $ 14,686,000 $ 20,994,000 $ 15,466,000
Accounts receivable................................ 6,810,000 12,789,000 7,860,000
Inventories........................................ 21,599,000 43,126,000 46,739,000
Prepaid expenses and other......................... 359,000 687,000 398,000
Deferred income taxes.............................. 4,334,000 3,200,000 4,496,000
Income taxes receivable............................ 0 0 1,961,000
------------ ------------ ------------
Total Current Assets....................... 47,788,000 80,796,000 76,920,000
------------ ------------ ------------
Property, plant and equipment...................... 84,429,000 81,146,000 85,547,000
Less accumulated depreciation...................... (23,039,000) (20,380,000) (26,221,000)
------------ ------------ ------------
Net Property, Plant and Equipment.................... 61,390,000 60,766,000 59,326,000
------------ ------------ ------------
Other Assets......................................... 973,000 712,000 927,000
------------ ------------ ------------
$110,151,000 $142,274,000 $137,173,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt.................. $ 2,990,000 $ 2,142,000 $ 2,990,000
Notes payable...................................... 14,024,000 31,226,000 26,886,000
Accounts payable................................... 2,400,000 24,637,000 21,991,000
Accrued expenses and warranty...................... 6,594,000 8,471,000 9,831,000
Income taxes payable............................... 2,799,000 610,000 0
------------ ------------ ------------
Total Current Liabilities.................. 28,807,000 67,086,000 61,698,000
------------ ------------ ------------
Long-Term Debt....................................... 26,513,000 26,959,000 25,218,000
------------ ------------ ------------
Commitment and Contingencies Stockholders' Equity:
Common stock, $.01 par value, 30,000,000 shares
authorized, 19,708,750 issued and outstanding at
July 31, 1998 and January 31, 1999.............. 197,000 197,000 197,000
Additional paid-in capital......................... 44,614,000 44,662,000 44,614,000
Retained earnings.................................. 10,020,000 3,370,000 5,446,000
------------ ------------ ------------
54,831,000 48,229,000 50,257,000
------------ ------------ ------------
$110,151,000 $142,274,000 $137,173,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
E-2
<PAGE> 96
MEADOWCRAFT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------------- -------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales................................... $28,546,000 $22,646,000 $35,462,000 $30,973,000
Cost of Sales............................... 19,754,000 17,942,000 26,502,000 28,356,000
----------- ----------- ----------- -----------
Gross Profit................................ 8,792,000 4,704,000 8,960,000 2,617,000
----------- ----------- ----------- -----------
Operating Expenses:
Selling................................... 1,643,000 1,656,000 2,622,000 2,607,000
General and administrative................ 2,006,000 2,710,000 3,559,000 4,480,000
----------- ----------- ----------- -----------
3,649,000 4,366,000 6,181,000 7,087,000
----------- ----------- ----------- -----------
Operating Income............................ 5,143,000 338,000 2,779,000 (4,470,000)
Interest Expense............................ 893,000 1,031,000 1,383,000 1,712,000
----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes -- historical....................... 4,250,000 (693,000) 1,396,000 (6,182,000)
Credit for income taxes..................... (2,030,000) (251,000) (2,030,000) (2,293,000)
----------- ----------- ----------- -----------
Net income (loss) -- historical............. $ 6,280,000 $ (442,000) $ 3,426,000 $(3,889,000)
=========== =========== =========== ===========
Pro Forma Presentation:
Net income (loss) -- historical............. $ 6,280,000 $ (442,000) $ 3,426,000 $(3,889,000)
Pro forma (credit) for income taxes......... 412,000 0 (650,000) 0
----------- ----------- ----------- -----------
Pro forma net income (loss)................. $ 5,868,000 $ (442,000) $ 4,076,000 $(3,889,000)
=========== =========== =========== ===========
Pro forma net income (loss) excluding
benefit related to change in tax status... $ 2,668,000 $ (442,000) $ 874,000 $(3,889,000)
=========== =========== =========== ===========
Earnings (loss) per share:
Basic and diluted -- historical........... $ 0.34 $ (0.02) $ 0.20 $ (0.20)
=========== =========== =========== ===========
Basic and diluted -- pro forma............ $ 0.31 $ (0.02) $ 0.24 $ (0.20)
=========== =========== =========== ===========
Basic and diluted excluding benefit
related to change in tax status........ $ 0.14 $ (0.02) $ 0.05 $ (0.20)
=========== =========== =========== ===========
Weighted average shares outstanding......... 18,662,378 19,708,750 17,331,189 19,708,750
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
E-3
<PAGE> 97
MEADOWCRAFT, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
--------------------------
1998 1999
------------ -----------
<S> <C> <C>
Cash flows from Operating Activities:
Net income (loss)......................................... $ 3,426,000 $(3,889,000)
------------ -----------
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization.......................... 2,680,000 3,416,000
Credit for deferred income taxes....................... (3,200,000) (162,000)
Changes in assets and liabilities:
Due from factor........................................ (10,236,000) (780,000)
Accounts receivable.................................... (7,089,000) (1,050,000)
Inventories............................................ (31,536,000) (25,140,000)
Prepaid expenses and other............................. (394,000) (39,000)
Other assets........................................... 144,000 46,000
Accounts payable....................................... 21,790,000 19,591,000
Accrued expenses and warranty.......................... 1,558,000 3,237,000
Income taxes payable/receivable........................ 610,000 (4,760,000)
------------ -----------
Total adjustments................................. (25,673,000) (5,641,000)
------------ -----------
Net cash provided used in operating activities.... (22,247,000) (9,530,000)
------------ -----------
Cash flows from Investing Activities:
Capital expenditures...................................... (21,277,000) (1,352,000)
------------ -----------
Net cash used in investing activities............. (21,277,000) (1,352,000)
------------ -----------
Cash flows from Financing Activities:
Proceeds from Initial Public Offering..................... 44,358,000 0
Net borrowings on notes payable........................... 21,000,000 12,862,000
Proceeds from issuance of long-term debt.................. 12,000,000 0
Principal payments of long-term debt...................... (841,000) (1,295,000)
Payment of loan costs..................................... (293,000) 0
Payment of S corporation distributions.................... (32,700,000) (685,000)
------------ -----------
Net cash provided by financing activities......... 43,524,000 10,882,000
------------ -----------
Net change in cash.......................................... 0 0
Cash, beginning of period................................... 0 0
------------ -----------
Cash, end of period......................................... $ 0 $ 0
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 1,383,000 $ 1,748,000
============ ===========
Cash paid during the period for income taxes.............. $ 0 $ 2,629,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
E-4
<PAGE> 98
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements of Meadowcraft,
Inc. and Subsidiaries, ("the Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
are presented in accordance with the requirements of Form 10-Q and Article 10 of
Regulation S-X. The financial statements should be read in conjunction with the
audited financial statements and notes thereto in the Company's Annual Report on
form 10-K for the year ended July 31, 1998 as filed with the Securities and
Exchange Commission.
In the opinion of management, the unaudited financial statements included
herein reflect all adjustments, consisting of normal, recurring adjustments,
necessary to present fairly the information set forth therein. The fiscal 1999
interim results of operations are not necessarily indicative of results expected
for the full year. Revenues and expenses are subject to material seasonal
variations. The seasonal nature of the Company's business requires an inventory
build-up during the fall and winter months in order to meet customer demand
during the spring and summer selling seasons. The Company relies upon bank
borrowings and cash flow from operations to finance this production.
PRINCIPLES OF CONSOLIDATION
The unaudited interim consolidated financial statements include the
accounts and transactions of the Company and its wholly owned subsidiaries,
Meadowcraft De Mexico, S.A. De C.V. and Meadowcraft (UK) Limited. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
NEW ACCOUNTING STANDARDS AND STATEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information." SFAS No. 131, which
supersedes SFAS Nos. 14, 18, 24 and 30, establishes new standards for segment
reporting using the "management approach" in which reportable segments are based
on the same criteria on which management disaggregates a business for making
operation decisions and assessing performance. The new rule becomes effective in
fiscal 1999 and is not expected to have a significant impact on the Company's
financial reporting.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS No. 132, which
supersedes SFAS Nos. 87, 88 and 106, standardizes the disclosure requirements
for pensions and other postretirement benefits to the extent practicable,
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis, and eliminates
certain disclosures that are no longer useful as they were when SFAS Nos. 87, 88
and 106 were issued. The Company will adopt the new rules in fiscal 1999. The
new rule is not expected to have a significant impact on the Company's financial
reporting.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments including certain derivative instruments
embedded in other contracts and for hedging activities. This statement is
effective for fiscal years beginning after June 15, 1999. The new rules are not
expected to have a material effect on the Company's results of operations.
2. INITIAL PUBLIC OFFERING
On November 25, 1997, the Company completed an Initial Public Offering (the
"Offering") of 3,225,000 shares of common stock at $13.00 per share. On December
10, 1997, the underwriters exercised their over allotment option to purchase an
additional 483,750 shares of common stock from the Company at $13.00 per share.
E-5
<PAGE> 99
MEADOWCRAFT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
The net proceeds from the Offering and the over allotment option were
$44,311,787, net of an underwriting discount of $3,374,963 and expenses of
approximately $527,000. The proceeds were used to pay $32,700,000 of the S
Corporation distribution, with the balance of $11,611,787 used to fund capital
expenditures.
Upon completion of the Offering, the Company terminated its S Corporation
election. The Company made an additional S Corporation distribution in the
amount of $16,334,000 in fiscal 1998. In fiscal 1999, the Company distributed
$686,435, representing the final S Corporation distribution based upon the
Company's S Corporation earnings attributable to the period from May 4, 1997 to
the date of termination of the S Corporation election (November 25, 1997).
3. INVENTORIES
Inventories are valued at first-in, first-out ("FIFO") cost, which is not
in excess of market. An analysis of inventories follows:
<TABLE>
<CAPTION>
JANUARY 31,
JULY 31, -------------------------
1998 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Raw materials and purchased parts............... $11,533,000 $12,633,000 $17,203,000
Work-in-process............................... 1,075,000 1,489,000 1,748,000
Finished goods................................ 8,991,000 29,004,000 27,788,000
----------- ----------- -----------
$21,599,000 $43,126,000 $46,739,000
=========== =========== ===========
</TABLE>
4. EARNINGS PER SHARE
The Company's basic and diluted earnings per share calculations resulted in
the same weighted average shares outstanding as the Company's 403,587 stock
options were not considered as their effect would be antidilutive.
E-6
<PAGE> 100
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, Share Certificates and any other required
documents should be sent or delivered by each stockholder of the Company or such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
the Depositary at its addresses set forth below.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Facsimile
(For Eligible Institutions Only):
(718) 234-5001
Confirm Facsimile by Telephone
(800) 937-5449
By Mail, Hand or Overnight Courier:
40 Wall Street
46th Floor
New York, New York 10005
---------------------
Stockholders should contact the Information Agent or their broker, dealer,
commercial bank or trust company for assistance concerning the Offer. Additional
copies of this Offer to Purchase, the Letter of Transmittal and other related
materials may also be obtained from the Information Agent.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, N.Y. 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 207-2872
<PAGE> 1
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
MEADOWCRAFT, INC.
