SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
/X/ Preliminary information statement / / Confidential, for use of the
Commission only (as permitted
by Rule 14c - 5(d)(2))
/ / Definitive information statement
REXEL, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, Par Value $1 per Share
(2) Aggregate number of securities to which transaction applies:
12,893,809 shares of Common Stock plus 628,000 shares of
Common Stock subject to options outstanding as of October
16, 1997
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
$22.50 (offering price per share; fee determined by multiplying
$22.50 by 13,521,809)
(4) Proposed maximum aggregate value of transaction:
$304,245,000
(5) Total fee paid:
$60,849
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$60,849
(2) Form, Schedule or Registration Statement No.:
Schedule 14D-1/Schedule 13D (Amendment No. 12)
(3) Filing Party:
S.C.A. Financiere Pinault, Rexel S.A. and International Technical
Distributors, Inc.
(4) Date Filed:
October 23, 1997
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1997
REXEL, INC.
150 Alhambra Circle
Coral Gables, Florida 33134
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 30, 1997
TO THE SHAREHOLDERS OF REXEL, INC.:
NOTICE IS HEREBY GIVEN THAT A SPECIAL MEETING OF SHAREHOLDERS OF REXEL,
INC. (THE "COMPANY") WILL BE HELD AT 150 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA
33134, ON DECEMBER 30, 1997, AT 9:00 A.M., LOCAL TIME (THE "SPECIAL MEETING"),
FOR THE FOLLOWING PURPOSE:
TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND
PLAN AND MERGER, DATED AS OF OCTOBER 17, 1997 (THE "MERGER AGREEMENT"),
AMONG REXEL S.A., A SOCIETE ANONYME ORGANIZED UNDER THE LAWS OF THE
REPUBLIC OF FRANCE ("PARENT"), INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.,
A NEW YORK CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("ITD"), AND
THE COMPANY, PURSUANT TO WHICH ITD WILL BE MERGED WITH AND INTO THE COMPANY
(THE "MERGER"). THE COMPANY WILL BE THE SURVIVING CORPORATION IN THE
MERGER, AND IMMEDIATELY FOLLOWING THE MERGER THE ENTIRE EQUITY INTEREST IN
THE COMPANY WILL BE OWNED BENEFICIALLY BY PARENT. AS A RESULT OF THE
MERGER, EACH OUTSTANDING COMMON SHARE, PAR VALUE $1.00 PER SHARE, OF THE
COMPANY (THE "SHARES"), EXCEPT THOSE SHARES OWNED DIRECTLY OR INDIRECTLY BY
PARENT OR ITD OR HELD BY DISSENTING SHAREHOLDERS WHO PERFECT APPRAISAL
RIGHTS IN ACCORDANCE WITH THE NEW YORK BUSINESS CORPORATION LAW (THE
"NYBCL"), WILL BE CONVERTED INTO THE RIGHT TO RECEIVE $22.50 IN CASH,
WITHOUT INTEREST, ALL AS MORE FULLY DESCRIBED IN THE ACCOMPANYING
INFORMATION STATEMENT. EACH SHARE OWNED BY THE COMPANY AND HELD BY IT AS A
TREASURY SHARE WILL BE CANCELLED, AND NO CONSIDERATION WILL BE DELIVERED
WITH RESPECT TO SUCH SHARES. A COPY OF THE MERGER AGREEMENT IS INCLUDED AS
EXHIBIT D TO THE ACCOMPANYING INFORMATION STATEMENT.
ONLY HOLDERS OF SHARES OF RECORD AT THE CLOSE OF BUSINESS ON NOVEMBER 25,
1997 ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE SPECIAL MEETING. EACH SHARE
OUTSTANDING ON SUCH DATE IS ENTITLED TO ONE VOTE AT THE SPECIAL MEETING. A LIST
OF SHAREHOLDERS ENTITLED TO NOTICE OF AND TO VOTE AT THE SPECIAL MEETING WILL BE
AVAILABLE FOR INSPECTION DURING ORDINARY BUSINESS HOURS AT THE PRINCIPAL PLACE
OF BUSINESS OF THE COMPANY, 150 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134,
FOR THE 10-DAY PERIOD PRIOR TO THE SPECIAL MEETING. THE BY-LAWS OF THE COMPANY
REQUIRE THAT THE HOLDERS OF A MAJORITY OF THE SHARES ENTITLED TO VOTE BE PRESENT
IN PERSON OR BY PROXY AT THE SPECIAL MEETING IN ORDER TO CONSTITUTE A QUORUM FOR
THE TRANSACTION OF BUSINESS.
PURSUANT TO THE NYBCL, THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE
OUTSTANDING SHARES IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT.
PARENT AND ITD, WHICH COLLECTIVELY OWN APPROXIMATELY _____% OF THE OUTSTANDING
SHARES, HAVE ADVISED THE COMPANY THAT THEY WILL VOTE SUCH SHARES IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY, APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT IS ASSURED REGARDLESS OF THE VOTE OF ANY OTHER
SHAREHOLDER OF THE COMPANY.
IF THE MERGER IS CONSUMMATED, THE SHAREHOLDERS OF THE COMPANY WHO DO NOT
WISH TO ACCEPT THE $22.50 PER SHARE CASH PAYMENT IN THE MERGER AND WHO FULLY
COMPLY WITH THE STATUTORY PROCEDURES FOR ASSERTING DISSENTERS RIGHTS SET FORTH
IN SECTION 623 OF THE NYBCL WILL HAVE THE RIGHT TO RECEIVE, IN CONNECTION WITH
THE MERGER, PAYMENT IN CASH OF THE FAIR VALUE OF THEIR SHARES AS DETERMIND
PUSUANT TO THE PROCEDURES PRESCRIBED IN THE NYBCL. SEE "SPECIAL FACTORS-RIGHTS
OF SHAREHOLDERS IN THE MERGER; APPRAISAL RIGHTS" IN THE ACCOMPANYING INFORMATION
STATEMENT AND EXHIBIT C THERETO FOR A STATEMENT OF THE RIGHTS OF DISSENTING
SHAREHOLDERS AND A DESCRIPTION OF THE PROCEDURES REQUIRED TO BE FOLLOWED TO
OBTAIN THE FAIR VALUE OF THE SHARES.
WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
BY ORDER OF THE BOARD OF DIRECTORS,
Jon O. Fullerton
SECRETARY
Coral Gables, Florida
November 28, 1997
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1997
INFORMATION STATEMENT
REXEL, INC.
150 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 30, 1997
WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
THIS INFORMATION STATEMENT IS BEING FURNISHED TO THE SHAREHOLDERS OF REXEL,
INC., A NEW YORK CORPORATION (THE "COMPANY"), IN CONNECTION WITH THE SPECIAL
MEETING OF SHAREHOLDERS OF THE COMPANY TO BE HELD ON DECEMBER 30, 1997 AT 9:00
A.M., LOCAL TIME, AT 150 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134, AND AT
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF (THE "SPECIAL MEETING"). THIS
INFORMATION STATEMENT IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT NOVEMBER
__, 1997.
AT THE SPECIAL MEETING, HOLDERS OF THE OUTSTANDING SHARES OF COMMON STOCK,
PAR VALUE $1.00 PER SHARE, OF THE COMPANY (THE "SHARES") AT THE CLOSE OF
BUSINESS ON NOVEMBER 25, 1997, THE RECORD DATE FOR SHAREHOLDERS ENTITLED TO
NOTICE OF AND TO VOTE AT THE SPECIAL MEETING, WILL CONSIDER AND VOTE UPON A
PROPOSAL TO APPROVE AND ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF
OCTOBER 17, 1997 (THE "MERGER AGREEMENT"), AMONG REXEL S.A., A SOCIETE ANONYME
("PARENT"), INTERNATIONAL TECHNICAL DISTRIBUTORS, INC., A NEW YORK CORPORATION
AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("ITD"), AND THE COMPANY, PURSUANT TO
WHICH: (A) ITD WILL BE MERGED WITH AND INTO THE COMPANY (THE "MERGER"), AND
IMMEDIATELY FOLLOWING THE MERGER, THE ENTIRE EQUITY INTEREST IN THE COMPANY, AS
THE SURVIVING CORPORATION IN THE MERGER, WILL BE OWNED BENEFICIALLY BY PARENT;
AND (B) EACH SHARE THAT IS OUTSTANDING AT THE EFFECTIVE TIME OF THE MERGER OWNED
BY SHAREHOLDERS OTHER THAN PARENT OR ITD OR SHARES IN RESPECT OF WHICH APPRAISAL
RIGHTS HAVE BEEN PERFECTED IN ACCORDANCE WITH THE NEW YORK BUSINESS CORPORATION
LAW ("NYBCL"), WILL BE CONVERTED INTO THE RIGHT TO RECEIVE $22.50 IN CASH,
WITHOUT INTEREST (THE "MERGER CONSIDERATION"). AS A RESULT OF THE MERGER,
SHAREHOLDERS OF THE COMPANY (OTHER THAN PARENT OR ITD) WILL NO LONGER HAVE ANY
EQUITY INTEREST IN THE COMPANY. EACH SHARE OWNED BY THE COMPANY AND HELD BY IT
AS A TREASURY SHARE WILL BE CANCELLED, AND NO CONSIDERATION WILL BE DELIVERED
WITH RESPECT TO SUCH SHARES. THE SHARES OWNED BY SHAREHOLDERS OF THE COMPANY
OTHER THAN PARENT OR ITD ARE HEREIN REFERRED TO AS THE "PUBLIC SHARES" AND THE
HOLDERS OF THE PUBLIC SHARES ARE HEREIN REFERRED TO AS THE "PUBLIC
SHAREHOLDERS." PURSUANT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION,
NO OTHER BUSINESS MAY BE CONDUCTED AT THE SPECIAL MEETING.
