BURNUP & SIMS INC.
The undersigned hereby appoints
^ and , or either of them, each
with the power to
appoint his substitute, proxies to represent the undersigned
and to vote as
designated below all of the shares of Common Stock of Burnup &
Sims Inc. (the
"Company") held of record by the undersigned on
^, 1994 at the Annual and Special Meeting of Stockholders
(the "Meeting")
to be held on ^ March , 1994 and at any adjournment
or postponement
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
1. ELECTION OF SAMUEL C. HATHORN, JR. AS DIRECTOR.
/__/ FOR the nominee listed above
/__/ WITHHOLD AUTHORITY to vote for the nominee listed
above
^ 2. TO APPROVE THE TERMS OF AN AGREEMENT DATED AS OF
OCTOBER 15, 1993,
AS AMENDED ^, PURSUANT TO WHICH, AMONG OTHER THINGS, (i)
THE COMPANY WILL
ACQUIRE ALL OF THE OUTSTANDING CAPITAL STOCK OF CHURCH &
TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC. IN EXCHANGE FOR 10,250,000
SHARES OF COMMON
STOCK OF THE COMPANY AND (ii) IMMEDIATELY THEREAFTER,
THE COMPANY WILL
REDEEM 3,153,847 SHARES OF COMMON STOCK OF THE COMPANY
OWNED BY NATIONAL
BEVERAGE CORP. ("NBC") IN CONSIDERATION FOR THE
CANCELLATION OF CERTAIN
INDEBTEDNESS OWED BY NBC TO THE COMPANY.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
^ 3. TO APPROVE ^ AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF
INCORPORATION ^(THE "CERTIFICATE") CHANGING THE NAME OF THE
COMPANY TO MASTEC
INC.
<PAGE>
/__/ FOR /__/ AGAINST /__/
ABSTAIN
^ 4. TO APPROVE AN AMENDMENT TO THE CERTIFICATE
INCREASING THE TOTAL
NUMBER OF SHARES OF COMMON STOCK WHICH THE COMPANY IS
AUTHORIZED TO ISSUE
FROM 25,000,000 TO 50,000,000.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
^ 5. TO APPROVE AN AMENDMENT TO THE CERTIFICATE TO
ELIMINATE ALL
DESIGNATIONS, POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND
RESTRICTIONS PRESCRIBED IN THE CERTIFICATE RELATING TO THE
5,000,000 SHARES
OF PREFERRED STOCK AUTHORIZED BY THE CERTIFICATE AND WHICH
MAY IN THE FUTURE
BE ISSUED BY THE COMPANY.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
6. TO APPROVE AN AMENDMENT TO THE CERTIFICATE TO ADOPT
THE PROVISIONS
OF SECTION 102(b)(7) OF THE DELAWARE GENERAL CORPORATION
LAW ("DGCL")
RELATING TO THE LIABILITY OF DIRECTORS.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
7. TO APPROVE AN AMENDMENT TO THE CERTIFICATE TO
BROADEN THE CORPORATE
POWERS OF THE COMPANY TO MAXIMUM EXTENT PERMITTED BY THE
DGCL AND MAKE
CERTAIN OTHER CLARIFICATIONS TO THE CERTIFICATE.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
8. TO APPROVE THE COMPANY'S 1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE
DIRECTORS.
<PAGE>
/__/ FOR /__/ AGAINST /__/
ABSTAIN
9. TO APPROVE THE COMPANY'S 1994 STOCK INCENTIVE PLAN.
/__/ FOR /__/ AGAINST /__/
ABSTAIN
AS A CONDITION TO THE CONSUMMATION OF THE ACQUISITION,
THE STOCKHOLDERS
OF THE COMPANY ARE REQUIRED TO HAVE APPROVED EACH OF THE
FOREGOING AMENDMENTS
TO THE CERTIFICATE, PROPOSED BY THE STOCKHOLDERS OF CT AND
CTF. IF EACH OF
THE PROPOSED AMENDMENTS TO THE CERTIFICATE ARE NOT APPROVED
BY THE REQUISITE
NUMBER OF STOCKHOLDER VOTES, THE ACQUISITION MAY NOT BE
EFFECTED EVEN IF THE
TERMS OF THE ACQUISITION AGREEMENT ARE APPROVED BY THE
STOCKHOLDERS OF THE
COMPANY. ADDITIONALLY, THE PROPOSALS TO (i) APPROVE THE
AMENDMENTS TO THE
COMPANY'S CERTIFICATE, (ii) APPROVE THE COMPANY'S 1994 STOCK
OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS AND (iii) APPROVE THE COMPANY'S 1994
STOCK INCENTIVE
PLAN ARE CONDITIONED UPON THE APPROVAL OF THE TERMS OF
THE ACQUISITION
AGREEMENT. ACCORDINGLY, IF THE ACQUISITION AGREEMENT IS NOT
APPROVED, THESE
PROPOSALS, EVEN IF APPROVED BY THE STOCKHOLDERS, WILL NOT BE
EFFECTED.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY
WILL BE VOTED, "FOR" PROPOSALS 1 THROUGH ^ 9, AND WILL
BE VOTED AT THE
DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE
THE MEETING.
Dated
___________________________, 199^
<PAGE>
___________________________________________
Signature
_________________________________________^
Signature if held jointly
Please sign exactly as
name appears
opposite. When shares are
held by joint
tenants, both should sign.
When signing
as attorney, executor,
administrator,
trustee or guardian,
please give full
title as such. If a
corporation, please
sign in full corporate
name by President
or other authorized
officer. If a
partnership, please sign
in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING ENCLOSED ENVELOPE^
<PAGE>
^
NOTICE OF ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS - BURNUP
& SIMS INC.
TIME: _________ [a.m./p.m.] (___________)
DATE: February ^, 1994
PLACE: _________________________________
_________________________________
At the Annual and Special Meeting of Stockholders
of Burnup &
Sims Inc. (the "Company"), and any adjournments or
postponements thereof
(the "Meeting"), the following proposals are on the agenda
for action by
the stockholders:
. To elect one director to serve as a Class II director.
.To approve the terms of an Agreement, dated as of October 15,
1993^, by and
among the Company, and the stockholders of Church & Tower,
Inc., a Florida
corporation ("CT"), and Church & Tower of Florida, Inc., a
Florida corporation
("CTF"), as amended ^, pursuant to which, among other things,
(i) the Company
will acquire (the "Acquisition") all of the issued and
outstanding capital stock
of CT and CTF in exchange for 10,250,000 shares of the
Company's Common Stock,
par value $.10 per share ("Common Stock") ^ and (ii) immediately
thereafter, the
Company will redeem 3,153,847 shares of Common Stock owned by
National Beverage
Corp. ("NBC") in consideration for the cancellation of certain
indebtedness owed
by NBC to the Company.
.To approve ^ an amendment to the Company's Certificate of
Incorporation (the
"Certificate") changing the name of the Company to MasTec Inc.
.To approve ^ an amendment to the Certificate increasing the
total number of
shares of Common Stock which the Company is authorized to issue
from 25,000,000
to 50,000,000.
<PAGE>
.To approve an amendment to the Certificate to eliminate all
designations,
powers, preferences, rights, qualifications, limitations
and restrictions
prescribed in the Certificate relating to the 5,000,000
shares of preferred
stock authorized by the Certificate and which may in the future
be issued by the
Company.
.To approve an amendment to the Certificate to adopt the
provisions of Section
102(b)(7) of the Delaware General Corporation Law ("DGCL")
relating to the
liability of directors.
.To approve an amendment to the Certificate to broaden the
corporate powers of
the Company to the maximum extent permitted by the DGCL and
make certain other
clarifications to the Certificate.
.To approve the Company's ^ 1994 Stock Option Plan for
Non-Employee Directors.
.To approve the Company's 1994 Stock Incentive Plan.
.To transact such other business as may properly come before the
Meeting.
Upon consummation of the Acquisition and the transactions
contemplated thereby,
the former stockholders of CT and CTF will own approximately
65% of the issued
and outstanding shares of Common Stock of the Company.
Accordingly, to the
extent they act in concert, the former stockholders of CT and
CTF will have the
ability to control the affairs of the Company and control the
election of the
Company's directors regardless of how the other stockholders may
vote.
Furthermore, such persons will have the ability to control
other actions
requiring stockholder approval, including certain fundamental
corporate
transactions such as a merger or sale of substantially all of
the assets of
the Company, regardless of how the other stockholder may vote.
This ability
may be enhanced by the adoption of the proposed amendments to
the
Certificate, including those which would (i) increase the number
of authorized shares of Common Stock from twenty-five million
(25,000,000) to
fifty million (50,000,000) and (ii) eliminate all
designations, powers,
<PAGE>
preferences, rights, qualifications, limitations and
restrictions in the
Certificate relating to the Company's preferred stock.
These proposed amendments to the Certificate may be
deemed to
have the effect of making more difficult the acquisition of
control of the
Company after the consummation of the Acquisition by means of
a hostile
tender offer, open market purchases, a proxy contest or
otherwise. On
the one hand, these amendments may be seen as encouraging
persons seeking
to acquire control of the Company to initiate such an
acquisition
through arm's length negotiations with the Company; on the
other hand,
the amendments may have the effect of discouraging a third
party from
making a tender offer or otherwise attempting to obtain
control of the
Company, even though such an attempt may be economically
beneficial to the
Company and its stockholders. Furthermore, the proposed
amendments to the
Certificate and the fact that the CT and CTF stockholders
will own
approximately 65% of the Common Stock after the consummation
of the
Acquisition and the transactions contemplated thereby may
have a negative
effect on the market price and liquidity of the Common Stock.
Only holders of record of Common Stock of the Company at
the close of
business on ^, 1994 are entitled to notice of, and to vote
at, the Meeting.
A complete list of the stockholders entitled to vote
at the Meeting
will be open to examination by any stockholder, for any
proper purpose,
during ordinary business hours for a period of ten days prior
to the
Meeting at the corporate offices of the Company at One North
University
Drive, Fort Lauderdale, Florida 33324. This list will
also be kept
at the Meeting and may be inspected by any stockholder
present.
A Proxy Statement, setting forth certain additional
information, and
the Company's Annual Report on Form 10-K for the fiscal year
ended April 30,
1933 ^ and Quarterly Report on Form 10-Q for the fiscal
quarter ended ^
October 31, 1993, accompany this Notice of Annual and
Special Meeting.
^
All stockholders are cordially invited to attend
the Meeting in
person. Please complete and return the proxy in the
enclosed envelope
addressed to the Company, since a majority of the
outstanding shares
entitled to vote at the Meeting must be represented at the
Meeting in
order to transact business. Stockholders have the power to
revoke any such
<PAGE>
proxy at any time before it is voted and the giving of such
proxy will not
affect the right to vote in person if the Meeting is
attended. Your vote is
important.
By Order of the Board
of Directors,
Nick A. Caporella
Chairman of the Board
of Directors
President and Chief
Executive Officer
__________________, ^ 1994
Fort Lauderdale, Florida
<PAGE>
ANNUAL AND SPECIAL MEETING OF
STOCKHOLDERS
OF
BURNUP & SIMS INC.
____________________
PROXY STATEMENT
___________________
This Proxy Statement is furnished in connection with the
solicitation by the
Board of Directors (the "Board of Directors") of Burnup & Sims
Inc., a Delaware
corporation ("Burnup & Sims" or the "Company"), of proxies from
the holders of
the Company's Common Stock, par value $.10 per share (the "Common
Stock"), for
use at the 1993 Annual and Special Meeting of Stockholders of the
Company to be
held at the ________________, ______________ on ^, 1994 at
____ [a.m./p.m.],
______________ time and any adjournments or postponements
thereof (the
"Meeting").
The approximate date on which this Proxy Statement and the
enclosed form of
proxy are first being sent to stockholders is ____________, ^
1994.
Stockholders should review the information provided herein in
conjunction
with the Annual Report on Form 10-K of the Company for the fiscal
year ended
April 30, 1993 (the "Annual Report"), and the Quarterly
Report on Form 10-Q of the Company for the ^ six months
ended ^ October 31, 1993 which
accompany this Proxy Statement.
INFORMATION CONCERNING PROXY
The giving of a proxy does not preclude the right
to vote in person should any
stockholder giving the proxy so desire. The mailing
address of the principal executive
offices of the Company is P.O. Box 15070, Fort Lauderdale,
Florida 33318. A stockholder who
gives a proxy may revoke it at any time before it is
exercised, either in person at the
Meeting or by filing with Ms. Margaret M. Madden, Vice
President and Corporate Secretary of
the Company, at the address of the executive offices set
forth above, a written revocation
or a duly executed proxy bearing a later date than the date
of the proxy being revoked.
The cost of preparing, assembling and mailing this
Proxy Statement, the Notice of
Annual and Special Meeting of Stockholders and the
enclosed proxy will be borne by the
1
<PAGE>
Company. In addition to the use of mail, officers,
directors and employees of the Company
may solicit proxies personally and by telephone. The
Company's officers, directors and
employees will receive no compensation for soliciting
proxies other than their regular
salaries. The Company has ^ retained Hill & Knowlton to
assist in soliciting proxies for
use at the Meeting ^ for an aggregate fee of $8,000
plus reimbursement of reasonable
out-of-pocket expenses. The Company may request banks,
brokers and other custodians,
nominees and fiduciaries to forward copies of the proxy
material to the beneficial owners on
whose behalf they are holding shares of Common Stock and
to request authority for the
execution of proxies. The Company may reimburse such
persons for their expenses in so
doing.
PURPOSES OF THE MEETING
At the Meeting, the Company's stockholders will
consider and vote upon the following
matters:
1. The election of one member to the Company's
Board of Directors to serve as a
Class II director.
2. The approval of the terms of an Agreement, dated
as of October 15, 1993 ^ by and
among the Company and the stockholders of Church &
Tower, Inc., a Florida corporation
("CT"), and Church & Tower of Florida, Inc., a Florida
corporation ("CTF"), as amended ^(the
"Acquisition Agreement"), pursuant to which, among other
things, (i) the Company will
acquire all of the issued and outstanding capital stock of CT
and CTF (collectively, the "CT
and CTF Shares") in exchange for 10,250,000 shares of
Common Stock (the "Burnup Shares"),
and (ii) immediately thereafter, the Company will redeem
3,153,847 shares of Common Stock
owed by National Beverage Corp. ("NBC") in consideration
for the cancellation of certain
indebtedness owed by NBC to the Company. The acquisition
of CT and CTF by the Company
pursuant to the terms of the Acquisition Agreement is
sometimes herein referred to as the
"Acquisition".^
3. The approval of an amendment to the Company's
Certificate of Incorporation (the
"Certificate") changing the name of the Company to MasTec
Inc.
2
<PAGE>
4. The approval of an amendment to the Certificate
increasing the total number of
shares of Common Stock which the Company is authorized
to issue from 25,000,000 to
50,000,000.
5. The approval of an amendment to the Certificate
to eliminate all designations,
powers, preferences, rights, qualifications, limitations and
restrictions prescribed in the
Certificate relating to the 5,000,000 shares of
preferred stock authorized by the
Certificate and which may in the future be issued by the
Company.
6. The approval of an amendment to the
Certificate to adopt the provisions of
Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL") relating to the
liability of directors.
7. The approval of an amendment to the Certificate
to broaden the corporate powers
of the Company to the maximum extent permitted by the
DGCL and make certain other
clarifications to the Certificate.
8. The approval of the Company's ^ 1994 Stock
Option Plan for Non-Employee
Directors.
9. The approval of the Company's ^ 1994 Stock
Incentive Plan.
10. The transaction of such other business as may
properly come before the Meeting
and any adjournments or postponements thereof.
As a condition to the consummation of the Acquisition,
the stockholders of the Company
are required to have approved ^ each of the foregoing
amendments to ^ the Certificate,
proposed by the stockholders of CT and CTF. If each of
the proposed amendments to the
Certificate are not approved by the requisite number of
stockholder votes, the Acquisition
may not be effected even if the terms of the Acquisition
Agreement are approved by the
3
<PAGE>
stockholders of the Company. Additionally, the proposals to
(i) approve such amendments to
the Company's Certificate, (ii) approve the Company's ^
1994 Stock Option Plan for
Non-Employee Directors and (iii) approve the Company's ^
1994 Stock Incentive Plan are
conditioned upon the approval of the terms of the
Acquisition Agreement. Accordingly, if
the Acquisition Agreement is not approved, these
proposals, even if approved by the
stockholders, will not be effected.
Unless a stockholder otherwise specifies therein,
all shares represented by valid
proxies will be voted FOR the election as director of the
Company of the person named under
the caption "Election of Director," FOR the adoption of the
Acquisition Agreement, FOR each
of the amendments to the Company's Certificate, FOR approval
of the Company's ^ 1994 Stock
Option Plan for Non-Employee Directors and FOR approval
of the Company's ^ 1994 Stock
Incentive Plan, and will be voted at the discretion of the
proxies on any other matter that
may properly come before the Meeting. Where a stockholder
has specified how a proxy is to
be voted, it will be voted accordingly. The Board of
Directors does not know of any action
to be taken at the Meeting other than the foregoing.
4
<PAGE>
SUMMARY OF THE ACQUISITION AND RELATED
MATTERS
The following is a summary of certain information
contained in this Proxy Statement
concerning the Acquisition and matters related thereto.
This summary is provided for your
convenience, should not be considered complete, and is
qualified in its entirety by the
detailed discussions contained elsewhere in this Proxy
Statement, the Financial Statements
and Notes thereto included herein or incorporated by
reference herein and by reference to
the Acquisition Agreement, ^ a copy of which is attached
hereto as Appendix A. Certain
terms which are used in this Proxy Statement are defined
in the summary. THE COMPANY'S
STOCKHOLDERS ARE URGED TO READ THE ENTIRE PROXY
STATEMENT CAREFULLY, INCLUDING ALL
APPENDICES HERETO AND ALL DOCUMENTS INCORPORATED HEREIN BY
REFERENCE.
The Company. The Company is a corporation incorporated
under the laws of the state of
Delaware with its principal offices located at One North
University Drive, Fort Lauderdale,
Florida 33324. Where appropriate, the term the Company shall
mean and include Burnup & Sims
Inc. and its subsidiaries. The Company's telephone number is
(305) 587-4512.
The Company was founded in 1929 and currently provides
a wide range of cable design,
installation and maintenance services to telephone, CATV and
utility services throughout the
United States. These services are rendered through
various subsidiary companies located
principally in California, Florida, Georgia, Mississippi,
North Carolina and Texas. In
addition, the Company is one of ^ three major manufacturers
of power supplies for the CATV
industry, operates a motion picture theater chain in the
southeastern U.S. and also provides
commercial printing and graphic arts services.
CT and CTF. CT and CTF provide a broad range of
services to the telecommunications
industry and are engaged in ^ providing construction ^ and
design ^ services to government
and industry, in South Florida. CTF is principally
involved in providing engineering,
construction and maintenance services to local utility
companies under master contracts. CT
is a subcontractor of CTF and engages in selected
construction projects in the public and
private sectors. CT and CTF are sometimes collectively
referred to herein as the "CT
Group." See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT WITH
CHURCH & TOWER, INC. AND CHURCH
& TOWER OF FLORIDA, INC. - Background on CT and CTF."
5
<PAGE>
The Proposed Acquisition. Pursuant to the terms of
the Acquisition Agreement, the
Company will acquire the CT and CTF Shares in exchange for
10,250,000 shares of Common Stock
issued to the present stockholders of CT and CTF. As a
result of the Acquisition, CT and
CTF will become wholly-owned subsidiaries of the Company.
The Acquisition will become
effective on the business day immediately following
receipt of stockholder approval and
satisfaction or waiver of all other conditions set forth in
the Acquisition Agreement (the
"Closing Date" or the "Closing"). See "PROPOSAL TO
APPROVE ACQUISITION AGREEMENT WITH
CHURCH & TOWER, INC. AND CHURCH & TOWER OF FLORIDA, INC -
Terms of Acquisition Agreement."
Change of Control. As a result of transactions
contemplated by and in connection with
the Acquisition, the present stockholders of CT and CTF
will ^ own approximately ^ 65% of
the Common Stock outstanding immediately after the
Acquisition and ^ the transactions
contemplated thereby. See "MANAGEMENT-Proposed Directors
and Executive Officers". To the
extent such persons act in concert, they will be controlling
stockholders of the Company and
will have the ability to control the election of the
Company's directors and certain
fundamental corporate transactions regardless of how the
other stockholders may vote. See
"PROPOSAL TO APPROVE ACQUISITION AGREEMENT WITH CHURCH &
TOWER, INC. AND CHURCH & TOWER OF
FLORIDA, INC. - Certain Effects of the Acquisition - Change
of Control".
Requirements for Stockholder Approval. The ^ listing
requirements of The National
Association of Securities Dealers Automated Quotation System
("NASDAQ") require stockholder
approval of any ^ transaction, such as the Acquisition, in
which the issuer proposes to
issue new shares of a listed class of securities constituting
20% or more of the outstanding
shares of such class prior to the date of issuance. The
Burnup Shares will constitute ^
approximately 65% of the outstanding Common Stock following
consummation of the Acquisition
and the transactions contemplated thereby.