Pursuant to the Offer to Purchase dated May 19, 1999
of
MWI ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
SRB-MWI, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JUNE 17, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Facsimile
(For Eligible Institutions Only):
(718) 234-5001
Confirm Facsimile by Telephone
(800) 937-5449
By Mail, Hand or Overnight Courier:
40 Wall Street
46(th) Floor
New York, New York 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or if delivery of Shares is to
be made by book-entry transfer to the Depositary's account at The Depository
Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC")
(each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry
Transfer Facilities") pursuant to the book-entry transfer procedure described
under "The Tender Offer--Procedures for Accepting the Offer and Tendering
Shares" in the Offer to Purchase (as defined below).
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined under "The Tender Offer -- Terms of the Offer; Expiration Date"
in the Offer to Purchase) or who cannot complete the procedure for delivery by
book-entry transfer on a timely basis and who wish to tender their Shares must
do so pursuant to the guaranteed delivery procedure described under "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer
to Purchase. See Instruction 2.
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
---------------------------------------------------------
TOTAL NUMBER OF NUMBER OF
CERTIFICATE SHARES REPRESENTED SHARES
NUMBER(S)* BY CERTIFICATE(S)* TENDERED**
- -----------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
TOTAL SHARES
- -----------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are being tendered. See Instruction 4.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
-----------------------------------------------------------------------------
Check box of applicable book-entry transfer facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No.
-------------------------------------------------------------------------- at
Transaction Code No.
-----------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
-----------------------------------------------------------------------------
If delivery is by book-entry transfer, check box of applicable book-entry
transfer facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No.
-------------------------------------------------------------------------- at
Transaction Code No.
-----------------------------------------------------------------------------
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to MWI Acquisition Co., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of SRB-MWI, L.L.C., a
Nevada limited liability company, the above-described shares (the "Shares") of
common stock, par value $.01 per share, of Meadowcraft, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in Purchaser's Offer to Purchase dated May 19, 1999 (the "Offer to
Purchase") and this Letter of Transmittal (which, together with any amendments
or supplements thereto or hereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged. The undersigned understands that Purchaser
reserves the right to transfer or assign, in whole or from time to time in part,
to one or more of its affiliates, the right to purchase all or any portion of
the issued and outstanding Shares tendered pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and all dividends, distributions
(including, without limitation, distributions of additional Shares) and rights
declared, paid or distributed in respect of such Shares on or after May 19, 1999
(collectively, "Distributions") and irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver Share Certificates evidencing such
Shares and all Distributions, or transfer ownership of such Shares and all
Distributions on the account books maintained by a Book-Entry Transfer Facility,
together, in either case, with all accompanying evidences of transfer and
authenticity, to or upon the order of Purchaser, (ii) present such Shares and
all Distributions for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares and all Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that when such Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto and to all Distributions, free and clear of all liens,
restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned will, upon
request, execute any additional documents deemed by the Depositary or Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby and all Distributions.
In addition, the undersigned shall remit and transfer promptly to the
Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints each and any of Samuel R.
Blount, Steven C. Braswell and Larry M. York as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
such attorney and proxy or his substitute shall, in his sole discretion, deem
proper and otherwise act (by written consent or otherwise) with respect to all
the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any
3
<PAGE> 4
meeting of stockholders of the Company (whether annual or special and whether or
not an adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise. This proxy and power of attorney is coupled with an interest in the
Shares tendered hereby, is irrevocable and is granted in consideration of, and
is effective upon, the acceptance for payment of such Shares by Purchaser in
accordance with other terms of the Offer. Such acceptance for payment shall
revoke all other proxies and powers of attorney granted by the undersigned at
any time with respect to such Shares (and all Shares and other securities issued
in Distributions in respect of such Shares), and no subsequent proxy or power of
attorney shall be given or written consent executed (and if given or executed,
shall not be effective) by the undersigned with respect thereto. The undersigned
understands that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's acceptance of such Shares for payment, Purchaser must be able
to exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's stockholders then
scheduled.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions," please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not purchase any of the Shares tendered hereby.
4
<PAGE> 5
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased to be
issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer are to be returned by
credit to an account at one of the Book-Entry Transfer facilities other
than that designated above.
Mail: [ ] Check [ ] Share Certificate(s) to:
Name----------------------------------------------------------------------
(Please Print)
Address-------------------------------------------------------------------
---------------------------------------------------------------------
(Include Zip Code)
---------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
(Also complete Substitute Form W-9 on reverse side)
[ ] Credit Shares delivered by book-entry transfer and not purchased to
the account set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
----------------------------------------------------------------------
(Account number)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail: [ ] Check [ ] Share Certificate(s) to:
Name-----------------------------------------------------------------------
(Please Print)
Address--------------------------------------------------------------------
----------------------------------------------------------------------
(Zip Code)
----------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 on reverse side)
---------------------------------------------------------------------------
5
<PAGE> 6
- --------------------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated , 1999
-----------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please
provide the following information and see Instruction 5).
Name(s)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED; SEE INSTRUCTIONS 1 AND 5)
Name of Firm
--------------------------------------------------------------------------
Authorized Signature
--------------------------------------------------------------------------
Dated , 1999.
-------------------------
For use by financial institutions only.
Financial institutions: place medallion guarantee in space below.
- --------------------------------------------------------------------------------
<PAGE> 7
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PAYOR: AMERICAN STOCK TRANSFER AND TRUST COMPANY
PART I Taxpayer Identification No. Social security number
SUBSTITUTE ---------------------------- ----------------------------
FORM W-9 OR
For All Accounts ----------------------------
---------------------------- Employer Identification Number
PART II For Payees Exempt from Backup Withholding (see enclosed Guidelines)
</TABLE>
<TABLE>
<S> <C> <C>
Enter your taxpayer identification number in the appropriate box. For most
DEPARTMENT OF THE individuals and sole proprietors, this is your Social Security Number. For other
TREASURY entities, it is your Employer Identification Number. If you do not have a
INTERNAL REVENUE number, see how to obtain a TIN in the enclosed Guidelines.
SERVICE Note: If the account is in more than one name, see the chart on page 2 of the
enclosed Guidelines to determine what number to enter.
</TABLE>
<TABLE>
<S> <C> <C>
PAYER'S REQUEST FOR CERTIFICATION -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION
NO.
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me, I understand that if I do
not provide a taxpayer identification number within sixty (60) days, 31% of
all reportable payments made to me thereafter will be withheld until I
provide a number, and either: (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration Office or (b) I
intend to mail or deliver an application in the near future);
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
You must cross item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because of under reporting interest or
dividends on your tax return and you have not received a notice from the IRS
advising you that backup withholding has terminated.
Signature ____________________ Date ____________ , 1999
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion signature
Guarantee Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth under "The Tender Offer -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein prior to the Expiration Date (as defined
in "The Tender Offer -- Terms of the Offer; Expiration Date" in the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis may
tender their Shares pursuant to the guaranteed delivery procedure described in
under "The Tender Offer -- Procedures for Accepting the Offer and Tendering
Shares" in the Offer to Purchase. Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution; (ii) a properly completed
and duly executed Notice of guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date; and (iii) the Share Certificates evidencing all physically
delivered Shares in proper form for transfer by delivery, or a confirmation of a
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of all Shares delivered by book-entry transfer, in each case together
with a Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange, Inc. trading days after the date of
execution of such Notice of Guaranteed Delivery, all as described under "The
Tender Offer -- Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY 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.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
<PAGE> 9
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or
<PAGE> 10
any such Share Certificate is to be sent to someone other than the person(s)
signing this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal but at an address other than that shown in the box entitled
"Description of Shares Tendered" on the reverse hereof, the appropriate boxes on
the reverse of this Letter of Transmittal must be completed. Stockholders
delivering Shares tendered hereby by book-entry transfer may request that Shares
not purchased be credited to such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate in the box entitled "Special Payment
Instructions" on the reverse hereof. If no such instructions are given, all such
Shares not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated on the reverse hereof as the account from which
such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
address or telephone numbers set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
9. 31% BACKUP WITHHOLDING. Under U.S. Federal income tax law, a
stockholder whose tendered Shares are accepted for payment is required by law to
provide the Depositary (as payor) with such stockholder's correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9. If the Depositary is not
provided with the correct TIN or an adequate basis for exemption, the Internal
Revenue Service (the "IRS") may subject the stockholder or other payee to a $50
penalty. In addition, payments that are made to such stockholder or other payee
with respect to Shares purchased pursuant to the Offer may be subject to a 31%
backup withholding. If a stockholder makes a false statement that results in no
imposition of backup withholding, and there is no reasonable basis for such
statement, a $500 penalty may also be imposed by the IRS.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8, signed under penalties of
perjury, attesting to such individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions. A stockholder should consult his or her advisor as to such
stockholder's qualification for exemption from backup withholding and the
procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the IRS. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are held in more than one name or are not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report. If the tendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, the stockholder should write "Applied For" in the
space provided for the TIN in Part I, and sign and date the Substitute Form W-9.
If "Applied For" is written in Part I and the Depositary is not provided with a
TIN within 60 days, the Depositary will withhold 31% of all payments of the
purchase price to such stockholder until a TIN is provided to the Depositary.
However, such amounts will be refunded to such stockholder if a TIN is provided
to the Depositary within 60 days.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 and other
related materials should be directed to the Information Agent at its address set
forth below. Questions or requests for assistance may be directed to the
Information Agent.
<PAGE> 11
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: (800) 207-2872
Banks and Brokers Call Collect:
(212) 269-5500
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
<PAGE> 1
EXHIBIT (A)(3)
NOTICE OF GUARANTEED DELIVERY
for
Tender of Shares of Common Stock
of
MEADOWCRAFT, INC.
Pursuant to the Offer to Purchase dated May 19, 1999
of
MWI ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
SRB-MWI, L.L.C.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares (the "Shares") of common stock, par
value $.01 per share, of Meadowcraft, Inc., a Delaware corporation (the
"Company"), are not immediately available, (ii) if Share Certificates and all
other required documents cannot be delivered to American Stock Transfer and
Trust Company, as depositary (the "Depositary"), prior to the Expiration Date
(as defined under "The Tender Offer -- Terms of the Offer; Expiration Date" in
the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by facsimile
transmission to the depositary. See "The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Facsimile
(For Eligible Institutions Only):
(718) 234-5001
Confirm Facsimile by Telephone
(800) 937-5449
<TABLE>
<S> <C> <C>
By Mail, Hand or Overnight Courier:
40 Wall Street
46(th) Floor
New York, New York 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to MWI Acquisition Co., a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of SRB-MWI, L.L.C.,
a Nevada limited liability company, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated May 19, 1999 and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, shares of Common Stock, par value $.01 per share
(the "Shares"), of Meadowcraft, Inc., a Delaware corporation, pursuant to the
guaranteed delivery procedure set forth under "The Tender Offer -- Procedures
for Accepting the Offer and Tendering Shares" of the Offer to Purchase.