THE MERGER AGREEMENT IS ATTACHED AS EXHIBIT D TO THIS INFORMATION STATE-
MENT. THE MERGER IS THE SECOND AND FINAL STEP IN THE ACQUISITION OF THE
OUTSTANDING SHARES OF THE COMPANY BY PARENT AND ITD PURSUANT TO THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT. THE FIRST STEP WAS A TENDER OFFER BY ITD
PURSUANT TO WHICH ITD OFFERED TO PURCHASE ALL ISSUED AND OUTSTANDING SHARES, NOT
ALREADY OWNED BY PARENT OR ITD, FOR $22.50 PER SHARE, NET TO THE SELLER IN CASH,
UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE OFFER TO PURCHASE
DATED OCTOBER 23, 1997 (THE "OFFER TO PURCHASE") AND IN THE RELATED LETTER OF
TRANSMITTAL (WHICH, TOGETHER WITH THE OFFER TO PURCHASE, EACH AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, CONSTITUTE THE "OFFER"). THE OFFER EXPIRED AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER __, 1997, AT WHICH TIME ITD AC-
QUIRED _____ SHARES. AS A RESULT OF SUCH PURCHASE AND PRIOR ACQUISITIONS OF
SHARES, ITD AND PARENT OWN ____ SHARES, REPRESENTING APPROXIMATELY __% OF THE
ISSUED AND OUTSTANDING SHARES BASED ON THE NUMBER OF SHARES ISSUED AND OUTSTAND-
ING ON ________, 1997.
PURSUANT TO THE NYBCL, THE AFFIRMATIVE VOTE OF HOLDERS OF AT LEAST TWO-
THIRDS OF THE OUTSTANDING SHARES IS REQUIRED TO APPROVE AND ADOPT THE MERGER
AGREEMENT. PARENT AND ITD, WHICH COLLECTIVELY OWN APPROXIMATELY ____% OF THE
OUTSTANDING SHARES, HAVE ADVISED THE COMPANY THAT THEY WILL VOTE SUCH SHARES IN
FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY,
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT IS ASSURED REGARDLESS OF THE VOTE
OF ANY OTHER SHAREHOLDER OF THE COMPANY. FOR ADDITIONAL INFORMATION CONCERNING
THE TERMS AND CONDITIONS OF THE MERGER, SEE "THE MERGER - AGREEMENT."
EACH SHARE OUTSTANDING ON THE RECORD DATE IS ENTITLED TO ONE VOTE AT THE
SPECIAL MEETING. UNDER THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND
BY-LAWS AND UNDER NEW YORK LAW, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE
EFFECT OF VOTES IN OPPOSITION TO THE MERGER.
THE BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AND
VOTING, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
ON NOVEMBER _____, 1997, THE CLOSING SALES PRICE OF THE SHARES AS REPORTED
ON THE NEW YORK STOCK EXCHANGE ("NYSE") WAS $ __________ PER SHARE. ON AUGUST
28, 1997, ONE DAY PRIOR TO THE ANNOUNCEMENT THAT THE PARENT PROPOSED TO ACQUIRE
SHARES NOT OWNED BY PARENT OR ITD, THE CLOSING PRICE OF THE SHARES AS REPORTED
ON THE NYSE WAS $18.88 PER SHARE.
IF THE MERGER IS CONSUMMATED, SHAREHOLDERS WHO FULLY COMPLY WITH THE
STATUTORY PROCEDURES FOR ASSERTING DISSENTERS RIGHTS SET FORTH IN SECTION 623 OF
THE NYBCL, THE RELEVANT PORTIONS OF WHICH ARE ATTACHED TO THIS INFORMATION
STATEMENT AS EXHIBIT C, WILL BE ENTITLED TO RECEIVE CASH FOR THE FAIR VALUE OF
THEIR SHARES AS DETERMINED PURSUANT TO THE PROCEDURES PRESCRIBED BY THE NYBCL.
MERELY VOTING AGAINST THE MERGER AGREEMENT WILL NOT PERFECT A SHAREHOLDER'S
DISSENTERS RIGHTS. SHAREHOLDERS ARE URGED TO REVIEW CAREFULLY THE DISSENTING
SHAREHOLDERS' RIGHTS PROVISIONS OF THE NYBCL, A DESCRIPTION OF WHICH IS PROVIDED
IN THIS INFORMATION STATEMENT UNDER "SPECIAL FACTORS-RIGHTS OF SHAREHOLDERS IN
THE MERGER; APPRAISAL RIGHTS" AND THE FULL TEXT OF WHICH IS ATTACHED TO THIS
INFORMATION STATEMENT AS EXHIBIT C AND INCORPORATED HEREIN BY REFERENCE.
SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE APPLICABLE PROCEDURES WILL
FORFEIT THEIR DISSENTERS RIGHTS IN CONNECTION WITH THE MERGER. SEE "SPECIAL
FACTORS-RIGHTS OF SHAREHOLDERS IN THE MERGER; APPRAISAL RIGHTS" AND EXHIBIT C TO
THIS INFORMATION STATEMENT.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE 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.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THE DELIVERY OF THIS
INFORMATION STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN OR IN ANY DOCUMENT INCORPORATED HEREIN BY
REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE DATE OF
SUCH DOCUMENT, AS THE CASE MAY BE, OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE DATE OF SUCH DOCUMENT, AS
THE CASE MAY BE. THIS INFORMATION STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY FROM ANY PERSON IN ANY JURISDICTION.
ALL INFORMATION CONTAINED IN THIS INFORMATION STATEMENT RELATING TO PARENT,
ITD AND THEIR AFFILIATES (OTHER THAN THE COMPANY) HAS BEEN SUPPLIED BY PARENT
FOR INCLUSION HEREIN AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY THE COMPANY.
THE COMPANY MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR
COMPLETENESS OF ANY SUCH INFORMATION.
_____________________________
THE DATE OF THIS INFORMATION STATEMENT IS NOVEMBER __, 1997.
TABLE OF CONTENTS
PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 1
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . 3
Background of the Merger . . . . . . . . . . . . . . . 3
Business of the Company and Arrangements between Parent, 3
ITD and the Company . . . . . . . . . . . . . . . .
Contacts of Parent with the Company . . . . . . . . . 4
Position of Parent and ITD Regarding Fairness of the Merger 9
Position of Parent and ITD . . . . . . . . . . . . . . 9
J.P. Morgan Report . . . . . . . . . . . . . . . . . . 9
Recommendation of the Company Board; Fairness of the Offer 12
and the Merger . . . . . . . . . . . . . . . . . . .
Recommendation of the Special Committee and the Company 12
Board
Opinion of WP&Co. . . . . . . . . . . . . . . . . . . 14
WP&Co. Engagement Agreement . . . . . . . . . . . . . 18
Certain Financial Projections (Unaudited) . . . . . . . 18
Cautionary Statement Concerning Forward-Looking Statements 22
Purpose and Structure of the Merger; Reasons of Parent and 22
ITD for the Merger . . . . . . . . . . . . . . . . .