Accordingly, it is a condition to the
consummation of the Acquisition that holders of a majority
of the outstanding Common Stock
approve the terms of the Acquisition Agreement. The terms of
the Acquisition Agreement were
reviewed and approved by the ^ Special Transaction
Committee of the Board of Directors of
the Company (the "Special Transaction Committee") ^ on
behalf of the stockholders of the
Company (other than NBC and its affiliates). See
"MANAGEMENT - Meetings and Committees of
Board of Directors" for the names of the members of the
Special Transaction Committee ^ and
the functions of such committee. The vote of a majority of
the unaffiliated stockholders of
6
<PAGE>
the Company is not required to approve the Acquisition
Agreement. NBC, which currently
holds approximately 36% of the shares of outstanding Common
Stock, will vote in connection
with the proposal to approve the Acquisition Agreement. A
vote in favor of the Acquisition
^ Agreement may preclude a stockholder of the Company from
challenging the Acquisition and
the other transactions described in this Proxy Statement
and from participating in, and
receiving damages, if any, as a result of any action which
has been or may be filed on
behalf of any or all of the stockholders with respect to
such transactions. See "CERTAIN
TRANSACTIONS AND LITIGATION" for a description of a class
action and derivative complaint
relating to, among other things, the Acquisition Agreement
and certain other transactions
described in this Proxy Statement. On November 16, 1993,
the Board of Directors of the
Company approved the Acquisition. ^
The Redemption. The Acquisition Agreement
provides ^ as a condition to the
consummation of the Acquisition by the stockholders of CT
and CTF and the Company that (i)
the Company shall have entered into a written agreement
with NBC ^ pursuant to which the
Company ^ shall have agreed to redeem 3,153,847 shares of
Common Stock owned by NBC ^(the
"Redemption", together with the Acquisition, the
"Transaction"), (ii) all of the conditions
to the consummation of the Redemption shall have been
satisfied or waived, except the
condition requiring consummation of the Acquisition, and
(iii) the stockholders of CT and
CTF shall have received a written certificate from the
Chief Executive Officer and Chief
Financial Officer of the Company that all of the
conditions to the consummation of the
Redemption shall have been satisfied or waived, except the
condition to the Redemption that
the Acquisition shall have occurred, which certificate shall
be supported by a certificate
from the Chief Executive Officer of NBC, to the same effect.
Accordingly, the Acquisition
will be consummated prior to the Redemption. The Redemption
was negotiated and approved by
the Special Transaction Committee on behalf of the
stockholders of the Company (other than
NBC and its affiliates). The Redemption will not be
consummated unless the Acquisition shall
have occurred. Accordingly, assuming satisfaction of
all other conditions to the
consummation of the Acquisition, approval by stockholders of
the Acquisition Agreement shall
result in consummation of the Redemption. The consideration
for the Redemption will be the
cancellation of the outstanding principal of $17,500,000 of
a 14% Subordinated Debenture
(the "Subordinated Debenture") owed to the Company by
NBC and ^ crediting the next
succeeding principal payments in the amount of $592,313
of a promissory note with an
outstanding principal amount of ^ $1,371,430 owed to
the Company by NBC (the "Other
Indebtedness"). Nick A. Caporella, the Chairman of the
Board of Directors, President and
Chief Executive Officer of the Company is also the
Chairman of the Board of Directors,
7
<PAGE>
President, Chief Executive Officer and controlling
stockholder of NBC. On November 16,
1993, the Board of Directors of the Company approved the
Redemption. The Board of Directors
of NBC has not yet met to consider the terms of the
Redemption. See "PROPOSAL TO APPROVE
ACQUISITION AGREEMENT WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC. -
Interest of Certain Persons in Matters to be Acted Upon^",
and CERTAIN TRANSACTIONS AND
LITIGATION."
Fairness Opinion. The Special Transaction
Committee has retained PaineWebber
Incorporated ("PaineWebber") as a financial advisor in
connection with the Acquisition and
the transactions contemplated thereby to render an
opinion to the Special Transaction
Committee as to the fairness from a financial point of
view of the Transaction. On
November 16, 1993, representatives of PaineWebber advised
the Special Transaction Committee
of its valuation analysis and indicated that they were not
aware of any facts on such date
that would preclude such representatives from recommending to
PaineWebber's fairness opinion
committee that on such date, the Transaction is fair, from a
financial point of view to the
Company and the holders of Common Stock other than NBC and
its affiliates. On January 18,
1994, PaineWebber delivered their written opinion which is
attached hereto as Appendix B
indicating that each of the Acquisition, Redemption and
Transaction is fair, from a
financial point of view to the Company and the holders of
Common Stock, other than NBC and
its affiliates. The opinion of PaineWebber sets forth the
assumptions made, the matters
considered and the scope of the review. PaineWebber will
reaffirm its opinion immediately
prior to the Meeting. See "PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER,
INC. AND CHURCH & TOWER OF FLORIDA, INC. - Report and Opinion
of Financial Advisor."
Outstanding Stock Options. Pursuant to the terms of
the Acquisition Agreement, the
Company is required to take all necessary action to
cause the acceleration, in certain
instances, of the vesting periods of options and rights to
elect alternative settlement
methods issued pursuant to the Company's 1976 Stock Option
Plan and 1978 Stock Option Plan.
See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT WITH CHURCH &
TOWER, INC. AND CHURCH & TOWER
OF FLORIDA, INC. -Certain Effects of the Acquisition --
Outstanding Stock Options."
Conditions to Acquisition. There are a number of
conditions which must be satisfied
prior to or simultaneous with the Acquisition, including
certain matters relating to the
Redemption. See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC. -Terms of the Acquisition
Agreement -- Conditions of the
Acquisition."
8
<PAGE>
Reasons for the Acquisition. ^ In determining to
recommend the approval of the
Acquisition Agreement and the transactions contemplated
thereby to the Board of Directors,
and in approving the Acquisition Agreement and the
transactions contemplated thereby and
recommending that stockholders approve and adopt the
Acquisition Agreement and the
transactions contemplated thereby, the Special
Transaction Committee and the Board,
respectively, considered and based their opinion as to the
fairness of the transactions
contemplated by the Acquisition Agreement, on a number of
factors, including the following:
(i) the belief of the Board and Special Transaction
Committee that the combination of the
Company, CT and CTF is an attractive business opportunity
because the Company's financial
condition, business prospects and senior management will
be strengthened through the
consummation of the Acquisition and greater economies of
scale and synergies will be created
through the Acquisition; (ii) the ^ belief of the Board and
Special Transaction Committee
that significant favorable recent developments are
taking place in the domestic and
international telecommunications industry and the combined
entity will be better able to
compete in the global marketplace; and (iii) the oral and
written presentations and the
written opinion of PaineWebber as to the fairness from a
financial point of view of the ^
Transaction to the Company and the holders of Common
Stock other than NBC and its
affiliates. See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC. - ^"Background of
Transaction and Reasons for Engaging in
the Acquisition."
Directors and Management of the Company Following the
Acquisition. The Acquisition
Agreement provides that upon consummation of the
Acquisition and the ^ transactions
contemplated thereby, the Board of Directors will hold a
meeting at which (i) Jorge Mas will
be elected as President and Chief Executive Officer of
the Company and the Board will
determine his compensation and (ii) the size of the Board
will be expanded from five to
seven members. The directors intend to appoint Jorge L. Mas
Canosa as a Class II director
and Jorge Mas as a Class I director. Prior to the conducting
of any other business at such
meeting, Nick A. Caporella (a Class I Director) and Leo J.
Hussey (a Class III Director)
will resign from the Board of Directors. The remaining
directors will appoint Eliot C.
Abbott as a Class II Director and Arthur B. Laffer as a
Class III Director to fill the
resulting vacancies. Messrs. Mas Canosa and Mas are
controlling stockholders of ^ CTF and ^
CT, respectively. See "MANAGEMENT -Proposed Directors and
Executive Officers" and EXECUTIVE
COMPENSATION - Report of Compensation and Stock Option
Committee."
9
<PAGE>
Appraisal Rights. The holders of Common Stock are
not entitled to appraisal rights
under Delaware law with respect to the Acquisition or any
transactions contemplated by the
Acquisition Agreement.
Restrictions on Resales of Burnup Shares. The
Burnup Shares received by the
stockholders of ^ CT and CTF in connection with the
Acquisition will be subject to certain
restrictions on transfer. Pursuant to the Acquisition
Agreement, however, the Company has
agreed, under certain circumstances, to register the
Burnup Shares. See "PROPOSAL TO
APPROVE ACQUISITION AGREEMENT WITH CHURCH & TOWER, INC. AND
CHURCH AND TOWER OF FLORIDA,
INC. - Terms of the Acquisition Agreement -- Registration
Rights" and "PROPOSAL TO APPROVE
ACQUISITION AGREEMENT WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC.
-Restrictions on Resales of Burnup Shares to be Issued in the
Acquisition."
Indemnification. The Acquisition Agreement provides
that in certain circumstances (i)
the Company will indemnify and hold harmless CT, CTF and
their respective stockholders ^
and (ii) the CT and CTF stockholders will indemnify and
hold ^ harmless the Company, its
subsidiaries and their respective officers and directors.
The aggregate liability of the CT
and CTF stockholders is limited to the sum of $1,000,000
plus the aggregate fair market
value of 350,000 Burnup Shares on the date of payment. The
Company's aggregate liability is
limited to the sum of $2,500,000. The Acquisition Agreement
also provides that at Closing
the Company will enter into an Indemnification Agreement
with certain current and former
directors and officers of the Company pursuant to which
the Company will be obligated to
indemnify and hold harmless such directors and officers to
the fullest extent permitted
under Delaware law, subject to certain limitations, for a
period of six years after Closing
for all damages and costs which they suffer or incur by
reason of the fact that they were or
are a director or officer of the Company. See "PROPOSAL
TO APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND CHURCH AND TOWER OF FLORIDA,
INC. ^- Terms of the Acquisition
Agreement - Indemnification."
Accounting Treatment. The Acquisition will be
accounted for as a "purchase", as such
term is used under generally accepted accounting
principles, for accounting and financial
reporting purposes. Because of certain factors, including
the fact that the ^ stockholders
of the CT Group will hold a majority of the Common Stock
subsequent to the ^ Closing and
that they or their designees will constitute a majority of
the Board of Directors, it is
anticipated that the Acquisition will be treated as a
"reverse acquisition", with the CT
10
<PAGE>
Group considered to be the acquiring entity. See "PROPOSAL
TO APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND CHURCH & TOWER OF FLORIDA,
INC. - Certain Effects of the
Acquisition -- Accounting Treatment."
Certain Federal Income Tax Considerations. The
stockholders of CT and CTF have
received an opinion from Price Waterhouse ^ substantially to
the effect that, on the basis
of the facts in existence at the Closing Date, the
Acquisition constitutes a tax-free
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as
amended (the "Code"). See "PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER,
INC. AND CHURCH & TOWER OF FLORIDA, INC. - Certain Effects
of the Acquisition -- Federal
Income Tax Considerations."
Other Approvals. The Acquisition is subject
to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the
rules and regulations thereunder. ^ On January 21, 1994,
the Company and the CT Group made
the necessary filings under the HSR Act with the Federal
Trade Commission and Justice
Department. Under the provisions of the HSR Act, the
Acquisition ^ may not be consummated
until ^ the thirty day waiting period expires, unless the
request for early termination of
the waiting period by the Company and the CT Group is
granted. Additionally, under certain
of the loan documents between the Company and its senior
bank lender, and between the CT
Group and its bank lender (which is the same as the
Company's lender), the written consent
of such ^ lender is required to consummate the
Acquisition. Such lender has orally
indicated to each of the Company and the CT Group that it
intends to provide its written
consent for consummation of the Acquisition, subject to
certain conditions. The Company and
the CT Group are not currently aware of any other material
permits, approvals, consents or
similar actions that are required for consummation of the
Acquisition.
Approval by CT and CTF Stockholders. The
stockholders of each of CT and CTF have
unanimously approved the Acquisition Agreement^.
Amendments to the Company's Certificate. As a
condition to the consummation of the
Acquisition, the Company is required to have approved
certain amendments to ^ the
Certificate proposed by the ^ CT Group. See "PROPOSAL
TO APPROVE AMENDMENTS TO THE
COMPANY'S CERTIFICATE OF INCORPORATION." The affirmative
votes of the holders of a majority
11
<PAGE>
of the outstanding Common Stock will be required for
approval of ^ each amendment to the
Certificate. The proposed amendments to the
Certificate are contingent upon the
consummation of the Acquisition and, as such, will not be
effected unless the terms of the
Acquisition Agreement are approved at the Meeting.
The Proposal to Approve the Company's ^ 1994 Stock
Option Plan for Non-Employee
Directors. The CT and CTF stockholders have proposed,
subject to approval by the Board of
Directors and the holders of the Common Stock, the ^ 1994
Stock Option Plan for Non-Employee
Directors (the "Directors' Plan"). ^ There will be
400,000 shares of Common Stock ^
reserved for issuance pursuant to the Directors' Plan.
The members of the Special
Transaction Committee have agreed not to participate in the
Directors' Plan. See "PROPOSAL
TO APPROVE 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS."
The Proposal to Approve ^ 1994 Stock Incentive Plan.
The CT and CTF stockholders have
proposed, subject to approval by the Board of Directors and
the holders of Common Stock ^,
the ^ 1994 Stock Incentive Plan (the "Incentive Plan") for
key employees of the Company and
its subsidiaries to replace the existing 1976 Stock Option
Plan (the "Current Plan"). ^
There will be 800,000 shares of Common Stock ^ reserved
for issuance pursuant to the
Incentive Plan. See "PROPOSAL TO APPROVE ^ 1994 STOCK
INCENTIVE PLAN."
Operations Following the Acquisition. Following
consummation of the Acquisition, each
of CT and CTF will become a wholly-owned subsidiary of the
Company. Other than as described
herein, it is the present intention of the CT and CTF
stockholders to operate the Company
under their present names and related trade names in
substantially the same manner following
consummation of the Acquisition as currently being
operated. The proposed Board of
Directors will, upon consummation of the Acquisition,
review additional information about
the Company and, upon completion of such review, may
develop or propose plans which may
result in changes in the operations of the Company. See
"PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER, INC. AND CHURCH & TOWER
OF FLORIDA, INC. - Operations
Following the Acquisition."
12
<PAGE>
PROPOSAL TO APPROVE ACQUISITION
AGREEMENT
WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC.
General
^ A copy of the Acquisition Agreement ^ is
attached to this Proxy Statement as
Appendix A and incorporated herein by reference. The
following summary of the material
terms of the Acquisition Agreement, and the potential
consequences thereof does not purport
to be complete. The discussion of the Acquisition Agreement
is qualified in its entirety by
reference to the text of the Acquisition Agreement. The
Company's stockholders are urged to
read the entire proxy statement carefully, including all
appendices hereto and all documents
incorporated herein by reference.
The Closing under the Acquisition Agreement will occur
on the business day immediately
following receipt of stockholder approval and satisfaction or
waiver of all other conditions
set forth in the Acquisition Agreement. As a result,
each of CT and CTF will become
wholly-owned subsidiaries of the Company and the former
stockholders of CT and CTF will own
approximately ^ 65% of the outstanding Common Stock after
giving effect to the Acquisition
and the transactions contemplated thereby and, to the extent
they act in concert, will be
controlling stockholders of the Company. See " - Certain
Effects of the Acquisition -
Change in Control".
The ^ listing requirements of NASDAQ require
stockholder approval of any acquisition
transaction in which the issuer proposes to issue new shares
of a listed class of securities
constituting 20% or more of the outstanding shares of
such class prior to the date of
issuance. The Burnup Shares will constitute 65% of the
outstanding Common Stock following
consummation of the Acquisition and the transactions
contemplated thereby. Accordingly, it
is a condition to the Acquisition that holders of a majority
of the outstanding Common Stock
of the Company approve the terms of the Acquisition
Agreement.
The terms of the Acquisition Agreement were
reviewed and approved by the Special
Transaction Committee on behalf of the stockholders of the
Company (other than NBC and its
affiliates). The vote of a majority of the unaffiliated
stockholders of the Company is not
13
<PAGE>
required to approve the Acquisition Agreement. NBC, which
currently holds approximately 36%
of the shares of outstanding Common Stock, will vote in
connection with the proposal to
approve the Acquisition Agreement. A vote in favor of
the Acquisition Agreement may
preclude a stockholder of the Company from challenging
the Acquisition and the other
transactions described in this Proxy Statement and from
participating in, and receiving
damages, if any, as a result of any action which has been
or may be filed on behalf of any
or all of the stockholders with respect to such transactions.
See "CERTAIN TRANSACTIONS AND
LITIGATION" for a description of a class action and
derivative complaint relating to, among
other things, the Acquisition Agreement and certain other
transactions described in this
Proxy Statement.
Background ^ of CT and CTF
CTF was incorporated under the laws of Florida in 1968.
Since 1969, CTF has performed
engineering, construction and maintenance services on behalf
of Southern Bell, an affiliate
of BellSouth, pursuant to master contracts covering outside
plant work. CTF currently holds
three such master contracts, expiring at various times
through 1996, for Dade County and
south Broward County, Florida. The revenues generated
under such contracts constitute
approximately 70% of its total combined revenues. CTF
also provides construction and
maintenance services under individual contracts to local
utilities, including the Miami-Dade
Water and Sewer Department.
CT was incorporated under the laws of Florida in
1990 to engage in selected
construction projects in the public and private sectors.
In 1990, a joint venture (the
"9001 Joint Venture") of which CT is the majority partner was
established for the purpose of
constructing a detention facility in Dade County with a
capacity of approximately 2,500 beds
which was completed in 1993. In September, 1990, CT entered
into a joint venture (the "OCT
Joint Venture") of which CT is a 20% minority partner
with ^ Constructora Norberto
Odebrecht, an international construction contractor, to
construct governmental projects.
The OCT Joint Venture has completed the Brickell Extension
Project of the City of Miami's
Metro Mover, an elevated transportation system, and has
begun construction of a landfill in
south Dade County.
In May 1992, CT merged with Communication
Contractors, Inc., an affiliate of CTF
engaged primarily in providing manpower and equipment to CTF.
Since the merger, work under
the Southern Bell master contracts has been subcontracted to
CT. The principal offices of
14
<PAGE>
CT and CTF are located at 10441 S.W. 187th Street, Miami,
Florida 33157 and their telephone
number is (305) 233-6540.
^ Background of Transaction
The acquisition by the Company of CT and CTF
represents the culmination of the
Company's efforts to implement a transactional solution to
the operational and strategic
challenges resulting from the impact of the recession on the
Company's core operations.
The recent recession resulted in the deferral or
cancellation of construction projects
and a general contraction in the market for the services
comprising the Company's core
business. The Company believed that while it had
adequate resources to participate in
renewed growth in the market expected to occur following
the recession's anticipated end,
its ability to participate in that growth would be enhanced
if it combined with a strategic
partner. It was the Company's view that an appropriate
partner would be one which conducted
substantial business in the telecommunications services
industry, had strong operational
management and a history of positive operating results. The
Company's management and Board
recognized that the search for a strategic partner
would have to be conducted with
sensitivity to the possible detrimental effects that such
a search could have on the
Company's core business.
In February 1992, the Company announced that it had
entered into an agreement with
certain stockholders of Dycom Industries, Inc.
("Dycom"), a company engaged in the
telecommunications industry, pursuant to which, among other
things, ^ the Company acquired
an option to purchase approximately 9.9% of the outstanding
common stock of Dycom. At the
time, the Company was seeking to effect a merger or
business combination with Dycom. The
Company believed that the combined entity would result in
cost saving efficiencies that
would enhance earnings. Over the course of the next few
months, representatives of the
Company unsuccessfully attempted to commence discussions
with members of senior management
of Dycom, as well as its Board of Directors. On December
3, 1992, the Company announced
that the agreement had expired pursuant to its terms.
15
<PAGE>
^ In August 1992, after numerous attempts to
negotiate with Dycom had failed, a
meeting of the Special Transaction Committee of the Board of
Directors was held to consider
alternatives in light of the decline in profitability.
The members of the Special
Transaction Committee are Messrs. Conlee, Morse and
Hathorn. During the course of the
meeting, representatives of PaineWebber discussed with
members of the Committee a variety of
alternatives to enhance shareholder value, including a
merger, sale of all or substantially
all of the assets or other business combination. In
addition, the Committee discussed the
lack of any expression of interest by third parties to engage
in a business combination with
the Company in spite of the Company's public announcements
that it was seeking to effect
such a transaction. The difficulty of managing the Company's
business during any attempt to
seek strategic partners was also discussed. Prior to
conclusion of the meeting, the Special
Transaction Committee requested PaineWebber to prepare a
proposal for the Committee's review
with respect to engaging PaineWebber as financial advisor
in connection with the sale or
merger of the Company.
In October 1992, the Board of Directors of the Company
^ held a meeting to discuss
the engagement of PaineWebber by the Special Transaction
Committee to explore strategic
alternatives for the Company, including the sale of part or
all of the Company. Although
PaineWebber was not formally engaged by the Special
Transaction Committee, PaineWebber
reflected upon strategic merger and acquisition
alternatives and attempted to identify
likely candidates for merger, joint ventures and/or partners
for all or part of the Company.