Certificate Nos. (if available):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated:
- --------------------------------------------------------------------------------
Please check one box if Shares will be delivered by book-entry transfer:
[ ] The Depositary Trust Company
[ ] The Philadelphia Depositary Company
Account No.
- --------------------------------------------------------------------------------
Name(s) of Holder(s):
- --------------------------------------------------------------------------------
Please type or print
- --------------------------------------------------------------------------------
Address of Company
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
2
<PAGE> 3
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national securities exchange
or the National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States, guarantees (a) that the
above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4
under the Securities Exchange Act of 1934, (b) that such tender of Shares complies with Rule
14e-4 and (c) to deliver to the Depositary the Shares tendered hereby, together with a
properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) thereof) or
an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry
delivery and any other required documents, all within three New York Stock Exchange trading
days of the date hereof. A "trading day" is any day on which the New York Stock Exchange is
open for business.
- -------------------------------------------------------------------------------------------------------
Name of Firm:
--------------------- ------------------------------
(Authorized Signature)
Address:
-------------------------
Name:
- ----------------------------------- -------------------------
(Please type or print)
(Include Zip Code)
Title:
------------------------
Area Code and Tel. No.:
------------
Dated:
------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT (A)(4)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
MEADOWCRAFT, INC.
at
$10.00 Net Per Share
by
MWI ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
SRB-MWI, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JUNE 17, 1999, UNLESS THE OFFER IS EXTENDED.
May 19, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
D.F. King & Co., Inc. has been appointed by MWI Acquisition Co., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of SRB-MWI, L.L.C., a
Nevada limited liability company ("Parent"), to act as the Information Agent in
connection with Purchaser's offer to purchase all issued and outstanding shares
(the "Shares") of common stock, par value $.01 per share, of Meadowcraft, Inc.,
a Delaware corporation (the "Company"), at a price of $10.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase, dated May 19, 1999 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed
materials to those of your clients for whose accounts you hold Shares registered
in your name or in the name of your nominee.
The Offer is conditioned upon, among other things, the satisfaction or
waiver of certain conditions, as set forth in the Offer to Purchase. The Offer
is not conditioned upon any minimum number of shares being tendered in the Offer
and neither the Offer nor the Merger (as defined in the Offer to Purchase) is
subject to any financing condition.
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated May 19, 1999;
2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to American Stock Transfer and Trust Company (the
"Depositary") by the Expiration Date (as defined in the Offer to Purchase)
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date;
<PAGE> 2
4. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
5. A letter to stockholders of the Company from Timothy M. LeRoy,
President and Chief Operating Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to
stockholders of the Company, recommending that the Company's stockholders
accept the Offer and tender their Shares pursuant to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JUNE 17, 1999, UNLESS THE OFFER
IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the terms
and subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any such extension or amendment) will be
made only after timely receipt by the Depositary of certificates evidencing such
Shares (or a confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined in
the Offer to Purchase)), a Letter of Transmittal (or facsimile thereof) properly
completed and duly executed and any other required documents.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedure described under "The Tender Offer -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase.
None of Purchaser, Parent nor any officer, director, stockholder, agent or
other representative of Purchaser or Parent will pay any fees or commissions to
any broker, dealer or other person (other than the Depositary and the
Information Agent as described in the Offer) in connection with the solicitation
of tenders of Shares pursuant to the Offer. However, Purchaser will, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. Purchaser will
pay or cause to be paid any stock transfer taxes payable with respect to the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D.F. King & Co., Inc. at its addresses and telephone numbers set forth on the
back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone numbers set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
D.F. KING & CO., INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU, OR
ANY OTHER PERSON, THE AGENT OF PARENT, PURCHASER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT (A)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
MEADOWCRAFT, INC.
at
$10.00 Net Per Share
by
MWI ACQUISITION CO.
a wholly-owned subsidiary of
SRB-MWI, L.L.C.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JUNE 17, 1999, UNLESS THE OFFER IS EXTENDED.
May 19, 1999
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated May 19,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal in
connection with the offer by MWI Acquisition, Co., a Delaware corporation
("Purchaser") and wholly-owned subsidiary of SRB-MWI, L.L.C., a Nevada limited
liability company ("Parent"), to purchase all issued and outstanding shares (the
"Shares") of common stock, par value $.01 per share, of Meadowcraft, Inc., a
Delaware corporation (the "Company"), at a price of $10.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which, together with
the Offer to Purchase, constitute the "Offer"). We are the holder of record of
Shares held by us for your account.
A tender of Shares can be made only by us as the holder of record and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Shares held by us for
your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $10.00 per Share, net to you in cash.
2. The Offer is being made for all issued and outstanding Shares.
3. The Board of Directors of the Company (the "Company Board") has
unanimously determined that the Offer and the Merger (as defined in the
Offer to Purchase) are fair to, and are in the best interests of, the
holders of Shares (other than Parent and its affiliates), has unanimously
approved the Merger Agreement (as defined in the Offer to Purchase) and the
transactions contemplated thereby, including the Offer and the Merger, and
unanimously recommends that stockholders accept the Offer and tender their
Shares pursuant to the Offer. The unanimous vote of the Company Board is
based upon, among other things, the unanimous recommendation of a Special
Committee of the Company Board, which is comprised entirely of non-employee
independent directors.
4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, JUNE 17, 1999, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
5. The Offer is conditioned upon, among other things, the satisfaction
or waiver of certain conditions, as set forth in the Offer to Purchase. The
Offer is not conditioned upon any minimum number of shares being tendered
in the Offer, and neither the Offer nor the Merger is subject to any
financing condition.
6. You will not be obligated to pay brokerage fees or commissions or,
except as otherwise provided in Instruction 6 of the Letter of Transmittal,
stock transfer taxes with respect to the purchase of Shares by Purchaser
pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF MEADOWCRAFT, INC.
BY MWI ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
SRB-MWI, L.L.C.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated May 19, 1999, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by MWI
Acquisition Co., a Delaware corporation and wholly-owned subsidiary of SRB-MWI,
L.L.C., a Nevada limited liability company, to purchase all issued and
outstanding shares (the "Shares") of common stock, par value $.01 per share, of
Meadowcraft, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1999
---------------------------
Number of Shares to be Tendered:*
Shares
SIGN HERE
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please type or print name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please type or print address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE> 1
EXHIBIT (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payor.
<TABLE>
<S> <C>
- ----------------------------------------------------------- -----------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE TAXPAYER IDENTIFICATION
NUMBER OF:
- ----------------------------------------------------------- -----------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, any
one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either
person(1)
4. Custodian account of a minor (Uniform Gift to Minors The minor(2)
Act)
5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the
minor(1)
6. Account in the name of guardian or committee for a The ward, minor, or incompetent person(3)
designated ward, minor, or incompetent person
7. (a) The usual revocable savings trust account (grantor The grantor-trustee(1)
is also trustee)
(b) So-called trust account that is not a legal or The actual owner(1)
valid trust under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying number of
the personal representative or trustee unless the legal
entity itself is not designated in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization The organization
account
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in the name The public entity
of a public entity (such as a State or local
government, school district or prison) that receives
agricultural program payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
<PAGE> 2
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one non-resident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE -- Section 6019 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to a
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT(a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase, dated May 19, 1999, and the related Letter of
Transmittal and any supplements thereto, and is being made to all holders of
Shares. The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. In any jurisdiction whose laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser (as defined below), if at all, only by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
MEADOWCRAFT, INC.
at
$10.00 Net Per Share
by
MWI ACQUISITION CO.
a Wholly-Owned Subsidiary of
SRB-MWI, L.L.C.
MWI Acquisition Co. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of SRB-MWI, L.L.C., a Nevada limited liability company
("Parent"), is offering to purchase any and all outstanding shares (the
"Shares") of common stock, par value $.01 per share, of Meadowcraft, Inc. (the
"Company"), a Delaware corporation, at a price of $10.00 per Share, net to the
seller in cash (the "Offer Price"), upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated May 19, 1999 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY,
JUNE 17, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 13, 1999 (the "Merger Agreement"), among Parent, Purchaser and the
Company.
The Offer is not conditioned on obtaining financing. The Merger Agreement
provides, among other things, that as promptly as practicable after the purchase
of Shares pursuant to the Offer and the satisfaction of the other conditions set
forth in the Merger Agreement, in accordance with the Delaware General
Corporation Law, Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation. At the
effective time of the Merger (the "Effective Time"), each Share outstanding
immediately prior to the Effective Time (other than Shares held in the treasury
of the Company, Shares owned by Parent or its affiliates or Shares as to which
appraisal rights have been exercised) shall be converted into the right to
receive the per Share price paid in the Offer in cash, without interest.
The Board of Directors of the Company has unanimously determined that the
Offer and the Merger are advisable, fair to, and in the best interests of, the
holders of Shares (other than Parent and its affiliates) and recommends that
stockholders accept the Offer and tender their Shares pursuant to the Offer. The
unanimous vote of the Board of Directors of the Company is based upon, among
other things, the unanimous recommendation of the Offer by a Special Committee
of the Board of Directors, which is comprised entirely of non-employee
independent directors.
<PAGE> 2
As of May 18, 1999, Parent beneficially owned 14,392,931 of the 19,708,750
outstanding Shares, and Samuel R. Blount, the sole Manager of Parent, the
Chairman and Chief Executive Officer of Purchaser and the Chairman of the
Company, beneficially owned an additional 100 Shares, representing in aggregate
approximately 73% of the Shares then outstanding.
The Offer is conditioned upon, among other things, the satisfaction or
waiver of certain conditions set forth in the Offer to Purchase. The Offer is
not conditioned upon any minimum number of shares being tendered in the Offer,
and neither the Offer nor the Merger is conditioned upon Parent or Purchaser
obtaining financing therefor.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to American
Stock Transfer and Trust Company (the "Depositary"), of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting such payments to tendering
stockholders whose Shares have been accepted for payment. Under no circumstances
will interest on the purchase price for Shares be paid, regardless of any delay
in making such payment. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (A) the certificates evidencing such Shares (the "Share
Certificates") or timely confirmation (a "Book-Entry Confirmation") of
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in the Offer to Purchase), (B) the 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 in the Offer to Purchase) and (C) any other
documents required under the Letter of Transmittal. Accordingly, payment may be
made to tendering stockholders at different times if delivery of the Shares and
other required documents occurs at different times.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission), at any time and from
time to time, to extend for any reason the period of time during which the Offer
is open, by giving oral or written notice of such extension to the Depositary.
The term "Expiration Date" shall mean 12:00 midnight, New York City time,
on Thursday, June 17, 1999, 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, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended, shall expire. Any
such extension will be followed as promptly as practicable by a public
announcement thereof not later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date of the Offer.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after July 18, 1999. 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 page of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in the Offer to Purchase, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Shares. However, withdrawn
Shares may be retendered by again following one of the procedures described in
the Offer to Purchase at any time prior to the Expiration Date. All questions as
to the
2
<PAGE> 3
form and validity (including time of receipt) of any notice of withdrawal will
be determined by Purchaser, in its sole discretion, whose determination will be
final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and Letter of Transmittal will be mailed to
record holders of Shares whose names appear on the Company's stockholder list
and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies, and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing.