Plans for the Company; Certain Effects of the Merger . 22
Rights of Shareholders in the Merger; Appraisal Rights 23
The Merger Agreement . . . . . . . . . . . . . . . . . 25
Agreements of Parent, ITD and the Company . . . . . . 26
Representations and Warranties . . . . . . . . . . . . 27
Conditions to the Merger . . . . . . . . . . . . . . . 27
Termination . . . . . . . . . . . . . . . . . . . . . 28
Amendment and Waiver . . . . . . . . . . . . . . . . . 28
Accounting Treatment . . . . . . . . . . . . . . . . . 28
Payment for Shares of Common Stock . . . . . . . . . . 28
Interests of Certain Persons in the Offer and the Merger 28
Related Party Transactions . . . . . . . . . . . . . . . 28
Beneficial Ownership of Shares . . . . . . . . . . . . . 29
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES . . . . . . . 31
PRICE RANGE OF SHARES; DIVIDENDS . . . . . . . . . . . . . 32
CERTAIN INFORMATION CONCERNING THE COMPANY . . . . . . . . 32
FIVE YEAR SELECTED FINANCIAL DATA . . . . . . . . . . . . 37
CERTAIN INFORMATION CONCERNING PARENT AND ITD . . . . . . . 39
FINANCING OF THE MERGER . . . . . . . . . . . . . . . . . . 41
EFFECT OF THE MERGER ON THE MARKET FOR THE SHARES; THE NEW
YORK STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE AND EXCHANGE 41
ACT REGISTRATION . . . . . . . . . . . . . . . . . . . . .
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS . . . . . . 42
FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . 45
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . 45
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . 45
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . 46
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 46
EXHIBIT A LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, ITD
AND S.C.A. FINANCIERE PINAULT
EXHIBIT B OPINION OF WASSERSTEIN PERELLA & CO., INC., FINANCIAL ADVISOR OF
THE SPECIAL COMMITTEE OF THE COMPANY
EXHIBIT C NEW YORK BUSINESS CORPORATION LAW SECTION 623 REGARDING
DISSENTERS' RIGHTS
EXHIBIT D AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 17, 1997,
AMONG PARENT, ITD AND THE COMPANY
INTRODUCTION
A special meeting of Shareholders of Rexel, Inc., a New York Corporation
(the "Company"), will be held on December 30, 1997 at 9:00 a.m., Local Time, at
150 Alhambra Circle, Coral Gables, Florida 33134 (the "Special Meeting"). The
Special Meeting is being held to consider and vote upon a proposal to approve
and adopt the Agreement and Plan of Merger, dated as of October 17, 1997 (the
"Merger Agreement"), among the Company, Rexel S.A., a French societe anonyme
("Parent"), and International Technical Distributors, Inc., a New York
corporation and a wholly owned subsidiary of Parent ("ITD"). The Merger
Agreement provides, among other things, that 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"), ITD 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 wholly owned subsidiary of Parent.
At the effective time of the Merger (the "Effective Time"), the shares of Common
Stock, par value $1.00 per share, of the Company (the "Shares") issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
ITD or Parent, Shares held in the treasury of the Company or Shares, if any,
held by dissenting shareholders who perfect appraisal rights under Section 623
of the NYBCL) will be converted into the right to receive $22.50 per Share, in
cash, 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 "SPECIAL FACTORS-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.
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 THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
SHAREHOLDERS OF THE COMPANY (OTHER THAN ITD AND PARENT) AND HAS APPROVED THE
MERGER AND THE MERGER AGREEMENT. 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 Merger is the second and final step in the acquisition of the
outstanding Shares of the Company by Parent and ITD pursuant to the transactions
contemplated by the Merger Agreement. The first step was a tender offer by ITD
pursuant to which ITD offered to purchase all issued and outstanding Shares, not
already owned by Parent or ITD, for $22.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated October 23, 1997 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with the Offer to Purchase, each as amended or
supplemented from time to time, constitute the "Offer"). The Offer expired at
12:00 Midnight, New York City Time, on November [__], 1997.
As of November_______, 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 November_______, 1997, __________ Shares
were issued and outstanding and held by approximately ________ shareholders of
record.
As of November __, 1997, _______ Shares were reserved for issuance pursuant
to the Company's stock incentive plan and options to acquire _______ Shares were
outstanding thereunder (the "Stock Options").
Parent currently directly holds _________ Shares (the "Parent Shares"), equal
to approximately ____% of the total number of Shares issued and outstanding. ITD
directly holds _________ Shares, equal to approximately ____% of the issued and
outstanding Shares. Parent, by virtue of its control of ITD, and through ITD,
holds directly and indirectly __________ Shares, equal to approximately ____% of
the Shares currently issued and outstanding.
Only holders of Shares of record at the close of business on November
25,1997 are entitled to notice of and to vote at the Special Meeting. A list of
shareholders entitled to notice of and to vote at the Special Meeting will be
available for inspection during ordinary business hours at the principal place
of business of the Company, 150 Alhambra Circle, Coral Gables, Florida 33134,
for the 10-day period prior to the Special Meeting.
Each Share outstanding on the record date is entitled to one vote at the
Special Meeting. Under the Company's Certificate of Incorporation and By-Laws
and under New York law, abstentions and broker non-votes will have the effect of
votes in opposition to the Merger.
Parent and ITD have advised the Company that they will vote their Shares in
favor of the approval and adoption of the Merger Agreement. Accordingly,
approval and adoption of the Merger Agreement is assured regardless of the vote
of any other shareholder of the Company.
The purpose of the Merger is to facilitate the acquisition of all of the
remaining Shares for cash and thereby enable Parent to own 100% of the equity of
the Company.
Parent and ITD believe that the consideration to be received by the
Company's shareholders (other than Parent and ITD) pursuant to the Merger is
fair to such shareholders. See "SPECIAL FACTORS-Position of Parent and ITD
Regarding Fairness of the Offer and the Merger-Position of Parent and ITD."
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 be received by holders of Shares (other than Parent or any of
its wholly owned subsidiaries, including ITD) 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.
It is the present intention of Parent and ITD 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 consummation of the Merger. See "Effect of the Merger on the
Market for the Shares; the New York Stock Exchange, the Pacific Stock Exchange
and Exchange Act Registration."
Parent (formerly known as Compagnie de Distribution de Material 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. Its
telephone number is 011 33 1 42 85 85 00. Based on 1996 sales, management of
the Company believes that Parent, operating through its affiliated companies
including the Company (the "Parent Group"), is the largest electrical parts and
supplies distributor in the world, with operations in 17 countries.
ITD 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. ITD is a direct, wholly owned
subsidiary of Parent. Its mailing address is c/o McDermott, Will & Emery, 50
Rockefeller Plaza, New York, New York 10020-1605, Attention: Joel A. Adler,
Esq.; telephone (212) 547-5579.
The Company is a New York corporation that was incorporated in 1866 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. 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.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). The Rule 13e-3 Transaction Statement on
Schedule 13E-3 filed by Parent and ITD in connection with the Offer (as may be
amended from time to time, the "Schedule 13E-3"), the Tender Offer Statement on
Schedule 14D-1 filed by S.C.A. Financiere Pinault, Parent and ITD in connection
with the Offer (as may be amended from time to time, the "Schedule 14D-1") and
the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company
in connection with the Offer, as well as such reports, proxy statement and other
information filed with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Commission at prescribed rates by
addressing written requests for such copies to the Public Reference Section of
the Commission at Judiciary Plaza, 450 Street, N.W., Washington, D.C. 20549.
The Commission also maintains an Internet web site at http://www.sec.gov that
contains reports, proxy statements and other information filed with the
Commission. In addition, reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the NYSE at 20
Broad Street, New York, New York 10005.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Business of the Company and Arrangements between Parent, ITD 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, ITD and
Southern Electric Supply Company, Inc. (then a subsidiary of ITD 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 ITD 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, ITD nor SES owned any Shares. In connection with the Purchase Agreement,
the Company, Parent and ITD entered into an investment agreement dated November
12, 1992 (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 ITD 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 ITD 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 dated December 10, 1993
among Parent, ITD and the Company (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 ITD entered into Amendment No. 1 to the Investment Agreement (the
"Amendment to the Investment Agreement"), which permitted the purchase of
additional securities of the Company by Parent, ITD and certain of their
affiliates. Additionally, the Amendment to the Investment Agreement provided for
Parent to have the power to appoint a majority of the members of the Company
Board. The Investment Agreement, as amended, expired December 31, 1994 (except
for the obligations of the Company to maintain directors' and officers'
insurance for an additional period).
In 1996, the Company acquired Utility Products Supply of Denver, Colorado, a
distributor of electrical products to the utility industry, 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 closed on November 3, 1997 and the Taylor acquisition
closed on November 14, 1997.
Between June 1994 and June 1997, 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, and Shares purchased pursuant to the Offer,
Parent is the direct and indirect beneficial owner of __________ Shares or
approximately ____% of the outstanding Shares. See "INTRODUCTION" and "-
Interests of Certain Persons in the Offer and the Merger-Beneficial Ownership of
Shares."
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 ITD 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 Securities, Inc.
("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 constitutes a majority of the independent directors. 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 as Exhibit (a)(11) to the Schedule 14D-1 and is incorporated herein by
reference.
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.