While PaineWebber considered certain companies as potential
candidates, preliminary analysis
and efforts by PaineWebber led it to conclude that there
was a very low likelihood of
effecting a transaction with any such candidates. In
the course of its activities,
PaineWebber noted that the impact of the economic recession
on the industry of which the
Company is a part substantially reduced the likelihood
of successfully concluding a
transaction, both because of effects of that recession on
the Company's performance and the
effects of the recession on potential other parties to a
transaction. In addition, the
interrelationship between the Company and NBC increased
the difficulty of effecting a
transaction.
In April 1993, representatives of the Company were
contacted by Jorge Mas, President
of CT, who expressed an interest in meeting with the Company
to discuss a possible business
combination with the Company. From late April 1993 through
July 1993, Nick A. Caporella,
Chairman of the Board, President and Chief Executive
Officer of the Company, met with
16
<PAGE>
representatives of the CT Group and discussed in conceptual
terms the possibility of such a
transaction. At these meetings, which were informal
and general in nature, various
structural possibilities pursuant to which the companies
could be combined were explored.
On July 10, 1993, a meeting of the Strategic
Planning Committee of the Board of
Directors of the Company (which includes the members of the
Special Transaction Committee)
was held. The members of the Committee, who had been
advised from time to time of the
discussions with CT Group prior to the meeting, were
informed of the nature of the business
of CT and CTF, their management and financial results and
the impact an acquisition would
have on the operations of the Company. Mr. Caporella
informed the members of the Strategic
Planning Committee of the discussions he had held with
representatives of the CT Group and
explored with the members of the Committee the
possibility of a business combination
transaction. Mr. Caporella also advised the Committee that
the CT Group indicated that it
may require that the repurchase of the Company's stock held
by NBC be a condition to any
such acquisition. Mr. Caporella also noted that a likely
result of the transaction would be
that the stockholders of the CT Group would become
significant stockholders of the Company.
Mr. Caporella also indicated that in light of a condition
requiring repurchase of Common
Stock from NBC, the terms of any such transaction would
require the review and approval of
the Special Transaction Committee of the Board of
Directors. Mr. Caporella further
indicated that stockholder approval would be required for
such an acquisition in accordance
with the rules of NASDAQ. The Strategic Planning
Committee then discussed the various
alternatives available to the Company, including the lack
of any viable alternatives which
could maximize shareholder value, such as a
recapitalization, extraordinary dividend, or
sale of assets to other third parties. The Committee noted
that previous attempts to find a
buyer for the Company were unsuccessful and that a
recapitalization or extraordinary
dividend could not be effectuated in light of the losses
being reported by the Company, the
effect such a transaction would have on the Company's cash
flow and the inability of the
Company to obtain sufficient borrowings to fund such
transactions. At the conclusion of the
meeting, the Committee determined that Mr. Caporella should
hold further meetings with the
CT Group and report his progress to the Committee or the full
Board at a later date.
From late July through mid August 1993, the parties
and their respective advisers
negotiated the terms of a letter agreement (the "Letter
Agreement"). On August 18, 1993, a
meeting was held among representatives of the Company and
the stockholders of the CT Group
and their advisors at which time the Letter Agreement was
executed. The Letter Agreement
17
<PAGE>
provided a format to proceed forward with a possible
transaction pursuant to which the
stockholders of the CT Group would exchange the CT and CTF
Shares for shares of Common Stock
of the Company and contained a number of conditions,
including satisfactory completion of
due diligence, an agreement as to the number of shares of
Common Stock to be issued in the
Acquisition, the requirement by the CT Group that the
ownership by NBC of Common Stock of
the Company be reduced or eliminated on terms acceptable to
the Company and the stockholders
of the CT Group and approval of the transaction by the
stockholders and Board of Directors
of the Company. During the meeting, the parties also
discussed the due diligence process,
regulatory requirements and fiduciary obligations applicable
to such a transaction.
Effective August 1, 1993, PaineWebber was retained
by the Special Transaction
Committee for the purpose of acting as its financial
adviser to render an opinion with
respect to the terms of the Acquisition. See "PROPOSAL TO
APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND CHURCH & TOWER OF FLORIDA,
INC. - Report and Opinion of
Financial Advisor."
In September 1993, representatives of the Company
and the CT Group commenced
negotiations of the terms of the Agreement. Various issues
regarding the structure of the
transaction, indemnification obligations, conditions to the
transaction and other material
terms of the Agreement were discussed and reviewed.
In September 1993, representatives of PaineWebber met
with management of the Company
and management of the CT Group to review the respective
businesses, operations and prospects
of each of the Company, CT and CTF. Thereafter,
numerous discussions were held among
PaineWebber, the Company and CT Group with respect to the
financial results of each company.
On September 20, 1993, a meeting of the Board of
Directors of the Company was held to
discuss the status of the negotiations with the CT Group as
well as financial due diligence
. During the meeting, representatives of PaineWebber,
at the request of the Special
Transaction Committee, provided an overview of the due
diligence that had been conducted to
date by PaineWebber. The Committee also held lengthy
discussions concerning the
negotiations that had taken place to date with respect to the
terms of the transaction. The
Board discussed the desire to promptly pursue negotiations
with representatives of the CT
18
<PAGE>
Group and the need to engage in negotiations which would
result in the most favorable
transaction for shareholders of the Company. The Board
noted that the initial negotiations
were held between management of each company and concluded
that engaging outside advisors to
negotiate the transaction would only increase the costs and
length of time to complete the
transaction and negatively impact the relationship which
had been established between the
managements of each Company. The Board authorized
management of the Company, in
consultation with the advisors to the Special Transaction
Committee, to proceed forward with
its negotiations based upon the matters discussed at the
meeting and to review with the
Board the final terms of the Acquisition Agreement prior to
its execution.
Subsequent to this meeting, the Special Transaction
Committee engaged outside counsel
to represent it in connection with the transaction.
On September 23, 1993, the Company issued a press
release announcing its negotiations
with the CT Group. The high and low sales prices for the
Common Stock as quoted on NASDAQ
as of September 22, 1993 were $3.25 and $3.00, respectively.
^ On October 18, 1993, a meeting of the Board of
Directors was held to discuss the
terms of the Acquisition Agreement ^ and other related
matters. During the meeting, the
Board reviewed the terms of the Acquisition Agreement as
well as the financial results of
the CT Group. The Board also discussed the number of shares
of Common Stock that would be
issued by the Company to the stockholders of the CT Group,
including the fact that the CT
Group had made known its intentions to be a significant
shareholder following consummation
of the Acquisition and the transactions contemplated thereby.
^ Later that day, a meeting of the Special
Transaction Committee was held for the
purpose of reviewing the terms of the Acquisition ^
Agreement and for representatives of
PaineWebber to present its preliminary valuation analysis.
During the meeting, PaineWebber
reviewed for the Committee its financial analysis,
including background, operating and
financial information of the Company and the CT Group,
based upon various valuation
analyses. PaineWebber advised the Committee that,
subject to completion of its due
diligence, the CT Group would have a preliminary range of
value between approximately $45
million to $55 million, depending upon the amount of the
distribution the CT Group makes to
19
<PAGE>
its stockholders prior to closing the Acquisition for
previously taxed earnings not
distributed to such stockholders. In addition, the
Committee was informed by PaineWebber
that a preliminary range of value for the shares of the
Company's Common Stock was between
$4.50 to $6.00 per share. For information concerning the
analysis undertaken by PaineWebber
see "PROPOSAL TO APPROVE ACQUISITION AGREEMENT WITH CHURCH &
TOWER, INC. AND CHURCH & TOWER
OF FLORIDA, INC. - Report and Opinion of Financial Advisor."
It was also noted that since
September 23, 1993, the date negotiations with the CT
Group were publicly disclosed, no
offers or expressions of interest had been received by the
Company from other third parties
with respect to a potential business combination or other
significant transaction.
The Committee also discussed the manner in which to
negotiate the exchange ratio with
the CT Group. The Committee indicated that the exchange
ratio should be arrived at based
upon an agreed upon valuation for the CT Group and the
percentage of stock to be held by the
stockholders of the CT Group following the Acquisition.
PaineWebber advised the Committee
that, based upon its preliminary analysis approximately 56%
to 67% of the outstanding Common
Stock could be held by the stockholders of the CT Group
following the Acquisition and the
transactions contemplated thereby. This analysis was based
upon the relative values of the
Company and the CT Group utilizing various valuation
analyses. The Committee authorized Mr.
Caporella to negotiate the terms of the exchange ratio with
representatives of the CT Group
within the parameters discussed by the Committee and in
consultation with the members of the
Special Transaction Committee and its legal and financial
advisors. The Committee required
that the exchange ratio for purposes of the Redemption
would not be negotiated unless and
until an agreement was reached with the CT Group. See
"PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER, INC. AND CHURCH & TOWER OF
FLORIDA, INC. - Report and Opinion
of Financial Advisor."
^ The Committee also reviewed the terms of the
Acquisition Agreement ^ with its
special counsel. The Committee reviewed the overall
structure of the transaction and
certain material terms of the Acquisition Agreement,
including: (i) the terms of the
Memorandum of Understanding and the requirement that the
memoranda to be executed prior to
approval of the Acquisition Agreement, (ii) the provisions
permitting the Board to review
other proposals received by the Company with respect to an
acquisition proposal, (iii) the
right to terminate the Acquisition Agreement without the
Company being liable for "break-up"
fees in excess of $500,000, (iv) the requirement for
stockholder approval and delivery of a
20
<PAGE>
fairness opinion from PaineWebber, and (v) the fact that
the Redemption would not occur
unless and until the Acquisition was consummated.
After conclusion of the meeting of the Special
Transaction Committee, a reconvened
meeting of the Board of Directors was held. During the
meeting, the Special Transaction
Committee updated the Board concerning the discussions
held at the Special Transaction
Committee meeting. After discussing the terms of the
Acquisition Agreement, ^ the Board
approved the execution of the Memorandum of Understanding
and the Acquisition Agreement,
subject to a number of conditions, including satisfactory
conclusion of the negotiation of
the valuation of the CT Group and the number of shares of
Common Stock ^ to be issued by the
Company, approval by the stockholders and Special
Transaction Committee of the Company and
receipt of a written fairness opinion from PaineWebber.
^ On October 19, 1993, the Company, CT and CTF issued
a press release announcing the
execution ^ of the Acquisition Agreement. The high and low
sales price for the Common Stock
as quoted on NASDAQ as of October 18, 1993, was $4.00 and
$3.75^, respectively.
^ Pursuant to the terms of the Acquisition
Agreement, the parties completed their
respective due diligence by November 1, 1993.
^ During the period from late October 1993 through
November 4, 1993, representatives
of the parties engaged in lengthy negotiations concerning the
relative values of the Company
and the CT Group for the purpose of determining the number
of shares of Common Stock to be
owned by the CT Group following consummation of the
Acquisition and the transactions
contemplated thereby. During this period, there were
differing views regarding the proper
relative valuations of the Company and the CT Group. On
November 4, 1993, the Company and
CT Group reached an agreement pursuant to which 10,250,000
shares of Common Stock would be
exchanged for the CT and CTF Shares. In addition, in light
of the fact that the CT Group
would no longer be afforded Subchapter S status under the
Internal Revenue Code of 1986, an
aggregate distribution of $11.5 million in the form of cash
and notes would be made to the
stockholders of the CT Group for undistributed earnings on
which the stockholders of the CT
Group had paid income taxes (a portion of which
distribution was made during the period
ended September 30, 1993). In a press release issued on
November 5, 1993, the parties
21
<PAGE>
announced that 10,250,000 shares of Common Stock would be
issued to the stockholders of CT
and CTF upon consummation of the Acquisition subject to,^
among other things, ^ receipt of
financial advisory opinions, ratification by the Board of
Directors of the Company, approval
by the stockholders of the Company, and execution of an
agreement with NBC regarding the
Redemption.
^ In November, 1993, a purported class action and
derivative suit was filed against
the Company, the members of the Board of Directors, CT, CTF,
Jorge Mas Canosa, Jorge Mas and
Juan Carlos Mas with respect to the Acquisition Agreement
and the transactions contemplated
thereby. See "CERTAIN TRANSACTIONS AND LITIGATIONS".
At a meeting of the Special Transaction Committee on
November 9, 1993, the status of
the Acquisition was reviewed by the Committee and the terms
of the Redemption were discussed
among the members of the Committee and their financial and
legal advisers. It was indicated
that a proposal had been received from NBC subsequent to
November 4, 1993 pursuant to which
(i) the Company would redeem the shares of Burnup Common
Stock owned by NBC for $6.00 per
share or a total redemption price of $18,923,082, and (ii)
the Company would cancel (x) the
Subordinated Debenture, having a book value of 17,291,000, at
an amount equal to $17,250,000
and (y) the remaining balance outstanding under the Other
Indebtedness. The Committee
expressed the view that the per share redemption price
should not exceed the value
negotiated for the shares of Burnup Common Stock being
issued in the Acquisition.
On November 10, 1993, discussions were held between
PaineWebber and representatives
of NBC with respect to the terms of the Redemption. During
these discussions, the relative
values of the Company, the Subordinated Debenture and the
Other Indebtedness were analyzed
by the respective parties. Later that evening, a
meeting of the Special Transaction
Committee was held. PaineWebber indicated to the Committee
that NBC was prepared to accept
the per share value arrived at in the Acquisition, but
was insistent on discounting the
Subordinated Debenture, in light of the fact that the
Subordinated Debenture could be
prepaid at any time without penalty. In addition, NBC had
requested that all interest cease
accruing on the Subordinated Debenture commencing
December 1, 1993. PaineWebber then
answered numerous questions concerning the terms proposed by
NBC, including an analysis of
the valuation of the Subordinated Debenture and Other
Indebtedness. A discussion also
ensued concerning the preferred stock of NBC owned by the
Company and whether all or a
22
<PAGE>
portion of such preferred stock should be utilized in
the Redemption. The Committee's
advisers stated that NBC indicated it would not accept any
terms requiring NBC to retire its
preferred stock. The Committee concluded that it would be
inappropriate to discount the
Subordinated Debenture in connection with the Redemption and
directed PaineWebber to propose
the following to NBC: (i) the Company would redeem the
shares of Common Stock owned by NBC
at $5.74 per share (the per share value in the Acquisition),
(ii) the Company would cancel
the Subordinated Debenture at its face value of
$17,500,000 and (iii) the balance of
$592,313 would be applied to reduce the Other Indebtedness.
Discussions continued on November 11, 1993 between
PaineWebber and representatives of
NBC. At a meeting of the Special Transaction Committee
later that day, PaineWebber advised
the Committee that representatives of NBC were prepared
to recommend to the Board of
Directors ^ of NBC the Special Transaction Committee's
proposal made by PaineWebber earlier
in the day; provided all collateral underlying the Other
Indebtedness was released by the
Company. PaineWebber then reviewed for the Committee the
terms of the Other Indebtedness
and the security underlying the obligations. The
Committee concluded that it would not
agree to release any collateral and would not alter from its
previous proposal and directed
PaineWebber to communicate the Committee's position to
representatives of NBC.
On November 16, 1993, a meeting of the Special
Transaction Committee was held. During
the meeting, an overview of the negotiations was presented as
well as the historical and pro
forma financial results of the CT Group and the Company.
Representatives from PaineWebber
answered questions and discussed in detail the
structure of the transaction and the
valuations utilized to negotiate the Acquisition and
Redemption. During the meeting,
PaineWebber advised the Committee of its valuation analysis
and indicated that they were not
aware of any facts on such date that would preclude such
representatives from recommending
to PaineWebber's fairness opinion committee that on such
date, the Transaction is fair, from
a financial point of view, to the Company and the holders of
Common Stock other than NBC and
its affiliates. The Committee's counsel then discussed
legal issues concerning the
Transaction and answered the questions of members of the
Special Transaction Committee. The
Special Transaction Committee then adopted a resolution to
unanimously recommend that the
Board approve the Acquisition Agreement and the transactions
contemplated thereby, subject
to receipt of stockholder approval and an amendment to the
Agreement described below. At a
meeting held immediately thereafter, the Board, by the
unanimous vote of all directors
(other than, Mr. Caporella, who abstained with respect to
the Redemption), concluded that
the transactions contemplated by the Acquisition Agreement
was in the best interest of the
23
<PAGE>
Company's stockholders, and approved the Acquisition
Agreement and the transactions
contemplated thereby (including the Redemption), subject to
receipt of a written fairness
opinion from PaineWebber, an executed Amendment to the
Acquisition Agreement described
below, waiver by the CT Group of its rights to terminate
the Acquisition Agreement as a
result of the filing of the 1993 Complaint (as defined
herein) and the execution of the
agreement between the Company and NBC with respect to
the Redemption. The Board also
resolved to recommend that the stockholders approve and adopt
the Acquisition Agreement and
the transactions contemplated thereby.
On November 23, 1993, the stockholders of the CT
Group and the Company executed the
First Amendment to the Agreement (the "First Amendment")
which provided for, among other
things: (i) the exchange ratio of the CT and CTF Shares
for the Burnup Shares, (ii) the
waiver by the stockholders of the CT Group of their
rights with respect to the 1993
Complaint and (iii) the amount and manner of payment of the
distribution to the stockholders
of the CT Group. In addition, a Second Amendment to the
Agreement was executed by the
parties, effective November 23, 1993, to clarify a mutual
mistake in the First Amendment
with respect to the calculation of the distribution to be
made to the stockholders of the CT
Group by CT and CTF.
On January 18, 1993, PaineWebber delivered its written
fairness opinion to the Special
Transaction Committee that each of the Acquisition,
Redemption and Transaction is fair, from
a financial point of view, to the Company and the
stockholders of the Company, other than
NBC and its affiliates.
Reasons for Engaging in the Acquisition
In determining to recommend the approval of the
Acquisition Agreement and the
transactions contemplated thereby to the full Board of
Directors, and in approving the
Acquisition Agreement and the transactions contemplated
thereby and recommending that
stockholders approve and adopt the Acquisition Agreement and
the transactions contemplated
thereby, the Special Transaction Committee and the Board,
respectively, considered and based
their opinion as to the fairness of the transactions
contemplated by the Acquisition
Agreement, on a number of factors, including the following:
(i) the belief of Board and
24
<PAGE>
the Special Transaction Committee, that the combination of
the Company and the CT Group is
an attractive business opportunity because the Company's core
business operations, business
prospects and senior operating management will be
strengthened through the consummation of
the Acquisition and greater economies of scale and
synergies will be created through the
Acquisition; (ii) the belief of the Board and the
Special Transaction Committee that
significant favorable recent developments are taking place in
the domestic and international
telecommunications industry and that the combined entity
will be better able to compete in
the global marketplace; (iii) the fact that the transactions
contemplated by the Acquisition
Agreement require the approval of the stockholders of the
Company; (iv) information with
respect to the financial condition, results of operations,
business and prospects of CT and
CTF and the Company and current industry, economic and
market conditions as well as the
risks involved in achieving those prospects; (v) the
possible alternatives to the
Acquisition, including the prospects of the Company
continuing to successfully operate as an
independent entity, and in particular, the potential
adverse consequences to the Company,
including its business prospects and its ability to retain
and attract talented operating
management, in the event the Acquisition were not to
occur; (vi) the fact that,
notwithstanding the Company's objective to effect a business
combination and the significant
possibility of the Company being sold or a change in
control of the Company occurring, no
expressions of interest or proposals from third parties
which might be interested in
acquiring the Company were received by the Board of
Directors; (vii) the fact that the
Acquisition is not structured to preclude additional bona
fide offers to acquire the Company
and that the Acquisition Agreement permits the Board of
Directors of the Company in the
exercise of its fiduciary obligations under applicable law,
to review and accept proposals
from third parties relating to any acquisition of the
Company; and (viii) the oral and
written presentations of PaineWebber described under
"Report and Opinion of Financial
Advisor" and the written opinion of PaineWebber to the
effect that, as of the date of its
opinion, each of the Acquisition, Redemption, and the
Transaction, is fair from a financial
point of view to the Company and the stockholders of the
Company other than NBC and its
affiliates.