Questions or requests for assistance may be directed to D.F. King & Co.,
Inc., the Information Agent, at its addresse and telephone numbers set forth
below. Additional copies of this Offer to Purchase, the Letter of Transmittal
and other related materials may be obtained from the Information Agent. No fees
or commissions will be paid to brokers, dealers or other persons (other than the
Depositary and the Information Agent) for soliciting tenders of the Shares
pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: (800) 207-2872
Banks and Brokers Call Collect:
(212) 269-5550
3
<PAGE> 1
Exhibit (a)(8)
FOR IMMEDIATE RELEASE
- ---------------------
MEADOWCRAFT, INC. REACHES AGREEMENT WITH ENTITY
CONTROLLED BY CHAIRMAN SAMUEL R. BLOUNT FOR
ACQUISITION OF ALL OUTSTANDING SHARES OF THE COMPANY
Birmingham, Alabama (May 13, 1999) -- Meadowcraft, Inc. (NYSE: MWI)
and MWI Acquisition Co. today jointly announced that they have executed a
definitive merger agreement pursuant to which MWI Acquisition Co. will purchase
for $10 per share in cash all outstanding shares of Meadowcraft, Inc. not
already directly or indirectly owned by Samuel R. Blount, Meadowcraft's Chairman
and controlling stockholder, or members of his family, for an aggregate of
approximately $53.2 million. MWI Acquisition Co. is a Delaware corporation and
wholly-owned subsidiary of SRB-MWI, L.L.C., a Nevada limited liability company
of which Mr. Blount is a Member and the sole Manager.
The merger agreement provides that MWI Acquisition Co. will commence a
tender offer within five business days. Pursuant to the merger agreement, any
shares not purchased in the offer (other than shares as to which appraisal
rights have been perfected) will be acquired for the same price in cash, in a
second-step merger. Meadowcraft currently has approximately 19.7 million shares
outstanding. Through SRB-MWI, L.L.C., Mr. Blount and members of his family
currently own approximately 14.4 million shares or 73 percent of the outstanding
shares of Meadowcraft.
The tender offer will be subject to the satisfaction or waiver of
certain conditions, as set forth in the Offer to Purchase to be delivered to the
shareholders of Meadowcraft. The offer is not conditioned upon any minimum
number of shares being tendered, and neither the offer nor the merger is subject
to any financing condition.
The merger agreement was approved by the Board of Directors of
Meadowcraft following the unanimous recommendation of a Special Committee of
non-employee independent directors of Meadowcraft. Wachovia Securities, Inc. has
served as financial advisor to the Special Committee of Meadowcraft, and has
rendered to the Special Committee its opinion that the per share consideration
to be paid pursuant to the offer and in the merger is fair, from a financial
point of view, to the public stockholders.
The surviving corporation of the merger will continue to conduct
Meadowcraft's present business and will retain the name Meadowcraft, Inc. All
members of the management and Board of Directors of Meadowcraft will continue to
serve in their present positions.
<PAGE> 2
Meadowcraft is a leading domestic producer of casual outdoor furniture
and is the largest manufacturer of wrought iron furniture in the United States.
The company designs, manufactures, and distributes a variety of consumer
products, including outdoor and indoor furniture and accessories, outdoor
cushions and umbrellas, and garden products.
FORWARD-LOOKING STATEMENTS
The statements contained in this press release that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the company's expectations, hopes, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the company on
the date hereof, and the company assumes no obligation to update any such
forward-looking statement. It is important to note that the company's actual
results could differ materially from those in such forward-looking statements.
Factors that could cause actual results to differ materially from those
projected include, among others, its customer concentration; seasonality;
cyclicality; fluctuation of price of raw materials; risk of business
interruption; dependence on key personnel; control by existing stockholders;
government regulation; shares eligible for future sale; dilution; and possible
volatility of stock price. Prospective purchasers of the common stock should
consult the risk factors listed from time to time in the Company's Reports on
Form 1O-Q, 8-K, 1O-K, and Annual Reports to Stockholders.
[Contact: Steven C. Braswell, Vice President - Finance, Telephone: 205-715-4280]
2
<PAGE> 1
Exhibit (a)(9)
FOR IMMEDIATE RELEASE
- ---------------------
MWI ACQUISITION CO. COMMENCES TENDER OFFER TO
PURCHASE ALL OUTSTANDING SHARES OF MEADOWCRAFT
----------------------------------------------
Birmingham, Alabama (May 19, 1999) -- MWI Acquisition Co. announced
today that it has commenced a tender offer to acquire all outstanding shares of
Meadowcraft, Inc. (NYSE: MWI) not already directly or indirectly owned by Samuel
R. Blount, Meadowcraft's Chairman and controlling stockholder, or members of his
family, for $10.00 per share, net to the seller in cash. MWI Acquisition Co. is
a Delaware corporation and wholly-owned subsidiary of SRB-MWI, L.L.C., a Nevada
limited liability company of which Mr. Blount is a Member and the sole Manager.
The offer is being made in accordance with the terms of the previously announced
merger agreement among Meadowcraft, MWI Acquisition Co. and SRB-MWI, L.L.C. The
offer and withdrawal rights will expire at 12:00 midnight, New York City time,
on Thursday, June 17, 1999, unless the offer is extended.
The tender offer is subject to the satisfaction or waiver of certain
conditions, as set forth in the Offer to Purchase. The offer is not conditioned
upon any minimum number of shares being tendered, and neither the tender offer
nor the merger is subject to any financing condition.
Pursuant to the merger agreement, any shares not purchased in the offer
(other than shares as to which appraisal rights have been perfected) will be
acquired for the same price in cash, in a second-step merger. Meadowcraft
currently has approximately 19.7 million shares outstanding. Through SRB-MWI,
L.L.C., Mr. Blount and members of his family currently own approximately 14.4
million or 73 percent of the outstanding shares of Meadowcraft.
D.F. King and Co., Inc. is acting as information agent in connection
with the offer.
Meadowcraft is a leading domestic producer of casual outdoor furniture
and is the largest manufacturer of wrought iron furniture in the United States.
The company designs, manufactures, and distributes a variety of consumer
products, including outdoor and indoor furniture and accessories, outdoor
cushions and umbrellas, and garden products.
[Contact: John W. Cornwell, Executive Vice President, D.F. King & Co., Inc.,
Telephone: (212) 493-6952]
<PAGE> 1
EXHIBIT (B)(1)
NATIONSBANK, N.A.
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
NATIONSBANC MONTGOMERY SECURITIES LLC
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
MAY 10, 1999
SRB-MWI, LLC
4700 Pinson Valley Parkway
Birmingham, AL 35215
MWI Acquisition Co.
4700 Pinson Valley Parkway
Birmingham, AL 35215
Re: Meadowcraft, Inc.
We understand that
(i) SRB-MWI, LLC, a Nevada limited liability company (the "Sponsor")
has formed MWI Acquisition Co., a Delaware corporation (the "Acquisition
Company"), through which the Sponsor intends to engage in a "going private
transaction" with Meadowcraft, Inc. (the "Subject Company") whereby (A) the
Acquisition Company will make a tender offer (the "Tender Offer") to
acquire (the "Acquisition") the outstanding common stock of the Subject
Company not already owned by the Sponsor or its affiliates, (B) upon
successful completion of the Tender Offer, the Acquisition Company will
merge with and into the Subject Company, with the Subject Company being the
surviving entity (the "Merger"), and (C) upon completion of the merger, the
Subject Company will refinance existing funded debt of the Subject Company,
including debt incurred to finance the Acquisition pursuant to the Tender
Offer (the "Refinancing"). The Acquisition Company will be the wholly-owned
subsidiary of the Sponsor.
(ii) Up to approximately $56 million is needed to finance the Tender
Offer and Acquisition (including payment of transaction fees and expenses
in an amount not to exceed $3 million, the "Tender Financing", "Tender
Offer Facility") and, upon successful completion of the Tender Offer,
Acquisition and Merger, approximately $150 million in permanent senior debt
financing is needed to refinance certain existing funded debt (including
the Tender Financing) and to provide for on-going working capital needs and
general corporate purposes (the "Permanent Financing" or "Permanent
Facilities"). As used herein, "Borrower" shall refer to the Acquisition
Company prior to the Merger, and to the Subject Company after the Merger;
and "Transactions" shall refer collectively to the Tender Offer,
Acquisition, Merger, Refinancing and payment of transaction fees and
expenses in connection therewith.
(iii) Upon consummation of the Tender Offer, the Sponsor and its
affiliates will contribute all of the shares of common stock of the Subject
Company currently owned by the Sponsor or such affiliates to the
Acquisition Company. There will be no other external debt financing except
as referenced herein.
In connection with the foregoing, (i) NationsBank, N.A. ("NationsBank" or
the "Agent") is pleased to advise you of its commitment to provide the full
principal amount (up to $56 million) of the Tender Offer Facility and to provide
up to $56 million of the $150 million Permanent Facility (hereafter, the Tender
Offer
<PAGE> 2
SRB-MWI, LLC
MWI Acquisition Co.
May 10, 1999
Page 2
Facility and the Permanent Facilities may be referred to as the "Senior Credit
Facilities" or the "Credit Facilities") as described in the attached Summary of
Terms and Conditions (the "Term Sheet"), and (ii) NationsBanc Montgomery
Securities LLC ("NMS") is pleased to advise you of its willingness to act as
Sole Lead Arranger and Sole Book Manager for the Senior Credit Facilities and to
form a syndicate of financial institutions (together with NationsBank, the
"Lenders") reasonably acceptable to NMS and you for the Senior Credit
Facilities. No additional agents, arrangers or book managers will be appointed
without the prior approval of NationsBank and NMS, which shall not be
unreasonably withheld. All capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Term Sheet.
The commitments of NationsBank and NMS hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
reasonably acceptable to NationsBank and NMS:
(a) each of the terms and conditions set forth herein;
(b) each of the terms and conditions set forth in the Term Sheet;
(c) the absence of a material breach of any representation or warranty
of the Sponsor set forth herein;
(d) execution of the fee letter dated the date hereof among the
Sponsor, NationsBank and NMS (the "Fee Letter") prior to or concurrently
with the acceptance by the Sponsor of this letter; and
(e) with regard to the Permanent Facilities, there not having occurred
and being continuing since the date hereof a material adverse change in the
market for syndicated bank credit facilities which NationsBank and NMS
determine in their reasonable discretion could have a material adverse
effect on the syndication of the Credit Facilities.
Furthermore, the commitments of NationsBank and NMS hereunder are based
upon the financial and other information regarding the Subject Company and its
subsidiaries previously provided to NationsBank and NMS and NationsBank's and
NMS's general familiarity with the business, financial condition and operations
of the Subject Company and are subject to the conditions, among others, that
there shall not have occurred after January 31, 1999 any material adverse change
in the business, assets, liabilities, operations or financial condition of the
Subject Company and its subsidiaries taken as a whole.