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 is
filed 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 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, to 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 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 existed
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 Parent Group and WP& Co.'s agreement
that it would not represent or provide services to the Parent 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.
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
"SPECIAL FACTORS-Certain Financial Projections (Unaudited)"), 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 S.A. 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.
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. See "CERTAIN LEGAL
MATTERS AND REGULATORY APPROVALS - Litigation." During the discussions the
parties reached an understanding on price, the condition that there be validly
tendered and not properly withdrawn prior to the expiration of the Offer a
majority of the Shares not owned by Parent or ITD (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 is fair to and in the best interests of the shareholders of
the Company (other than ITD 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 as Exhibit
(a)(8) to the Schedule14D-1 and is incorporated 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 Parent's and ITD's 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. Subsequently, the third party's
investment banker contacted J.P. Morgan. None of the Company, Parent, ITD,
WP&Co. or J.P. Morgan has received a written proposal from such party and as of
the date of this information statement, there are no substantive discussions
being conducted with such third party.
On October 23, 1997, pursuant to the Merger Agreement, ITD commenced the
Offer. On November _____, 1997, the Offer was terminated and ITD purchased
_______ Shares pursuant to the Offer.
POSITION OF PARENT AND ITD REGARDING FAIRNESS OF THE MERGER
Position of Parent and ITD
Parent and ITD believe that the consideration to be received by the Company's
shareholders pursuant to the Merger is fair to the Company's shareholders (other
than Parent and ITD). Parent and ITD 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 neither Parent nor
ITD is entitled to rely on such opinion, the fact that the Special Committee
received an opinion 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 ITD) 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 ITD will have to be tendered pursuant to the
Offer, (iv) the Merger Agreement was negotiated at arm's-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 ITD 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 ITD 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 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 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.
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
"SPECIAL FACTORS-Certain Financial Projections (Unaudited)."
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 affect 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 business of the Company. The companies selected by J.P. Morgan
were Anixter 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 years 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 to $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, 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 principal
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 Acquisition 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 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 ITD) 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 Exhibit B
(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 ITD 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 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 ITD) 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, ITD 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 ITD
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 ITD) 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 ITD) and that Parent and ITD 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 ITD shall have purchased all Shares tendered in the Offer. Consummation
of the Offer was conditioned upon there being validly tendered, and not
withdrawn, such number of the then issued and outstanding Shares which
constituted at least a majority of the then issued and outstanding Shares not
beneficially owned by Parent or ITD on a fully-diluted basis, which effectively
required 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 ITD) 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.
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 AS EXHIBIT B TO THIS INFORMATION
STATEMENT 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 HOW SUCH HOLDER SHOULD VOTE OR OTHERWISE ACT IN RESPECT OF 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 EXHIBIT B.
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.
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
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 EBIT, $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 6.0x 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 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 Financial Projections
(Unaudited)."
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 Financial Projections (Unaudited)."
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 Financial Projections
(Unaudited)."
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 Base 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%.
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, ITD or any of their
affiliates, in excess of $19.50 per share.
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, 1997, 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 Parent Group.
Furthermore, WP&Co. agreed in the WP&Co. Letter Agreement not to represent or to
provide services for any member of the Parent 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 Transactions.
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 Parent and ITD 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, ITD 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, ITD, 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 ITD
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 1 of each of 1998, 1999 and 2000. Each
acquisition is assumed to contribute approximately $200 million in total sales
per year. At the time the acquisition projections were incorporated in the
management plan, the Company was not referring to any existing company or any
specific contemplated transaction.
<TABLE>
REXEL, INC.
THREE-YEAR PLAN
(INCLUDING NEW ACQUISITIONS)
SUMMARY
(PREPARED AS OF JUNE 19, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<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 in-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
(1) Working capital turnover.
</TABLE>
<TABLE>
REXEL, INC.
THREE-YEAR PLAN
(EXCLUDING NEW ACQUISITIONS)
SUMMARY
(PREPARED AS OF JUNE 19, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<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 n-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 33.7% 34.8% 3.3% 40.8% 17.2% 44.9% 9.9% 48.5% 8.0%
assets . . . . .
Return on equity
. 16.3% 15.9% -2.3% 16.6% 4.2% 15.9% -4.2% 14.9% -6.2%
Debt to equity 0.32 0.24 -25.0% 0.18 -0.02 -0.18
ratio . . . . . .
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%
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.
</TABLE>
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.
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
<TABLE>
REXEL, INC.
1998 PROFIT PLAN ESTIMATE
SUMMARY
(PREPARED AS OF SEPTEMBER 18, 1997)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<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 33.5% 38.2% 41.5% 45.9%
assets
</TABLE>
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 Information Statement
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 Information Statement 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 MERGER; REASONS OF PARENT AND ITD FOR THE MERGER
The purpose of the Merger and the Merger Agreement is to enable Parent to
acquire complete control of the 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.
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
"SPECIAL FACTORS-Background of the Merger-Business of the Company and
Arrangements between Parent, ITD and the Company."
PLANS FOR THE COMPANY; CERTAIN EFFECTS 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 after the
consummation of the Merger and will take further actions as it deems appropriate
under the circumstances then existing.
Except as otherwise described in this Information Statement, 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.
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.
[The Company has sent requests to the NYSE and the Pacific Stock Exchange
(the "PSE") to discontinue the listing of Shares on such exchanges.] In
addition, the registration of the Shares under the Exchange Act may be
terminated 90 days following consummation of the Merger. Accordingly, following
the Merger there will be no publicly-traded Common Stock of the Company
outstanding. See "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 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 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 $22.50 per Share payable pursuant to the Merger Agreement (the "Merger
Consideration") 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 $22.50 per Share.
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 provision and is qualified in its entirety by reference to the
full text of Section 623 which is set forth in Exhibit C attached hereto.
Any holder of Shares who wishes to exercise his dissenter's rights with
respect to the Merger must file with the Company prior to the holding of the
vote concerning the Merger, a written objection thereto. An objection by a
holder must include (i) a written notice of election to dissent, (ii) his name
and residence address, (iii) the number and class of shares as to which he
dissents and (iv) a demand for payment of the fair value of his shares. The
Company takes the position that a Shareholder's failure to vote against the
approval and adoption of the Merger Agreement will not constitute a waiver of
his dissenters' rights. However, a Shareholder's vote against the approval and
adoption of the Merger Agreement will not suffice to provide the Company with
written notice of the Shareholder's intention to exercise his dissenters' rights
under New York law. 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.
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 ten days after the holding of the shareholders vote regarding the
Merger, the Company will give written notice of such vote to all shareholders
that have filed written objection to the Merger (except shareholders voting in
favor of the Merger). 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 $22.50
per Share. 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 as described in the preceding
paragraph, 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 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.
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.
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 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, except the right to bring or maintain appropriate action to
obtain relief upon a showing of fraud, misrepresentation or self-dealing as to
such shareholder.
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 Exhibit C. 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.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Exhibit D to this Information Statement. Such
summary is qualified in its entirety by reference to the Merger Agreement.
The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, and in accordance with the NYBCL, at the Effective Time, ITD
(or a wholly owned subsidiary of ITD 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 ITD, 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 ITD), shall be
canceled and, subject to dissenters rights under the NYBCL, shall be converted
automatically into the right to receive from the Company $22.50 per Share. 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 ITD, 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 $22.50 per Share 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 ITD 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
(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 $22.50 per Share over the
exercise price per Share previously subject to such Stock Option.
Agreements of Parent, ITD and the Company
Pursuant to the Merger Agreement, the Company agreed, if necessary in order
to consummate the Merger, to (i) duly call, give notice of, convene and hold the
special meeting of its shareholders to which this Information Statement relates
as soon as practicable following consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement and the transaction
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 transaction 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, each of Parent and ITD is obligated to cause all Shares
then owned by it and its subsidiaries to be voted in favor of the approval and
adoption of the Merger Agreement and the transaction contemplated thereby.
Parent and ITD currently have sufficient voting power to approve the Merger,
even if no other shareholder votes in favor of the Merger.
The Merger Agreement provides that in the event ITD has acquired ownership of
such number of Shares which, when taken together with Shares contributed to ITD
by Parent, if any, constitutes at least 90% of the then issued and outstanding
Shares, then ITD, 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.
Pursuant to the Merger Agreement, the Company has covenanted and agreed that,
between the date of the Merger Agreement and the Effective Time, unless ITD
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 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 ITD 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 ITD, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it thereunder.
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 ITD 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 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 Merger Agreement and the other transactions contemplated thereby and to
fulfill the conditions to 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 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 ITD 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).
