<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
REXEL, INC.
(NAME OF SUBJECT COMPANY)
REXEL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
761680 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
JON O. FULLERTON, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
REXEL, INC.
150 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
(305) 446-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATION ON BEHALF OF THE PERSON(S) FILING STATEMENT).
WITH A COPY TO:
PAUL T. SCHNELL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3897
(212) 735-3000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Rexel, Inc., a New York corporation (the
"Company"), and the address of the principal executive offices of the Company
is 150 Alhambra Circle, Suite 900, Coral Gables, Florida 33134. The title of
the class of equity securities to which this statement (this "Statement")
relates is the common stock, par value $1.00 per share (the "Shares"), of the
Company.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to the tender offer by International Technical
Distributors, Inc., a New York corporation ("Purchaser") and a direct, wholly-
owned subsidiary of Rexel S.A., a French societe anonyme ("Parent"), disclosed
in a Tender Offer Statement on Schedule 14D-1, dated October 23, 1997 (the
"Schedule 14D-1"), to purchase all of the issued and outstanding Shares, not
already owned by Purchaser and Parent, at a price of $22.50 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 October 23, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with the Offer to Purchase, as amended or supplemented from time to time,
constitute the "Offer"), copies of which are filed herewith as Exhibits (a)(1)
and (a)(2), respectively, and are incorporated herein by reference.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 17, 1997 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the completion of the Offer and the satisfaction or
waiver of the conditions set forth in the Merger Agreement, Purchaser will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation of the Merger and as a wholly owned subsidiary of
Parent (the "Surviving Corporation"). At the effective time of the Merger,
each Share then outstanding (other than Shares owned directly or indirectly by
Parent or held in the treasury of the Company, all of which will be canceled,
and other than Shares held by shareholders who perfect appraisal rights under
New York law) will be converted into the right to receive $22.50 in cash or
any higher price per Share paid in the Offer. A copy of the Merger Agreement
is filed herewith as Exhibit (c)(1) and is incorporated herein by reference.
The information set forth under the captions "INTRODUCTION", "SPECIAL
FACTORS--Background of the Offer", "SPECIAL FACTORS--Purpose and Structure of
the Offer; Reasons of Parent and Purchaser for the Offer and the Merger", "THE
TENDER OFFER--Section 1. Terms of the Offer" and "THE TENDER OFFER--Section 8.
Certain Information Concerning Parent and Purchaser" of the Offer to Purchase
is incorporated herein by reference.
Concurrently with the filing of this Statement, Parent and Purchaser are
jointly filing with the Securities and Exchange Commission a Transaction
Statement on Schedule 13E-3, dated October 23, 1997.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser are located at 301 46th Court, Meridian, Mississippi 39305 and the
principal executive offices of Parent are located at 25 rue de Clichy, 75009
Paris, France.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) The information contained under the captions "INTRODUCTION", "SPECIAL
FACTORS--Background of the Offer", "SPECIAL FACTORS--The Merger Agreement" and
"SPECIAL FACTORS--Interests of Certain Persons in the Offer and the Merger" of
the Offer to Purchase is incorporated herein by reference. Each material
contract, agreement, arrangement and understanding and actual or potential
conflict of interest between the Company or its affiliates and: (i) its
executive officers, directors or affiliates; or (ii) Purchaser, its executive
officers, directors or affiliates, is either incorporated herein by reference
as a result of the previous sentence, disclosed under the captions "Security
Ownership of Certain Beneficial Owners", "Security Ownership of Management",
"ELECTION OF DIRECTORS", "Compensation of Outside Directors",
1
<PAGE>
"EXECUTIVE COMPENSATION", "Employment Contracts", "Change of Control
Provisions", "Board Compensation Committee Report on Executive Compensation"
and "CERTAIN TRANSACTIONS" at pages 2 through 16 of the Company's Proxy
Statement, dated April 18, 1997, for its 1997 Annual Meeting of Shareholders
(the "Proxy Statement"), a copy of which is filed herewith as Exhibit (c)(2)
and is incorporated herein by reference, or set forth below. All information
contained in this Statement or incorporated herein by reference concerning
Parent, Purchaser or their respective officers, directors, representatives of
affiliates, or actions or events with respect to any of them, was provided by
Parent or Purchaser, respectively, and the Company takes no responsibility for
such information.
Indemnification Agreements. The Company entered into an indemnification
agreement, dated October 8, 1997 (the "Indemnification Agreement"), with each
of the members of the Special Committee (as defined below), pursuant to which
the Company has agreed to indemnify each such person in connection with his
service on the Special Committee to the fullest extent permitted by applicable
law. A copy of the Indemnification Agreement is filed as Exhibit (c)(3) hereto
and is incorporated herein by reference.
The Company enters into individual indemnification agreements with its
directors and officers which provide that the Company shall indemnify each
such person to the full extent permitted by New York law. The indemnification
agreements specify procedures for determining entitlement to indemnification
and advancement of expenses, provide for the creation of a trust fund to
assure payment of indemnity amounts in the event of a Potential Change in
Control (as defined therein), confirm that contractual indemnity rights shall
survive charter or By-Law changes or termination of services and contain
various other provisions designed to clarify the rights of directors and
officers to indemnity. A copy of the form of such indemnification agreements
is filed as Exhibit (c)(4) hereto and is incorporated herein by reference.
Indemnification of Directors and Officers. The Company is a New York
corporation. Pursuant to Section 722 of the NYBCL, a corporation incorporated
under the laws of the State of New York is permitted to indemnify its current
and former directors and officers under certain circumstances against certain
liabilities and expenses incurred by them by reason of their serving in such
capacities, if such persons acted in good faith for a purpose which they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful.
Pursuant to Article NINTH of the Company's Restated Certificate of
Incorporation ("Certificate of Incorporation") and New York law, no director
will be personally liable to the Company or any shareholder for damages for
any breach of duty in such capacity, except if a judgment or other final
adjudication adverse to the director establishes that (i) the director's acts
or omissions were in bad faith or involved intentional misconduct or a knowing
violation of law, (ii) the director personally gained in fact a financial
profit or other advantage to which he was not legally entitled or (iii) the
director's acts violated Section 719 of the New York Business Corporation Law
("NYBCL"). The Company's Certificate of Incorporation further provides that if
the NYBCL is amended after approval by the stockholders of Article NINTH to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of directors of the Company will be
eliminated or limited to the fullest extent permitted by the NYBCL, as so
amended. In addition, the Company's Certificate of Incorporation provides that
neither the amendment nor repeal of Article NINTH, nor the adoption of any
provision of the Company's Certificate of Incorporation or By-Laws or of any
statute inconsistent with Article NINTH, may eliminate or reduce the effect of
Article NINTH in respect of any acts or omissions occurring prior to such
amendment, repeal or adoption of such inconsistent provision. Article NINTH of
the Company's Certificate of Incorporation is filed herewith as Exhibit (c)(5)
and is incorporated herein by reference.
Based upon Article IX of the Company's By-Laws, any person made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, by reason of the fact that he, his testator or intestate then is or
was a director or officer of the Company, or then serves or has served any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity at the request of the Company, will be
indemnified by the Company against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement to the full extent permitted
by the laws of the State of New York. This provision of the Company's
2
<PAGE>
By-Laws, to the full extent so permitted, applies to actions by or in the
right of the Company and requires the Company to pay expenses in advance of
final disposition. In addition, Article IX of the Company's By-Laws provides
that its adoption will not adversely affect any right to indemnification which
any person may have had under the Company's By-Laws as in effect prior to its
adoption or apart from the provisions of the Company's By-Laws as then,
thereafter or formerly in effect. Other rights to indemnification or
advancement of expenses may also be provided by (i) a resolution of
stockholders, (ii) a resolution of directors or (iii) an agreement providing
for such indemnification. In addition, the Company's By-Laws empower the Board
of Directors of the Company in its discretion, to provide indemnity on such
terms and to such extent as it may fix, to employees and other persons to whom
the provisions of Article IX do not relate. Article IX of the Company's By-
Laws is filed herewith as Exhibit (c)(6) and is incorporated herein by
reference.
The Company has a contract for insurance coverage under which the Company's
directors and officers (as well as the Company) are indemnified under certain
circumstances with respect to litigation and other costs and liabilities
arising out of actual or alleged misconduct of such directors and officers.
The Merger Agreement contains certain provisions regarding the
indemnification and insurance of directors described under the heading
"SPECIAL FACTORS--The Merger Agreement--Agreements of Parent, Purchaser and
the Company" of the Offer to Purchase.
Employment Agreements. Mr. Guinchard has reached an agreement with Rexel
S.A. concerning the terms of his employment by the Company, although such
agreement has not been finalized. Under the terms of the proposed agreement,
Mr. Guinchard would be employed by the Company for a minimum of three (3)
years beginning April 12, 1997 with a base salary of $280,000 per year. In
addition to his base salary, he would be entitled to a bonus of up to 70% of
his base salary based upon performance criteria which are established each
year by the Company's Executive Compensation Committee, and for calendar year
1997 he is guaranteed a minimum bonus of $110,000. Mr. Guinchard is also
furnished with living quarters, educational costs for two of his children, a
car and round trip tickets once a year for his immediate family living in the
U.S. to return to France and round trip tickets twice per year for members of
his immediate family who live in France to visit him in the United States. The
Company also paid for Mr. Guinchard's move from Paris, France to Coral Gables,
Florida and provided him with a non-accountable expense allowance of $10,000.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Company Board
On October 17, 1997, the Board of Directors of the Company by unanimous vote
of all directors present and voting, based upon, among other things, the
unanimous recommendation and approval of the Special Committee, determined
that each of the Offer and the Merger is fair to and in the best interests of
the Company's shareholders (other than Parent and Purchaser), approved the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and recommends that the Company's shareholders accept
the Offer and tender their Shares in the Offer.
A letter to the Company's shareholders communicating the recommendation of
the Board of Directors of the Company and a press release announcing the
execution of the Merger Agreement are filed herewith as Exhibits (a)(3) and
(a)(11), respectively, and are incorporated herein by reference.
(b) Background; Reasons for the Company Board's Recommendation
The reasons for the recommendation stated in paragraph (a) of this Item 4
are set forth in the captions "INTRODUCTION", "SPECIAL FACTORS--Background of
the Offer" and "SPECIAL FACTORS--Recommendation of the Company Board; Fairness
of the Offer and Merger" of the Offer to Purchase and are incorporated herein
by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information contained under the captions "SPECIAL FACTORS--Background of
the Offer", "SPECIAL FACTORS--Recommendation of the Company Board; Fairness of
the Offer and Merger--WP&Co. Engagement Agreement" and "SPECIAL FACTORS--
Interests of Certain Persons in the Offer and the Merger" of the Offer to
Purchase is incorporated herein by reference.
3
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) The information contained under the caption "SPECIAL FACTORS--Interests
of Certain Persons in the Offer and the Merger" of the Offer to Purchase is
incorporated herein by reference. Except as incorporated as a result of the
previous sentence, no transactions in the Shares have been effected during the
past 60 days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company (other than Parent and Purchaser)
currently intends to tender to Purchaser pursuant to the Offer all Shares over
which he or she has sole dispositive power.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9 or in the Offer to Purchase,
the Company is not engaged in any negotiation in response to the Offer which
relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company; (iii) a tender offer for or
other acquisition of securities by or of the Company; or (iv) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in this Schedule 14D-9 or in the Offer to Purchase,
there are no transactions, board resolutions, agreements in principle or
signed contracts in response to the Offer which relate to or would result in
one or more of the matters referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, copies of which are filed herewith as Exhibits (a)(1) and (a)(2),
respectively, and are incorporated herein by reference, including without
limitation the information contained under the captions "SPECIAL FACTORS--
Background of the Offer" and "THE TENDER OFFER--Section 14. Certain Legal
Matters and Regulatory Approvals" of the Offer to Purchase.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
(a)(1) Offer to Purchase.+
(a)(2) Letter of Transmittal.+
(a)(3) Letter to Company Shareholders.*+
(a)(4) Opinion of Wasserstein Perrella & Co., Inc., dated October 17, 1997
(incorporated by reference to Schedule II to Purchaser's Tender Offer
Statement on Schedule 14D-1, dated October 23, 1997).
(a)(5) Notice of Guaranteed Delivery (incorporated by reference to Exhibit
(a)(3) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(a)(6) Letter from J.P. Morgan Securities Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees (incorporated by
reference to Exhibit (a)(4) to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997).
(a)(7) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees to Clients (incorporated by reference to Exhibit (a)(5) to
Purchaser's Tender Offer Statement on Schedule 14D-1, dated October
23, 1997).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (incorporated by reference to Exhibit (a)(6) to
Purchaser's Tender Offer Statement on Schedule 14D-1, dated October
23, 1997).
(a)(9) Summary Advertisement as published in The New York Times on October
23, 1997 (incorporated by reference to Exhibit (a)(7) to Purchaser's
Tender Offer Statement on Schedule 14D-1, dated October 23, 1997).
(a)(10) Press Release issued by Parent and the Company on October 20, 1997
(incorporated by reference to Exhibit B to Amendment No. 11 to the
Schedule 13D of Parent et al. dated October 20, 1997).
(a)(11) English translation of French-language Press Release published on
October 20, 1997 (incorporated by reference to Exhibit C to Amendment
No. 11 to the Schedule 13D of Parent et al. dated October 20, 1997).
(a)(12) Press Release issued by the Parent on August 29, 1997 (incorporated by
reference to Exhibit (a)(10) to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997).
(a)(13) Press Release issued by the Company on August 29, 1997 (incorporated
by reference to Exhibit (a)(11) to Purchaser's Tender Offer Statement
on Schedule 14D-1, dated October 23, 1997).
(a)(14) Press Release issued by the Company on October 21, 1997 (incorporated
by reference to Exhibit (a)(12) to Purchaser's Tender Offer Statement
on Schedule 14D-1, dated October 23, 1997).
(a)(15) Proposal Letter dated August 29, 1997 to Mr. Guinchard from Rexel S.A.
(incorporated by reference to Exhibit (a)(14) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(1) Agreement and Plan of Merger, dated as of October 17, 1997, among
Rexel, S.A., International Technical Distributors, Inc. and Rexel,
Inc. (incorporated by reference to Schedule VI to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(2) Pages 2 through 16 of the Proxy Statement, dated April 18, 1997,
relating to the Company's 1997 Annual Meeting of Shareholders.+
(c)(3) Indemnification Agreement, dated October 8, 1997, between the Company
and the members of the Special Committee.+
(c)(4) Form of Indemnification Agreement between the Company and directors
and officers of the Company.+
(c)(5) Article NINTH of the Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
(c)(6) Article IX of the Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
(c)(7) Purchase Agreement dated April 22, 1992 among Parent, Purchaser,
Company and Southern Electrical Supply Company, Inc. (incorporated by
reference to Exhibit 2 to the Initial Statement on Schedule 13D of
Parent et al. dated November 25, 1992).
(c)(8) Investment Agreement dated November 12, 1992 among Parent, Purchaser
and Company (incorporated by reference to Exhibit 4 to the Initial
Statement on Schedule 13D of Parent et al. dated November 25, 1992).
(c)(9) Shareholders Agreement dated November 10, 1992 among Parent, Purchaser
and Robert M. Merson (incorporated by references to Exhibit 5 to the
Initial Statement on Schedule 13D of Parent et al. dated November 25,
1992).
(c)(10) Registration Rights Agreement dated November 12, 1992 between Parent
and Company (incorporated by reference to Exhibit 6 to the Initial
Statement on Schedule 13D of Parent et al. dated November 25, 1992).
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<S> <C>
(c)(11) Purchase Agreement dated December 10, 1993 among Parent, Purchaser and Company
(incorporated by reference to Exhibit 7 to Amendment No. 2 to Schedule 13D of Parent
et al. dated June 24, 1994).
(c)(12) Amendment No. 1 to Investment Agreement dated March 1, 1994 among Parent, Purchaser
and Company (incorporated by reference to Exhibit 8 to Amendment No. 2 to Schedule
13D of Parent et al. dated June 24, 1994).
(c)(13) Services Agreement dated as of November 1, 1995 between Parent and Company
(incorporated by reference to Exhibit 10.7 to Form 10-K of Company for 1995).
(c)(14) Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Form
10-K of Company for 1995).
(c)(15) Complaint Filed in Appleby v. Rexel, Inc. et al. (Supreme Court of the State of New
York, County of New York, filed August 29, 1997) (incorporated by reference to
Exhibit (g)(1) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(16) Complaint Filed in 7547 Partners v. Chareyre et al. (Supreme Court of the State of
New York, County of New York, filed August 29, 1997) (incorporated by reference to
Exhibit (g)(2) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(17) Complaint Filed in Parnes v. Rexel S.A. et al. (Supreme Court of the State of New
York, County of New York, filed September 2, 1997) (incorporated by reference to
Exhibit (g)(3) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(18) Complaint Filed in Deital v. Chareyre. et al. (Supreme Court of the State of New
York, County of New York, filed September 2, 1997) (incorporated by reference to
Exhibit (g)(4) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(19) Complaint Filed in Shave v. Chareyre et al. (Supreme Court of the State of New York,
County of New York, filed September 2, 1997) (incorporated by reference to Exhibit
(g)(5) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated October 23,
1997).
(c)(20) Complaint Filed in Maurer and Rand v. Chareyre (Supreme Court of the State of New
York, County of New York, filed September 3, 1997) (incorporated by reference to
Exhibit (g)(6) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(21) Complaint Filed in Black v. Rexel, Inc. et al. (Supreme Court of the State of New
York, County of New York, filed September 4, 1997) (incorporated by reference to
Exhibit (g)(7) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(c)(22) Complaint Filed in Tepper v. Chareyre et al. (Supreme Court of the State of New
York, County of New York, filed September 12, 1997) (incorporated by reference to
Exhibit (g)(8) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
</TABLE>
- --------
* Included with Schedule 14D-9 mailed to shareholders.
+ Filed herewith.
6
<PAGE>
SIGNATURE
After reasonable 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.
Rexel, Inc.
By:/s/ Gilles Guinchard
___________________________________
Name:Gilles Guinchard
Title:President and Chief
Executive Officer
Dated: October 23, 1997
7
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(a)(1) Offer to Purchase.+
(a)(2) Letter of Transmittal.+
(a)(3) Letter to Company Shareholders.*+
(a)(4) Opinion of Wasserstein Perrella & Co., Inc., dated October 17, 1997
(incorporated by reference to Schedule II to Purchaser's Tender Offer
Statement on Schedule 14D-1, dated October 23, 1997).
(a)(5) Notice of Guaranteed Delivery (incorporated by reference to Exhibit
(a)(3) to Purchaser's Tender Offer Statement on Schedule 14D-1, dated
October 23, 1997).
(a)(6) Letter from J.P. Morgan Securities Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees (incorporated by
reference to Exhibit (a)(4) to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997).
(a)(7) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees to Clients (incorporated by reference to Exhibit (a)(5) to
Purchaser's Tender Offer Statement on Schedule 14D-1, dated October
23, 1997).
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (incorporated by reference to Exhibit (a)(6) to
Purchaser's Tender Offer Statement on Schedule 14D-1, dated October
23, 1997).
(a)(9) Summary Advertisement as published in The New York Times on October
23, 1997 (incorporated by reference to Exhibit (a)(7) to Purchaser's
Tender Offer Statement on Schedule 14D-1, dated October 23, 1997).
(a)(10) Press Release issued by Parent and the Company on October 20, 1997
(incorporated by reference to Exhibit B to Amendment No. 11 to the
Schedule 13D of Parent et al. dated October 20, 1997).
(a)(11) English translation of French-language Press Release published on
October 20, 1997 (incorporated by reference to Exhibit C to Amendment
No. 11 to the Schedule 13D of Parent et al. dated October 20, 1997).
(a)(12) Press Release issued by Parent on August 29, 1997 (incorporated by
reference to Exhibit (a)(10) to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated October 23, 1997).
(a)(13) Press Release issued by the Company on August 29, 1997 (incorporated
by reference to Exhibit (a)(11) to Purchaser's Tender Offer Statement
on Schedule 14D-1, dated October 23, 1997).
(a)(14) Press Release issued by the Company on October 21, 1997 (incorporated
by reference to Exhibit (a)(12) to Purchaser's Tender Offer Statement
on Schedule 14D-1, dated October 23, 1997).
(a)(15) Proposal Letter dated August 29, 1997 to Mr. Guinchard from Rexel S.A.
(incorporated by reference to Exhibit (a)(14) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(1) Agreement and Plan of Merger, dated as of October 17, 1997, among
Rexel, S.A., International Technical Distributors, Inc. and Rexel,
Inc. (incorporated by reference to Schedule VI to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(2) Pages 2 through 16 of the Proxy Statement, dated April 18, 1997,
relating to the Company's 1997 Annual Meeting of Shareholders.+
(c)(3) Indemnification Agreement, dated October 8, 1997, between the Company
and the members of the Special Committee.+
(c)(4) Form of Indemnification Agreement between the Company and directors
and officers of the Company.+
(c)(5) Article NINTH of the Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(c)(6) Article IX of the Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
(c)(7) Purchase Agreement dated April 22, 1992 among Parent, Purchaser,
Company and Southern Electrical Supply Company, Inc. (incorporated by
reference to Exhibit 2 to the Initial Statement on Schedule 13D of
Parent et al. dated November 25, 1992).
(c)(8) Investment Agreement dated November 12, 1992 among Parent, Purchaser
and Company (incorporated by reference to Exhibit 4 to the Initial
Statement on Schedule 13D of Parent et al. dated November 25, 1992).
(c)(9) Shareholders Agreement dated November 10, 1992 among Parent, Purchaser
and Robert M. Merson (incorporated by references to Exhibit 5 to the
Initial Statement on Schedule 13D of Parent et al. dated November 25,
1992).
(c)(10) Registration Rights Agreement dated November 12, 1992 between Parent
and Company (incorporated by reference to Exhibit 6 to the Initial
Statement on Schedule 13D of Parent et al. dated November 25, 1992).
(c)(11) Purchase Agreement dated December 10, 1993 among Parent, Purchaser and
Company (incorporated by reference to Exhibit 7 to Amendment No. 2 to
Schedule 13D of Parent et al. dated June 24, 1992).
(c)(12) Amendment No. 1 to Investment Agreement dated March 1, 1994 among
Parent, Purchaser and Company (incorporated by reference to Exhibit 8
to Amendment No. 2 to Schedule 13D of Parent et al. dated June 24,
1994).
(c)(13) Services Agreement as of November 1, 1995 between Parent and Company
(incorporated by reference to Exhibit 10.7 to Form 10-K of Company for
1995).
(c)(14) Form of Stock Option Agreement (incorporated by reference to Exhibit
10.2 to Form 10-K of Company for 1995).
(c)(15) Complaint Filed in Appleby v. Rexel, Inc. et al. (Supreme Court of the
State of New York, County of New York, filed August 29, 1997)
(incorporated by reference to Exhibit (g)(1) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(16) Complaint Filed in 7547 Partners v. Chareyre et al. (Supreme Court of
the State of New York, County of New York, filed August 29, 1997)
(incorporated by reference to Exhibit (g)(2) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(17) Complaint Filed in Parnes v. Rexel S.A. et al. (Supreme Court of the
State of New York, County of New York, filed September 2, 1997)
(incorporated by reference to Exhibit (g)(3) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(18) Complaint Filed in Deital v. Chareyre. et al. (Supreme Court of the
State of New York, County of New York, filed September 2, 1997)
(incorporated by reference to Exhibit (g)(4) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(19) Complaint Filed in Shave v. Chareyre et al. (Supreme Court of the
State of New York, County of New York, filed September 2, 1997)
(incorporated by reference to Exhibit (g)(5) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(20) Complaint Filed in Maurer and Rand v. Chareyre (Supreme Court of the
State of New York, County of New York, filed September 3, 1997)
(incorporated by reference to Exhibit (g)(6) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
(c)(21) Complaint Filed in Black v. Rexel, Inc. et al. (Supreme Court of the
State of New York, County of New York, filed September 4, 1997)
(incorporated by reference to Exhibit (g)(7) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
(c)(22) Complaint Filed in Tepper v. Chareyre et al. (Supreme Court of the
State of New York, County of New York, filed September 12, 1997)
(incorporated by reference to Exhibit (g)(8) to Purchaser's Tender
Offer Statement on Schedule 14D-1, dated October 23, 1997).
</TABLE>
- --------
* Included with Schedule 14D-9 mailed to shareholders.
+ Filed herewith.
3
<PAGE>
EXHIBIT 99(a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
REXEL, INC.
AT
$22.50 NET PER SHARE IN CASH
BY
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.
A WHOLLY OWNED SUBSIDIARY
OF
REXEL S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC., A NEW YORK CORPORATION
("PURCHASER") AND A WHOLLY OWNED SUBSIDIARY OF REXEL S.A., A FRENCH SOCIETE
ANONYME ("PARENT"), IS OFFERING TO PURCHASE ALL OUTSTANDING SHARES OF COMMON
STOCK, PAR VALUE $1.00 PER SHARE (THE "SHARES"), OF REXEL, INC., A NEW YORK
CORPORATION (THE "COMPANY"), AT A PRICE OF $22.50 PER SHARE, NET TO THE SELLER
IN CASH, WITHOUT INTEREST THEREON, UPON THE TERMS AND SUBJECT TO THE
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL (WHICH TOGETHER, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME,
CONSTITUTE THE "OFFER").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, NOT
LESS THAN 6,760,905 SHARES (WHICH CONSTITUTE A MAJORITY OF THE SHARES NOT
OWNED BY PARENT OR PURCHASER ON A FULLY DILUTED BASIS) (THE "MINIMUM
CONDITION"). SEE "THE TENDER OFFER--SECTION 12. CERTAIN CONDITIONS OF THE
OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS
RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS COMPRISED
OF THREE INDEPENDENT DIRECTORS, HAS DETERMINED THAT EACH OF THE OFFER AND THE
MERGER (AS DEFINED HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
SHAREHOLDERS OF THE COMPANY (OTHER THAN PURCHASER AND PARENT) AND HAS APPROVED
THE OFFER, THE MERGER AND THE MERGER AGREEMENT (AS DEFINED HEREIN) AND
RECOMMENDS THAT SUCH SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER. SEE "SPECIAL FACTORS--RECOMMENDATION OF THE COMPANY
BOARD; FAIRNESS OF THE OFFER AND THE MERGER--RECOMMENDATION OF THE SPECIAL
COMMITTEE AND THE COMPANY BOARD."
THE SHARES ARE LISTED ON BOTH THE NEW YORK STOCK EXCHANGE (THE "NYSE") AND
THE PACIFIC STOCK EXCHANGE UNDER THE SYMBOL "RXL". ON OCTOBER 17, 1997, THE
LAST FULL DAY OF TRADING, PRIOR TO THE ANNOUNCEMENT OF THE EXECUTION OF THE
MERGER AGREEMENT, THE CLOSING PRICE ON THE NYSE COMPOSITE TAPE WAS $21.31 PER
SHARE. ON OCTOBER 22, 1997, THE LAST FULL TRADING DAY PRIOR TO THE
COMMENCEMENT OF THE OFFER, THE CLOSING PRICE ON THE NYSE COMPOSITE TAPE WAS
$22.25 PER SHARE. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE SHARES.
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
MANUALLY SIGNED FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE
LETTER OF TRANSMITTAL, AND MAIL OR DELIVER IT TOGETHER WITH THE CERTIFICATE(S)
EVIDENCING TENDERED SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO IBJ SCHRODER
BANK & TRUST COMPANY (THE "DEPOSITARY") (AT THE DEPOSITARY'S ADDRESS SET FORTH
ON THE BACK COVER OF THIS OFFER TO PURCHASE) OR TENDER SUCH SHARES PURSUANT TO
THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN "THE TENDER OFFER--SECTION
3. PROCEDURES FOR TENDERING SHARES" OR (2) REQUEST SUCH SHAREHOLDER'S BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
TRANSACTION FOR SUCH SHAREHOLDER. A HOLDER WHOSE SHARES ARE REGISTERED IN THE
NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST
CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY, OR OTHER NOMINEE
IF SUCH HOLDER DESIRES TO TENDER SUCH SHARES.
Any shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedure for guaranteed delivery set forth in "THE
TENDER OFFER--Section 3. Procedures for Tendering Shares."
Questions and requests for assistance and additional copies of the Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be directed to MacKenzie Partners, Inc. (the
"Information Agent") or J.P. Morgan Securities Inc. (the "Dealer Manager") at
their respective addresses and telephone numbers set forth on the back cover
of this Offer to Purchase. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the other tender offer materials may also be
obtained from brokers, dealers, commercial banks or trust companies.
--------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
--------------
The Dealer Manager for the Offer is:
J.P. MORGAN & CO.
October 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 1
SPECIAL FACTORS........................................................... 4
Background of the Offer................................................. 4
Business of the Company and Arrangements between Parent, Purchaser and
the Company.......................................................... 4
Contacts of Parent with the Company................................... 5
Position of Parent and Purchaser Regarding Fairness of the Offer and
the Merger........................................................... 10
J.P. Morgan Report.................................................... 11
Recommendation of the Company Board; Fairness of the Offer and Merger... 14
Recommendation of the Special Committee and the Company Board......... 14
Opinion of WP&Co...................................................... 16
WP&Co. Engagement Agreement........................................... 21
Certain Financial Projections (Unaudited)............................... 22
Cautionary Statement Concerning Forward-Looking Statements.............. 26
Purpose and Structure of the Offer; Reasons of Parent and Purchaser for
the Offer and the Merger............................................... 26
Plans for the Company; Certain Effects of the Offer..................... 26
Rights of Shareholders in the Offer and the Merger; Appraisal Rights.... 28
The Merger Agreement.................................................... 30
The Offer............................................................. 30
The Merger............................................................ 31
Agreements of Parent, Purchaser and the Company....................... 32
Representations and Warranties........................................ 33
Conditions to the Merger.............................................. 34
Termination........................................................... 34
Amendment and Waiver.................................................. 35
Interests of Certain Persons in the Offer and the Merger................ 35
Related Party Transactions............................................ 35
Beneficial Ownership of Shares........................................ 36
THE TENDER OFFER.......................................................... 38
1. Terms of the Offer.................................................. 38
2. Acceptance for Payment and Payment.................................. 38
3. Procedures for Tendering Shares..................................... 39
4. Withdrawal Rights................................................... 41
5. Certain U.S. Federal Income Tax Consequences........................ 42
6. Price Range of Shares; Dividends.................................... 42
7. Certain Information Concerning the Company.......................... 43
General.............................................................. 43
Financial Information................................................ 43
8. Certain Information Concerning Parent and Purchaser................. 48
9. Financing of the Offer and the Merger............................... 50
10. Dividends and Distributions......................................... 50
11. Effect of the Offer on the Market for the Shares; the New York Stock
Exchange, the Pacific Stock Exchange and Exchange Act Registration.. 51
12. Certain Conditions of the Offer..................................... 51
13. Extension of Tender Period; Amendment; Termination.................. 53
14. Certain Legal Matters and Regulatory Approvals...................... 53
15. Fees and Expenses................................................... 57
16. Miscellaneous....................................................... 58
</TABLE>
i
<PAGE>
<TABLE>
<C> <S>
SCHEDULE I LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER AND
S.C.A. FINANCIERE PINAULT
SCHEDULE II OPINION OF WASSERSTEIN PERELLA & CO., INC., FINANCIAL ADVISOR OF
THE SPECIAL COMMITTEE OF THE COMPANY
SCHEDULE III NEW YORK BCL SECTION 623 REGARDING DISSENTERS' RIGHTS
SCHEDULE IV REPORT OF INDEPENDENT ACCOUNTANTS AND AUDITED FINANCIAL
STATEMENTS OF THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1995
AND DECEMBER 31, 1996
SCHEDULE V UNAUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE
COMPANY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
SCHEDULE VI AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 17, 1997, AMONG
PARENT, PURCHASER AND THE COMPANY
</TABLE>
ii
<PAGE>
To the Holders of Common Stock of Rexel, Inc.:
INTRODUCTION
International Technical Distributors, Inc., a New York corporation
("Purchaser") and a wholly owned subsidiary of Rexel S.A., a societe anonyme
organized and existing under the laws of the Republic of France ("Parent"),
hereby offers to purchase all issued and outstanding shares of common stock,
par value $1.00 per share (the "Shares"), of Rexel, Inc., a New York
corporation (the "Company"), not already owned by Purchaser or Parent, at a
price of $22.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer").
The Company is a New York corporation that was incorporated in 1866. Parent,
a French company listed on the Paris Stock Exchange, currently owns directly
or indirectly approximately 50.5% of the outstanding stock of the Company. In
1995, the Company changed its name from Willcox & Gibbs, Inc. to Rexel, Inc.
Based on 1996 sales, management of the Company believes that the Company is
the fifth largest distributor of electrical parts and supplies in the United
States and that Parent, operating through its affiliated companies including
the Company (the "Parent Group"), is the largest electrical supplies
distributor in the world, with operations in 17 countries.
Tendering shareholders 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. Purchaser and Parent will pay all charges and
expenses of J.P. Morgan Securities Inc. ("J.P. Morgan") which is acting as the
Dealer Manager (in such capacity, the "Dealer Manager"), IBJ Schroder Bank &
Trust Company, as Depositary (the "Depositary"), and MacKenzie Partners, Inc.,
as Information Agent (the "Information Agent"), incurred in connection with
the Offer. See "THE TENDER OFFER--Section 15. Fees and Expenses."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, NOT
LESS THAN 6,760,905 SHARES (WHICH CONSTITUTE A MAJORITY OF THE SHARES NOT
OWNED BY PARENT OR PURCHASER ON A FULLY DILUTED BASIS) (THE "MINIMUM
CONDITION"). SEE "THE TENDER OFFER--SECTION 12. CERTAIN CONDITIONS OF THE
OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY UNANIMOUS
VOTE OF ALL DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE
UNANIMOUS RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS
(THE "SPECIAL COMMITTEE") COMPRISED OF THREE INDEPENDENT DIRECTORS, HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED HEREIN) IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY (OTHER THAN
PURCHASER AND PARENT) AND HAS APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT (AS DEFINED BELOW) AND RECOMMENDS THAT SUCH SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES TO PURCHASER PURSUANT TO THE OFFER. SEE "SPECIAL
FACTORS--RECOMMENDATION OF THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE
MERGER--RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD."
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 17, 1997 (the "Merger Agreement"), among Purchaser, Parent and
the Company. The Merger Agreement provides, among other things, that following
the purchase of Shares pursuant to the Offer and upon the terms and subject to
the conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the New York Business Corporation Law (the "NYBCL"),
Purchaser (or a subsidiary of Purchaser as more fully set forth in the Merger
Agreement) will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation of the Merger (the "Surviving Corporation") and will be a direct
or indirect wholly owned subsidiary of Parent. At the effective time of the
1
<PAGE>
Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time (other than Shares owned by Purchaser or Parent,
Shares held in the treasury of the Company or Shares, if any, held by
dissenting shareholders who perfect their appraisal rights under Section 623
of the NYBCL) will be converted into the right to receive, in cash, the Offer
price, without interest.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption
of the Merger Agreement by the requisite vote of the shareholders of the
Company. See "THE MERGER AGREEMENT." Under the NYBCL, except as otherwise
described below, the Merger contemplated by the Merger Agreement must be
approved by the affirmative vote of 66 2/3% of the Shares entitled to vote on
a proposal to approve the Merger at a duly convened meeting of the
shareholders of the Company. However, under the NYBCL, if Purchaser acquires,
pursuant to the Offer or otherwise, at least 90% of the then outstanding
Shares of the Company, Purchaser will be able to cause the Merger to become
effective without the approval of the Company's shareholders.
In the event that Purchaser acquires at least 90% of the then outstanding
Shares, subject to the transfer of Shares by Parent described below, Purchaser
intends to take all necessary and appropriate action under the NYBCL to cause
the Merger to become effective as soon as practicable after such acquisition,
without approval of the Company's shareholders. See "THE MERGER AGREEMENT--
Agreements of Parent, Purchaser and the Company." If, however, Purchaser does
not acquire 90% of the then outstanding Shares, and a vote of the Company's
shareholders is required under the NYBCL to consummate the Merger, a
significantly longer period of time will be required to effect the Merger. In
order for Purchaser to acquire at least 90% of the outstanding Shares, Parent
must transfer to Purchaser substantially all of the Shares owned by Parent.
Parent has indicated that it will transfer the Shares owned by it to Purchaser
only if it obtains a ruling from the French fiscal authorities that any such
transfer will not result in any French tax to Parent. While Parent expects
that it will be able to obtain such ruling, there is no assurance that it will
be granted, or, if granted, that it will be granted on a timely basis.
Therefore, if Purchaser does not acquire 90% of the then outstanding Shares,
including as a result of Parent not transferring its Shares to Purchaser,
Purchaser will be unable to consummate a "short-form" Merger, and due to the
requirements of the NYBCL, consummation of the Merger would be delayed.
The Company has represented to Purchaser that, as of September 30, 1997, the
authorized capital stock of the Company was 47,000,000 shares, consisting of
45,000,000 Shares and 2,000,000 shares of preferred stock ("Preferred Stock"),
par value $1.00 per share. No shares of Preferred Stock have been issued. As
of September 30, 1997, 26,055,290 Shares were outstanding and held by
approximately 1,300 shareholders of record.
As of October 16, 1997, 713,453 Shares were reserved for issuance pursuant
to the Company's stock incentive plan and options to acquire 628,000 Shares
were outstanding thereunder (the "Stock Options").
Parent currently directly holds 8,524,487 Shares (the "Parent Shares"),
equal to approximately 32.7% of the total number of Shares issued and
outstanding. Purchaser directly holds 4,636,994 Shares, equal to approximately
17.8% of the issued and outstanding Shares. Parent, by virtue of its control
of Purchaser, and through Purchaser, holds directly and indirectly 13,161,481
Shares, equal to approximately 50.5% of the Shares currently issued and
outstanding. As a result of the 26,055,290 Shares outstanding, the options to
acquire 628,000 Shares and Parent and Purchaser's collective ownership of
13,161,481 Shares, the Minimum Condition will be satisfied if 6,760,905 Shares
are validly tendered in the Offer and not properly withdrawn.
The purpose of the Offer and the Merger is to facilitate the acquisition of
all of the remaining Shares for cash and thereby enable Parent to acquire 100%
of the Shares.
Parent and Purchaser believe that the consideration to be received by the
Company's shareholders (other than Parent and Purchaser) pursuant to the Offer
and the Merger is fair to such shareholders. See "SPECIAL FACTORS--Position of
Parent and Purchaser Regarding Fairness of the Offer and the Merger--Position
of Parent and Purchaser."
Wasserstein Perella & Co., Inc. ("WP&Co."), the Special Committee's
financial advisor, has delivered a written opinion to the Special Committee,
dated October 17, 1997, to the effect that, subject to the various assumptions
and limitations set forth therein, as of the date thereof, the $22.50 per
Share cash consideration to
2
<PAGE>
be received by holders of Shares (other than Parent or any of its wholly owned
subsidiaries, including Purchaser) in the Offer and the Merger pursuant to the
Merger Agreement is fair to such holders from a financial point of view. See
"SPECIAL FACTORS--Recommendation of the Company Board; Fairness of the Offer
and the Merger--Opinion of WP&Co." for further information concerning the
opinion of WP&Co.
Termination of Registration of Shares. It is the present intention of the
Purchaser to seek to cause the Company to make an application for the
termination of the registration of Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as soon as possible after the purchase
of Shares pursuant to the Offer if the requirements for termination of such
registration are met. See "TENDER OFFER--Section 11. Effect of the Offer on
the Market for the Shares; the New York Stock Exchange, the Pacific Stock
Exchange and Exchange Act Registration."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
3
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE OFFER
Business of the Company and Arrangements between Parent, Purchaser and the
Company
In 1992, in connection with the Company's restructuring (including the
spinoff of the Company's operations related to the manufacture of covered
elastic yarn and the disposition of its data communications equipment
distribution, apparel parts and supplies and knitting equipment distribution
businesses collectively referred to as "Apparel"), the Company, Parent,
Purchaser and Southern Electric Supply Company, Inc. (then a subsidiary of
Purchaser engaged in the distribution of electrical materials, "SES"), entered
into a purchase agreement (the "Purchase Agreement"), pursuant to which Parent
purchased 1,647,307 Shares at a purchase price of $6.00 per Share and
Purchaser exchanged all of the issued and outstanding shares of the common
stock of SES for 4,008,564 Shares and later received an additional 628,430
Shares. Prior to such transaction, neither Parent, Purchaser nor SES owned any
Shares. In connection with the Purchase Agreement, the Company, Parent and
Purchaser entered into an investment agreement (the "Investment Agreement")
providing for the grant to Parent of the right to nominate three of the ten
members of the Company Board, and pursuant to which Parent and Purchaser were
permitted to acquire additional Shares and other voting securities of the
Company, subject to certain restrictions which became less restrictive with
the passage of time, and Parent and Purchaser were to be granted additional
representation on the Company Board with an increase in their ownership of
Shares. Also in connection therewith, the Company transferred to its
subsidiary, Worldtex, Inc. ("Worldtex"), all of the stock of the Company's
subsidiaries engaged in the manufacture of covered elastic yarn and declared a
dividend consisting of one share of common stock of Worldtex for each Share
outstanding on November 23, 1992. Parent did not receive any shares of common
stock of Worldtex.
In 1993, the Company acquired Sacks Electrical Supply Co. and Summers Group
Inc., distributors of electrical parts and supplies, and in 1994, the Company
realigned the management and operations of its electrical distribution
business along geographic lines into the Eastern Region and the Western
Region.
In 1994, pursuant to an additional purchase agreement (the "Additional
Purchase Agreement"), Parent acquired 3,491,280 additional Shares from the
Company for consideration of $9.00 per share. In connection with the
Additional Purchase Agreement, the Company, Parent and Purchaser entered into
Amendment No. 1 to the Investment Agreement (the "Amendment to Investment
Agreement"), which permitted the purchase of additional securities of the
Company by Parent, Purchaser and certain of their affiliates. Additionally,
the Amendment to Investment Agreement provided for Parent to have the power to
appoint a majority of the members of the Company Board.
In 1996, the Company acquired Utility Products Supply of Denver, Colorado, a
distributor of electrical products to the utility industries and Cable &
Connector Warehouse, Inc. of Dallas, Texas, a distributor of electronic wire,
cable, connectors and related apparatus for manufacturers of data and
telecommunication products, and in 1997, the Company acquired the assets of
Southland Electrical Supply and the common stock of Chemco Electric Supply,
Inc., both distributors of electrical parts and supplies. On September 22,
1997, the Company agreed to acquire, in two separate transactions, Pacific
Electrical Supply, Inc. ("Pacific"), and Taylor Electric Supply, Inc.
("Taylor"), distributors of electrical parts and supplies, and to sell its
Utility Products Division. The sale of the Utility Product Division closed on
October 15, 1997. The Pacific acquisition is expected to close before the end
of November 1997. The Taylor acquisition remains subject to the expiration of
applicable waiting periods related to filings with the Federal Trade
Commission and the Antitrust Division of the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Since June 1994, Parent, through a series of open-market purchases, has
acquired 3,385,900 additional Shares. As a result of its open-market
acquisitions since 1994, Parent is the direct and indirect beneficial owner of
13,161,481 Shares or approximately 50.5% of the outstanding Shares. See
"INTRODUCTION" and "--Interests of Certain Persons in the Offer and the
Merger--Beneficial Ownership of Shares."
4
<PAGE>
Parent has periodically reviewed its investment in the Company, its position
and the position of the Company in the markets in which they compete, and how
best to position itself to compete and grow in the mid- and long-term. Parent
has determined that the increasingly competitive nature of the electric
supplies distribution market sector as well as the potential for industry-wide
consolidation make the acquisition by Parent of the Shares it does not
currently own attractive at the present time. Parent believes that the
combined businesses of Parent and the Company will enable the combined entity
to continue to grow, which Parent believes is essential to compete in the
rapidly changing environment that their industry has become. The
simplification of the ownership structure in the United States will, in
addition to the greater size of the combined entity, enhance Parent's
strategic flexibility to pursue acquisitions and other growth opportunities
and enable it to move more quickly in exploiting opportunities in the United
States electric supplies distribution sector.
Contacts of Parent with the Company
On August 8, 1997, Mr. Alain Redheuil, Chairman and Chief Executive Officer
of Parent, met with Mr. Gilles Guinchard, President and Chief Executive
Officer of the Company, to advise Mr. Guinchard of Parent's desire to
rationalize its investment in the Company and in connection therewith Parent's
potential interest in possibly pursuing an acquisition of the Shares of the
Company that it did not already own.
On August 28, 1997, Messrs. Redheuil and Nicolas Sokolow, outside counsel to
Parent and a director of the Company, met with Mr. Eric Lomas, the Chairman of
the Board of Directors of the Company, to advise Mr. Lomas of Parent's
interest in a possible acquisition. Also on August 28, 1997, a meeting was
held among Messrs. Redheuil, Sokolow and Pierre Chareyre, Chief Financial
Officer of Parent and Mr. Guinchard to discuss timing and other issues
regarding proceeding with a possible acquisition.
Following the August 28, 1997 meetings, Messrs. Redheuil and Lomas met to
discuss the possible acquisition and the process to be implemented.
On August 29, 1997, a special meeting of the Company Board was held at the
offices of McDermott, Will & Emery ("MW&E"), United States counsel to Parent,
in New York City, at which the Company Board received the proposal of Parent
to acquire all of the outstanding common shares of the Company not currently
owned by Parent or Purchaser at a price of $19.50 per share in cash (the
"Proposal"). At the meeting, Mr. Redheuil, at the request of Mr. Lomas,
outlined the Proposal to the Company Board. Mr. Redheuil then outlined the
view of Parent that acquiring the balance of the outstanding stock of the
Company would be beneficial to the employees of the Company and to the
shareholders of the Company, who would receive a premium over recent market
trading prices for their Shares. Mr. Redheuil, among other things, stated that
the transaction would promote a more unified posture with suppliers and
customers on a worldwide basis. Mr. Redheuil informed the Company Board that
Parent had retained J.P. Morgan to act as its financial advisor in connection
with the Proposal and provided the Company Board with a letter documenting its
proposal (the "Proposal Letter"). Following the comments of Mr. Redheuil, the
Company Board established the Special Committee, comprised of Messrs. Gerald
E. Morris, John B. Fraser and Austin List, with Mr. Morris to act as chairman.
The Special Committee was granted the authority of the Company Board with
respect to the Proposal and authorized to retain, at the expense of the
Company, financial and legal advisors. The Company Board then reviewed and
approved a press release announcing that the Proposal had been received and
that the Special Committee had been appointed to consider the Proposal, which
press release was issued later that day (the "August 29 Announcement"). A copy
of the press release is filed herewith as Exhibit (a)(11) to the Schedule 14D-
1 (as defined below) and is incorporated herein by reference.