If, after the date hereof, NationsBank and NMS become aware of information
with respect to the Subject Company and its subsidiaries relating to conditions
or events not previously disclosed to NationsBank and NMS or relating to new
information or additional developments concerning conditions or events
previously disclosed or otherwise known to NationsBank and NMS and which has a
material adverse effect on the business, assets, liabilities, operations or
financial condition of the Subject Company and its subsidiaries taken as a
whole, NationsBank and NMS may, in their reasonable discretion, suggest
alternative financing amounts or structures that ensure adequate protection for
the Lenders or terminate this Commitment Letter and decline to participate in
the proposed financing.
You agree to actively assist NationsBank and NMS in achieving a syndication
of the Credit Facilities that is satisfactory to NationsBank, NMS and you.
Syndication of the Credit Facilities will be accomplished by a variety of means,
including direct contact during the syndication between you and your advisors
and the senior management and advisors of the Acquisition Company and, to the
extent reasonably practicable, the Subject Company, and the proposed Lenders. To
assist NationsBank and NMS in the syndication efforts, you hereby agree to (a)
provide and cause your advisors to provide NationsBank and NMS and the other
Lenders upon request with all information reasonably deemed necessary by
NationsBank and NMS to complete syndication, including but not limited to
information and evaluations prepared by the Sponsor and, to the
<PAGE> 3
SRB-MWI, LLC
MWI Acquisition Co.
May 10, 1999
Page 3
extent reasonably practicable, the Subject Company and their respective
advisors, or on their behalf, relating to the Transaction, (b) assist
NationsBank and NMS upon their reasonable request in the preparation of an
Information Memorandum to be used in connection with the syndication of the
Credit Facilities and (c) otherwise assist NationsBank and NMS in their
syndication efforts, including by making available officers and advisors of the
Sponsor and, to the extent reasonably practicable, the Subject Company and their
respective subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Subject Company and its
subsidiaries, as appropriate, at a meeting or meetings of prospective Lenders.
You further agree to refrain from engaging in any additional financings for the
Transaction(s) (except as described in this letter) during such syndication
process unless otherwise agreed to by NationsBank and NMS.
It is understood and agreed that NationsBank and NMS, after consultation
with you, will manage all aspects of the syndication, including decisions as to
the selection of proposed Lenders (which shall be reasonably acceptable to you)
and any titles offered to proposed Lenders, when commitments will be accepted
and the final allocations of the commitments among the Lenders. It is understood
that no Lender participating in the Credit Facilities will receive compensation
from you outside the terms contained herein, in the Term Sheet and in the Fee
Letter in order to obtain its commitment. It is also understood and agreed that
the amount and distribution of the fees among the Lenders will be at the
reasonable discretion of NationsBank and NMS, upon consultation with you.
You hereby represent, warrant and covenant that (i) to your knowledge, all
information, other than Projections (as defined below), which has been or is
hereafter made available to NationsBank and NMS or the Lenders by you or any of
your representatives in connection with the transactions contemplated hereby
("Information"), when taken as a whole, is and will be complete and correct in
all material respects and does not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (ii) all financial
projections and estimates concerning the Subject Company and its subsidiaries
that have been or are hereafter made available to NationsBank and NMS or the
Lenders by you or any of your representatives (the "Projections") have been or
will be prepared in good faith based upon assumptions believed by you to be
reasonable. You agree to furnish us with such Information and Projections as we
may reasonably request and to supplement the Information and the Projections
from time to time until closing of the Permanent Facilities so that the
representation and warranty in the preceding sentence is correct on such date.
In arranging and syndicating the Credit Facilities, NationsBank and NMS will be
using and relying on the Information and the Projections without independent
verification thereof.
By executing this letter agreement, you agree to reimburse NationsBank and
NMS at closing of the Permanent Facilities (or, if the Permanent Facilities are
not closed, on the date that the commitment of NationsBank to provide the
Permanent Facilities expires in accordance with the terms of this letter
agreement) for all reasonable out-of-pocket fees and expenses (including, but
not limited to, the reasonable fees, disbursements and other charges of Moore &
Van Allen, PLLC, as counsel to NationsBank and the other Lenders) incurred in
connection with this letter and the preparation of the definitive documentation
for the Credit Facilities and the other transactions contemplated hereby.
In the event that NationsBank or NMS becomes involved in any capacity in
any action, proceeding or investigation in connection with this letter, the Term
Sheet, the Fee Letter, the Credit Facilities or the loans thereunder, the use of
proceeds of such loans or the Transactions, the Sponsor will reimburse
NationsBank and NMS for their reasonable legal and other expenses (including the
cost of any investigation and preparation). The Sponsor also agrees to indemnify
and hold harmless NationsBank, NMS and their affiliates and their respective
directors, officers, employees and agents (the "Indemnified Parties") from and
against
<PAGE> 4
SRB-MWI, LLC
MWI Acquisition Co.
May 10, 1999
Page 4
any and all losses, claims, damages and liabilities, joint or several, related
to or arising out of the foregoing matters. The foregoing rights to
reimbursement and indemnification shall not apply to the extent that any
expenses, losses, claims, damages or liabilities result from the bad faith,
gross negligence or willful misconduct of any Indemnified Party.
The provisions of the immediately preceding two paragraphs shall remain in
full force and effect notwithstanding the termination of this letter agreement
or the commitment of NationsBank and NMS hereunder; provided, that they shall
terminate upon execution and delivery of definitive financing documentation for
the Tender Offer Facility.
As described herein and in the Term Sheet, NMS will act as Sole Lead
Arranger and Sole Book Manager for the Credit Facilities. NationsBank reserves
the right to allocate, in whole or in part, to NMS certain fees payable to
NationsBank in such manner as NationsBank and NMS agree in their reasonable
discretion. You acknowledge and agree that NationsBank may share with any of its
affiliates (including specifically NMS) any information relating to the Credit
Facilities, the Subject Company, the Sponsor and their subsidiaries and
affiliates as may be reasonably necessary solely for purposes of performing
NationsBank's and NMS's obligations hereunder.
This letter agreement may not be assigned by the Sponsor without the prior
written consent of NationsBank and NMS.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than the close of business on
May 13, 1999. This letter agreement will become effective upon your delivery to
us of executed counterparts of this letter agreement and the Fee Letter. This
commitment shall terminate if not so accepted by you prior to that time.
Following acceptance by you, this commitment will terminate (i) on August 31,
1999, unless the Tender Offer Facility is closed by such time, and (ii) if the
Tender Offer Facility is closed in a timely manner, then on September 30, 1999,
unless the Permanent Facilities are closed by such time.
Except as required by applicable law or court order, this letter and the
Fee Letter and the contents hereof and thereof (other than the terms of the Term
Sheet or of the first four paragraphs and the thirteenth paragraph hereof) shall
not be disclosed by you to any third party (with the exception of the Subject
Company and its advisors) without the prior consent of NationsBank and NMS,
other than to your attorneys, financial advisors and accountants, in each case
to the extent necessary in your reasonable judgment; provided, that it is
understood and agreed that, after acceptance of this letter by you by execution
in the space provided below and execution by you of the Fee Letter, you may file
a copy of this letter (but not the Fee Letter) as an exhibit to such filings as
the Sponsor, the Acquisition Company or the Subject Company may make with the
Securities and Exchange Commission or make such other disclosures as are, in the
opinion of the Sponsor's counsel, required by law or regulation.
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet and the Fee
Letter, embodies the entire agreement and understanding among NationsBank, NMS
and the Sponsor with respect to the specific matters set forth herein and
supersedes all prior agreements and understandings relating to the subject
matter hereof. No party has been authorized by NationsBank or NMS to make any
oral or written statements inconsistent with this letter.
Notwithstanding any provision to the contrary contained in this letter or
the Fee Letter, the Sponsor shall be deemed released of its obligations under
this letter upon the execution of definitive financing documentation for the
Tender Offer Facility.
<PAGE> 5
SRB-MWI, LLC
MWI Acquisition Co.
May 10, 1999
Page 5
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Very truly yours,
NATIONSBANK, N.A.
By: /s/ DAVID B. JACKSON
------------------------------------
Title: Senior Vice President
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ TERRY KATON
------------------------------------
Title: Vice President
ACCEPTED AND AGREED TO:
SRB-MWI, LLC
By: /s/ SAMUEL R. BLOUNT
------------------------------------
Name: Samuel R. Blount
Title: Manager
MWI ACQUISITION CO.
By: /s/ SAMUEL R. BLOUNT
------------------------------------
Name: Samuel R. Blount
Title: Chairman and Chief Executive
Officer
<PAGE> 6
ANNEX I
FACILITY FOR THE ACQUISITION OF
MEADOWCRAFT, INC.
SUMMARY OF TERMS & CONDITIONS
MAY 10, 1999
Unless otherwise defined herein, capitalized terms shall have the definitions
assigned to them in the Commitment Letter dated of even date herewith to which
this Summary of Terms & Conditions is attached.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BORROWER: SRB-MWI, LLC, a Nevada limited liability
corporation (the "Sponsor"), through its
wholly-owned subsidiary MWI Acquisition Co., a
Delaware company (the "Acquisition Company") will
acquire (the "Acquisition") the outstanding common
stock of Meadowcraft, Inc. (the "Subject Company")
not already owned by the Sponsor or its affiliates
pursuant to a tender offer (the "Tender Offer").
Subsequent to the Acquisition, the Acquisition
Company will be merged with and into the Subject
Company, with the Subject Company being the
surviving entity (the "Merger") and
contemporaneously certain existing funded
indebtedness and letters of credit of the Subject
Company shall be refinanced (the "Refinancing").
The Tender Offer, the Acquisition, the Merger, the
Refinancing and the payment of transaction fees and
expenses in connection therewith are collectively
referred to herein as the "Transaction". Prior to
the Merger, the Acquisition Company will be the
Borrower and, subsequent to the Merger, the Subject
Company (into which the Acquisition Company shall
have been merged) will be the Borrower.
GUARANTORS: TENDER OFFER FACILITY: The Tender Offer Facility
(hereinafter defined) shall be guaranteed by the
Sponsor and by Samuel R. Blount.
PERMANENT FACILITIES: The Permanent Facilities
(hereinafter defined) shall be guaranteed by all
existing and hereafter acquired direct and indirect
domestic subsidiaries of the Borrower upon
consummation of the Merger.
All guarantees shall be guarantees of payment and
not of collection.
AGENT: NationsBank, N.A. (the "Agent" or "NationsBank")
will act as sole and exclusive administrative and
collateral agent. As such, NationsBank will
negotiate with the Borrower, act as the primary
contact for the Borrower and perform all other
duties associated with the role of exclusive
administrative agent. No other agents or co-agents
may be appointed without the prior written consent
of NationsBank and NMS.
SOLE LEAD ARRANGER & SOLE
BOOK MANAGER: NationsBanc Montgomery Securities LLC ("NMS").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NMS, which institutions
shall be acceptable to the Borrower and the Agent
(collectively, the "Lenders").
<PAGE> 7
CREDIT FACILITIES: TENDER OFFER FACILITY
An aggregate principal amount of up to $56 million
of a senior tender offer facility (the "Tender
Offer Facility") to finance all costs and expenses
associated with the purchase by the Acquisition
Company of all of the tendered stock of the Subject
Company.