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) ITD 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 ITD if, in breach of the Merger Agreement, ITD 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 governing bodies of Parent and ITD and the Company at the direction of the
Special Committee; or (b) by either ITD 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 the Company, upon direction of the Special
Committee, (i) if any representation or warranty of Parent or ITD 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 ITD 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 ITD to be performed or complied with by it under the Merger
Agreement; or (d) by the Company upon direction of the Special Committee if the
Special Committee has withdrawn or modified its approval or recommendation of
the Merger or the Merger 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.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
whereby the amount paid to the Public Shareholders will be allocated among the
Company's assets and liabilities based on their respective fair market values.
PAYMENT FOR SHARES OF COMMON STOCK
As a result of the Merger, holders of certificates formerly representing
Shares will cease to have any equity interest in the Company. After
consummation of the Merger, each Share issued and outstanding immediately prior
to the consummation of the Merger held by shareholders other than Parent or any
direct or indirect subsidiary of Parent will be required to be surrendered to
IBJ Schroder Bank & Trust Company (the "Paying Agent") in order that such Share
be cancelled and converted automatically into the right to receive the cash
price of $22.50 per Share. No interest will be paid or accrued on the cash
payable upon the surrender of such certificates.
DETAILED INSTRUCTIONS WITH REGARD TO THE SURRENDER OF CERTIFICATES, TOGETHER
WITH A LETTER OF TRANSMITTAL, WILL BE FORWARDED TO FORMER HOLDERS OF SHARES BY
THE PAYING AGENT PROMPTLY FOLLOWING THE EFFECTIVE TIME. HOLDERS OF SHARES
SHOULD NOT SUBMIT THEIR CERTIFICATES TO THE PAYING AGENT UNTIL THEY HAVE
RECEIVED SUCH MATERIALS. PAYMENT FOR SHARES WILL BE MADE TO FORMER HOLDERS OF
SHARES AS PROMPTLY AS PRACTICABLE FOLLOWING RECEIPT BY THE PAYING AGENT OF THEIR
CERTIFICATES AND OTHER REQUIRED DOCUMENTS.
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 Merger, shareholders should be aware that certain
officers and directors of Parent and the Company have interests in 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 ITD's executive officers or directors. See also "Exhibit A-List of
Directors and Executive Officers of Parent, ITD 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, ITD, 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 Merger.
As a result of Parent's current ownership of approximately [__%] 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 or 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, employees, 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 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 Services 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,
ITD 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 Merger."
Beneficial Ownership of Shares
The following table sets forth certain information, as of November 5, 1997,
regarding the ownership of Shares by each person known by ITD or the Company to
be the beneficial owner of more than 5% of the issued and outstanding Shares,
and any director or executive officer of the Company, Parent or ITD who is the
beneficial owner of Shares or Stock Options issued by the Company as well as
ownership by all such directors and officers as a group: [to be updated after
the Offer]
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF SUBJECT TO PERCENTAGE OF
SHARES UNVESTED COMMON STOCK
BENEFICIALLY OPTIONS BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED ISSUED BY THE OWNED
COMPANY
<S> <C> <C> <C>
S.C.A. FINANCIERE PINAULT . . . . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
ARTEMIS S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
SOCIETE ANONYME PROFESSIONELLE DE
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
PINAULT-PRINTEMPS-REDOUTE S.A. . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
ITD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,646,9941 - 17.8
Francois Pinault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,161,4811 - 50.5
Alain Redheuil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 8,000 *
Serge Weinberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 2,000 *
Steve Barke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 10,000 *
Bernard Clerc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 - *
Pierre Chareyre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10,000 *
Michel Rivaillon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - *
John B. Fraser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500 4,500 *
Frederic de Castr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 4,000 *
Jon O. Fullerton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,600 9,600 *
R. Gary Gentles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500 4,500 *
Allan M. Gonopolsky . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,894 2,000 *
Gilles Guinchard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - *
William J. Jett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500 23,000 *
Austin List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,896 4,500 *
Eric Lomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 7,000 *
Robert M. Merson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,734 56,000 *
Gerald E. Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,500 6,500 *
Nicolas Sokolow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,500 6,500 *
All directors and officers as a group . . . . . . . . . . . . . . . . . . . 221,124 158,100 *
1 Each of S.C.A. Financiere Pinault, Artemis S.A., Societe Anonyme Professionelle de Distribution, Pinault-Printemps-
Redoute S.A., Parent and ITD is owned, directly or indirectly, by Francois Pinault. Mr. Pinault and such entities share voting
and investment power with respect to Shares reported as beneficially owned. The addresses of Mr. Pinault and each such entity are
set forth in Exhibit A to this Information Statement or under the caption "CERTAIN INFORMATION CONCERNING PARENT AND ITD."
* Less than 1%.
</TABLE>
The individuals included in the table (other than Mr. Pinault) had sole
voting and investment power with respect to Shares reported as beneficially
owned, except as otherwise indicated in this paragraph. Shares owned by certain
individuals include vested options exercisable within 60 days of November 5,
1997, as follows: Mr. Redheuil (2,000); Mr. Weinberg (8,000); Mr. Barker
(3,000); Mr. Fraser (10,500); Mr. Castro (2,000); Mr. Fullerton (13,100); Mr.
Gentles (10,500); Mr. Jett (4,500); Mr. Gonopolsky (2,000); Mr. List (3,500);
Mr. Lomas (7,000); Mr. Merson (74,000); Mr. Morris (8,500); and Mr. Sokolow
(8,500). Shares owned by Messrs. Gonopolsky and Merson include, respectively,
3,894 and 1,034 Shares 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. Holders of options, whether or not
vested, will receive pursuant to the Merger the difference between $22.50 and
the exercise price for each option owned by the holder.
Neither the Company, Parent nor ITD has effected any transactions in Shares
during the past 60 days, except for ____ Shares acquired by ITD pursuant to the
Offer.
Other than automatic purchases effected for the benefit of certain officers,
employees or affiliates thereof pursuant to the Company's 401(k) plan, and
Shares tendered pursuant to the Offer, to the best of Parent's knowledge, no
officer or director of the Company, Parent or ITD has effected any transaction
in Shares during the past 60 days. [All of the individual beneficial owners
whose names appear in the table set forth above (other than Mr. Pinault)
tendered all of their Shares for $22.50 per Share.] To the best of the
Company's knowledge, each such owner tendered his Shares because, in his
capacity as a shareholder of the Company, he believes accepting the Offer
maximizes the value of his investment in Shares of the Company.
According to Parent's records, since January 1, 1995, ITD and Parent have
purchased the following number of Shares at the following average price per
Share:
[to be updated]
<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 $16.38
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [ ] $22.50 $22.50 $22.50
</TABLE>
According to the Company's records, since January 1, 1995, the Company
purchased 1,600 Shares at $11.50 per Share on March 8, 1996.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following summary addresses the material U.S. federal income tax
consequences to holders of Shares who receive cash for their Shares in the
Merger. 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 Merger 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 Merger will recognize
gain or loss for federal income tax purposes equal to the difference between the
amount of cash received in exchange for the Shares 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 a 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
MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS INCLUDING THE FEDERAL ALTERNATIVE MINIMUM TAX.
PRICE RANGE OF SHARES; DIVIDENDS
The Shares [are] listed and principally traded on the NYSE under the symbol
"RXL." The Shares also [trade] on the PSE. 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 November [___], 1997). [22.50] [21.31]
</TABLE>
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. On November [___], 1997, the last full trading day prior to the
date of this Information Statement, the closing price per Share as reported on
the NYSE was $[___].
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.
CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the Company
contained in this Information Statement, including financial information, has
been furnished by the Company. Parent and ITD assume 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 ITD 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 September 30, 1997
Quarterly Report on Form 10-Q (the "Form 10-Q"), each of which is incorporated
herein by reference. More comprehensive financial information is included in the
Form 10-K and the Form 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.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
INCOME STATEMENT DATA
NINE MONTHS NINE MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
(UNAUDITED)
(DOLLARS, IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales . . . . . . . . . . . . . . . . . . $ 1,028,577 $854,023 $ 1,159,446 $ 1,120,688
Income from continuing operations before
income tax . . . . . . . . . . . . . . . . . 43,369 36,523 51,124 37,679
Income taxes provision . . . . . . . . . . . 18,432 15,824 21,728 16,579
Extraordinary charge, net of income tax
benefit of $837 . . . . . . . . . . . . . . - - - (1,325)
Net income from continuing operations . . . . 24,937 20,699 29,396 19,775
Income per Share from continuing
operations . . . . . . . . . . . . . . . . . 0.95 0.80 1.13 0.85
Dividends paid on Common Shares . . . . . . . - - - -
Average of number of common and common
equivalent Shares . . . . . . . . . . . . . 26,194 25,986 25,986,000 24,949,000
Ratio of earnings to fixed charges . . . . . 9.7 10.0 10.8 5.7
</TABLE>
<TABLE>
SELECTED BALANCE SHEET DATA
<CAPTION>
FISCAL YEAR FISCAL YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 24,190 $ 11,854 $ 14,396 $ 10,013
Accounts and notes receivable-net 197,650 158,037 156,450 138,604
Inventories . . . . . . . . . . . . . . . . . 126,888 98,524 117,657 102,239
Prepaid expenses and other current assets . . 9,657 9,637 10,423 8,344
Income taxes receivable . . . . . . . . . . . 527 - -
Deferred income taxes . . . . . . . . . . . . 3,870 3,878 3,747 3,849
Total current assets . . . . . . . . . . 363,802 282,457 302,673 263,049
Investments and noncurrent receivables . . . . 173 872 814 1,069
Fixed assets-net . . . . . . . . . . . . . . . 46,564 48,462 48,218 49,453
Other assets . . . . . . . . . . . . . . . . . 3,938 2,789 3,286 2,135
Deferred income taxes . . . . . . . . . . . . . - 1,289 - -
Goodwill, net of accumulated amortization . . . 91,023 60,812 73,947 58,953
$ 505,500 $ 396,681 $ 428,938 $ 374,659
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt . . . . . . . . . . . . . . . $ 43,500 10,950 $ 25,500 $ 8,050
Current portion of long-term debt . . . . . . 7,770 7,719 7,737 7,757
Accounts and notes payable-trade, and other 200,904 154,849 161,377 147,031
liabilities . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . 0 0 2,186 3,725
Deferred income taxes . . . . . . . . . . . . - 6 - -
Total current liabilities . . . . . . . 252,174 173,524 196,800 166,563
Long-term debt . . . . . . . . . . . . . . . . 21,986 29,716 29,582 37,219
Other long-term liabilities . . . . . . . . . . 3,458 3,660 3,476 3,363
Deferred income taxes . . . . . . . . . . . . . 2,774 2,594 2,973 1,195
Commitments and contingencies
Shareholders' equity:
Preferred stock (authorized 2,000 shares, none
issued) . . . . . . . . . . . . . . . . . . . . 0 0 0 0
Common stock . . . . . . . . . . . . . . . . . 26,675 26,286 26,314 26,258
Capital surplus . . . . . . . . . . . . . . . . 98,408 94,365 94,706 94,206
Retained earnings . . . . . . . . . . . . . . . 104,914 71,279 79,976 50,580
Treasury stock, at cost . . . . . . . . . . . . (4,889) (4,743) (4,889) (4,725)
. . . . . . . . . . . . . . . . . . . 225,108 187,187 196,107 166,319
Total shareholders' equity . . . . . . . . . .
$ 505,500 $ 396,681 $ 428,938 $ 374,659
Book value per Common Share . . . . . . . . . . $ 7.63 $ 6.48 $ 7.63 $ 6.48
</TABLE>
<TABLE>
CASH FLOW DATA
<CAPTION>
NINE MONTHS NINE MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
30, 1997 1996 1996 1995
(IN THOUSANDS,)
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . 28,953 15,926 27,011 41,763
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . (3,653) (3,418) (4,634) (5,052)
Acquisitions of businesses, net of cash acquired (25,146) (5,218) (24,490) (1,720)
Proceeds from sale of net assets . . . . . . - - - 4,050
Other investing activities . . . . . . . . . 1,169 123 (199) 761
NET CASH (USED IN) PROVIDED BY INVESTING (27,630) (8,513) (29,323) (1,961)
ACTIVITIES . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES - - -
Net borrowings (payments) under line of credit
. . . . . . . . . . . . . . . arrangements
. 18,000 2,900 15,150 8,050
Proceeds from exercise of stock options . . . 2,650 187 225 51
Redemption of 7% Convertible Subordinated
Debentures. - - - (36,780)
Acquisition of Treasury Shares . . . . . . . 0 (18) - -
Other debt payments and financing activities, net (8,471) (8,641) (8,680) (24,953)
NET CASH PROVIDED BY (USED IN) FINANCING 12,179 (5,572) 6,695 (53,632)
ACTIVITIES . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash 9,794 1,841 4,383 (13,830)
equivalents . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period. 14,396 10,013 10,013 23,843
Cash and cash equivalents at end of period . . $ 24,190 $ 11,584 $ 14,396 $ 10,013
</TABLE>
<TABLE>
SHAREHOLDERS' EQUITY DATA
<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>
FIVE YEAR SELECTED FINANCIAL DATA
The following tables set forth certain consolidated financial data of the
Company and its subsidiaries for the five fiscal years ended December 31, 1996,
which have been derived from the Company's audited financial statements, and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto of the Company appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, which is incorporated herein by
reference.
The selected financial data of the Company for the years set forth below
are not directly comparable due to acquisitions and dispositions during such
periods, including the distribution of Worldtex on November 12, 1992, the sale
of the Apparel Division on July 13, 1994, and the acquisitions of SES on
November 12, 1992, Sacks on April 12, 1993, Summers on December 17, 1993,
Utility Products Supply on August 7, 1996 and Cable & Connector Warehouse, Inc.
on November 12, 1996.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 1,159,446 $ 1,120,688 $ 1,065,543 $ 521,519 $ 359,080
Income (loss) from continuing operations
before income taxes . . . . . . $ 51,124 $ 37,679 $ 16,528 $ 11,928 $ (17,588)
Income tax provision (benefit) 21,728 16,579 7,270
5,038 (5,186)
Income (loss) from continuing operations 29,396 21,100 9,258 6,890 (12,402)
Income (loss) from discontinued operations _ __ __ (327) 1,517 7,527
Income (loss) before extraordinary charge and
Extraordinary charge(a) . . . . 0 (1,325) 0 0 0
Cumulative effect of accounting change(b) 660
Net income (loss) . . . . . . . $ 29,396 $ 19,775 $ 8,931 $ 9,067 $
Earnings per common share(c)
Income (loss) from discontinued
Income (loss) before extraordinary charge and
Extraordinary charge(a) . . 0 (.05) 0 0 0
Cumulative effect of accounting change(b) _________ 0 _________0 _____0_____ _____.03 _____0___
Net income (loss) $ 1.13 $ .80 $ .38 $ .43 $
Fully Diluted(c):
Extraordinary charge(a) (.05)
Net Income $
Total assets . . . . . . . . $ 428,938 $ 374,659 $ 414,487 $ 428,519 $ 285,309
Long-term obligations . . . $ 33,058 $ 40,582 $ 99,201 $ 129,503 $ 114,251
Cash dividends per common share $ - $ - $ $ $
0- 0- -0- -0- -0-
____________________________
(a) Loss on early extinguishment of debt.
(b) Cumulative effect of accounting change for income taxes in connection with SFAS No. 109, "Accounting for Income Taxes."
(c) Fully diluted amounts are equivalent to primary in 1996 and anti-dilutive in all years prior to 1995.
</TABLE>
CERTAIN INFORMATION CONCERNING PARENT AND ITD
Parent (formerly known as Compagnie de Distribution de Materiel Electrique)
is a societe anonyme organized under the laws of the Republic of France. Parent
is engaged principally in the distribution of electrical components and
industrial supplies. Parent is a subsidiary of Pinault-Printemps-Redoute S.A., a
societe anonyme organized under the laws of the Republic of France. Parent's
registered office is 25, rue de Clichy, 75009 Paris, France, and its telephone
number is 011 33 1 42 85 85 00.
ITD 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, the execution of the Merger Agreement and the consummation of the Offer.
ITD is a direct, wholly owned subsidiary of Parent. The mailing address of ITD
is c/o McDermott, Will & Emery, 50 Rockefeller Plaza, New York, New York 10020-
1605, Attention: Joel A. Adler, Esq.; telephone (212) 547-5579.
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 ITD and certain other information are set forth in
Exhibit A 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.
<TABLE>
REXEL S.A.
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER
ENDED 31,
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:
<TABLE>
(FRF PER U.S. DOLLAR)
<CAPTION>
PERIOD AT AVERAGE
DECEMBER RATE
31
<S> <C> <C>
1996 . . . . . . . . . . . . . . . . . . 5.244 5.114
1995 . . . . . . . . . . . . . . . . . . 4.909 4.986
</TABLE>
The noon buying rate on November [___], 1997 was FRF [5.7805]=$1.00
ITD and Parent own [_________] Shares, representing approximately [___%] of
the 26,055,290 Shares issued and outstanding at November ___, 1997.