In view of the wide variety of factors considered in
connection with its evaluation of
the transaction neither the Special Transaction Committee nor
the Board found it practicable
to and did not, quantify or otherwise attempt to assign
relative weights to the specific
factors in reaching its determination, although it viewed
the matters set forth in (i),
(ii), (iii), (iv) (v), (vi), (vii) and (viii) as favorable
to its decision. Moreover, the
Special Transaction Committee and the Board placed special
emphasis on the financial terms
25
<PAGE>
of the Acquisition and the transactions contemplated thereby
(including the Redemption) and
the absence of any other proposals from third parties to
acquire the Company. The factors
discussed above were considered by the Special Transaction
Committee and the Board in the
manner set below:
(i) As noted above, the Special Transaction Committee and the
Board considered favorable the
matters set forth in item (i). The Special Transaction
Committee and the Board reviewed the
financial results of the Company, including a three-year
revenue decline and losses incurred
during that period, and compared such results to the
historical financial results of the CT
Group and proforma combined financial results of the Company
and the CT Group. The Board
and Special Transaction Committee noted that the CT Group
results were obtained within a
more contained geographic area. The Board and Special
Transaction Committee also noted that
recently the Company had been required to obtain waivers of
certain violations of its loan
documents. The Special Transaction Committee and the Board
considered the synergies that
would result from combining the companies, and concluded
that increased economies of scale
are attainable through the Acquisition, primarily due to the
more efficient use of equipment
and personnel and the elimination of certain administrative
redundancies. In addition, the
combination of the financial strength and operational
capabilities of the CT Group along
with the potential increased efficiencies that would
result from the Acquisition were
considered by the Special Transaction Committee and the
Board as being favorable to the
development of business prospects. The Special Transaction
Committee and Board noted the
closing stock price of the Common Stock on NASDAQ had
increased approximately 44% since the
initial announcement of the transaction through November
15, 1993 and interpreted the
increase as a favorable perception of the combined entities
by the investment community.
The Board and the Special Transaction Committee also
considered as favorable the potential
strengthening of senior operating management through the
consummation of the Acquisition.
The attraction and retention of management personnel
who are experienced within the
telecommunications industry and have demonstrated knowledge
of the business, the customer
base, and operating efficiencies as demonstrated by the
strong operating margins attained by
the CT Group was considered important to the growth of the
Company, particularly in view of
anticipated capital spending programs expected to occur in
the domestic and international
telephone and cable industries.
(ii) As noted above, the Special Transaction Committee and
the Board considered as favorable
the matters set forth in item (ii). The Special
Transaction Committee and the Board
26
<PAGE>
discussed the various opportunities which are available to
the telecommunications industry
in view of recent legislation allowing the formation of
alliances between cable television
and telephone companies and concluded that a business
combination with the CT Group would
result in the enhancement of earnings and shareholder
value. Additionally, the Special
Transaction Committee and the Board considered as favorable
the combination of experience
and customer contacts of management of the Company
and the CT Group relative to
international opportunities and the potential for further
significant development of the
Company's international telecommunications customer base
resulting from the Acquisition, and
concluded the combined entity would be better equipped and
financially able to compete in
the global marketplace. The Special Transaction Committee
also noted the probable need for
additional capital in order to take advantage of
the projected expansion of
telecommunications construction and the likelihood of the
Company obtaining such capital as
a stand alone entity.
(iii) As noted above, the Special Transaction Committee
and the Board considered as
favorable the matters set forth in item (iii).
Specifically, the Special Transaction
Committee and the Board viewed as favorable the
requirement that the transactions
contemplated by the Acquisition Agreement required the
approval of holders of a majority of
the outstanding Common Stock.
(iv) As noted above, the Special Transaction Committee and
the Board considered as favorable
the matters set forth in item (iv). The Special Transaction
Committee and the Board reviewed
the information provided in presentations by the
Company's advisors and management,
including summary historical financial information for both
the Company and the CT Group and
proforma financial information for the combined entity. The
Special Transaction Committee
and the Board also reviewed the historical volatility of the
Company's financial performance
and the demands placed on the Company and other large,
telecommunications companies to
compete effectively, particularly in view of the past
prolonged economic pressures. On the
basis of such review, the Special Transaction Committee
and the Board reconfirmed their
understanding of the Company's and the CT Group's historical
financial and business results
and prospects, the necessity to stabilize and
strengthen the Company's financial
performance, and to increase the Company's presence in
the global telecommunications
marketplace. The Special Transaction Committee also
reviewed such risks as currency and
political risks associated with international opportunities
and the potential returns to be
realized if global business development can be efficiently
implemented.
27
<PAGE>
(v) As noted above, the Special Transaction Committee and
the Board considered as favorable
the matters set forth in item (v). Possible alternatives
to the transactions contemplated
by the Acquisition Agreement were discussed at various
meetings of the Special Transaction
Committee and the Board. In that connection, members of the
Special Transaction Committee
were advised of alternative transaction structures which had
been discussed and rejected or
withdrawn during the period from 1990 through 1993.
Alternative transactions included the
Company's entering into an agreement to acquire beneficial
ownership of certain shares and
other interests in Dycom for the purpose of effecting a
merger with Dycom. See "Background
of Transaction". The members of the Special Transaction
Committee and the Board also
explored the alternatives which may or may not be available
to the Company in the event
that the transactions contemplated by the Acquisition
Agreement were not consummated,
including the possible further deterioration in the
Company's financial results. Based on
its understanding of the potentially adverse consequences
to the Company, including the
potential loss of certain business opportunities and the
Company's current ability to retain
and attract talented operating management, the Special
Transaction Committee considered
favorably the terms of the Acquisition and the
transactions contemplated thereby and
recommended that the stockholders of the Company
approve and adopt the Acquisition
Agreement.
(vi) As noted above, the Special Transaction Committee and
the Board considered as favorable
the matters set forth in item (vi). In connection with their
consideration of such matters,
the Special Transaction Committee and the Board reviewed the
fact that, notwithstanding the
fact that several press releases and newspaper articles
were disseminated to the public
concerning the Company's desire to enhance shareholder value
through a business combination
as well as the announcement of the negotiations between
the Company and the CT Group and
the execution of the Acquisition Agreement, no proposals
from third parties which might be
interested in acquiring the Company have been received by the
Board of Directors.
(vii) As noted above, the Special Transaction Committee
and the Board considered as
favorable the matter set forth in item (vii).
Specifically, the fact that the Acquisition
is not structured to preclude consideration of additional
bona fide offers by third parties
to acquire the Company and the Acquisition Agreement
permits the Special Transaction
Committee to provide information and to accept, review and
negotiate with such parties prior
28
<PAGE>
to the Closing is fair to the stockholders of the
Company. The Special Transaction
Committee and the Board required that the terms of the
Acquisition Agreement not preclude
the Company from terminating the Acquisition Agreement if a
more favorable transaction were
to be proposed and noted that no "lock-up" arrangements were
entered into in connection with
the Acquisition nor would break-up fees in excess of
$500,000 be payable in the event the
Acquisition were terminated.
(viii) As noted above, the Special Transaction
Committee and the Board considered as
favorable the matter set forth in Item (viii). In
connection with their consideration of
such matters, the Special Transaction Committee and the
Board relied in part on the
presentation of PaineWebber described under "Report and
Opinion of Financial Advisor" and
adopted as reasonable both PaineWebber's presentations and
analysis of various factors
described therein.
Report and Opinion of Financial Advisor
The Special Transaction Committee has retained
PaineWebber as its financial advisor in
connection with the Acquisition and to render a fairness
opinion to the Special Transaction
Committee with respect to the Company and the holders of
Common Stock, other than NBC and
its affiliates.
^ On November 16, 1993, in connection with the
evaluation of the Acquisition and the
transactions contemplated thereby by the Board of Directors
^ and the Special Transaction
Committee, representatives of PaineWebber advised the
Special Transaction Committee of its
valuation analysis and indicated that they were not aware
of any facts on such date that
would preclude such representatives from recommending to
PaineWebber's fairness opinion
committee that on such date, the Transaction is fair from a
financial point of view to the
Company and holders of Common Stock other than NBC and its
affiliates. On January 18, 1994,
PaineWebber delivered its written opinion to the Special
Transaction Committee indicating
that each of the Acquisition, Redemption and Transaction is
fair from a financial point of
view to Company and the holders of Common Stock, other
than NBC and its affiliates.
Stockholders are urged to read such opinion in its
entirety for a discussion of the
assumptions made, the matters considered and the scope of the
review undertaken in rendering
29
<PAGE>
such opinion. The fairness opinion will be updated by
PaineWebber immediately prior to the
Meeting. A copy of the opinion letter of PaineWebber dated
the date of this Proxy Statement
is attached as Appendix B and should be read carefully and in
its entirety by the holders of
Common Stock.
In rendering its written opinion to the Special
Transaction Committee, PaineWebber:
(i) reviewed the audited financial statements for CT and
CTF for the three fiscal years
ended December 31, 1992, and reviewed the unaudited
financial statements for CT and CTF for
the six months ended June 30, 1993; (ii) reviewed the
combined audited financial statements
for the CT Group for the three years ended December 31,
1992, and reviewed the unaudited
financial statements for the CT Group for the nine months
ended September 30, 1993; (iii)
reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the
three fiscal years ended April 30, 1993 and the
Company's Form 10-Q and the related
unaudited financial information for the six months ended
October 31, 1993; (iv) reviewed an
estimated income statement for the CT Group for the year
ended December 31, 1993 and an
estimated income statement for the Company for the year
ended April 30, 1994; (v) conducted
discussions with members of senior management of the CT
Group and the Company concerning
their respective businesses and prospects; (vi) reviewed the
summary appraisal reports dated
June and July of 1991 and an updated market analysis dated
August 12, 1993 prepared by an
outside appraisal firm with respect to certain of the
Company's real estate assets; (vii)
reviewed the historical market prices and trading activity of
the Company's Common Stock and
compared them with that of certain publicly traded companies
which PaineWebber deemed to be
reasonably similar to the Company; (viii) compared the
results of operations of the CT Group
and the Company and compared them with that of certain
publicly traded companies which
PaineWebber deemed to be reasonably similar to the CT Group
and the Company, respectively;
(ix) reviewed the terms of the Subordinated Debenture and
Other Indebtedness; (x) reviewed
the Acquisition Agreement; and (xi) reviewed such other
financial studies and analyses and
performed such other investigations and took into account
such other matters as PaineWebber
deemed necessary, including PaineWebber's assessment of
general economic, market and
monetary conditions.
In preparing its opinion, PaineWebber relied on the
accuracy and completeness of all
information supplied or otherwise made available to
PaineWebber by the Company, CT and CTF
and assumed that estimates have been reasonably prepared
on bases reflecting the best
currently available information and judgments of the
managements of the Company, CT and CTF
30
<PAGE>
as to the expected future financial performance of their
respective companies. PaineWebber
did not independently verify such information or
assumptions, including estimates, or
undertake an independent appraisal of the assets of the
Company, CT or CTF. PaineWebber's
opinion is based upon market, economic, financial and other
conditions as they exist and can
be evaluated as of the date of the opinion. PaineWebber's
opinion does not constitute a
recommendation to any holder of Common Stock of the Company
as to how any such holder of
Common Stock should vote on the Acquisition. The opinion
does not address the relative
merits of the Transaction and any other transactions or
business strategies discussed by the
Board of Directors of the Company as alternatives to the
Transaction or the decision of ^
the Board of Directors ^ of the Company to proceed with the
Transaction. Although various
estimates of value were developed with respect to the
combined entities, no opinion is
expressed by PaineWebber as to the price at which the
securities to be issued in the
Transaction may trade at any time.
PaineWebber assumed that there had been no material
change in the Company's, CT's or
CTF's assets, financial condition, results of operations,
business or prospects since the
date of the last financial statements made available to
PaineWebber. PaineWebber relied
upon the Company with respect to the accounting treatment to
be accorded in the Acquisition.
In addition, PaineWebber did not make an independent
evaluation, appraisal or physical
inspection of the assets or individual properties of the
Company, CT or CTF. In rendering
its opinion, PaineWebber has not been engaged to act as an
agent or fiduciary of, and the
Company has expressly waived any duties or liabilities
PaineWebber may otherwise be deemed
to have had to, the Company's equity holders or any other
third party.
The preparation of a fairness opinion involves various
determinations as to the most
appropriate and relevant quantitative and qualitative methods
of financial analyses and the
application of those methods to the particular circumstances
and, therefore, such an opinion
is not readily susceptible to partial analysis or summary
description. Furthermore, in
arriving at its fairness opinion, PaineWebber did not
attribute any particular weight to any
analysis or factor considered by it, but rather made
qualitative judgments as to the
significance and relevance of each analysis or factor.
Accordingly, PaineWebber believes
that its analysis must be considered as a whole and that
considering any portion of such
analysis and of the factors considered, without considering
all analyses and factors, could
create a misleading or incomplete view of the process
underlying its opinion. In its
analyses, PaineWebber made numerous assumptions with
respect to industry performance,
31
<PAGE>
general business and economic conditions and other matters,
many of which are beyond the
control of the Company, CT and CTF. Any estimates
contained in these analyses are not
necessarily indicative of actual values or predictive of
future results or values, which
may be significantly more or less favorable than as
set forth therein, and none of
PaineWebber, the Company, CT or CTF assumes
responsibility for the accuracy of such
estimates. In addition, analyses relating to the value of
such businesses do not purport to
be appraisals or to reflect the prices at which business may
actually be sold.
The following paragraphs summarize the significant
analyses performed by PaineWebber
in its presentations to the Special Transaction Committee of
the Company and in delivering
its written opinion dated January 18, 1994. ^
The ^ Acquisition
Selected Comparable Public Company Analysis. Using
publicly available information,
PaineWebber compared selected historical and financial
operating data of the Company and the
CT Group and the stock market performance data of the
Company to the corresponding data of
certain publicly traded companies. These comparable
companies consisted of Butler
International, Inc., CRSS Services, Inc., Dycom Industries,
Inc., L.E. Myers Co. Group and
UTILX Corporation.
Because of the inherent differences between the
operations of the Company, CT Group
and the selected comparable companies, PaineWebber
believed that a purely quantitative
comparable company analysis would not be particularly
meaningful in the context of the
Acquisition. As PaineWebber informed the Special
Transaction Committee of the Board of
Directors of the Company, an appropriate use of comparable
public company analysis in this
instance would involve qualitative judgments concerning
differences between the financial
and operating characteristics which would affect the public
trading values of the selected
companies, the Company and CT Group.
To determine a valuation range for the CT Group based
upon comparable public company
analysis but subject to the foregoing limitations,
PaineWebber determined ranges of
32
<PAGE>
multiples of total value to revenues, total value to
earnings before interest, taxes,
depreciation and amortization ("EBITDA"), total value to
earnings before interest and taxes
("EBIT"), and equity value to net income. The comparable
public company analysis resulted
in a total value range for the CT Group of $50.0 million
to $65.0 million, from which
PaineWebber deducted the CT Group's pro forma total
outstanding debt and added back its cash
balance (after giving effect to the transactions contemplated
by the Acquisition Agreement),
resulting in an equity value range of $54.9 million to
$69.9 million. PaineWebber noted
that the negotiated equity value for the CT Group as
disclosed in the Acquisition Agreement
was $58.8 million.
Implied Stock Price Analysis. PaineWebber noted that
because the stockholders of the
CT Group will hold approximately 65% of the outstanding
common stock of the Company on a pro
forma basis after giving effect to the Acquisition and the
Redemption, the historical market
prices of the Company's Common Stock are not necessarily
indicative of the fair value of the
Company's Common Stock being issued in the Acquisition.
Using the range of equity values
that resulted from the comparable public company analysis
and dividing by the 10.25 million
shares of Common Stock to be issued in the Acquisition,
PaineWebber determined an implied
stock price range of $5.36 to $6.82 per share at which the
shares of Common Stock were being
issued in the Acquisition. PaineWebber then compared the
implied stock price to the price
of ^ the Company's Common Stock ^ on September 23, 1993
(the announcement date of the
Transaction), and for an average of the Company's stock
price for one month prior to the
announcement to determine the premiums of the implied
stock price over the price of the
Company's Common Stock. ^ This analysis indicated that the
range of implied premiums to the
September 23, 1993 stock market price is 64.8% to 109.9% and
that the range to average stock
market price is 96.2% to 149.8%.
Multiples Paid Analysis. PaineWebber performed
an analysis of the implied
multiples of the Acquisition for various historical
operating results for the CT Group's
nine months ended September 30, 1993, and the estimated
operating results for the fiscal
year ended December 31, 1993. PaineWebber utilized the
same range of values derived from
the comparable public company analysis to analyze the
resulting multiples. Using the CT
Group's historical operating results for the twelve months
ended September 30, 1993 resulted
in the following ranges: 0.9x to 1.2x sales; 3.6x to 4.7x
EBITDA; 3.8x to 5.0x EBIT; and
6.8x to 8.6x net income. Using the CT Group's estimated
operating results for the fiscal
year ended December 31, 1993 resulted in the following
ranges: 1.1x to 1.5x sales; 4.3x to
5.7x EBITDA; 4.6x to 6.0x EBIT; and 8.2x to 10.4x net income.
33
<PAGE>
Discounted Cash Flow Analysis. PaineWebber
analyzed the CT Group based on an
unlevered discounted cash flow analysis of the projected
financial performance of the CT
Group. Because the management of CT Group did not provide
projections other than an estimate
of the financial results for the fiscal year ended December
31, 1993, PaineWebber performed
several different discounted cash flow analyses utilizing a
range of revenue growth rates
and EBIT margins selected by PaineWebber based on
discussions with the management of the
Company and the CT Group.
The discounted cash flow analysis determined the
present value of the CT Group's
unlevered after-tax cash flows generated over a five year
period and then added to such
discounted value the present value of the estimated
residual valuation at the end of the
five years for each scenario to provide a total value.
"Unlevered after-tax cash flows"
were calculated as tax-effected EBIT plus depreciation and
amortization, plus (or minus) net
changes in non-cash working capital, minus capital
expenditures. The analysis utilized two
methodologies for determining the terminal value. The
first methodology calculated a
terminal value based upon a range of multiples of EBIT
from 6.0x to 7.5x. The second
methodology calculated a terminal value based on a range of
perpetual growth rates from 2.0%
to 5.0% of the unlevered after-tax cash flows. The
unlevered after-tax cash flows and the
terminal values were discounted using a range of discount
rates from 12.0% to 18.0% which
were selected by PaineWebber based on PaineWebber's
investment banking experience. This
range also reflects the risk assumptions applied by
PaineWebber to the financial forecasts.
PaineWebber noted that because of the inherent uncertainties
of the projections used in this
analysis, the results of this analysis may not be considered
particularly reliable.
The Redemption
Analysis of the Redemption. PaineWebber noted that,
as set forth in the Acquisition
Agreement, the satisfaction of all of the conditions
to the Redemption (other than
consummation of the Acquisition) was a condition to
consummation of the Acquisition and its
analysis of the Redemption was performed in that context.
34
<PAGE>
PaineWebber reviewed the terms of the 14%
Subordinated Debenture in the principal
amount of $17,500,000 and the Promissory Note in the then
principal amount of $1,374,000
issued by NBC to the Company. PaineWebber noted that the
terms of the 14% Subordinated
Debenture included a provision which rendered the
Subordinated Debenture callable at any
time. PaineWebber also noted that the Company carried
the Subordinated Debenture at a
discount on its books, but in arriving at the terms of the
Redemption , the Company valued
the Subordinated Debenture at its face amount.
Break-up Analysis. PaineWebber analyzed the net book
value per share of the Company
assuming the termination of the Company's operating
activities and the liquidation of the
Company's assets and liabilities. This analysis was
based upon: (i) the Company's
October 31, 1993 balance sheet; (ii) discussions with the
Company's management, including
their estimates of the realizable value of certain assets and
liabilities; (iii) real estate
appraisals prepared by an outside appraisal firm and provided
by the Company to PaineWebber;
and (iv) assumptions made by PaineWebber as to the
liquidation value of certain assets and
liabilities. To determine the net book value per share
of the Company in a break-up
scenario, PaineWebber determined the realizable value
(net of taxes) of the Company's
assets, deducted the book value of the Company's liabilities
and an estimate of liquidation
expenses, and then divided the result by approximately 8.8
million shares, the number of
outstanding shares of the Company's Common Stock as of
December 1, 1993. In performing this
analysis, PaineWebber applied a range of discounts
from 0.0% to 15.0% to the
appraised/estimated value of the Company's plant, property
and equipment. This analysis
resulted in a range of net book value per share from $4.61
to $5.34. The negotiated stock
price of $5.74 reflected in the Acquisition Agreement was
used by PaineWebber to determine
the implied premium to the range of net book values per
share. This analysis indicated a
range of premiums of 7.5% to 24.5% to the negotiated
stock price of $5.74 per share as
reflected in the Acquisition Agreement. In addition,
PaineWebber applied a 27.1% premium,
the average premium for the four week period prior to
the announcement of selected
transactions of between $30 to $400 million from January 1,
1992 to November 9, 1993, to the
range of net book value per share determined by the
break-up analysis. This analysis
resulted in a range of stock prices for the Company from
$5.86 to $6.79 per share.
Post-Acquisition; Pre-Redemption Analysis.
PaineWebber analyzed the equity value per
share of the Company assuming consummation of the
Acquisition but prior to the consummation
of the Redemption. In this analysis, the range of equity
values ($54.9 million to $69.9
35
<PAGE>
million) for the CT Group derived from the comparable
public company analysis was added to
the range of equity values ($40.4 million to $46.8) for
the Company derived from the
break-up analysis resulting in a combined equity value from
$95.3 million to $116.7 million.
Dividing this result by the number of shares outstanding
after the Acquisition and prior to
the Redemption (19.02 million shares) resulted in an equity
value per share range of $5.01
to $6.14. PaineWebber used the resulting net book values
per share to analyze the implied
premiums to the negotiated stock price of the Company.