PERMANENT FACILITIES
An aggregate principal amount of up to $150 million
of permanent senior secured credit facilities (the
"Permanent Facilities", and together with the
Tender Offer Facility, the "Credit Facilities")
will be available upon consummation of the Merger
under the conditions hereinafter set forth and
shall consist of:
TRANCHE A SEASONAL REVOLVING CREDIT FACILITY: $80
million revolving credit facility which will
include a $5 million sublimit for the making of
swingline loans (each a "Swingline Loans").
Swingline Loans will be made by NationsBank, and
each Lender will purchase an irrevocable and
unconditional participation in each Swingline Loan.
TRANCHE B REVOLVING CREDIT FACILITY: $70 million
reducing revolving credit facility which will
include a $15 million sublimit for the issuance of
letters of credit (each a "Letter of Credit").
Letters of Credit will be issued by NationsBank (in
such capacity, the "Fronting Bank"), and each
Lender will purchase an irrevocable and
unconditional participation in each Letter of
Credit.
PURPOSE: TENDER OFFER FACILITY: The proceeds of the Tender
Offer Facility shall be used to finance the
acquisition of tendered shares of the Subject
Company ("Shares") upon the completion of the
Tender Offer.
PERMANENT FACILITIES: The proceeds of the Tranche
A Revolving Credit Facility shall be used to
provide for seasonal working capital requirements
of the Borrower and its subsidiaries, including a
portion of the Refinancing. The proceeds of the
Tranche B Revolving Credit Facility shall be used
(i) to refinance the Tender Offer Facility, (ii) to
finance the Merger, related fees and expenses, and
the Refinancing, (iii) to pay fees and expenses
incurred in connection with the Tender Offer, the
Acquisition, the Merger and the Refinancing in an
amount (together with the fees and expenses paid
with proceeds of the Tender Offer Facility) not to
exceed $3 million and (iv) to provide for ongoing
working capital and general corporate purposes of
the Borrower and its subsidiaries, including,
without limitation, capital expenditures (subject
to minimum Revolving Credit Facility availability
requirements to be determined).
INTEREST RATES: Advances outstanding under the Credit Facilities
shall bear interest as set forth on Addendum I
hereto.
MATURITY: TENDER OFFER FACILITY: The commitments under the
Tender Offer Facility shall terminate on the
earlier to occur of the closing of the Merger or
August 31, 1999 and all amounts outstanding
thereunder shall be due and payable in full on the
earliest of (i) the closing of the Merger, (ii) the
date 60 days from the funding of the loans under
the Tender Offer Facility, or (iii) in any event,
September 30, 1999.
2
<PAGE> 8
PERMANENT FACILITIES:
TRANCHE A REVOLVING CREDIT FACILITY. The Tranche A
Revolving Credit Facility shall terminate and all
amounts outstanding thereunder shall be due and
payable in full 5 years from closing of the
Permanent Facilities.
TRANCHE B REVOLVING CREDIT FACILITY. The Tranche B
Revolving Credit Facility shall terminate and all
amounts outstanding thereunder shall be due and
payable in full 5 years from the closing of the
Permanent Facilities.
AVAILABILITY: TENDER OFFER FACILITY: Loans made under the Tender
Offer Facility shall be available in a single
borrowing upon the completion of the Tender Offer.
Availability under the Tender Offer Facility will
be subject to compliance with Reg. U.
TRANCHE A REVOLVING CREDIT FACILITY. Loans under
the Tranche A Revolving Credit Facility may be made
subject to availability under the aggregate
committed amount for the Tranche A Revolving Credit
Facility. Availability shall be determined by
reference to a Borrowing Base (submitted at least
monthly) to be determined.
TRANCHE B REVOLVING CREDIT FACILITY: Loans under
the Tranche B Revolving Credit Facility may be
made, and Letters of Credit may be issued, subject
to availability under the aggregate committed
amount for the Tranche B Revolving Credit Facility.
The aggregate commitments under the Tranche B
Revolving Credit Facility shall be subject to
permanent reduction at the end of each anniversary
date of the closing date as follows:
<TABLE>
<CAPTION>
REDUCTION AMOUNT
----------------
<S> <C> <C>
Year 1.............................. $ 5,000,000
Year 2.............................. $10,000,000
Year 3.............................. $10,000,000
Year 4.............................. $10,000,000
</TABLE>
SECURITY: TENDER OFFER FACILITY: Concurrently with
consummation of the Acquisition, the Agent (on
behalf of the Lenders) shall receive a first
priority perfected security interest in (i) a
pledge of all shares of common stock of the Subject
Company owned by the Sponsor and its affiliates,
including Mr. Blount not otherwise pledged or
encumbered (but not less than 12 million shares),
and (ii) a pledge of all of the Shares purchased in
connection with the Tender Offer. The stock pledges
will be released on establishment of the Permanent
Facilities and refinancing of the Tender Offer
Facility with the initial advance thereunder.
PERMANENT FACILITIES: Concurrently with
consummation of the Merger, the Agent (on behalf of
the Lenders) shall receive a first priority
perfected security interest in (i) 100% of the
issued and outstanding capital stock of each of the
direct and indirect domestic subsidiaries of the
Borrower, (ii) 65% of the issued and outstanding
capital stock (or such greater percentage which
would not result in material adverse tax
consequences) of each direct foreign subsidiary of
the Borrower or any of its domestic subsidiaries
and (iii) substantially all other present and
future assets and properties of the Borrower and
the Guarantors
3
<PAGE> 9
(including, without limitation, accounts
receivable, inventory, real property, machinery,
equipment, contracts, trademarks, copyrights,
patents, license agreements, and general
intangibles, but excluding certain non-material
real property to be determined), subject to
permitted liens and, in the case of leases of real
property, license agreements and other like
arrangements requiring the consent of third parties
thereto, subject to and only to the extent that any
such consents required from such third parties are
actually obtained.
The foregoing collateral (collectively, the
"Collateral") shall ratably secure the Credit
Facilities and any interest rate swap/foreign
currency swap or similar agreements with a Lender
(or an affiliate of a Lender) under the Credit
Facilities.
MANDATORY
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: TENDER OFFER FACILITY: If at any time, the
outstanding principal amount of loans under the
Tender Offer Facility exceeds 50% of the value of
the shares pledged to secure such loans, the
Borrower immediately shall either, at its option,
prepay the Tender Offer Facility or provide
additional collateral in an amount sufficient to
eliminate such excess.
PERMANENT FACILITIES: The Permanent Facilities
will be prepaid by an amount equal to (a) 100% of
the net cash proceeds of all non-ordinary course
asset sales by the Parent, the Borrower or any
subsidiary (including stock of subsidiaries),
subject to baskets and reinvestment provisions to
be agreed upon; (b) 50% of Excess Cash Flow (to be
defined) pursuant to a cash sweep arrangement; (c)
100% of the net cash proceeds from the issuance of
any funded debt for borrowed money by the Parent,
the Borrower or any subsidiary (other than certain
permitted funded debt for borrowed money) and (d)
100% of the net cash proceeds from the issuance of
equity (other than sponsor equity) by the Parent,
the Borrower or any subsidiary.
In addition to the foregoing, the Tranche A
Revolving Credit Facility shall be subject to
mandatory prepayment for a 30 day clean-up period
during each 12 month period (in an amount to be
agreed upon).
OPTIONAL
PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Credit Facilities may be prepaid (and
commitments thereunder may be permanently reduced)
voluntarily in whole or in part at any time without
penalty, subject to reimbursement of the Lenders'
breakage and redeployment costs in the case of
prepayment of LIBOR borrowings.
CONDITIONS
PRECEDENT
TO CLOSING: The initial borrowings under the Credit Facilities
will be subject to satisfaction of the following
conditions precedent:
(i) The negotiation, execution and delivery of
definitive documentation with respect to the
Credit Facilities reasonably satisfactory to
NMS and the Agent.
4
<PAGE> 10
(ii) In the case of the initial borrowings under
the Tender Offer Facility, the Agent shall
have received certified copies of (a) the
documentation relating to the Tender Offer
(the "Tender Offer Documents"), and (b) the
Agreement and Plan of Merger relating to the
Merger (the "Merger Agreement"), in each case
in form reasonably satisfactory to the Agent.
(iii) In the case of the initial borrowings under
the Tender Offer Facility, the Agent shall
have received evidence that (a) the material
conditions to the Tender Offer as provided in
the Tender Offer Documents have been
satisfied, or waived with the consent of the
Agent, (b) the requisite shares have been
tendered to give effect to the Merger on the
terms specified in the Merger Agreement and
(iii) the purchase price for the tendered
shares shall not exceed $10.00 per share (on
a fully diluted basis).
(iv) In the case of the initial borrowings under
the Permanent Facilities, the Merger and the
Refinancing (a) shall have been consummated in
all material respects in accordance with the
terms of the Merger Agreement and in
compliance with applicable law and regulatory
approvals, and all conditions precedent to the
obligations of the buyer thereunder shall have
been satisfied, or waived with the consent of
the Agent, and (b) the Merger Agreement shall
not have been altered, amended or otherwise
changed or supplemented in any material
respect or any material condition therein
waived, without the prior written consent of
the Agent.
(v) The Agent shall have received certified copies
of articles of incorporation, bylaws,
resolutions and other corporate documentation
(including the Merger Agreement) reasonably
requested by the Agent and officer's
certificates regarding incumbency and solvency
in form and substance reasonably satisfactory
to the Agent.
(vi) The Agent shall have received and, in each
case, be reasonably satisfied with (a) interim
monthly financial statements for each fiscal
month of the Subject Company after January 31,
1999, (b) in the case of the initial
borrowings under the Permanent Facilities, a
pro forma consolidated balance sheet of the
Borrower as of closing of the Permanent
Facilities giving effect to the Merger and the
financings and other transactions contemplated
hereby, and (c) such other information
relating to the Subject Company and its
subsidiaries or the Transaction as the Agent
may reasonably require.
(vii) There shall not have occurred a material
adverse change since January 31, 1999 in the
business, assets, liabilities, operations or
financial condition of the Borrower and its
subsidiaries or in the facts and information
regarding such entities as represented or
otherwise known to the Agent to date.
(viii) In the case of the initial borrowings under
the Permanent Facilities, the Agent shall
have received a reasonably satisfactory
certificate from the chief financial officer
of the Borrower as to the financial
condition and solvency of each of the
Borrower and the
5
<PAGE> 11
Guarantors (after giving effect to the
Acquisition and Merger and the incurrence of
indebtedness related thereto).
(ix) The Agent shall have received (a) reasonably
satisfactory opinions of counsel to the
Borrower and the Guarantors (which shall cover,
among other things, authority, legality
(including compliance with Reg. U), validity,
binding effect and enforceability of the
documents for the Credit Facilities) and such
resolutions, certificates and other documents
as the Agent shall reasonably require and (b)
reasonably satisfactory evidence that, upon
completion of the Merger, the Agent (on behalf
of the Lenders) holds or will hold a perfected,
first priority lien in all collateral for the
Credit Facilities, subject to no other liens
except for permitted liens to be determined.