5
<PAGE>
The text of the Proposal Letter to the Company Board is as follows:
August 29, 1997
Dear Gentlemen,
As you are aware, the investment by Rexel, S.A. and International
Technical Distributors Inc. (collectively, "Rexel S.A. Group") in
Rexel, Inc. ("Rexel") over the past five years has been rewarding for
Rexel, Rexel S.A. Group, and the public shareholders of Rexel. However,
Rexel S.A. Group and Rexel are facing, among other challenges, an
increasingly competitive environment and the prospect of industry-wide
consolidation. Accordingly, we believe that Rexel S.A. Group and Rexel
must continue to grow, by acquisition or otherwise, to compete
effectively in this rapidly changing environment and moreover, that
this growth can be achieved much more effectively if Rexel becomes a
wholly owned subsidiary of Rexel, S.A.
Given the strategic benefits we see from such a business combination,
we have decided that the best way to proceed is to submit this proposal
to the Board of Directors of Rexel for its consideration. Accordingly,
I am pleased to make the following proposal (the "Transaction") on
behalf of Rexel S.A. to acquire all of the outstanding common shares of
Rexel not currently owned by Rexel S.A. Group, including shares
issuable upon exercise of outstanding options (the "Public Shares").
The principal terms of our proposal are as follows:
1. The Transaction would be structured to result in the holders of
Public Shares receiving $19.50 per share. The Transaction would
represent an aggregate payment of approximately $265 million to
the holders of Public Shares based on the number of Public Shares
stated in the 10-K as of December 31, 1996.
2. Consummation of the Transaction would be subject to, among other
things, approval by the Board of Directors of Rexel, including
the approval of the unaffiliated directors, and other conditions
customary in transactions of this type. Moreover, this proposal
is subject to the completion of satisfactory due diligence by
Rexel S.A.
3. Consummation of the Transaction is not conditioned upon any
financing.
We believe that our proposal is fair to, and in the best interests of
Rexel and the holders of Public Shares. The proposed acquisition price
represents a premium of approximately 10% and close to 18% over the
average closing price of Rexel common stock on the New York Stock
Exchange over the past 30 trading days and the one year ended August
27, 1997, respectively.
We would like to make it clear that Rexel S.A. Group is not
interested, under any circumstances, in selling its interest in Rexel
and thus there is no realistic prospect of sale of a controlling
interest in Rexel to a third party.
We understand that you may wish to deliberate on this proposal
through a special committee of independent directors and that such
committee may wish to retain its own advisors to assist in those
deliberations. We invite your representatives to meet with our advisors
to discuss this proposal at your earliest convenience and hopefully no
later than ten business days from the date hereof.
We hope you will view our proposal favorably and give it your prompt
attention. We reserve the right to amend or withdraw this proposal at
any time in our discretion.
We look forward to hearing from you soon.
Sincerely,
/s/ Alain Redheuil
Alain Redheuil
Chairman of the Executive Board
Rexel, S.A.
6
<PAGE>
Also at the August 29, 1997 meeting of the Company Board, Parent delivered a
letter (the "Guinchard Letter") to Mr. Guinchard substantially similar to the
Proposal Letter, which emphasized certain of the synergies and growth
potential to be realized from the acquisition of the remaining Shares by
Parent. The Guinchard Letter also referred to Parent's intent to honor
existing incentives and implement, following completion of the proposed
transaction, a new incentive program to motivate and reward personnel. The
text of the Guinchard Letter has been filed herewith as Exhibit (a)(14) to the
Schedule 14D-1 and is incorporated herein by reference.
Also on August 29, 1997, Parent issued a press release announcing the
Proposal. A copy of the press release is filed herewith as Exhibit (a)(10) to
the Schedule 14D-1 and is incorporated herein by reference.
The Special Committee was advised by Parent that it desired to consummate
any potential acquisition by December 31, 1997.
During the month of September, 1997, various telephone conferences were held
between Mr. Redheuil and Messrs. Guinchard and Jon Fullerton, Vice President,
General Counsel and Secretary of the Company, and between Messrs. Redheuil and
Lomas to discuss the progress of the Special Committee's consideration of the
Proposal and related issues, including the status of the retention of legal
and financial advisors by the Special Committee.
During the weeks of September 2 and September 9, the Special Committee met
with or spoke to representatives of various investment banking firms and law
firms, including SBC Warburg Dillon Read ("Dillon
Read") and Skadden Arps, Slate, Meagher & Flom LLP ("Skadden Arps") and
received and reviewed proposals from such investment banks and law firms for
their engagement as financial and legal advisor, respectively, of the Special
Committee.
On September 15, 1997, the Company Board held a telephonic board meeting to
discuss two acquisitions unrelated to the Offer and the divestiture by the
Company of its utility business.
On September 16, 1997, the Special Committee held a meeting by telephone
conference and invited representatives of Skadden Arps to participate in parts
of the meeting. At the meeting, the Special Committee selected Skadden Arps as
legal advisor of the Special Committee. The Special Committee also reviewed
the selection of a financial advisor, determined preliminarily to select
Dillon Read as financial advisor and authorized Mr. Morris and Skadden Arps to
negotiate, on behalf of the Special Committee, the terms of a possible
engagement. Skadden Arps and Dillon Read were each identified and selected by
the Special Committee based upon, among other things, their advisory
experience in similar transactions and the belief that they each had no
relationships with Parent or any of its affiliates.
On September 16, 1997, Dillon Read was informed of its preliminary selection
by the Special Committee and asked to confirm the absence of any relationship
with Parent or any of its affiliates.
On September 17, 1997, a representative of Dillon Read informed the Special
Committee and Skadden Arps that SBC Warburg, which had recently merged with
Dillon Read & Co., had certain ongoing business relationships between one of
its European offices and an affiliate of Parent. Dillon Read was asked to
obtain further information with respect to the business relationship, and on
September 18, 1997 Dillon Read provided certain additional information
pertaining to the matter.
On September 19, 1997, the Company announced by press release that the
Special Committee had selected Skadden Arps as its legal counsel and Dillon
Read as its financial advisor. The announcement of the engagement of Dillon
Read was premature, as at the time of the issuance of the press release, the
Special Committee had not entered into an engagement letter with Dillon Read
or resolved the issue of the business relationship between Dillon Read and an
affiliate of Parent.
On September 22, 1997, the Special Committee held a meeting at which
representatives of Skadden Arps were present. At the meeting, Mr. Morris
updated the Special Committee on the status of the engagement of Dillon Read
by the Special Committee as its financial advisor and, together with Skadden
Arps, described Dillon
7
<PAGE>
Read's business relationship with an affiliate of Parent. The Special
Committee noted the importance of ensuring its financial advisor's
independence regarding the Proposal and, after further discussion, the members
of the Special Committee unanimously agreed to defer the engagement of Dillon
Read until further information was obtained about its business relationship
with an affiliate of Parent.
On September 22, 1997, following the meeting of the Special Committee, the
Special Committee and representatives of Skadden Arps informed Dillon Read of
the Special Committee's decision to defer its engagement as financial advisor.
On September 24, 1997, MW&E confirmed that a business relationship exists
between an affiliate of Parent and Dillon Read. After reviewing this
information, the Special Committee determined, with the concurrence of Dillon
Read, that Dillon Read should not be engaged as financial advisor by the
Special Committee.
On September 24 and 25, 1997, representatives of the Special Committee
contacted several additional investment banking firms, including WP&Co.,
regarding such firms' potential engagement as financial advisor of the Special
Committee.
On September 26 and 29, 1997, Messrs. Redheuil and Guinchard met in Paris to
discuss matters relating to activities of the Company unrelated to the
Proposal.
On or about September 26, 1997, Mr. Morris held a telephone call with
Messrs. Lomas and Redheuil in which he confirmed that the Special Committee
had determined not to retain Dillon Read as financial advisor and expected to
retain another financial advisor shortly.
On September 27 and 28, 1997, representatives of Skadden Arps spoke with
representatives of WP&Co. and of Jones, Day, Reavis & Pogue, counsel to
WP&Co., regarding the terms for the potential engagement of WP&Co. by the
Special Committee as its financial advisor.
On September 29, 1997, the Special Committee and representatives of Skadden
Arps met with representatives of WP&Co. WP&Co. made a presentation to the
Special Committee, discussing, among other things, its qualifications and its
experience as financial advisor to special committees of boards of directors
and answered various questions.
On September 29, 1997, following the Special Committee's meeting with
representatives of WP&Co., the Special Committee held a meeting at which
representatives of Skadden Arps were present. At the meeting, the Special
Committee reviewed the presentation and qualifications of WP&Co. and agreed to
engage WP&Co. as its financial advisor, based upon, among other things, its
advisory experience in similar transactions, its understanding that WP&Co.
does not have an existing relationship with the Company, Parent, Purchaser or
their affiliates (the "Rexel Group") and WP& Co.'s agreement that it would not
represent or provide services to the Rexel Group during the time of its
engagement by the Special Committee. Following the meeting of the Special
Committee, the Special Committee and Skadden Arps again met with
representatives of WP&Co. to discuss, among other things, the process for
reviewing the Proposal and the timing of the work to be performed by each of
them, including due diligence and strategy. Later that day, WP&Co. received
certain due diligence material from the Company and WP&Co. submitted a request
for additional due diligence information to the Company. On October 1, 1997,
Skadden Arps submitted a request for legal due diligence information to the
Company.
On October 1, 1997, the Company issued a press release announcing that the
Special Committee had retained WP&Co. as its financial advisor to assist the
Special Committee in its evaluation of the Proposal.
On October 2, 1997, representatives of WP&Co. and Skadden Arps met with the
senior management of the Company at the Company's headquarters in Coral
Gables, Florida to conduct additional financial and legal due diligence with
respect to, among other things, the Company's history, business, operations,
relationship with Parent, financial performance, prospects and the electrical
parts and supply industry in general.
On October 6, 1997, senior management of the Company met with
representatives of J.P. Morgan to discuss, among other things, the Company's
history, business and operations, its relationship with Parent, its financial
performance, certain financial projections, future acquisition plans,
prospects and the electrical parts and supply industry, in general.
8
<PAGE>
On October 6, 1997, representatives of WP&Co. met with senior management of
the Company at WP&Co.'s New York office for detailed discussions of the
Company's financial projections including income and cash flow statements,
balance sheet and future acquisition plans.
Also on October 6, 1997, representatives of WP&Co. met in New York City with
representatives of J.P. Morgan to discuss the Proposal and to conduct
financial due diligence and business due diligence with respect to the Company
and Parent. The discussions at this meeting included the following: Parent's
historical investment in the Company; the reasons for Parent's desire to
acquire all of the outstanding Shares; the rationale underlying the Proposal
at $19.50 per Share (including projections prepared by the Company as of June
19, 1997) (see "--Certain Financial Projections"), the degree of involvement
of Parent in the management, operations and strategy of the Company;
intercompany relationships between Parent and the Company; the projected cost
savings and synergies to be realized from a combination of Parent and the
Company, as estimated by the Company, as well as the advantages of being a
privately held entity in the United States; Parent's ability to obtain
additional financing, if any; the business relationships between Pinault-
Printemps-Redoute and the Parent; the rationale underlying the due diligence
condition contained in the Proposal Letter; and pending acquisitions of the
Company and Parent in the United States.
On October 6, 1997, Messrs. Morris and Redheuil held a brief meeting at Mr.
Morris's office to discuss the timing of the Special Committee's consideration
of the Proposal.
On October 7, 1997, WP&Co. met with senior management of Parent and
representatives of J.P. Morgan to discuss further certain issues relating to
the Proposal, including additional financial and business due diligence items.
On October 7, 1997, representatives of WP&Co. also spoke with representatives
of Skadden Arps to discuss the status of due diligence. In addition, during
the weeks of September 29th and October 6th, representatives of WP&Co. had
numerous telephone conversations with management of the Company to discuss and
review various due diligence items.
Throughout the week of October 6, 1997, there were various telephone calls
between Mr. Redheuil and Messrs. Guinchard and Fullerton regarding the timing
of the Special Committee's review of the Proposal. Also during such week, MW&E
sent to Skadden Arps a draft merger agreement.
On October 7, 1997, Messrs. Morris and Redheuil met briefly at Mr. Morris's
office to discuss the timing of the Special Committee's consideration of the
Proposal and the progress to date. Also on October 7, 1997, Messrs. Lomas and
Redheuil held a brief meeting to discuss timing of the Special Committee's
consideration of the Proposal and the progress to date.
On October 7, 1997, Skadden Arps submitted a request to MW&E for certain
additional due diligence information concerning Parent.
On October 8 and 9, 1997, representatives of Skadden Arps spoke with
representatives of MW&E regarding the status of the Special Committee's review
of the Proposal and related timing issues.
On October 12, 1997, representatives of WP&Co. and Skadden Arps met with the
Special Committee. Representatives of Skadden Arps reviewed, among other
things, legal duties of the Special Committee in reviewing the Proposal and
the process for reviewing the Proposal, and representatives of WP&Co.
presented the preliminary results of its financial analysis of the Proposal.
WP&Co.'s presentation included, among other things (i) a review of the
background of the Proposal and a summary of its due diligence procedures, (ii)
a review of the history of Parent's investment in the Company, the performance
of the Company's stock and analyst expectations for the Company, (iii) an
overview of the Company and Parent, (iv) a summary of past acquisitions of the
Company and (v) a profile of the shareholders of the Company. Representatives
of WP&Co. then provided the Special Committee with a detailed description of
its preliminary valuation analysis, including the assumptions upon which its
analyses were based.
On October 13, 1997, representatives of WP&Co. and Skadden Arps again met
with the members of the Special Committee. At this meeting, representatives of
WP&Co. continued its presentation concerning its financial analysis of the
Proposal, answered questions of the Special Committee and provided additional
financial analysis pertaining to the valuation of the Proposal.
9
<PAGE>
On October 13, 1997, the Special Committee and representatives of WP&Co. met
with Messrs. Redheuil and Chareyre of Parent and representatives of J.P.
Morgan. A presentation was made by representatives of WP&Co. regarding
elements of value of the Company, which was followed by discussions and price
negotiations between the parties and their representatives. Separate
discussions were held later that day between the Special Committee and Mr.
Redheuil and between the representatives of WP&Co. and J.P. Morgan as
financial and legal advisors to the respective parties.
On October 14, 1997, the Special Committee, and representatives of WP&Co.
and Skadden Arps again met with Messrs. Redheuil and Chareyre and
representatives of J.P. Morgan and Wachtell, Lipton, Rosen & Katz ("Wachtell
Lipton"), counsel to J.P. Morgan, at the offices of Skadden Arps in New York
City. Discussions of price and value continued, as well as various proposals
for the settlement of various lawsuits relating to the Proposal. The parties
did not reach a final agreement on modifications to the Proposal.
During the latter part of the week of October 13, 1997, numerous discussions
among representatives of MW&E, Skadden Arps and Wachtell Lipton regarding the
draft merger agreement occurred.
On October 17, 1997, Messrs. Redheuil and Chareyre, representatives of J.P.
Morgan, MW&E and Wachtell Lipton met with the Special Committee, and
representatives of WP&Co. and Skadden Arps at the offices of Skadden Arps to
continue discussions of price and terms of a possible transaction. Mr.
Redheuil conditioned any agreement concerning a transaction upon reaching a
tentative agreement to settle certain lawsuits related to the Proposal. During
the discussions the parties reached an understanding on price, the Minimum
Condition and the other material conditions to the Offer. Additionally,
representatives of MW&E, Wachtell Lipton and Skadden Arps resolved all areas
of disagreement with regard to the draft merger agreement. At a meeting held
on October 17, 1997 at the offices of Skadden Arps, the Special Committee met
with representatives of Skadden Arps and WP&Co. At the meeting, Skadden Arps
reviewed the legal duties of the Special Committee in approving a transaction
and the proposed terms of the Merger Agreement, and WP&Co. reviewed its
valuation analysis and rendered its opinion concerning the fairness from a
financial point of view of the proposed consideration to be received by
holders of the Shares. The Special Committee unanimously recommended and
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger. The Company Board then met and received a
presentation from representatives of WP&Co. and Skadden Arps and received the
recommendation of the Special Committee. The Company Board then approved, by
unanimous vote of all directors present and voting, the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
determined that each of the Offer and the Merger are fair to and in the best
interests of the shareholders of the Company (other than Purchaser and Parent)
and recommended that the shareholders of the Company accept the Offer and
tender their Shares in the Offer.
On October 20, 1997, Parent and the Company issued a joint press release
(the "Joint Press Release") announcing the transactions, including the
execution of the Merger Agreement. A copy of the Joint Press Release is filed
herewith as Exhibit (a)(8) to the Schedule 14D-1 (as defined below) and is
incorporated herein by reference.
On October 21, 1997, WP&Co. received an unsolicited telephone inquiry from a
third party expressing a possible interest in a transaction to acquire the
Company, including Parents' and Purchasers' current interest in the Company,
at an unspecified price per Share in excess of $22.50, payable in securities
of such third party and conditioned on such transaction being accounted for as
a pooling of interests for financial reporting purposes.
On October 23, 1997, pursuant to the Merger Agreement, Purchaser commenced
the Offer.
POSITION OF PARENT AND PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE
MERGER
Position of Parent and Purchaser
Parent and Purchaser believe that the consideration to be received by the
Company's shareholders pursuant to the Offer and the Merger is fair to the
Company's shareholders (other than Parent and Purchaser). 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, and in the best
interests of, the Company's shareholders; (ii) notwithstanding the fact that
WP&Co.'s opinion was provided solely for the information and assistance of the
Special Committee and that Purchaser is not entitled to rely on such opinion,
the fact that the Special Committee received an opinion
10
<PAGE>
from WP&Co. that subject to the various assumptions and limitations set forth
therein, as of the date thereof, the $22.50 per Share in cash to be received
by the holders of Shares (other than Parent and Purchaser) in the Offer and
the Merger pursuant to the Merger Agreement is fair to such shareholders from
a financial point of view, (iii) the presence of the Minimum Condition ensures
that in order for the Offer to be consummated a majority of the Shares not
held by Parent or Purchaser will have to be tendered pursuant to the Offer,
(iv) the Merger Agreement was negotiated at arms' length, (v) the historical
and projected financial performance of the Company and its financial results,
(vi) the consideration to be paid in the Offer represents a premium of 26.3%
and 19.2%, respectively over the average closing price for the one-week
period, and the closing price of August 28, 1997, the last trading day, prior
to the August 29 Announcement, (vii) the Offer will provide consideration to
the shareholders entirely in cash and (viii) in the Merger, shareholders will
receive the $22.50 Offer price.
Parent and Purchaser did not find it practicable to assign, nor did they
assign, relative weights to the individual factors considered in reaching
their conclusion as to fairness. In light of the nature of the Company's
business, Parent and Purchaser did not deem net book value or liquidation
value to be relevant indicators of the value of the Shares.
J.P. Morgan Report
Pursuant to an engagement letter dated July 24, 1997, Parent retained J.P.
Morgan as its exclusive financial advisor in connection with Parent's efforts
to acquire the Shares it does not currently own (the "Acquisition"). In
connection with its engagement, J.P. Morgan delivered a report, dated October
13, 1997 (the "Report"), to certain members of the senior management of Parent
respecting the views of J.P. Morgan as to the valuation of the Company. No
limitations were imposed by Parent upon J.P. Morgan with respect to the
investigations made or procedures followed by J.P. Morgan in rendering the
Report.
The full text of the Report, which sets forth the assumptions made, matters
considered and limits on the review undertaken, is filed as Exhibit (b)(3) to
the Company's Transaction Statement on Schedule 13E-3 and is incorporated
herein by reference. The Report is directed only to the consideration proposed
to be paid in the Acquisition and does not constitute a recommendation to any
shareholder of the Company as to (i) whether such shareholder should tender
his shares pursuant to the Offer and (ii) how such shareholder should vote in
connection with the Merger. The summary, which summarizes all of the material
analyses performed by J.P. Morgan, is qualified in its entirety by reference
to the full text of the Report.
In producing the Report, J.P. Morgan reviewed, among other things, the
audited financial statements of the Company for the fiscal year ended December
31, 1996, and the unaudited financial statements of the Company for the period
ended August 31, 1997; current and historical market prices of the Shares;
certain publicly available information concerning the business of the Company
and of certain other companies engaged in businesses comparable to those of
the Company, and the reported market prices for certain other companies'
securities deemed comparable; publicly available terms of certain transactions
involving companies comparable to the Company and the consideration paid for
such companies; the terms of other business combinations deemed relevant by
J.P. Morgan; certain internal financial analyses and forecasts prepared by the
Company and its management; and certain agreements with respect to outstanding
indebtedness or obligations of the Company. J.P. Morgan also held discussions
with certain members of the senior management of the Company and Parent with
respect to certain aspects of the Acquisition, and the past and current
business operations of the Company, the financial condition and future
prospects and operations of the Company, and certain other matters believed
necessary or appropriate to J.P. Morgan's inquiry. In addition, J.P. Morgan
reviewed such other financial studies and analyses and considered such other
information as it deemed appropriate for the purpose of its Report.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or
that was furnished to it by the Company or Parent or otherwise reviewed by
J.P. Morgan, and J.P. Morgan has not assumed any responsibility or liability
therefor. J.P. Morgan has not conducted any valuation or appraisal of any
assets or liabilities, nor have any valuations or appraisals been provided to
J.P. Morgan. In relying on financial analyses and forecasts provided to J.P.
Morgan, J.P. Morgan has assumed that they have been reasonably prepared based
on assumptions reflecting the best currently available estimates and judgments
by management as to the expected future results of operations and financial
condition of the Company to which such analyses or forecasts relate.
11
<PAGE>
The projections furnished to J.P. Morgan for the Company were prepared by
the management of the Company. The Company does not publicly disclose internal
management projections of the type provided to J.P. Morgan in connection with
J.P. Morgan's analysis of the Acquisition, and such projections were not
prepared with a view toward public disclosure. Such projections were based on
numerous variables and assumptions that are inherently uncertain and may be
beyond the control of management, including, without limitation, factors
related to general economic and competitive conditions and prevailing interest
rates. Accordingly, actual results could vary significantly from those set
forth in such projections. For additional information regarding such
projections see "--Certain Financial Projections."
The Report is based on economic, market and other conditions as in effect
on, and the information made available to J.P. Morgan as of, the date of such
report. Subsequent developments may effect the contents and conclusions of the
Report.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching the conclusions set
forth in the Report. The following is a summary of the material financial
analyses utilized by J.P. Morgan in connection with providing its Report.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per
share for the Company's Shares. J.P. Morgan calculated the unlevered free cash
flows that the Company is expected to generate during fiscal years 1997
through 2003 based upon (1) financial projections prepared by the management
of Company on June 19, 1997 through the years ending December 31, 2000,
including assumed acquisitions (the "Original Management Case"); (2) financial
projections prepared by the management of the Company as subsequently revised
on September 18, 1997 and furnished to J.P. Morgan on October 9, 1997 by the
Company (the "Revised Management Case"); (3) management projections adjusted
by J.P. Morgan to reflect more moderate growth in revenues and lower operating
margins compared to the Original Management Case over the course of the 7-year
projection period (the "Adjusted Case," referred to as the "Upside Case" in
the text of the J.P. Morgan Report); and (4) management projections adjusted
by J.P. Morgan to reflect more moderate growth in revenues and relatively flat
operating margins over the course of the 7-year projection period (the "Base
Case"). J.P. Morgan's preparation of the Base Case and the Adjusted Case were
completed following discussions with the senior management of Parent and the
Company and reflect only two of a broad range of possible economic outcomes
for the Company. J.P. Morgan also calculated a range of terminal values of the
Company at the end of the 7-year projection period ending December 31, 2003 by
applying a terminal value EBITDA multiple ranging from 6.0x to 8.0x to the
EBITDA of the Company during the final year of the 7-year projection period.
The unlevered free cash flows and the range of terminal values were then
discounted to present values using a range of discount rates from 9.5% to
10.5%, which were chosen by J.P. Morgan based upon an analysis of the weighted
average cost of capital of the Company. The present value of the unlevered
free cash flows and the range of terminal values were then adjusted for each
of the Company's August 31, 1997 period ended cash, option exercise proceeds
and total debt. J.P. Morgan's analysis made no adjustment for potential
continuing liabilities associated with the sale of Apparel or potential
environmental liabilities. Based on the Original Management Case and the
discount rate as described above, the discounted cash flow analysis produced a
range of implied equity values of approximately $21.70 to $27.85 per share of
the Company's Shares on a stand-alone basis. Based on the Adjusted Management
Case and the discount rate as described above, the discounted cash flow
analysis produced a range of implied equity values of approximately $20.20 to
$24.70 per share of the Company's Shares on a stand-alone basis. Based on the
Adjusted Case and the discount rate as described above, the discounted cash
flow analysis produced a range of implied equity values of approximately
$19.40 to $23.90 per share of the Company's Shares on a stand-alone basis.
Based on the Base Case and the discount rate as described above, the
discounted cash flow analysis produced a range of implied equity values of
approximately $18.10 to $22.00 per share of the Company's Shares on a stand-
alone basis.
Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of the Company with similar data for selected
publicly traded companies engaged in businesses which J.P. Morgan judged to be
analogous to the Company. The companies selected by J.P. Morgan were Anixter
12
<PAGE>
International Inc., Hughes Supply Inc., W.W. Grainger Inc. and Applied
Industrial Technologies Inc. These companies were selected, among other
reasons, because of the comparable nature of their business segments, size
and/or customer base. For each comparable company, publicly available
financial performance through the twelve months ended June 30, 1997 (or the
closest financial reporting date thereto) was measured. J.P. Morgan selected a
high/low range and the median value for each multiple, specifically, firm
value/revenue, firm value/EBITDA, firm value/EBIT and price/earnings for the
last twelve months ended June 30, 1997 (or the closest financial reporting
date thereto) and for the projected full year ending December 31, 1997 and
1998. These multiples were then applied to the Company's publicly available
financial performance through the twelve months ended June 30, 1997, and the
Company's projected financial results (based on the Adjusted Case) for the
years ending December 31, 1997 and 1998. After adjusting for each of the
Company's August 31, 1997 period ended cash, option exercise proceeds and
total debt, this analysis yielded implied trading values for the Company's
Shares of approximately $19.80 to $25.80 per share. J.P. Morgan's analysis
made no adjustment for potential continuing liabilities associated with the
sale of Apparel or potential environmental liabilities.
Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined selected transactions with respect to comparability to the
Company's current business, the related transactions were announced within the
last three years and had a value greater than $80 million. Specifically, J.P.
Morgan reviewed the following transactions: (i) Applied Industrial
Technologies acquiring Invetech Company announced March 1997; (ii) Raab
Karcher AG (Veba AG) acquiring Wyle Electronics announced July 1997 (pending
completion); (iii) Arrow Electronics, Inc. acquiring Farnell Electronic
Services announced December 1996; (iv) Bell Industries, Inc. acquiring Milgray
Electronics, Inc. announced November 1996; (v) W.W. Grainger, Inc. acquiring
Acklands Ltd. announced September 1996; (vi) Windmere Corp. acquiring
Salton/Maxim Housewares Inc. announced February 1996; (vii) Bell Industries,
Inc. acquiring Sterling Electronics Corp. announced August 1995 (subsequently
withdrawn); and (viii) Consolidated Electrical Distributors Ltd. acquiring
Guillevin International Inc. announced March 1995. J.P. Morgan applied a range
of multiples derived from such analysis to the Company's publicly available
financial performance through the twelve months ended June 30, 1997. After
adjusting for each of the Company's August 31, 1997 period ended cash, option
exercise proceeds and total debt, this analysis yielded an implied range of
equity values for the Company's Shares of approximately $17.60 and $23.20 per
share. J.P. Morgan's analysis made no adjustment for potential continuing
liabilities associated with the sale of Apparel or potential environmental
liabilities.
Analysis of the Company's Valuation Premiums. J.P. Morgan compared the
premium which it calculated to holders of the Company's Shares represented by
the Merger Consideration of $22.50 per share, to the closing price for the
Company's Shares on August 28, 1997 (one business day prior to the
announcement of the proposal), and on the date one week prior thereto, as well
as, on the daily average closing price for the Company's Shares during the
latest 30 days, 90 days and the last twelve months ("LTM").
J.P. Morgan calculated that the Merger Consideration represented the
following premiums to holders of the Company's Shares: (i) a premium of 19.2%
over the closing price of $18.88 for the Company's Shares one day prior to the
public announcement of the proposal on August 29, 1997; (ii) a premium of
26.3% over the closing price of $17.81 for the Company's Shares one week prior
thereto; (iii) a premium of 25.9% over the latest 30-day average closing price
of $17.87 for the Company's Shares; (iv) a premium of 25.5% over the latest
90-day average closing price of $17.93 for the Company's Shares; and (v) a
premium of 35.4% over the LTM average closing price of $16.62 for the
Company's Shares.
J.P. Morgan also reviewed selected minority transactions which it deemed
relevant. Such comparable minority transactions which were consummated between
July 1990 and June 1997, consisted of (acquiror/acquired company): (i) Rhone-
Poulenc S.A./Rhone-Poulenc Rorer; (ii) Allmerica Financial Corp./Allmerica
Property & Casualty; (iii) Berkshire Hathaway Inc./GEICO Corp.; (iv) COBE
Laboratories/REN Corp.-USA; (v) McCaw Cellular Communication/LIN Broadcasting;
(vi) Rust International Inc./Brand Cos Inc.; (vii) Leucadia National
Corp./PHLCORP Inc.; (viii) Tele-Communications Inc./United Artists
Entertainment; (ix) BHP Holdings Inc./Hamilton Oil Corp.; (x) Murphy Oil
Corp./Ocean Drilling & Exploration; (xi) Renault Vehicles Industrials/Mack
Trucks Inc. Such transactions were chosen based on deal values above $100
million,
13
<PAGE>
ownership by acquiror between 50% and 67% of the acquired company prior to the
transaction, and location of the acquired company in the United States. The
median of the implied premiums paid in the selected transactions was 19.4%
over the closing price of the acquired companies common shares one week prior
to the announcement of such transactions.
The summary set forth above does not purport to be a complete description of
the analyses or data presented by J.P. Morgan. The preparation of valuation
analysis of the type set forth in the Report is a complex process and is not
necessarily susceptible to partial analysis or summary description. J.P.
Morgan believes that the summary set forth above and its analyses must be
considered as a whole and that selecting portions thereof, without considering
all of its analyses, could create an incomplete view of the processes
underlying its analyses and Report. J.P. Morgan based its analyses on
assumptions that it deemed reasonable, including assumptions concerning
general business and economic conditions and industry-specific factors. The
other principle assumptions upon which J.P. Morgan based its analyses are set
forth above under the description of each such analysis. J.P. Morgan's
analyses are not necessarily indicative of actual values or actual future
results that might be achieved, which values may be higher or lower than those
indicated. Moreover, J.P. Morgan's analyses are not and do not purport to be
appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.
As part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. J.P. Morgan was selected to advise Parent with respect to
the Acquisition on the basis of such experience and its familiarity with
Parent.
For services rendered in connection with the Acquisition, Parent has agreed
to pay J.P. Morgan a total fee of $1.65 million if the Acquisition is
consummated or $350,000 if the Transaction is not consummated. In addition,
Parent has agreed to reimburse J.P. Morgan for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will indemnify J.P. Morgan against certain liabilities, including
liabilities arising under the federal securities laws.
J.P. Morgan and its affiliates maintain banking and other business
relationships with Parent and its affiliates, for which it receives customary
fees. In the ordinary course of their businesses, affiliates of J.P. Morgan
may actively trade the debt and equity securities of Parent or the Company for
their own accounts or for the accounts of customers and, accordingly, they may
at any time hold long or short positions in such securities.
RECOMMENDATION OF THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE MERGER
Recommendation of the Special Committee and the Company Board
On October 17, 1997, the Special Committee unanimously recommended and
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger.
On October 17, 1997, the Company Board, by unanimous vote of all directors
present and voting, based upon, among other things, the unanimous
recommendation and approval of the Special Committee, approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, and determined that each of the Offer and the Merger is fair to,
and in the best interests of, the shareholders of the Company and recommended
that the shareholders of the Company accept the Offer and tender their Shares
in the Offer.
Special Committee. In reaching its determinations referred to above, the
Special Committee considered the following factors, each of which, in the view
of the Special Committee, supported such determinations:
(i) the historical market prices and recent trading activity of the
Shares, including (x) that the Offer price of $22.50 per Share represents a
premium of approximately 19.2% over the $18.88 per Share closing price on
August 28, 1997, the day prior to the August 29 Announcement, a premium of
approximately 25.9% over the $17.88 per Share closing price on July 29,
1997, which was 30 days prior to the August 29 Announcement, and a premium
of approximately 25.9% over the $17.88 per Share closing price on June 27,
1997, which was 60 days prior to the August 29 Announcement, (y) that the
Shares never traded on the
14
<PAGE>
New York Stock Exchange (the "NYSE") above $22.00 per Share following the
August 29 Announcement and (z) that the Shares have never traded on the
NYSE higher than $22.50;
(ii) the history of the negotiations between the Special Committee and
its representatives and Parent and its representatives, including (a) that
the negotiations resulted in an increase in the price at which Parent was
prepared to acquire the Shares from $19.50 to $22.50 per Share, (b) the
Special Committee's belief that Parent would not further increase the Offer
price, and, accordingly, $22.50 per Share was, in the opinion of the
Special Committee, the highest price which could be obtained from Parent
and (c) the Special Committee's belief that further negotiations with
Parent could cause Parent to abandon the Offer, with the resulting
possibility that the market price for the Shares could fall substantially
below $22.50, and possibly below $19.50, per Share;
(iii) the opinion of WP&Co. that, based upon and subject to the various
assumptions and limitations set forth therein, as of the date thereof, the
$22.50 per Share to be received by the shareholders of the Company (other
than Parent or any of its wholly owned subsidiaries, including Purchaser)
in the Offer and the Merger pursuant to the Merger Agreement is fair to
such shareholders from a financial point of view, and the report and
analyses presented to the Special Committee in connection therewith (See
"--Opinion of WP&Co."); a copy of WP&Co.'s opinion is attached hereto as
Schedule II (shareholders are urged to read this opinion in its entirety);
(iv) the belief that a tender offer unilaterally commenced by Parent
without a recommendation of the Special Committee may have been
successfully completed at a price lower than that negotiated and
recommended by the Special Committee;
(v) the possibility that, because of potentially lower than expected
projected Company earnings or a decline in the trading price of the Shares
or the stock market in general, the consideration the minority shareholders
would obtain in a future transaction might be less advantageous than the
consideration they would receive pursuant to the Offer and the Merger;
(vi) the Special Committee recognized that Parent had obtained control of
the Company prior to the Proposal;
(vii) Parent has sufficient stock ownership to control a disposition of
the Company, Parent had indicated that it was not interested in selling the
Company to a third party and the Special Committee and WP&Co. were not
authorized to, and did not, solicit third party indications of interest for
the acquisition of the Company or its businesses;
(viii) the terms and conditions of the Offer, the Merger and the Merger
Agreement, including (a) that the Minimum Condition may not be waived; (b)
that the terms and conditions of the Offer may not be changed in any manner
which is adverse to the minority shareholders without the consent of the
Special Committee; (c) that the recommendation of the Special Committee may
be withdrawn, modified or amended to the extent the Special Committee
believes it necessary to do so in the exercise of its fiduciary duties; (d)
that the Offer and Merger are not subject to any financing condition; (e)
that the terms of the Merger Agreement may only be amended or waived by the
Company at the direction of Special Committee; and (f) the limited nature
of other conditions to the Offer and the Merger;
(ix) the Minimum Condition requirement that the Offer not be consummated
unless at least a majority of the Shares not held by Parent or Purchaser on
a fully-diluted basis be validly tendered pursuant to the Offer and not
withdrawn;
(x) the availability of dissenters' rights for the minority shareholders
under the NYBCL in connection with the Merger; and
(xi) the risk that the Company would suffer the loss of key employees and
other adverse consequences if Parent were to commence a tender offer
without a favorable recommendation of the Special Committee.
Company Board. 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
15
<PAGE>
taken into account by the Special Committee, including the receipt by the
Special Committee of the opinion of WP&Co. addressed to the Special Committee
that, based upon and subject to the various assumptions and limitations set
forth therein, as of the date thereof, the $22.50 per Share to be received by
the holders of the Shares (other than Parent or any of its wholly owned
subsidiaries, including Purchaser) in the Offer and the Merger pursuant to the
Merger Agreement is fair to such holders from a financial point of view and
the analysis presented to the Company Board; and (iii) the fact that the Offer
price and the terms and conditions of the Merger Agreement were the result of
arm's-length negotiations between the Special Committee and Parent.
The Company Board recognized that consummation of the Offer and the Merger
will deprive current shareholders of the Company 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 $22.50 price per Share. The members of the
Company Board, including the members of the Special Committee, evaluated the
Offer and the Merger in light of their knowledge of the business, financial
condition and prospects of the Company, and based upon the advice of financial
and legal advisors. In light of the number and variety of factors that the
Company Board and the Special Committee considered in connection with their
evaluation of the Offer and the Merger, neither the Company Board nor the
Special Committee found it practicable to assign relative weights to the
foregoing factors, and, accordingly, neither the Company Board nor the Special
Committee did so.
The Company Board, including the members of the Special Committee, believes
that the Offer and the Merger are procedurally fair because, among other
things: (i) the Special Committee consisted of independent directors appointed
to represent the interests of the shareholders other than Parent, Purchaser
and their subsidiaries, (ii) the Special Committee retained and was advised by
independent legal counsel; (iii) the Special Committee retained WP&Co. as its
independent financial advisor to assist it in evaluating a potential
transaction with Purchaser and received advice from WP&Co.; (iv) the existence
of the Minimum Condition (which may not be waived) has the effect of requiring
a majority of the Company's shareholders (other than Parent and Purchaser) to
tender their Shares into the Offer in order for it to be consummated; (v) the
deliberations pursuant to which the Special Committee evaluated the Offer and
the Merger and alternatives thereto; and (vi) the fact that the $22.50 per
Share 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, on the
other.
Under New York law, a plan of merger requires the vote of two-thirds of all
outstanding shares entitled to vote thereon in order to be adopted. The
Company Board and the Special Committee recognized that the Merger is not
structured to require the approval of a majority of the shareholders of the
Company (other than Parent and Purchaser) and that Parent and Purchaser have
sufficient voting power to approve the Merger with the affirmative vote of
unaffiliated holders of approximately 16% of the outstanding Shares. A
condition to the Merger, however, is that Purchaser shall have purchased all
Shares tendered in the Offer. Consummation of the Offer is conditioned upon
there being validly tendered, and not withdrawn, such number of the then
issued and outstanding Shares which constitutes at least a majority of the
then issued and outstanding Shares not beneficially owned by Parent or
Purchaser on a fully-diluted basis, which effectively requires that over 50%
of the minority shareholders tender their Shares.
Opinion of WP&Co.
The Special Committee retained WP&Co. to act as its financial advisor in
connection with the Transactions (as defined herein). WP&Co. has delivered a
written opinion to the Special Committee, dated October 17, 1997, to the
effect that, subject to the various assumptions and limitations set forth
therein, as of the date thereof, the $22.50 per Share cash consideration to be
received by holders of Shares (other than Parent or any of its wholly owned
subsidiaries, including Purchaser) in the Offer and the Merger pursuant to the
Merger Agreement (collectively, the "Transactions") is fair to such
shareholders from a financial point of view. WP&Co. was engaged and acted
solely as an advisor to the Special Committee and not as an advisor to or
agent of any other person, including the Company. WP&Co.'s opinion is for the
benefit and use of the Special Committee in its consideration of the
Transactions and may not be used for any other purpose.
16
<PAGE>
THE FULL TEXT OF THE WRITTEN OPINION OF WP&CO., DATED OCTOBER 17, 1997,
WHICH SETS FORTH AMONG OTHER THINGS THE OPINIONS EXPRESSED, THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED TO THIS STATEMENT AS
SCHEDULE II AND HOLDERS OF THE SHARES ARE URGED TO READ IT IN ITS ENTIRETY.
WP&CO.'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES
AS TO WHETHER OR NOT SUCH HOLDER SHOULD TENDER SHARES PURSUANT TO THE OFFER OR
HOW SUCH HOLDER SHOULD VOTE OR OTHERWISE ACT IN RESPECT OF THE OFFER, THE
MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY AND SHOULD NOT BE
RELIED UPON BY ANY HOLDER IN RESPECT OF SUCH MATTERS. THE SUMMARY OF THE
OPINION OF WP&CO. SET FORTH HEREIN, WHICH SETS FORTH ALL THE MATERIAL ANALYSES
PERFORMED BY WP&CO., IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE OPINION ATTACHED AS SCHEDULE II.
In connection with rendering its opinion, WP&Co., among other things, (i)
reviewed and analyzed the Merger Agreement; (ii) reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts,
projections and analyses prepared by or on behalf of the Company and provided
to WP&Co. for purposes of its analyses; (iii) met with certain representatives
of the Company and Parent to review and discuss such information and, among
other matters, the Company's business, financial condition, results of
operations and prospects, including the financial forecasts, projections and
analyses referred to below; (iv) reviewed and considered certain financial and
stock market data relating to the Company and compared those data with similar
data for certain other companies, the securities of which are publicly traded
and that WP&Co. believed might be relevant or comparable in certain respects
to the Company or one or more of its businesses or assets; (v) reviewed and
considered the financial terms of certain recent acquisitions and business
combination transactions in the electrical and industrial supply industry
specifically, and in other industries generally, which WP&Co. believed to be
reasonably comparable in certain respects to the Transactions or otherwise
relevant to its analysis; and (vi) performed such other studies, analyses and
investigations and reviewed such other information as WP&Co. considered
appropriate. No limitations were imposed by the Special Committee upon WP&Co.
with respect to the investigations made or the procedures followed by it in
rendering its opinion. In the context of its engagement, WP&Co. was not
authorized to solicit and did not solicit alternative offers for the Company
or its assets, or investigate any other alternative transactions which may be
available to the Company.
In its review and analysis and in formulating its opinion, WP&Co. assumed
and relied on the accuracy and completeness of all the financial and other
information provided to or discussed with it or made publicly available,
including the financial projections, forecasts, analyses and other information
provided to WP&Co., without assuming any responsibility for independent
verification of, or expressing an opinion as to, any of such information.
Except for the written financial projections included in the June Plan and the
September Plan (each as defined below, see "--Discounted Cash Flow Analysis"),
which management of the Company advised WP&Co. do not reflect its best
estimates of the Company's future operating performance, WP&Co. also relied
upon the reasonableness and accuracy of the financial forecasts, projections
and analyses, and other information furnished to WP&Co. and assumed, with the
Special Committee's consent, that such forecasts, projections, analyses and
other information were reasonably prepared in good faith and on bases
reflecting the best currently available judgments and estimates of the
Company's management as of October 17, 1997 and that management of the Company
is unaware of any facts that would make the projections, forecasts and other
information provided to WP&Co. incomplete or misleading. WP&Co. also did not
review any of the books and records of the Company or Parent or conduct, or
assume any responsibility for conducting, a physical inspection of the
properties or facilities of the Company or Parent, or for making or obtaining
an independent valuation or appraisal of the assets or liabilities of the
Company or Parent, and no such independent valuation or appraisal was provided
to it. WP&Co.'s opinion was based on economic and market conditions and other
circumstances as they existed and could be evaluated by it on October 17,
1997.
The following is a summary of the report presented by WP&Co. to the Special
Committee in connection with the delivery of its opinion on October 17, 1997.
17
<PAGE>
Stock Price and Premium Analyses. WP&Co. reviewed the weekly stock market
price and volume trading history of the Company from October 10, 1996 through
October 10, 1997 (including a comparison of the relative stock price
performance of the Company as compared to the S&P 500 and other electrical and
industrial supply companies).
WP&Co. also reviewed the following 14 acquisition transactions by majority
shareholders of publicly held minority interests with values ranging from $100
million to $550 million to derive a range of premiums paid over the public
trading prices per share one day, 30 days, 60 days, 90 days and 120 days prior
to the announcement of such transactions since July 1990 (listed by
acquiror/seller): Investors Group Inc./BET Holdings Inc.; Anthem Electronics
Inc./Acordia, Inc.; Enron Corp./Enron Global Power and Pipelines LLC; St. Joe
Paper Corporation/Florida East Coast Industries Inc.; Monsanto Co./Calgene,
Inc.; Zurich Versicherungs-Aktiengesellschaft/Zurich Reinsurance Centre
Holdings; Novartis AG/SyStemix Inc.; COBE Laboratories Inc./ REN Corp.--USA;
Foundation Health Corp./Intergroup Healthcare Corp.; Medco Containment
Services, Inc./Medical Marketing Group Inc.; Rust International Inc./Brand
Company; BHP Holdings Inc./Hamilton Oil Corp.; Murphy Oil Corp./Ocean Drilling
& Exploration; and Renault V.I./Mack Trucks, Inc. In connection therewith,
WP&Co. noted, among other things, that (i) the reasons for, and circumstances
surrounding, each of the transactions analyzed were diverse, (ii) the
characteristics of the companies involved were not necessarily comparable to
those of the Company and Parent and (iii) premiums fluctuate based on
perceived growth, synergies, strategic value, the type of consideration
utilized in the transaction, information in the securities markets and other
factors.
The foregoing analyses indicated that the medians of premiums paid in the
transactions over the public per share trading prices one day, 30 days, 60
days, 90 days and 120 days prior to the announcement of such transactions were
17.1%, 22.5%, 24.2%, 22.3% and 24.8%, respectively, and that the means of
premiums paid in the transactions over the public per share trading prices one
day, 30 days, 60 days, 90 days and 120 days prior to the announcement of such
transactions were 21.6%, 25.4%, 23.9%, 22.3% and 26.3%, respectively. The
proposed premium of $3.62 over the closing price per Share on August 28, 1997,
the last trading day prior to the announcement of Parent's initial proposal to
acquire all Shares not owned by it or its affiliates at $19.50 per Share (the
"Last Preannouncement Trading Day"), and the trading price of the Shares 30,
60, 90 and 120 days prior to such date, were 19.2%, 25.9%, 25.9%, and 24.1%,
respectively.
Comparable Company Analysis. WP&Co reviewed and compared certain financial
information of the Company to corresponding financial information for four
publicly traded companies: Hughes Supply, Inc.; Noland Co.; W.W. Grainger,
Inc. and Waxman Industries, Inc. (collectively, the "Major Companies"), and
two additional companies that are in the data communication industry, which
represents less than 10% of the Company's historical business mix
(collectively, the "Other Companies" and, together with the Major Companies,
the "Comparable Companies"). Such financial information was used to calculate
latest 12 months ("LTM"), multiples of estimated calendar year 1997 and 1998
financial results, including (i) the market equity value as of October 15,
1997 ("Market Value") as a multiple of each of net income and book value and
(ii) adjusted market value as of October 15, 1997 (defined generally as the
Market Value plus net debt (short-and long-term debt less cash)) ("Adjusted
Market Value"), net sales, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and earnings before interest and taxes ("EBIT").