On the basis of, and subject to the foregoing,
PaineWebber delivered a written opinion
to the Special Transaction Committee that each of the
Acquisition, Redemption, and
Transaction is fair, from a financial point of view, to the
Company and holders of Common
Stock other than NBC and its affiliates.
PaineWebber was selected by the Special Transaction
Committee as its financial advisor
in connection with the Acquisition because of its
background, reputation and expertise as
investment bankers and financial advisors. PaineWebber
regularly provides a range of
financial advisory and investment banking services,
including providing financial advisory
services to and valuations of companies involved in merger
and acquisition transactions.
PaineWebber has provided investment banking services to the
Special Transaction Committee
from time to time. During the past two years, PaineWebber
was paid approximately $275,000
in connection with investment banking services provided.
For financial advisory services in connection
with the consummation of the
Acquisition, including the rendering of its opinion,
the Company has agreed to pay
PaineWebber a fee of $10,000 per month for twelve months and
$125,000 upon delivery of their
written opinion. The Company has also agreed to reimburse
PaineWebber for its reasonable
fees and expenses of legal counsel, and to indemnify it
against certain expenses and
liabilities in connection with its services, including
those arising under federal
securities laws.
Terms of the Acquisition Agreement
36
<PAGE>
Sale and Purchase of Shares. The Acquisition
Agreement provides that the Company
shall acquire all of the issued and outstanding capital
stock of CT and CTF in exchange for
10,250,000 shares of the Common Stock of the Company.
Representations and Warranties. The Acquisition
Agreement contains various
representations and warranties made by each of the Company,
CT and CTF and relating to,
among other things, organization and similar corporate
matters, financial statements, taxes,
title to property and certain other matters.
Conditions of the Acquisition. The respective
obligations of the Company, CT and CTF
to effect the Acquisition are conditioned upon, among
other things, (i) approval of the
Acquisition Agreement and the transactions contemplated
thereby by the Board of Directors of
the Company and the holders of Common Stock; (ii) no
action or proceeding having been
instituted to restrain or prohibit any of the transactions
contemplated by the Acquisition
Agreement; (iii) expiration or termination of the waiting
period under the HSR Act and
receipt of all material consents and approvals required to
permit the consummation of the
transactions contemplated by the Acquisition Agreement;
(iv) the agreement effecting the
Redemption having been duly executed and delivered and
not having been terminated or
amended, and all conditions to the consummation of the
agreement between NBC and the Company
dated , 1994 (the "NBC Agreement") contemplated
thereby having been satisfied or
waived to the satisfaction of CT and CTF, except the
condition requiring the consummation of
the Acquisition; (v) the receipt of a written fairness
opinion from PaineWebber and (vi) the
fulfillment or waiver of certain other conditions,
including the receipt of the written
consent of certain lenders to the Company and the CT Group.
Under the terms and conditions
of the First Amendment, the parties waived their rights
under the Acquisition Agreement not
to consummate the Acquisition pursuant to Article VII of
the Acquisition Agreement as a
result of the filing of the 1993 Complaint.
Certain Covenants. Each of the Company, CT and CTF
have agreed, among other things,
that, during the period from the date of the Acquisition
Agreement to the Closing Date,
except as permitted by the Acquisition Agreement or as
consented to in writing by the other
party, each will conduct its operations in the ordinary
course of business, use its best
efforts to do all things necessary in order to consummate
the Acquisition and refrain from
entering into certain transactions in excess of certain
specified amounts.
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<PAGE>
Directors and Management of The Company Following the
Acquisition. The Acquisition
Agreement provides that upon consummation of the
Acquisition, the Board of Directors will
hold a meeting at which (i) Jorge Mas will be elected as
President and Chief Executive
Officer of the Company and the Board will determine his
compensation and (ii) the size of
the Board will be expanded from five to seven members.
The directors intend to appoint
Jorge L. Mas Canosa as a Class II Director and Jorge Mas as
a Class I Director. Prior to
the conducting of any other business at such meeting, Nick A.
Caporella (a Class I Director)
and Leo J. Hussey (a Class III Director) will resign from
the Board of Directors. The
remaining directors will appoint Eliot C. Abbott as a Class
II Director and Arthur B. Laffer
as a Class III Director, to fill the resulting vacancies.
Messrs. Canosa and Mas are
controlling stockholders of CT and CTF, respectively.
Registration Rights. The Acquisition Agreement
provides that commencing six months
after the Closing Date, the Company would register on two
occasions such number of Burnup
Shares as the CT and CTF stockholders requested (which
would not be less than 1,000,000
Burnup Shares in any one request) provided that at the time
of such request the CT and CTF
stockholders shall have owned in the aggregate at least 20%
of the shares of Common Stock
then outstanding. Upon such request, the Company had agreed,
subject to certain conditions,
to promptly prepare and file, at its expense, a registration
statement with the SEC.
The Acquisition Agreement also provides that
commencing six months following the
Closing Date, if the Company shall conduct an offering of
its securities, the Company will
allow the CT and CTF stockholders, subject to certain
conditions, to include a minimum of
50,000 shares in any such registration at the Company's
expense.
Indemnification. The Acquisition Agreement provides
that (i) the Company shall
indemnify and hold harmless CT, CTF and their respective
stockholders and (ii) the CT and
CTF stockholders shall indemnify and hold harmless the
Company, its subsidiaries and their
respective officers and directors from all damages arising
out of a misrepresentation or
breach of a warranty or covenant, agreement or obligation
contained in the Acquisition
Agreement. The CT and CTF stockholders shall be deemed to
have made a misrepresentation or
breached a warranty only if the damages suffered by the
Company exceed $1,000,000 and the
38
<PAGE>
aggregate liability of the CT and CTF stockholders is
limited to the sum of $1,000,000 plus
the aggregate fair market value of 350,000 Burnup Shares
on the date of payment. The
Company shall be deemed to have made a misrepresentation or
have breached a warranty only if
the damages suffered by the CT and CTF stockholders
exceed $2,750,000 and the Company's
aggregate liability is limited to the sum of $2,500,000. The
Acquisition Agreement provides
that at Closing, the Company will enter into an
Indemnification Agreement with certain
current and former directors and officers of the Company
pursuant to which the Company is
obligated to indemnify and hold harmless such directors and
officers to the fullest extent
permitted under Delaware law, subject to certain
limitations, for a period of six years
after Closing for all damages and costs which arise by reason
of the fact that they were or
are a director or officer of the Company.
Termination; Expenses. The Acquisition Agreement
will terminate if the Closing does
not occur prior to February 28, 1994 unless extended by
mutual agreement of the Company and
the CT Group. The Acquisition Agreement also provides that
in the event the Closing does
not occur due to the failure of the Company or CT and CTF
to fulfill certain conditions
(other than approval of the Acquisition Agreement by the
Company's stockholders) or due to a
party's failure to close, the breaching/non-fulfilling party
will pay the sum of $500,000 in
damages.
Government Approvals. The Acquisition is subject to
the requirements of the HSR Act
and the rules and regulations thereunder. On January 21,
1994, the Company and the CT Group
made the necessary filings under the HSR Act with the
Federal Trade Commission and Justice
Department. Under the provisions of the HSR Act, the
Acquisition may not be consummated
until the thirty day waiting period expires, unless the
request for early termination of the
waiting period by the Company and the CT Group is granted.
Certain Effects of the Acquisition
General Effect. Upon consummation of the Acquisition,
all the issued and outstanding
capital stock of CT and CTF will be acquired by the Company
and each of CT and CTF will be
wholly-owned subsidiaries of the Company.
39
<PAGE>
Change of Control. Upon consummation of the
Acquisition and the transactions
contemplated thereby, the former stockholders of CT and CTF
will own approximately 65% of
the outstanding Common Stock and to the extent they act
in concert will be controlling
stockholders of the Company. Accordingly, the former
stockholders of CT and CTF will have
the ability to control the affairs of the Company and
control the election of the Company's
directors regardless of how the other stockholders may vote.
Furthermore, such persons will
have the ability to control other actions requiring
stockholder approval, including certain
fundamental corporate transactions such as a merger or
sale of substantially all of the
assets of the Company, regardless of how the other
stockholders may vote. This ability may
be enhanced by the adoption of the proposed amendments to
the Certificate, including those
which would (i) increase the number of authorized shares of
the Company's common stock from
twenty-five million (25,000,000) to fifty million
(50,000,000) and (ii) eliminate all
designations, powers, preferences, rights, qualifications,
limitations and restrictions in
the Certificate of Incorporation relating to the Company's
preferred stock. See "PROPOSAL
TO APPROVE AMENDMENTS TO THE COMPANY'S CERTIFICATE OF
INCORPORATION".
These proposed amendments to the Certificate may be
deemed to have the effect of
making more difficult the acquisition of control of the
Company after the consummation of
the Acquisition by means of a hostile tender offer, open
market purchases, a proxy contest
or otherwise. On the one hand, these amendments may be seen
as encouraging persons seeking
to acquire control of the Company to initiate such an
acquisition through arms-length
negotiations with the Company; on the other hand, the
amendments may have the effect of
discouraging a third party form making a tender offer or
otherwise attempting to obtain
control of the Company, even though such an attempt may be
economically beneficial to the
Company and its stockholders. Furthermore, the proposed
amendments to the Certificate and
the fact that the CT and CTF stockholders will own
approximately 65% of the Common Stock of
the Company after the consummation of the Acquisition may
have a negative effect on the
market price and liquidity of the Common Stock ^ of the
Company.
^ Dilution. The issuance, pursuant to the Acquisition
Agreement of the Burnup Shares
to the stockholders of CT and CTF, will dilute
proportionately the aggregate voting power of
present holders of Common Stock. The stockholders of CT and
CTF will have the ability to
elect the entire Board of Directors and to approve certain
transactions at meetings of the
Company's stockholders regardless of the vote of the minority
stockholders.
40
<PAGE>
^ Outstanding Stock Options. Pursuant to the terms of
the Acquisition Agreement, the
Company is required to take such action as is necessary so
that its 1976 Stock Option Plan
and 1978 Stock Option Plan (the "Current Plans") provides
that each option to purchase
Common Stock (an "Option") and each right to elect an
alternate settlement method ("SAR")
held by (i) any employee of the Company who is terminated
other than for just cause by the
Company at any time during the twelve (12) month period
subsequent to October 15, 1993 shall
become immediately exercisable and vested, whether or not
previously exercisable or vested,
on the date of receipt by such employee of notice of
termination of employment by the
Company or receipt by the Company of notice of voluntary
termination, as the case may be,
and such employee shall, for a period of three months
thereafter, have the right to exercise
such Option or SAR, and (ii) any employee who is
terminated for just cause, or who
voluntarily terminates his employment subsequent to the
Closing Date shall not become
exercisable or vested except as currently provided under
such plans. The Acquisition
Agreement states that "termination for just cause"
includes termination by reason of a
material breach by the employee of his duties (after 10-day
notice thereof and opportunity
to cure), gross negligence, fraud or willful misconduct by
the employee in the performance
of his duties, excessive absences by the employee not
related to illness, misappropriation
by the employee of any assets of the Company or any of its
subsidiaries, commission by the
employee of any crime involving moral turpitude and
conviction of a felony. On November 16,
1993, the Compensation and Stock Option Committee and
Board of Directors ^ authorized
amendments to the Current Plans to comply with the terms of
the Acquisition Agreement.
Federal Income Tax Considerations. The Company, CT and
CTF do not intend to request a
ruling from the Internal Revenue Service (the "IRS")
regarding the federal income tax
consequences of the Acquisition. CT and CTF have received
an opinion from Price Waterhouse
to the effect that the Acquisition constitutes as a
"reorganization" within the meaning of
Section 368(a) of the Code. This opinion (referred to
herein as the "Tax Opinion") will
neither bind the IRS nor preclude the IRS from successfully
asserting a contrary position.
In addition, the Tax Opinion will be subject to certain
assumptions and qualifications and
will be based on the truth and accuracy of representations
made by CT and CTF and the CT and
CTF stockholders.
41
<PAGE>
A successful IRS challenge to the reorganization
status of the Acquisition would
result in each of the CT and CTF stockholders recognizing
gain or loss with respect to each
share of common stock of CT and CTF equal to the difference
between such stockholder's basis
in such share and the aggregate amount of consideration
received in exchange therefor. Such
stockholder's aggregate basis in the Common Stock so
received would then equal its fair
market value and his holding period for such stock
would begin the day after the
Acquisition.
Accounting Treatment. The Acquisition will be
accounted for as a "purchase", as such
term is used under generally accepted accounting
principles, for accounting and financial
reporting purposes. Because of certain factors
including the fact that the former
stockholders of the CT Group will hold a majority of the
Common Stock subsequent to the
closing of the Acquisition and that they or their designees
will constitute a majority of
the Board of Directors, it is anticipated that the
Acquisition will be treated as a "reverse
acquisition," with the CT Group considered to be the
acquiring entity. As a result, the
Company will establish a new accounting basis for its assets
and liabilities based upon the
fair values thereof and the CT Group's purchase price (based
on the market value of Common
Stock immediately prior to Closing), including the costs of
acquisition incurred by CT and
CTF. A final determination of required purchase
accounting adjustments and of the fair
value of the assets and liabilities of the Company has not
been made as of the date of this
Proxy Statement. Accordingly, the purchase accounting
adjustments made in connection with
the development of the unaudited pro forma financial
information appearing elsewhere in this
Proxy Statement are preliminary and have been made solely
for purposes of developing such
pro forma financial information to comply with disclosure
requirements of the SEC. The
Company will undertake a study to determine the fair value of
its assets and liabilities and
will make appropriate purchase accounting adjustments upon
completion of that study. For
financial purposes, the Company will consolidate the
results of operations of CT and CTF
with those of the Company's operations beginning with the
consummation of the Acquisition,
and the Company's financial statements for prior periods will
reflect the historical results
of CT and CTF. See "THE COMPANY, CT AND CTF UNAUDITED
COMBINED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS."
Bonus Service Pool. At or prior to Closing, the
Company may pay compensation in
recognition of loyalty and past service in the aggregate
amount of up to $1,000,000, to such
executive officers and employees of the Company and in such
amounts, as Nick A. Caporella
42
<PAGE>
shall determine in his sole discretion (after consultation
with Jorge Mas). No bonuses will
be awarded to Mr. Caporella.
Interest of Certain Persons in Matters to be Acted Upon
The Acquisition Agreement provides as a condition
to the consummation of the
Acquisition by the stockholders of CT and CTF and the
Company that (i) the Company shall
have entered into an agreement with NBC pursuant to which
the Company shall have agreed to
redeem and purchase 3,153,847 shares of Common Stock
owned by NBC, (ii) all of the
conditions to the consummation of the Redemption shall have
been satisfied or waived, except
the condition requiring consummation of the Acquisition,
and (iii) the stockholders of CT
and CTF shall have received a written certificate from the
Chief Executive Officer and ^
Chief Financial Officer of the Company that all of the
conditions to the consummation of the
Redemption shall have been satisfied or waived, except the
condition to the Redemption that
the Acquisition shall have occurred, which certificate shall
be supported by a certificate
from the Chief Executive Officer ^ of NBC, to the same
effect. Accordingly, the Acquisition
will be consummated prior to the Redemption.
^ The Redemption was negotiated and approved by the
Special Transaction Committee on
behalf of the stockholders of the Company (other than
NBC and its affiliates). The
Redemption will not be consummated unless the Acquisition
shall have occurred. Accordingly,
assuming satisfaction of all other conditions to the
consummation of the Acquisition,
approval by stockholders of the Acquisition Agreement shall
result in consummation of the
Redemption. NBC, which currently holds approximately 36% of
the Common Stock, will vote in
connection with the proposal to approve the Acquisition
Agreement. The consideration for
the Redemption and purchase will be the cancellation of
the outstanding principal of
$17,500,000 under the Subordinated Debenture owed to the
Company by NBC and crediting the
next succeeding principal payments in the amount of $592,313
of Other Indebtedness with an
outstanding principal amount of $1,371,430 owed to the
Company by NBC. Nick A. Caporella,
the Chairman of the Board of Directors, President and Chief
Executive Officer of the Company
is also the Chairman of the Board of Directors,
President, Chief Executive Officer and
controlling stockholder of NBC. On November 16, 1993,
the Board of Directors of the
Company approved the Redemption. The Board of Directors of
NBC has not yet met to consider
the terms of the Redemption. See " PROPOSAL TO APPROVE
ACQUISITION AGREEMENT WITH CHURCH &
43
<PAGE>
TOWER, INC. AND CHURCH & TOWER OF FLORIDA, INC. - ^ Interest
of Certain Persons in Matters
to be Acted Upon." For a discussion of the negotiations
relating to the Acquisition and
Redemption and a description of the terms of the
Acquisition Agreement^, see "PROPOSAL TO
APPROVE ACQUISITION AGREEMENT WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC.
- Background of Transaction" and "PROPOSAL TO APPROVE
ACQUISITION AGREEMENT WITH CHURCH &
TOWER, INC. AND CHURCH & TOWER OF FLORIDA, INC. - Terms of
the Acquisition Agreement."
^ Operations Following the Acquisition
^ Following consummation of the Acquisition, each of CT
and CTF will be a wholly-owned
subsidiary of the Company. Other than as described below,
it is the present intention of
the Company to operate CT and CTF under their present
names and related trade names in
substantially the same manner following consummation of the
Acquisition as currently being
operated.
^ Following consummation of the Acquisition, it is
anticipated that the Board of
Directors will attempt to integrate the businesses of the
Company, CT and CTF as promptly
and cost efficiently as is practicable, to assess the
strengths and weaknesses of the
combined enterprise and, in light of the foregoing, to
attempt to capitalize on emerging
opportunities both in the United States and abroad. In the
process, changes may be effected
in the Company's capitalization, dividend policy,
corporate structure, business or
management as the Board of Directors may from time to time
determine to be necessary or
desirable. However, except as noted in this Proxy
Statement, the proposed Board of
Directors ^(after the Acquisition) has no present plans or
proposals which would result in
an extraordinary corporate transaction, such as a merger,
reorganization, liquidation,
relocation of operations, or sale or transfer of assets
involving the Company, or any
material changes in the Company's corporate structure, or
business.
Appraisal Rights
44
<PAGE>
Holders of Common Stock are not entitled to
dissenters' rights of appraisal or other
dissenters' rights under Delaware law with respect to the
Acquisition or any transactions
contemplated by the Acquisition Agreement.
Restrictions on Resales of Burnup Shares to be Issued in the
Acquisition
The Burnup Shares to be issued in the Acquisition
shall be restricted from transfer,
subject to the resale limitations of Rule 144 under the
Securities Act of 1933, as amended
(the "Securities Act") or pursuant to an exemption from the
registration requirements of the
Securities Act.
In general, under Rule 144 as currently in effect, a
person who has beneficially owned
restricted shares for at least two years, including an
"affiliate" as that term is defined
under the Securities Act, is entitled to sell, within any
three-month period, a number of
such shares that does not exceed the greater of 1% of the
then outstanding shares of common
stock or the average weekly trading volume of the common
stock during the four calendar
weeks preceding such sale. Rule 144 also generally
permits a person (other than an
affiliate of the Company) who has owned restricted shares
for at least three years to sell
such shares without any volume limitation. For purposes of
Rule 144, some or all of the ^
stockholders of CT and CTF prior to closing will be deemed
to be affiliates of the Company
following the consummation of the Acquisition. See
"PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER, INC. AND CHURCH ^ AND TOWER OF
FLORIDA, INC. - ^ Terms of the
Acquisition Agreement - Registration Rights."
Certain ^ Expenses of the Acquisition
^ It is estimated that the expenses to be incurred in
connection with the Acquisition
and Redemption will be approximately $900,000.
Included in this amount are legal,
accounting, printing, solicitation and other costs in
connection with the preparation and
dissemination of this Proxy Statement, and the fees for
financial advisory services and
fairness opinions.
45
<PAGE>
^ Memorandum of Understanding
^
The Company's Certificate requires the affirmative
vote or consent of the holders of
four-fifths of all classes of the Company's stock entitled to
vote in elections of directors
of the Company (the "Voting Shares") in connection with
certain transactions with any
person, corporation or other entity ("Affiliated Entity")
beneficially owning 10% or more of
the outstanding Voting Shares. The Certificate provides,
however, that the foregoing
provision is not applicable to such transactions if the
Board of Directors has approved by
resolution a memorandum of understanding (a "Memorandum
of Understanding") with such
Affiliated Entity with respect to such transactions prior to
the time such Affiliated Entity
became an Affiliated Entity. In order to induce the
stockholders of CT and CTF to enter
into the Acquisition Agreement and by eliminating the effects
of the foregoing provisions of
the Certificate, the Company entered into a Memorandum of
Understanding with each of Neff
Machinery, Inc., Neff Rental, Inc. and Atlantic Real Estate
Holding Corp. ("Neff Machinery,"
"Neff Rental" and "Atlantic," respectively) prior to the
execution of the Acquisition
Agreement . Each of Neff Machinery, Neff Rental and
Atlantic is ^ controlled by ^ one or
more stockholders of CT and CTF ^ and accordingly, following
consummation of the Acquisition
and by virtue of the ownership of the Burnup Shares by
the CT Group, would be deemed
affiliates of the Company. Although the stockholders of
CT and CTF have no present
intention of selling these companies to the Company,
following consummation of the
Acquisition, the Company ^ will ^ purchase and lease
equipment and parts from, and obtain
services from, these companies upon such terms and
conditions as the Board of Directors
shall approve, which terms and conditions will be no less
favorable to the ^ Company than
those that would be obtained in transactions of a
similar type with unaffiliated third
parties.