(x) (a) In the case of borrowing under the Tender
Offer Facility, evidence of receipt of all
material governmental consents and approvals
necessary in connection with the Tender Offer
and the related financings and other
transactions contemplated hereby and expiration
of all applicable waiting periods on reasonably
satisfactory terms and (b) in the case of the
initial borrowings under the Permanent
Facilities, evidence of receipt of all
governmental, shareholder and other, if any,
consents and approvals necessary in connection
with the consummation of the Merger and the
related financings and other transactions
contemplated hereby except where the failure to
obtain such consents or approvals would not,
individually or in the aggregate, have a
material adverse effect on the business,
assets, liabilities, operations or financial
condition of the Subject Company and its
subsidiaries, taken as a whole (a "Material
Adverse Effect"), or a material adverse effect
on the Sponsor's ability to consummate the
Merger or the related transactions, and the
absence of any statute, rule or regulation
enacted, promulgated or deemed applicable by
any governmental authority of competent
jurisdiction which remains in effect and that
makes consummation of the Merger illegal.
(xi) (a) In the case of borrowings under the Tender
Offer Facility, the absence of any pending
action (or any investigation or other inquiry
that might result in such an action or
proceeding) by any governmental authority or
administrative agency before any governmental
authority or administrative agency or court of
competent jurisdiction, domestic or foreign, or
any judgment, decree or order of any
governmental authority, administrative agency
or court of competent jurisdiction, or any
other legal restraint which is in effect and
that prevents or seeks to prevent consummation
of the Tender Offer, the Merger or any of the
transactions contemplated by the Merger
Agreement, or that prohibits or seeks to
prohibit or limits or seeks to limit the
Sponsor or the Subject Company from exercising
any material rights and privileges pertaining
to ownership of the Shares or that compels or
seeks to compel the Sponsor or the Subject
Company or any of their respective subsidiaries
to dispose of or hold separate all or any
portion of the business or assets of the
Sponsor or the Subject
6
<PAGE> 12
Company and its subsidiaries, in each case as a
result of the Offer, the Merger or any of the
transactions contemplated by the Merger
Agreement; (b) in the case of borrowings under
the Permanent Facility, the absence of any
temporary restraining order preliminary or
permanent injunction or other order issued by
any court of competent jurisdiction or any
other legal restraint or prohibition which
remains in effect and prevents the consummation
of the Merger; or (c) in the case of borrowings
under the Tender Offer Facility and under the
Permanent Facilities, any action, suit,
investigation or proceeding pending in any
court or before any arbitrator or governmental
authority that would reasonably be expected to
have a material adverse effect on the financial
condition of the Subject Company and its
subsidiaries taken as a whole or on the ability
of the Subject Company and the Guarantors taken
as a whole to perform their respective
obligations under the documents to be executed
in connection with the Credit Facilities.
(xii) The Subject Company and its subsidiaries
shall be in compliance with all existing
financial obligations (after giving effect to
the Acquisition and Merger, except such
noncompliance as would not, individually or
in the aggregate, have a Material Adverse
Effect).
(xiii) The Borrower shall have paid to the Lenders
and the Agent all fees and expenses due and
payable at closing of the Permanent
Facilities.
REPRESENTATIONS &
WARRANTIES: TENDER OFFER FACILITY: Usual and customary for
senior tender offer facilities of this type.
PERMANENT FACILITIES: Usual and customary for
permanent senior secured credit facilities of this
type (subject to appropriate materiality and
reasonableness limitations), to include without
limitation: (i) corporate status; (ii) corporate
power and authority/enforceability; (iii) no
violation of law or contracts or organizational
documents; (iv) no material litigation; (v)
correctness of specified financial statements and
no material adverse change since January 31, 1999;
(vi) no required governmental or third party
approvals; (vii) use of proceeds/compliance with
margin regulations; (viii) status under Investment
Company Act; (ix) ERISA; (x) environmental matters;
(xi) perfected liens and security interests; (xii)
payment of taxes, (xiii) consummation of the
Transaction and (xiv) Year 2000 assurances.
COVENANTS: TENDER OFFER FACILITY: Usual and customary for
senior tender offer facilities of this type.
PERMANENT FACILITIES: Usual and customary for
permanent senior secured credit facilities of this
type (subject to materiality limitations, baskets
and carve-outs to be negotiated), to include
without limitation: (i) delivery of financial
statements and other reports; (ii) delivery of
borrowing base and compliance certificates: (iii)
delivery of notices of default, material litigation
and material governmental and environmental
proceedings; (iv) compliance with laws; (v) payment
of taxes; (vi) maintenance of insurance; (vii)
limitation on liens and negative pledges; (viii)
limitations on mergers, consolidations and sales of
assets;
7
<PAGE> 13
(ix) limitations on incurrence of debt; (x)
limitations on cash dividends and stock redemptions
and the redemption and/or prepayment of other debt;
(xi) limitations on investments and acquisitions;
(xii) ERISA; (xiii) limitation on transactions with
affiliates (specifically excluding sponsor fees in
amounts to be determined); (xiv) limitation on
capital expenditures; and (xv) upon completion of
the Merger, delivery of collateral documentation
and opinions as to the perfected security interest
of the Agent in the Collateral.
Financial covenants under the Permanent Facilities
to include (but not limited to):
- Maintenance on a rolling four quarter basis of a
Maximum Leverage Ratio (total funded debt/EBITDA)
as of the end of each fiscal month and quarter
not to exceed:
<TABLE>
<CAPTION>
FQE
---
<S> <C> <C>
July 31, 1999 through October 31, 1999...... 3.25:1.0
January 31, 2000............................ 3.75:1.0
April 30, 2000.............................. 4.5:1.0
May 31, 2000................................ 4:25:1.0
June 30, 2000............................... 3.5:1.0
July 31, 2000............................... 2.75:1.0
with step-downs thereafter to be determined
</TABLE>
- Maintenance on a rolling four quarter basis of a
Debt Service Coverage Ratio (as defined under the
existing Credit Agreement, including cash taxes
in the denominator) with step-ups to be
determined,
- Maintenance at all times of a Minimum Net Worth
with step-ups to be determined; and
- Annual capital expenditure limits to be
determined.
EVENTS OF DEFAULT: TENDER OFFER FACILITY: Usual and customary for
senior tender offer facilities of this type.
PERMANENT FACILITIES: Usual and customary for
permanent senior secured credit facilities of this
type (subject to materiality and grace periods to
be negotiated), and to include, without limitation,
(i) nonpayment of principal, interest, fees or
other amounts, (ii) violation of covenants, (iii)
material inaccuracy of representations and
warranties, (iii) cross-default to other material
agreements and indebtedness, (iv) bankruptcy or
insolvency, (v) material judgments, (vi) ERISA,
(vii) actual or asserted invalidity of any loan
documents or security interests, or (viii) Change
in Control.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments
in minimum amounts of $5 million to other financial
institutions approved by the Borrower and the
Agent, which approval shall not be unreasonably
withheld. Lenders will be permitted to sell
participations with voting rights limited to
significant matters such as changes in amount,
reduction in rate and extension of maturity date.
An assignment fee of $3,500 is payable by the
Lender to the Agent upon any such assignment
occurring
8
<PAGE> 14
(including, but not limited to an assignment by a
Lender to another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the
loan agreement and other definitive credit
documentation will require the approval of Lenders
holding loans and commitments representing more
than 50% of the aggregate amount of loans and
commitments under the Credit Facilities, except
that the consent of all the Lenders affected
thereby shall be required with respect to (i)
increases in commitment amounts, (ii) reductions of
principal, interest, or fees, (iii) extensions of
final maturities, (iv) releases of all or
substantially all collateral and (v) releases of
all or substantially all guarantors.
INDEMNIFICATION: In the definitive documentation for the Credit
Facilities, the Borrower shall indemnify the
Lenders from and against all losses, liabilities,
claims, damages or expenses relating to their
loans, the Borrower's use of loan proceeds or the
commitments, including but not limited to
reasonable attorneys' fees and settlement costs,
but only to the extent that such losses,
liabilities, claims, damages or expenses do not
result from the bad faith, gross negligence or
willful misconduct of the indemnified party.
CLOSING: With respect to the Tender Offer Facility, on or
before August 31, 1999, and with respect to the
Permanent Facilities, on or before September 30,
1999.
GOVERNING LAW: New York.
FEES/EXPENSES: As outlined in ADDENDUM I.
OTHER: This term sheet is intended as an outline only and
does not purport to summarize all the conditions,
covenants, representations, warranties and other
provisions which would be contained in definitive
legal documentation for the Credit Facilities
contemplated hereby. Each of the Borrower, the
Guarantors, the Agent and the Lenders shall waive
its right to a trial by jury.
9
<PAGE> 15
ADDENDUM I
FEES AND EXPENSES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMITMENT FEE A commitment fee, calculated in accordance with the
Performance Pricing grid set forth below, on the
unused portion of the Permanent Facilities shall
commence to accrue on the date of the closing of
the Permanent Facilities and shall be paid
quarterly in arrears
INTEREST RATES: Advances outstanding under the Tender Offer
Facility shall bear interest at a rate equal to the
Federal Funds rate plus 200 basis points. Advances
outstanding under the Permanent Facilities shall
bear interest at a rate equal to LIBOR plus the
Applicable LIBOR Margin shown below or the
Alternate Base Rate plus the Applicable Alternate
Base Rate Margin shown below. Alternate Base Rate
shall be defined as the higher of: (i) the
NationsBank prime rate and (ii) the Federal Funds
rate plus 0.50%. If during the 90 day period
following the closing of the Permanent Facilities,
any breakage costs, charges or fees are incurred
with respect to LIBOR loans on account of the
syndication of the Credit Facilities, the Borrower
shall immediately reimburse the Agent for any such
costs, charges or fees (such right of reimbursement
to be in addition to and not in limitation of
customary cost and yield protection). The Agent
shall cooperate with the Borrower in order to
minimize the incurrence of costs by the Borrower
pursuant to the proviso contained in the
immediately preceding sentence.
The Borrower may select interest periods of 1, 2, 3
or 6 months for LIBOR loans, subject to
availability.
Swingline loans will bear interest at a rate
mutually agreed upon by the Borrower and the
Swingline Lender.
A penalty rate shall apply on all amounts not paid
when due at a rate per annum of 2% above the
applicable interest rate or letter of credit fee.
LETTER OF CREDIT FEES: The Borrower shall pay a per annum letter of credit
fee on the undrawn amount of all outstanding
Letters of Credit. The applicable letter of credit
fee shall be the Applicable Margin applicable from
time to time for LIBOR based loans. The letter of
credit fee shall be due quarterly in arrears and
shared proportionately by the Lenders.
In addition, the Borrower shall pay the Fronting
Bank for its own account a per annum facing fee of
1/8% on the outstanding amount of all Letters of
Credit. The letter of credit facing fee shall be
due quarterly in arrears.