Market Value and Adjusted Market Value multiples of the Company were based on
the closing price per Share on the Last Preannouncement Trading Day and the
estimated 1997 and 1998 financial results for the Company were those used in
the Base Case described below in "--Discounted Cash Flow Analysis". Such
analyses, excluding certain multiples which WP&Co. determined were not
meaningful, indicated that, as of October 15, 1997: (i) as compared to the LTM
financial results, (a) the Company traded at a Market Value multiple of 15.5x
net income, as compared to a range of 15.5x to 20.4x for the Major Companies
(and a median of 19.2x) and 22.9x for the Other Companies (relevant data were
available for only one of the Other Companies); (b) the Company traded at a
Market Value multiple of 2.3x book value, compared to a range of 0.7x to 3.5x
for the Major Companies (and a median of 1.9x) and a range of 2.0x to 3.2x for
the Other Companies (and a median of 2.6x); (c) the Company traded at an
Adjusted Market Value multiple of 0.4x net sales, compared to a range of 0.3x
to 1.3x for the Major Companies (and a median of 0.9x) and a range of 0.5x to
1.6x for the Other Companies (and a median of 1.0x); (d) the Company
18
<PAGE>
traded at an Adjusted Market Value multiple of 8.2x EBITDA, as compared to a
range of 9.4x to 13.0x for the Major Companies (and a median of 10.7x) and
10.8x for the Other Companies (which included only one in the LTM analysis due
to the lack of available information); and (e) the Company traded at an
Adjusted Market Value multiple of 9.4x EBIT, compared to a range of 11.7x to
12.9x for the Major Companies (and a median of 12.3x) and 14.1x for the Other
Companies (relevant data were available for only one of the Other Companies);
(ii) as compared to the estimated calendar year 1997 financial results, (a)
the Company traded at a Market Value multiple of 15.4x net income, compared to
a range of 15.1x to 19.6x for the Major Companies (and a median of 17.3x) and
20.8x for the Other Companies (relevant data were available for only one of
the Other Companies); (b) the Company traded at a Market Value multiple of
2.1x book value, compared to a range of 1.8x to 3.0x for the Major Companies
(and a median of 2.4x) and 1.8x to 4.5x for the Other Companies (and a median
of 3.2x); (c) the Company traded at an Adjusted Market Value multiple of 0.4x
net sales, compared to a range of 0.5x to 1.2x for the Major Companies (and a
median of 0.8x) and 0.5x and 1.2x for the Other Companies (and a median of
0.9x); (d) the Company traded at an Adjusted Market Value multiple of 7.8x
EBITDA, compared to a range of 9.8x to 10.0x for the Major Companies (and a
median of 9.9x) and 11.9x to 25.4x for the Other Companies (and a median of
18.7x); and (e) the Company traded at an Adjusted Market Value multiple of
9.0x EBIT, compared to a range of 11.8x to 12.8x for the Major Companies (and
a median of 12.3x) and 16.2x to 31.1x for the Other Companies (and a median of
23.7x); and (iii) as compared to the estimated calendar year 1998 financial
results, (a) the Company traded at a Market Value multiple of 12.7x net
income, compared to a range of 13.0x to 18.1x for the Major Companies (and a
median of 15.6x) and a range of 17.9x to 32.9x for the Other Companies (and a
median of 25.4x); (b) the Company traded at a Market Value multiple of 1.8x
book value, compared to a range of 1.6x to 2.7x for the Major Companies (and a
median of 2.1x) and 1.6x to 4.0x for the Other Companies (and a median of
2.8x); (c) the Company traded at an Adjusted Market Value multiple of 0.4x net
sales, compared to a range of 0.4x to 1.1x for the Major Companies (and a
median of 0.8x) and 0.4x to 0.9x for the Other Companies (and a median of
0.7x); (d) the Company traded at an Adjusted Market Value multiple of 6.9x
EBITDA, compared to a range of 9.0x to 9.1x for the Major Companies (and a
median of 9.0x) and 14.0x to 15.6x for the Other Companies (the median for
which was 14.8x); and (e) the Company traded at an Adjusted Market Value
multiple of 7.9x EBIT, compared to a range of 11.0x to 11.5x for the Major
Companies (and a median of 11.3x) and 18.3x to 21.9x for the Other Companies
(and a median of 20.1x). The above analysis produced an implied per Share
price, based on the median of the Major Companies' multiples, of, (i) for the
LTM, $39.32 based on sales, $25.23 based on EBITDA, $25.50 based on EBIT,
$23.35 based on net income and $15.58 based on book value, (ii) for the
estimated calendar year 1997, $39.63 based on sales, $24.76 based on EBITDA,
$26.88 based on EDIT, $21.26 based on net income and $21.66 based on book
value, and (iii) for the estimated calendar year 1998, $39.35 based on sales,
$25.71 based on EBITDA, $28.19 based on EBIT, $23.02 based on net income and
$22.57 based on book value.
Discounted Cash Flow Analysis. WP&Co. also performed discounted cash flow
analyses of the Company ("DCF") based on certain alternative financial
forecasts provided to WP&Co. by the management of the Company. The base case
considered by WP&Co. (the "Base Case") was predicated on the forecasts for
1997 through 2000 (assuming no acquisitions) that were developed by the
Company's management in June 1997 (the "June Plan"), modified as described
below based on information provided to WP&Co. by management in connection with
its analyses. The Base Case assumed no additional acquisitions after 1997 and
a recession in 1999 and 2000. For analytical purposes only, WP&Co. also
considered three alternative cases (i) a revised Base Case (the "No-Recession
Case") which was predicated on the Base Case and assumed no recession in 1999
or 2000 and sales growth at an annual rate of 4% (approximately 1.5% above
estimated GDP growth), (ii) an acquisition case (the "Acquisition Case"),
which was predicated on the Base Case and assumed a market recession in 1999
and 2000 and that, for each year of the projection period, the Company-
acquired businesses contributed $100 million in sales and had EBITDA margins
of 5.3% and acquisition prices of 6.0 EBITDA, and (iii) a downside case (the
"Downside Case") which used the Base Case projected out ten years and assumed
a more severe recession in 1999 and 2000 than was assumed in the Base Case and
a second recession in 2003 and 2004.
WP&Co. considered, but did not rely on, the June Plan because it was advised
by the Company's management that the forecasts reflected in the June Plan did
not reflect management's judgment of the most
19
<PAGE>
likely future financial results of the Company. Rather, WP&Co. was advised
that the June Plan (i) was prepared quickly and at the direction of Parent,
(ii) reflected performance targets that had been established for the year 2000
by Parent even though such targets had not historically been achieved by the
Company, and (iii) assumed that each of sales, gross profit, operating margin,
earnings per share and working capital would improve during the assumed
recession in 1999 and 2000, assumptions that the Company and WP&Co. noted had
not been achieved by two of the Company's largest subsidiaries in the 1990-
1991 recessionary period. For similar reasons, and following discussions with
the Company's management, WP&Co. did not consider or rely on the Company's
forecasts for 1997 through 2000 that were also developed by the Company's
management in June 1997 but that assumed substantial new acquisitions by the
Company. See "--Certain Projections."
The material elements of the Base Case differed from the June Plan as
follows: (i) the Base Case contained projections for 1997 through 2002, where
the June Plan projections were for 1997 through 2000; (ii) in both the Base
Case and in the June Plan sales growth rates were projected for the years
1997, 1998, 1999 and 2000 to be 18.0%, 7.0%, 1.2% and (0.9%); (iii) in the
Base Case EBIT margins (EBIT as a percent of sales) were projected for the
years 1997, 1998, 1999 and 2000 at 4.6%, 4.9%, 4.8% and 4.8%, compared to
4.9%, 5.4%, 5.8% and 6.1% in the June Plan; (iv) in the Base Case EBIT growth
rates were projected for the years 1997, 1998, 1999 and 2000 at 13.3%, 14.4%,
(2.0)% and (1.1)%, compared to 19.9%, 18.2%, 8.1% and 5.1% in the June Plan;
(v) in the Base Case, EBITDA margins (EBITDA as a percent of sales) were
projected for the years 1997, 1998, 1999 and 2000 at 5.3%, 5.7%, 5.5% and
5.5%, compared to 5.6%, 6.1%, 6.4% and 6.8% in the June Plan; (vi) in the Base
Case EBITDA growth rates were projected for the years 1997, 1998, 1999 and
2000 at 13.8%, 13.3%, (1.6%) and (0.5%), compared to 19.5%, 15.6%, 6.4% and
4.9% in the June Plan; (vii) in the Base Case gross profit margins were
projected for 1997, 1998, 1999 and 2000 to be 20.7%, 21.0%, 21.0% and 21.0%,
compared to 20.9%, 21.4%, 21.8% and 22.1% in the June Plan; and (viii) in the
Base Case, capital expenditures (as a percent of sales) for 1997, 1998, 1999
and 2000 were 0.4%, 0.7%, 07% and 0.5%, compared to 0.4% in each such year in
the June Plan. For a detailed description of the June Plan, see "--Certain
Projections."
WP&Co. also received forecasts from the Company's management for 1997
through 2000 that were developed and provided to WP&Co. in September 1997 (the
"September Plan"). WP&Co. did not consider or rely on the September Plan
because WP&Co. was advised by the Company's management that the September Plan
was prepared solely for the purpose of establishing "stretch" targets for
divisional management and would, in the ordinary course of the Company's
business, be revised to significantly lower numbers. See "--Certain
Projections."
In performing the discounted cash flow analyses, WP&Co., using the forecasts
as described above, discounted the unlevered free cash flows of the Company
(unlevered net income, plus depreciation and amortization, less changes in
working capital, capital expenditures and, in the case of the Acquisition
Case, the cost of acquisitions) over the specified forecast period using a
range of risk adjusted discount rates between 9.5% and 11.5%. The sum of the
present values of such free cash flows for the Company was then added to the
present value of the Company's terminal value computed using a forward
multiple range of EBITDA (a five-year forecast was used for all cases, except
the Downside Case, which used a ten-year forecast) of 7.0x to 9.0x. Based on
this analysis, WP&Co. calculated the following implied price per share ranges.
The Management Case resulted in a per share DCF valuation range from (i)
$19.21 to $23.71 using a discount rate of 9.5%; (ii) $18.36 to $22.66 using a
discount rate of 10.5%; and (iii) $17.54 to $21.65 using a discount rate of
11.5%. The Acquisition Case resulted in a per share DCF valuation range from
(a) $18.71 to $24.67 using a discount rate of 9.5%; (b) $17.76 to $23.46 using
a discount rate of 10.5%; and (c) $16.87 to $22.31 using a discount rate of
11.5%. The No-Recession Case resulted in a per share DCF valuation range from
(x) $20.21 to $24.96 using a discount rate of 9.5%; (y) $19.32 to $23.85 using
a discount rate of 10.5%; and (z) $18.46 to $22.80 using a discount rate of
11.5%. The Downside Case resulted in a per share DCF valuation range from (i)
$17.19 to $20.09 using a discount rate of 9.5%; (ii) $15.89 to $18.54 using a
discount rate of 10.5%; and (iii) $14.70 to $17.13 using a discount rate of
11.5%. The June Plan resulted in a per share DCF valuation range from (a)
$23.37 to $28.66 using a discount rate of 9.5%; (b) $22.36 to $27.41 using a
discount rate of 10.5%; and (c) $21.40 to $26.22 using a discount rate of
11.5%.
20
<PAGE>
Comparable Acquisitions. WP&Co. reviewed five proposed or completed
comparable acquisitions announced since November 1993. However, no relevant
data were available for four of these acquisitions. WP&Co. also reviewed the
terms of nine acquisitions made by the Company from 1992 through 1997. Due to
the small number of comparable acquisitions made by parties other than the
Company and the small size and regional nature of the companies acquired by the
Company, WP&Co. did not consider the comparable acquisitions to be material to
its analysis.
Certain General Matters. No company or transaction used in the foregoing
analysis is identical to the Company. In addition, those analyses and the
discounted cash flow analyses are based and heavily dependent upon, among other
factors, assumptions as to future performance and other factors, and are
therefore subject to the limitations described in WP&Co.'s opinion.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the acquisition value or the
public trading value of the companies to which they are being compared and the
Company.
The fairness analysis is a complex process and is not necessarily susceptible
to a partial analysis or summary description. WP&Co. believes that its analyses
must be considered as a whole and that selecting portions of its analyses,
without considering the analyses taken as a whole, would create an incomplete
view of the process underlying the analyses performed in reaching its opinion.
In addition, WP&Co. considered the results of all such analyses and did not
assign relative weights to any of the analyses, so that the ranges of
valuations resulting from any particular analysis described above should not be
taken to be WP&Co.'s view of the actual value of the Company.
In performing its analyses, WP&Co. made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by WP&Co. are not necessarily indicative of actual values, which may
be significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of WP&Co.'s opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold.
The Special Committee retained WP&Co. based upon its experience and
expertise. WP&Co. is an internationally recognized investment banking and
advisory firm. WP&Co., as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In the course of
its market making and other trading activities, WP&Co. and its affiliates may,
from time to time, have a long or short position in, and may buy and sell,
securities of the Company.
WP&Co. Engagement Agreement
Pursuant to the terms of a letter agreement, dated September 29, 1997 between
WP&Co. and the Company (the "WP&Co. Letter Agreement"), the Special Committee
retained WP&Co. to serve as exclusive financial advisor to the Special
Committee with respect to any transaction considered by the Special Committee
pursuant to which Parent or any other affiliated entity acquires all or
substantially all of the outstanding minority interest in the capital stock or
assets of the Company, whether by way of merger, consolidation, reorganization
or other business combination, a tender or exchange offer, a recapitalization
or otherwise (an "Engagement Transaction").
The Company agreed in the WP&Co. Letter Agreement to pay WP&Co. $100,000 upon
the execution of the WP&Co. Letter Agreement and $400,000 at such time as
WP&Co. renders an opinion to the Special Committee with respect to the fairness
from a financial point of view of the consideration to be received by the
public holders of common stock of the Company pursuant to an Engagement
Transaction. In addition, the Company also agreed to pay WP&Co. upon the
consummation of an Engagement Transaction 1.30% of the aggregate value paid or
payable to the common shareholders of the Company, other than Parent, Purchaser
or any of their affiliates, in excess of $19.50 per share.
21
<PAGE>
The Company has also agreed to reimburse WP&Co., subject to certain
limitations, for all reasonable out-of-pocket expenses incurred by WP&Co.
(including the reasonable fees and disbursements of counsel) in connection
with the matters contemplated by the WP&Co. Letter Agreement. In addition,
pursuant to the terms of an indemnification agreement, dated September 29,
1996, the Company agreed to indemnify WP&Co. (and its affiliates, their
respective directors, officers, agents, employees and controlling persons)
against certain liabilities arising out of or in connection with WP&Co.'s
engagement, including liabilities under the federal securities laws.
WP&Co. represented in the WP&Co. Letter Agreement that it does not have, and
has not in the last three years had, any relationship with the Rexel Group.
Furthermore, WP&Co. agreed in the WP&Co. Letter Agreement not to represent or
to provide services for any member of the Rexel Group until the earlier of (i)
the termination of WP&Co.'s services under the WP&Co. Letter Agreement by the
Special Committee or (ii) the consummation or termination of the Transaction.
CERTAIN FINANCIAL PROJECTIONS (UNAUDITED)
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data.
However, in connection with Parent's position as a controlling shareholder of
the Company, Parent has received and examined certain analyses prepared by the
Company which include projections of future financial results prepared as of
June 19, 1997 and September 18, 1997 (the "Projections"). See "Recommendation
of the Company Board; the Offer and the Merger--Opinion of WP&Co." In
addition, as a result of the review of the Company's financial position and
outlook, in the context of preparing for the Offer, Parent has received and
examined the Projections for the years 1997 through 2000. Such information has
been set forth below for the limited purpose of giving the Company's
shareholders access to financial projections by the Company's management that
were available for review by Purchaser in connection with the Offer.
The projected financial information set forth below necessarily reflects
numerous assumptions with respect to general business and economic conditions
and other matters, many of which are inherently uncertain or beyond the
Company's or Parent's control, and does not take into account any changes in
the Company's operations or capital structure which may result from the Offer
and the Merger. It is not possible to predict whether the assumptions made in
preparing the projected financial information will be valid and actual results
may prove to be materially higher or lower than those contained in the
projections. The inclusion of this information should not be regarded as an
indication that the Company, Parent, Purchaser or anyone else who received
this information considered it a reliable predictor of future events, and this
information should not be relied on as such. None of Parent, Purchaser, the
Company or any of their respective representatives assumes any responsibility
for the validity, reasonableness, accuracy or completeness of the projected
financial information, and the Company has made no representations to Parent
or Purchaser regarding such information.
The Company's management projections prepared as of June 19, 1997, assuming
new acquisitions, and the Company's management projections prepared as of June
19, 1997, assuming no new acquisitions, were prepared as part of the planning
process of Parent's corporate parent. The Company's management projections
prepared as of September 19, 1997 were prepared primarily to establish
performance targets for management of the Company. These projections, at the
time of their preparation, represented management's aggressive estimates for
actual financial performance. Such projections do not currently represent
management's judgment of the most likely future financial results of the
Company.
Three Year Plans
Incremental to the Company's core business, the June 19, 1997 projections
(including new acquisitions) incorporate three unidentified acquisitions which
are assumed to occur on January 1st of each of 1998, 1999 and 2000. Each
acquisition is assumed to contribute approximately $200 million in total sales
per year. At the time
22
<PAGE>
the acquisition projections were incorporated in the Management plan, the
Company was not referring to any existing company or any specific contemplated
transaction.
REXEL, INC.
THREE-YEAR PLAN
(INCLUDING NEW ACQUISITIONS)
SUMMARY
(PREPARED AS OF JUNE 19, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACTUAL FORECAST PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
1996 1997 INCREASE PLAN 1998 INCREASE PLAN 1999 INCREASE PLAN 2000 INCREASE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................ $1,159,446 $1,368,389 18.0% $1,662,836 21.5% $1,879,402 13.0% $2,065,070 9.9%
========== ========== ========== ========== ==========
Gross profit......... 239,494 287,257 19.9% 356,441 24.1% 409,153 14.8% 452,924 10.7%
%................... 20.7% 21.0% 21.4% 21.8% 21.9%
Labor................ 124,667 145,248 16.5% 177,085 21.9% 201,537 13.8% 223,009 10.7%
%................... 52.1% 50.6% 49.7% 49.3% 49.2%
All other............ 58,703 71,255 21.4% 86,589 21.5% 98,911 14.2% 107,246 8.4%
%................... 24.5% 24.8% 24.3% 24.2% 23.7%
---------- ---------- ---------- ---------- ----------
EBITA................ 56,124 70,754 92,767 108,705 122,669
%................... 4.8% 5.2% 5.6% 5.8% 5.9%
LIFO Adjustment...... (2,050) 1,020 -149.8% 1,088 6.6% 1,098 0.9% 1,087 -0.9%
Amortization......... 1,943 2,793 43.8% 3,690 32.1% 4,337 17.5% 4,992 15.1%
Interest expense..... 5,109 7,382 44.5% 8,782 19.0% 7,370 -16.1% 7,245 -1.7%
---------- ---------- ---------- ---------- ----------
Income before tax.... 51,122 59,558 16.5% 79,207 33.0% 95,901 21.1% 109,344 14.0%
Tax.................. 21,727 25,312 16.5% 33,663 33.0% 40,758 21.1% 46,471 14.0%
---------- ---------- ---------- ---------- ----------
Net income........... 29,395 34,246 16.5% 45,544 33.0% 55,143 21.1% 62,873 14.0%
========== ========== ========== ========== ==========
%................... 2.5% 2.5% 2.7% 2.9% 3.0%
Earnings per share... $ 1.13 $ 1.31 16.2% $ 1.75 33.0% $ 2.12 21.1% $ 2.41 14.0%
========== ========== ========== ========== ==========
Average shares....... 25,987 26,055 0.3% 26,055 26,055 26,055
========== ========== ========== ========== ==========
TWC turnover(1)...... 7.9 7.9 0.0 8.2 8.1 7.9
========== ========== ========== ========== ==========
Return on net
assets.............. 38.0% 36.6% -1.4% 42.3% 43.4% 44.1%
========== ========== ========== ========== ==========
Return on equity..... 16.3% 15.8% -0.5% 17.6% 17.8% 17.1%
========== ========== ========== ========== ==========
Debt to equity
ratio............... 0.32 0.41 0.09 0.27 0.21 0.13
========== ========== ========== ========== ==========
Operating cash flow.. 27,111 47,761 76.2% 54,128 13.3% 67,053 23.9% 77,027
========== ========== ========== ========== ==========
Free cash flow....... 22,477 42,495 89.1% 47,578 12.0% 60,128 26.2% 69,727
========== ========== ========== ========== ==========
Free cash flow per
share............... $ 0.86 $ 1.63 88.6% $ 1.83 12.0% $ 2.31 26.4% $ 2.68
========== ========== ========== ========== ==========
</TABLE>
- --------
(1) Working capital turnover.
23
<PAGE>
REXEL, INC.
THREE-YEAR PLAN
(EXCLUDING NEW ACQUISITIONS)
SUMMARY
(PREPARED AS OF JUNE 19, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACTUAL FORECAST PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
1996 1997 INCREASE PLAN 1998 INCREASE PLAN 1999 INCREASE PLAN 2000 INCREASE
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................ $1,159,446 $1,368,389 18.0% $1,463,836 7.0% $1,481,402 1.2% $1,468,070 -0.90%
========== ========== ========== ========== ==========
Gross profit......... 239,494 287,257 19.9% 313,829 9.3% 323,929 3.2% 325,036 0.3%
%................... 20.7% 21.0% 21.4% 21.9% 22.1%
---------- ---------- ---------- ---------- ----------
Labor................ 124,667 145,248 16.5% 155,404 7.0% 158,174 1.8% 157,965 -0.1%
%................... 52.1% 50.6% 49.5% 48.8% 48.6%
---------- ---------- ---------- ---------- ----------
All other............ 58,703 71,255 21.4% 75,169 5.5% 76,071 1.2% 72,986 -4.1%
%................... 24.5% 24.8% 24.0% 23.5% 22.5%
---------- ---------- ---------- ---------- ----------
EBITA................ 56,124 70,754 26.1% 83,256 17.7% 89,683 7.7% 94,085 4.9%
%................... 4.8% 5.2% 5.7% 6.1% 6.4%
LIFO adjustment...... (2,050) 1,020 -149.8% 1,088 1,098 1,087
Amortization......... 1,943 2,793 43.7% 3,043 9.0% 3,043 3,051 0.3%
Interest expense..... 5,109 7,382 44.5% 4,897 -33.7% 1,880 -61.6% (1,546) -182.2%
---------- ---------- ---------- ---------- ----------
Income before tax.... 51,122 59,559 16.5% 74,228 24.6% 83,662 12.7% 91,493 9.4%
Tax provision........ 21,727 25,312 16.5% 31,547 24.6% 35,557 12.7% 38,884 9.4%
---------- ---------- ---------- ---------- ----------
Net income........... 29,395 34,246 16.5% 42,681 24.6% 48,106 12.7% 52,608 9.4%
%................... 2.5% 2.5% 2.9% 3.2% 3.6%
========== ========== ========== ========== ==========
Earnings per share... $ 1.13 $ 1.31 16.3% $ 1.64 -16.9% $ 1.85 12.7% $ 2.02 9.4%
========== ========== ========== ========== ==========
TWC turnover......... 8.0 8.3 7.9 8.0 8.0
========== ========== ========== ========== ==========
Return on net
assets.............. 33.7% 34.8% 3.3% 40.8% 17.2% 44.9% 9.9% 48.5% 8.0%
========== ========== ========== ========== ==========
Return on equity..... 16.3% 15.9% -2.3% 16.6% 4.2% 15.9% -4.2% 14.9% -6.2%
========== ========== ========== ========== ==========
Debt to equity
ratio............... 0.32 0.24 -25.0% 0.18 -0.02 -0.18
========== ========== ========== ========== ==========
Operating cash flow.. 27,111 47,761 76.2% 50,244 5.2% 57,973 15.4% 63,696 9.9%
========== ========== ========== ========== ==========
Free cash flow....... 22,477 42,495 89.1% 44,069 3.7% 51,798 17.5% 57,521 11.0%
========== ========== ========== ========== ==========
</TABLE>
Management's June 19, 1997 projections for 1997 to 2000 were based on the
following assumptions:
Core business sales growth is driven by three factors as shown numerically
in the table below:
(i) Market growth was assumed to grow directly with the Commercial and
Industrial Buildings market growth forecast, by region, of F.W. Dodge
(an industry consultant), dated March, 1997. Market growth for the
Company was based on the weighted average growth of the regions in
which it conducts business.
(ii)Sales were adjusted for expected product price inflation.
(iii) The Company was assumed to capture incremental market share from
competitors of 1.0% per year.
Gross margins were assumed to increase over the projection period due to: (i)
sales force training, (ii) improved inventory controls, and (iii) improved
terms of trade with suppliers.
24
<PAGE>
Other assumptions included: (i) labor costs have been assumed to grow by 2.5%
per year, and (ii) other variable costs have been assumed to grow in relation
to sales. Additionally, the projections assume a 7% interest rate on short-term
debt and assumed capital expenditures are equal to depreciation.
The following are certain assumptions relating to the June 19, 1997
projections:
<TABLE>
<CAPTION>
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Sales growth:
Market growth............................................... 4.9% -1.8% -4.3%
Inflation................................................... -0.2% 1.8% 2.3%
Market share growth......................................... 1.0% 1.0% 1.0%
Margin improvement.......................................... 0.1% 0.2% 0.1%
----- ----- -----
Total..................................................... 5.8% 1.2% -0.9%
===== ===== =====
Labor costs--inflation........................................ 2.5% 2.5% 2.5%
===== ===== =====
</TABLE>
1998 Profit Plan Estimate
REXEL, INC.
1998 PROFIT PLAN ESTIMATE
SUMMARY
(PREPARED AS OF SEPTEMBER 18, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE 98 PROFIT PERCENTAGE
95 ACTUAL 96 ACTUAL INCREASE 97 FORECAST INCREASE PLAN CORE INCREASE
--------- --------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales 1,120,688 1,159,446 3.5% 1,370,118 18.2% 1,500,000 9.5%
========= ========= ========= =========
Gross Profit 231,630 239,494 3.4% 284,840 18.9% 318,000 11.6%
% of Sales 20.7% 20.7% 20.8% 21.2%
Labor 121,777 124,667 2.4% 145,298 16.5% 158,000 8.7%
% of Sales 10.9% 10.8% 10.6% 10.5%
% of Gross
Profit 52.6% 52.1% 51.0% 49.7%
Other 61,138 58,703 (4.0%) 68,524 16.7% 74,000 8.0%
% of Sales 5.5% 5.1% 5.0% 4.9%
% of Gross
Profit 26.4% 24.5% 24.1% 23.3%
--------- --------- --------- ---------
EBITA 48,715 56,124 15.2% 71,018 26.5% 86,000 21.1%
% of Sales 4.3% 4.8% 5.2% 5.7%
Net Income 19,769 29,395 48.7% 34,184 16.3% 45,000 31.6%
========= ========= ========= =========
% of Sales 1.8% 2.5% 2.5% 3.0%
Earnings per
Share 0.79 1.13 42.7% 1.31 15.6% 1.72 31.3%
========= ========= ========= =========
TWC/turnover 7.7 7.9 8.0 8.0
========= ========= ========= =========
Return on
net assets 33.5% 38.2% 41.5% 45.9%
========= ========= ========= =========
</TABLE>
25
<PAGE>
1998 Profit Plan Estimate Assumptions:
The 1998 Profit Plan Estimate is based on the same fundamental assumptions
described above for the Three Year Plans. However, it does not include
acquisitions and has higher sales and margins for the underlying core
business. These numbers were used as a budgeting tool in order for the various
division heads to build the actual 1998 Profit Plan and represent management's
aggressive estimates for actual 1998 financial performance.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed herein, including without limitation, the
Projections, are forward-looking statements that involve risks and
uncertainties. Such information has been included in this Offer to Purchase
for the limited purpose of giving the Company's shareholders access to
financial projections by the Company's management that were made available to
Parent. Such information was prepared by the Company's management for internal
use and not with a view to publication. The foregoing Projections were based
on assumptions concerning the Company's products and business prospects in
1997 through 2000, including the assumption that the Company would continue to
operate under the same ownership structure as then existed. The Projections
were also based on other revenue and operating assumptions. Information of
this type is based on estimates and assumptions that are inherently subject to
significant economic and competitive uncertainties and contingencies, all of
which are difficult to predict and many of which are beyond the Company's
control. Such uncertainties and contingencies include, but are not limited to:
changes in the economic conditions in which the Company operates; greater than
anticipated competition or price pressures; new product offerings; better than
expected customer growth resulting in the need to expand operations and make
capital investments; and the impact of investments required to enter new
markets. Accordingly, there can be no assurance that the projected results
would be realized or that actual results would not be significantly higher or
lower than those set forth above. In addition, the Projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Securities and Exchange Commission (the "Commission") or the
guidelines established by the American Institute of Certified Public
Accountants regarding projections and forecasts and are included in this Offer
to Purchase only because such information was made available to Parent by the
Company. Neither Parent's nor the Company's independent accountants have
examined, compiled or applied any agreed upon procedures to this information
and, accordingly, assume no responsibility for this information. Neither
Parent nor the Company nor any other party assumes any responsibility for the
accuracy or validity of the foregoing projections.
PURPOSE AND STRUCTURE OF THE OFFER; REASONS OF PARENT AND PURCHASER FOR THE
OFFER AND THE MERGER
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire complete control of Company Board and the entire equity
interest in the Company. Upon consummation of the Merger, the Company will
become a wholly owned subsidiary of Parent. The Offer is being made pursuant
to the Merger Agreement.
Parent believes that the increasingly competitive environment in the
electric supplies distribution sector and the prospect of industry-wide
consolidation make an acquisition by Parent of the remaining Shares
appropriate at this time. As such, Parent and the Company must continue to
grow, by acquisition or otherwise, to compete more effectively in this rapidly
changing environment. Such simplification of Parent's corporate structure in
the United States would enhance Parent's strategic flexibility and allow it to
benefit from opportunities in the United States' electric supplies
distribution sector. See "--Background of the Offer--Business of the Company
and Arrangements between Parent, Purchaser and the Company."
PLANS FOR THE COMPANY; CERTAIN EFFECTS OF THE OFFER
As promptly as practicable following the purchase of and payment for Shares
under the Offer, (x) Parent intends, in the event Purchaser acquires at least
90% of the then outstanding Shares including Shares transferred
26
<PAGE>
from Parent to Purchaser, to cause a "short-form" merger of Purchaser and the
Company under the NYBCL with holders of Shares other than Parent and Purchaser
receiving $22.50 per Share in cash in such merger and (y) in the event
Purchaser acquires less than 90% of the then outstanding Shares, the Company
intends to cause a special meeting of the Company's shareholders to be held to
vote upon the Merger. Parent has indicated that it will transfer the Shares
owned by it to Purchaser only if it obtains a ruling from the French fiscal
authorities that any such transfer will not result in any French tax to
Parent. While Parent expects that it will be able to obtain such ruling, there
is no assurance that it will be granted, or, if granted that it will be
granted on a timely basis. If Purchaser does not acquire 90% of the then
outstanding Shares, and a vote of the Company's shareholders is required under
the NYBCL to consummate the Merger, a significantly longer period of time will
be required to effect the Merger. In the Merger Agreement, the Company has
agreed to take all action necessary to convene a special meeting of its
shareholders as soon as practicable following consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby and to use its reasonable best efforts to
obtain such approval and adoption. Parent and Purchaser have agreed that all
Shares owned by them and their subsidiaries will be voted in favor of the
Merger.
It is expected that, initially following the Merger, except as set forth
below, the business and operations of the Company will be conducted in a
manner substantially similar to how they are conducted currently. However,
Parent will continue to evaluate the business and operations of the Company
during the pendency of the Offer and after the consummation of the Offer and
the Merger and will take further actions as it deems appropriate under the
circumstances then existing.
Except as otherwise described in this Offer to Purchase, Parent has no
current plans or proposals which relate to or would result in: (a) other than
the Merger, 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; (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.
Nevertheless, Parent may initiate a review of the Company and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the Merger in order best to organize and integrate the activities of
the Company and Parent. In particular, Parent may study the possibility of
changing the Company Board by changing the number or term of directors, and
may also consider material changes in the present dividend rate and policy,
indebtedness and capitalization of the Company. In particular, Parent
expressly reserves the right to make any changes that it deems necessary or
appropriate in light of its review or in light of future developments.
As a result of the Offer, the direct and indirect interest of Parent in the
Company's net book value and net earnings will increase to the extent of the
number of Shares acquired under the Offer. Following consummation of the
Merger, Parent's direct and indirect interest in such items will increase to
100% and 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. Upon consummation of the Merger, the
Company will become a privately held corporation. Accordingly, shareholders
will not have the opportunity to participate directly in the earnings and
growth of the Company after the Merger and will not have any right to vote on
corporate matters. Similarly, shareholders will not face the risk of losses
generated by the Company's operations or decline in the value of the Company
after the Merger.
Following consummation of the Offer, the Company may fail to meet certain of
the criteria for continued listing on the NYSE and the PSE and be subject to
delisting. The criteria for listing on the NYSE include a requirement that the
Company have at least 1,200 beneficial shareholders of 100 Shares or more, and
at least 600,000 publicly held Shares. The criteria for continued listing on
the PSE include that the Company have at least 500,000 publicly held Shares
and at least 800 public beneficial shareholders if the Company has at least
27
<PAGE>
500,000 and less than 1,000,000 Shares publicly held or a minimum of 400
public beneficial shareholders if the Company has at least 1,000,000 Shares
publicly held. In addition, the registration of the Shares under the Exchange
Act may be terminated either (i) 90 days following consummation of the Offer,
if there be fewer than 300 shareholders of record of the Company or (ii) 90
days following consummation of the Merger. Accordingly, following the Merger
there will be no publicly-traded Common Stock of the Company outstanding. See
"THE TENDER OFFER--Section 11. Effect of the Offer on the Market for the
Shares; the New York Stock Exchange, Pacific Stock Exchange and Exchange Act
Registration." It is expected that, if Shares are not accepted for payment by
Purchaser pursuant to the Offer and the Merger is not consummated, the
Company's current management, under the general direction of the Company
Board, will continue to manage the Company as an ongoing business.
RIGHTS OF SHAREHOLDERS IN THE OFFER AND THE MERGER; APPRAISAL RIGHTS
In connection with the consummation of the Merger, all holders of Shares as
of the Effective Time will have certain rights under the NYBCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. If the statutory procedures are complied with, such rights could
lead to a judicial determination of the fair value required to be paid in cash
to such dissenting holders for their Shares. Any such judicial determination
of the fair value of the Shares could be based upon considerations other than
or in addition to the Offer price or the market value of the Shares, including
asset values and the investment value of the Shares. The value so determined
could be more or less than the Offer price.
The rights of dissenting shareholders of the Company are governed by Section
623 and Section 910 of the NYBCL. The following summary of the applicable
provisions of Section 623 of the NYBCL is not intended to be a complete
statement of such provisions and is qualified in its entirety by reference to
the full text of Section 623 which is set forth in Schedule III attached
hereto.
It is anticipated that the Merger will be authorized by a vote of
shareholders holding at least 66 2/3%, but less than all of the issued and
outstanding Shares or upon a "short-form" merger. See "--Plans for the
Company; Certain Effects of the Offer." Within ten days after such
authorization, the Company will give written notice of such authorization to
each holder of Shares. Recipients of such notice are entitled under the
provisions of Sections 910 and 623 of the NYBCL, as an alternative to
receiving the consideration offered for their shares in the Merger, to a
judicial determination of the fair value in cash of their Shares. The
following is a summary of the procedural steps which must be taken if the
right of appraisal is to be validly exercised.
Any holder of Shares who did not vote in favor of the Merger, who wishes to
exercise his dissenter's rights with respect to the Merger must file with the
Company, within 20 days after the Company gives to him written notice of
authorization of the Merger by shareholders, a written notice of election to
dissent which includes (i) his name and residence address, (ii) the number and
class of shares as to which he dissents and (iii) a demand for payment of the
fair value of his shares. Failure to vote in favor of the Merger will not
constitute the written notice required to be filed by a dissenting
shareholder. A shareholder voting in favor of the Merger will be deemed to
have waived his dissenter's rights.
A shareholder may not dissent as to less than all Shares, as to which he has
a right of dissent, held by him of record, that he owns beneficially. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all Shares of such owner, as to which such nominee or fiduciary has
a right to dissent, held of record by such nominee or fiduciary. Furthermore,
if the stock is owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, the demand should be made in that capacity, and if the
stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be made by or for all owners of record.
An authorized agent, including one or two joint owners, may execute the demand
for appraisal for a holder of record; however, such agent must identify the
record owner or owners and expressly state, in such demand, that the agent is
acting as agent for the record owner or owners of such shares.
A record holder, such as a broker, who holds Shares as a nominee for
beneficial owners, some of whom desire to demand appraisal, must exercise
appraisal rights on behalf of such beneficial owners with respect to the
Shares held for such beneficial owners. All notices of election to dissent
should be addressed to the Company at 150 Alhambra Circle, Coral Gables,
Florida 33134.
28
<PAGE>
At the time of filing a notice of election to dissent or within one month
thereafter, a dissenting shareholder must submit the certificate or
certificates representing his Shares to the Company, for notation thereon of
the election to dissent, after which such certificate will be returned to the
shareholder. Failure to submit the certificates may result in the loss of
dissenters' rights.
Within 15 days after the expiration of the period within which shareholders
file their notices of election to dissent, or within 15 days after the
Effective Time, whichever is later (but in no case later than 90 days after
the shareholders' authorization of the Merger), the Company is required to
make a written offer by registered mail (which, if the Merger has not been
consummated, may be conditioned upon such consummation) to each shareholder
who has filed a notice of election to dissent to pay for such holder's Shares
at a specified price which the Company considers to be their fair value. The
Company intends to make such written offer to each shareholder who has filed
such notice of election to dissent at a price it determines to be the fair
value of such holder's Shares. It is anticipated that the price for such offer
will be equivalent to the Offer price. Such offer will be accompanied by a
statement setting forth the aggregate number of Shares with respect to which
notices of election to dissent have been received and the aggregate number of
holders of such shares. If the Merger has been consummated at the time such
offer is made, such offer will also be accompanied by (a) advance payment to
each dissenting shareholder who has submitted his certificates for notation
thereon, of an amount equal to 80 percent of the amount of such offer, or (b)
as to each dissenting shareholder who has not yet submitted his certificates
for notation thereon, a statement that advance payment to him of an amount
equal to 80 percent of the amount of such offer will be made by the Company
promptly upon submission of his certificates. Acceptance of such advance
payment by a dissenting shareholder will not constitute a waiver of his
dissenter's rights. If within 30 days after the making of such written offer
by the Company, the Company and any dissenting shareholder agree upon the
price to be paid for his Shares, payment therefor will be made within 60 days
after the making of such offer or the Effective Time, whichever is later, upon
the surrender of the certificates for any such Shares represented by
certificates.
If the Company fails to make such an offer within the 15-day period
described above, or if it makes an offer but the Company and a dissenting
shareholder do not agree within 30 days of the making of the offer upon the
price to be paid for such shareholder's Shares, the Company must, within 20
days of such 15- or 30-day period, as the case may be, institute a special
proceeding in New York Supreme Court (the "Court"), to determine the rights of
dissenting shareholders and fix the fair value of their Shares. If the Company
does not institute such a proceeding within such 20-day period, any dissenting
shareholder may, within 30 days after such 20-day period, institute a
proceeding for the same purpose. If such proceeding is not instituted within
such 30-day period, dissenting shareholders who have not agreed with the
Company as to the price to be paid for their Shares will lose their
dissenter's rights, unless the Court, for good cause shown, shall otherwise
direct.
All dissenting shareholders, other than those who agreed with the Company as
to the price to be paid for their Shares, will be made parties to such
appraisal proceeding. The Court will determine whether each dissenting
shareholder is entitled to receive payment for his Shares and will then
determine the fair value of his Shares as of the close of business on the day
prior to the date the Merger was authorized by shareholders. In fixing the
fair value of the Shares, the Court will consider the nature of the
transaction giving rise to the shareholder's right to receive payment for his
Shares under the NYBCL, the effects of such transaction on the Company and its
shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable circumstances
and all other relevant factors. Within 60 days after the completion of any
such Court proceeding, the Company will be required to pay to each dissenting
shareholder the amount found to be due him, with interest thereon at such rate
as the Court finds to be equitable, upon surrender to the Company by such
shareholder of the certificates representing his Shares. If the Court finds
that the refusal of any dissenting shareholder to accept the offer of the
Company was arbitrary, vexatious or otherwise not in good faith, no interest
shall be allowed to such shareholder.
The parties to such appraisal proceeding will bear their own costs and
expenses, including the fees and expenses of their counsel and any experts
employed by them, except that the Court, in its discretion and under
29
<PAGE>
certain conditions, may apportion and assess all or any part of the costs,
expenses and fees incurred by the Company against any dissenting shareholders,
including any dissenting shareholders who have withdrawn their notices of
election to dissent from the Merger, who the Court finds were arbitrary,
vexatious or otherwise not acting in good faith in refusing any offer of
payment the Company may have made.
Any shareholder who has filed a notice of election will not, after the
Effective Time, have any of the rights of a shareholder with respect to his
Shares other than the right to be paid the fair value of his Shares under the
NYBCL. Any notice of election to dissent may be withdrawn by a dissenting
shareholder at any time prior to his acceptance in writing of any offer by the
Company but in no case later than 60 days after the Effective Time (or if the
Company fails to make a timely offer to pay such shareholder the fair value of
his Shares as provided above, at any time within 60 days after any date such
an offer is made), or thereafter with the written consent of the Company. Any
dissenting shareholder who withdraws his notice of election to dissent or
otherwise loses his dissenter's rights shall thereupon have only the right to
receive the consideration of each of his Shares provided in the Merger.
The Court may, in its discretion, apportion and assess all or any part of
the costs, expenses and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding against the Company if the
Court finds any of the following: (i) that the fair value of the Shares as
determined materially exceeds the amount which the Company offered to pay;
(ii) that no offer or required advance payment was made by the Company; (iii)
that the Company failed to institute the special proceeding within the period
specified therefor; or (iv) that the action of the Company in complying with
its obligations as provided in Section 623 of the NYBCL was arbitrary,
vexatious or otherwise not in good faith. In making any determination as
described in this paragraph, the Court may consider the dollar amount or the
percentage, or both, by which the fair value of the Shares as determined
exceeds the Company offer.
The enforcement by a shareholder of his right to receive payment for his
Shares in the manner provided in the NYBCL may exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership.
Any holder of Shares contemplating the exercise of dissenters' rights is
urged to review carefully the provisions of Section 623 of the NYBCL, attached
hereto as Schedule III. Failure by any holder of Shares to follow precisely
all of the steps required by the NYBCL to perfect dissenters' rights will
result in the loss of those rights.
In view of the complexities of the foregoing provisions of the NYBCL,
Company shareholders who are considering pursuing their dissenters' rights may
wish to consult with legal counsel.
Appraisal rights cannot be exercised at this time. The information set forth
above is for informational purposes only if appraisal rights become available
in connection with the Merger.
Shareholders who tender shares in the Offer will not be entitled to exercise
any appraisal rights with respect thereto but, rather, will receive the Offer
price.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Schedule VI to this Offer to Purchase. Such
summary is qualified in its entirety by reference to the Merger Agreement.
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 after the initial public announcement of Purchaser's intention
to commence the Offer. The obligation of Purchaser to accept for payment and
pay for Shares tendered pursuant to the Offer is subject to the satisfaction
of certain conditions that are described in "THE TENDER OFFER--Section 12.
Certain Conditions of the Offer." Without the prior consent of the Special
Committee, Purchaser has agreed that it shall not (i) decrease the price per
Share payable in the Offer, (ii) change the number
30
<PAGE>
of Shares to be purchased in the Offer, (iii) change the form of the
consideration payable in the Offer, (iv) amend or add to the conditions to the
Offer set forth in "THE TENDER OFFER--Section 12. Certain Conditions of the
Offer" or (v) make any other change in the terms or conditions of the Offer
which is adverse to the holders of Shares.
Pursuant to the Merger Agreement, Purchaser, subject to the terms and
conditions of the Offer (i) if so requested by the Company at the direction of
the Special Committee will extend the Offer for up to ten business days, in the
event upon the initial expiration date of the Offer, Purchaser has not accepted
for payment Shares pursuant to the Offer as a result of one or more of the
conditions to the Merger Agreement not having been satisfied or waived by
Purchaser, (ii) at its discretion may determine from time to time to extend the
Offer for no more than an aggregate of ten business days following the later of
November 20, 1997 and the first expiration date thereafter on which all of the
conditions set forth in "THE TENDER OFFER--Section 12. Certain Conditions of
the Offer" are satisfied or waived, if applicable, provided, however, that in
the event that the Offer is extended in accordance with this clause (ii), all
of the conditions of the Offer will be deemed to have been irrevocably
satisfied for all purposes of the Offer and may not be asserted as a basis for
not consummating the Offer and (iii) may, from time to time at its discretion,
extend the Offer in increments of up to ten business days each, if one or more
of the conditions set forth in "THE TENDER OFFER--Section 12. Certain
Conditions of the Offer" shall not have been satisfied or waived.
The Merger
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, and in accordance with the NYBCL, at the Effective Time,
Purchaser (or a wholly owned subsidiary of Purchaser formed for the purpose of
effecting the Merger) shall be merged with and into the Company. The Company
shall continue as the surviving corporation of the Merger and will become a
direct (or in the case that the Merger shall be consummated with a subsidiary
of Purchaser, an indirect) wholly owned subsidiary of Parent. At the Effective
Time, each Share issued and outstanding immediately prior to the Effective Time
held by shareholders (other than any Shares owned directly or indirectly by
Parent or Purchaser), shall be canceled and, subject to dissenters rights under
the NYBCL, shall be converted automatically into the right to receive from the
Company the Offer price. The Merger Agreement provides that the directors of
the Company immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation and that the officers of the Company
immediately prior to the Effective Time will remain officers of the Surviving
Corporation. The Merger Agreement provides that, at the Effective Time, the
Restated Certificate of Incorporation and By-laws of the Company will remain
unmodified.
The Merger Agreement provides that at the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, the Company or the
holders of any of the following securities and/or options:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned directly or indirectly by Parent, Shares held
in the treasury of the Company and Shares as to which the shareholder has
perfected its rights of appraisal) will be canceled and will be converted
automatically into the right to receive, in cash, from the Company an
amount equal to the Offer price payable, without interest, to the holder of
each such Share, upon surrender of the certificate that formerly evidenced
such Share;
(b) Each Share issued and outstanding immediately prior to the Effective
Time owned directly or indirectly by Parent, will remain issued and
outstanding and no payment or distribution will be made with respect
thereto;
(c) Each share of Common Stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time will be
canceled and no payment or distribution will be made with respect thereto;
(d) Each share of Common Stock held in the Company's treasury will be
canceled and no payment or distribution will be made with respect thereto;
and
31
<PAGE>
(e) Each outstanding option to purchase Shares outstanding immediately
prior to the Effective Time, whether or not then exercisable, will be
canceled and each holder of a canceled Stock Option will be entitled to
receive a payment (the "Exercise Amount") in cash from the Company, in
consideration for the cancellation of each such option, at the same time as
the consideration in the Merger is received by the holders of Shares, equal
to the product of (i) the number of Shares to be issued upon the exercise
of such option and (ii) the excess, if any, of the amount paid per Share
pursuant to the Offer over the exercise price per Share previously subject
to such Stock Option.