^ THE BOARD OF DIRECTORS OF THE COMPANY, BY THE
UNANIMOUS VOTE OF ALL DIRECTORS
(OTHER THAN WITH RESPECT TO THE REDEMPTION, MR. CAPORELLA,
WHO ABSTAINED) HAVE CONCLUDED
THAT THE TRANSACTIONS CONTEMPLATED BY THE ACQUISITION
AGREEMENT ARE FAIR AND IN THE BEST
INTEREST OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT
THE STOCKHOLDERS APPROVE AND
ADOPT THE ACQUISITION AGREEMENT. THE COMPANY'S DIRECTORS
AND NAMED EXECUTIVE OFFICERS ARE
46
<PAGE>
THE RECORD OWNERS OF 296,877 SHARES OF COMMON STOCK
(APPROXIMATELY 3.3% OF THE OUTSTANDING
SHARES) AND HAVE INDICATED THAT THEY INTEND TO VOTE THEIR
SHARES FOR THE APPROVAL OF THE
ACQUISITION AGREEMENT.
47
<PAGE>
PROPOSAL TO APPROVE AMENDMENTS TO
THE
COMPANY'S CERTIFICATE OF
INCORPORATION
As a condition to the consummation of the Acquisition,
the Company is required to have
approved each of the amendments to its Certificate proposed
by the CT and CTF stockholders.
The Board of Directors has approved a resolution
proposing to amend and restate the
Certificate, as described below, subject to approval of
the Acquisition by the Company's
stockholders. The proposed amendments to the Certificate
will not be effected unless a
majority of the shares of outstanding Common Stock vote in
favor of each amendment. The
Board of Directors believes that it is advisable and in the
best interest of the Company to
approve each of the amendments to the Certificate in order
to assure that, assuming the
requisite stockholder vote is obtained and all other
conditions to the Acquisition Agreement
are fulfilled, the Acquisition can be consummated. The
adoption of the amendments is
contingent upon the consummation of the Acquisition ^ and,
as such, will not be approved
unless the Acquisition Agreement is approved by a vote of a
majority of the shares of Common
Stock represented in person or by proxy at the Meeting.
Upon consummation of the Acquisition, the former
stockholders of CT and CTF will own
approximately 65% of the issued and outstanding shares
of voting common stock of the
Company. Accordingly, the former stockholders of CT and
CTF will have the ability to
control the affairs of the Company and control the
election of the Company's directors
regardless of how the other stockholders may vote.
Furthermore, such persons will have the
ability to control other actions requiring stockholder
approval, including certain
fundamental corporate transactions such as a merger or
sale of substantially all of the
assets of the Company, regardless of how the other
stockholders may vote. This ability may
be enhanced by the adoption of the proposed amendments to
the Certificate, including those
which would (i) increase the number of authorized shares of
the Company's common stock from
twenty-five million (25,000,000) to fifty million
(50,000,000) and (ii) eliminate all
designations, powers, preferences, rights, qualifications,
limitations and restrictions in
the Certificate relating to the Company's preferred stock.
These proposed amendments to the Certificate may be
deemed to have the effect of
making more difficult the acquisition of control of the
Company after the consummation of
48
<PAGE>
the acquisition by means of a hostile tender offer, open
market purchases, a proxy contest
or otherwise. On the one hand, these amendments may be seen
as encouraging persons seeking
to acquire control of the Company to initiate such an
acquisition through arms-length
negotiations with the Company; on the other hand, the
amendments may have the effect of
discouraging a third party form making a tender offer or
otherwise attempting to obtain
control of the Company, even though such an attempt may be
economically beneficial to the
Company and its stockholders. Furthermore, the proposed
amendments to the Certificate and
the fact that the CT and CTF stockholders will own
approximately 65% of the common stock of
the Company after the consummation of the Acquisition may
have a negative effect on the
market price and liquidity of the common stock of the
Company.
The principal features of the proposed amendments
are described below but this
discussion is qualified in its entirety by reference
to the text of the Company's
Certificate as previously amended, and of the proposed
Amended and Restated Certificate set
forth in Appendices D and E hereto, respectively.
Generally. The proposed amendment to the Certificate
would:
1. Change the name of the Company to MasTec Inc.;
2. Increase the total number of shares of common
stock which the Company is
authorized to issue from 25,000,000 to 50,000,000;
3. Eliminate all designations, powers,
preferences, rights, qualifications,
limitations and restrictions prescribed in the Certificate
relating to the 5,000,000 shares
of preferred stock authorized by the Certificate and which
may in the future be issued by
the Company; and
4. Approve the provisions of Section 102(b)(7) of
Delaware General Corporation Law
relating to the liability of directors (the "Delaware Law").
49
<PAGE>
In addition to the foregoing amendments, the
Board of Directors has approved
resolutions proposing to restate the Certificate in order
to (i) clarify and/or shorten
certain provisions of the Certificate, (ii) update the
language of certain provisions of the
Certificate to conform with applicable sections of the
Delaware Law, (iii) incorporate into
a single document various amendments made to the original
Certificate since July 26, 1968,
and (iv) renumber the various articles and paragraphs of
the Certificate for ease of
reference.
Copies of the Company's Certificate, as previously
amended, and of the proposed
Amended and Restated Certificate are set forth in Appendices
D and E hereto, respectively.
Change of Corporate Name. The first of the proposed
amendments to the Certificate
would change the name of the Company to MasTec Inc.
The CT and CTF stockholders have required this
amendment to the Certificate because
they believe that (i) the proposed name will make it easier
for the financial community and
others with whom the Company does business to associate
the Company with its principal
business, (ii) the proposed name, by indicating the
Company's principal business, also
indicates the technological and other resources of the
Company, thus making it easier to
attribute such resources to the Company's subsidiaries and
affiliates and (iii) the founders
of the Company, whose surnames form the current name of the
Company, are no longer involved
in its management.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE FOREGOING AMENDMENT TO THE
CERTIFICATE OF INCORPORATION AND RECOMMENDS THAT
STOCKHOLDERS VOTE IN FAVOR OF THE
AMENDMENT. THE COMPANY'S DIRECTORS AND NAMED EXECUTIVE
OFFICERS ARE THE RECORD OWNERS
296,877 SHARES OF COMMON STOCK (APPROXIMATELY 3.3% OF THE
OUTSTANDING SHARES) AND HAVE
INDICATED THAT THEY INTEND TO VOTE THEIR SHARES FOR
THE APPROVAL OF THE FOREGOING
AMENDMENT.
50
<PAGE>
Increase In Authorized Capital Stock. The second of
the proposed amendments to the
Certificate would amend existing Article FIRST of the
Certificate to increase the number of
shares of Common Stock authorized to be issued by the
Company from 25,000,000 to 50,000,000
shares. Such additional shares of Common Stock will be a
part of the existing class of
Common Stock of the Company and, if and when issued,
will have the same rights and
privileges as the shares of Common Stock of the Company
presently outstanding.
As of the Record Date, the Company had 8,768,339
shares of Common Stock outstanding,
1,459,000 shares of Common Stock reserved for issuance upon
conversion of the Company's 12%
Convertible Subordinated Debentures due November 15, 2000,
and 547,000 shares of Common
Stock reserved for issuance under the Company's 1976 and
1978 Non-Qualified Stock Option
Plans. See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT WITH
CHURCH & TOWER, INC. AND CHURCH
^ & TOWER OF FLORIDA, INC. - ^"Certain Effects of the
Acquisition - Outstanding Stock
Options."
^ Set forth below are the number of shares of
capital stock authorized, issued and
outstanding, and unissued, as of the Record Date, and
assuming the Certificate is amended as
proposed and the Acquisition and the Redemption ^ are
consummated:
<TABLE>
<CAPTION>
At January , 1994 If
Acquisition is Consummated
Authorized
Authorized
Issued and & Not
Issued and & Not
Class Authorized Outstanding Outstanding
Authorized Outstanding Outstanding
<S> <C> <C> <C> <C>
<C> <C>
Common Stock 25,000,000 8,768,000 16,232,000
50,000,000 15,864,153 34,135,847
Preferred Stock 5,000,000 0 0
5,000,000 0 0
</TABLE>
51
<PAGE>
Once authorized, the additional shares of Common
Stock will be issuable without
further authorization of the stockholders and on such terms
and for such consideration as
may be determined by the Board of Directors provided that
such consideration is at least
equal to the par value thereof. No stockholder has
preemptive rights.
The proposed increase in the number of authorized but
unissued shares of Common Stock
of the Company could have the effect of frustrating or
discouraging an attempt to take over
control of or merge with the Company because such shares
could be issued to dilute the stock
ownership of any person seeking to obtain control of or merge
with the Company.
CT ^ and CTF have required, as a condition of the
Acquisition, that the Company
increase the number of authorized and unissued shares of
Common Stock of the Company. Such
shares would be available for possible use in the future in
connection with the ^ raising of
additional capital, the acquisition of other companies or
assets, the payment of stock
dividends, the subdivision of outstanding shares through
stock splits, the adoption and
implementation of additional share incentive plans and other
corporate purposes approved by
the Board of Directors. Except as discussed elsewhere in
this Proxy Statement, the CT and
CTF stockholders have no present plan to utilize any of
the additional shares of Common
Stock for which authorization is sought.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
FOREGOING AMENDMENT TO THE CERTIFICATE
OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE AMENDMENT. THE
COMPANY'S DIRECTORS AND NAMED EXECUTIVE OFFICERS ARE THE
RECORD OWNERS 296,877 SHARES OF
COMMON STOCK (APPROXIMATELY 3.3% OF THE OUTSTANDING
SHARES) AND HAVE INDICATED THAT THEY
INTEND TO VOTE THEIR SHARES FOR THE APPROVAL OF THE
FOREGOING AMENDMENT.
Designations, Powers, Preferences, Rights,
Qualifications, Limitations and
Restrictions Relating to Preferred Stock. The third of
the proposed amendments to the
Certificate would delete paragraphs 3 through 14 from
Section B of existing Article FOURTH
of the Certificate. Paragraphs 3 through 14 prescribe
certain powers, preferences, rights,
qualifications, limitations and restrictions for all series
of preferred stock issued by the
Company, including, among other things, (i) the
declaration and payment of dividends on
preferred stock, (ii) the distribution of the assets of
the Company with respect to the
preferred stock upon any liquidation, dissolution or
winding up of the Company, (iii) the
52
<PAGE>
status of shares of preferred stock upon redemption or
purchase thereof by the Company, (iv)
restrictions on the declaration and payment of dividends on,
and the redemption or purchase
of, any shares of common stock or other class of stock of
the Company ranking junior to the
preferred stock, (v) restrictions concerning the creation
of other classes of preferred
stock, (vi) restrictions concerning the ability of the
Company to increase the authorized
number of shares of preferred stock and (v) the automatic
right of holders of preferred
stock to elect, as a separate class, two additional
directors to the Board of Directors
under certain circumstances. No shares of preferred
stock are currently issued and
outstanding.
By deleting 3 through 14 of Section B of existing
Article FOURTH of the Certificate,
the Board of Directors would have the authority to
determine, among other things, with
respect to each series of preferred stock which may
be issued (i) the distinctive
designation and number of shares constituting such series,
(ii) the dividend rates, if any,
on the shares of that series and whether dividends would
be payable in cash, property,
rights or securities, (iii) whether dividends would be
non-cumulative, cumulative to the
extent earned, partially cumulative or cumulative and, if
cumulative, the date from which
dividends on the series would accumulate, (iv) whether, and
upon what terms and conditions,
the shares of that series would be convertible into or
exchangeable for other securities or
cash or other property or rights, (v) whether, and upon
what terms and conditions, the
shares of that series would be redeemable, (vi) the rights
and the preferences, if any, to
which the shares of that series would be entitled in the
event of voluntary or involuntary
dissolution or liquidation of the corporation, (vii)
whether a sinking fund would be
provided for the redemption of the series and, if so, the
terms of and amounts payable into
such sinking fund, (viii) whether the holders of such
securities would have voting rights
and the extent of those voting rights, (ix) whether the
issuance of any additional shares of
such series, or any other series, would be subject to
restrictions as to issuance or as to
the powers, preferences or rights of any such other series
and (x) any other preferences,
privileges and relative rights of such series as the Board of
Directors may deem advisable.
It is not possible to state the precise effect of the
deletion of paragraphs 3 through
14 of Section B of existing Article FOURTH upon the rights
of holders of Common Stock until
the Board of Directors determines the respective
preferences, limitations and relative
rights of the holders of one or more series of the
preferred stock. Such effect might
include, however, (i) reduction of the amount otherwise
available for payment of dividends
53
<PAGE>
on Common Stock, (ii) restrictions on dividends on
Common Stock if dividends on the
preferred stock are in arrears, (iii) dilution of the
voting power of the Common Stock to
the extent that the preferred stock has voting rights and
(iv) reduction in the interests of
the holders of Common Stock in the Company's assets upon
liquidation to the extent of any
liquidation preference granted to the preferred stock.
Deletion of paragraphs 3 through 14 of Section B of
existing Article FOURTH may be
viewed as having the effect of discouraging an unsolicited
attempt by another person or
entity to acquire control of the Company. Issuances of
authorized preferred shares can be
implemented with voting or conversion privileges which make
acquisition of control of the
Company more difficult or more costly. Such an issuance
could discourage or limit the
stockholders' participation in certain types of transactions
that might be proposed (such as
a tender offer), whether or not such transactions were
favored by a majority of the
stockholders, and could enhance the ability of officers
and directors to retain their
positions with the Company.
The CT and CTF stockholders believe that paragraphs
3 through 14 of Section B of
existing Article FOURTH of the Certificate overly restrict
the ability of the Board of
Directors to issue shares of preferred stock with such
powers, preferences and rights as may
be suitable for achieving a valid corporate purpose. The
CT and CTF stockholders believe
that the complexity of modern business financing and
acquisition transactions requires
greater flexibility in the corporation's capital structure
than now exists. By deleting
paragraphs 3 through 14 of Section B of Article FOURTH, the
Board of Directors would have
the authority to issue shares of preferred stock from
time to time with such powers,
preferences and rights as the Board of Directors may
determine appropriate to achieve a
valid corporate purpose, including, the raising of additional
capital and the acquisition of
other companies or assets. The CT and CTF stockholders do
not presently have any plan to
issue any shares of preferred stock.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
FOREGOING AMENDMENT TO THE CERTIFICATE
OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE AMENDMENT. THE
COMPANY'S DIRECTORS AND NAMED EXECUTIVE OFFICERS ARE THE
RECORD OWNERS 296,877 SHARES OF
COMMON STOCK (APPROXIMATELY 3.3% OF THE OUTSTANDING
SHARES) AND HAVE INDICATED THAT THEY
INTEND TO VOTE THEIR SHARES FOR THE APPROVAL OF THE
FOREGOING AMENDMENT.
54
<PAGE>
Liability of Directors for Monetary Damages for
Certain Breaches of Fiduciary Duty.
Pursuant to Section 102(b)(7) of the Delaware Law, the
Company is permitted to include in
its Certificate a provision limiting the liability of its
directors for monetary damages for
breaches of their fiduciary duty of care.
In accordance with such statute, it is proposed that
the Certificate be amended by
adding thereto the following:
No director of the Company shall have personal
liability to the Company or its
stockholders for monetary damages for breach of
fiduciary duty as a director
except (i) for any breach of such director's duty of
loyalty to the Company or
its stockholders, (ii) for acts or omissions not in
good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of
Delaware Law relating to unlawful distributions and
(iv) for any transaction
from which such director derives an improper personal
benefit.
The proposed limitations on a director's liability to
the Company and its stockholders
(i) will have no effect on the availability of equitable
remedies such as injunction or
rescission in the event of a breach of a director's
fiduciary duty of care and (ii) relates
only to future conduct and will not eliminate liability,
even monetary, for conduct which
pre-dates the effectiveness of the proposed amendment.
The Company is not aware of any
pending or threatened claims which would be affected or
covered by the proposed amendment.
The proposed limitations will reduce the availability
of remedies to the Company and
its stockholders for negligent misconduct by directors in
certain circumstances. However,
the CT and CTF stockholders believe that it is in the
best interests of the Company to
approve such limitations for two reasons. First, although
the CT and CTF stockholders have
received no indications that qualified persons would be
unwilling to serve as independent
directors in the absence of such limitations, the CT and CTF
stockholders believe, based on
discussions with some of the proposed nominees, that the
presence of such provisions makes
it easier to attract qualified independent directors to
serve on the Company's Board of
55
<PAGE>
Directors, Second, the CT and CTF stockholders believe that
such limitations may reduce the
Company's cost to maintain directors' and officers' liability
insurance coverage.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
FOREGOING AMENDMENT TO THE CERTIFICATE
OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE AMENDMENT. THE
COMPANY'S DIRECTORS AND NAMED EXECUTIVE OFFICERS ARE THE
RECORD OWNERS 296,877 SHARES OF
COMMON STOCK (APPROXIMATELY 3.3% OF THE OUTSTANDING
SHARES) AND HAVE INDICATED THAT THEY
INTEND TO VOTE THEIR SHARES FOR THE APPROVAL OF THE
FOREGOING AMENDMENT.
Restatement of Certificate. The Company, directly
or through one or more of its
subsidiaries, conducts a variety of businesses. The conduct
of some of those businesses is
specifically authorized under Paragraphs 1 through 9 of
existing Article THIRD of the
Certificate while others are conducted under Paragraph 10
of existing Article THIRD which
authorizes the Company "to conduct any lawful business, to
exercise any lawful purpose and
power, and to engage in any lawful act or activity for which
corporations may be organized."
The authority granted under Paragraph 10 of existing
Article THIRD of the Certificate
is sufficiently broad to authorize the Company to conduct
all businesses in which it is
currently engaged or may in the future engage.
Accordingly, the CT and CTF Stockholders
believe that Paragraphs 1 through 9 of existing Article
THIRD are unnecessary and have
proposed that they be deleted from the Certificate and that
the text of Article THIRD of the
Certificate be restated to read in its entirety as follows:
The purpose of the Company is to engage in any lawful
act or activity for which
corporations may be organized under Delaware Law.
The CT and CTF stockholders have proposed that the text
of paragraph 3 of Section A of
existing Article FOURTH of the Certificate be restated as
follows in order to clarify its
meaning and conform it with Sections 243 and 244 of Delaware
Law:
56
<PAGE>
The Board of Directors may retire any and all shares
of Common Stock that are
issued but are not outstanding, including shares of
Common Stock purchased or
otherwise reacquired by the Company, and may reduce
the capital of the Company
in connection with the retirement of such shares in
the manner provided for
under Delaware Law.
The CT and CTF stockholders have proposed that the text
of paragraph 4 of Section A of
existing Article FOURTH of the Certificate be restated
in order to clarify that upon
liquidation of the Company each holder of Common Stock will
be entitled, after payment or
provision for payment of the debts and other liabilities of
the Company and the amounts to
which the holders of the Preferred Stock are entitled, to
share in the remaining net assets
of the Company on a pro-rata basis based on the number of
shares of Common Stock held by
such holder and the total number of shares of Common Stock
then outstanding.
Section 245 of Delaware Law permits the Company to omit
from a restated certificate of
incorporation any provision of the original certificate of
incorporation which named the
incorporator. Accordingly, the CT and CTF stockholders have
proposed that Article FIFTH of
the existing Certificate be deleted from the proposed
Amended and Restated Certificate of
the Company.
In addition to the amendments and restatements
described above, the CT and CTF
stockholders have proposed that (i) certain other provisions
of the Certificate be restated
for the purpose of clarifying such provisions or making
them consistent with the proposed
amendments described above, without changing the substance
of such provisions, (ii) the
various amendments made to the original Certificate since
July 26, 1968 to the extent not
amended in the foregoing amendments be incorporated into a
single document, and (iii) the
various articles and paragraphs of the Certificate be
renumbered for ease of reference.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
FOREGOING AMENDMENT TO THE CERTIFICATE
OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE AMENDMENT. THE
COMPANY'S DIRECTORS AND NAMED EXECUTIVE OFFICERS ARE THE
RECORD OWNERS 296,877 SHARES OF
COMMON STOCK (APPROXIMATELY 3.3% OF THE OUTSTANDING
SHARES) AND HAVE INDICATED THAT THEY
INTEND TO VOTE THEIR SHARES FOR THE APPROVAL OF THE
FOREGOING AMENDMENT.
57
<PAGE>
58
<PAGE>
PROPOSAL TO APPROVE 1994 STOCK
OPTION
PLAN FOR NON-EMPLOYEE DIRECTORS
The CT and CTF Stockholders have proposed, subject
to approval by the Board of
Directors and the holders of Common Stock, the Burnup & Sims
Inc. 1994 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan"). The
Directors' Plan is designed to maintain
the Company's ability to attract and retain the services of
experienced and highly qualified
non-employee or outside directors and to increase the
proprietary interest of such directors
in the Company's continued success. In the event the
Directors Plan is approved by the
Board of Directors, the Directors' Plan will have been
approved if a majority of the shares
present, or represented, and entitled to vote at the
Meeting ^ are voted in favor of it.