Except as described in this Information Statement, (i) none of Parent, ITD,
nor, to the best knowledge of the Company, Parent and ITD, any of the persons
listed in Exhibit A to this Information Statement or any associate or majority-
owned subsidiary of the Company, Parent or ITD or any of the persons so listed
beneficially owns or has any right to acquire, directly or indirectly, any
Shares and (ii) none of the Company, Parent, ITD, nor, to the best knowledge of
the Company, Parent and ITD, 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
Information Statement, none of the Company, Parent, ITD nor, to the best
knowledge of the Company, Parent and ITD, any of the persons listed in Exhibit A
to this Information Statement, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guaranties against loss, guaranties of profits, division of profits or
losses or the giving or withholding of proxies. Except as set forth in this
Information Statement, since January 1, 1995, none of the Company, Parent, ITD
nor, to the best knowledge of the Company, Parent and ITD, any of the persons
listed on Exhibit A 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 Merger. Except as set forth in this Information Statement,
since January 1, 1995, there have been no contacts, negotiations or transactions
between Parent or ITD or any of their subsidiaries or, to the best knowledge of
Parent and ITD, any of the persons listed in Exhibit A to this Information
Statement, 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 ITD, 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 may be inspected 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 ITD may also be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005. The
Commission also maintains an Internet web site at http://www.sec.gov that
contains reports, proxy statements and other information filed with the
Commission.
FINANCING OF THE MERGER
The total amount of funds required by Parent and ITD to consummate the Merger
and to pay related fees and expenses is estimated to be approximately $[___]
million. Parent shall use funds from its or its affiliate's existing undrawn
credit facilities granted to Parent, ITD 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 Merger.
Parent intends to refinance a portion of the indebtedness related to the
Offer and Merger from proceeds of a public offering of shares through the French
capital markets to be commenced, market conditions permitting, prior to the
meeting at which shareholders will vote on the Merger. 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.
EFFECT OF THE MERGER ON THE MARKET FOR THE SHARES; THE NEW YORK STOCK EXCHANGE,
THE PACIFIC STOCK EXCHANGE AND EXCHANGE ACT REGISTRATION
[The Company has requested both the NYSE and the PSE to discontinue the
listing of the Shares on those exchanges.]
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, it is
possible that, prior to the vote on the Merger, 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 is
terminated, the Shares will 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 once
the requirements for termination of registration are met. Such requirements
will be met no later than the Effective Time of the Merger.
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
General. Neither the Company, ITD 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 consummation of the Merger
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 consummation of the
Merger. Should any such approval or other action be required, it is ITD's
present intention to seek such approval or action. ITD does not currently
intend, however, to delay vote on the Merger pending the outcome of any such
action or the receipt of any such approval. 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.
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
mergers and consolidations) 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 Shares 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. The Company, ITD and Parent
do not know whether any of these laws will, by their terms, apply to the Merger
and has not complied with any such laws. Should any person seek to apply any
state takeover law, the Company, ITD 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 Merger, and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Merger, the Company, ITD or Parent might be required to file
certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, there might be a delay in consummating
the Merger.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, 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 (the "Antitrust Division") and the FTC and certain waiting
period requirements have been satisfied. The consummation of the Merger,
however, is not subject to such requirements because ITD 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 and the applicable waiting period
requirements were satisfied.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Merger, 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 Merger or seeking the divestiture of Shares
purchased by ITD or the divestiture of substantial assets of ITD, 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 the
Company, ITD and Parent relating to the businesses in which Parent and the
Company and their respective affiliates are engaged, the Company, ITD and Parent
believe that the Merger will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to the Merger on antitrust grounds will not
be made or, if such a challenge is made, what the result would be.
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 the action on behalf of himself and allegedly on behalf of all
others similarly situated. The defendants are Parent, ITD, 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 Public Shareholders, that they are not exercising
independent business judgment and have acted and are acting to the detriment of
the 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 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 have not seriously considered other potential
purchasers of the Company or its stock in a manner to obtain the highest
possible price for the 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, an owner of Shares. Plaintiff brought the action individually
and allegedly on behalf of all shareholders of the Company other than
defendants. The defendants are Parent, ITD 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/ITD 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 an
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 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 2, 1997. See Deital v. Chareyre et al. and Shave v. Chareyre et al.
discussed above.
Settlement. 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.
FEES AND EXPENSES
Except as set forth below, neither the Company, ITD nor Parent will pay any
fees or commissions to any broker, dealer or other person in connection with the
Merger.
J.P. Morgan is acting as exclusive financial advisor to ITD in connection
with the Merger. As compensation for its services, J.P. Morgan has received a
fee of $1,650,000. 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 IBJ Schroder Bank & Trust Company as the Paying Agent in
connection with the Merger.
Parent will pay the Paying Agent reasonable and customary compensation for
its services in connection with the Merger, plus reimbursement for out-of-pocket
expenses, and will indemnify the Paying Agent 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 and the Merger:
<TABLE>
<CAPTION>
<S> <C>
EXPENSES TO BE PAID BY THE COMPANY, ITD AND PARENT:
Fees and Expenses of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . $2,900,000
Legal Fees and expenses of Plaintiffs' Attorneys . . . . . . . . . . . . . . . . . . 1,250,000
Other Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,000
Printing and Mailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,850
Information Agent Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Depositary Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,650
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,770,000
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and schedules included in the
Company's annual report on Form 10-K, incorporated by reference in this
Information Statement, have been audited by Coopers & Lybrand L.L.P.,
independent public accountants, as stated in their reports with respect
thereto. In May 1997, the Company terminated Coopers & Lybrand L.L.P. as
its independent public accountants and engaged Deloitte & Touche LLP. as its
independent public accountants to audit the Company's financial statements
for the year ended December 31, 1997. It is not expected that
representatives of Coopers & Lybrand L.L.P. will be present at the Special
Meeting, and, therefore, they will not have the opportunity to make a
statement or to be available to answer questions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by the Company (File no. 1-5731)
or Parent and ITD are incorporated by reference in this Information Statement:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996:
2. The Company's Report on Form 8-K dated May 20, 1997 and the Company's
Quarterly Reports on Form 10-Q for the periods ended March 31, June 30 and
September 30, 1997, except that the information set forth under "Part II - Other
Information" shall not be deemed filed as part of this Information Statement.
All documents and reports filed by the Company with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Information Statement and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Information Statement and to be a
part hereof from the respective dates of filing of such documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Information Statement to the extent that a statement
contained herein (or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Information
Statement.
THIS INFORMATION STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS
TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS INFORMATION STATEMENT IS DELIVERED,
ON WRITTEN ON ORAL REQUESTS TO REXEL, INC., 150 ALHAMBRA CIRCLE, CORAL GABLES,
FLORIDA 33134, ATTENTION: JON FULLERTON, ESQ., TELEPHONE: (305) 446-8000. IN
ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS
MUST BE RECEIVED NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, information statements and
other information with the SEC. Such reports, information statements and other
information can be inspected and copied at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and may be inspected at the regional offices of the SEC located at 7 World
Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400,
Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. In addition, such reports, information
statements and other information can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005, and are available from the EDGAR filings
obtained through the SEC internet website (http://www.sec.gov.).
This Information Statement includes information required by the SEC to be
disclosed pursuant to Rule 13E-3 under the Exchange Act, which governs so-called
"going private" transactions by certain issuers or their affiliates. In
accordance with that rule, the Company, Parent and ITD have filed with the SEC,
under the Exchange Act, a Schedule 13E-3 with respect to the Merger. This
Information Statement does not contain all of the information set forth in the
Schedule 13E-3, parts of which are omitted in accordance with the regulations of
the SEC. The Schedule 13E-3, and any amendments thereto, including exhibits
filed as a part thereof, will be available for inspection and copying at the
offices of the SEC as set forth above.
MISCELLANEOUS
Where information contained in this Information Statement is particularly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person or contained in filings made by such
person with the SEC.
November 28, 1997
EXHIBIT A
LIST OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PARENT, ITD
AND S.C.A. FINANCIERE PINAULT
1. The Parent,ITD and S.C.A. Financiere Pinault. The name, business address,
present principal occupation or employment and five-year employment history of
each director and executive officer of the Parent, ITD and S.C.A. Financiere
Pinault 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
<S> <C>
PARENT
Bernard Clerc (75) . . . . . . . Honorary Chairman of Parent since 1990. Director since 1971.
Chairman and Chief Executive Officer of Parent since 1973 until
1990. [Sold [xx] Shares pursuant to the Offer.]
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. Chairman of the Board and Chief
Executive Officer of Parent (1990 to 1995). [Sold [xx] Shares
pursuant to the Offer.]
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
(trader of non-ferrous metals) 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. (extraction and
transformation of lime) from June 1993 to September 1996. Director
of European Operations of Michelin, S.A. (tire production) 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 (food products) 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 (35)
. Director of Parent since June 8, 1993. See address below.
Francois Pinault (61) . . . . . . Director of Parent since March 28, 1990. Managing General Partner
of S.C.A. Financi re Pinault for more than five years. See address
below.