Agreements of Parent, Purchaser and the Company
If necessary in order to consummate the Merger, pursuant to the Merger
Agreement, the Company, acting through the Company Board, will, in accordance
with applicable law and the Company's Restated Certificate of Incorporation and
By-laws, (i) duly call, give notice of, convene and hold a special meeting of
its shareholders as soon as practicable following consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby (the "Shareholders' Meeting"), (ii) include
in the proxy statement for the Shareholders' Meeting the recommendation of the
Company Board and the Special Committee that the shareholders of the Company
approve and adopt the Merger Agreement and the transactions contemplated
thereby, subject to their respective fiduciary duties as advised by independent
counsel and (iii) use its reasonable best efforts to obtain such approval and
adoption. At the Shareholders' Meeting or any other meeting of shareholders
called for such purpose, each of Parent and Purchaser will cause all Shares
beneficially owned and acquired after the date of the Merger Agreement
including, without limitation, pursuant to the Offer, by it and its
subsidiaries to be voted in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated thereby.
The Merger Agreement provides that in the event Purchaser has acquired
ownership of such number of Shares which, when taken together with Shares
contributed to Purchaser by Parent, if any, constitutes at least 90% of the
then issued and outstanding Shares, then Purchaser, Parent and the Company may
take all necessary and appropriate action to cause the Merger to become
effective after such acquisition, without the approval of the Company's
shareholders in accordance with Section 905 of the NYBCL.
The Merger Agreement provides that the Company will, if required by
applicable law, as soon as practicable following consummation of the Offer,
file a proxy statement with the Commission under the Exchange Act (the "Proxy
Statement"), and will use its reasonable best efforts to have the Proxy
Statement cleared by the Commission and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Shareholders' Meeting at the earliest
practicable time.
Pursuant to the Merger Agreement, the Company has covenanted and agreed that,
between the date of the Merger Agreement and the Effective Time, unless
Purchaser otherwise agrees in writing, the businesses of the Company and its
subsidiaries will be conducted only in, and the Company and its subsidiaries
will not take any action except in, the ordinary course of business and in a
manner consistent with past practice; and the Company will use its reasonable
best efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and its subsidiaries and to
preserve the current relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations.
The Company on the one hand, and Parent and Purchaser on the other hand, are
each obligated under the Merger Agreement to give each other prompt notice of
(i) the occurrence, or nonoccurrence, of any event the occurrence, or
nonoccurrence, of which would be likely to cause any representation or warranty
contained in the Merger Agreement to be untrue or inaccurate in any material
respect and (ii) any failure of the Company, Parent or Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it thereunder.
32
<PAGE>
Pursuant to the Merger Agreement, the Company will, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company and each of its
subsidiaries (collectively, the "Indemnified Parties") against all costs and
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer, director, employee, fiduciary or agent, whether occurring before or
after the Effective Time, until the expiration of the statute of limitations
relating thereto (and will pay any expenses in advance of the final
disposition of such action or proceeding to each Indemnified Party to the
fullest extent permitted under the NYBCL, upon receipt from the Indemnified
Party to whom expenses are advanced of an undertaking to repay such advances
required under the NYBCL). In the event of any such claim, action, suit,
proceeding or investigation, (i) the Company will pay the fees and expenses of
counsel selected by the Indemnified Parties, which counsel will be reasonably
satisfactory to the Company, promptly after statements therefor are received
and (ii) the Company will cooperate in the defense of any such matter;
provided, however, that the Company will not be liable for any settlement
effected without its written consent (which consent will not be unreasonably
withheld); and provided further that the Company will not be obligated to pay
the fees and expenses of more than one counsel (plus appropriate local
counsel) for all Indemnified Parties in any single action except (x) that the
persons who served as directors of the Company who were not designees of
Parent or Purchaser shall be entitled to retain one additional counsel (plus
appropriate local counsel) to represent them at the expense of the Company and
(y) to the extent that two or more of such Indemnified Parties shall have
conflicting interests in the outcome of such action, in which case such
additional counsel (including local counsel) as may be required to avoid any
such conflict or likely conflict may be retained by the Indemnified Parties at
the expense of the Company, and provided further that, in the event that any
claim for indemnification is asserted or made within the period prior to the
expiration of the applicable statute of limitations, all rights to
indemnification in respect of such claim will continue until the disposition
of such claim. All rights pursuant to the foregoing indemnification provisions
of the Merger Agreement are deemed to be a contract between the Company and
each of the Indemnified Parties.
The Merger Agreement provides that the Company will maintain in effect for
six years from the Effective Time, if available, the current directors' and
officers' liability insurance policies maintained by the Company covering
those persons who are currently covered by such policies (provided that the
Company may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time.
Pursuant to the terms of the Merger Agreement and subject to the conditions
thereof, each of the parties thereto will (i) use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the Offer, the Merger Agreement and the other transactions contemplated
thereby and to fulfill the conditions to the Offer and the Merger. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of the Merger Agreement, the proper officers and
directors of each party to the Merger Agreement will use their reasonable best
efforts to take all such action.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties of the parties thereto, including representations by the Company,
Parent and Purchaser as to the enforceability of the Merger Agreement and by
the Company as to compliance with law, corporate status and capitalization and
the accuracy of financial statements and filings with the Commission (as
defined below).
33
<PAGE>
Conditions to the Merger
Under the Merger Agreement, the respective obligations of each party to
effect the Merger are subject to the satisfaction at or prior to the Effective
Time of the following conditions: (a) to the extent required by the NYBCL and
the Company's Restated Certificate of Incorporation and By-laws, the Merger
Agreement and the transactions contemplated thereby will have been approved
and adopted by the affirmative vote of the shareholders of the Company; (b) no
foreign, United States or state governmental authority or other agency or
commission or foreign, United States or state court of competent jurisdiction
will have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of preventing or prohibiting consummation of the Merger or the
effective operation of the business of the Company and its subsidiaries after
the Effective Time; and (c) Purchaser or its permitted assignee will have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition will not be applicable to the
obligations of Parent or Purchaser if, in breach of the Merger Agreement,
Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.
Termination
The Merger Agreement may be terminated and the Merger and the other
transactions contemplated by the Merger Agreement may be abandoned at any time
prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the shareholders of the Company: (a) by mutual written consent duly authorized
by the Boards of Directors of Parent and Purchaser and the Company at the
direction of the Special Committee; or (b) by either Purchaser or the Company
at the direction of the Special Committee if (i) the Effective Time has not
occurred on or before March 31, 1998; provided, however, that such right to
terminate the Merger Agreement will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (ii) any court of competent jurisdiction or other
governmental authority has issued an order, decree, ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable; or (c) by Purchaser (i) if due to an occurrence or circumstance
that would result in a failure to satisfy any condition to the Offer,
Purchaser has terminated the Offer or permitted the Offer to expire in
accordance with the terms of the Merger Agreement without having accepted any
Shares for payment thereunder unless such termination or failure to pay for
Shares has been caused by or resulted from the failure of Parent or Purchaser
to perform in any material respect any material covenant or agreement of
either of them contained in the Merger Agreement or the material breach by
Parent or Purchaser of any material representation or warranty of either of
them contained in the Merger Agreement or (ii) if prior to the purchase of
Shares pursuant to the Offer, the Special Committee has withdrawn or modified
in a manner adverse to Parent or Purchaser its approval or recommendation of
the Offer, the Merger Agreement or, the Merger or any transaction contemplated
by the Merger Agreement or has resolved to do any of the foregoing; or (d) by
the Company, upon direction of the Special Committee, if due to an occurrence
or circumstance that would result in a failure to satisfy any of the
conditions to the Offer, Purchaser has (i) failed to commence the Offer within
30 days following the date of the Merger Agreement, (ii) terminated the Offer
without having accepted any Shares for payment thereunder or (iii) failed to
pay for Shares pursuant to the Offer within 90 days following the commencement
of the Offer, unless such termination or failure to pay for Shares has been
caused by or resulted from the failure of the Company to perform in any
material respect any material covenant or agreement of it contained in the
Merger Agreement or the material breach by the Company of any material
representation or warranty of it contained in the Merger Agreement; or (e) by
the Company, upon direction of the Special Committee, (i) if any
representation or warranty of Parent or Purchaser in the Merger Agreement
which is qualified as to materiality will not be true and correct or any such
representation or warranty that is not so qualified will not be true and
correct in any material respect, in each case as if such representation or
warranty was made as of such time on or after the date of the Merger
Agreement, or (ii) Parent or Purchaser has failed to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant of Parent or Purchaser to be performed or complied with by it
under the Merger Agreement; or (f) by the Company upon direction of the
Special Committee if the Special Committee has withdrawn or modified its
approval or recommendation of the Offer, the Merger or the Merger
34
<PAGE>
Agreement. In the event of the termination of the Merger Agreement, the Merger
Agreement will forthwith become void.
Amendment and Waiver
The Merger Agreement may be amended in writing by the parties thereto by or
on behalf of their respective governing bodies (and, in the case of the
Company if directed by the Special Committee) at any time prior to the
Effective Time. Except as otherwise provided by the Merger Agreement, any
party thereto may (i) extend the time for the performance of any obligation or
other act of any other party thereto, (ii) waive any inaccuracy in the
representations and warranties contained therein and (iii) waive compliance
with any agreement or condition contained therein, other than the Minimum
Condition.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
Related Party Transactions
In considering the recommendation of the Company Board and the Special
Committee with respect to the Offer and the Merger, shareholders should be
aware that certain officers and directors of Parent and the Company have
interests in the Offer and the Merger which are described below and which may
present them with certain potential conflicts of interest. Currently, of the
ten (10) directors of the Company, two (2) are also directors of Parent and
two (2) are executive officers of Parent. Messrs. Alain Redheuil and Serge
Weinberg serve as directors of both the Company and Parent, and Mr. Pierre
Chareyre, a director of the Company, serves as the Chief Financial Officer,
and Mr. Redheuil serves as Chairman and Chief Executive Officer, of Parent.
See "--Beneficial Ownership of Shares" for information regarding Shares and
options to acquire Shares beneficially owned by Parent and certain of
Purchaser's executive officers or directors. See also "Schedule I--List of
Directors and Executive Officers of Parent, Purchaser and S.C.A. Financiere
Pinault."
Mr. Eric Lomas, the Chairman of the Company and an appointee to the Company
Board by Parent, is the president of The Hill Thompson Group Ltd., an
investment banking firm ("Hill Thompson"). Mr. Lomas is paid $75,000 per year
for his services as Chairman of the Company Board. Hill Thompson has performed
certain investment banking services for the Company in the past. In May 1997,
the Company engaged Hill Thompson to act as its financial advisor in
connection with the Company's efforts to dispose of its Utility Products
Division, for which it was paid a fee of $325,000 upon the consummation of
such disposition.
Mr. Gerald Morris, the chairman of the Special Committee, leases office
space, through December 31, 1997, from Hill Thompson, at what Mr. Lomas and
Mr. Morris each believes is a market rate. Mr. Morris and Mr. Lomas have made
several business investments together in the past and Hill Thompson has
provided investment banking services to a company with which Mr. Morris is
currently affiliated. According to Mr. Morris and Mr. Lomas, such investments
and such company are not affiliated with Parent, Purchaser, the Company or
their affiliates.
Shareholders also should be aware that Parent has certain interests that
present actual or potential conflicts of interest in connection with the Offer
and the Merger. As a result of Parent's current ownership of approximately
50.5% of the issued and outstanding Shares, and its designees constituting a
majority of the Company's directors, Parent may be deemed to control the
Company.
Nicolas Sokolow, a director of the Company is a partner in Sokolow, Dunaud,
Mercadier & Carreras ("SDMC"). During the years 1994, 1995 and 1996, SDMC
received from Parent fees for legal services in the French Franc approximate
dollar equivalent amounts of $50,000, $70,000 and $130,000 (FrF 5.1139=$1.00).
The Company and Parent have entered into a Services Agreement, dated as of
November 1, 1995 (the "Services Agreement"). The Services Agreement was
negotiated and approved by a special committee of the Company Board consisting
of persons who are neither officers nor directors of Parent or its affiliates
nor have a material financial relationship with Parent and its affiliates.
Under the Services Agreement, in consideration for the benefits to the Company
arising from its association with the worldwide business of Parent, including
without limitation, in matters relating to customers, suppliers, employers,
business methods and know-how and financial expertise, the Company has agreed
to pay to Parent $600,000 per year (commencing with 1995). In addition, Parent
has agreed to provide consulting services to the Company relating to specific
projects at the request of the
35
<PAGE>
Company at a rate 10% higher than the costs to Parent of providing such
services (including, in the case of employees of Parent, costs based on the
wages, social insurance payments and allocated overhead and general corporate
expenses attributable to such employees). Any payment for consulting services
must be approved by the Audit Committee of the Company Board (excluding any
member thereof who is an officer or director of Parent or any of its affiliates
or a person that has a material financial relationship with Parent or any of
its affiliates). During 1996, the Company requested from Parent services valued
at $200,000 relating to the development of training programs, logistics
consulting, enhancement of cash management and treasury systems and a global
agreement on implementation of an inventory management system. In addition,
pursuant to the agreement, Parent consented to the use by the Company of the
name "Rexel". The Services Agreement is effective through December 31, 1997,
subject to automatic renewal for successive one year terms unless terminated on
30 days notice given by either party prior to the commencement of a renewal
term.
The other business contacts between the Company and Parent relate to the
purchase of Shares by Parent and its affiliates and certain arrangements
regarding representation on the Company Board and related matters. Such
relationships are set forth in the Purchase Agreement, the Investment Agreement
(as amended) and the Additional Purchase Agreement. See "SPECIAL FACTORS--
Background of the Offer--Business of the Company and Arrangements Between
Parent, Purchaser and the Company."
The Special Committee and the Company Board were aware of these actual and
potential conflicts of interest and considered them along with the other
matters described under "SPECIAL FACTORS--Background of the Offer."
Beneficial Ownership of Shares
The following table sets forth certain information, as of October 8, 1997,
regarding the ownership of Shares by each person known by Purchaser to be the
beneficial owner of more than 5% of the issued and outstanding Shares, and any
director or executive officer of Parent or Purchaser who is the beneficial
owner of Shares or Stock Options issued by the Company:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SUBJECT PERCENTAGE OF
SHARES TO OPTIONS COMMON STOCK
BENEFICIALLY ISSUED BY THE BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED COMPANY OWNED
------------------------ ------------ -------------- -------------
<S> <C> <C> <C>
S.C.A. FINANCIERE PINAULT........... 13,161,481 -- 50.5
ARTEMIS S.A......................... 13,161,481 -- 50.5
SOCIETE ANONYME PROFESSIONELLE DE
DISTRIBUTION....................... 13,161,481 -- 50.5
PINAULT-PRINTEMPS-REDOUTE S.A....... 13,161,481 -- 50.5
Parent.............................. 13,161,481 -- 50.5
Purchaser........................... 4,646,994 -- 17.8
Francois Pinault.................... 13,161,481 -- 50.5
Alain Redheuil...................... -- 10,000 *
Serge Weinberg...................... 1,000 10,000 *
Bernard Clerc....................... 2,500 -- *
Pierre Chareyre..................... -- 10,000 *
Michel Rivaillon.................... 79 -- *
</TABLE>
- --------
* Less than 1%.
Neither Parent nor Purchaser has effected any transactions in Shares during
the past 60 days.
Other than automatic purchases effected for the benefit of certain officers,
employees or affiliates thereof pursuant to the Company's 401(k) plan, to the
best of Parent's knowledge, no officer or director of Parent or Purchaser has
effected any transaction in Shares during the past 60 days.
36
<PAGE>
To the best of Parent's knowledge, it is the present intention of each
officer and director of Parent or Purchaser who owns Shares to tender such
Shares in connection with the Offer.
According to Parent's records, since January 1, 1995, Purchaser and Parent
have purchased the following number of Shares at the following average price
per Share:
<TABLE>
<CAPTION>
AVERAGE
NUMBER OF PURCHASE
SHARES PRICE HIGH LOW
--------- -------- ------ ------
<S> <C> <C> <C> <C>
1995:
First Quarter................................ 372,300 $ 6.12 $ 7.25 $ 5.86
Second Quarter............................... 442,000 $ 7.61 $ 9.50 $ 6.88
Third Quarter................................ 201,400 $ 9.88 $10.63 $ 9.50
Fourth Quarter............................... 150,700 $11.54 $14.63 $10.00
1996:
First Quarter................................ 230,100 $12.32 $13.88 $11.63
Second Quarter............................... 321,600 $11.91 $14.63 $11.38
Third Quarter................................ 416,700 $13.87 $15.75 $13.75
Fourth Quarter............................... 218,500 $14.67 $15.88 $13.38
1997:
First Quarter................................ 227,000 $18.81 $20.13 $15.63
Second Quarter............................... 86,700 $17.72 $19.00 $17.13
Third Quarter................................ -- -- -- --
Fourth Quarter............................... -- -- -- --
</TABLE>
37
<PAGE>
THE TENDER OFFER
1. Terms of the Offer. Upon the terms and subject to the conditions of the
Offer, Purchaser will accept for payment and pay for all Shares which are
validly tendered prior to the Expiration Date and not withdrawn in accordance
with Section 4. The term "Expiration Date" means 12:00 midnight, New York City
time, on November 20, 1997, unless and until Purchaser, subject to the terms
of the Merger Agreement, shall have extended the period of time during which
the Offer is open, in which event the term "Expiration Date" shall refer to
the latest time and date at which the Offer, as so extended by Purchaser,
shall expire.
Pursuant to the Merger Agreement, Purchaser, subject to the terms and
conditions of the Offer (i) if so requested by the Company at the direction of
the Special Committee, will extend the Offer for up to ten business days in
the event upon the initial expiration date of the Offer Purchaser has not
accepted for payment Shares pursuant to the Offer as a result of one or more
of the conditions to the Merger Agreement not having been satisfied or waived
by Purchaser, (ii) at its discretion may determine from time to time to extend
the Offer for no more than an aggregate of ten business days following the
later of November 20, 1997 and the first expiration date thereafter on which
all of the conditions set forth in Section 12 are satisfied or waived, if
applicable, provided, however, that in the event that the Offer is extended in
accordance with this clause (ii), all of the conditions of the Offer will be
deemed to have been irrevocably satisfied for all purposes of the Offer and
may not be asserted as a basis for not consummating the Offer and (iii) may,
from time to time at its discretion, extend the Offer in increments of up to
ten business days each, if one or more of the conditions set forth in Section
12 shall not have been satisfied or waived.
Purchaser expressly reserves the right to amend the terms and conditions of
the Offer; provided that pursuant to the Merger Agreement, except as provided
in the preceding paragraph, without the prior consent of the Special
Committee, Purchaser shall not (and Parent shall not cause Purchaser to): (i)
decrease the Offer price, change the form of consideration therefor, or change
the number of Shares sought pursuant to the Offer; (ii) amend or add to the
conditions set forth in Section 12; or (iii) amend any other term or condition
of the Offer which is adverse to holders of Shares.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN SECTION 12,
INCLUDING SATISFACTION OF THE MINIMUM CONDITION. If any such condition is not
satisfied prior to the expiration of the Offer, Purchaser may, subject to the
terms of the Merger Agreement: (i) terminate the Offer and return all tendered
Shares to tendering shareholders; (ii) extend the Offer and, subject to
withdrawal rights as set forth in Section 4, retain all such Shares until the
expiration of the Offer as so extended; (iii) other than as described in
Section 12, waive such condition and, subject to any requirement to receive
written consent from the Company pursuant to the Merger Agreement, purchase
all Shares validly tendered and not withdrawn by the Expiration Date; or (iv)
delay acceptance for payment of (whether or not the Shares have theretofore
been accepted for payment), or payment for, any Shares tendered and not
withdrawn, subject to applicable law, until satisfaction or waiver of the
conditions to the Offer. In the Merger Agreement, Purchaser has agreed,
subject to the terms and conditions of the Offer, to pay promptly for all
Shares duly tendered thereunder after the expiration time of the Offer. For a
description of Purchaser's right to extend the period of time during which the
Offer is open, and to amend, delay or terminate the Offer, see Section 13.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other related materials will be mailed to record holders of Shares and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the shareholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment. 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 and not properly
withdrawn by the
38
<PAGE>
Expiration Date as soon as practicable after the later of (i) the Expiration
Date and (ii) the satisfaction or waiver of the conditions set forth in
Section 12. For a description of Purchaser's right to terminate the Offer and
not accept for payment or pay for Shares or to delay acceptance for payment or
payment for Shares, see Section 13.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written notice
to the Depositary of its acceptance of the tender of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders. In all cases, payment
for Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or of 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 Section
3)), a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) (or, in the case of a book-entry transfer, an
Agent's Message (as defined below in Section 3)) and any other documents
required by the Letter of Transmittal. For a description of the procedure for
tendering Shares pursuant to the Offer, see Section 3. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID BY PURCHASER ON THE CONSIDERATION PAID FOR SHARES
PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer whether or not such shares were tendered prior
to such increase in consideration.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or,
in the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at one of the Book-Entry Transfer
Facilities), without expense to the tendering shareholder, as promptly as
practicable after the expiration or termination of the Offer.
3. Procedures for Tendering Shares. To tender Shares pursuant to the Offer,
either: (a) a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof), with any required signature guarantees,
and any other documents required by the Letter of Transmittal must be received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date and either: (i) certificates
for Shares to be tendered must be received by the Depositary; or (ii) such
Shares must be delivered to the Depositary pursuant to the procedures for book
entry transfer described below (and a confirmation of such delivery received
by the Depositary, including an Agent's Message (as defined below) if the
tendering shareholder has not delivered a Letter of Transmittal), in each case
prior to the Expiration Date; or (b) the tendering shareholder must comply
with the guaranteed delivery procedures described below. The term "Agent's
Message" means a message transmitted by a Book-Entry Transfer Facility to and
received by the Depositary and forming a part of a book-entry confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgement 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 the Company may enforce such agreement against
such participant.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each of The Depository Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "Book-Entry Transfer
Facilities") for purposes of the Offer within two (2) business days after the
date of this Offer to Purchase, and any financial institution that is a
participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with the procedures of
such Book-Entry Transfer Facility. However, although delivery of Shares may be
effected through book-entry transfer, the Letter of Transmittal (or manually
signed facsimile thereof) properly completed and duly executed, together with
any required signature guarantees or an Agent's Message and any other required
documents, must, in any case, be received by the Depositary at
39
<PAGE>
one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the guaranteed delivery procedures described
below must be complied with. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Except as provided below, all signatures on all Letters of Transmittal must
be guaranteed by a recognized member of a Medallion Signature Guarantee
Program (each of the foregoing, an "Eligible Institution"). Signatures on a
Letter of Transmittal need not be guaranteed: (a) if the Letter of Transmittal
is signed by a registered holder of the Shares tendered therewith, and such
holder has not completed either the box entitled "Special Payment
Instructions," or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal; or (b) if such Shares are tendered for the account of
an Eligible Institution.
If the certificates evidencing Shares are registered in the name of a person
other than the signer of the Letter of Transmittal, or if payment is to be
made or certificates for Shares which are not tendered or accepted for payment
are to be returned to a person other than the registered holder of the
certificates surrendered, then such tendered certificates must be endorsed or
accompanied by appropriate stock powers signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the
signature(s) on the certificate or stock powers guaranteed as described above.
See Instruction 5 of the Letter of Transmittal.
If a shareholder desires to tender Shares pursuant to the Offer, and such
holder's certificates for Shares are not immediately available, or such
shareholder cannot deliver such Shares and all other required documents to
reach the Depositary on or prior to the Expiration Date, or such shareholder
cannot complete the procedure for book-entry transfer on a timely basis, such
Shares may nevertheless be tendered if all the following conditions are
satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date as provided below; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility), together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) or, in the
case of book-entry, an Agent's Message, with any required signature
guarantees and any other documents required by the Letter of Transmittal,
are received by the Depositary within three (3) trading days after the date
of execution of the Notice of Guaranteed Delivery. A "trading day" is any
day on which the New York Stock Exchange ("NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile transmission, or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Under the U.S. federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain shareholders
pursuant to the Offer. In order to avoid such backup withholding, each
tendering shareholder must provide the Depositary with such shareholder's
correct taxpayer identification number and certify that such shareholder is
not subject to backup U.S. federal income tax withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal (see Instruction 10
of the Letter of Transmittal) or by filing a Form W-9 with the Depositary
prior to any such payments. If the shareholder is a nonresident alien or
foreign entity not subject to backup withholding, the shareholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
40
<PAGE>
By executing a Letter of Transmittal as set forth above, a tendering
shareholder irrevocably appoints designees of Purchaser as the shareholder's
attorneys in fact and proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
shareholder's rights with respect to the Shares tendered by the shareholder
and accepted for payment by Purchaser (and any and all other Shares or other
securities issued or issuable in respect of such Shares on or after the date
of the Merger Agreement). All such proxies and powers of attorney shall be
irrevocable and coupled with an interest in the tendered Shares. Such
appointment is effective only upon acceptance for payment of the Shares by
Purchaser. Upon such acceptance for payment, all prior proxies and consents
granted by such shareholder with respect to such Shares and other securities
will, without further action, be revoked, and no subsequent proxies or powers
of attorney may be given nor any subsequent written consent executed by such
shareholder (and, if given or executed, will be deemed to be ineffective). The
designees of Purchaser will be empowered to exercise all voting and other
rights of such shareholder as they in their sole discretion may deem proper at
any annual, special or adjourned meeting of the Company's shareholders, by
written consent or otherwise. Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser is able to exercise full
voting and other rights with respect to such Shares (including voting at any
meeting of shareholders then scheduled or acting by written consent without a
meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's representation
and warranty that such shareholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tendered Shares
will be determined by Purchaser, in its sole discretion, which determination
shall be final and binding. Purchaser reserves the absolute right to reject
any or all tenders of any Shares determined by it not to be in proper form or
the acceptance for payment of, or payment for which may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right
to waive any defect or irregularity in any tender of Shares. No tender of
Shares will be deemed to have been properly made until all defects and
irregularities relating thereto have been cured or waived. Purchaser's
interpretation of the terms and conditions of the Offer in this regard will be
final and binding. None of Purchaser, Parent, the Depositary, the Dealer
Manager, the Information Agent, or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
4. Withdrawal Rights. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after December 21, 1997,
unless theretofore accepted for payment as provided in this Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If the Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with (except in the case of Shares
tendered by an Eligible Institution) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering holder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn
securities. Withdrawals may not be rescinded, and Shares withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by again following one of the procedures
described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser,
41
<PAGE>
Parent, the Depositary, the Dealer Manager, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. Certain U.S. Federal Income Tax Consequences. The following summary
addresses the material U.S. federal income tax consequences to holders of
Shares who exchange their Shares for cash in the Offer. The summary does not
address all aspects of U.S. federal income taxation that may be relevant to
particular holders of Shares in light of their personal circumstances or to
holders subject to special treatment under the Internal Revenue Code of 1986,
as amended (the "Code") (including financial institutions, broker-dealers,
insurance companies, tax-exempt organizations, holders who received their
Shares through the exercise of employee stock options or otherwise as
compensation, holders who are not citizens or residents of the United States
and holders who hold their Shares as part of a hedge, straddle or conversion
transaction) nor does this summary address the effect of any foreign, state,
local or other tax laws. The discussion assumes that each holder of Shares
holds such Shares as a capital asset within the meaning of Section 1221 of the
Code.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. In general, a
shareholder who receives cash for Shares pursuant to the Offer will recognize
gain or loss for federal income tax purposes equal to the difference between
the amount of cash received in exchange for the Shares and such shareholder's
adjusted tax basis in such Shares. Such gain or loss will be capital gain or
loss, and will be long-term capital gain or loss if the holder has held the
Shares for more than one year. The maximum regular federal income tax rate
applicable to capital gains recognized by an individual is 20% if the
individual has held the Shares for more than 18 months, 28% if the individual
has held the Shares for more than 12 months but not more than 18 months and
39.6% if the individual has held the Shares for 12 months or less. The maximum
federal income tax rate applicable to all capital gains recognized by the
corporation is 35%. Certain limitations exist on the deductibility of capital
losses by corporate and individual taxpayers.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE OFFER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS INCLUDING THE FEDERAL ALTERNATIVE MINIMUM
TAX.
6. Price Range of Shares; Dividends. The Shares are listed and principally
traded on the NYSE under the symbol "RXL." The following table sets forth, for
the quarters indicated, the high and low prices per Share on NYSE as reported
by the Dow Jones News Service:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995:
First Quarter................................................. $ 7.25 $ 5.86
Second Quarter................................................ 9.50 6.88
Third Quarter................................................. 10.63 9.50
Fourth Quarter................................................ 14.63 10.00
1996:
First Quarter................................................. 13.88 11.63
Second Quarter................................................ 14.63 11.38
Third Quarter................................................. 15.75 13.75
Fourth Quarter................................................ 15.88 13.38
1997:
First Quarter................................................. 20.13 15.63
Second Quarter................................................ 19.00 16.38
Third Quarter................................................. 21.50 17.13
Fourth Quarter (through October 22, 1997)..................... 22.31 21.31
</TABLE>
42
<PAGE>
On August 28, 1997, the last full trading day prior the public announcement
of Parent's consideration of a possible acquisition of all remaining
outstanding Shares of the Company not owned by Parent Group, the closing price
per Share as reported on the NYSE was $18.87. On October 17, 1997, the last
full trading day prior to announcement of the Offer, the closing price per
Share as reported on the NYSE was $21.31. On October 22, 1997, the last full
trading day prior to commencement of the Offer, the closing price per Share as
reported on the NYSE was $22.25.
No cash dividends have been paid on the Shares since the last quarter of
1991.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. 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. Purchaser assumes no
responsibility for the accuracy or completeness of the information concerning
the Company furnished by the Company or contained in such documents and
records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information
but which are unknown to Purchaser or Parent.
General. The Company is a New York corporation with its principal executive
offices located at 150 Alhambra Circle, Coral Gables, Florida 33134. The
telephone number of the Company at such offices is (305) 446-8000. The Company
is engaged in the wholesale distribution of electrical parts and supplies,
operating approximately 200 electrical distribution locations in 22 states and
the Bahamas. The Company manages its business through two principal regional
organizations: the Eastern Region and the Western Region. In 1996, the Company
served over 82,000 customers, with no single customer accounting for more than
2% of total annual sales. The products sold by the Company are purchased from
over 4,300 manufacturers and other suppliers, the two largest of which
accounted in the aggregate for approximately 15% of the Company's total
purchases during 1996, with none of the remainder accounting for more than 4%.
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 December 31, 1996 (the "Form 10-K") and
the unaudited financial statements contained in the Company's June 30, 1997
and 1996 Forms 10-Q (the "Forms 10-Q"). More comprehensive financial
information is included in the Form 10-K and the Forms 10-Q and other
documents filed by the Company with the Commission. 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 below. In addition, Schedules IV and V
hereto set forth the Company's audited financial statements for the fiscal
year ended December 31, 1996 and the Company's unaudited financial statements
for the periods ended June 30, 1997 and June 30, 1996, respectively.
43
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
INCOME STATEMENT DATA
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ------------- ----------------- -----------------
(DOLLARS, IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales............... $ 666,834 $ 556,648 $ 1,159,446 $ 1,120,688
Income from continuing
operations before
income tax............. 27,714 23,530 51,124 37,679
Income taxes provision.. 11,778 10,353 21,728 16,579
Extraordinary charge,
net of income tax
benefit of $837........ -- -- -- (1,325)
Net income from
continuing operations.. 15,936 13,177 29,396 19,775
Income per Share from
continuing operations.. 0.61 0.51 1.13 0.85
Dividends paid on Common
Shares................. -- -- -- --
Average of number of
common and common
equivalent Shares...... 26,152,000 26,000,000 25,986,000 24,949,000
Ratio of earnings to
fixed charges.......... 9.7 10.0 10.8 5.7
</TABLE>
44
<PAGE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 16,190 $ 13,033 $ 14,396 $ 10,013
Accounts and notes
receivable--net, less
allowance for doubtful
accounts.............. 187,406 149,601 156,450 138,604
Inventories............ 125,346 103,496 117,657 102,239
Prepaid expenses and
other current assets.. 8,598 7,657 10,423 8,344
Income taxes
receivable............ -- 68 -- --
Deferred income taxes.. 4,088 3,868 3,747 3,849
-------- -------- -------- --------
Total current assets... 341,628 277,723 302,673 263,049
-------- -------- -------- --------
Investments and
noncurrent
receivables............ 192 905 814 1,069
Fixed assets--net....... 47,511 48,962 48,218 49,453
Other assets............ 3,503 2,282 3,286 2,135
Deferred income taxes... -- 1,127 -- --
Goodwill, net of
accumulated
amortization........... 91,690 58,132 73,947 58,953
-------- -------- -------- --------
$484,524 $389,131 $428,938 $374,659
======== ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt........ $ 37,100 $ 15,000 $ 25,500 $ 8,050
Current portion of
long-term debt........ 7,708 7,761 7,737 7,757
Accounts and notes
payable--trade, and
other liabilities..... 188,293 151,508 161,377 147,031
Income taxes payable... 4,721 0 2,186 3,725
Deferred income taxes.. -- 4 -- --
-------- -------- -------- --------
Total current
liabilities........... 237,822 174,273 196,800 166,563
-------- -------- -------- --------
Long-term debt.......... 22,053 29,859 29,582 37,219
Other long-term
liabilities............ 5,936 3,044 3,476 3,363
Deferred income taxes... 2,774 2,393 2,973 1,195
Commitments and
contingencies
Shareholders' equity:
Preferred stock
(authorized 2,000
shares, none issued).. -- -- -- --
Common stock............ 26,655 26,271 26,314 26,258
Capital surplus......... 98,261 94,278 94,706 94,206
Retained earnings....... 95,912 63,757 79,976 50,580
Treasury stock, at
cost................... (4,889) (4,744) (4,889) (4,725)
Total shareholders'
equity............... 215,939 179,562 196,107 166,319
-------- -------- -------- --------
$484,524 $389,131 $428,938 $374,659
======== ======== ======== ========
Book value per Common
Share.................. $ 8.29 $ 7.00 $ 7.63 $ 6.48
</TABLE>
45
<PAGE>
CASH FLOW DATA
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996 DECEMBER 31, 1996 DECEMBER 31, 1995
------------- ------------- ----------------- -----------------
(IN THOUSANDS,)
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES... 23,225 6,399 27,011 41,763
-------- ------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES -- -- -- --
Capital expenditures... (2,445) (2,584) (4,634) (5,052)
Acquisitions of
businesses, net of
cash acquired......... (25,146) -- (24,490) (1,720)
Proceeds from sale of
net assets............ -- -- -- 4,050
Other investing
activities............ 1,738 (137) (199) 761
-------- ------- -------- --------
NET CASH (USED IN)
PROVIDED BY INVESTING
ACTIVITIES............. (25,853) (2,721) (29,323) (1,961)
-------- ------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES -- -- -- --
Net borrowings
(payments) under line
of credit
arrangements.......... 11,600 6,950 15,150 8,050
Proceeds from exercise
of stock options...... 2,518 85 225 51
Redemption of 7%
Convertible
Subordinated
Debentures............ -- -- -- (36,780)
Acquisition of treasury
Shares................ -- (19) -- --
Other debt payments and
financing activities,
net................... (9,696) (7,674) (8,680) (24,953)
-------- ------- -------- --------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES............. 4,422 (658) 6,695 (53,632)
-------- ------- -------- --------
Net increase (decrease)
in cash and cash
equivalents............ 1,794 3,020 4,383 (13,830)
Cash and cash
equivalents at
beginning of year...... 14,396 10,013 10,013 23,843
-------- ------- -------- --------
Cash and cash
equivalents at end of
year................... $ 16,190 $13,033 $ 14,396 $ 10,013
======== ======= ======== ========
</TABLE>
46
<PAGE>
SHAREHOLDERS' EQUITY DATA
<TABLE>
<CAPTION>
UNREALIZED
LOSSES ON
MARKETABLE TREASURY
COMMON CAPITAL RETAINED EQUITY STOCK, AT
STOCK SURPLUS EARNINGS SECURITIES COST TOTAL
------- ------- -------- ---------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994................... 24,705 81,354 30,805 (875) (4,537) 131,452
------- ------- ------- ---- ------- --------
Net Income.............. -- -- 19,775 -- -- 19,775
Issuance of 1,517,000
shares upon conversion
of 7% Convertible
Subordinated
Debentures............. 1,517 13,001 -- -- -- 14,518
Expenses incurred in
connection with
redemption of 7%
Convertible
Subordinated
Debentures............. -- (352) -- -- -- (352)
Issuance of 35,900
shares pursuant to
Stock Incentive Plan
and 18,048 treasury
shares acquired as
payment................ 36 203 -- -- (188) 51
Marketable equity
security adjustment.... -- -- -- 875 -- 875
------- ------- ------- ---- ------- --------
BALANCE AT DECEMBER 31,
1995................... 26,258 94,206 50,580 -- (4,725) 166,319
------- ------- ------- ---- ------- --------
Net Income.............. -- -- 29,396 -- -- 29,396
Issuance of 55,500
shares pursuant Stock
Incentive Plan and
10,500 treasury shares
acquired as payment.... 56 315 -- -- (146) 225
Acquisition of 1,600
treasury shares........ -- -- -- -- (18) (18)
Tax benefit on exercise
of non-qualified stock
options................ -- 185 -- -- -- 185
------- ------- ------- ---- ------- --------
BALANCE AT DECEMBER 31,
1996................... $26,314 $94,706 $79,976 -- $(4,889) $196,107
------- ------- ------- ---- ------- --------
</TABLE>
47
<PAGE>
Recent Financial Results.
On October 21, 1997, the Company announced that earnings per share for the
third quarter of 1997 increased to $.34 per share from $.29 per share in the
third quarter of 1996 on a 19.7% increase in net income from $7.5 million to
$9.0 million. Earnings per share for the nine months ended September 30, 1997
increased to $.95 per share from $.80 for the first nine months of 1996 on a
20.5% increase in net income from $20.7 million to $24.9 million.
Sales for the third quarter ended September 30, 1997 were up 21.6% (9.7% on
same branch sales) to $361.7 million compared to third quarter 1996 sales of
$297.4 million. For the nine months ended September 30, 1997, sales were up
20.4% (7.8% on same branch sales) to $1,028.6 million from $854.0 million for
the first nine months of 1996.
Sales for 1997 include $115.5 million and $43.3 million for the nine months
and quarter ended September 30, 1997, respectively, for Utility Products
Supply, Cable & Connector Warehouse, Southland Electrical and Chemco Electric
Supply, acquired, respectively, on August 7, 1996, November 12, 1996, January
17, 1997 and April 29, 1997.
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. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed
to the Company's shareholders and filed with the Commission. 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 the 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.
8. Certain Information Concerning Parent and Purchaser. Parent (formerly
known as Compagnie de Distribution de Materiel Electrique) is a societe
anonyme organized under the laws of the Republic of France. Its registered
office address is 25, rue de Clichy, 75009 Paris, France. Parent is engaged
principally in the distribution of electrical components and industrial
supplies. Parent is an indirect subsidiary of Pinault-Printemps-Redoute S.A.,
a societe anonyme organized under the laws of the Republic of France.
Purchaser is a New York corporation established on December 5, 1986, and has
not carried on any activities since 1992 other than the acquisition and
ownership of Shares and the execution of the Merger Agreement. Purchaser is a
direct, wholly owned subsidiary of Parent.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Parent and Purchaser and certain other information are set forth
in Schedule I hereto.
Set forth below is a summary of certain information with respect to Parent
for and as at the end of its fiscal years ended December 31, 1996 and December
31, 1995 and the six months ended June 30, 1997, excerpted or derived from
financial statements, copies of which have been filed as an exhibit to the
Purchaser's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1").
Copies of such exhibit may be obtained from the offices of the Commission in
the manner set forth in Section 7.
48
<PAGE>
REXEL S.A.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS DECEMBER 31,
ENDED -------------
JUNE 30, 1997 1996 1995
------------- ------ ------
(UNAUDITED)
(IN MILLIONS OF FRENCH
FRANCS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues...................................... 13,684 24,395 22,084
Income (loss) before extraordinary item............. 603 1,208 1,011
Net Income.......................................... 281 611 520
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets........................................ 16,191 14,821 12,052
Working Capital..................................... 4,493 4,340 3,820
Long-term debt...................................... N.A. 871 998
Shareholders' equity................................ 5,292 5,000 4,328
</TABLE>
The foregoing data were prepared in accordance with accounting principles
accepted in France which may not in all respects be in accordance with
accounting principles generally accepted in the United States.
The consolidated financial statements of Parent are published in French
francs ("Frf"). The following table sets forth, for the periods and dates
indicated, certain information concerning the exchange rate of French francs
into U.S. dollars based upon the noon buying rate in New York City for cable
transfers in foreign currencies as determined from publicly available sources:
(FRF PER U.S. DOLLAR)
<TABLE>
<CAPTION>
PERIOD AT DECEMBER 31 AVERAGE RATE
------ -------------- ------------
<S> <C> <C>
1996........................................... 5.244 5.114
1995........................................... 4.909 4.986
</TABLE>
The noon buying rate on October 22, 1997 was FRF5.986 = $1.00
Purchaser and Parent own 13,161,481 Shares, representing approximately 50.5%
of the 26,055,290 Shares issued and outstanding at September 30, 1997.
Except as described in this Offer to Purchase, (i) none of Parent,
Purchaser, nor, to the best knowledge of Parent and Purchaser, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of Parent or Purchaser or any of the persons so
listed 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 or 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, none of Parent, Purchaser nor, to the best knowledge of
Parent and Purchaser, any of the persons listed in Schedule I to this Offer to
Purchase, 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 call, 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 January 1, 1995, none of Parent, Purchaser nor, to the best
knowledge of Parent and Purchaser, any of the persons listed on
49
<PAGE>
Schedule I hereto, 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
January 1, 1995, there have been no contacts, negotiations or transactions
between Parent or Purchaser or any of their subsidiaries or, to the best
knowledge of Parent and Purchaser, any of the persons listed in Schedule I to
this Offer to Purchase, on the one hand, and the Company or its affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender
offer or other acquisition of securities, an election of directors or a sale
or other transfer of a material amount of assets.
Parent and Purchaser, with respect to their ownership of Shares, are subject
to the informational reporting requirements of the Exchange Act and in
accordance therewith file reports and other information with the Commission.
Such reports 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
the 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. 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 Parent and Purchaser
may also be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
9. Financing of the Offer and the Merger. The total amount of funds required
by Parent and Purchaser to consummate the Offer and the Merger and to pay
related fees and expenses is estimated to be approximately $310 million.
Parent shall use funds from its or its affiliate's existing undrawn credit
facilities granted to Parent, Purchaser or Parent's controlling shareholder,
Pinault--Printemps--Redoute, S.A. The decision as to the allocation of funding
among existing or anticipated credit facilities will be made based on Parent's
review from time to time of the advisability of particular actions, as well as
on prevailing interest rates and financial and other economic conditions and
such other factors as Parent may deem appropriate. The terms of any such
financing will be fixed prior to consummation of the Offer.
Parent intends to refinance a portion of the indebtedness related to the
Offer from proceeds of a public offering of shares through the French capital
market to be commenced, market conditions permitting, following the successful
completion of the Offer. 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.
10. Dividends and Distributions. If, on or after October 17, 1997, the
Company should declare or pay any dividend on the Shares or make any other
distribution (including the issuance of additional shares of capital stock
pursuant to a stock dividend or stock split, the issuance of other securities
or the issuance of rights for the purchase of any securities) with respect to
the Shares that is payable or distributable to shareholders of record on a
date prior to the transfer to the name of Purchaser or its nominee or
transferee on the Company's stock transfer records of the Shares pursuant to
the Offer, then, without prejudice to Purchaser's rights under "THE TENDER
OFFER--Section 12. Certain Conditions of the Offer," (i) the purchase price
per Share payable by Purchaser pursuant to the Offer will be reduced (subject
to the terms and conditions of the Merger Agreement) to the extent any such
dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution or right shall be received and held by the tendering shareholder
for the account of Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
Purchaser, accompanied by appropriate documentation of transfer. Pending such
remittance and subject to applicable law, Purchaser will be entitled to all
the rights and privileges as owner of any such non-cash dividend, distribution
or right and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by Purchaser in its
sole discretion.
50
<PAGE>
11. Effect of the Offer on the Market for the Shares; the New York Stock
Exchange, the Pacific Stock Exchange and Exchange Act Registration. The
purchase of Shares by Purchaser pursuant to the Offer will reduce the number
of Shares that might otherwise trade publicly and will reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public. Following consummation of the
Offer, the Company may fail to meet certain of the criteria for continued
listing on the NYSE and the PSE and be subject to delisting. The criteria for
listing on the NYSE include a requirement that the Company have at least 1,200
beneficial shareholders of 100 Shares or more, and at least 600,000 publicly
held Shares. The criteria for continued listing on the PSE include that the
Company have at least 500,000 publicly held Shares and at least 800 public
beneficial shareholders if the Company has at least 500,000 and less than
1,000,000 Shares publicly held or a minimum of 400 public beneficial holders
if the Company has at least 1,000,000 Shares publicly held.
In the event the Shares are no longer listed on the NYSE or the PSE,
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.
The Shares are currently "margin securities," as such term is defined under
the rules 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 such securities.
Depending upon factors similar to those described above regarding listing and
market quotations, following the Offer it is possible that the Shares might no
longer constitute "margin securities" for purposes of the margin regulations
of the Federal Reserve Board, in which event such Shares could no longer be
used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. The termination of the registration
of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and
to the Commission and would make certain provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with shareholders'
meetings and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares.
In addition, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or be eligible
for NYSE reporting. Parent currently intends to cause the Company to terminate
the registration of the Shares under the Exchange Act as soon as practicable
after consummation of the Offer if the requirements for termination of
registration are met.