The adoption of the Directors' Plan is contingent upon
consummation of the Acquisition and,
as such, will not be approved unless the Acquisition
Agreement is approved by a vote of a
majority of the shares of Common Stock represented in person
or by proxy at the Meeting.
The ^ principal features of the Directors' Plan are
summarized below, but this summary
is qualified in its entirety by reference to the terms of
the Directors' Plan, which is
attached hereto as Appendix F.
Summary of Directors' Plan
If authorized at the Meeting, grants of stock options
will automatically be made to
each individual who is elected to the Board of Directors at
a meeting of stockholders held
at any time after the day on which the Directors' Plan is
approved by the stockholders,
provided the individual (i) is not and has not been an
employee of the Company or any of its
subsidiaries and (ii) is not otherwise eligible to
participate in any plan of the Company or
any of its subsidiaries which would entitle such
director to acquire securities or
derivative securities of the Company. Grants of stock
options will also be automatically
made to each director who is at any time after the
Directors' Plan is approved by the
stockholders appointed by the Board of Directors to fill a
vacancy on the Board, subject to
the same eligibility requirements stated above.
59
<PAGE>
An aggregate of 400,000 shares of Common Stock
(subject to adjustment as described
below and provided in the Directors' Plan) will be subject
to the Plan. Shares subject to
options which terminate or expire unexercised will
become available for future option
grants. Subject to the maximum number of shares which are
subject to the Plan, options will
be granted to each then eligible director on the day after
the day on which the Directors'
Plan is approved by the stockholders and on the day
after each annual meeting of
stockholders held thereafter, until that held in the year
2004.
Subject to certain restrictions and limitations set
forth below, each option will
permit the non-employee director, for a period of up to
ten years from the date of grant
(unless the period is shortened as indicated below), to
purchase from the Company 30,000
shares of the Company's Common Stock (subject to adjustment
as provided in the Directors'
Plan) at the fair market value of such shares on the date
the option is granted as reported
on NASDAQ.
Except as noted below, an option shall not be
exercisable prior to the expiration of
one year from the date of grant. One half of the total
number of shares covered by the
option shall become exercisable on the first anniversary date
of the grant and an additional
one-quarter of the total number of shares covered by the
option shall become exercisable on
each of the two succeeding anniversary dates of the grant
date. Except as noted below, an
option may be exercised, only if the optionee at the time of
exercise is, and at all times
since the grant of the option, has been a director of
the Company. Each option is
nonassignable and non-transferable other than by will
or the laws of descent and
distribution.
In the event a non-employee director terminates
service on the Board of Directors by
reason of retirement, each unexpired option held by the
optionee will, to the extent
otherwise exercisable on such date, remain exercisable until
the earlier of ten years from
the date of grant or three years following such retirement.
The term "retirement" means
termination after at least six years of service as a
director.
60
<PAGE>
In the event a non-employee director terminates
service on the Board of Directors by
reason of death or disability, any then unexpired option
that has been outstanding for at
least one year (six months in the case of death) will become
exercisable in its entirety and
those and all other exercisable options will continue to be
exercisable until the earlier of
ten years from the date of grant or three years after such
termination. In the event a
non-employee director terminates service on the Board of
Directors other than by reason of
retirement, death or disability, all unexercised
options shall terminate upon such
termination of service.
In the event of a "change in control" of the Company at
any time on or after March 1,
1994, then all of the optionee's outstanding options
become immediately exercisable ^.
However, the provisions regarding termination of service as a
director continue to apply and
in no event may an option be exercised prior to the
expiration of six months from the date
of grant or after ten years from the date of grant. Change
in control is generally defined
to include (i) a merger or consolidation in which the
Company is not the surviving
corporation or pursuant to which any shares of the Company
are to be converted into cash,
securities or other property, or any sale, lease, exchange
or other transfer of all, or
substantially all, of the assets of the Company, (ii) the
approval by the shareholders of
any plan for the liquidation or dissolution of the
Company, (iii) the acquisition by a
"person" or "group," as defined in the Directors' Plan,
of 33% or more of the Company's
Common Stock or (iv) if individuals constituting the
"Incumbent Board," as defined in the
Directors' Plan, cease to constitute a majority of the
whole Board of Directors of the
Company.
Payment of the option price upon exercise may be
made in cash, by the delivery of
Common Stock already owned by the non-employee director, a
combination of cash and shares,
or in accordance with a cashless exercise program under which
shares of Common Stock may be
issued directly to the optionee's broker or dealer upon
receipt of the purchase price in
cash from the broker or dealer. No optionee shall have
any rights to dividends or other
rights of a stockholder with respect to his or her shares
subject to the option until the
optionee has given written notice of exercise and has paid
in full for such shares. The
optionee shall be required to pay to the Company, such
amount as the Company may demand to
satisfy any tax withholding obligation. Tax withholding
obligations may be met by a
withholding of stock otherwise deliverable to the optionee
under procedures approved by the
Board of Directors.
61
<PAGE>
The Directors' Plan will be administered by the
Board of Directors who will be
authorized to interpret the Directors' Plan. However, the
Board will have no authority in
respect of the selection of directors to receive options,
the number of shares subject to
the Directors' Plan, the number of options to be granted,
the number of shares in each
grant, the option price for shares subject to options, the
period during which options may
be granted or exercised, or the class of persons eligible
to receive options. The Board
also may not materially increase the benefits under the
Directors' Plan or, without further
approval of the stockholders, amend the Plan in any of
the foregoing respects provided,
however, that the Directors' Plan provisions affecting the
amount of Common Stock to be
awarded to eligible directors, the timing of those awards
or the determination of those
eligible to receive such awards may not be amended more
than once every six months, other
than to comport with changes in the Code, the Employee
Retirement Income Security Act of
1974, as amended, or the rules thereunder. No
stockholder approval will be required,
however, if the Board of Directors obtains a legal opinion
stating that such approval is not
required under the Securities Exchange Act of 1934, in
order for the options granted under
the Plan to continue to be exempt from the operation of
Section 16(b) of such Act.
Adjustments shall be made in the number and class
of shares available under the
Directors' Plan and the number, class and price of shares
subject to outstanding option
grants, in each such case to reflect changes in the
Company's Common Stock through changes
in the Company's corporate structure or capitalization,
such as through a merger or stock
split.
Federal Income Tax Consequences
The following is a brief description of the federal
income tax consequences, under
existing law, of the Directors' Plan:
The options under the Directors' Plan are nonstatutory
options not intended to qualify
as incentive stock options under Section 422 of the
Internal Revenue Code. The grant of
options will not result in taxable income to the non-employee
director or a tax deduction to
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<PAGE>
the Company. The exercise of an option by a non-employee
director will result in taxable
ordinary income to the non-employee director and, if
applicable withholding requirements are
satisfied, a corresponding deduction for the Company, in
each case equal to the difference
between the fair market value of the acquired shares on the
date the option was exercised
and the fair market value of such shares on the date the
option was granted (the option
price).
An optionee's tax basis for shares acquired upon
exercise of an option will be equal
to the fair market value of such shares on the date the
option is exercised. The holding
period for such shares will commence on such date and,
accordingly, will not include the
period during which the option was held. The payment of
the option exercise price by
delivery of Common Stock of the Company will constitute a
non-taxable exchange by the
optionee. Use of Common Stock in payment of the option
price will result in the same tax
consequences to the Company as if the exercise were effected
by a cash payment.
In the event of a sale of shares received upon exercise
of an option, any gain or loss
will generally be a capital gain or loss. The capital
gain or loss will be a long-term
capital gain or loss if the shares were held for more than
one year after the date on which
the option was exercised.
THE BOARD OF DIRECTORS HAS NOT YET VOTED ON THE
1994 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS. IN THE EVENT THE BOARD OF
DIRECTORS APPROVES THE COMPANY'S 1994
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, THE BOARD OF
DIRECTORS WOULD RECOMMEND THAT
THE HOLDERS OF COMMON STOCK VOTE FOR APPROVAL OF THE
COMPANY'S 1994 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS. THE COMPANY'S DIRECTORS AND NAMED
EXECUTIVE OFFICERS ARE THE RECORD
OWNERS OF 296,877 SHARES OF COMMON STOCK (APPROXIMATELY
3.3% OF OUTSTANDING SHARES) AND
HAVE INDICATED THAT THEY INTEND TO VOTE THEIR SHARES FOR
THE APPROVAL OF THE 1994 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
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<PAGE>
PROPOSAL TO APPROVE
1994 STOCK INCENTIVE PLAN
The CT and CTF Stockholders have proposed, subject
to approval by the Board of
Directors and the holders of Common Stock, the Burnup & Sims
Inc. 1994 Stock Incentive Plan
(the "Incentive Plan") for key employees, including
officers, of the Company and its
subsidiaries to replace the Current Plans. The Incentive
Plan is more flexible than the
Current Plans, containing provisions which the Company
believes are similar to those
presently approved by other large corporations. The
Incentive Plan is designed to provide
for the grant of options that qualify as "incentive
stock options" under the Internal
Revenue Code of 1986, as amended (the "Code"), or options
other than "incentive stock
options," as well as provide for the award of restricted
stock and bonuses payable in stock.
In addition to the replacement of the Current Plan, the
purpose of approving the Incentive
Plan, consistent with the purposes of the Current Plans is
to continue to have available a
stock compensation plan that will encourage and enable
participating employees of the
Company to acquire a proprietary interest in the Company
through stock ownership and will
assist the Company in attracting and retaining key
employees. In the event the Board of
Directors approves the Incentive Plan, the Incentive Plan
will have been approved if a
majority of the shares present or represented, and entitled
to vote at the Meeting are voted
in favor of it. The adoption of the Incentive Plan is
contingent upon consummation of the
Acquisition and, as such, will not be approved unless the
Acquisition Agreement is approved
by a vote of a majority of the shares of Common Stock
represented in person or by proxy at
the Meeting.
The principal features of the Incentive Plan are
summarized below, but this summary is
qualified in its entirety by reference to the terms of the
Incentive Plan, which is attached
hereto as Appendix G.
Summary of Incentive Plan
Subject to adjustment as noted below, the total number
of shares that may be optioned
or awarded under the Incentive Plan is 800,000 shares of the
Company's Common Stock of which
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<PAGE>
200,000 shares may be awarded as restricted stock. If the
Incentive Plan is approved by
stockholders, no further awards will be made under
the Current Plans. However,
approximately 252,000 shares will continue to be
reserved with respect to the shares
outstanding under Current Plans. No employee may receive,
over the term of the Incentive
Plan, awards in the form of options, whether incentive stock
options or options other than
incentive stock options, to purchase more than 200,000 shares
of the Company's Common Stock.
Any shares subject to an option under the Incentive Plan
which for any reason expires, is
relinquished or is terminated unexercised and any
restricted stock which is forfeited may
again be optioned or awarded under the Incentive Plan,
provided, however, that forfeited
shares shall not be available for further awards if the
employee has realized any benefits
of ownership from such shares.
Key salaried employees, including officers, of the
Company and its subsidiaries, shall
be eligible to participate in the Incentive Plan. The
Compensation Committee of the Board
of Directors (the "Committee") will administer the
Incentive Plan and determine the
recipients of options and awards, their terms and
conditions within the parameters of the
Incentive Plan and the number of shares covered by each
option or award. The Committee may
approve rules and regulations to carry out the Incentive
Plan and its decision with regard
to any question arising under the Plan shall be final and
conclusive on all employees of the
Company or its subsidiaries participating or eligible to
participate in the Plan. The
Committee shall consist of not less than three outside
non-employee directors of the
Company. Such directors are not eligible to participate in
the Incentive Plan. No award or
option may be granted under the Incentive Plan after
January, 2004, but awards or options
theretofore granted may extend beyond that date.
The Board of Directors of the Company may amend,
alter or discontinue the Incentive
Plan, but no amendment, alteration or discontinuation may be
made which would (i) impair the
rights of any recipient of restricted stock or option or
stock bonus already granted,
without his or her written consent, or (ii) without the
approval of the stockholders (A)
increase the total number of shares reserved for the
Incentive Plan, (B) decrease the option
price of an incentive stock option to less than 100% of the
fair market value of the stock
on the date the option was granted, (C) change the class of
persons eligible to receive an
award of restricted stock or options under the Incentive
Plan, or (D) extend the duration of
the Incentive Plan. The Committee may, retroactively or
prospectively, amend the terms of
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<PAGE>
any award of restricted stock or option already granted,
provided no such amendment will
impair the rights of any holder without his or her written
consent.
The option price per share shall be determined by the
Committee, but shall not be less
than 100% of the fair market value of a share of Common
Stock at the time the option is
granted as reported on NASDAQ. Options granted under the
Incentive Plan will expire on a
date fixed by the Committee, but not more than ten years
from the date of grant in the case
of incentive stock options or such later date as may be
permitted under the Code. Each
option will state whether it is immediately exercisable in
full or when and to what extent
it shall be exercisable. In the absence of any contrary
provision, no option will be
exercisable within six months from the date of grant.
Payment of the option price upon exercise of an
option may be made in cash, by the
delivery of Common Stock already owned by the optionee, a
combination of cash and shares, or
in accordance with a cashless exercise program under which
shares of Common Stock may be
issued directly to the optionee's broker or dealer upon
receipt of the purchase price in
cash from the broker or dealer. No optionee shall have
any rights to dividends or other
rights of a stockholder with respect to his or her shares
subject to the option until the
optionee has given written notice of exercise and has paid
in full for such shares. Tax
withholding obligations may be met by a withholding of
stock otherwise deliverable to the
optionee under procedures approved by the Committee.
Each option granted under the Incentive Plan may
provide for stock appreciation
rights, that is, the right to exercise such option in whole
or in part without payment of
the option price. If an option is exercised without payment,
the optionee shall be entitled
to receive the excess of the fair market value of the
stock covered by the option on the
date of exercise over the option exercise price. Such amount
is payable in stock or in cash
or in a combination of stock and cash at the discretion of
the Committee.
If an optionee's employment terminates by reason of
his or her retirement under a
retirement plan of the Company or a subsidiary or
death, the optionee's option may
thereafter be exercised by the optionee or by his or her
estate or beneficiary within the
period specified in the option (not to exceed 3 years from
the date of termination) but not
66
<PAGE>
beyond the termination date of the option. Unless otherwise
determined by the Committee, if
an optionee's employment terminates for any reason other
than death or retirement, the
optionee's option shall thereupon terminate. During the
optionee's lifetime, the option is
exercisable only by the optionee and shall not be
transferable except by will or the laws of
descent and distribution.
No incentive stock option will be granted to an
employee who owns or would own
immediately before the grant of such option, directly or
indirectly, stock possessing more
than 10% of the total combined voting power of all classes
of stock of the Company. This
restriction will not apply if, at the time such incentive
stock option is granted, the
option price is at least 110% of the fair market value of
one share of Common Stock on the
date of grant and the incentive stock option by its terms
is not exercisable after the
expiration of five years from the date of grant.
Awards of restricted stock may be in addition to or in
lieu of option grants. During
the restriction period (as set by the Committee) the
recipient of restricted stock is not
permitted to sell, transfer, pledge, or assign the shares.
Shares of restricted stock shall
become free of all restrictions if the recipient dies or his
or her employment is terminated
by reason of permanent disability during the restriction
period, and to the extent set by
the Committee, if the recipient retires under a
retirement plan of the Company or any
subsidiary. In the event of a termination of employment
during the restriction period for
any reason other than death, disability or, to the extent
determined by the Committee,
retirement under a retirement plan of the Company or a
subsidiary, shares of restricted
stock will be forfeited and revert to the Company, except
to the extent that the Committee
determines that such forfeiture is not in the best interests
of the Company and waives the
forfeiture provision with respect to all or some of the
restricted stock held by the
employee.
The recipient of restricted stock shall be entitled to
vote the shares and receive all
dividends paid thereon, except that dividends paid in Company
Common Stock or other property
shall also be subject to the same restrictions. Tax
withholding obligations shall be paid
in cash by the recipient or may be met by the
withholding of Common Stock otherwise
deliverable to the recipient pursuant to procedures approved
by the Committee.
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<PAGE>
In lieu of cash bonuses otherwise payable to eligible
employees under the Company's
compensation practices, the Committee may determine that
such bonuses shall be payable in
Common Stock or partly in Common Stock and partly in cash.
Any such shares of Common Stock
shall be free of any restrictions imposed by the Plan. The
Company shall withhold from any
such cash bonuses an amount of cash sufficient to meet its
tax withholding obligations. If
the cash portion of the bonus is not sufficient, the tax
withholding obligations shall be
paid in cash by the recipient or may be met by the
withholding of Common Stock otherwise
deliverable to the recipient pursuant to procedures approved
by the Committee.
In the event of a "change in control" of the
Company, in addition to any action
required or authorized by the option or award, the Committee
may in its discretion recommend
that the Board of Directors take certain actions as a result
of, or in anticipation, of the
change in control, to assure fair and equitable treatment of
the employees who hold options
or restricted stock, including an offer to purchase any
outstanding option or restricted
stock granted or issued pursuant to the Incentive Plan for
its cash value as determined by
the Committee. However, in no event may an option be
made exercisable prior to the
expiration of six months from the date of grant or, in
the case of an incentive stock
option, after ten years from the date it was granted.
Change in control is generally defined to include
(i) a merger or consolidation in
which the Company is not the surviving corporation ^ or
pursuant to which any shares of the
Company are to be converted into cash, securities or other
property, or any sale, lease,
exchange or other transfer of all, or substantially all,
of the assets of the Company,
(ii) the approval by the stockholders of any plan for the
liquidation or dissolution of the
Company, (iii) the acquisition by a "person" or "group," as
defined in the Incentive Plan,
of 33% or more of the Company's Common Stock or (iv) if
individuals constituting the
"Incumbent Board," as defined in the Incentive Plan, cease
to constitute a majority of the
whole Board of Directors of the Company.
Adjustments shall be made in the number and class
of shares available under the
Incentive Plan and the number, class and price of shares
subject to outstanding option
grants, in each such case to reflect changes in the
Company's Common Stock through changes
68
<PAGE>
in the Company's corporate structure or capitalization such
as through a merger or stock
split.
Federal Income Tax Consequences
^ The following is a brief description of the federal
income tax consequences, under
existing law, of the Incentive Plan:
Incentive Stock Options
(a) Neither the grant nor the exercise (while the
employee is employed or within
three months after termination of employment,
or twelve months in the case of
termination on account of disability) of an
incentive stock option will be
treated as the receipt of taxable income by the
employee or a deductible item by
the Company. The amount by which the fair
market value of the shares issued
upon exercise exceeds the option price will
constitute an item of "tax
preference" to the employee for purposes of the
alternative minimum tax. For
alternative minimum tax purposes only the tax
basis of the Common Stock acquired
upon the exercise of such option, is increased by
the amount of such excess.
(b) If the employee holds shares acquired by him
or her upon the exercise of an
option for the two-year period from the date
of grant of the option and the
one-year period beginning on the day after such
exercise, and if he or she has
been an employee of the Company or its
subsidiaries at all times from the date
of grant to the day three months before
exercise, or twelve months in the case
of termination on account of disability, then any
gain realized by the employee
on a later sale or exchange of such shares will
be a long-term capital gain and
any loss sustained will be a long-term capital
loss. The Company will realize
no tax deduction with respect to any such sale or
exchange of option shares.
69
<PAGE>
(c) If the employee disposes of any shares acquired
upon the exercise of an option
during the two-year period from the date of
grant of the option or the one-year
period beginning on the day after such exercise,
the employee will generally be
obligated to report as ordinary income for the
year in which the disposition
occurred the amount by which the fair market
value of such shares on the date of
the exercise of the option (or, as noted in
clause (d) below, in the case of
certain sales or exchanges of such shares for
less than such fair market value,
the amount realized upon such sale or exchange)
exceeds the option price, and
the Company will be entitled to a deduction equal
to the amount of such ordinary
income. Any such ordinary income will increase
the employee's tax basis for the
purpose of determining gain or loss.
(d) If an option holder who has acquired stock
upon the exercise of an incentive
stock option makes a disposition within the
two-year period described above, and
the disposition is a sale or exchange with
respect to which a loss (if
sustained) would be recognized to the option
holder, then the amount includible
in the option holder's gross income, and the
amount deductible by the Company,
will not exceed the excess (if any) of the
amount realized on the sale or
exchange over the tax basis of the stock.
Non-Qualified Stock Options
In the case of an option granted under the
Incentive Plan that is not an
incentive stock option, the grant of the option
will not result in taxable
income to the option holder or a tax deduction to
the Company. The option
holder recognizes ordinary income at the time the
option is exercised in the
amount by which the fair market value of the shares
acquired exceeds the option
price. The Company is entitled to a corresponding
ordinary income tax deduction
at that time, if applicable withholding requirements
are satisfied. The option
holder's tax basis for purposes of determining gain or
loss on a subsequent sale
of the shares is the fair market value of the shares
at the date of exercise of
the option. The holding period for such shares will
commence on such date and,
accordingly, will not include the period during which
the option was held. In
the event of a sale of shares received upon exercise
of the option, any gain or
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<PAGE>
loss will generally be a capital gain or loss. The
capital gain or loss will be
a long-term capital gain or loss if the shares were
held for more than one year
after the date on which the option was exercised.