ITD
Alain Redheuil . . . . . . Director and President
Pierre Chareyre . . . . . . Secretary
S.C.A. FINANCIERE PINAULT
5, Boulevard de Latour Maubourg
75007 Paris
Francois Pinault (61) . . . Managing General Partner of Financiere Pinault for more than five
4, rue de Tournon years.
75006 Paris
Pinault Trustee (S.A.R.L.) . General Partner of Financiere Pinault for more than five years.
5, boulevard de la Tour
Maubourg
75007 Paris
</TABLE>
2. The Company. The name, business address, present principal
occupation or employment and five-year employment history of each director
and executive officer of the Company is set forth below. Unless otherwise
indicated, each occupation set forth oppposite such director's or executive
officer's name refers to employment with the Company. 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 Company nor any director or executive officer
of the Company 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 proceeeding, was or is
subject to a judgment, decree or final order enjoining furture 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>
<S> <C>
THE COMPANY
Pierre Chareyre . . . . . . Director. See above.
*John B. Fraser (62) . . . Director. Pesident, Geneva Financial Corp. (investment banking)
(July 1994 to present); Managing Director, Citibank N.A.
(investment banking) (June 1987 to June 1994); director of
Worldtex, Inc. (covered yarn manufacturing).
Gilles Guinchard (49) . . . Director. President and Chief Executive Officer of the Company
(address c/o Rexel, Inc.) (April 1997 to present); President of the North Eastern division
of CDME France and General Manager of Facen (electrical parts and
supply distribution) (1995 to April 1997); Director and General
Manager of British Plasterboard in France (gypsum industry)
(1992-1996).
*Eric Lomas (50) . . . . . Chairman of the Board of the Company. Director. President of The
Hill Thompson Group Ltd. (investment banking) (1989 to present);
co-head of investment banking, Gruntal & Co. (investment banking)
(1985 to 1989).
Alain Redheuil . . . . . . Director. See above
*R. Gary Gentles (48) . . . Director. President, Blue Circle America (cement production)
(January 1995 to present); Executive Vice President and
President, Cement Group of Lafarge Corporation (cement
production) (November 1992 to 1994).
- ----------
* United States citizen; address c/o Rexel, Inc.
*Austin List (74) . . . . . Director. Vice Chairman and director of Strahl & Pitsch, Inc.
(refiner of natural 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).
*Gerald E. Morris (69) . . Director. President, Intalite International N.V. (manufacturing
and marketing of commercial ceilings) (1968 to present); Chairman
of the Board of Alumet Building Products Inc. (manufacturers of
building products) (1995 to present); President, Morris Asset
Management (investment banking) (1988 to December 1995).
Nicolas Sokolow (47) . . . Director. Partner, Sokolow, Dunaud, Mercadier & Carreras (law
firm) (1994 to present); Partner, Coudert Brothers (law firm)
(1981 to 1994).
Serge Weinberg . . . . . . Director. Vice Chairman of the Board; see above.
*Jon O. Fullerton . Vice President, General Counsel and Secretary.
*Allan M. Gonopolsky Vice President and Comptroller.
*Robert M. Merson . Chief Operating Officer since 1997; Senior Vice President since
1994; President and CEO of Southern Electric Supply Company, Inc.
*William J. Jett Vice President, Corporate Development. Vice President, Eastern
Region since 1997.
*Steve Barker Vice President, Marketing and Corporate Communications.
- ----------
* United States citizen; address c/o Rexel, Inc.
</TABLE>
3. Other information.
ARTEMIS S.A.
5, Boulevard de Latour Maubourg
75007 France
SOCIETE ANONYME PROFESSIONELLE DE DISTRIBUTION
102, rue de Provence
75009 Paris
PINAULT-PRINTEMPS-REDOUTE S.A.
18, place Henri Bergson
Paris 8e
LOGO
EXHIBIT B
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
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,
LOGO
EXHIBIT C
NEW YORK BUSINESS 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.
(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 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 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).
EXHIBIT D
AGREEMENT AND PLAN OF MERGER
AMONG
REXEL S.A.
INTERNATIONAL TECHNICAL DISTRIBUTORS, INC.
AND
REXEL, INC.
OCTOBER 17, 1997
TABLE OF CONTENTS
PAGE
ARTICLE ITHE 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-3
SECTION 2.04. Restated Certificate of Incorporation; By-laws . . . .VI-3
SECTION 2.05. Directors and Officers . . . . . . . . . . . . . . . . VI-3
SECTION 2.06. Conversion of Securities . . . . . . . . . . . . . . . VI-3
SECTION 2.07. Options and Warrants . . . . . . . . . . . . . . . . . VI-4
SECTION 2.08. Dissenting Shares . . . . . . . . . . . . . . . . . . . VI-4
SECTION 2.09. Surrender of Shares; Stock Transfer Books . . . . . . . VI-4
SECTION 2.10. Short-form Merger . . . . . . . . . . . . . . . . . . . VI-5
SECTION 2.11. Special Purpose Subsidiary . . . . . . . . . . . . . . VI-5
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-6
SECTION 3.05. No Conflict; Required Filings and Consents . . . . . .VI-6
SECTION 3.06. Compliance . . . . . . . . . . . . . . . . . . . . . . VI-7
SECTION 3.07. SEC Filings; Financial Statements . . . . . . . . . . . VI-7
SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy
Statement . . . . . . . . . . . . . . . . . . . . . . . VI-8
SECTION 3.09. Brokers . . . . . . . . . . . . . . . . . . . . . . . . VI-8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . VI-8
SECTION 4.01. Corporate Organization . . . . . . . . . . . . . . . . VI-8
SECTION 4.02. Authority Relative to this Agreement . . . . . . . . . VI-8
SECTION 4.03. No Conflict; Required Filings and Consents . . . . . .VI-8
SECTION 4.04. Offer Documents; Proxy Statement . . . . . . . . . . . VI-9
SECTION 4.05. Brokers . . . . . . . . . . . . . . . . . . . . . . . . VI-9
SECTION 4.06. Ownership of Merger Subsidiary . . . . . . . . . . . . VI-9
SECTION 4.07. Financing . . . . . . . . . . . . . . . . . . . . . . . VI-9
SECTION 4.08. Information Known by Parent or Certain Subsidiaries . .VI-9
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .VI-10
SECTION 5.01. Conduct of the Business Pending the Merger . . . . . .VI-10
SECTION 5.02. Shareholders' Meeting; Voting of Shares . . . . . . . . VI-10
SECTION 5.03. Proxy Statement . . . . . . . . . . . . . . . . . . . . VI-10
SECTION 5.04. Access to Information; Confidentiality . . . . . . . . VI-10
SECTION 5.05. Directors' and Officers' Indemnification and Insurance VI-10
SECTION 5.06. Notification of Certain Matters . . . . . . . . . . . . VI-11
SECTION 5.07. Further Action; Best Efforts . . . . . . . . . . . . . VI-11
SECTION 5.08. Public Announcements . . . . . . . . . . . . . . . . . VI-11
SECTION 5.09. Financing . . . . . . . . . . . . . . . . . . . . . . . VI-12
ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . VI-12
SECTION 6.01. Conditions to the Merger . . . . . . . . . . . . . . . VI-12
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . .VI-12
SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . VI-12
SECTION 7.02. Effect of Termination . . . . . . . . . . . . . . . . . VI-13
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . VI-13
SECTION 7.04. Waiver . . . . . . . . . . . . . . . . . . . . . . . . VI-13
ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . VI-13
SECTION 8.01. Non-Survival of Representations, Warranties and
Agreements. . . . . . . . . . . . . . . . . . . . . . . VI-13
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . VI-13
SECTION 8.03. Certain Definitions . . . . . . . . . . . . . . . . . . VI-14
SECTION 8.04. Severability . . . . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.05. Entire Agreement; Assignment . . . . . . . . . . . . . VI-15
SECTION 8.06. Parties in Interest . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.07. Specific Performance . . . . . . . . . . . . . . . . . VI-15
SECTION 8.08. Fees and Expenses . . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.09. Governing Law . . . . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.10. Headings . . . . . . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.11. Counterparts . . . . . . . . . . . . . . . . . . . . . VI-15
SECTION 8.12. Consent to Jurisdiction; Appointment of Agent for
Service of Process . . . . . . . . . . . . . . . . . . .VI-15
ANNEX A: Conditions to Offer . . . . . . . . . . . . . . . . . . . . . .VI-19
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 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 Information Statement (the "Information
Statement") and forms of the related letter of transmittal and any related
summary advertisement (the Schedule 14D-1, the Schedule 13E-3, the Information
Statement 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 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 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 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 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 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").
(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 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
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 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 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 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.
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 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 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 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 congtrolled by the
Company, the Surviving 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.
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.