12. Certain Conditions of the Offer. Purchaser shall not accept for payment
any Shares tendered pursuant to the Offer unless 6,760,905 Shares (which,
constitute a majority of the then issued and outstanding Shares not owned by
Parent or Purchaser on a fully diluted basis), other than Shares owned
directly or indirectly by Parent shall have been validly tendered and not
withdrawn prior to the expiration of the Offer. Notwithstanding any other
provision of the Offer, Purchaser shall not be required to accept for payment
or pay, subject to the applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act, for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer to the extent
expressly provided in the Merger Agreement and may postpone the acceptance for
payment of and payment for Shares tendered, if (i) the Minimum Condition shall
not have been satisfied or (ii) at any time on or after the date of the Merger
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity (as defined in the Merger Agreement)
(i) challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer,
51
<PAGE>
the acceptance for payment of, or payment for, any Shares by Purchaser or
Parent or the consummation of any other transaction contemplated by the
Merger Agreement, (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Purchaser, Parent or any of their
subsidiaries of all or any material portion of the business or assets of
the Company or any of its subsidiaries, or to compel the Company,
Purchaser, Parent or any of their subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company or any of its subsidiaries, as a result of the transaction
contemplated by the Merger Agreement, (iii) seeking to impose or confirm
limitations on the ability of Purchaser or any affiliate of Purchaser to
exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Purchaser
pursuant to the Offer or otherwise on all matters properly presented to the
Company's shareholders, including, without limitation, the approval and
adoption of the Merger Agreement and the Merger, (iv) seeking to require
divestiture by Purchaser or any affiliate of Purchaser of any Shares, or
(v) which otherwise has a Material Adverse Effect (as defined in the Merger
Agreement) on the Company;
(b) there shall have been any order or injunction issued, or any Law (as
defined in the Merger Agreement) enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to Parent, Purchaser, the Company or
any subsidiary or affiliate of Parent, Purchaser or the Company which has
resulted, or is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (v) of paragraph (a)
above;
(c) there shall have occurred any change, condition, event or development
that has a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the NYSE
or the PSE; (ii) any general suspension of, or limitation on prices for,
trading in equity securities on the Paris Stock Exchange; (iii) any
decline, measured from the date hereof, in the Standard & Poor's 500 Index
by an amount in excess of 25%; (iv) any change in currency exchange rates,
measured from the close of business on October 17, 1997, resulting in an
increase of 20% or more in the Per Share Amount (as defined in the Merger
Agreement) as translated from United States Dollars into French Francs; (v)
a commencement of war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
or the Republic of France; or (vi) in the case of any of the foregoing
existing on the date hereof, a material acceleration or worsening thereof;
(e) (i) the Special Committee shall have withdrawn or modified in a
manner adverse to Parent or Purchaser the adoption or recommendation of the
Offer, the Merger or the Merger Agreement or (ii) the Special Committee
shall have resolved to do any of the foregoing;
(f) (1) any representation or warranty of the Company in this Agreement
shall not be true and correct; provided in any such case, such
representation and warranty shall continue to be incorrect in any material
respect at the time of such termination; or (2) the Company shall have
failed to perform in any respect any agreement or covenant of the Company
to be performed or complied with by it under this Agreement, except in each
case, where such representation or warranty not being true and correct or
such failure to perform such agreements, and covenants does not have and
would not be reasonably be likely have a Material Adverse Effect;
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) Purchaser, Parent and the Company (with the approval of the Special
Committee) shall have agreed that Purchaser shall terminate the Offer or
postpone the acceptance for payment of or payment for Shares thereunder;
which, in the reasonable judgment of Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by
Purchaser, Parent or any of Parent's other affiliates) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or, subject to the terms and conditions of
the Merger Agreement, may be waived by Purchaser or Parent in whole or in part
at any time and from time
52
<PAGE>
to time in the sole discretion of Purchaser or Parent. See "SPECIAL FACTORS--
The Merger Agreement." The failure by Purchaser or Parent at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
13. Extension of Tender Period; Amendment; Termination.
Purchaser expressly reserves the right, in its sole discretion, at any time
or from time to time, regardless of whether or not any of the conditions set
forth in Section 12 will have occurred or will have been determined by
Purchaser to have occurred, subject to the terms of the Merger Agreement and
the applicable rules of the Commission, (i) to extend the period of time
during which the Offer is open and thereby delay acceptance for payment of,
and the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary, and (ii) to amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary.
Purchaser also reserves the right, in its sole discretion, subject to the
terms of the Merger Agreement, in the event any of the conditions specified in
Section 12 will not have been satisfied and so long as Shares have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for Shares or to
terminate the Offer and not accept for payment or pay for Shares.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of or payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering shareholders are entitled
to withdrawal rights as described in Section 4. However, the ability of
Purchaser to delay the payment for Shares which Purchaser has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of such bidder's offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer (including the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information. With respect to a change in
price or a change in percentage of securities sought, a minimum ten business
day period is generally required to allow for adequate dissemination to
shareholders and investor response. If prior to the Expiration Date, Purchaser
should decide to increase the Offer price, such increase will be applicable to
all holders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 a.m. through 12:00 Midnight, New York City time, as computed in
accordance with Rule 14d-1 under the Exchange Act.
14. Certain Legal Matters and Regulatory Approvals.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Purchaser and Parent and discussions of representatives of
Purchaser and Parent with representatives of the Company during Purchaser and
Parent's investigation of the Company (See "SPECIAL FACTORS--Background of the
Offer"), neither Purchaser nor Parent is aware of any license or other
regulatory permit that appears to be material to the business of the Company,
which might be adversely affected by the acquisition of Shares by Purchaser
pursuant to the Offer or, except as set forth below, of any approval or other
action by any domestic (federal or state) or foreign governmental,
administrative or regulatory authority or agency which would be required prior
to the acquisition
53
<PAGE>
of Shares by Purchaser pursuant to the Offer. Should any such approval or
other action be required, it is Purchaser's present intention to seek such
approval or action. Purchaser does not currently intend, however, to delay the
purchase of Shares tendered pursuant to the Offer pending the outcome of any
such action or the receipt of any such approval (subject to Purchaser's right
to decline to purchase Shares if any of the conditions in Section 12 shall
have occurred). There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company or Parent
or that certain parts of the businesses of the Company or Parent might not
have to be disposed of or held separate or other substantial conditions
complied with in order to obtain such approval or other action or in the event
that such approval was not obtained or such other action was not taken.
Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions, including conditions relating to the
legal matters discussed in this Section 14. See "THE TENDER OFFER--Section 12.
Certain Conditions of the Offer."
Charter Provisions. Article EIGHTH of the Company's Restated Certificate of
Incorporation requires the affirmative vote of the holders of not less than 75
percent of the outstanding shares of voting stock of the Company for the
approval or authorization of any business combination, including mergers,
involving a "Related Person," which is defined as a holder of at least 10% of
such outstanding shares. However, such vote is not required by Article EIGHTH
if the "Continuing Directors" (as defined in Article Eighth) approved in
advance the acquisition of voting stock of the Company that caused the Related
Person to become a Related Person. Because Parent's acquisition of common
stock of the Company that caused it to become a "Related Person" was approved
by the Continuing Directors at the time, Article EIGHTH is not applicable to
the Merger.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, shareholders, executive offices or places of business in such
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden of interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws governing corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining shareholders, provided
that such laws were applicable only under certain conditions. Subsequently, a
number of Federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside
the state of enactment.
The Company is incorporated under the laws of the State of New York. Section
912 of the NYBCL prohibits certain "business combinations" (defined to include
merger and consolidation) involving a New York corporation that qualifies as a
"resident domestic corporation" (which includes the Company) and an interested
shareholder (defined generally as a person who is the beneficial owner of 20%
or more of the outstanding voting stock of such New York corporation)
following the date of which such shareholder became such (such date, a "Stock
Acquisition Date") unless such business combination or the purchase made by
such interested shareholder is approved by the board of directors of such New
York corporation prior to such interested shareholder's Stock Acquisition Date
or certain other statutory conditions have been met. As the Board of Directors
of the Company approved the acquisition of Stock by Parent on its Stock
Acquisition Date, the provisions of Section 912 have been satisfied.
The Company conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. Purchaser and Parent do not
know whether any of these laws will, by their terms, apply to the Offer or the
Merger and has not complied with any such laws. Should any person seek to
apply any state takeover law, Purchaser and Parent will take such action as
then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the
event it is asserted that one or more state takeover laws are 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, Purchaser or Parent might
be required
54
<PAGE>
to file certain information with, or receive approvals from, the relevant
state authorities. In addition, if enjoined, Purchaser might be unable to
accept for payment any Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer and the Merger. In such case, Purchaser
may not be obligated to accept for payment any Shares tendered. See "THE
TENDER OFFER--Section 12. Certain Conditions of the Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain 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. The acquisition of Shares by Purchaser and Parent pursuant to
the Offer, however, is not subject to such requirements because Purchaser and
Parent prior to acquiring their current ownership of in excess of 50% of the
issued and outstanding Shares furnished the requisite information to the
Antitrust Division of the Department of Justice and the FTC.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or seeking the divestiture of Shares purchased
by Purchaser or the divestiture of substantial assets of Purchaser, the
Company or their respective subsidiaries. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws
under certain circumstances. Based upon an examination of information
available to Purchaser and Parent relating to the businesses in which Parent
and the Company and their respective affiliates are engaged, Purchaser and
Parent believe that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, what the
result would be. See "THE TENDER OFFER--Section 12. Certain Conditions of the
Offer."
Litigation. Following the August 29, 1997 Announcement by Parent that it was
studying a possible business combination with the Company, eight putative
class actions were filed by certain of the Company's shareholders.
In Appleby v. Rexel, Inc. et al. (Supreme Court of the State of New York,
County of New York, filed August 29, 1997), the plaintiff is Richard Appleby.
Plaintiff brought action on behalf of himself and allegedly on behalf of all
others similarly situated. The defendants are Parent, Purchaser, the Company
and the following officers and/or directors of the Company and/or Parent:
Gilles Guinchard, Eric Lomas, Serge Weinberg, Pierre Chareyre, Alain Redheuil,
John B. Fraser, R. Gary Gentles, Austin List, Gerald E. Morris, and Nicolas
Sokolow. Plaintiff alleges that defendants have breached their fiduciary and
other common law duties owed to the Company's public shareholders, that they
are not exercising independent business judgment and have acted and are acting
to the detriment of the Company's public shareholders and have failed to
announce any active auction or open bidding procedures best calculated to
maximize shareholder value in selling the Company. The relief sought by
plaintiff includes a declaration that defendants have breached their fiduciary
and other duties, an injunction requiring the defendants to undertake an
appropriate evaluation of the Company's worth, an injunction requiring the
defendants to act independently, an injunction against the alleged buyout
transaction or if the proposed buyout transaction is consummated, rescinding
it and setting it aside and damages in an unspecified amount.
In 7547 Partners v. Chareyre et al. (Supreme Court of the State of New York,
County of New York, filed August 29, 1997), plaintiff is 7547 Partners.
Plaintiff brought the action individually and allegedly on behalf of all
persons similarly situated. The defendants are Parent and the following
officers and/or directors of the Company: Pierre Chareyre, John B. Fraser,
Gilles Guinchard, Eric Lomas, Alain Redheuil, R. Gary Gentles, Austin List,
Gerald E. Morris, Nicolas Sokolow and Serge Weinberg. Plaintiff claims that
the directors of the Company have breached their fiduciary and other common
law duties owed to the plaintiff, that the consideration proposed to be paid
to the Company public shareholders in the "proposed transaction" is grossly
unfair, inadequate, and substantially below the fair or inherent value of the
Company, that the "proposed transaction" is not the result of arm's length
negotiations and has been fixed arbitrarily by the directors, that the
directors
55
<PAGE>
have not seriously considered other potential purchasers of the Company or its
stock in a manner to obtain the highest possible price for the Company's
public shareholders. The relief sought includes a declaration that the
directors of the Company and the Company have committed or aided and abetted a
gross abuse of trust and have breached their fiduciary duties to the
plaintiff, an injunction against the "proposed transaction" or in the event
the transaction is consummated, a rescission of the "proposed transaction",
the establishment of a shareholders' committee to ensure a fair procedure in
connection with any transaction for the Shares and damages in an unspecified
amount.
In Parnes v. Rexel S.A. et al. (Supreme Court of the State of New York,
County of New York, filed September 2, 1997), plaintiff is L.J. Parnes.
Plaintiff alleges that by virtue of a power of attorney, she is attorney-in-
fact for Alan R. Kahn, the owner of shares of the Company. Plaintiff brought
the action individually and allegedly on behalf of all shareholders of the
Company other than defendants. The defendants are Parent, Purchaser and the
following officers and/or directors of the Company and/or Parent: Pierre
Chareyre, John B. Fraser, R. Gary Gentles, Gilles R. Guinchard, Austin List,
Eric J. Lomas, Gerald E. Morris, Alain Redheuil, Nicolas Sokolow and Serge
Weinberg. Plaintiff claims that the alleged "bid" made by Parent on August 29,
1997 to acquire the 49.4% of the Company not owned by Parent/Purchaser is
grossly unfair to the minority shareholders of the Company, is unlawful and
fraudulent and constitutes a breach of Parent's fiduciary duty of fair
dealing. The relief sought by plaintiff includes a declaration that defendants
have committed or aided and abetted a gross abuse of trust and have breached
their fiduciary duties, an injunction against the continuation of the alleged
proposed "freeze-out", or in the event the alleged "freeze-out" is
consummated, an order that it be rescinded and set aside and damages in an
unspecified amount.
In Deital v. Chareyre et al. (Supreme Court of the State of New York, County
of New York, filed September 2, 1997), the plaintiff is Barbara Deital.
Plaintiff brought the action individually and allegedly on behalf of all
others similarly situated. The defendants are Parent, the Company and the
following officers and directors of the Company: Pierre Chareyre, John B.
Fraser, Gilles Guinchard, Eric Lomas, Alain Redheuil, R. Gary Gentles, Austin
List, Gerald E. Morris, Nicolas Sokolow and Serge Weinberg. Plaintiff claims
that the alleged transaction is in furtherance of a fraudulent plan to take
the Company private, that the directors of the Company have breached their
fiduciary duties of good faith and loyalty, that defendants have not announced
whether the alleged "transaction" will be conditioned on approval by a
"majority of the minority"of the shareholders of the Company and by failing to
afford this protection, defendants have breached their fiduciary obligations
to structure the "transaction" in a procedurally fair manner, that the
majority of the directors of the Company are beholden to Parent and thus,
suffer from an inherent conflict of interest because Parent has a desire to
pay the lowest price possible for the Shares. The relief sought by plaintiff
includes an order directing defendants to carry out their fiduciary duties to
plaintiff, preliminary and permanent injunctive relief against the
consummation of the transaction, and in the event the transaction is
consummated, rescission of the transaction and damages in unspecified amount.
In Shave v. Chareyre et al. (Supreme Court of the State of New York, County
of New York, filed September 2, 1997), the plaintiff is Victoria Shave.
Plaintiff brought the action individually and allegedly on behalf of all
others similarly situated. The defendants are Parent, the Company and the
following officers and/or directors of the Company: Pierre Chareyre, John B.
Fraser, Gilles Guinchard, Eric Lomas, Alain Redheuil, R. Gary Gentles, Austin
List, Gerald E. Morris, Nicolas Sokolow and Serge Weinberg. The facts alleged,
the cause of action and the relief sought are identical to the complaint filed
by Barbara Deital on September 2, 1997. See Deital v. Chareyre et al.
discussed above.
In Maurer and Rand v. Chareyre (Supreme Court of the State of New York,
County of New York, filed September 3, 1997), the plaintiffs are Leslie Maurer
and Harriet Rand. Plaintiffs brought the action on behalf of themselves and
allegedly on behalf of all others similarly situated. The defendants are
Parent and the following officers and/or directors of the Company and/or
Parent: Pierre Chareyre, Gilles Guinchard, Alain Redheuil and Serge Weinberg.
Plaintiffs allege that the proposed purchase price of $19.50 is
unconscionable, unfair and grossly inadequate, that such price is not the
result of arm's length negotiations and was not based upon any independent
evaluation of the Company, that Parent and the individual defendants have
engaged in a plan
56
<PAGE>
involving acts which are grossly unfair to plaintiffs, that Parent has
breached and continues to breach its duty as a controlling shareholder of the
Company, that the individual defendants have breached and continue to breach
their duties as directors of the Company. The relief sought by plaintiffs
includes preliminary and permanent injunctive relief to enjoin the alleged
"offer" of Parent, or in the event the transaction is consummated, rescission
of the transaction and damages in an unspecified amount.
In Black v. Rexel, Inc. et al. (Supreme Court of the State of New York,
County of New York, filed September 4, 1997), the plaintiff is Asher Black.
Plaintiff brought the action individually and allegedly on behalf of all
others similarly situated. The defendants are the Company, Parent and the
following officers and/or directors of the Company and/or Parent: Pierre
Chareyre, Gilles Guinchard, Alain Redheuil, Eric Lomas, Gerald E. Morris and
Serge Weinberg. Plaintiff alleges that the defendants have breached their
fiduciary duties to the minority shareholders by not having Parent offer a
fair price, as majority controlling shareholder of the Company, that
defendants have conflicts of interest and that they are putting their own
self-interest in paying the lowest possible price, that the proposed
consideration is not an arm's length negotiation and is not based upon an
independent evaluation of the current value of the Company's assets or
business, but was fixed arbitrarily, and that defendants are not acting in
good faith toward plaintiff. The relief sought by plaintiff includes a
declaration that defendants have committed a gross abuse of trust and have
breached their fiduciary and other duties, an injunction against the
continuation of the alleged "buy out" or, in the event the alleged "buy out"
is consummated, an order that it be rescinded and damages in an unspecified
amount.
In Tepper v. Chareyre et al. (Supreme Court of the State of New York, County
of New York, filed September 12, 1997), the plaintiff is Miles M. Tepper.
Plaintiff brought the action individually and allegedly on behalf of all
others similarly situated. The defendants are the Company, Parent and the
following officers and/or directors of the Company and/or Parent: Pierre
Chareyre, John B. Fraser, Eric Lomas, Alain Redheuil, R. Gary Gentles, Austin
List, Gerald E. Morris, Nicolas Sokolow and Serge Weinberg. The facts alleged,
the cause of action and the relief sought are identical to the complaint filed
by Barbara Deital on September 2, 1997 and also to the complaint filed by
Victoria Shave on September 1997. See Deital v. Chareyre et al. and Shave v.
Chareyre et al. discussed above.
As a result of the increase in the offer price to $22.50, an agreement in
principle to settle all eight putative class actions has been reached among
counsel representing the various plaintiffs in the putative class actions and
counsel representing the defendants. The agreement which, among other things,
calls for certification of a class of common shareholders of the Company,
denial of any wrongdoing by the defendants and the payment of legal fees to
class counsel of no more than $1,250,000, is subject to, among other things,
execution of definitive documentation and the approval of the Supreme Court of
the State of New York following appropriate proceedings.
15. Fees and Expenses. Except as set forth below, neither Purchaser nor
Parent will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
J.P. Morgan is acting as exclusive financial advisor to Purchaser in
connection with the Offer and as exclusive Dealer Manager. As compensation for
its services, J.P. Morgan has received a fee of $350,000 and will receive an
additional fee of $1.3 million upon Purchaser accepting Shares for payment
pursuant to the Offer, and Parent has agreed to reimburse J.P. Morgan for all
reasonable out-of-pocket expenses incurred by it, including the reasonable
fees and expenses of legal counsel, and to indemnify J.P. Morgan against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws.
Parent has retained MacKenzie Partners, as the Information Agent, and IBJ
Schroder Bank & Trust Company, as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
facsimile and personal interview and may request banks, brokers, dealers and
other nominee shareholders to forward materials relating to the Offer to
beneficial owners.
57
<PAGE>
As compensation for acting as Information Agent in connection with the
Offer, MacKenzie Partners will receive reasonable and customary compensation
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 Parent for customary handling and
mailing expenses incurred by them in forwarding material to their customers.
The following is an estimate of expenses, to be incurred in connection with
the Offer:
<TABLE>
<S> <C>
EXPENSES TO BE PAID BY PURCHASER AND PARENT:
Financial Advisor Fees and Expenses............................ $1,900,000
Legal Fees and Expenses........................................ 1,000,000
Printing and Mailing........................................... 400,000
Advertising.................................................... 35,000
Filing Fees.................................................... 60,850
Depositary Fees................................................ 13,000
Information Agent Fees......................................... 7,500
Miscellaneous.................................................. 8,650
----------
Total........................................................ 3,425,000
==========
</TABLE>
16. Miscellaneous. Purchaser and Parent are not aware of any jurisdiction in
which the making of the Offer is prohibited by any administrative or judicial
action pursuant to any valid state statute. If Purchaser or Parent becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, Purchaser and Parent will make a good
faith effort to comply with any such state statute. If, after such good faith
effort, Purchaser and Parent cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser by the
Dealer Manager or 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 MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, PARENT OR THE COMPANY NOT CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Purchaser and Parent have filed with the Commission a Schedule
14D-1 (the "Schedule 14D-1") together with exhibits, furnishing additional
information with respect to the Offer. Pursuant to Rule 14d-9 promulgated
under the Exchange Act, the Company has filed with the Commission Schedule
14D-9. Purchaser, Parent and certain affiliates of each of them have filed a
statement on Schedule 13E-3 with respect to the Offer and may file amendments
to the Schedule 13E-3. Such statements, including exhibits and any amendments
thereto, which furnish certain additional information with respect to the
Offer (including the report of Wasserstein Perella to the Special Committee
October 17, 1997), may be inspected at, and copies may be obtained from, the
same places and in the same manner as set forth in "THE TENDER OFFER--Section
7. Certain Information Concerning the Company" (except that they will not be
available at the regional offices of the Commission).
INTERNATIONAL TECHNICAL
DISTRIBUTORS, INC.
October 23, 1997
58
<PAGE>
SCHEDULE I
LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER AND S.C.A.
FINANCIERE PINAULT
1. The Parent. The name, business address, present principal occupation or
employment and five-year employment history of each director and executive
officer of the Parent and certain other information is set forth below. Unless
otherwise indicated below, the address of each director and executive officer
is 25, rue de Clichy, 75009 Paris, France. Unless otherwise indicated, each
occupation set forth opposite such director's or executive officer's name
refers to employment with the Parent. Except as noted, none of the persons
listed below owns any Shares or has engaged in any transactions with respect
to Shares during the past 60 days. During the last five years, neither the
Parent nor any director or executive officer of the Parent indicated has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor was such person 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. Unless otherwise
indicated, all directors and executive officers listed below are citizens of
France.
<TABLE>
<CAPTION>
NAME (AGE) EMPLOYMENT HISTORY
---------- ------------------
<C> <S>
Bernard Clerc (75)............. Honorary Chairman of Parent since 1990.
Director since 1971. Chairman and Chief
Executive Officer of Parent since 1973 until
1990.
Serge Weinberg (46)............ Chairman and Chief Executive Officer of
Parent until October 1, 1996. Director for
more than last 5 years. Vice Chairman of
Board. Also Chairman and Chief Executive
Officer of Pinault-Printemps-Redoute S.A.
since July 25, 1995.
Pierre Chareyre (40)........... Chief Financial Officer of Parent since June
1997. Chief Executive Officer of Sogem S.A.,
a subsidiary of Societe Generale de Belgique
from October 1993 to April 1997.
Alain Redheuil (49)............ Director, Chairman and Chief Executive
Officer of Parent since October 1996. General
Manager of Lhoist S.A. from June 1993 to
September 1996. Director of European
Operations of Michelin, S.A. from January
1981 until May 1993.
Patrice Marteau (49)........... Director of Parent since 1996. Chief
Financial Officer of Pinault-Printemps-
Redoute S.A. from 1994 to the present. Also
Chief Financial Officer of Danone from 1983
to 1994.
Jacques Vincent (55)........... Secretary General of Parent for more than 5
years.
Marc Valentiny (33)............ Director of Parent since 1997. Director du
Plan et de la Strategie of Pinault-Printemps-
Redoute from October 1996 to the Present;
previously Senior Engagement Manager of
McKinsey & Co. Paris from February 1994 to
October 1996. Associate of McKinsey & Co.
Brussels from August 1992 to January 1994.
Jean Louis de Roux (68)........ Director of Parent since April 23, 1991.
Patricia Barbizet (42)......... Director of Parent since September 17, 1990.
Claude Schoesetters (61)....... Director of Parent since 1992. Mr.
Schoesetters is currently retired. Chief
Operating Officer of Parent until 1996.
Michel Rivaillon (62).......... Censor of Parent since June 1993. Chairman
and Chief Executive Officer of Groupelec-
Distribution S.A. for more than the past five
years. Chairman and Chief Executive Officer
of L.M.E.I. S.A. since 1993.
Francois Jean-Henri Pinault Director of Parent since June 8, 1993.
(35)..........................
Francois Pinault (61).......... Director of Parent since March 28, 1990.
Managing General Partner of S.C.A. Financiere
Pinault for more than five years.
</TABLE>
I-1
<PAGE>
PURCHASER
<TABLE>
<S> <C> <C>
Alain Redheuil.......... Director and President
Pierre Chareyre......... Secretary
S.C.A. FINANCIERE PINAULT
Francois Pinault (61)... Managing General Partner of Financiere Pinault for more than five years.
Pinault Trustee
(S.A.R.L.)............. General Partner of Financiere Pinault for more than five years.
</TABLE>
I-2
<PAGE>
SCHEDULE II
OPINION OF WASSERSTEIN PERELLA & CO. INC., FINANCIAL ADVISOR OF THE SPECIAL
COMMITTEE OF THE COMPANY
October 17, 1997
Special Committee of the Board of Directors
Rexel, Inc.
150 Alhambra Circle, Suite 900
Coral Gables, FL 33134
Gentlemen:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders (other than Rexel S.A. and its wholly
owned subsidiaries, including International Technical Distributors, Inc.
(collectively the "Rexel S.A. Group")) of shares of Common Stock, par value $1
per share (the "Shares"), of Rexel, Inc., a New York corporation (the
"Company"), of the consideration to be received by such holders in the
Transactions (as defined below) pursuant to the Agreement and Plan of Merger,
dated as of October 17, 1997, by and among Rexel S.A., International Technical
Distributors, Inc. and the Company (the "Merger Agreement"). The Merger
Agreement provides for, among other things, a cash tender offer (the "Tender
Offer") by a wholly owned subsidiary of Rexel S.A. ("Sub") to acquire all of
the outstanding Shares, other than Shares held by members of the Rexel S.A.
Group, at a price of $22.50 per Share, net to the seller in cash (the "Cash
Price"), and for a subsequent merger of Sub with and into the Company pursuant
to which each outstanding Share (other than as provided in the Merger
Agreement) will be converted into the right to receive the Cash Price (the
"Merger" and, together with the Tender Offer, the "Transactions"). The terms
and conditions of the Transactions are set forth in more detail in the Merger
Agreement.
In connection with rendering our opinion, we have reviewed the Merger
Agreement. We have also reviewed and analyzed certain publicly available
business and financial information relating to the Company for recent years
and interim periods to date, as well as certain internal financial and
operating information, including financial forecasts, projections and analyses
prepared by or on behalf of the Company and provided to us for purposes of our
analysis, and we have met with certain representatives of the Company and
Rexel S.A. to review and discuss such information and, among other matters,
the Company's business, financial condition, results of operations and
prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or
one or more of its businesses or assets, and we have reviewed and considered
the financial terms of certain recent acquisitions and business combination
transactions in the electrical and industrial supply industries specifically,
and in other industries generally, which we believe to be reasonably
comparable to the Transactions or otherwise relevant to our inquiry. We have
also performed such other studies, analyses and investigations and reviewed
such other information as we considered appropriate for purposes of this
opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, including
the financial projections, forecasts, analyses and other information provided
to us, and we have not assumed any responsibility for independent verification
of, and express no opinion as to, any of such information. Except for the
written financial projections developed in June 1997 and September 1997, which
management of the Company has advised us do not reflect its best estimates of
the Company's future operating performance, we have also relied upon the
reasonableness and accuracy of the projections, forecasts, analyses and other
II-1
<PAGE>
information furnished to us, and have assumed, with the Special Committee's
consent, that such projections, forecasts and analyses and other information
were reasonably prepared in good faith and on bases reflecting the best
currently available judgments and estimates of the Company's management as of
the date hereof and that management of the Company is unaware of any facts
that would make the projections, forecasts and other information provided to
us incomplete or misleading. We also have not reviewed any of the books and
records of the Company or Rexel S.A. or conducted, or assumed any
responsibility for conducting, a physical inspection of the properties or
facilities of the Company or Rexel S.A., or for making or obtaining an
independent valuation or appraisal of the assets or liabilities of the Company
or Rexel S.A., and no such independent valuation or appraisal was provided to
us. Our opinion is necessarily based on economic and market conditions and
other circumstances as they exist and can be evaluated by us as of the date
hereof. Within the context of our engagement, we have not been authorized to
and have not solicited alternative offers for the Company or its assets, or
investigated any other alternative transactions which may be available to the
Company. Finally, we have assumed that the transactions described in the
Merger Agreement will be consummated on the terms set forth therein, without
material waiver or modification.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") in connection with the
Transactions and will receive a fee for our services, including this opinion.
In the ordinary course of our business, we may actively trade the securities
of the Company or Rexel S.A. for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion addresses only the fairness from a financial point of view to
the holders of the Shares (other than the members of the Rexel S.A. Group) of
the consideration to be paid to them pursuant to the Merger Agreement and does
not address the Company's underlying business decision to effect the
Transactions.
This letter is for the benefit and use of the Special Committee of the Board
of Directors of the Company (the "Special Committee") in its consideration of
the Transactions and may not be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent (except as otherwise provided in the
engagement letter, dated as of September 29, 1997, between the Company and
us). We have been engaged and are acting solely as an advisor to the Special
Committee and not as an advisor to or agent of any other person. This opinion
does not constitute a recommendation to any stockholder with respect to
whether such holder should tender Shares pursuant to the Tender Offer or as to
how such holder should vote or otherwise act with respect to the Merger, and
should not be relied upon by any stockholder as to any such matter.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date
hereof, the Cash Price to be received by the holders of Shares (other than
members of the Rexel S.A. Group) in the Transactions pursuant to the Merger
Agreement is fair to such holders from a financial point of view.
Very truly yours,
/s/ Wasserstein Perella & Co., Inc.
II-2
<PAGE>
SCHEDULE III
NEW YORK BCL SECTION 623 REGARDING DISSENTERS RIGHTS
SECTION 623. Procedure to Enforce Shareholder's Right to Receive Payment for
Shares
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the
meeting of shareholders at which the action is submitted to a vote, or at such
meeting but before the vote, written objection to the action. The objection
shall include a notice of his election to dissent, his name and residence
address, the number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares if the action is taken. Such
objection is not required from any shareholder to whom the corporation did not
give notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders without a
meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall
give written notice of such authorization or consent by registered mail to
each shareholder who filed written objection or from whom written objection
was not required, excepting any shareholder who voted for or consented in
writing to the proposed action and who thereby is deemed to have elected not
to enforce his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he
dissents and a demand for payment of the fair value of his shares. Any
shareholder who elects to dissent from a merger under section 905 (Merger of
subsidiary corporation) or paragraph (c) of section 907 (Merger or
consolidation of domestic and foreign corporations) shall file a written
notice of such election to dissent within twenty days after the giving to him
of a copy of the plan of merger or an outline of the material features thereof
under section 905.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any
beneficial owner as to less than all of the shares of such owner, as to which
such nominee or fiduciary has a right to dissent, held of record by such
nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the
fair value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his
acceptance in writing of an offer made by the corporation, as provided in
paragraph (g), but in no case later than sixty days from the date of
consummation of the corporate action except that if the corporation fails to
make a timely offer, as provided in paragraph (g), the time for withdrawing a
notice of election shall be extended until sixty days from the date an offer
is made. Upon expiration of such time, withdrawal of a notice of election
shall require the written consent of the corporation. In order to be
effective, withdrawal of a notice of election must be accompanied by the
return to the corporation of any advance payment made to the shareholder as
provided in paragraph (g). If a notice of election is withdrawn, or the
corporate action is rescinded, or a court shall determine that the shareholder
is not entitled to receive payment for his shares, or the shareholder shall
otherwise lose his dissenter's rights, he shall not have the right to receive
payment for his shares and he shall be reinstated to all his rights as a
shareholder as of the consummation of the corporate action, including any
intervening preemptive rights and the right to payment of any intervening
dividend or other distribution or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu
thereof, at the election of the corporation, the fair value thereof in cash as
determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
III-1
<PAGE>
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the
shareholder or other person who submitted them on his behalf. Any shareholder
of shares represented by certificates who fails to submit his certificates for
such notation as herein specified shall, at the option of the corporation
exercised by written notice to him within forty-five days from the date of
filing of such notice of election to dissent, lose his dissenter's rights
unless a court, for good cause shown, shall otherwise direct. Upon transfer of
a certificate bearing such notation, each new certificate issued therefor
shall bear a similar notation together with the name of the original
dissenting holder of the shares and a transferee shall acquire no rights in
the corporation except those which the original dissenting shareholder had at
the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later
(but in no case later than ninety days from the shareholders' authorization
date), the corporation or, in the case of a merger or consolidation, the
surviving or new corporation, shall make a written offer by registered mail to
each shareholder who has filed such notice of election to pay for his shares
at a specified price which the corporation considers to be their fair value.
Such offer shall be accompanied by a statement setting forth the aggregate
number of shares with respect to which notices of election to dissent have
been received and the aggregate number of holders of such shares. If the
corporate action has been consummated, such offer shall also be accompanied by
(1) advance payment to each such shareholder who has submitted the
certificates representing his shares to the corporation, as provided in
paragraph (f), of an amount equal to eighty percent of the amount of such
offer, or (2) as to each shareholder who has not yet submitted his
certificates a statement that advance payment to him of an amount equal to
eighty percent of the amount of such offer will be made by the corporation
promptly upon submission of his certificates. If the corporate action has not
been consummated at the time of the making of the offer, such advance payment
or statement as to advance payment shall be sent to each shareholder entitled
thereto forthwith upon consummation of the corporate action. Every advance
payment or statement as to advance payment shall include advice to the
shareholder to the effect that acceptance of such payment does not constitute
a waiver of any dissenters' rights. If the corporate action has not been
consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the
making of such offer, and a profit and loss statement or statements for not
less than a twelve month period ended on the date of such balance sheet or, if
the corporation was not in existence throughout such twelve month period, for
the portion thereof during which it was in existence. Notwithstanding the
foregoing, the corporation shall not be required to furnish a balance sheet or
profit and loss statement or statements to any shareholder to whom such
balance sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders' authorization
for or consent to the proposed corporate action the shareholders were
furnished with a proxy or information statement, which included financial
statements, pursuant to Regulation 14A or Regulation 14C of the United States
Securities and Exchange Commission. If within thirty days after the making of
such offer, the corporation making the offer and any shareholder agree upon
the price to be paid for his shares, payment therefor shall be made within
sixty days after the making of such offer or the consummation of the proposed
corporate action, whichever is later, upon the surrender of the certificates
for any such shares represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and
any dissenting shareholder or shareholders fail to agree with it within the
period of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is
III-2
<PAGE>
a foreign corporation without an office in this state, such proceeding
shall be brought in the county where the office of the domestic
corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each nonresident
dissenting shareholder either by registered mail and publication, or in
such other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value as
of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the shareholder's
right to receive payment for shares and its effects on the corporation and
its shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law
and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest,
the court shall consider all relevant factors, including the rate of
interest which the corporation would have had to pay to borrow money during
the pendency of the proceeding. If the court finds that the refusal of any
shareholder to accept the corporate offer of payment for his shares was
arbitrary, vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties to
the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer
or required advance payment was made by the corporation; (C) that the
corporation failed to institute the special proceeding within the period
specified therefor; or (D) that the action of the corporation in complying
with its obligations as provided in this section was arbitrary, vexatious
or otherwise not in good faith. In making any determination as provided in
clause (A), the court
III-3
<PAGE>
may consider the dollar amount or the percentage, or both, by which the
fair value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section
515 (Reacquired shares), except that, in the case of a merger or
consolidation, they may be held and disposed of as the plan of merger or
consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the nondissenting shareholders, and if it is
not liquidated, retain his right to be paid for his shares, which right the
corporation shall be obliged to satisfy when the restrictions of this
paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option by written notice given
to him within twenty days after the expiration of such period of thirty
days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except
that this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
III-4
<PAGE>
SCHEDULE IV
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Rexel, Inc.:
We have audited the accompanying consolidated balance sheets of Rexel, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, retained earnings and cash flows for the years then ended.
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 consolidated financial position of Rexel, Inc.
and subsidiaries as of December 31, 1996 and 1995 and the consolidated results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Miami, Florida
February 14, 1997
IV-1
<PAGE>
AUDITED FINANCIAL STATEMENT FOR THE COMPANY FOR THE YEARS ENDED DECEMBER 31,
1995 AND DECEMBER 31, 1996
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, 1996 AND 1995
---------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
---------------------
<S> <C> <C>
Net sales.............................................. $1,159,446 $1,120,688
Cost of goods sold..................................... 917,907 890,605
---------- ----------
Gross profit......................................... 241,539 230,083
Selling and administrative expense..................... 185,699 184,687
---------- ----------
Operating profit..................................... 55,840 45,396
Interest expense....................................... 5,110 7,688
Other income (expense)--net............................ 394 (29)
---------- ----------
Income from continuing operations before income tax-
es.................................................. 51,124 37,679
Income tax provision................................... 21,728 16,579
---------- ----------
Income from continuing operations.................... 29,396 21,100
Extraordinary charge, net of income tax benefit of
$837.................................................. -- (1,325)
---------- ----------
Net income........................................... $ 29,396 $ 19,775
Income (loss) per common share:
Primary
Income from continuing operations.................. $ 1.13 $ .85
Extraordinary charge............................... -- (.05)
---------- ----------
Net income......................................... $ 1.13 $ .80
Fully diluted(a).....................................
Income before extraordinary charge................. $ .79
Extraordinary charge............................... (.05)
----------
Net income......................................... $ .74
----------
Average number of common and common equivalent shares
Primary.............................................. 25,986 24,949
---------- ----------
Fully diluted........................................ 28,214
----------
</TABLE>
- --------
(a) Fully diluted income (loss) per common share was consistent with primary
earnings per share in 1996.
See accompanying notes to consolidated financial statements.
IV-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1996 AND 1995
------------------
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents............................... $ 14,396 $ 10,013
-------- --------
Accounts and notes receivable, less allowance for
doubtful accounts of
$3,004 in 1996 and $2,680 in 1995...................... 156,450 138,604
Inventories............................................. 117,657 102,239
Prepaid expenses and other current assets............... 10,423 8,344
Deferred income taxes................................... 3,747 3,849
-------- --------
Total current assets.................................. 302,673 263,049
Investments and noncurrent receivables.................... 814 1,069
Fixed assets, at cost:
Land.................................................... 8,196 8,196
Buildings and leasehold improvements.................... 28,485 26,531
Machinery, equipment and other tangible property........ 45,010 37,861
81,691 72,588
Less, accumulated depreciation and amortization......... 33,473 23,135
-------- --------
Fixed assets--net....................................... 48,218 49,453
-------- --------
Other assets.............................................. 3,286 2,135
Goodwill, net of accumulated amortization of $8,695 in
1996 and $6,996 in 1995.................................. 73,947 58,953
-------- --------
$428,938 $374,659
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt......................................... $ 25,500 $ 8,050
Current portion of long-term debt....................... 7,737 7,757
Accounts and notes payable--trade, and other
liabilities............................................ 161,377 147,031
Income taxes payable.................................... 2,186 3,725
-------- --------
Total current liabilities............................. 196,800 166,563
Long-term debt............................................ 29,582 37,219
Other long-term liabilities............................... 3,476 3,363
Deferred income taxes..................................... 2,973 1,195
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock (authorized 2,000,000 shares, none
issued)................................................ -- --
Common stock (26,313,633 and 26,258,133 shares issued in
1996 and 1995)......................................... 26,314 26,258
Capital surplus......................................... 94,706 94,206
Retained earnings....................................... 79,976 50,580
Treasury stock, at cost (621,243 and 609,143 shares in
1996 and 1995)......................................... (4,889) (4,725)
-------- --------
Total stockholders' equity............................ 196,107 166,319
-------- --------
$428,938 $374,659
-------- --------
See accompanying notes to consolidated financial statements.
IV-3
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 AND 1995
--------------------------------------------------------
UNREALIZED
LOSSES ON
MARKETABLE TREASURY
COMMON CAPITAL RETAINED EQUITY STOCK AT
STOCK SURPLUS EARNINGS SECURITIES COST TOTAL
------- ------- -------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 24,705 81,354 30,805 (875) (4,537) 131,452
Net income.............. 19,775 19,775
Issuance of 1,517,000
shares upon conversion
of 7% Convertible
Subordinate
Debentures............. 1,517 13,001 14,518
Expenses incurred in
connection with
redemption of 7%
Convertible
Subordinated
Debentures............. (352) (352)
Issuance of 35,900
shares pursuant to
Stock Incentive Plan
and 18,048 treasury
shares acquired as
payment................ 36 203 (188) 51
Marketable equity
security adjustment.... 875 875
------- ------- ------- ---- ------- --------
Balance at December 31,
1995................... 26,258 94,206 50,580 -- (4,725) 166,319
Net income.............. 29,396 29,396
Issuance of 55,500
shares pursuant to
Stock Incentive Plan
and 10,500 treasury
shares acquired as
payment................ 56 315 (146) 225
Acquisition of 1,600
treasury shares........ (18) (18)
Tax benefit on exercise
of nonqualified stock
options................ 185 185
------- ------- ------- ---- ------- --------
Balance at December 31,
1996................... $26,314 $94,706 $79,976 $ -- $(4,889) $196,107
======= ======= ======= ==== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
IV-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 29,396 $ 19,775
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization..................... 8,494 8,949
Provision for losses on accounts receivable....... (303) 827
Deferred income taxes............................. 1,428 (4,773)
Loss on redemption of 7% Convertible Subordinated
Debentures....................................... -- 2,162
Gain on sale of investments....................... -- (991)
Provision for loss on investment and noncurrent
receivable....................................... -- 1,975
Changes in assets and liabilities, net of effect
of acquisitions and sale
of net assets:
Accounts and notes receivable................... (7,434) 4,651
Inventories..................................... (4,802) 10,008
Prepaid expenses and other current assets....... (1,811) 590
Accounts and notes payable-trade, and other
liabilities.................................... 2,410 (9,997)
Income taxes payable............................ (282) 8,712
Other, net........................................ (85) (125)
------------ ------------
Total adjustments............................... 2,385 21,988
------------ ------------
Net cash provided by operating activities....... 27,011 41,763
------------ ------------
Cash flows from investing activities:
Capital expenditures.............................. (4,634) (5,052)
Acquisitions of businesses, net of cash acquired.. (24,490) (1,720)
Proceeds from sale of net assets.................. -- 4,050
Other investing activities........................ (199) 761
------------ ------------
Net cash (used in) provided by investing
activities....................................... (29,323) (1,961)
------------ ------------
Cash flows from financing activities:
Net borrowings (payments) under line of credit
arrangements..................................... 15,150 8,050
Proceeds from exercise of stock options........... 225 51
Redemption of 7% Convertible Subordinated
Debentures....................................... -- (36,780)
Other debt payments and financing activities,
net.............................................. (8,680) (24,953)
------------ ------------
Net cash provided by (used in) financing
activities....................................... 6,695 (53,632)
------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... 4,383 (13,830)
Cash and cash equivalents at beginning of year..... 10,013 23,843
------------ ------------
Cash and cash equivalents at end of year........... $ 14,396 $ 10,013
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.......................................... $ 5,272 $ 9,427
------------ ------------
Income taxes...................................... $ 20,110 $ 11,352
------------ ------------
Supplemental information of businesses acquired:
Fair value of assets acquired, other than cash.... $ 40,283 $ 3,350
Liabilities assumed............................... (14,743) (972)
Liability issued to seller........................ (1,050) (658)
------------ ------------
Cash paid......................................... $ 24,490 $ 1,720
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
IV-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Consolidation
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All significant intercompany transactions and
balances have been eliminated. The Company's continuing operations consist
solely of the distribution of electrical parts and supplies, principally in
the southern United States.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
Highly liquid investments with a maturity of three months or less when
purchased are generally considered to be cash equivalents. The Company
maintains its cash in bank deposit accounts which at times exceed federally
insured limits. The Company has not experienced any losses in such accounts.
(d) Inventories
Inventories are stated at the lower of LIFO cost or market. Had the LIFO
method been used to value inventories, total inventories would have increased
$12,464 and $14,514 at December 31, 1996 and 1995, respectively.
(e) Investments and Noncurrent Receivables
Investments and noncurrent receivables are stated at the lower of cost or
net realizable value.
(f) Long-Lived Assets
Long-lived assets and certain identifiable intangible assets held or used by
the Company are reviewed for impairment of the carrying amount of such assets.
An impairment loss is recognized in the event that facts and circumstances
indicate that the carrying amount of an asset may not be recoverable, and an
estimate of future undiscounted cash flows is less than the caring amount of
the asset. Impairments are recognized as losses in the current period.
(g) Depreciation and Amortization
Depreciation, computed by means of straight-line and accelerated methods, is
based on the estimated useful lives of the related assets. Leasehold
improvements are amortized over their respective lease terms or their
estimated useful lives, if shorter.
Goodwill, representing the cost in excess of net assets of acquired
businesses, is being amortized over 40 years. At each balance sheet date, the
Company reviews the carrying value of goodwill in relation to current and
expected operating results of the businesses which benefit therefrom in order
to assess whether there has been a permanent impairment of goodwill.
IV-6
<PAGE>
(h) Earnings Per Share
Primary earnings per share are based on the weighted average number of
common and common equivalent shares outstanding during the year. Fully diluted
earnings per share in 1995 assume the conversion of the convertible debentures
at the beginning of the year and the resultant reduction in interest costs,
net or tax.
(i) Accounting for Stock Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" encourages, but does not require companies to
record compensation cost for stock-based compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Accordingly, compensation cost for stock options is measured
based on the excess, if any, of the quoted market price of the Company's stock
at the date of the grant over the exercise price of the option. Any income tax
benefit from the exercise and early disposition of stock options is accounted
for as a credit to capital surplus.
(j) Future Impact of Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS
128). FAS 128 specifies new standards designed to improve the earnings per
share (EPS) information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an international basis. Some of
the changes made to simplify the EPS computations include: (a) eliminating the
presentation of primary EPS and replacing it with basic EPS, with the
principal difference being that common stock equivalents (CSEs) are not
considered in computing basic EPS, (b) eliminating the modified treasury stock
method and the three percent materiality provision, and (c) revising the
contingent share provisions and the supplemental EPS data requirements. FAS
128 also makes a number of changes to existing disclosure requirements. FAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. The Company has not yet
determined the impact of the implementation of FAS 128.
2. SIGNIFICANT TRANSACTIONS
On November 12, 1992, pursuant to a purchase agreement dated April 22, 1992
among the Company and Rexel, S.A. and certain affiliates of Rexel, S.A.
("Rexel"), the Company issued to Rexel 6,284,301 shares of the Company's
common stock in exchange for all of the stock of an affiliated company and
$9,885 in cash. As a result, Rexel obtained beneficial ownership of 30% of the
outstanding common stock of the Company.
On March 1, 1994, the Company sold to Rexel 3,491,280 newly issued shares of
Company common stock for a total cash purchase price of $31,422. As a result,
Rexel increased its beneficial ownership to 40%.