PERFORMANCE PRICING: The Commitment Fee and the Applicable Margin for
LIBOR based loans shall be determined as of the
last day of the immediately preceding fiscal
quarter based on the pricing grid shown below:
<TABLE>
<CAPTION>
FUNDED DEBT/ COMMITMENT LIBOR ALTERNATE
EBITDA RATIO FEE MARGIN BASE RATE MARGIN
------------ ---------- ------ ----------------
<S> <C> <C> <C>
-1.75 20.0 100.0 0.0
-1.75 and -2.50 25.0 125.0 0.0
-2.50 and -3.25 37.5 175.0 0.0
-3.25 50.0 225.0 50.0
</TABLE>
<PAGE> 16
Pricing will be set at the highest level until
delivery of the financial statements and the
compliance certificate for the fiscal quarter
ending July 31, 1999, whereupon pricing shall be
adjusted as provided in the foregoing pricing grid.
CALCULATION OF
INTEREST AND FEES: Other than calculations in respect of interest at
the Base Rate (which shall be made on the basis of
actual number of days elapsed in a 365/366 day
year), all calculations of interest and fees shall
be made on the basis of actual number of days
elapsed in a 360 day year.
COST AND YIELD PROTECTION: The usual for transactions and facilities of this
type, including, without limitation, in respect of
prepayments, changes in capital adequacy and
capital requirements or their interpretation,
illegality, unavailability, reserves without
proration or offset.
EXPENSES: The Borrower will pay all reasonable costs and
expenses of the Agent associated with the
preparation, due diligence, administration,
syndication and enforcement of all documents
executed in connection with the Credit Facilities,
including without limitation, the reasonable legal
fees of the Agent's counsel regardless of whether
or not the Credit Facilities are closed.
2
<PAGE> 1
EXHIBIT (G)(1)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C> <C>
- -------------------------------
MARY D. ANDRA, )
) Civil Action No.
Plaintiff, ) 17154NC
)
v. )
) CLASS ACTION COMPLAINT
SAMUEL R. BLOUNT, )
WILLIAM J. McCANNA, )
T. MORRIS HACKNEY, )
JAMES M. SCOTT, )
REESE H. McKINNEY, JR. and )
MEADOWCRAFT, INC., )
)
Defendants.
- -------------------------------
</TABLE>
Plaintiff alleges on information and belief, except paragraph 1 which is
alleged on knowledge, as follows:
THE PARTIES
1. Plaintiff is and was at all times relevant to this action the owner of
shares of Meadowcraft, Inc. ("Meadowcraft") common stock.
2. Meadowcraft, a corporation organized and existing under the laws of the
state of Delaware, is the leading domestic producer of casual outdoor furniture
and is the largest manufacturer of wrought iron furniture in the United States.
As of April 9, 1999, Meadowcraft had approximately 19.7 million shares of common
stock outstanding.
3. Defendant Samuel R. Blount ("Blount") is and was at all relevant times
Chairman of the Board and a director of Meadowcraft since 1985. Blount is also
the 73% controlling stockholder of Meadowcraft, having sole voting power over
14,407,716 shares. A member of Blount's family, Mary M. Blount, beneficially
owns 800,000 shares, representing 4.1%, but shares voting and disposition powers
with Samuel R. Blount through SRM-MWI, LLC.
4. Defendant William J. McCanna ("McCanna") is and was at all relevant
times President and a director of Meadowcraft since 1991. McCanna beneficially
owns 1,615,385 shares, or 8.2%, of Meadowcraft stock.
5. Defendant T. Morris Hackney ("Hackney") is and was at all relevant times
a director of Meadowcraft since at least November 25, 1997, and the Chairman of
Citation Corporation, a metal component supplier located in Birmingham, Alabama.
Hackney owns no shares of Meadowcraft stock.
6. Defendant James M. Scott ("Scott") is and was at all relevant times a
director of Meadowcraft since at least November 25, 1997, and a partner in the
Montgomery law firm of Capell, Howard, Knabe and Cobbs, P.A. Scott and his law
firm have provided tax and business advice to Blount and Blount, Inc., who are
clients of the firm. Scott owns 3,000 shares of Meadowcraft stock.
7. Defendant Reese H. McKinney, Jr., ("McKinney") is and was at all
relevant times a director of Meadowcraft since at least November 25, 1997.
McKinney owns 1,000 shares of Meadowcraft stock.
<PAGE> 2
8. The officers and directors of Meadowcraft, referred to in paragraphs 3-7
(collectively the "Individual Defendants") owe fiduciary duties of good faith,
fair dealing, due care and candor to plaintiff and the other Meadowcraft public
stockholders.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action pursuant to Rule 23 of the Rules of this
Court, on behalf of herself and all other shareholders of the Company (except
the defendants herein and any persons, firms, trust, corporations, or other
entities related to or affiliated with them) and their successors in interest,
who are or will be harmed by reason of the conduct of defendants described
herein (the "Class").
10. This Action is properly maintainable as a class action for the
following reasons:
(a) the Class is so numerous that joinder of all members is
impracticable. There are over 3.4 million Meadowcraft shares publicly
traded. There are hundreds of holders of Meadowcraft common stock who are
members of the Class.
(b) there are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual class
members. The common questions include, inter alia, the following:
(i) Whether defendants have breached or are breaching their
fiduciary duties to the Class; and
(ii) Whether plaintiff and the other members of the Class would be
irreparably damaged were defendants not enjoined from effecting the
transaction described herein.
(c) The claims of plaintiff are typical of the claims of the other
members of the Class in that all members of the Class will be injured alike
by defendants' actions.
(d) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Accordingly,
plaintiff is an adequate representative of the Class.
SUBSTANTIVE ALLEGATIONS
11. In November, 1997, Meadowcraft became a publicly-traded company listed
on the NYSE after having sold 3,700,000 shares in an initial public offering
("IPO") at $13.00 per share, raising over $44 million in additional paid in
capital. According to the IPO Prospectus, the proceeds of the IPO would be used,
and were used, to pay approximately $32.7 million to the existing shareholders
of Meadowcraft, Blount and McCanna, and the balance for capital expenditures.
Prior to the IPO, Blount owned 90% of the shares and McCanna owned the remaining
10%. After the IPO, Meadowcraft converted from a Subchapter S corporation to a
Subchapter C corporation under the Internal Revenue Code.
12. In connection with the IPO, defendants represented, among other things,
that Meadowcraft had enjoyed increasing profitability, that Meadowcraft was an
"innovator in the design, manufacturing, distribution and marketing of
moderately priced, quality wrought iron furniture;" that its "net sales have
grown from $50.5 million in fiscal 1991 to $141.9 million in fiscal 1997 while
pro forma net income has increased from $1.2 million to $15.9 million over the
same period;" that Meadowcraft had net income of $16.7 million "[f]or seasonal
1997;" that Meadowcraft's growth and "strong market position" is attributable to
its "ability to produce quality" products with "broad consumer appeal," its
"advanced manufacturing and distribution facilities and computerized inventory
tracking;" and its excellent relationships with its mass market retail
customers."
13. It was also represented that Meadowcraft's sales are very seasonal.
Historically, approximately 50% of the net sales have been realized in the
quarter ended on the last day of April, while only about 5% of the company's
sales have occurred in the quarter ended on the last day of October. Meadowcraft
historically has experienced losses for the quarter ended on October 31, as the
company resumes production in September to build inventory for the spring
selling season.
2
<PAGE> 3
14. After the IPO, Meadowcraft changed its financial reporting year from a
fiscal year ending on the Saturday closest to the last day of April to a fiscal
year ending on July 31, 1999. As a result, Meadowcraft's two down quarters
became the first fiscal quarter ending October 31 and the second fiscal quarter
ending January 31. And, its best fiscal quarter became the third fiscal quarter
ending on April 30.
15. Not surprisingly, in light of the seasonality of its business,
Meadowcraft reported losses for the first and second fiscal quarters of 1999,
ending in October 1998 and January 1999 respectively. After these reported
losses, Meadowcraft's publicly traded shares plummeted to approximately $8 per
share in November 1998 and as low as $4 per share in March 1999.
16. Taking advantage of this seasonality and the market's reactions, on
April 9, 1999 Blount offered to purchase the 27% of the shares of Meadowcraft he
did not own for $8 cash per share in a cash-out merger transaction.
17. The proposed acquisition price does not take into account the Company's
increased or seasonal earnings prospects and potential. In fact, Blount has
timed the transaction to capture Meadowcraft's future and seasonal prospects and
potential for his own ends without paying an adequate or fair price for
Meadowcraft's public shares.
18. Blount is in a position of control and power over Meadowcraft and has
access to internal financial information about Meadowcraft, its true value,
expected increase in true value and the benefits of 100% ownership of
Meadowcraft to which plaintiff and the Class members are not privy. Blount is
using his position of power and control to benefit himself in this transaction,
to the detriment of the Meadowcraft public stockholders.
19. The proposed acquisition undervalues Meadowcraft common stock by
ignoring the full value of its assets and future prospects. The proposed buyout
consideration does not reflect the fair value of Meadowcraft's valuable assets.
20. Blount timed the announcement of the proposed buyout to place an
artificial lid on the market price of Meadowcraft's common stock in order to
justify a price which is unfair to Meadowcraft public stockholders.
21. In a press release issued on April 9, 1999, Meadowcraft announced that
it had formed a special committee of three (3) "independent directors to
evaluate the buy-out proposal made by . . . Blount." The press release did not
disclose the seasonality of Meadowcraft's business and, in turn, its stock price
performance. Nor did it disclose the material conflicts of interest of the
purportedly "independent directors." All Meadowcraft's directors were
hand-picked by Blount at the time of the IPO, including McCanna, an employee of
the Company and beholden to Blount for his livelihood. All the directors are
long time, intimate colleagues of Blount (one is his personal lawyer) through
business and social relationships. None of the directors would take any action
or position contrary to Blount's wishes and interests. They are incapable of
impartially representing Meadowcraft's public shareholders in any dealings with
Blount.
22. As a result of the defendants' unlawful actions, plaintiff and the
other members of the Class will be irreparably harmed in that they will not
receive their fair portion of the value of Meadowcraft's assets and business and
will be prevented from obtaining the real value of their equity ownership of the
Company. Unless the proposed buyout is enjoined by the Court, Blount, with the
acquiescence of the other Individual Defendants, will continue to breach his
fiduciary duties owed to plaintiff and the members of the Class, to the
irreparable harm of the members of the Class.
23. Plaintiff and the other members of the Class have no adequate remedy at
law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing the proposed
transaction;
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C. In the event the proposed buyout is consummated, rescinding it and
setting it aside;
D. Awarding the Class compensatory and/or rescissory damages against
defendants, individually and severally, in an amount to be determined at
trial, together with prejudgment interest at the maximum rate allowable by
law;
E. Awarding plaintiff her costs and disbursements, including a
reasonable allowance for counsel fees and experts' fees; and
F. Granting such other and further relief at to the Court may seem
just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ [Signature Illegible]
------------------------------------
919 North Market Street
Suite 1401, Mellon Bank Center
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
DONOVAN MILLER LLC
1608 Walnut Street, Suite 1400
Philadelphia, PA 19103
(215) 732-6020
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