IV-7
<PAGE>
3. ACQUISITIONS
On August 7, 1996, the Company acquired the common stock of Utility Products
Supply Co. of Denver, Colorado ("UPS"), a distributor of electrical products
to the utility industries with locations in Colorado, Arizona, California and
Kansas, for cash and deferred payments totaling $5.6 million (including
acquisition costs of $0.1 million).
On November 12, 1996, the Company acquired the common stock of Cable &
Connector Warehouse, Inc. of Dallas, Texas ("CCW"), a distributor of
electronic wire, cable, connectors and related apparatus to manufacturers of
data and telecommunication products with locations in Louisiana, Texas,
Colorado, California, Oregon and Kansas, for cash consideration of $20.2
million (including $0.2 million of acquisition costs), plus contingent
consideration of up to $4.0 million based upon achieving certain operating
results in 1997. Any contingent payments will be recorded as additional
purchase price.
Each of these acquisitions has been recorded as a purchase and the excess of
the total purchase price over the fair value of the net assets acquired ($3.0
million for UPS and $13.7 million for CCW) is being amortized over 40 years.
Results of operations of both companies are included in the Company's
financial statements from the respective dates of acquisition.
The following table summarizes the effect on consolidated sales and income
of the Company for 1996 and 1995, on an unaudited pro forma basis, assuming
the acquisitions had been consummated as of January 1, 1995, the year
preceding the year of acquisition:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net sales.......................................... $1,212,403 $1,185,760
---------- ----------
Income before extraordinary charge................. $ 30,043 $ 21,731
---------- ----------
Net income......................................... $ 30,403 $ 20,406
---------- ----------
Income per share before extraordinary charge $1.16 $.87
---------- ----------
Net income per share............................... $1.16 $.82
---------- ----------
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been in effect at the beginning of the
period or are they necessarily indicative of future consolidated results.
IV-8
<PAGE>
4. SHORT-TERM DEBT
The Company entered into a Revolving Credit and Reimbursement Agreement,
dated as of December 17, 1993 (the "Credit Agreement"), with NationsBank of
Florida, N.A., and Credit Lyonnais New York Branch. The Credit Agreement was
amended on August 8, 1995 to add Societe Generale as a participant in the
facility and to provide for borrowings through August 1, 2000 of up to $100
million. Interest on borrowings under such facility is at a rate based on
rates in the certificate of deposit market or LIBOR plus a margin, which
margin varies depending on the Company's financial performance. The Credit
Agreement includes various covenants, including restrictions on liens, debt
and lease obligations and requirements that certain financial ratios be
maintained.
In June 1995, to offset the variable rate characteristic of its revolving
line of credit, the Company entered into interest rate swap agreements with
major banks resulting in fixed interest rates on $30 million. During 1996, the
Company and the banks agreed to terminate these interest rate swap agreements,
resulting in an immaterial net gain to the Company.
5. LONG-TERM DEBT
Long-term debt, less current installments, consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- -------
<S> <C> <C>
9.78% Senior Notes due March 15, 2001................... $35,720 $42,860
Other notes payable..................................... 1,599 2,116
------- -------
37,319 44,976
Less current installments............................... 7,737 7,757
------- -------
$29,582 $37,219
======= =======
</TABLE>
The 9.78% Senior Notes are payable ratably over a seven-year period
commencing March 15, 1995 with interest payable semi-annually at a rate of
9.78% per annum. Under the terms of the Senior Notes (as amended), the Company
may pay dividends and make other restricted payments (as defined) to the
extent of $26,000 plus 50% of consolidated net income (as defined) plus
certain other amounts and is subject to certain restrictions on the incurrence
of additional debt and other transactions and to other covenants calling for
minimum levels of working capital and certain financial ratios.
On August 11, 1995, the Company redeemed all of its outstanding 7%
Convertible Subordinated Debentures Due 2014, which had an original principal
amount of $50 million. Of such principal amount, $35.5 million was redeemed
for cash at a redemption price of 102.8% of principal, plus accrued and unpaid
interest to the redemption date, or a total redemption payment of $36.5
million. The balance of the Debentures was converted in accordance with the
terms thereof into Common Stock of the Company at a conversion price of $9.57
per share, or a total of 1,517,000 shares. Results for 1995 include an
extraordinary charge of approximately $2.2 million ($1.3 million after tax or
$.05 per share) in connection with the redemption. These charges result
primarily from the premium paid to redeem the Debentures and the accelerating
of unamortized financing costs associated with the issuance of the Debentures
in 1989. Assuming the conversions and redemption occurred as of January 1,
1995, primary income per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Income from continuing operations........................... $.84
Discontinued operations..................................... --
Extraordinary charge........................................ (.05)
----
Net income.................................................. $.79
====
</TABLE>
IV-9
<PAGE>
Long-term debt maturities during the next five years are as follows:
<TABLE>
<CAPTION>
AMOUNT
YEAR ENDING DECEMBER 31, ------
<S> <C>
1997............................................................ $7,737
1998............................................................ 7,691
1999............................................................ 7,447
2000............................................................ 7,284
2001............................................................ 7,160
------
</TABLE>
Based on borrowing rates currently available to the Company for long-term
debt with similar terms and average maturities, the fair value of the
Company's long-term indebtedness was approximately $39,744 and $50,197 as of
December 31, 1996 and 1995.
6. STOCKHOLDERS' EQUITY
The authorized capital stocks of the Company is 47,000,000 shares,
consisting of 2,000,000 shares of Preferred Stock and 45,000,000 shares of
Common Stock with a par value of $1 per share.
At December 31, 1996, 1,724,353 shares of common stock are reserved for
issuance pursuant to the Company's Stock Incentive Plan.
IV-10
<PAGE>
On September 19, 1995, the Board of Directors authorized the purchase of up
to 2,000,000 shares of its out-standing common stock from time to time, in
open market transactions or otherwise. Such purchases, if commenced, may be
suspended or discontinued at any time. As of December 31, 1996, 1,600 shares
have been purchased under this program.
7. STOCK OPTION PLANS
Under the Company's 1988 and 1985 Stock Option Plans, options to purchase up
to 2,266,667 shares and 829,630 shares of common stock, respectively, were
available to be granted to key employees of the Company. The 1985 plan
terminated on January 15, 1995. The 1988 Plan also provides that each director
of the Company, other than one who is an officer or employee, be granted a
non-qualified stock option to purchase 10,000 shares of Company common stock
and provides for annual grants to directors if defined levels of income are
achieved by the Company. For each plan, the option period is either ten or
eleven years from the date of grant, and options may be exercised at various
times depending on the provisions of the grant.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF OPTION PRICE SHARES
SHARES PER SHARE EXERCISABLE
--------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Outstanding at Dec.31, 1994.......... 570,000 $ 6.50 - $ 8.06 237,200
Granted............................ 399,000 6.00 - 7.25
Terminated & cancelled............. (70,000) 6.69
Exercised.......................... (35,900) 6.63 - 6.69
---------
Outstanding at Dec. 31, 1995......... 863,100 6.00 - 8.06 352,040
Granted............................ 196,000 13.125 - 13.875
Terminated & cancelled............. (1,200) 6.00
Exercised.......................... (55,500) 6.00 - 8.065
---------
Outstanding at Dec. 31, 1996......... 1,002,400 $ 6.00 - $13.875 462,800
---------
</TABLE>
All options were granted at market value on the date of grant.
As of December 31, 1996, options for the purchase of 721,953 shares were
available for future grant under the 1988 plan.
Had compensation costs for the Company's 1988 stock option plan been
determined based upon the fair value at the grant date for awards under the
plan consistent with the methodology prescribed under SFAS 123 for options
granted in 1996 and 1995, the Company's net income and earnings per share for
those years would have been reduced by approximately $321 and $232,
respectively, or $.01 per share for both years. The fair value of the options
granted during 1996 and 1995 is estimated as $1,594 and $1,460, respectively,
on the dates of grant using the Black-Scholes option-pricing model with the
following assumptions: volatility of 40%, expected dividends of 0, risk-free
interest rates of 5.6% to 7.6%, and terms of 10 years.
IV-11
<PAGE>
8. EMPLOYEE BENEFIT PLANS
The Rexel, Inc. Section 401(k) Savings Plan, whereby participants may
contribute a percentage of compensation, but not in excess of the maximum
allowed under the Internal Revenue Code, became effective January 1, 1995. The
Company matches 50% of employee contributions to the plan up to 6% of an
employee's base compensation ("Matching Contributions"). In addition, the
Company may make additional contributions at the discretion of the Board of
Directors. Employees who complete one year of service are eligible to
participate and are always vested 100% in the Matching Contributions. Vesting
in discretionary contributions is based on years of service with 100% vesting
after seven years.
This plan replaced all other plans of the Company with the exception of a
nonqualified defined benefit supplemental retirement plan.
The nonqualified defined benefit supplemental retirement plan covers certain
key employees and is not funded. Benefits under this plan are based on years
of service and defined levels of compensation. No new enrollments are
permitted into the plan and salary levels under the plan have been frozen.
The Company had a qualified noncontributory defined benefit pension plan
covering certain eligible domestic employees of a subsidiary. This plan was
terminated on February 22, 1995 and all obligations were settled. The Company
also had a qualified noncontributory defined benefit pension plan covering
certain eligible domestic employees in the discontinued apparel operation. As
part of the agreement to sell the apparel operation, the purchaser assumed all
obligations under this plan. The Company's funding policy was to contribute
annually the maximum amount that could be deducted for Federal income tax
purposes.
The Company also had a defined benefit plan maintained for eligible
employees of certain United Kingdom subsidiaries included in the discontinued
apparel operation. The plan was funded annually for the maximum amount
permitted by statute. The benefits were based on years of service and defined
levels of compensation.
The following table sets forth the funded status of the nonqualified defined
supplemental retirement plan at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
NON-QUALIFIED NON-QUALIFIED
------------- -------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation................ $(1,419) $(1,450)
Accumulated benefit obligation........... $(1,429) $(1,514)
------- -------
Projected benefit obligation............... $(1,429) $(1,514)
------- -------
Unrecognized net loss (gain)............... 20 (32)
Unrecognized net transition obligation..... -- 26
------- -------
Accrued pension liability.................. $(1,409) $(1,520)
------- -------
</TABLE>
IV-12
<PAGE>
Net periodic pension cost of 1996 and 1995 (excluding the United Kingdom
Plan assumed in the Apparel sale) includes the following components:
<TABLE>
<CAPTION>
INTEREST COST ACTUAL NET
ON PROJECTED RETURN NET PERIODIC
SERVICE BENEFIT ON AMORTIZATION PENSION
COST OBLIGATIONS ASSETS AND DEFERRAL COST
------- ------------- ------ ------------ --------
<S> <C> <C> <C> <C> <C>
1996
Non-Qualified............ $12 104 -- 26 $142
1995
Non-Qualified............ $31 133 -- 26 $190
Qualified................ -- 12 (26) (5) $(19)
----
$171
----
</TABLE>
The actuarial assumptions used for each of the plans for 1996 and 1995 are
as follows:
<TABLE>
<CAPTION>
QUALIFIED NON-
QUALIFIED SUBSIDIARY QUALIFIED
PLAN PLAN PLAN
--------- ---------- ---------
<S> <C> <C> <C>
1996
Weighted average discounts used in
determining the actuarial present value of
the projected benefit obligation............ n/a n/a 7.25%
Rates of increase in future compensation lev-
els......................................... n/a n/a n/a
Expected long-term rates of return on as-
sets........................................ n/a n/a n/a
1995
Weighted average discounts used in
determining the actuarial present value of
the projected benefit obligation............ n/a n/a 7.00%
Rates of increase in future compensation lev-
els......................................... n/a 5.00% n/a
Expected long-term rates of return on
assets....................................... n/a 8.50% n/a
</TABLE>
IV-13
<PAGE>
Prior to January 1, 1995 certain subsidiaries had non-contributory profit-
sharing plans and defined contribution pensions plans providing for minimum
contributions based upon defined levels of subsidiary income or employee
compensation.
Pension and profit-sharing expense for the years ended December 31, 1996 and
1995 amounted to approximately $3,761 and $3,553, respectively.
A subsidiary of the Company, acquired in 1993, provides certain health care
benefits for eligible retired employees. The status of the plan at December
31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated
postretirement benefit
obligation ("APBO").... $1,376 $1,323
Unrecognized prior serv-
ice cost............... (260) (279)
Unrecognized net loss... (336) (264)
------ ------
Accrued postretirement
benefit cost........... $ 780 $ 780
====== ======
</TABLE>
The postretirement benefit cost in 1996 and 1995 included the following
components:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Interest cost on APBO......................................... $ 84 $ 98
Net amortization and deferral................................. 29 22
----- ----
$ 113 $120
===== ====
</TABLE>
The plan is unfunded. This discount rate used in determining APBO was 6.50%
at December 31, 1996 and 1995. The assumed health care trend rate assumed for
1997 was 9.5%. Increasing assumed health care trends one percentage point will
increase the APBO by $167 as of December 31, 1996.
The Company's Employee Stock Ownership Plan provided eligible employees with
an opportunity to purchase the Company's common stock through payroll
deductions, which were matched by the Company, subject to certain limitations.
Contributions to the plan were invested by an independent trustee in common
stock of the Company. Effective January 1, 1995, this plan was merged into the
Rexel, Inc. Section 401(k) Saving Loan.
9. INCOME TAXES
The Company and its U.S. subsidiaries file Federal income tax returns on a
consolidated basis. The provision (benefit) for income taxes has been
classified as follows in the consolidated statements of income:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Tax provision from continuing operations................ $ 21,728 $16,579
Tax benefit for discontinued operations................. -- --
Tax benefit for extraordinary charge.................... -- (837)
-------- -------
$ 21,728 $15,742
======== =======
</TABLE>
IV-14
<PAGE>
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Federal:
Current............................................... $17,486 $17,019
Deferred.............................................. 1,230 (4,465)
State and local:
Current............................................... 2,814 3,496
Deferred.............................................. 198 (308)
Foreign:
Current............................................... -- --
Deferred.............................................. -- --
------- -------
$21,728 $15,742
------- -------
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of revenue and expenses for financial statement and income tax reporting
purposes. The tax effects of each as of December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable..................................... $1,228 $ 1,562
Inventory............................................... 2,348 1,896
Other liabilities and reserves.......................... 2,437 2,745
Costs incurred in connection with the Rexel, S.A. acqui-
sition of Rexel, Inc. ................................. 1,406 1,233
Federal foreign tax credit carryforward................... 22 --
State net operating loss carryforwards.................... 892 1,278
Valuation allowance....................................... (760) (1,097)
------ -------
Total deferred tax assets................................. 7,573 7,617
------ -------
Deferred tax liabilities:
Property, plant and equipment........................... 4,939 2,295
Book/tax difference on asset valuation upon acquisi-
tion................................................... 1,860 2,668
------ -------
Total deferred tax liabilities.......................... 6,799 4,963
------ -------
Net deferred tax assets................................. $ 774 $ 2,654
------ -------
</TABLE>
The change in the valuation allowance between 1996 and 1995 of $337 resulted
from updating estimates of state and local net operating loss utilization.
Income before income taxes is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Continuing operations:
Domestic............................................... $51,062 $37,607
Foreign................................................ 63 72
------- -------
51,125 37,679
Discontinued operations.................................. -- --
Extraordinary charge..................................... -- (2,162)
------- -------
$51,125 $35,517
------- -------
</TABLE>
IV-15
<PAGE>
A reconciliation for 1996 and 1995 between the amount computed using the
Federal income tax rate and the effective rate of tax on income (loss),
including discontinued operations, but excluding extraordinary charge, is as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Statutory Federal income tax rate............................. 35.0% 35.0%
State and local income taxes, net of Federal income tax ef-
fect......................................................... 3.8 5.2
Amortization of goodwill...................................... 0.7 0.8
Costs incurred in connection with the Rexel, S.A. acquisition
of Rexel, Inc................................................ -- --
(Decrease) in taxes resulting from foreign income subject to
foreign income tax but not expected to be subject to U.S. tax
in foreseeable future........................................ -- (0.1)
Increase (decrease) in deferred tax asset valuation allow-
ance......................................................... (0.7) --
Other, net.................................................... 3.7 3.1
---- ----
Effective tax rate.......................................... 42.5% 44.0%
---- ----
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
December 31, 1996, annual minimum rental commitments under noncancelable
operating leases, primarily for real property, are summarized as follows:
<TABLE>
<S> <C>
1997................................. $10,133
1998................................. 8,058
1999................................. 5,942
2000................................. 4,366
2001................................. 2,916
2002 and thereafter.................. 6,069
-------
$37,384
=======
</TABLE>
The minimum annual commitments include amounts payable to an officer of the
Company and/or members of his and his wife's family for certain of the
Company's distribution centers as follows: 1997--$737; 1998--$727; 1999--$717;
2000--$717; 2001--$694; thereafter--$172.
Total rent expense charged to operations for the years ended December 31,
1996 and 1995 amounted to approximately $10,783 and $9,498, respectively.
In the normal course of business, the Company is sometimes named as a
defendant in litigation. In the opinion of management, based upon the advice
of counsel, any uninsured liability which may result from the resolution of
any present litigation or asserted claim will not have a material effect on
the Company's financial position, results of operations or cash flows.
IV-16
<PAGE>
11. ACCOUNTS AND NOTES PAYABLE--TRADE, AND OTHER LIABILITIES
Accounts and notes payable--trade and other liabilities consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
<S> <C> <C>
Accounts and other payables--trade..................... $122,620 $107,341
Salaries, wages and other compensation................. 15,441 16,794
Pensions, profit sharing and employee benefits......... 5,231 4,781
Taxes, other than income taxes......................... 3,906 2,371
Interest............................................... 1,105 1,267
Other.................................................. 13,074 14,477
-------- --------
$161,377 $147,031
-------- --------
</TABLE>
12. RELATED PARTY TRANSACTIONS
The Company and Rexel, S.A. have entered into a Services Agreement, dated as
of November 1, 1995. The Services Agreement was negotiated and approved by a
special committee of the Board of Directors consisting of persons who are
neither officers nor directors of Rexel, S.A. or its affiliates nor have a
material financial relationship with Rexel, S.A. and its affiliates. Under
this agreement, in consideration for the benefits to the Company arising from
its association with the world-wide business of Rexel, S.A., including without
limitation, in matters relating to customers, suppliers, employers, business
methods and know-how and financial expertise, the Company has agreed to pay to
Rexel, S.A. $600 per year (commencing with 1995). In addition, Rexel, S.A. has
agreed to provide consulting services to the Company relating to specific
projects at the request of the Company at a rate 10% higher than the costs to
Rexel, S.A. of providing such services (including, in the case of employees of
Rexel, S.A., costs based on the wages, social insurance payments and allocated
overhead and general corporate expenses attributable to such employees). Any
payment for consulting services must be approved by the Audit Committee of the
Board of Directors (excluding any member thereof who is an officer or director
of Rexel, S.A. or any of its affiliates or a person that has a material
financial relationship with Rexel, S.A. or any of its affiliates). During 1996
and 1995, the Company requested from Rexel, S.A. services valued at $200 and
$340, respectively, relating to the development of training programs,
logistics, marketing and accounting consulting, enhancement of cash management
and treasury systems and a global agreement on implementation of an inventory
management system. In addition, pursuant to the agreement, Rexel, S.A.
consented to the use by the Company of the name "Rexel." The Services
Agreement is effective through December 31, 1996, subject to automatic renewal
for successive one year terms unless terminated on 30 days notice given by
either party prior to the commencement of a renewal term.
13. SUBSEQUENT EVENT
On January 17, 1997, the Company acquired the assets of Southland Electrical
Supply Company, a distributor of electrical parts and supplies with eight
locations in Kentucky for a cash purchase price of approximately $25.0
million.
IV-17
<PAGE>
SCHEDULE V
UNAUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
REXEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets........................................ $ 16,190 $ 14,396
Cash................................................ 187,406 156,450
Accounts and Notes Receivable--Net.................. 125,346 117,657
Prepaid Expenses and Other Current Assets........... 8,598 10,423
Deferred Income Taxes............................... 4,088 3,747
-------- --------
Total Current Assets.............................. 341,628 302,673
Investments and Noncurrent Receivables................ 192 814
Fixed Assets--Net..................................... 47,511 48,218
Other Assets.......................................... 3,503 3,286
Goodwill--Net......................................... 91,690 73,947
-------- --------
$484,524 $428,938
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Debt..................................... $ 37,100 $ 25,500
Current Portion of Long-Term Debt................... 7,708 7,737
Accounts Payable--Trade and Other Liabilities....... 188,293 161,377
Income Taxes Payable................................ 4,721 2,186
-------- --------
Total Current Liabilities......................... 237,822 196,800
Long-Term Debt........................................ 22,053 29,582
Other Long-Term Liabilities........................... 5,936 3,476
Deferred Income Taxes................................. 2,774 2,973
Stockholders' Equity
Preferred Stock (Authorized 2,000,000 Shares, None
Issued)............................................ 0 0
Common Stock (26,654,933 and 26,313,633 Shares
Issued)............................................ 26,655 26,314
Capital Surplus..................................... 98,261 94,706
Retained Earnings................................... 95,912 79,976
Treasury Stock, at Cost (621,243 Shares)............ (4,889) (4,889)
-------- --------
215,939 196,107
-------- --------
$484,524 $428,938
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
V-1
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000'S OMITTED, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Net Sales................................................... $666,834 $556,648
Cost of Goods Sold.......................................... 528,962 439,323
-------- --------
Gross Profit.............................................. 137,872 117,325
Selling and Administrative Expenses......................... 107,270 91,494
-------- --------
Operating Profit.......................................... 30,602 25,831
Interest Expense............................................ 3,141 2,543
Other Income--Net........................................... 253 242
-------- --------
Income From Operations Before Income Taxes.................. 27,714 23,530
Provision for Income Taxes.................................. 11,778 10,353
-------- --------
Net Income.................................................. $ 15,936 $ 13,177
======== ========
Net Income Per Common Share................................. $.61 $.51
======== ========
Weighted Average Number of Common and Common Equivalent
Shares..................................................... 26,152 26,000
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
V-2
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
-------- -------
(UNAUDITED)
Net Cash Provided By Operating Activities........................ $ 23,225 $ 6,399
<S> <C> <C>
-------- -------
<CAPTION>
Cash Flows from Investing Activities:
<S> <C> <C>
Capital Expenditures........................................... (2,445) 2,584)
Cash paid for Acquisitions..................................... (25,146) 0
Other Investing Activities..................................... 1,738 (137)
-------- -------
Net Cash Used in Investing Activities........................ (25,853) (2,721)
-------- -------
Cash Flows From Financing Activities
Net Borrowings under Line of Credit Arrangement................ 11,600 6,950
Acquisition of Treasury Shares................................. 0 (19)
Proceeds From Exercise of Stock Options........................ 2,518 85
Other Debt Payments and Financing Activities................... (9,696) (7,674)
-------- -------
Net Cash Provided By (Used In) Financing Activities.......... 4,422 (658)
-------- -------
Net Increase in Cash............................................. 1,794 3,020
Cash at Beginning of Period...................................... 14,396 10,013
-------- -------
Cash at End of Period............................................ $ 16,190 $13,033
======== =======
Supplemental information of business acquired:
Fair value of assets required, other than cash................. $ 40,572
Liabilities assumed............................................ (10,197)
Liabilities issued to sellers.................................. (5,229)
--------
Cash paid for acquisitions..................................... $ 25,146
========
</TABLE>
See accompanying notes
to unaudited condensed consolidated financial statements.
V-3
<PAGE>
REXEL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. The accompanying financial information should be read in conjunction with
the consolidated financial statements, including the notes thereto, for the
year ended December 31, 1996. The condensed consolidated balance sheet as
of December 31, 1996 has been summarized from the Company's audited
consolidated balance sheet as of that date but does not include all
disclosures required by generally accepted accounting principles.
2. Results for interim periods are not necessarily indicative of the results
to be expected for the year. The accompanying financial information
reflects all adjustments which are, in the opinion of Management, of a
normal, recurring nature and necessary for a fair presentation of the
results for the periods.
3. Inventories are stated at the lower of LIFO cost or market.
4. Net income per common share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during the periods.
5. On August 7, 1996, the Company acquired the common stock of Utility
Products Supply Co. of Denver, Colorado ("UPS"), a distributor of
electrical products to the utility industries with locations in Colorado,
Arizona, California and Kansas, for cash and deferred payments totaling
$5.6 million.
On November 12, 1996, the Company acquired the common stock of Cable &
Connector Warehouse, Inc. of Dallas, Texas ("CCW") a distributor of electronic
wire, cable, connectors and related apparatus to manufacturers of data and
telecommunications products with locations in Louisiana, Texas, Colorado,
California, Oregon and Kansas, for cash consideration of $20.2 million
(including $0.2 million of acquisition costs), plus contingent consideration
of up to $4.0 million based upon achieving certain operating results in 1997.
Any contingent consideration will be recorded as additional purchase price.
Effective January 1, 1997, the Company acquired the assets of Southland
Electrical Supply Company ("Southland"), a distributor of electrical parts and
supplies with eight locations in Kentucky for a cash purchase price (including
$0.2 million of acquisition costs) of approximately $20.1 million and a future
obligation of $4.7 million.
On April 29, 1997, the Company acquired the common stock of Chemco Electric
Supply, Inc., ("Chemco") a distributor of electrical parts and supplies with
three distribution centers located in Tampa, Bartow and Pinellas Park, Florida
for a total consideration (including $0.2 million of acquisition costs) of
approximately $5.5 million consisting of cash of $5.0 million and a future
obligation of $0.5 million. Concurrent with the Chemco acquisition, the
Company paid approximately $2.1 million of Chemco bank debt and received
approximately $1.1 million from the seller as payment for the selling
shareholder's debt to Chemco and the purchase of a life insurance policy.
Each of these acquisitions has been recorded as a purchase, and the excess
of the total purchase price over the fair value of the net assets acquired
($3.0 million for UPS, $13.7 million for CCW, $14.6 million for Southland and
$4.3 million for Chemco) is being amortized over 40 years. Results of
operations of the companies are included in the Company's financial statements
from the respective dates of acquisition. The following table summarizes the
effect on consolidated sales and income of the Company for the six months
ended June 30, 1997 and 1996 on an unaudited pro forma basis, assuming the
acquisitions had been consummated to January 1, 1996:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)
<S> <C> <C>
Net sales............................................. $673,485 $631,499
======== ========
Net income............................................ $ 16,011 $ 13,959
======== ========
Net income per share.................................. $.61 $.54
======== ========
</TABLE>
V-4
<PAGE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been consummated on January 1, 1996 or
are they necessarily indicative of future operating results.
V-5
<PAGE>
SCHEDULE VI
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
REXEL S.A.
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.
AND
REXEL, INC.
OCTOBER 17, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
ARTICLE I THE OFFER.................................................. VI-1
SECTION 1.01. The Offer................................... VI-1
SECTION 1.02. Company Action.............................. VI-2
ARTICLE II THE MERGER................................................. VI-3
SECTION 2.01. The Merger.................................. VI-3
SECTION 2.02. Effective Time; Closing..................... VI-3
SECTION 2.03. Effect of the Merger........................ VI-4
SECTION 2.04. Restated Certificate of Incorporation; By-
laws........................................ VI-4
SECTION 2.05. Directors and Officers...................... VI-4
SECTION 2.06. Conversion of Securities.................... VI-4
SECTION 2.07. Options and Warrants........................ VI-4
SECTION 2.08. Dissenting Shares........................... VI-5
SECTION 2.09. Surrender of Shares; Stock Transfer Books... VI-5
SECTION 2.10. Short-form Merger........................... VI-6
SECTION 2.11. Special Purpose Subsidiary.................. VI-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. VI-6
SECTION 3.01. Organization and Qualification;
Subsidiaries................................ VI-6
SECTION 3.02. Certificate of Incorporation and By-laws.... VI-6
SECTION 3.03. Capitalization.............................. VI-6
SECTION 3.04. Authority Relative to this Agreement........ VI-7
SECTION 3.05. No Conflict; Required Filings and Consents.. VI-7
SECTION 3.06. Compliance.................................. VI-8
SECTION 3.07. SEC Filings; Financial Statements........... VI-8
SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule
13E-3; Proxy Statement...................... VI-8
SECTION 3.09. Brokers..................................... VI-9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY................................................. VI-9
SECTION 4.01. Corporate Organization...................... VI-9
SECTION 4.02. Authority Relative to this Agreement........ VI-9
SECTION 4.03. No Conflict; Required Filings and Consents.. VI-9
SECTION 4.04. Offer Documents; Proxy Statement............ VI-10
SECTION 4.05. Brokers..................................... VI-10
SECTION 4.06. Ownership of Merger Subsidiary.............. VI-10
SECTION 4.07. Financing................................... VI-11
SECTION 4.08. Information Known by Parent or Certain
Subsidiaries................................ VI-11
ARTICLE V COVENANTS.................................................. VI-11
SECTION 5.01. Conduct of the Business Pending the Merger.. VI-11
SECTION 5.02. Shareholders' Meeting; Voting of Shares..... VI-11
SECTION 5.03. Proxy Statement............................. VI-11
SECTION 5.04. Access to Information; Confidentiality...... VI-12
SECTION 5.05. Directors' and Officers' Indemnification and VI-12
Insurance...................................
SECTION 5.06. Notification of Certain Matters............. VI-13
SECTION 5.07. Further Action; Best Efforts................ VI-13
SECTION 5.08. Public Announcements........................ VI-13
SECTION 5.09. Financing................................... VI-13
</TABLE>
VI-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
ARTICLE VI CONDITIONS TO THE MERGER.................................. VI-14
SECTION 6.01. Conditions to the Merger................... VI-14
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................... VI-14
SECTION 7.01. Termination................................ VI-14
SECTION 7.02. Effect of Termination...................... VI-15
SECTION 7.03. Amendment.................................. VI-15
SECTION 7.04. Waiver..................................... VI-15
ARTICLE VIII GENERAL PROVISIONS........................................ VI-15
SECTION 8.01. Non-Survival of Representations, Warranties VI-15
and Agreements.............................
SECTION 8.02. Notices.................................... VI-15
SECTION 8.03. Certain Definitions........................ VI-16
SECTION 8.04. Severability............................... VI-17
SECTION 8.05. Entire Agreement; Assignment............... VI-17
SECTION 8.06. Parties in Interest........................ VI-17
SECTION 8.07. Specific Performance....................... VI-17
SECTION 8.08. Fees and Expenses.......................... VI-17
SECTION 8.09. Governing Law.............................. VI-18
SECTION 8.10. Headings................................... VI-18
SECTION 8.11. Counterparts............................... VI-18
SECTION 8.12. Consent to Jurisdiction; Appointment of
Agent for Service of Process............... VI-18
ANNEX A: Conditions to Offer....................................... VI-19
</TABLE>
VI-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of October 17, 1997 (this
"Agreement"), among REXEL S.A., a French societe anonyme (hereinafter
"Parent"), INTERNATIONAL TECHNICAL DISTRIBUTORS, INC., a New York corporation
and a direct, wholly owned subsidiary of Parent ("Merger Subsidiary"), and
REXEL, INC., a New York corporation (the "Company").
WHEREAS, Parent beneficially owns approximately 50.5% (the "Parent Shares")
of the Common Stock, par value $1.00 per share, of the Company (the "Shares");
WHEREAS, Parent has proposed that the Merger Subsidiary or, at the option of
the Parent, a direct, wholly owned subsidiary of the Merger Subsidiary
incorporated in New York for such purpose (the "Special Purpose Subsidiary"),
acquire all of the issued and outstanding Shares not beneficially owned by
Parent or the Merger Subsidiary (references to the Parent shall, where the
context so requires, be deemed to refer to the Merger Subsidiary and/or the
Special Purpose Subsidiary as well, and references to the Merger Subsidiary
shall, where the context so requires, be deemed to refer to the Special
Purpose Subsidiary as well);
WHEREAS, the Board of Directors of the Company (the "Board") and a special
committee comprised of three independent directors of the Board (the "Special
Committee") have determined that it is in the best interests of the
Shareholders of the Company to approve Parent's proposed acquisition and have
voted (i) to recommend that the shareholders of the Company accept the Offer
(as defined below) and tender their Shares pursuant to the Offer and (ii) to
approve the merger (the "Merger") of Merger Subsidiary with and into the
Company, with the Company being the surviving corporation, in accordance with
the New York Business Corporation Law (the "NYBCL") following consummation of
the Offer;
WHEREAS, it is proposed that Parent will make a cash tender offer (the
"Offer") in compliance with Section 14(d)(1) of the Exchange Act (as defined
below) and the rules and regulations promulgated thereunder to acquire all the
issued and outstanding Shares for $22.50 per Share (such amount, or any
greater amount per Share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount") net to the seller in cash, upon the
terms and subject to the conditions of this Agreement; and that the Offer will
be followed by the Merger, pursuant to which each issued and outstanding Share
not beneficially owned by Parent will be converted into the right to receive
the Per Share Amount, upon the terms and subject to the conditions provided
herein; and
WHEREAS, the Special Committee has received the opinion of Wasserstein
Perella & Co., Inc. ("Wasserstein") that, based on, and subject to, the
various assumptions and qualifications set forth in such opinion, as of the
date thereof, the consideration to be received by the holders of Shares (other
than Parent and the Merger Subsidiary) pursuant to the Offer and the Merger is
fair to such holders from a financial point of view;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Subsidiary and the Company hereby agree as follows:
ARTICLE I
THE OFFER
---------
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
----------
been terminated in accordance with Section 7.01, Merger Subsidiary shall, and
Parent shall cause Merger Subsidiary to, commence within the meaning of Rule
14d-2 under the Exchange Act (as hereinafter defined) the Offer as promptly as
practicable after the date hereof, but in no event later than five business
days after the initial public announcement of Parent's intention to commence
the Offer. The Offer shall have a scheduled Expiration date 20 business days
following commencement of the Offer (the "Initial Expiration Date").
Notwithstanding any contrary provision of this Agreement, Merger Subsidiary
(i) if so requested by the Company at the direction of the Special Committee,
will extend the Offer for up to ten business days in the event upon the
Initial Expiration
VI-1
<PAGE>
Date, Merger Subsidiary shall not have accepted for payment Shares pursuant to
the Offer as a result of one or more of the conditions set forth in Annex A
hereto not having been satisfied or waived by Merger Subsidiary, (ii) at its
discretion may determine from time to time to extend the Offer for no more
than an aggregate of ten business days following the later of the Initial
Expiration Date and the first expiration date thereafter on which all of the
conditions set forth in Annex A shall have been satisfied or waived, if
applicable, provided, however, that in the event that Parent extends the Offer
pursuant to this clause (ii) all of the conditions to the Offer shall be
deemed to have been irrevocably satisfied for all purposes of the Offer and
shall not be asserted by Parent as a basis for not consummating the Offer and
(iii) may, from time to time at its discretion, extend the Offer in increments
of up to ten business days each, if one or more of the conditions set forth in
Annex A shall not have been satisfied or waived. Parent shall not accept for
payment any Shares tendered pursuant to the Offer unless there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares which, constitutes at least a majority of the Shares not
beneficially owned by Parent or Merger Subsidiary on a fully diluted basis
(the "Minimum Condition"). In addition to the Minimum Condition, the
obligation of Parent to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject only to the satisfaction of the
conditions set forth in Annex A hereto. Parent expressly reserves the right to
increase the Per Share Amount. Without the prior consent of the Special
Committee, Parent will not (i) decrease the Per Share Amount (ii) change the
number of Shares to be purchased in the Offer (iii) change the form of the
consideration payable in the Offer (iv) amend or add to the conditions to the
Offer set forth in Annex A hereto; or (v) make any other change in the terms
or conditions of the Offer which is adverse to the holders of Shares. Under no
circumstances shall Parent waive the Minimum Condition. The Per Share Amount
shall, subject to any applicable withholding of taxes, be net to the seller in
cash, upon the terms and subject to the conditions of the Offer. Following the
satisfaction or waiver of the conditions to the Offer, Parent shall cause
Merger Subsidiary to accept for payment and pay for, in accordance with the
terms of the Offer, all Shares validly tendered pursuant to the Offer and not
withdrawn, as soon as it is permitted to do so pursuant to applicable law.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Parent shall file with the Securities and Exchange Commission (the
"SEC") (i) a Tender Offer Statement on Schedule 14D-1, including the exhibits
thereto (together with all amendments and supplements thereto, the "Schedule
14D-1"), including the exhibits thereto with respect to the Offer and (ii) a
Rule 13e-3 Transaction Statement on Schedule 13E-3, including the exhibits
thereto (together with all amendments and supplements thereto, the "Schedule
13E-3") with respect to the Offer and the other transactions contemplated
hereby (the "Transactions"). The Schedule 14D-1 and the Schedule 13E-3 shall
contain or shall incorporate by reference an offer to purchase (the "Offer to
Purchase") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Schedule 13E-3, the Offer to
Purchase and such other documents, together with all supplements and
amendments thereto, being referred to herein collectively as the "Offer
Documents"). Parent, Merger Subsidiary and the Company agree to correct
promptly any information provided by any of them for use in the Offer
Documents which shall have become materially incorrect or misleading, and
Parent and Merger Subsidiary further agree to take all steps necessary to
cause the Schedule 14D-1 and the Schedule 13E-3 as so corrected to be filed
with the SEC and the other Offer Documents as so corrected to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
Law (as defined hereinafter). The Company, the Special Committee and their
respective counsel shall be given the opportunity to review and comment on the
Offer Documents and any amendments thereto prior to the filing thereof with
the SEC. Parent and Merger Subsidiary shall provide the Company, the Special
Committee and their respective counsel with a copy of any written comments or
telephonic notification of any oral comments Parent or Merger Subsidiary may
receive from the SEC or its staff with respect to the Offer Documents promptly
after the receipt thereof. Parent and its counsel shall provide the Company
and the Special Committee and their respective counsel with a reasonable
opportunity to participate in all communications with the SEC and its staff,
including any meetings and telephone conferences, relating to the Transactions
or this Agreement.
SECTION 1.02. Company Action. (a) The Company hereby consents to the Offer
---------------
and represents that (i) the Special Committee and the Board at meetings duly
called and held on October 17, 1997, have each, by unanimous vote of all
directors present and voting, (A) determined that each of the Offer and the
Merger, is fair
VI-2
<PAGE>
to and in the best interests of the shareholders of the Company (other than
Parent and Merger Subsidiary), (B) approved this Agreement and the
Transactions and (C) resolved to recommend that the shareholders of the
Company accept the Offer and tender their Shares pursuant to the Offer and
approve and adopt this Agreement and the Merger; provided that such
--------
recommendation may be withdrawn, modified or amended to the extent the Board
or the Special Committee deems it necessary to do so in the exercise of its
fiduciary duties, as advised by independent counsel, and (ii) Wasserstein has
delivered to the Special Committee a written opinion that, based on, and
subject to, the various assumptions and qualifications set forth in such
opinion, as of the date thereof the consideration to be received by the
holders of Shares (other than Parent and the Merger Subsidiary) pursuant to
the Offer and the Merger is fair to such holders from a financial point of
view to the holders of Shares. A copy of such opinion has been provided to
Parent. The Company hereby consents to the inclusion in the Offer Documents of
the recommendations of the Special Committee and the Board described in the
immediately preceding sentence.
(b) On the same day as the Parent first files the Schedule 14D-1 with the
SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9, including all exhibits thereto (together with all
amendments and supplements thereto, the "Schedule 14D-9"), containing the
recommendations of the Special Committee and the Board described in Section
1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by
Rule 14d-9 promulgated under the Exchange Act, and any other applicable
federal securities laws or regulations. The Company, Parent and Merger
Subsidiary agree to correct promptly any information provided by any of them
for use in the Schedule 14D-9 which shall have become materially incorrect or
misleading, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. Parent and its counsel shall be given
the opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. The Company shall provide
Parent and its counsel with a copy of any written comments or telephonic
notification of any oral comments the Company may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt thereof.
The Company and its counsel shall provide Parent and its counsel with a
reasonable opportunity to participate in all communications with the SEC and
its staff, including any meetings and telephone conferences, relating to the
Transactions or this Agreement.
(c) In connection with the Transactions, the Company (i) shall promptly
furnish Parent with mailing labels containing the names and addresses of all
record holders of Shares and with security position listings of Shares held in
stock depositories, each as of a recent date, together with all other
available listings and computer files containing names, addresses and security
position listings of record holders and beneficial owners of Shares and (ii)
shall furnish Parent with such additional information, including, without
limitation, updated listings and computer files of shareholders, mailing
labels and security position listings, and such other assistance as Parent,
Merger Subsidiary or their agents may reasonably request in connection with
the Offer and the Merger.
ARTICLE II
THE MERGER
----------
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
-----------
forth in this Agreement, and in accordance with the NYBCL, at the Effective
Time, as hereinafter defined, Merger Subsidiary shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Merger Subsidiary shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 2.02. Effective Time; Closing. As promptly as practicable after the
------------------------
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by delivering
to the Secretary of State of the State of New York the Certificate of Merger
in such form as may be required by, and executed and acknowledged in
accordance with, the relevant provisions of the NYBCL (such documents being
referred to collectively as the "Merger Documents"), and shall make all other
VI-3
<PAGE>
filings and recordings required by applicable law in connection with the
Merger. The Merger shall become effective at the time of filing of the
appropriate Merger Documents with the Secretary of State of the State of New
York, or at such later time, which shall be as soon as reasonably practicable,
specified as the effective time in the Merger Documents (the "Effective
Time"). Prior to such filing, a closing shall be held at the offices of
McDermott, Will & Emery, 50 Rockefeller Plaza, New York, New York USA 10020,
or such other place as the parties shall agree, for the purpose of confirming
the satisfaction or waiver, as the case may be, of the conditions set forth in
Article VI.
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of the
---------------------
Merger shall be as provided in the applicable provisions of the NYBCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Subsidiary shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of
the Company and Merger Subsidiary shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 2.04. Restated Certificate of Incorporation; By-laws. (a) The
-----------------------------------------------
Restated Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), as in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation following the
Effective Time until thereafter amended as provided by the NYBCL.
(b) The By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation following
the Effective Time until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-laws.
SECTION 2.05. Directors and Officers. (a) The directors of the Company
-----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and By-laws of the Surviving Corporation.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by virtue of
-------------------------
the Merger and without any action on the part of Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned directly or indirectly by Parent, Shares held
in the treasury of the Company and Dissenting Shares (as hereinafter
defined)) shall be canceled and, subject to Section 2.08, shall be
converted automatically into the right to receive from the Company an
amount equal to the Per Share Amount in cash (the "Merger Consideration")
payable, without interest, to the holder of each such Share, upon
surrender, in the manner provided in Section 2.09, of the certificate that
formerly evidenced such Share;
(b) Each Share issued and outstanding immediately prior to the Effective
Time owned directly or indirectly by Parent shall remain issued and
outstanding and no payment or distribution shall be made with respect
thereto;
(c) Each share that is owned by the Company as treasury stock shall be
canceled and no payment or distribution shall be made with respect thereto;
and
(d) Each share of Common Stock, par value $.01 per share, of Merger
Subsidiary issued and outstanding immediately prior to the Effective Time
shall be canceled and no payment or distribution shall be made with respect
thereto.
SECTION 2.07. Options and Warrants. Immediately prior to the Effective Time,
---------------------
each outstanding option to purchase Shares (in each case, an "Option"),
whether or not then exercisable, shall be canceled and each holder of a
canceled Option shall be entitled to receive a payment (the "Exercise Amount")
in cash from the Company, in consideration for the cancellation of each such
Option, at the same time as the Merger
VI-4
<PAGE>
Consideration is received by the holders of Shares, equal to the product of
(i) the number of Shares to be issued upon the exercise of such Option and
(ii) the excess, if any, of the amount paid per Share pursuant to the Offer
over the exercise price per Share previously subject to such Option.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision of this
------------------
Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are held by shareholders who shall have neither
voted in favor of the Merger nor consented thereto in writing and who shall
have filed with the Company, prior to the vote on the Merger by the Company's
shareholders, a written notice of intention to demand that such shareholder be
paid the fair value for his Shares if the proposed action is effected and
thereafter demanded properly in writing payment of fair value for such Shares
in accordance with, and otherwise complied in all respects with, Section 623
of the NYBCL (collectively, the "Dissenting Shares") shall be canceled but not
be converted into or represent the right to receive the Merger Consideration.
Such shareholders shall be entitled instead to receive payment of the court
determined fair value of such Shares (which may be more than, equal to, or
less than the Merger Consideration) in accordance with the provisions of such
Section 623, except that all Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to fair value for such Shares under such Section 623 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, upon surrender, in the manner provided in Section 2.09, of
the certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
payment of fair value received by the Company, withdrawals of such demands,
and any other instruments served pursuant to the NYBCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for payment of fair value under the NYBCL. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for payment of fair value or offer to settle or
settle any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior to the
------------------------------------------
Effective Time, Parent shall designate a bank or trust company to act as agent
(the "Paying Agent") for the holders of Shares in connection with the Merger
to receive the funds to which holders of Shares shall become entitled pursuant
to Section 2.06(a). Such funds shall be deposited with the Paying Agent by the
Surviving Corporation promptly following the Effective Time and shall be
invested by the Paying Agent as directed by the Surviving Corporation.
(b) As soon as practicable after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Shares entitled to receive the Merger
Consideration pursuant to Section 2.06(a) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the certificates evidencing such Shares (the "Certificates") shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates pursuant
to such letter of transmittal. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share formerly evidenced by such Certificate. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such
Certificate. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered
on the stock transfer books of the Company, it shall be a condition of payment
that the Certificate so surrendered shall be endorsed properly or otherwise be
in proper form for transfer and that the person requesting such payment shall
have paid all transfer and other taxes required by reason of the payment of
the Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such taxes either have been paid or are not
applicable.
(c) At any time commencing 180 days after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to it any
funds which had been made available to the Paying Agent and not disbursed to
holders of Shares (including, without limitation, all interest and other
income received by the
VI-5
<PAGE>
Paying Agent in respect of all funds made available to it), and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject
to abandoned property, escheat and other similar laws) only as general
creditors thereof with respect to any Merger Consideration that may be payable
upon due surrender of the Certificates held by them. Notwithstanding the
foregoing, neither Parent, the Company nor the Paying Agent shall be liable to
any holder of a Share for any Merger Consideration delivered in respect of
such Share to a public official pursuant to any abandoned property, escheat or
other similar law.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
Shares on the records of the Company. From and after the Effective Time,
except for Parent, the holders of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by applicable law.
SECTION 2.10. Short-form Merger. If, following the termination of the Offer,
------------------
the Merger Subsidiary, together with all Shares held by Parent if the same
shall have been transferred to the Merger Subsidiary, shall have acquired
ownership of at least 90% of the Shares, then in lieu of effecting the Merger,
the Board of Directors and shareholder of the Merger Subsidiary may cause the
Merger Subsidiary to be merged with and into the Company in accordance with
NYBCL Section 905. In such event, the foregoing provisions of this Article II
shall apply, mutatis mutandis.
SECTION 2.11. Special Purpose Subsidiary. At the option of the Parent, the
---------------------------
Merger may be effected through the Special Purpose Subsidiary in lieu of the
Merger Subsidiary. Should the Parent so elect all references to the Merger
Subsidiary in this Article II and elsewhere in this Agreement, shall, if
required to effect such election, be deemed to refer to the Special Purpose
Subsidiary.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Parent and Merger Subsidiary
that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of the
---------------------------------------------
Company and each material subsidiary of the Company (a "Subsidiary") is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing or in good standing or
to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). The Company and each Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect. The term "Material Adverse Effect" means any change or effect
that is or is reasonably likely to have a material adverse effect on the
business, results of operations or financial condition of the Company and the
Subsidiaries taken as a whole.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company has
-----------------------------------------
heretofore furnished to Parent a complete and correct copy of the Certificate
of Incorporation and the By-laws or equivalent organizational documents, each
as amended to date, of the Company. Such Certificate of Incorporation, By-laws
or equivalent organizational documents are in full force and effect, and
neither the Company nor any Subsidiary is in violation of any provision of its
Certificate of Incorporation, By-laws or equivalent organizational documents.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
---------------
consists of 45,000,000 Shares and 2,000,000 shares of preferred stock, par
value $1.00 per share. As of September 30, 1997, 26,055,290
VI-6
<PAGE>
Shares are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, and as of October 16, 1997, 628,000 options were
outstanding pursuant to the Company's employee stock option plans, each such
option entitling the holder thereof to purchase one Share. Except as set forth
above, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character issued or authorized by the
Company relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding contractual obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any
capital stock of any Subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any person.
Each outstanding share of capital stock of each Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such share owned by the
Company or another Subsidiary is free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Subsidiary's voting rights, charges
and other encumbrances of any nature whatsoever.
SECTION 3.04. Authority Relative to this Agreement. The Company has all
-------------------------------------
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company, the performance by
the Company of its obligations hereunder and the consummation by the Company
of the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the then outstanding Shares if and
to the extent required by applicable law, and the filing and recordation of
appropriate merger documents as required by the NYBCL). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Subsidiary,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general
equitable principles. The restrictions on business combinations contained in
Section 912 of the NYBCL have been satisfied with respect to the Transactions.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) Except as
-------------------------------------------
disclosed on Schedule 3.05 of the disclosure letter from the Company to Merger
Subsidiary dated as of the date hereof (the "Disclosure Letter"), the
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not (i) conflict with or
violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary (ii) to the best
knowledge of the Company, and subject to compliance with the Laws (as defined
below) and filings referred to in clause (i) of Section 3.05(b) hereof,
conflict with or violate any United States federal, state or local or any
foreign statute, law, rule, regulation, ordinance, code, order, or any other
requirement or rule of law (a "Law"), applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary
is bound or affected, or (iii) to the best knowledge of the Company result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any property or asset of either of them is bound
or affected, except in the case of each of clauses (ii) and (iii) above, for
any such conflicts, violations, breaches, defaults or other occurrences which
would not, individually or in the aggregate, have a Material Adverse Effect or
prevent or materially delay the performance by the Company of its obligations
under this Agreement or the consummation of the Offer, the Merger and the
short-form merger referred to in Section 2.10 ("Short-Form Merger").
VI-7
<PAGE>
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States federal, state or local or any foreign government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), except (i)
for applicable requirements, if any, of the Exchange Act, French securities
laws, state securities or "blue sky" laws ("Blue Sky Laws") and state takeover
laws and the filing of the applicable Merger Documents with the Secretary of
State of the State of New York and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate have a Material
Adverse Effect or prevent or materially delay the performance by the Company
of any of its obligations under this Agreement or the consummation of any of
the Transactions.
SECTION 3.06. Compliance. Except as previously disclosed to Parent, neither
-----------
the Company nor any Subsidiary is in conflict with, or in default or violation
of (i) any Law applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary or any
property or asset of the Company or any Subsidiary is bound or affected,
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay the performance by the Company of any of its obligations
under this Agreement or the consummation of the Offer, the Merger and the
Short-Form Merger.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has filed
----------------------------------
all forms, reports and documents required to be filed by it with the SEC since
December 31, 1995 (collectively, the "SEC Reports"). To the best knowledge of
the Company, the SEC Reports (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
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. No Subsidiary is required to file any form, report
or other document with the SEC.
(b) To the best knowledge of the Company, each of the consolidated financial
statements (including, in each case, any notes thereto) contained in the SEC
Reports was prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto or, in the case of
the unaudited interim financial statements, as permitted by Form 10-Q under
the Exchange Act) and each fairly presented the consolidated financial
position, results of operations and changes in financial position of the
Company and the consolidated Subsidiaries as at the respective dates thereof
and for the respective periods indicated therein, in all material respects
except that the unaudited interim financial statements are subject to normal
and recurring year-end adjustments which are not expected to be material in
amounts.
(c) To the best knowledge of the Company, except as and to the extent set
forth on the consolidated balance sheet of the Company and the consolidated
Subsidiaries at December 31, 1996, including the notes thereto, included in
the Company's Annual Report on Form 10-K for the fiscal year then ended, or on
the unaudited consolidated balance sheet of the Company and the consolidated
Subsidiaries at June 30, 1997, including the notes thereto, included in the
Company's Quarterly Report on Form 10-Q for the period then ended or in any
other SEC Report filed prior to the date hereof, the Company and the
consolidated Subsidiaries have no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required
to be reflected on a consolidated balance sheet, or in the notes thereto,
prepared in accordance with generally accepted accounting principles, except
for liabilities and obligations incurred in the ordinary course of business
consistent with past practice since June 30, 1997 or liabilities and
obligations which would not have a Material Adverse Effect.
SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy
------------------------------------------------------
Statement. None of the information supplied by the Company specifically for
- ----------
inclusion in the Schedule 14D-9, the Offer Documents or
VI-8
<PAGE>
the Schedule 13E-3 shall, at the respective times the Schedule 14D-9, the
Offer Documents, the Schedule 13E-3 or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to shareholders
of the Company, as the case may be, 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 are made, not misleading. Neither the proxy
statement to be sent to the shareholders of the Company in connection with the
Shareholders' Meeting (as hereinafter defined) nor the information statement
to be sent to such shareholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, being referred to herein as
the "Proxy Statement"), shall, at the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to shareholders of the
Company or at the time of the Shareholders' Meeting contain any untrue
statement with respect to any 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
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Shareholders' Meeting which shall have become materially incorrect or
misleading. Notwithstanding the foregoing, the Company makes no representation
and warranty with respect to information supplied by Parent, Merger Subsidiary
or any of their representatives which is contained in any of the foregoing
documents or the Offer Documents. The Schedule 14D-9 and the Proxy Statement
shall comply in all material respects as to form with the requirements of the
Exchange Act.
SECTION 3.09. Brokers. No broker, finder or investment banker (other than
--------
Wasserstein) is entitled to any brokerage, finder's or other fee or commission
in connection with the Transactions based upon arrangements made by or on
behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and
Wasserstein pursuant to which such firm would be entitled to any payment
relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
-------------------------------
Parent and Merger Subsidiary hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01. Corporate Organization. Parent is a societe anonyme duly
-----------------------
organized and validly existing under the laws of the Republic of France and
Merger Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent and
-------------------------------------
Merger Subsidiary has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Merger Subsidiary, the performance by Parent and Merger Subsidiary
of their respective obligations hereunder and the consummation by Parent and
Merger Subsidiary of the Transactions have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part
of Parent or Merger Subsidiary are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
filing and recordation of appropriate Merger Documents as required by the
NYBCL). This Agreement has been duly and validly executed and delivered by
Parent and Merger Subsidiary and, assuming the due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding obligation
of each of Parent and Merger Subsidiary enforceable against each of Parent and
Merger Subsidiary in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general
equitable principles.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The execution
-------------------------------------------
and delivery of this Agreement by Parent and Merger Subsidiary do not, and the
performance of this Agreement by Parent and Merger Subsidiary will not (i)
conflict with or violate the status (By-laws) of Parent or the Certificate of
VI-9
<PAGE>
Incorporation or By-laws of Merger Subsidiary (ii) conflict with or violate
any Law applicable to Parent or Merger Subsidiary or by which any property or
asset of either of them is bound or affected or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Merger Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Subsidiary is a party or by which Parent or Merger
Subsidiary or any property or asset of either of them is bound or affected,
except for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent, individually or in the aggregate have a
Parent Material Adverse Effect or materially delay the performance by Parent
or Merger Subsidiary of any of its obligations under this Agreement or the
consummation of any of the Transactions. The term "Parent Material Adverse
Effect" means any change of effect that is or is reasonably likely to be
materially adverse to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole.
(b) The execution and delivery of this Agreement by Parent and Merger
Subsidiary do not, and the performance of this Agreement by Parent and Merger
Subsidiary will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, French securities laws,
Blue Sky Laws and state takeover laws, and the filing of the applicable Merger
Documents with the Secretary of State of the State of New York and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the
aggregate, have a Parent Material Adverse Effect or prevent or materially
delay the performance by Parent or Merger Subsidiary of any of its obligations
under this Agreement or the consummation of any of the Transactions.
SECTION 4.04. Offer Documents; Proxy Statement. None of the Offer Documents
---------------------------------
nor any of the information supplied by Parent or Merger Subsidiary
specifically for inclusion in the Schedule 14D-9 shall, at the time the
respective documents or the Schedule 14D-9 are filed with the SEC or
published, sent or given to shareholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any 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 are made, not
misleading. The information supplied by Parent for inclusion in the Statement
will not, on the date the Proxy Statement (or any amendment or supplement
thereto) is first mailed to shareholders of the Company, or at the time of the
Shareholders' Meeting, contain any statement which, at such time and in light
of the circumstances under which it is made, is incorrect or misleading with
respect to any material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
materially incorrect or misleading or necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for the
Shareholders' Meeting which shall have become materially incorrect or
misleading. Notwithstanding the foregoing, Parent and Merger Subsidiary make
no representation or warranty with respect to any information supplied by the
Company or any of its representatives which is contained in any of the
foregoing documents or the Offer Documents. The Offer Documents shall comply
in all material respects as to form with the requirements of the Exchange Act
and the rules and regulations thereunder.
SECTION 4.05. Brokers. No broker, finder or investment banker (other than
--------
J.P. Morgan Securities, Inc.) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of Parent or Merger Subsidiary.
SECTION 4.06. Ownership of Merger Subsidiary. As of the date hereof and
-------------------------------
through and including the Effective Time, all of the outstanding capital stock
of the Merger Subsidiary will be owned directly or indirectly by Parent. As of
the date hereof and through and including the Effective Time, there will be no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments to which Merger Subsidiary is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Merger Subsidiary or obligating Merger Subsidiary to grant,
issue or sell any shares of the capital stock of, or
VI-10
<PAGE>
other equity interests in, Merger Subsidiary, by sale, lease, license or
otherwise, except as related to the financing of the Offer. There are no
obligations, contingent or otherwise, of Merger Subsidiary to repurchase,
redeem or otherwise acquire any shares of the capital stock of Merger
Subsidiary.
SECTION 4.07. Financing. Parent has or will have available, prior to the
----------
expiration of the Offer, and will, as necessary, provide to Merger Subsidiary
on a timely basis, sufficient funds to enable Parent and Merger Subsidiary to
consummate the Offer, the Merger and the other transactions contemplated
hereby and to pay all related fees and expenses.
SECTION 4.08. Information Known by Parent or Certain Subsidiaries. As of the
----------------------------------------------------
date hereof, neither Parent nor any of its subsidiaries (other than the
Company and its subsidiaries) has actual knowledge of any breach by the
Company of any of its representations and warranties set forth in Article III
hereof.
ARTICLE V
COVENANTS
---------
SECTION 5.01. Conduct of the Business Pending the Merger. The Company
-------------------------------------------
covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the businesses
of the Company and the Subsidiaries shall be conducted only in, and the
Company and the Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice; and the
Company shall use its reasonable best efforts to preserve substantially intact
the business organization of the Company and the Subsidiaries and to preserve
the current relationships of the Company and the Subsidiaries with customers,
suppliers and other persons with which the Company or any Subsidiary has
significant business relations.
SECTION 5.02. Shareholders' Meeting; Voting of Shares. If necessary in order
----------------------------------------
to consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable law and the Company's Certificate of Incorporation
and By-laws (a) duly call, give notice of, convene and hold a special meeting
of its shareholders as soon as practicable following consummation of the Offer
for the purpose of considering and taking action on this Agreement and the
Transactions (the "Shareholders' Meeting") and (b) (i) include in the Proxy
Statement the recommendation of the Board and the Special Committee that the
shareholders of the Company approve and adopt this Agreement and the Merger,
subject to their respective fiduciary duties as advised by independent counsel
and (ii) use its reasonable best efforts to obtain such approval and adoption.
At the Shareholders' Meeting, or any other meeting of Shareholders called for
the purpose, each of Parent and Merger Subsidiary shall cause all Shares
beneficially owned and hereafter acquired, including without limitation
pursuant to the Offer, by it and its subsidiaries to be voted in favor of the
approval and adoption of this Agreement and the Transactions.
SECTION 5.03. Proxy Statement. If required by applicable law, as soon as
----------------
practicable following consummation of the Offer, the Company shall file the
Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC.
Parent, Merger Subsidiary and the Company shall cooperate with each other in
the preparation of the Proxy Statement, and the Company shall notify Parent of
the receipt of any comments of the SEC with respect to the Proxy Statement and
of any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and
the SEC. The Company shall give Parent and its counsel the opportunity to
review the Proxy Statement prior to its being filed with the SEC and shall
give Parent and its counsel the opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company, Parent and Merger Subsidiary
agrees to use its reasonable best efforts, after consultation with the other
parties hereto, to
VI-11
<PAGE>
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement and all required amendments and supplements thereto to be
mailed to the holders of Shares entitled to vote at the Shareholders' Meeting
at the earliest practicable time.
SECTION 5.04. Access to Information; Confidentiality. (a) From the date
---------------------------------------
hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of
the Company and the Subsidiaries to, afford the officers, employees and
agents, including financing sources, of Parent and Merger Subsidiary
reasonable access during normal business hours and without disrupting the
orderly conduct of business by the Company and its Subsidiaries to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and each Subsidiary, and shall furnish Parent
and Merger Subsidiary with all financial, operating and other data and
information as Parent or Merger Subsidiary, through its officers, employees or
agents, may reasonably request.
(b) No investigation pursuant to this Section 5.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 5.05. Directors' and Officers' Indemnification and Insurance. (a)
-------------------------------------------------------
The By-laws of the Surviving Corporation shall contain provisions no less
favorable with respect to indemnification than are set forth in Article IX of
the By-laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
the Effective Time were directors, officers, employees, fiduciaries or agents
of the Company, unless such modification shall be required by law.
(b) The Company shall, to the fullest extent permitted under applicable law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company and each Subsidiary, including but not limited to the
members of the Special Committee (collectively, the "Indemnified Parties")
against all costs and expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, criminal, administrative
or investigative, arising out of or pertaining to any action or omission in
their capacity as an officer, director, employee, fiduciary or agent, whether
occurring before or after the Effective Time, until the expiration of the
statute of limitations relating thereto (and shall pay any expenses as they
are incurred in advance of the final disposition of such action or proceeding
to each Indemnified Party to the fullest extent permitted under the NYBCL,
upon receipt from the Indemnified Party to whom expenses are advanced of any
undertaking to repay such advances required under the NYBCL). In the event of
any such claim, action, suit, proceeding or investigation (i) the Company or
the Surviving Corporation, as the case may be, shall pay the fees and expenses
of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld); and provided further that neither the
Company nor the Surviving Corporation shall be obligated pursuant to this
Section 5.05(b) to pay the fees and expenses of more than one counsel (plus
appropriate local counsel) for all Indemnified Parties in any single action
except (x) that the persons who served as directors of the Company who were
not designees of Parent shall be entitled to retain one additional counsel
(plus appropriate local counsel) to represent them at the expense of the
Company or the Surviving Corporation, and (y) to the extent that two or more
of such Indemnified Parties shall have conflicting interests in the outcome of
such action, in which case such additional counsel (including local counsel)
as may be required to avoid any such conflict or likely conflict may be
retained by the Indemnified Parties at the expense of the Company or the
Surviving Corporation; and provided further that, in the event that any claim
for indemnification is asserted or made within the period prior to the
expiration of the applicable
VI-12
<PAGE>
statute of limitations, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim. All rights under this
Section 5.05(b) shall be deemed to be a contract between the Company and each
of the Indemnified Parties.
(c) The Company and, after the Effective Time, the Surviving Corporation
shall maintain in effect for six years from the Effective Time, if available,
the current directors' and officers' liability insurance policies maintained
by the Company covering those persons who are currently covered by such
policies (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions less
favorable) with respect to matters occurring prior to the Effective Time.
(d) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any other person, then, and in each such
case, proper provision shall be made so that the successors and assigns of the
Company or the Surviving Corporation, as the case may be, or, at Parent's
option, Parent, shall assume the obligations set forth (a) in this Section
5.05, (b) in the indemnification agreement dated October 8, 1997, between the
Company and the members of the Special Committee and (c) in the
indemnification agreements dated as of March 1, 1994, between the Company and
certain directors and/or officers of the Company.
SECTION 5.06. Notification of Certain Matters. The Company shall give prompt
--------------------------------
notice to Merger Subsidiary and Parent, and Merger Subsidiary and Parent shall
give prompt notice to the Company, of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (ii) any failure of the Company, Parent
or Merger Subsidiary, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.06 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 5.07. Further Action; Best Efforts. Upon the terms and subject to
-----------------------------
the conditions hereof, each of the parties hereto shall use its best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transactions, including,
without limitation, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
each Governmental Entity and parties to contracts with the Company and the
Subsidiaries as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Offer and the Merger. 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 directors of each
party to this Agreement and the Surviving Corporation shall use their best
efforts to take all such action.
SECTION 5.08. Public Announcements. Parent, Merger Subsidiary and the
---------------------
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any
Transaction 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 any
listing agreement with a securities exchange to which Parent or the Company is
a party.
SECTION 5.09. Financing. Parent shall ensure that it or Merger Subsidiary,
----------
as the case may be, has sufficient funds to acquire all the outstanding Shares
in the Offer and the Merger and pay all related fees and expenses.
VI-13
<PAGE>
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
SECTION 6.01. Conditions to the Merger. The respective obligations of each
-------------------------
party to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have been
---------------------
approved and adopted by the affirmative vote of the shareholders of the
Company to the extent required by the NYBCL and the Certificate of
Incorporation and By-laws of the Company;
(b) No Order. No Governmental Entity shall have enacted, issued,
---------
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is then in effect and has the effect of preventing or
prohibiting consummation of the Merger or the effective operation of the
business of the Company and the Subsidiaries after the Effective Time;
(c) Offer. Merger Subsidiary or its permitted assignee shall have
------
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall not be applicable to
the obligations of Parent or Merger Subsidiary if, in breach of this
Agreement or the terms of the Offer, Parent fails to purchase any Shares
validly tendered and not withdrawn pursuant to the Offer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 7.01. Termination. This Agreement may be terminated and the Merger
------------
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement
and the Transactions by the shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent, Merger Subsidiary and the Company at the direction of the
Special Committee; or
(b) by either Parent or the Company at the direction of the Special
Committee if (i) the Effective Time shall not have occurred on or before
March 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (ii) any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) by Parent, if (i) due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A hereto,
Parent shall have terminated the Offer or permitted the Offer to expire in
accordance with the terms of this Agreement without having accepted any
Shares for payment thereunder, unless such termination or such expiration
shall have been caused by or resulted from the failure of Parent or Merger
Subsidiary to perform in any material respect any material covenant or
agreement of either of them contained in this Agreement or the material
breach by Parent or Merger Subsidiary of any material representation or
warranty of either of them contained in this Agreement or (ii) prior to the
purchase of Shares pursuant to the Offer, the Special Committee shall have
withdrawn or modified in a manner adverse to Parent or Merger Subsidiary
its approval or recommendation of the Offer, this Agreement or the Merger
or shall have resolved to do any of the foregoing; or
(d) by the Company, upon direction of the Special Committee, if due to an
occurrence or circumstance that would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent shall have (i) failed to
commence the Offer within 30 days following the date of this Agreement or
(ii) terminated the Offer or permitted the Offer to expire without having
accepted any Shares for payment thereunder unless such termination or such
expiration shall have been caused by or resulted from the failure of the
Company
VI-14
<PAGE>
to perform in any material respect any material covenant or agreement of it
contained in this Agreement or the material breach by the Company of any
material representation or warranty of it contained in this Agreement; or
(e) by the Company, upon direction of the Special Committee, if any
representation or warranty of Parent and Merger Subsidiary in this
Agreement which is qualified as to materiality shall not be true and
correct in all respects or any such representation or warranty that is not
so qualified shall not be true and correct in any material respect, in each
case as if such representation or warranty was made as of such time on or
after the date of this Agreement; or Parent or Merger Subsidiary shall have
failed to perform in any material respect any obligation or to comply in
any material respect with any agreement or covenant of Parent or Merger
Subsidiary to be performed or complied with by it under this Agreement; or
(f) by the Company, upon direction of the Special Committee, if the
Special Committee shall have withdrawn or modified its approval or
recommendation of the Offer, the Merger or this Agreement.
SECTION 7.02. Effect of Termination. In the event of the termination of this
----------------------
Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(i) as set forth in Section 8.01 and (ii) nothing herein shall relieve any
party from liability for any willful breach hereof.
SECTION 7.03. Amendment. This Agreement may be amended by the parties hereto
----------
by action taken by or on behalf of their respective governing bodies (and, in
the case of the Company, as approved by Special Committee) at any time prior
to the Effective Time; provided, however, that, after the approval and
adoption of this Agreement and the Merger by the shareholders of the Company,
no amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of
the Merger, impose conditions to the Merger other than set forth in Section
6.01 or would otherwise amend or change the terms and conditions of the Merger
in a manner adverse to the holders of the Shares (other than Parent and its
affiliates) or would adversely affect the rights of the Indemnified Parties
under Section 5.05. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 7.04. Waiver. At any time prior to the Effective Time except as
-------
otherwise provided in this Agreement, any party hereto may by action taken by
or on behalf of its governing body (i) extend the time for the performance of
any obligation or other act of any other party hereto (ii) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any
agreement or condition contained herein, other than the Minimum Condition. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby and, in the case of
any extension or waiver by which the Company is to be bound, only if approved
by the Special Committee.
ARTICLE VIII
GENERAL PROVISIONS
------------------
SECTION 8.01. Non-Survival of Representations, Warranties and Agreements.
-----------------------------------------------------------
The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 7.01, as the case may be, except that (i) the
agreements set forth in Articles II and VIII and Section 5.05 shall survive
the Effective Time indefinitely and (ii) the agreements set forth in Article
VIII shall survive the termination of this Agreement indefinitely.
SECTION 8.02. Notices. All notices, requests, claims, demands and other
--------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in
VI-15
<PAGE>
person, by telecopy or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given
in accordance with this Section 8.02):
if to Parent or Merger Subsidiary:
Rexel S.A.
25, rue de Clichy
75009 Paris
France
Telecopier No: (33-1) 42.85.09.98
Attention: General Counsel
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier No: (212) 547-5444
Attention: Joel A. Adler, Esq.
if to the Company:
Rexel, Inc.
150 Alhambra Circle
Coral Gables, Florida 33134
Telecopier No: (305) 446-8128
Attention: General Counsel
with copies to:
Hughes, Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Telecopier No: (212) 422-4726
Attention: John Hoyns, Esq.
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No: (212) 735-2000
Attention: Paul T. Schnell, Esq.
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the term:
--------------------
(a) "affiliate" of a specified person means a person who directly or
-----------
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a person who
------------------
shall be deemed to be the beneficial owner of such Shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly (ii) which such person or any of its affiliates or associates
has, directly or indirectly (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise,
or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom
VI-16
<PAGE>
such person or any of its affiliates or associates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any Shares;
(c) "business day" means any day on which the principal offices of the
--------------
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in the City of
New York;
(d) "control" (including the terms "controlled by" and "under common
--------- --------------- -------------
control with") means the possession, directly or indirectly or as trustee
-------------
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "person" means an individual, corporation, partnership, limited
--------
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and Corporation,
Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries.
(f) "subsidiary" or "subsidiaries" of the Company, the Surviving
------------ --------------
Corporation, Parent or any other person means an affiliate controlled by
Corporation, Parent or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 8.04. Severability. If any term or other provision of this Agreement
-------------
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
in order that the Transactions be consummated as originally contemplated to
the fullest extent possible.
SECTION 8.05. Entire Agreement; Assignment. This Agreement constitutes the
-----------------------------
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by operation of law or otherwise, except
that Parent and Merger Subsidiary may assign all or any of their rights and
obligations hereunder to any wholly-owned subsidiary Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
SECTION 8.06. Parties in Interest. This Agreement shall be binding upon and
--------------------
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than the provisions of Section 2.07, Section
5.05 and Section 8.08 (which are intended to be for the benefit of the persons
covered thereby and may be enforced by such persons).
SECTION 8.07. Specific Performance. The parties hereto agree that
---------------------
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
SECTION 8.08. Fees and Expenses. All fees and expenses incurred in
------------------
connection with this Agreement and the Transactions shall be paid by the party
incurring such fees and expenses, whether or not such transactions are
consummated; provided, however, that the parties hereto agree that any fees
and expenses incurred by the Special Committee shall be paid by the Company.
VI-17
<PAGE>
SECTION 8.09. Governing Law. This Agreement and any disputes between the
--------------
parties related thereto shall be governed by, and construed in accordance
with, the laws of the State of New York (without regard to conflicts of laws
principle thereof). All actions and proceedings arising out of or relating to
this Agreement shall be heard and exclusively determined in any New York state
or federal court sitting in the County of New York and the parties hereto
hereby consent to the jurisdiction of such courts in any such action or
proceeding.
SECTION 8.10. Headings. The descriptive headings contained in this Agreement
---------
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 8.11. Counterparts. This Agreement may be executed in one or more
-------------
counterparts (including by facsimile transmission), and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
SECTION 8.12. Consent to Jurisdiction; Appointment of Agent for Service of
------------------------------------------------------------
Process. Parent hereby (a) irrevocably submits to the exclusive (except to the
- --------
extent of an action to enforce a judgment relating hereto) jurisdiction of any
New York State and Federal courts sitting in New York City with respect to
such matters arising out of or relating hereto, (b) irrevocably agrees that
all claims with respect to such action or proceeding may be heard and
determined in such New York State or Federal court, (c) irrevocably waives the
defense of an inconvenient forum, lack of personal jurisdiction and improper
venue, (d) irrevocably consents to service of process upon it by mailing or
delivering such service to its registered office at 25, rue de Clichy, 75009
Paris, France, (e) irrevocably agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law and (f) to the
extent that it or its properties have or hereafter may acquire immunity from
jurisdiction of any court or from any legal process (whether through service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise), waives such immunity in respect of its obligations
under this Agreement. All parties hereto hereby irrevocably waive a trial by
jury in any proceedings referred to in the preceding sentence.
IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
REXEL S.A.
/s/ Alain Redheuil
____________________________________________
Name: Alain Redheuil
Title: Chairman and Chief Executive Officer
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.
/s/ Alain Redheuil
____________________________________________
Name: Alain Redheuil
Title: President
REXEL, INC.
/s/ Gilles P. Guinchard
____________________________________________
Name: Gilles P. Guinchard
Title: President
VI-18
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
-----------------------
Notwithstanding any other provision of the Offer, Parent shall not be
required to accept for payment or pay, subject to the applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, for
any Shares tendered pursuant to the Offer, and may terminate or amend the
Offer to the extent expressly provided in this Agreement and may postpone the
acceptance for payment of and payment for Shares tendered, if (i) the Minimum
Condition shall not have been satisfied or (ii) at any time on or after the
date of this Agreement, and prior to the acceptance for payment of Shares, any
of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity seeking to (i) make illegal or
otherwise directly or indirectly restrain or prohibit or make materially
more costly the making of the Offer, the acceptance for payment of, or
payment for, any Shares by Parent or any other affiliate of Parent or the
consummation of the Merger; (ii) prohibit or limit materially the ownership
or operation by Parent or Merger Subsidiary of all or any material portion
of the business (as heretofore conducted) or assets (as heretofore owned or
operated) of the Company or any of its subsidiaries, or to compel the
Company, Parent or any of their subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company or any
of its subsidiaries, as a result of the Transactions; (iii) impose or
confirm material limitations on the ability of Parent or any affiliate of
Parent to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Parent pursuant to the Offer or otherwise on all matters properly presented
to the Company's shareholders, including, without limitation, the approval
and adoption of the Agreement and the Merger; or (iv) require divestiture
by Parent or any affiliate of Parent of any Shares;
(b) there shall have been any order or injunction issued, or any Law
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to Parent, the Company or any subsidiary or affiliate of Parent
or the Company which has resulted, or is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) there shall have occurred any change, event or development that has a
Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the NYSE;
(ii) any general suspension of, or limitation on prices for, trading in
equity securities on the Paris Bourse; (iii) any decline, measured from the
date hereof, in the Standard & Poor's 500 Index by an amount in excess of
25%; (iv) any change in currency exchange rates, measured from the close of
business on the date of this Agreement, resulting in an increase of 20% or
more in the Per Share Amount as translated from U.S. dollars into French
Francs; (v) a commencement of war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
or the Republic of France; or (vi) in the case of any of the foregoing
existing on the date hereof, a material acceleration or worsening thereof;
(e) (A) the Special Committee shall have withdrawn or modified in a
manner adverse to Parent or Merger Subsidiary the adoption or
recommendation of the Offer, the Merger or the Agreement, or (B) the
Special Committee shall have resolved to do any of the foregoing;
(f) (1) any representation or warranty of the Company in this Agreement
shall not be true and correct; provided in any such case, such
representation and warranty shall continue to be incorrect in any material
respect at the time of such termination; or (2) the Company shall have
failed to perform in any respect any agreement or covenant of the Company
to be performed or complied with by it under this Agreement, except in each
case, where such representation or warranty not being true and correct or
such failure to perform such agreements, and covenants does not have and
would not be reasonably be likely have a Material Adverse Effect;
(g) this Agreement shall have been terminated in accordance with its
terms; or
VI-19
<PAGE>
(h) Parent, Merger Subsidiary and the Company (acting at the direction of
the Special Committee) shall have agreed that Parent shall terminate the
Offer or postpone the acceptance for payment of or payment for Shares
thereunder;
which, in the reasonable judgment of Parent in any such case, and regardless
of the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and may be
asserted by Parent regardless of the circumstances giving rise to any such
condition or may be waived by Parent in whole or in part at any time and from
time to time in its reasonable discretion. The failure by Parent at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances; and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
VI-20
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each holder or his broker, dealer,
commercial bank or other nominee to the Depositary at one of its addresses set
forth below.
The Depositary for the Offer is:
IBJ Schroder Bank & Trust Company
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn.: Reorganization Dept.
Attn.: Reorganization Dept. Securities Processing Window SC-1
By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 858-2611
Confirm Receipt of Facsimile by Telephone:
(212) 858-2103
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank or trust company or nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO] MACKENZIE
PARTNERS, INC.
56 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT) OR
CALL TOLL FREE: (800) 322-2885
The Dealer Manager for the Offer is:
J.P. MORGAN & CO.
60 WALL STREET
NEW YORK, NEW YORK 10260
TELEPHONE: (212) 648-4808 OR
CALL TOLL FREE: (800) 292-9848
<PAGE>
EXHIBIT 99(a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
REXEL, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 23, 1997
BY
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.
A WHOLLY OWNED SUBSIDIARY OF
REXEL S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME, ON THURSDAY, NOVEMBER 20, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization Dept. New York, New York 10004
New York, New York 10274-0084 Attn.: Reorganization Dept.
Attn.: Reorganization Dept. Securities Processing Window SC-1
</TABLE>
Confirm Receipt of Facsimile
by Telephone
(212) 858-2103
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE(S) TENDERED
APPEAR(S) ON CERTIFICATES(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REGISTERED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificates delivered to the Depositary are being tendered.
See Instruction 4.
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW. 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 completed by shareholders either if
certificates are to be forwarded herewith or if delivery 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"), which
are hereinafter collectively referred to as the "Book-Entry Transfer
Facilities," pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below). Shareholders whose certificates are not
immediately available or who cannot deliver their certificates and all other
documents required hereby to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or who cannot comply with the
book-entry transfer procedures on a timely basis must tender their Shares (as
defined below) according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC OR PDTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution__________________________________________________
Check Box of Book-Entry Transfer Facility (check one):
[_] DTC [_] PDTC
Account Number_________________________________________________________________
Transaction Code Number________________________________________________________
Shareholders whose Share certificates are not immediately available or they
cannot deliver either their certificates for, or a book-entry confirmation
with respect to their Shares and all other required documents to the
Depositary prior to the Expiration Date (as defined in the Offer to Purchase)
may tender their Shares according to the guaranteed delivery procedure set
forth in the Offer To Purchase. See Instruction 2 hereof.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)_________________________________________________
Window Ticket Number (if any)__________________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________________
Name of Institution that Guaranteed Delivery___________________________________
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry Transfer
(check one):
[_] DTC [_] PDTC
Account Number (if delivered by Book-Entry Transfer)___________________________
Transaction Code Number________________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to International Technical Distributors, Inc.
("Purchaser"), a New York corporation and a wholly owned subsidiary of Rexel
S.A., a French societe anonyme ("Parent"), the above-described shares (the
"Shares") of common stock, par value U.S. $1.00 per share, of Rexel, Inc., a
New York corporation (the "Company"), at U.S. $22.50 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated October 23, 1997 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase, each as amended or
supplemented from time to time, constitutes the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all of the Shares
that are being tendered hereby (and any and all other Shares or other
securities ("Other Securities") or property issued or issuable in respect
thereof on or after October 17, 1997) and irrevocably appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares and Other Securities with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver certificates for such Shares (and any such Other
Securities), or transfer ownership of such Shares (and any such Other
Securities) on the account books maintained by either of the Book-Entry
Transfer Facilities, together in any such case with all accompanying evidences
of transfer and authenticity, to or upon the order of Purchaser, upon receipt
by the Depositary, as the undersigned's agent, of the purchase price
(adjusted, if appropriate, as provided in the Offer to Purchase), (ii) present
such Shares and any such Other Securities 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 any such Other Securities, all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
attorney and proxy of the undersigned, each with full power of substitution,
to exercise such voting and other rights as each such attorney and proxy or
his substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares (and
any Other Securities) tendered hereby which have been accepted for payment by
Purchaser prior to the time of such vote or action, which the undersigned is
entitled to vote at any meeting of stockholders of the Company (whether annual
or special and whether or not an adjourned meeting), or written consent in
lieu of such meeting, or otherwise. This proxy is coupled with an interest in
the Shares (and any Other Securities) tendered hereby and is irrevocable and
is granted in consideration of, and is effective upon, the acceptance for
payment of such Shares (and any Other Securities) by Purchaser in accordance
with the terms of the Offer. Such acceptance for payment shall revoke all
prior proxies granted by the undersigned with respect to such Shares (and any
Other Securities) and no subsequent proxies may be given (and if given will be
deemed not to be effective) with respect thereto by the undersigned. Purchaser
reserves the right to require that, in order for Shares (and any Other
Securities) to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares (and any Other Securities), Purchaser is
able to exercise full voting and other rights of a record holder or beneficial
holder, including rights in respect of acting by written consent, with respect
to such Shares (and any Other Securities).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
Other Securities) tendered hereby, and that when the same are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any signature guarantees
or additional documents deemed by the Depositary or Purchaser to be necessary
or desirable to complete the sale, assignment and transfer
3
<PAGE>
of the Shares (and any Other Securities) tendered hereby. In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser any such Other Securities issued to the undersigned on or
after October 17, 1997, in respect of the Shares tendered hereby, accompanied
by appropriate documentation of transfer, and pending such remittance or
appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of any such Other Securities and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof,
as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase or otherwise required by applicable law, this tender
is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer. The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
purchased (together with accompanying documents as appropriate) in the name(s)
of, and deliver said check and/or return such certificates to, the person or
persons so indicated. Shareholders tendering Shares by book-entry transfer may
request that any Shares not accepted for payment be returned by crediting such
account maintained at DTC or PDTC as such shareholder may designate by making
an appropriate entry under "Special Payment Instructions." The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
holder(s) thereof if Purchaser does not accept for payment any of the Shares
so tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned.
Issue: [_] Check [_] Certificate(s) to:
Name___________________________________________________________________
(Please Print)
Address________________________________________________________________
-----------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9 Included Herein)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be sent to someone other than the undersigned or to the undersigned at an
address other than that appearing under "Description of Shares Tendered."
Issue: [_] Check [_] Certificate(s) to:
Name___________________________________________________________________
(Please Print)
Address________________________________________________________________
-----------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9 Included Herein)
5
<PAGE>
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Signature(s) of Owner(s))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or any other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5.)
Dated____________________________________________________________, 1997
Name(s)________________________________________________________________
-----------------------------------------------------------------------
(Please Print)
Capacity (full title)__________________________________________________
Address _______________________________________________________________
-----------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number_________________________________________
Tax Identification or
Social Security Number_________________________________________________
-----------------------------------------------------------------------
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURES
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________________________
Name __________________________________________________________________
(Please Print)
Name of Firm __________________________________________________________
Address _______________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________
Dated ___________________________________________________________, 1997
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of a Medallion Signature Guarantee Program
(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 Shares
(which term, for the 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) and such holder(s) has (have) not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on this Letter of Transmittal or (ii) such
Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by shareholders
either if certificates for Shares are to be forwarded herewith or if a tender
of Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any
book-entry transfer into the Depositary's account at DTC or PDTC of Shares
delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal, must be received by the Depositary, at one of
the addresses set forth herein prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). Shareholders whose certificates are not
immediately available or who cannot deliver their certificates and all other
required documents to the Depositary prior to the Expiration Date or who
cannot comply with the book-entry transfer procedures on a timely basis may
tender their Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in
Section 3 of 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 provided by Purchaser, must be received by the Depositary (as
provided in (iii) below) prior to the Expiration Date and (iii) the
certificates for all physically tendered Shares (or Book-Entry Confirmation
with respect to such Shares), as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three (3)
Trading Days (as defined in the Offer to Purchase) after the date of execution
of such Notice of Guaranteed Delivery, all as provided in Section 3 of the
Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-
ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution
of this Letter of Transmittal (or manually signed facsimile thereof), waive
any right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to shareholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in
the box entitled "Number of Shares Tendered." In such case, new certificate(s)
for the remainder of the Shares that were evidenced by the old certificate(s)
will be sent to the registered holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after
the Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
7
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever. If any of the Shares tendered hereby are held of record
by two or more persons, all such persons must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by certificates listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required unless
payment is to be made to or certificates for Shares not tendered or purchased
are to be issued in the name of a person other than the registered holder(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares, evidenced by certificates listed and
transmitted hereby, the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holder or holders appear on the certificates. Signatures on
such certificates or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder(s), or if certificates
for tendered shares are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any share transfer
taxes (whether imposed on the registered holder(s) or such other person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check is to be issued
in the name of and/or certificates for Shares not tendered or not purchased
are to be returned to a person other than signer of this Letter of Transmittal
or if a check is to be sent and/or such certificates are to be returned to
someone other than the signer above, the appropriate boxes on this Letter of
Transmittal should be completed. Shareholders tendering Shares by book-entry
transfer may request that Shares not purchased be credited to such account
maintained at any of the Book-Entry Transfer Facilities as such shareholder
may designate under "Special Delivery Instructions." If no such instructions
are given, any such Share not purchased will be returned by crediting the
account at the Book-Entry Transfer Facility designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to, or additional copies of the Offer to Purchase and this Letter
of Transmittal may be obtained from, the Information Agent or Dealer Manager
at the telephone numbers and addresses set forth below. Shareholders may also
contact their broker, dealer, commercial bank or trust company.
9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, Purchaser reserves the right in its sole discretion to waive in
whole or in part at any time or from time to time any of the specified
conditions of the Offer or any defect or irregularity in tender with regard to
any Shares tendered.
8
<PAGE>
10. SUBSTITUTE FORM W-9. The tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the shareholder's social security or employer identification number,
on Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify whether he or she is subject to backup withholding of
federal income tax. If a tendering shareholder is subject to backup
withholding, he or she must cross out item (2) of the Certification Box on
Substitute Form W-9. Failure to provide the information on Substitute Form W-9
may subject the tendering shareholder to 31% federal income tax withholding on
the payment of the purchase price. If the tendering shareholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, he or she should write "Applied For" in the space provided
for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date
the Certificate of Awaiting Taxpayer Identification Number. 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 payments for surrendered Shares
thereafter until a TIN is provided to the Depositary.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
HEREOF) TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER
REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
9
<PAGE>
IMPORTANT TAX INFORMATION
Under federal tax law, a shareholder whose tendered Shares are accepted for
payment is required to provide the Depositary (as payor) with such
shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is
an individual, the TIN is his or her Social Security Number. If the Depositary
is not provided with the correct TIN or an adequate basis for exemption, the
shareholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such shareholder with respect
to Shares purchased pursuant to the Offer may be subject to backup withholding
in an amount equal to 31% of the gross proceeds resulting from the Offer.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit an IRS Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of his correct TIN by completing the
Substitute Form W-9 contained herein certifying that the TIN provided on the
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN)
and that (i) the shareholder is exempt from backup withholding, (ii) the
shareholder has not been notified by the Internal Revenue Service that he or
she is subject to backup withholding as a result of failure to report all
interest or dividends, or (iii) the Internal Revenue Service has notified the
shareholder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. Tendering shareholders who have not been issued a TIN and
have applied for a number or intend to apply for a number in the near future
should refer to Instruction 10.
10
<PAGE>
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
PART I--PLEASE PROVIDE
SUBSTITUTE FORM W-9 YOUR TIN IN THE BOX AT _____________________
RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER
SIGNING AND DATING
BELOW.
Department of the OR ___________________
Treasury Internal EMPLOYER
Revenue Service IDENTIFICATION NUMBER
(If awaiting TIN write
"Applied For")
--------------------------------------------------------
Payer's Request for PART II--For Payees not subject to backup
Taxpayer withholding, see the enclosed Guidelines for
Identification Number Certification of Taxpayer Identification Number
(TIN) on Substitute Form W-9 and complete as
instructed therein.
- -------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to
me) and either (a) I have mailed or delivered an application to
receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service ("IRS") or Social Security Administration
office or (b) I intend to mail or deliver an application in the
near future. (I understand that if I do not provide a Taxpayer
Identification Number within sixty (60) days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a
number); and
(2) I am not subject to backup withholding either because I am exempt
from backup withholding, I have not been notified by the IRS that I
am subject to backup withholding as a result of a failure to report
all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from
the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE DATE , 1997
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.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (i) 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 (ii) I intend to mail or deliver an
application in the near future. I understand that if I do not provide
a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I
provide a number.
Signature(s): Dated: , 1997
11
<PAGE>
If you have any questions regarding the Offer, please contact the Information
Agent or the Dealer Manager:
The Information Agent for the Offer is:
[LOGO] MACKENZIE
PARTNERS, INC.
156 Fifth Avenue New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885
The Dealer Manager for the Offer is:
J.P. MORGAN & CO.
60 Wall Street
Mail Stop 2860
New York, New York 10260
(212) 648-4808
or
(800) 292-9848 (toll free)
<PAGE>
EXHIBIT 99(a)(3)
REXEL
-----
INC.
October 23, 1997
Dear Shareholder:
On behalf of the Board of Directors of Rexel, Inc. (the "Company" or
"Rexel"), I am pleased to inform you that Rexel entered into an Agreement and
Plan of Merger, dated as of October 17, 1997 (the "Merger Agreement"), with
Rexel S.A. ("Parent") and International Technical Distributors, Inc.
("Purchaser"), pursuant to which Purchaser has commenced a cash tender offer
(the "Offer") to purchase all of the outstanding shares of common stock, par
value $1.00 per share, of Rexel (the "Shares"), not already owned by Purchaser
or Parent, at a price of $22.50 per Share, net to the seller in cash.
Purchaser and Parent currently own approximately 50.5% of the Shares.
In accordance with the terms and conditions contained in the Merger
Agreement, following the successful completion of the Offer, Purchaser will be
merged with and into the Company (the "Merger"), with the Company as the
surviving corporation. At the effective time of the Merger, each remaining
issued and outstanding Share (other than Shares held directly or indirectly by
Parent or held in the treasury of the Company, all of which will be canceled,
and other than Shares held by shareholders who perfect appraisal rights under
New York law) will be converted into the right to receive $22.50 in cash.
The Board of Directors of the Company, by unanimous vote of all directors
present and voting, based upon, among other things, the unanimous
recommendation and approval of a special committee of the Board of Directors
consisting of three independent directors of the Company (the "Special
Committee"), has determined that each of the Offer and the Merger is fair to,
and in the best interests of, the Company's shareholders (other than Parent
and Purchaser). The Board of Directors has also approved, by unanimous vote of
all directors present and voting, the Offer, the Merger and the Merger
Agreement and recommends that shareholders accept the Offer and tender their
Shares to Purchaser pursuant to the Offer.
In arriving at their decisions, the Special Committee and the Board of
Directors gave careful consideration to a number of factors described in the
enclosed Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") which is being filed today with the Securities and Exchange
Commission. Among other things, the Special Committee considered the opinion
of Wasserstein Perrella & Co., Inc., financial advisor to the Special
Committee, dated October 17, 1997, that, subject to the various assumptions
and limitations set forth in the opinion, as of the date of the opinion, the
$22.50 per Share in cash to be received by the shareholders of the Company
(other than Parent or any of its wholly owned subsidiaries, including
Purchaser) in the Offer and the Merger pursuant to the Merger Agreement is
fair to such shareholders from a financial point of view. The enclosed
Schedule 14D-9 describes the decisions of the Special Committee and the Board
of Directors and contains other important information relating to such
decisions.
Also accompanying this letter is Purchaser's Offer to Purchase, dated
October 23, 1997, which includes the written opinion of Wasserstein Perella &
Co., Inc., dated October 17, 1997, together with a letter of transmittal to be
used for tendering your Shares. These documents set forth the terms and
conditions of the Offer and provide instructions as to how to tender your
Shares. We urge you to read the enclosed materials carefully and consider all
factors set forth therein before making your decisions with respect to the
Offer.
On behalf of the Board of Directors, management and employees of Rexel, I
thank you for the support you have given our Company.
Very truly yours,
/s/ Gilles Guinchard
Gilles Guinchard
President and Chief Executive
Officer
<PAGE>
EXHIBIT 99(c)(2)
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons were known by the Company to be the beneficial owners
of more than five percent of the outstanding Common Stock as of February 5, 1997
(based on the most recently available Schedule 13G and 13D SEC filings):
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF
OF BENEFICIAL OWNER SHARES OWNED CLASS
-------------------- --------------- --------
<S> <C> <C>
Rexel, S.A. 8,218,787(1) 32.0%
25, rue de Clichy, 75009
Paris, France
International Technical 4,636,994(1) 18.0%
Distributors, Inc. ("ITD")
301 46th Court
Meridian, Mississippi 39305
</TABLE>
___________________
(1) Reported in an amended Schedule 13D, dated May 27, 1995, that Pinault --
Printemps -- Redoute S.A. (" Pinault "), by virtue of its control of Rexel,
S.A. and, through Rexel, S.A., ITD, may be deemed to be the indirect
beneficial owner of the shares of Common Stock held by Rexel, S.A. and ITD,
and may be deemed to share power to vote or dispose of such shares with
such companies. Further reported that as a result of the relationship
among Pinault, Rexel, S.A. and ITD, Rexel, S.A. and ITD may be deemed to
share power to vote or dispose of the shares of Common Stock held directly
by each of them with Pinault. Previously reported, in Schedule 13D, dated
November 25, 1992, that Rexel, S.A. and Pinault may be deemed to share the
power to direct the vote or disposition of the shares of Common Stock held
directly by ITD with Robert Merson, a director and minority shareholder of
ITD and an officer of the Company, and that pursuant to a shareholders'
agreement among Mr. Merson, Rexel, S.A. and ITD, ITD may not sell, pledge,
assign or otherwise dispose of any shares of the Common Stock without Mr.
Merson's approval (except as may otherwise be provided). Pursuant to such
shareholders' agreement, Mr. Merson is selling his interest in ITD to
Rexel, S.A., subject to certain conditions, which sale is expected to be
effected in 1997.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
As of February 5, 1997, shares of Common Stock were beneficially owned by
directors and nominees for directors, by the executive officers required to be
listed in the Summary Compensation Table below (see "Executive Compensation"),
and by all directors and executive officers as a group, as follows:
<TABLE>
<CAPTION>
PERCENT OF
NAME SHARES OWNED (1) CLASS (2)
- ---- ------------------ ---------
<S> <C> <C>
Pierre Chareyre None *
Frederic de Castro 2,000 *
John B. Fraser 9,000 *
Jon O. Fullerton 32,900 *
R. Gary Gentles 6,000 *
Gilles Guinchard None *
Steven M. Hitt 21,693 *
William J. Jett 12,000 *
Austin List 2,369 *
Eric Lomas 37,000 *
Robert M. Merson 125,133(3) *
Gerald E. Morris 9,000 *
Alain Redheuil None *
Nicolas Sokolow 6,000 *
Alain C. Viry 203,090 *
Serge Weinberg 7,000 *
All Directors and Executive
Officers as a Group 481,590(4) 1.8%
</TABLE>
_________________________
* Less than 1%.
(1) The persons included in the table had sole voting and investment power with
respect to shares reported as beneficially owned, except as otherwise
indicated in this and the following notes. Shares owned by Mr. de Castro
include options to purchase 2,000 shares of Common Stock, by Mr. Lomas
include options to purchase 36,000 shares of Common Stock and by each of
Messrs. Fraser, Gentles, Morris, Sokolow and Weinberg include options to
purchase 6,000 shares of Common Stock, in each case which are exercisable
within 60 days of February 5, 1997. Shares owned by Messrs. Fullerton,
Hitt, Jett, Merson and Viry, include options to purchase, respectively,
32,400, 14,400, 12,000, 74,000 and 196,000 shares of Common Stock which are
exercisable within 60 days of February 5, 1997. Subsequent to February 5,
3
<PAGE>
1997, the following persons exercised options for and sold the number of
shares of Common Stock indicated after their respective names: Mr. Viry,
196,000 shares; Mr. Fullerton, 19,300 shares; Mr. Jett, 7,500 shares; Mr.
Lomas, 36,000 shares; and Mr. Hitt, 14,400 shares. Shares owned by Messrs.
Hitt, Merson and Viry include, respectively, 4,293, 1,033 and 1,090 shares
of Common Stock held under the Company's Section 401(k) Savings Plan as of
December 31, 1996, the most recent date for which such information is
available. Voting power with respect to such shares is directed by the
participants, or, in the absence of such direction, voted in the best
interests of the trust, as determined by the Trustee.
(2) Percentages are calculated by dividing (x) the number of shares in the
"Shares Owned" column by (y) the sum of the number of shares of Common
Stock outstanding as of February 5, 1997 and the number of shares which a
particular owner (or group of owners) has a right to acquire within 60 days
of such date.
(3) Does not include 4,636,994 shares of Common Stock owned by ITD, of which
Mr. Merson is a vice president and director and in which he owns a 12.96%
interest. Mr. Merson disclaims beneficial ownership of such shares.
(4) Includes options to purchase 400,800 shares of Common Stock which are
exercisable within 60 days of February 5, 1997. Subsequent to February 5,
1997, such options were exercised for a total of 279,200 shares, which were
sold. Also includes 10,321 shares of Common Stock held under the Company's
401(k) Savings Plan as of December 31, 1996, the most recent date for which
such information is available, as to which voting power is directed by the
participants, or, in the absence of such direction, voted in the best
interests of the trust, as determined by the Trustee.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the classification
of the Board of Directors into three classes (Class I, Class II and Class III).
At the time of this year's Annual Meeting of Stockholders, the Board will
consist of ten directors.
Effective April 12, 1997, Mr. Viry resigned as a director and as President
and Chief Executive Officer of the Company and was replaced in such positions by
Mr. Guinchard. Mr. Viry has taken another position with an affiliate of Rexel,
S.A.
At this year's Annual Meeting, four Class II directors are to be elected to
serve for three-year terms expiring at the 2000 Annual Meeting. In addition,
Mr. Guinchard, elected by the Board to replace Mr. Viry upon his resignation in
April 1997, has been nominated for election by the stockholders as a Class III
director for a one-year term expiring at the 1998 Annual Meeting. The remaining
five directors in Classes I and III were previously elected by stockholders and
will continue to serve their terms of office, which will expire at the Annual
Meetings to be held in 1999 and 1998, respectively.
4
<PAGE>
In connection with the acquisition by Rexel, S.A. of 30% of the outstanding
Common Stock from the Company in November 1992 and of additional Common Stock
from the Company in March 1994 raising its ownership to 40%, Rexel, S.A. was
granted the right to nominate certain directors pursuant to the terms of the
Investment Agreement between Rexel, S.A. and the Company (the "Investment
Agreement"). Messrs. Lomas, Morris and Weinberg were previously nominated by
Rexel, S.A. pursuant to the Investment Agreement. The Investment Agreement
expired on December 31, 1994. The four nominees for election as Class II
directors and the nominee for election as a Class III director were nominated by
the Nominating Committee of the Board of Directors.
If any nominee becomes unavailable for any reason or if a vacancy should
occur before the election (which events are not anticipated), the shares
represented by the accompanying proxy may be voted for such other person as may
be determined by the holders of such proxies.
5
<PAGE>
Directors are elected by a plurality vote. Under the Company's Certificate
of Incorporation and By-Laws and under New York law, abstentions and broker non-
votes will not have the effect of votes in opposition to a nominee. The Board
of Directors of the Company recommends that stockholders vote FOR each nominee
listed below.
The following table sets forth information with respect to each nominee for
election as a director of the Company:
<TABLE>
<CAPTION>
NAME OF NOMINEE; YEAR TERM
POSITIONS AND OFFICES WOULD EXPIRE DIRECTOR PRINCIPAL OCCUPATIONS DURING
WITH COMPANY AGE AND CLASS SINCE LAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pierre Chareyre 40 2000 N/A Financial Officer, Rexel, S.A. (electrical parts and supplies
Director Class II distributor) (April 1997 to present); Chief Executive Officer of Sogem
S.A. (trading of non-ferrous metals) (1993 to April 1997); Group Corpo-
rate Finance Manager of Union Miniere S. A. (processing of non-ferrous
metals (1991 to 1993); director of Sogem, S.A. and of Sogemet, S.A.
John B. Fraser 62 2000 1988 President, Geneva Financial Corp. (investment banking) (July 1994 to
Director Class II present); Managing Director, Citibank N.A. (investment banking) (June
1987 to June 1994); director of Worldtex, Inc. (covered yarn manufac-
turing).
Gilles Guinchard 49 1998 1997 President and Chief Executive Officer of the Company (April 1997 to
Director; Class III present); President of the North Eastern division of CDME France and
President and General Manager of Facen (electrical parts and supply distribution)
Chief Executive (1995 to April 1997); Director and General Manager of British
Officer Plasterboard in France (European leader in the gypsum industry)
(1992-1996); European Manager of the flat glass division of PPG
Industries (U.S.) (paints, glass and chemical products) (1990 to 1992).
Eric Lomas 50 2000 1992 President of The Hill Thompson Group Ltd. (investment banking) (1989 to
Director; Class II present); co-head of investment banking, Gruntal & Co. (investment
Chairman of the banking) (1985 to 1989); director of Goodmark Foods.
Board
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME OF NOMINEE; YEAR TERM
POSITIONS AND OFFICES WOULD EXPIRE DIRECTOR PRINCIPAL OCCUPATIONS DURING
WITH COMPANY AGE AND CLASS SINCE LAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alain Redheuil 48 2000 1996 Chairman and Chief Executive Officer of Rexel, S.A. (electrical parts and
Class II supplies distributor) (Oct. 1996 to present); Member of the Executive
Board of Pinault-Printemps-Redoute (the French leader in
multi-distribution) (Oct. 1996 to present); General Manager in France of
Lhoist (extraction and transformation of lime) (1993 to 1996);
Operational Manager for Europe of Michelin (tire production) (1990 to
1993).
</TABLE>
The following table sets forth information with respect to those
incumbent directors whose terms will continue after the Annual Meeting:
<TABLE>
<CAPTION>
NAME OF DIRECTOR; YEAR TERM
POSITIONS AND OFFICES WOULD EXPIRE DIRECTOR PRINCIPAL OCCUPATIONS DURING
WITH COMPANY AGE AND CLASS SINCE LAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Gary Gentles 48 1999 1993 President, Blue Circle America (cement production) (January 1995 to
Director Class I present); Executive Vice President and President Cement Group of Lafarge
Corporation (cement production) (November 1992 to 1994); President and
General Manager of Platres Lafarge L'Isle-sur-Sorgue (September 1990 to
November 1992); director of the Portland Cement Association; Vice Chair-
man of the American Portland Cement Alliance.
Austin List 74 1998 1981 Vice Chairman and director of Strahl & Pitsch, Inc. (refiner of natural
Director Class III waxes) (prior to 1989 to present), Chief Executive Officer and director
of Golding Industries (textile printing) (October 1993 to December 1994);
Senior Vice President and director of Johnston Industries, Inc.
(manufacturers of industrial textile fabrics) (before 1988 to October
1993); director of Worldtex, Inc.; director and Chairman of the
American-Turkish Council.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME OF DIRECTOR; YEAR TERM
POSITIONS AND OFFICES WOULD EXPIRE DIRECTOR PRINCIPAL OCCUPATIONS DURING
WITH COMPANY AGE AND CLASS SINCE LAST FIVE YEARS; OTHER DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald E. Morris 64 1999 1994 President, Intalite International N.V. (manufacturing and marketing of
Director Class I commercial ceilings) (1968 to present); Chairman of the Board of Alumet
Building Products Inc. (manufacturers of building products) (1995 to
present); President, Morris & Arndt Associates, Inc. (investment bank-
ing) (1988 to December 1995); director of Beacon Trust Company; director
of Tivoli Industries Inc. (manufacturers of lighting equipment).
Nicolas Sokolow 47 1998 1994 Partner, Cabinet, Sokolow, Dunaud, Mercadier & Carreras (law firm) (1994
Director Class III to present); Partner, Coudert Brothers (law firm) (1981 to 1994);
director Armor Holdings (1996 to present).
Serge Weinberg 46 1999 1992 Chairman of the Executive Board of Pinault -- Printemps -- Redoute (the
Director; Vice Class I French leader in multi-distribution) (July 1995 to present); Chairman of
Chairman of the the Board of Directors and Chief Executive Officer of La Redoute (the
Board French leader in mail order distribution) (July 1995 to present);
Chairman of the Board of Directors and Chief Executive Officer of FNAC
(a leading French distributor of entertainment products and leisure
products) (July 1995 to present); Chairman of the Supervisory Board of
Conforama (France's foremost multi-line distributor of home appliances
and furnish ings) (July 1995 to present); Chairman and Chief Executive
Officer of Rexel, S.A. (electrical parts and supplies distributor) (1990
to October 1996); Managing Director of Pallas Finance (corporate
finance) (1987 to 1990).
</TABLE>
8
<PAGE>
COMMITTEES AND MEETINGS
The Company has standing Executive, Audit, Nominating and Executive
Compensation Committees of the Board of Directors. The Executive Committee may
exercise the powers of the Board of Directors (with certain statutory
exceptions) between meetings of the Board. The Audit Committee reviews
accounting matters with Company management and discusses accounting matters with
the Company's independent accountants in connection with the annual audit. The
Nominating Committee considers and recommends nominees for election to the
Company's Board of Directors. The Executive Compensation Committee reviews
compensation matters, including adoption and implementation of benefit plans,
and takes action or makes recommendations with respect thereto. During the 1996
fiscal year, the Executive Committee, composed of Messrs. Gentles, Viry and
Weinberg, held no meetings, the Executive Compensation Committee, composed of
Messrs. Fraser, List and Morris held one meeting, the Nominating Committee,
composed of Messrs. Gentles, Viry and Weinberg, held two meetings, the Audit
Committee, composed of Messrs. Fraser, List and Morris, held four meetings, and
the Company's Board of Directors held five meetings. Messrs. Sokolow and
Weinberg attended fewer than 75 percent of the total number of meetings during
1996 of the Board together, in the case of Mr. Weinberg, with the committee of
the Board on which he serves.
COMPENSATION OF OUTSIDE DIRECTORS
Non-employee directors (other than Mr. Lomas and employees of Rexel, S.A.) are
paid a fee of $1,333 per month and an additional $900 for each meeting attended.
Mr. Lomas is paid $75,000 per year for his services as Chairman of the Board of
Directors of the Company. The Company does not pay any fees to directors who
are employees of Rexel, S.A. or its parent company (currently Messrs. Weinberg,
Redheuil and de Castro and, if elected, Mr. Chareyre) in connection with their
service as directors of the Company, but reimburses them for their reasonable
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors of the Company and its committees.
Each director of the Company has entered into an Indemnity Agreement with the
Company, which provides that the Company will indemnify each such person to the
fullest extent permitted by law for losses arising in connection with their
service as a director or officer of the Company.
The Company has a retirement plan for directors pursuant to which they are
entitled, upon leaving the Board of Directors for any reason other than removal
for cause, to $1,333 per month, the retainer paid by the Company to active
directors (excluding meeting and committee fees) as of the date of the 1995
annual meeting of stockholders. Such payments will be made for a period equal
to the retired director's service on the Board (excluding periods during which
he also was an employee of the Company) through the date of the 1995 annual
meeting of stockholders, subject to termination upon the death of the director.
A retired director receiving payments under the plan is required to be available
for consultation with officers of the Company upon their request.
Each director of the Company other than one who is an officer or employee of
the Company or an entity in which the Company owns at least a 20% interest (an
"Outside Director") is entitled to receive stock options under the Company's
1988 Stock Incentive Plan (the "Plan"). Each person who was an Outside Director
at the close of the 1993 Annual Meeting of Stockholders was granted, as of the
date of such meeting, a non-qualified stock option to purchase 10,000 shares of
Common Stock, and the Plan provides that each person who subsequently becomes an
Outside Director will be granted a similar option as of the date of such
9
<PAGE>
person's election to the Board of Directors (an "Initial Option"). At the close
of each annual meeting of stockholders commencing with the 1995 annual meeting
(or in the case of a person who subsequently becomes an Outside Director, with
the annual meeting following the grant of his Initial Option), if the Company's
earnings per share for the immediately preceding fiscal year exceed 110% of the
Company's earnings per share for the fiscal year prior thereto, each Outside
Director other than the Chairman of the Board and any employee of Rexel, S.A.
will be granted an option to purchase 2,500 shares of Common Stock and any
Outside Director (other than a Rexel, S.A. employee) who served as Chairman of
the Board for the preceding year will be granted an option to purchase 5,000
shares of Common Stock (which grant shall be pro rated for service of less than
a full year as Chairman of the Board) (each such option being referred to as an
"Annual Option").
The option price for both Initial and Annual Options is equal to the fair
market value of the Common Stock on the date of the option grant, and may be
paid in cash or shares of Common Stock which have been owned by the optionee for
at least six months (with such shares valued based on the fair market value of
the Common Stock on the date of option exercise). The option price for the
Initial Options granted in 1993 was $6.5625, for options granted to Messrs. de
Castro and Morris on March 1, 1994, was $8.0625, for the option granted to Mr.
Sokolow on March 18, 1994, was $7.25 and for the option granted to Mr. Redheuil
on December 3, 1996 was $14.3125. An Initial Option becomes exercisable, in
whole or in part, in 20% increments on each of the first five anniversaries of
the date following the date of grant, provided the optionee is a director of the
Company on such date. Each Annual Option becomes fully exercisable, in whole or
in part, on the last business day before the annual meeting which follows the
grant of such option, provided the optionee is a director of the Company on such
date. Each option will expire ten years from the date of its grant, subject to
earlier termination upon termination of the optionee's service as a director.
However, if the optionee dies during his or her period of service as a director,
the optionee's legal representative has the right to exercise the option for a
period of twelve months after the optionee's death, even if such option would
otherwise have expired earlier. An option exercised after termination of
service can only be exercised to the extent it was exercisable at the time of
such termination of service. Stock options granted to Outside Directors are not
transferable except by will or by the laws of descent and distribution.
Each option granted to an Outside Director is granted in tandem with a limited
stock appreciation right which entitles the optionee to elect to receive within
60 days following the occurrence of a Change of Control (as defined in the
Plan), in lieu of exercising the option, a payment equal to the product of the
number of shares as to which the stock appreciation right is exercised
multiplied by the excess of the Change of Control Price (as defined in the Plan)
over the exercise price of the related option. See "Executive Compensation --
Change of Control Provisions" for the definition of "Change of Control" under
the Plan.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Chief Executive Officer of the Company and the four most highly compensated
executive officers of the Company other than the CEO serving as executive
officers at the end of 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
ANNUAL
COMPENSATION SECURITIES
--------------------- UNDERLYING
SALARY OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) (#) COMPENSATION ($)
- ------------------------------------------ ------- -------- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Alain C. Viry, 1996 $340,000 $340,000 40,000 $8,534(2)
President and Chief Executive Officer (1) 1995 310,000 191,240 50,000 5,006
1994 237,500 75,000 100,000 36,844
Robert M. Merson, 1996 260,000 260,000 30,000 8,534(2)
Senior Vice President 1995 230,000 172,500 30,000 8,560
1994 200,000 100,000 None 7,024
Jon O. Fullerton 1996 189,000 113,400 12,000 51,595(4)
Vice President, General Counsel and 1995 175,000 98,750 None 28,774
Secretary(3) 1994 100,038 25,000 30,000 20,177
Steven M. Hitt 1996 180,000 117,000 12,000 8,534(2)
Vice President and Chief Financial Officer 1995 162,000 102,000 30,000 47,297
1994 152,500 168,250 None 32,522
William M. Jett 1996 175,000 175,000 10,000 8,534(2)
Vice President, Corporate Development
</TABLE>
_________________________
(1) Mr. Viry resigned as President and Chief Executive Officer, effective April
12, 1997.
(2) Reflects Company contributions under a defined contribution plan.
(3) Mr. Fullerton became an executive officer of the Company on July 26, 1994.
Information for 1994 is for the period June 1 through December 31, 1994.
(4) Includes $8,034 in Company contributions under a defined contribution plan
and $43,061 that the Company paid in reimbursement of relocation expenses.
11
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (4)
- ----------------------------------------------------------------------------------- ----------------------------------
% OF TOTAL
OPTIONS/
NUMBER OF SARS
SECURITIES GRANTED EXERCISE
UNDERLYING TO OR BASE
OPTIONS/ EMPLOYEES PRICE
GRANTED IN FISCAL ($/
NAME (#) (1) YEAR SH)(2) EXPIRATION DATE (3) 5% ($) 10% ($)
- --------------------- ----------- ----------- ---------- -------------------- --------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Alain C. Viry 40,000 20.41% $13.125 January 30, 2006 $ 330,170 $ 836,715
Robert M. Merson 30,000 15.31 13.125 January 30, 2006 247,627 627,536
Jon O. Fullerton 12,000 6.12 13.125 January 30 ,2006 99,051 251,014
Steven M. Hitt 12,000 6.12 13.125 January 30, 2006 99,051 251,014
William J. Jett 10,000 5.10 13.125 January 30, 2006 82,542 209,179
All stockholders (5) N/A N/A N/A N/A 211,719,699 536,538,812
</TABLE>
_________________________
(1) With respect to Mr. Viry, the option is exercisable immediately. With
respect to Messrs. Merson, Fullerton, Hitt and Jett the options will
become exercisable in 20% installments on each of the first five
anniversaries of the date of grant, provided the optionee is still employed
on such date. The options include a limited SAR exercisable only in the
event of a "Change of Control" of the Company See "-- Change of Control
Provisions" below.
(2) The market price of the Company's common stock on the date of grant was
$13.125.
(3) The stock option is subject to termination prior to its expiration date in
the event of a termination of employment.
(4) This information is provided pursuant to the rules of the Securities and
Exchange Commission. Using $13.125, the market price of the Company's
common stock on the date of the option grant, the 5% and 10% rates of
appreciation would result in per share prices of $21.38 and $34.04,
respectively, at the end of the 10-year option term. This presentation is
not a prediction of possible future prices of the Company's common stock.
(5) For "All Stockholders", the potential realizable value is calculated from
$13.125, the market price of the Company's common stock on the date of the
option grant, and the 25,649,790 outstanding shares of Company common stock
on such date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END AT FY-END
---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alain C. Viry 196,000 4,000 $1,534,625 $ 37,250
Robert M. Merson 48,000 82,000 445,125 567,750
Jon O. Fullerton 30,000 12,000 281,250 33,000
Steven M. Hitt 6,000 36,000 59,250 270,000
William J. Jett 5,000 30,000 49,375 225,000
</TABLE>
_________________________
(1) No options were exercised by the executive officers named in the table in
1996.
12
<PAGE>
EMPLOYMENT CONTRACTS
Mr. Viry has a contract with the Company providing for services in a
senior executive capacity for a three-year term that expired March 1997, which
was not renewed due to Mr. Viry's resignation, effective April 12, 1997. The
contract provided for a minimum salary of $300,000 per annum and for bonuses as
approved by the Executive Compensation Committee in accordance with the
incentive plan then applicable to executive officers of the Company.
Mr. Fullerton has a contract with the Company to serve as General
Counsel at a base salary of no less than $170,000 per annum. His contract
provides for a bonus in accordance with the bonus plan applicable to executive
officers of the Company, subject to a minimum bonus of three times his monthly
salary if the Company meets its overall performance goals. The contract is
subject to termination by either party upon 30 days' notice. Upon termination
by the Company, Mr. Fullerton is entitled to severance pay equal to six months'
salary. The contract also provides for deferred compensation of $3,000 per
month for a period of 10 years commencing 30 days after termination of
employment, which right would become fully vested May 31, 2002 (and vested pro
rata if termination occurs prior to that date).
Mr. Hitt has a contract with the Company to serve as Chief Financial
Officer at a base salary of no less than $160,000 per annum. His contract
provides for a bonus in accordance with the bonus plan applicable to executive
officers of the Company. The contract is subject to termination by either party
upon 30 days' notice. Upon termination by the Company, Mr. Hitt is entitled to
severance pay equal to twelve months' salary.
Mr. Merson has a contract with the Company to serve as president and
chief executive officer of Southern Electric Supply Company, Inc., a subsidiary
of the Company ("SES"), and to serve as a Senior Vice President of the Company.
The agreement has a term continuing through November 12, 1997, subject to (i)
termination by either party upon one year's notice and (ii) immediate
termination by the unanimous vote of all the members of the Executive Committee
of the Board of Directors of the Company. Mr. Merson's contract provides for a
base salary of no less than $200,000 per annum and a bonus in accordance with
the bonus plan applicable to executive officers of the Company. Mr. Merson is
required not to compete with the Company for a period of three years after the
termination of his employment with the Company, and if Mr. Merson's employment
is terminated on one year's notice or upon immediate notice approved by the
Executive Committee of the Company, the Company will pay Mr. Merson $3,333.33
per month during such three years.
CHANGE OF CONTROL PROVISIONS
The Company's 1988 Stock Incentive Plan provides that, if there is a
Change of Control of the Company (as defined below), unless otherwise determined
by the Executive Compensation Committee at the time of grant, all stock options
and SARs granted under the Plan which are not then exercisable will become fully
exercisable and vested and the restrictions and deferral limitations applicable
to restricted stock and deferred stock granted under the Plan will lapse and
such shares and awards will be deemed fully vested. To the extent the cash
payment of any award is based on the fair market value of Company Common Stock,
such fair market value shall be the Change of Control Price, as defined below.
A Change of Control occurs on the date a person or group (other than
the Company and certain of its affiliates or Rexel, S.A. and its affiliates)
becomes a 25% beneficial owner of the voting securities of the Company, the date
on which one-third or more of the Board of Directors consists of persons other
than
13
<PAGE>
Current Directors (as defined) or the date of approval by stockholders of
certain agreements providing for merger, consolidation or disposition of all or
substantially all assets. The Change of Control Price will be the highest price
per share of Company Common Stock paid in any open market transaction, or paid
or offered to be paid relating to a Change of Control of the Company, at any
time during the 90-day period ending with the Change of Control.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program consists of the following
key elements: base salary, annual bonuses and periodic grants of stock options.
Base Salary. Certain of the Company's executive officers have
employment contracts providing for a minimum base salary, and the remaining
executive officers are paid a base salary pursuant to normal Company practices.
The amount of each officer's base salary was generally determined by negotiation
with such officer and was largely influenced by the base salaries historically
paid to him. Mr. Viry's employment contract was negotiated between him and
Rexel, S.A., the owner of approximately 50% of the Company's stock, and was
approved by the Executive Compensation Committee. Base salary rates paid by the
Company are generally intended to be at or below the average for comparable
positions with similar companies in the electrical supply distribution industry,
with the opportunity for significant bonuses if certain financial results are
achieved.
Bonuses. Under the Company's bonus program for executive officers, a
net income goal for the Company is established at the beginning of each year.
The Executive Compensation Committee then assigns to each executive officer a
potential bonus range determined by a minimum percentage of base salary to be
applicable if 80% of the net income goal is achieved and a maximum percentage of
base salary if actual net income exceeds the goal by a specified amount. The
amount of the bonus is adjusted if actual net income is within the established
range. With respect to 1996, in accordance with such formula, Mr Viry was
entitled to a bonus of $340,000.
Stock Options. Stock option grants are intended to provide incentives
for superior long-term future performance and to create and maintain in the
Company the entrepreneurial environment and spirit of a small company. The
number of stock options awarded to a particular employee is based on the
Committee's subjective judgment. In general, the Committee expects to grant the
largest awards to the Company's Chief Executive Officer and other senior
management due to their substantial influence on the Company's performance.
During 1996, the committee granted to Mr. Viry an option to purchase 40,000
shares.
EXECUTIVE COMPENSATION COMMITTEE
Austin List, Chair
John B. Fraser
Gerald E. Morris
The information above under the caption "Board Compensation Committee
Report on Executive Compensation" and under the caption "Performance Graph"
below shall not be deemed to be incorporated by reference into any filing by the
Company under the Securities Act of 1933, as amended, or the Securities
14
<PAGE>
Exchange Act of 1934, as amended, except to the extent that the Company
expressly states in any such filing that such information under either or both
such captions is incorporated by reference therein.
PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return for
the periods indicated of (1) the Company's Common Stock, (2) a New York Stock
Exchange Market Value Index, (3) textile weaving companies published by Media
General Financial Services, Inc. ("MGFS"), and (4) an index of electrical supply
distribution companies (Primary SIC Code 5063) published by MGFS, all based on
information provided by MGFS. In each case the graph assumes an investment of
$100 on December 31, 1991 and that all dividends were reinvested. Until
November 12, 1992, the Company was engaged in both lines of business reflected
in the graph. On November 12, 1992, the Company declared a distribution of its
textile business as a dividend to shareholders. The graph has been constructed
on the assumption that the shares received as such dividend were sold and the
proceeds reinvested in the Company's Common Stock on December 15, 1992, the date
on which the Company's Common Stock traded "Ex-Dividend."
[LINE CHART]
<TABLE>
<CAPTION>
Electrical
NYSE Textile Distribution
Year End Rexel Index Index Index
- -------- ---------------------------------------
<S> <C> <C> <C> <C>
1991 100 100 100 100
1992 162.95 104.70 119.80 114.47
1993 252.57 118.88 -- 121.21
1994 191.46 116.57 -- 119.36
1995 439.95 151.15 -- 137.52
1996 517.35 182.08 -- 165.72
</TABLE>
15
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1996, Form 3 reports were not filed in connection with the
election of Alain Redheuil as a director of the Company or the election of
William M. Jett and Steven W.Barker as officers of the Company.
CERTAIN TRANSACTIONS
A subsidiary of the Company made an advance to Mr. Viry, which bears
interest at a rate of 7.69% per annum, to assist him in purchasing a new
residence in connection with his relocation from Paris, France to Coral Gables,
Florida at the request of the Company. The highest amount outstanding on the
advance during 1996 was $697,790 and the balance, secured by a first mortgage on
the residence, was $656,534 at February 5, 1997. On April 8, 1997, a subsidiary
of the Company purchased the residence from Mr. Viry for $986,921, the amount
paid by Mr. Viry for its purchase, and the outstanding advance to Mr. Viry was
repaid in full. Any gain recognized on resale of the residence will be divided
between Mr. Viry and the subsidiary in the proportion that the principal amount
outstanding bears to the total resale price. Any loss will be borne by the
subsidiary.
The Company's SES subsidiary leases twelve facilities from Mr. Merson
and/or members of his or his wife's family, for terms extending through 2002.
The Company believes that these leases are on terms at least as favorable as SES
could have obtained from an unaffiliated third party.
The Company and Rexel, S.A., the owner of approximately 50% of the
outstanding common stock of the Company and the world's largest electrical
supplies distributor, have entered into a Services Agreement, dated as of
November 1, 1995. The Services Agreement was negotiated and approved by a
special committee of the Board of Directors consisting of persons who are
neither officers nor directors of Rexel, S.A. or its affiliates nor have a
material financial relationship with Rexel, S.A. and its affiliates. Under this
agreement, in consideration for the benefits to the Company arising from its
association with the worldwide business of Rexel, S.A., including without
limitation, in matters relating to customers, suppliers, employers, business
methods and know-how and financial expertise, the Company has agreed to pay to
Rexel, S.A. $600,000 per year (commencing with 1995). In addition, Rexel, S.A.
has agreed to provide consulting services to the Company relating to specific
projects at the request of the Company at a rate 10% higher than the costs to
Rexel, S.A. of providing such services (including, in the case of employees of
Rexel, S.A., costs based on the wages, social insurance payments and allocated
overhead and general corporate expenses attributable to such employees). Any
payment for consulting services must be approved by the Audit Committee of the
Board of Directors (excluding any member thereof who is an officer or director
of Rexel, S.A. or any of its affiliates or a person that has a material
financial relationship with Rexel, S.A. or any of its affiliates). During 1996,
the Company requested from Rexel, S.A. services valued at $200,000 relating to
the development of training programs, logistics consulting, enhancement of cash
management and treasury systems and a global agreement on implementation of an
inventory management system. In addition, pursuant to the agreement, Rexel,
S.A. consented to the use by the Company of the name "Rexel". The Services
Agreement is effective through December 31, 1997, subject to automatic renewal
for successive one year terms unless terminated on 30 days notice given by
either party prior to the commencement of a renewal term.
The Company has contracts for insurance coverage with Continental
Casualty Insurance Co., entered into on May 12, 1996 under which the Company's
directors and officers (as well as the Company) are indemnified under certain
circumstances with respect to litigation and other costs and liabilities arising
out of actual or alleged misconduct of such directors and officers. The Company
pays 100% of all premiums ($181,230 for the period ending May 12, 1997) to the
insurers.
16
<PAGE>
EXHIBIT 99(c)(3)
REXEL, INC.
150 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
October 8, 1997
Mr. Gerald E. Morris
President
Intalite International N.V.
437 Madison Avenue, 39th Floor
New York, NY 10022
Mr. John B. Fraser
President
Geneva Financial Corp.
425 Park Avenue, 25th Floor
New York, NY 10022
Mr. Austin List
Vice Chairman and Director
Strahl & Pitsch
521 Fifth Avenue, 9th Floor
New York, NY 10175
Gentlemen:
In connection with the proposal (the "Proposal") by Rexel S.A. ("Rexel") to
acquire all of the outstanding shares of common stock of Rexel, Inc., a New York
corporation (the "Company"), not currently owned by Rexel or International
Technical Distributors, Inc., a wholly owned subsidiary of Rexel ("ITD"), the
Company hereby agrees to indemnify and hold harmless, to the fullest extent
permitted by applicable law, the members of the Special Committee of the Board
of Directors of the Company (the "Special Committee") (collectively, the
"indemnified persons") from and against all losses, claims, damages,
liabilities, expenses (including
<PAGE>
reasonable fees and disbursements of counsel), judgments, fines and costs
(including amounts paid in settlement) incurred by them (A) which are related to
or arise out of (i) actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by us or any of our
affiliates, including Rexel and ITD, in connection with or in anticipation of
the Proposal, the acquisition contem plated by the Proposal (the "Acquisition")
or any related transaction or (ii) actions taken or omitted to be taken by an
indemnified person in connection with the Proposal or the consummation of the
Acquisition or any related transaction, (B) which are otherwise related to or
arise out of the Proposal or the Acquisition or any related transaction or (C)
by reason of the fact that an indemnified person is or was a member of the
Special Committee, and we will reimburse each indemnified person for all
expenses (including reasonable fees and disbursements of counsel) as they are
incurred by such indemnified person in connection with investigating, preparing
or defending any action, suit, proceeding, investigation or claim, whether or
not there is pending or threatened litigation in which any indemnified person is
a party; provided, however, that the foregoing agreement to indemnify and hold
-------- -------
harmless shall not apply to any such loss, claim, damage, liability, expense,
judgment, fine or cost (collec tively a "loss") if a judgment or other final
adjudication adverse to the indemnified person establishes that his acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that the indemnified
person personally gained in fact a financial profit or other advantage to which
he was not legally entitled (an "Excluded Loss"); and provided, further, if we
-------- -------
have reimbursed an indemnified person for expenses as provided above for any
loss and such loss is determined to be an Excluded Loss, such indemnified person
shall repay to us all amounts so reimbursed. The foregoing indemnification
relates to, among other matters, the litigation listed on Exhibit A attached
---------
hereto.
Promptly after receipt by an indemnified person of notice of any complaint
or the commencement of any action, suit, proceeding, investigation or claim with
respect to which indemnification is being sought hereunder, such person shall
notify us of such complaint or of the commencement of such action, suit,
proceeding, investigation or claim (unless we are also a party thereto, in which
event such notice shall not be necessary), but failure so to notify us will not
relieve us from any liability which we may have hereunder except to the extent
we are actually prejudiced by such failure. If we elect or are requested by the
indemnified person, we will assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the indemnified
person and the payment of reasonable fees and disbursements of such counsel, and
the indemnified person will use its best efforts to assist in the vigorous
defense of any such matter. In the event
2
<PAGE>
such indemnified person reasonably determines that having common counsel would
present such counsel with a conflict of interest or if we fail to assume the
defense of the action or proceeding in a timely manner, then such indemnified
person may employ separate counsel to represent or defend such person in any
such action or proceeding and we will pay the reasonable fees and disbursements
of such counsel as promptly as statements therefor are received and other costs
and expenses for which indemnification is available hereunder promptly after
they are incurred and will use our best efforts to assist in the vigorous
defense of such matter; provided, however, we shall not be obligated to pay the
-------- -------
fees and disbursements of more than one such counsel for each indemnified person
in any jurisdiction in any single action or proceeding (or related group of
actions or proceedings).
We hereby further agree that, should the Acquisition occur, all rights to
indemnification existing in favor of the members of the Special Committee in
their capacity as directors of the Company or any of its subsidiaries as
provided in any indemnification agreement with the Company, the Company's
Restated Certificate of Incorporation or Bylaws (or similar organizational
documents) or the certificate or articles of incorporation or by-laws (or
similar organizational documents) of any of the Company's subsidiaries as in
effect as of the date hereof shall survive the Acquisition and shall continue in
full force and effect for a period of not less than six years from the date
hereof. Until withdrawal of the Proposal or consummation of the Acquisition or
a similar transaction and, in either such case, for a period of at least six
years thereafter, we shall maintain or cause to be maintained in effect the
current policies of directors' liability insurance maintained by us with respect
to matters occurring prior to or in connection with the withdrawal of the
Proposal or the completion of the Acquisition (the "Current Policies");
provided, however, that we may substitute for the Current Policies other
- -------- -------
policies (the "New Policies") providing for at least the same coverage as, and
containing terms and conditions no less advantageous to the insured persons
covered thereby (which shall include the indemnified persons) than those
contained in, the Current Policies.
We hereby further agree that, except with respect to an Excluded Loss,
neither we nor any of our affiliates will initiate any action or claim against,
or otherwise seek any recovery from, any indemnified person for any matter for
which indemnification would be available under this Letter Agreement and that no
indemnified person will directly or indirectly incur any liability whatsoever to
us or any of our affiliates (in the capacity of a stockholder of the Company or
otherwise) as a result of the Proposal, the Acquisition, service on the Special
Committee or any related matter.
3
<PAGE>
Our obligations under this Letter Agreement shall be in addition to any
rights that any indemnified person may have under any indemnification agreement
with the Company, the Restated Certificate of Incorporation or Bylaws of the
Company, the laws of the State of New York, at common law or otherwise.
This Letter Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to the
provisions thereof relating to conflict of laws, and shall be binding on the
successors and assigns of the Company, whether by operation of law or otherwise.
We acknowledge that in indemnifying the members of the Special Committee
pursuant to, and entering into the other obligations contained in, this Letter
Agreement, we do not intend to compromise the independence of the Special
Committee but rather to create conditions where members of the Special Committee
can review the Proposal fully and independently without undue concern for
possible liabilities that may be alleged to exist as a result of their actions.
Very truly yours,
REXEL, INC.
By: /s/ Gilles Guinchard
---------------------------
Name: Gilles Guinchard
Title: President and Chief
Executive Officer
4
<PAGE>
EXHIBIT 99(c)(4)
INDEMNITY AGREEMENT
-------------------
AGREEMENT, dated as of _______________, by and between _____________
(the "Company") and the undersigned director and/or officer of the Company (the
"Indemnitee").
In view of the substantial increase in directors' and officers'
litigation costs and risks and the recent limitations on the availability and
cover age of liability insurance, and in view of the mutual desire of the
parties that the Indemnitee render valuable services to the Company, this
Agreement is entered into in order to provide assurance to the Indemnitee that
the Company will indemnify the Indemnitee against such costs and risks to the
full extent permitted by the laws of the State of New York.
1. Indemnification. To the full extent permitted by the laws of the
---------------
State of New York as from time to time in effect, the Company shall indem nify
the Indemnitee and any persons referred to in the second sentence of Section 6
against any expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement incurred in connection with any actual or threatened action
or proceeding, whether civil or criminal, to which the Indemnitee or such person
is made or threatened to be made a party by reason of the fact that the
Indemnitee then is or was a director or officer of the Company or then serves or
has served any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity at the request of the Company.
To the full extent so permitted, the foregoing shall apply to actions by or in
the right of the Company and require the Company to pay expenses in advance of
final disposi tion.
2. Procedure for Indemnification. After the final disposition of
-----------------------------
any action or proceeding covered by this Agreement, the Indemnitee shall send to
the Company a written request for any indemnification sought under this
Agreement. The Company shall promptly make a finding whether the indemnifi
cation requested is permitted by the laws of the State of New York and, no later
than 60 days following receipt by the Company of such request, the Company shall
cause the indemnification provided hereunder to be authorized and paid unless
the finding is that the indemnification requested is not permitted by such laws.
<PAGE>
(a) The burden of proving that such standard has not been
met shall be on the Company. During such 60-day period, the
Indemnitee shall be given an opportunity to be heard and to
present evidence in connection with consider ation by the Board
of Directors, independent legal counsel or the stockholders, as
the case may be, of any findings required by applicable law.
(b) If the Company does not pay the indemnifica tion
requested by the Indemnitee within 60 days after the receipt of
such request, the Indemnitee's right to indemnifi cation shall be
enforceable in any court of competent juris diction as set forth
below. In any such action, neither the making of, nor failure to
make, any finding by the Compa ny (including its Board of
Directors, its independent legal counsel and its stockholders)
that indemnification of the Indemnitee is proper or not proper in
the circumstances, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable
standard of con duct. The Indemnitee's reasonable expenses,
including attorneys' fees, actually and necessarily incurred in
connec tion with successfully establishing the right to
indemnifica tion, in whole or in part, in any such action shall
also be indemnified by the Company.
(c) Any action instituted by the Company or by the
Indemnitee under this Agreement may be maintained as to the
Company and the Indemnitee in any court of compe tent
jurisdiction, including but not limited to the courts of the
State of New York. The Company and the Indemnitee each consents
to the exercise of jurisdiction and venue over the Company or the
Indemnitee, as the case may be, by the Supreme Court of the State
of New York in and for the County of New York.
3. Procedure for Advancement of Expenses. Promptly upon receipt by
-------------------------------------
the Company of a written request for payment of expenses incurred by the
Indemnitees in defending any action or proceeding covered by Section 1,
accompanied by documentation of the expenses incurred and by an undertaking by
the Indemnitee to repay the amount advanced as and to the extent required by
2
<PAGE>
Section 725 of the New York Business Corporation Law, the Company shall pay the
amount requested to or as directed by the Indemnitee notwithstanding the absence
of a final disposition of the action or proceeding.
4. Change in Control. Following a Change in Control (as hereafter
-----------------
defined), any finding whether indemnification is permitted by the laws of the
State of New York shall, if the Indemnitee so elects, be based upon the written
opinion of special independent counsel selected by the Indemnitee and approved
by the Company (which approval shall not be unreasonably withheld). Following a
Potential Change in Control (as hereafter defined), the Company shall, if the
Indemnitee so elects, create an irrevocable trust for the benefit of the
Indemnitee with a trustee selected by the Indemnitee and fund such trust from
time to time in amounts sufficient to satisfy any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement reasonably anticipated or
proposed to be incurred or paid.
(a) Such counsel shall render an opinion to the Board of
Directors and the Indemnitee as to whether indem nification is
permitted by the laws of the State of New York. The Company
shall pay the reasonable fees of such counsel.
(b) Such trust shall provide that, following a Change in
Control, (i) the Trustee shall effect the indemnifi cation and
advances called for by this Agreement in accor dance with the
procedures and conditions of Sections 2 and 3 and (ii) all
unexpended funds in the trust shall revert to the Company upon a
final determination that the Indemnitee has been fully
indemnified under the terms of this Agree ment.
(c) A "Change in Control" shall mean: (i) the date that any
person or group deemed a person under Sec tions 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, other than the
Company or any of its affiliates imme diately prior to that date,
in a transaction or series of trans actions has become the
beneficial owner, directly or indi rectly (with beneficial
ownership determined as provided in Rule 13d-3, or any successor
rule, under such Act), of 25% or more of the outstanding
securities of the Company hav-
3
<PAGE>
ing the right under ordinary circumstances to vote at an election
of the Board of Directors; (ii) the date on which one third or
more of the members of the Board of Directors shall consist of
persons other than Current Directors (for these purposes, a
"Current Director" shall mean any mem ber of the Board of
Directors as of November 1, 1986 and any successor of a Current
Director who has been approved by a majority of the Current
Directors then on the Board); and (iii) the date of approval by
the stockholders of the Company of an agreement providing for (x)
the merger or consolidation of the Company with another
corporation where the stockholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares enti tling
such stockholders to 50% or more of all votes (without
consideration of the rights of any class of stock to elect
directors by a separate class vote) to which all stockholders of
the corporation issuing cash or securities in the merger or
consolidation would be entitled in the election of directors or
where the members of the Board of Directors of the Company,
immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a
majority of the Board of Directors of the corpo ration issuing
cash or securities in the merger or consolida tion or (y) the
sale or other disposition of all or substantial ly all the assets
of the Company.
(d) A "Potential Change in Control" shall be deemed to have
occurred if: (i) the Company enters into an agreement or
arrangement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or (iii) the Board of Directors adopts a resolution to
the effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
5. Voluntary Proceedings. Notwithstanding anything in this
---------------------
Agreement to the contrary, prior to a Change in Control, the Indemnitee shall
not
4
<PAGE>
be entitled to indemnification or any advance pursuant to this Agreement in
connection with any claim, action or proceeding initiated by the Indemnitee
against the Company or any director or officer of the Company unless the
institution of such claim, action or proceeding was authorized prior to its com
mencement by a majority vote of the Board of Directors or the Indemnitee is
successful on the merits in such claim, action or proceeding.
6. Other Rights; Continuation of Right to Indemnification. The
------------------------------------------------------
indemnification and advances provided by this Agreement shall not be deemed
exclusive of any other rights consistent with the laws of the State of New York
to which a director or officer seeking indemnification may be entitled under any
law (common or statutory), provision of the Company's certificate of
incorporation or by-laws, resolution of stockholders or directors, other
agreement or otherwise, both as to action in the Indemnitee's official capacity
and as to action in another capacity while holding office or while employed by
or acting as agent for the Company, and shall continue notwithstanding that the
Indemnitee may have ceased to be a director or officer or to act as such
employee or agent. The provisions of this Agreement shall inure to the benefit
of the estate, heirs, executors, administrators and other personal
representatives of the Indemnitee.
7. Amendments. This Agreement may not be amended without the
----------
agreement in writing of the Company and the Indemnitee.
8. Savings Clause. If any portion of this Agreement shall be deemed
--------------
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, and the Company shall nevertheless indemnify
the Indemnitee as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated and to the full
extent permitted by applicable law.
9. Survival Clause. The Company acknowledges that, in providing
---------------
services to the Company, the Indemnitee is relying on this Agreement.
Accordingly, the Company agrees that its obligations hereunder will survive (i)
any actual or purported termination of this Agreement by the Company or its
successors or assigns whether by operation of law or otherwise, (ii) any change
in the Company's certificate of incorporation or by-laws and (iii) termination
of the Indemnitee's services to the Company (whether such services were
terminated by the Company or the Indemnitee), whether or not a claim is made or
an action or
5
<PAGE>
proceeding is threatened or commenced before or after the actual or purported
termination of this Agreement, change in the certificate of incorporation or by-
laws, or termination of the Indemnitee's services.
10. Successors and Assigns of the Company. This Agreement shall be
-------------------------------------
binding on the successors and assigns of the Company whether by operation of law
or otherwise.
11. Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of New
York (without giving effect to the provisions thereof relating to conflict of
laws).
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first above written.
--------------------------
By:________________________
INDEMNITEE:
___________________________
6