Use of Stock to Exercise Options
The payment of the option exercise price by
delivery of Common Stock of
the Company will constitute a non-taxable exchange by
the optionee and will not
affect the incentive stock option status of the stock
acquired in the case of an
incentive stock option. However, if the Common Stock
delivered in payment was
previously acquired pursuant to the exercise of an
incentive stock option and
has not been held for the requisite one-year
period, the exchange would
constitute a premature disposition of such Common
Stock for purposes of the
incentive stock option holding requirements. Use of
Common Stock in payment of
the option price will result in the same tax
consequences to the Company as if
the exercise were effected by a cash payment.
Stock Appreciation Rights
The amount received by an optionee who
exercises a stock appreciation
right with respect to his or her option is taxable
as ordinary income at the
time of exercise and the Company is entitled to a
corresponding ordinary income
tax deduction.
Bonus Stock
The grantee will realize ordinary income during
his or her taxable year in
which the shares of Common Stock are issued pursuant to
the award of Bonus Stock
in an amount equal to the fair market value of the
shares of Common Stock at the
date of issue. The Company is entitled to a
corresponding ordinary income tax
deduction. If the grantee thereafter disposes of such
shares of Common Stock,
71
<PAGE>
any amount received in excess of the market value of
the shares on the date of
issue will be treated as long-or short-term capital
gain depending upon the
holding period of the shares.
Restricted Stock
A grantee will not realize any taxable income
upon the award of Restricted
Stock unless a grantee elects under Section 83(b) of
the Code to have the fair
market value of the Common Stock (determined without
regard to the possibility
of forfeiture) included in his or her gross income in
the year the Restricted
Stock is issued. In the absence of such an election,
the grantee will realize
ordinary income during his or her taxable year in
which the possibility of
forfeiture lapses. If the grantee thereafter disposes
of the Common Stock, any
amount received in excess of the fair market value of
the shares on the date the
possibility of forfeiture lapsed will be treated as
long- or short-term gain
depending upon the holding period (measured from the
date the possibility of
forfeiture lapsed) of the shares. The Company will be
entitled to an ordinary
tax deduction in the same amount and at the same time
the grantee is considered
to have realized ordinary income.
Change in Control
Under certain circumstances, accelerated vesting
or exercise of options or
stock appreciation rights, or the accelerated
lapse of restrictions on
restricted stock, in connection with a "change in
control" of the Company might
be deemed an "excess parachute payment" for purposes of
the golden parachute tax
provisions of Section 280G of the Code. To the extent
it is so considered, the
optionee or grantee may be subject to a 20% excise
tax and the Company may be
denied a tax deduction.
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<PAGE>
THE BOARD OF DIRECTORS HAS NOT YET ACTED ON THE 1994
STOCK INCENTIVE PLAN. IN THE
EVENT THE BOARD OF DIRECTORS APPROVES THE COMPANY'S 1994
STOCK INCENTIVE PLAN, THE BOARD OF
DIRECTORS WOULD RECOMMEND THAT THE HOLDERS OF COMMON
STOCK VOTE FOR APPROVAL OF THE
COMPANY'S 1994 STOCK INCENTIVE PLAN. THE COMPANY'S
DIRECTORS AND NAMED EXECUTIVE OFFICERS
ARE THE RECORD OWNERS OF 296,877 SHARES OF COMMON
STOCK (APPROXIMATELY 3.3% OF THE
OUTSTANDING SHARES) AND HAVE INDICATED THAT THEY INTEND
TO VOTE THEIR SHARES FOR THE
APPROVAL OF THE 1994 STOCK INCENTIVE PLAN .
73
<PAGE>
ELECTION OF DIRECTOR
The Board of Directors is currently comprised of
five directors elected in three
classes (the "Classes"), with two Class I, one Class II
and two Class III directors.
Directors in each Class hold office for three-year terms.
The terms of the Classes are
staggered so that the term of one Class terminates each year.
The term of the current Class
II Director expires at the Meeting and when his respective
successor has been duly elected
and qualified.
Samuel C. Hathorn, Jr., the current Class II Director,
has been nominated by the Board
of Directors to be reelected as the Class II Director at the
Meeting. The Company has no
reason to believe that Mr. Hathorn will refuse or be unable
to accept election; however, in
the event he is unable to accept election or if any other
unforeseen contingencies should
arise, each proxy that does not direct otherwise will be
voted for such other person as may
be designated by the Board of Directors.
MANAGEMENT
Information as to Nominees and Other Directorships
The following information concerning principal
occupation or employment during the
past five years, other directorships and age, has been
furnished to the Company by the
nominee for director in Class II, by the directors in
Classes III and I whose terms expire
at the Company's Annual Meetings of Stockholders in 1994
and 1995, respectively, and when
their respective successors have been duly elected and
qualified, all executive officers of
the Company, and the individuals who will become additional
executive officers and directors
of the Company if the Acquisition is consummated.
Nominee for Director
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<PAGE>
Class II (Term, if elected, expires at the Annual
Meeting of Stockholders in 1996)
Principal Occupation
or Employment
Director
Name Age During the Past Five Years
Since
Samuel C. Hathorn, Jr. 50 President of Trendmaker Homes,
and 1981
since December 1, 1990,
President
of Centennial Homes,
Inc.,
subsidiaries of Weyerhaeuser
Co.,
Houston and Dallas,
Texas,
homebuilders and real
estate
developers
Directors Whose Terms of Office will Continue After the
Annual Meeting
Class III (Terms expire at the Annual Meeting of
Stockholders in 1994)
Principal Occupation
or Employment
Director
Name Age During the Past Five Years
Since
Cecil D. Conlee 57 Chairman, CGR Advisors,
Atlanta, 1973
Georgia, real estate
investment
advisors
Leo J. Hussey 54 Executive Vice President of
the 1976
Company and President
of
Southeastern Printing
Company,
Inc., and The Deviney
Company,
wholly-owned subsidiaries of
the
Company
75
Class I (Terms expire at the Annual Meeting of
Stockholders in 1995)
Principal Occupation
or Employment
Director
Name Age During the Past Five Years
Since
Nick A. Caporella 57 Chairman of the Board
of 1974
Directors, Chief Executive
Officer
and President of the Company
and
Chairman of the Board
of
Directors, Chief Executive
Officer
and President of NBC
William A. Morse 66 Attorney-at-Law,
Danville, 1977
California
President,
Behring-Hofmann
Educational
Institute, Danville,
California
Mr. Caporella is a director of NBC. Mr. Conlee is a
director of Cousins Properties,
Inc. and Oxford Industries, Inc. Mr. Morse is a director
of Behring-Hofmann Educational
Institute, Inc.
Executive Officers
<PAGE>
Principal
Occupation
or
Employment
Name Age During the Past
Five Years
George R. Bracken 48 Vice President & Treasurer
of the Company, since
March 1992; Vice President
Financial Planning of the
Company since May 1985
Michael Brenner 45 General Counsel of the
Company since June 1988
Gerald W. Hartman 53 Senior Vice President of
the Company since
September 1988
Margaret M. Madden 41 Vice President of the Company
since September 1987;
Corporate Secretary since
August 1984
Linda L. Rine 46 Vice President - Insurance
of the Company since
September 1987
Proposed Directors and Executive Officers. The following
individuals will be appointed as
officers and directors of the Company, in the
capacities indicated below, assuming
consummation of the Acquisition. See "ELECTION OF
DIRECTOR" and "PROPOSAL TO APPROVE
ACQUISITION AGREEMENT WITH CHURCH & TOWER, INC. AND CHURCH &
TOWER OF FLORIDA, INC. - Terms
of the Acquisition Agreement -- Directors and Management
of the Company Following the
Acquisition."
Percentage Percentage
Ownership Ownership of
Principal Occupation
of Common Common
or Employment
Proposed Stock Before Stock After
Age During the Past Five Years Class
Acquisition Acquisition
Name
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<PAGE>
Jorge L. Mas Canosa 54 Proposed Director; during II
-0- 33.6%
the past five years has
served as President and
Chief Executive Officer of
CTF
Jorge Mas 30 Proposed Director, I
-0- 24.8%
President and Chief
Executive Officer; during
the past five years has
served for part or all of
such period as President
and Chief Executive
Officer of CT (and its
predecessor company
Communication Contractors,
Inc.), Neff Rental, Inc.,
Neff Machinery, Inc.,
Atlantic Real Estate
Holding Corp. and U.S.
Development Corp., each a
company controlled by the
CT and CTF stockholders
Eliot C. Abbott 44 Proposed Director; during II
-0- -0-
the past five years has
been a shareholder in the
law firm of Carlos &
Abbott, P.A., Miami,
Florida
77
<PAGE>
Arthur B. Laffer 53 Proposed Director; III
-0- -0-
President, Canto Advisors
Incorporated, an
investment advisor, since
May 1993; Chief Executive
Officer, Calport Asset
Management, a money
management firm, since
June 1992; Chairman, A.B.
Laffer, V.A. Canto &
Associates, an economic
research and financial
consulting firm (formerly
known as A.B. Laffer
Associates), since 1979;
Chief Executive Officer,
Laffer Advisors
Incorporated, an
investment advisor and
broker-dealer, since 1975
Mr. Laffer is a director of U.S. Filter Corporation,
Nicholas Applegate Growth Equity
Fund and Nicholas Applegate Mutual Fund. Mr. Mas Canosa
is a director of The Wackenhut
Corporation and Landair Transport, Inc.
Jorge L. Mas Canosa is the father of Jorge Mas.
Directors Following Consummation of the Acquisition
In the event Mr. Hathorn is elected and the Acquisition
is consummated, the Company's
Board of Directors will be comprised of the following
individuals:
78
<PAGE>
Name Class Term Expires
Cecil D. Conlee III 1994
Arthur B. Laffer III 1994
Jorge Mas I 1995
William A. Morse I 1995
Eliot C. Abbott II 1996
Jorge L. Mas Canosa II 1996
Samuel C. Hathorn, Jr. II 1996
Meetings and Committees of the Board of Directors
During Fiscal 1993, (i) the Board of Directors held
four meetings and all of the
members of the Board of Directors attended each of such
meetings and (ii) each member of the
Board of Directors also attended all meetings of those
committees of which he was a member.
The Board of Directors has standing Audit, Compensation and
Stock Option, Finance, Stock
Purchase Plan, Nominating, Special Transaction and Executive
Strategic Planning Committees.
The members of the Company's Audit Committee are
Messrs. Conlee, Hathorn and Morse.
During Fiscal 1993, the Audit Committee met four times.
The principal functions of the
Audit Committee are to review with management and the
Company's independent accountants the
scope of proposed audits, the Company's annual financial
statements, the results of audits
and the Company's system of internal accounting controls
and to be available to meet with
the independent accountants to resolve matters, if any,
that may arise in connection with
audits or otherwise.
The members of the Company's Compensation and Stock
Option Committee are Messrs.
Hathorn and Morse. During Fiscal 1993, the Compensation
and Stock Option Committee met
twice. The principal functions of the Compensation and
Stock Option Committee are to
recommend to and review with the Board of Directors the
compensation arrangements for the
executive officers of the Company, and to review with
management grants under the Company's
79
<PAGE>
non-qualified stock option plans, and overall
compensation arrangements and employee
benefits for the Company's employees.
The members of the Company's Finance Committee are
Messrs. Morse, Conlee, Hathorn and
Hussey. The principal function of the Finance Committee,
which met twice during Fiscal
1993, is to review the Company's long and short-term
financial strategies with management
and the Board of Directors.
The members of the Company's Stock Purchase Plan
Committee are Messrs. Morse, Hussey
and Hathorn. During Fiscal 1993, the Stock Purchase
Plan Committee, whose principal
function is to monitor the administration of the Company's
Employee Stock Purchase Plan, met
once.
The members of the Company's Nominating Committee are
Messrs. Hathorn, Caporella and
Hussey. The Nominating Committee, which met once during
Fiscal 1993, recommends to the
Board of Directors candidates for election to the Board
of Directors. The Committee
considers candidates recommended by the stockholders
pursuant to written applications
submitted to the Corporate Secretary.
The members of the Company's Special Transaction
Committee are Messrs. Conlee, Morse
and Hathorn. The primary function of the Special
Transaction Committee, which met twice
during Fiscal 1993, is to review related party
transactions between the Company and any
officer, director or affiliate of the Company. The
Committee was responsible for reviewing
and approving the terms of the Acquisition and negotiating
and approving the Redemption on
behalf of stockholders of the Company (other than NBC and its
affiliates).
The members of the Executive Strategic Planning
Committee are Messrs. Conlee, Morse,
Hathorn, and Caporella. During Fiscal 1993, the Executive
Strategic Planning Committee met
twice. The principal function of the Executive Strategic
Planning Committee is to review
future strategic courses available to the Company.
80
<PAGE>
If the Acquisition is consummated, the composition of
some or all of the foregoing
committees may change.
Director Compensation
The directors, except directors who are employees of
the Company or of any subsidiary,
are paid attendance fees at the rate of $600 for each
meeting of the Board of Directors and
$400 for each committee meeting attended ($1,000 for
Executive Strategic Planning Committee
meetings), regardless of the number of committees on
which they serve. In addition,
directors who are not employees of the Company or any of its
subsidiaries are paid retainer
fees at the rate of $15,000 per annum and Chairmen of
committees are paid an additional $200
for each meeting of their respective committees attended by
them.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information
for the last three fiscal years
concerning the compensation earned by or awarded to the
Chief Executive Officer of the
Company and each of the other three most highly
compensated executive officers of the
Company whose combined salary and bonus exceeded $100,000
in such fiscal year. The table
does not set forth certain of the tabular formats set forth
in the SEC's recently expanded
rules on executive compensation disclosure in proxy
statements dealing with other annual
compensation and long-term compensation awards and pay-outs,
since none of these executive
officers received any such compensation during such
three-year period.
81
<PAGE>
Annual
Compensation
Name and
Principal Position Year Salary
($) Bonus ($)
Nick A. Caporella, Chairman of the 1993
0 0
Board, President and Chief 1992
0 0
Executive Officer 1991
600,000 375,000
Gerald W. Hartman, Senior Vice
President of the Company and
President of Burnup & Sims ComTec, Inc. 1993
211,870 60,000
and Burnup & Sims of California, Inc., 1992
200,922 40,000
wholly-owned subsidiaries of the Company 1991
200,288 70,000
Leo J. Hussey, Executive Vice President,
and Director of the Company, and President1993
193,694 30,000
of Southeastern Printing Company, Inc. 1992
155,000 25,000
and The Deviney Company, wholly- 1991
155,000 25,000
owned subsidiaries of the Company
George R. Bracken, Vice President & 1993
105,945 28,000
Treasurer 1992
101,345 25,000
1991
101,474 20,000
Options Granted in Last Fiscal Year
No stock options were granted during Fiscal 1993.
Aggregate Fiscal Year-End Stock Option Value Table
82
<PAGE>
The following table summarizes the options held at
April 30, 1993 by individuals named
in the Summary Compensation Table; no stock options were
exercised by such persons during
Fiscal 1993.
Number of Unexercised Value
of Unexercised
Options at
In-the-Money Options
April 30, 1993(#) at
April 30, 1993 ($)
Name Exercisable Unexercisable
Exercisable Unexercisable
Nick A. Caporella 200,000 0 0
0
Leo J. Hussey 2,000 0 0
0
Gerald W. Hartman 2,800 0 0
0
George R. Bracken 500 0 0
0
Long-Term Incentive and Pension Plans
The Company does not have any long-term incentive or
pension plans.
Notwithstanding anything to the contrary set forth in
any of the Company's previous
filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of
1934, as amended, that might incorporate future filings,
including this Proxy Statement, in
whole or in part, the following Compensation and Stock
Option Committee Report and
Performance Graph on page 38 shall not be incorporated by
reference into any such filings.
Report of the Compensation and Stock Option Committee
The Compensation and Stock Option Committee of
the Board of Directors (the
"Compensation Committee" or the "Committee") is responsible
for approving the compensation
83
<PAGE>
levels of the executive officers of the Company, including
the Chief Executive Officer. The
Committee also reviews with the Chief Executive Officer
guidelines for salary adjustments
and aggregate bonus awards applicable to management and
employees other than executive
officers. The Committee, which is composed of two
non-employee directors of the Company,
reviews its recommendations with the members of the
Board. The following report is
submitted by the Committee regarding compensation paid during
fiscal year 1993:
The compensation program of the Company is designed to
enable the Company to attract,
motivate, reasonably reward, and retain professional
personnel who will effectively manage
the assets of the Company and maximize corporate
performance and stockholder value over
time. Compensation packages include a mix of salary,
incentive bonus awards, and stock
options.
Salaries of executive officers are established based
on an individual's performance
and general market conditions. Salary levels are
determined based upon the challenge and
responsibility of an individual's position with the Company
and are dependent on subjective
considerations. In addition to paying a base salary, the
Company provides incentive bonus
awards as a component of overall compensation. Bonus awards
are measured based upon overall
performance of the executive officer's area of
responsibility or operating performance of
the operation under control of the executive, if any. Due
to the fact that the Company's
financial results for the last three years reflect volume
declines and net losses, salaries
of executive officers during fiscal 1994 (with certain
exceptions for outstanding merit) are
frozen at previous levels. In addition, in light of these
factors, the Company's President
and Chief Executive Officer and Chairman of the Board, Nick
A. Caporella, declined to accept
any salary or bonus compensation for either fiscal year 1992
and 1993.
Long-term incentive compensation for executives
consists of stock-based awards made
under the Company's two non-qualified stock option plans
(the "Option Plans"). The Option
Plans provide for the granting of options to purchase
Common Stock to key employees at
prices equal to the fair market value on the date of grant.
The Committee believes that the
maximization of stockholder wealth through appreciation in
the value of Common Stock is
created through the use of stock options. At April 30,
1993, there were 205,300 stock
options granted under the Option Plans held by executive
officers.
84
<PAGE>
Compensation and Stock Option Committee
Samuel C. Hathorn, Jr.
William A. Morse
85
<PAGE>
The proposed Board of Directors has no plans to
materially change the Company's
overall compensation structure after the Acquisition. The
Board of Directors, however, will
meet after the Acquisition to determine the compensation of
Jorge Mas who will serve as the
President and Chief Executive Officer of the Company. It is
anticipated that Mr. Mas' will
be paid annual base compensation of $300,000 and bonus
compensation as determined by the
Compensation Committee of the Board of Directors. If the
1994 Stock Incentive Plan is
approved, both Mr. Mas and other key salaried employees of
the Company will be eligible to
receive options and awards as determined from time to time
by the Compensation Committee of
the Board of Directors, which shall consist of not less than
three non-employee directors.
If the Stock Option Plan for non-employee directors is
approved, directors who have never
been employees of the Company or any of its subsidiaries, and
who are not otherwise eligible
to participate in any plan of the Company or any of its
subsidiaries which would entitle
such directors to receive securities of the Company,
would automatically receive stock
options upon their election as directors.
PERFORMANCE GRAPH
The following graph compares the cumulative total
stockholder return on Common Stock
from April 30, 1988 through April 30, 1993 with the
cumulative total return of the S & P 500
Stock Index and a Company constructed index of two peer
companies consisting of Dycom
Industries, Inc. and the L.E. Myers Company. The graph
assumes that the value of the
investment in Common Stock was $100 on April 30, 1988
and that all dividends were
reinvested.
86
<PAGE>
Comparison of Five Year Cumulative Total
Return Among
Burnup & Sims Inc., S & P 500 Stock Index, and
Peer Group Companies
210
DOLLARS 190
170
150
130
110
90
70
50
30
10
1988 1989 1990
1991 1992 1993
+ Burnup & Sims * S & P 500
. (A) Peer Group
CERTAIN TRANSACTIONS AND
LITIGATION
The Company has billed NBC approximately $662,000 for
certain services rendered and
expenses for the year ended April 30, 1993. NBC owns
approximately 36% of the outstanding
Common Stock. Nick A. Caporella, the President, Chief
Executive Officer and Chairman of the
87
<PAGE>
Board of the Company is also the Chairman of the Board,
Chief Executive Officer, President
and the controlling stockholder of NBC.
As described elsewhere in this Proxy Statement, it is
a condition to the consummation
of the Acquisition by the stockholders of CT and CTF and
the Company that (i) the Company
shall have entered into a written agreement with NBC,
pursuant to which the Company will
redeem and purchase 3,153,847 shares of Common Stock owned by
NBC (which constitutes all of
the Common Stock owned by NBC), (ii) all of the
conditions to the consummation of the
Redemption shall have been satisfied or waived, and (iii)
the stockholders of CT and CTF
shall have received a written certificate from the
Chief Executive Officer and Chief
Financial Officer of the Company that all of the
conditions to the consummation of the
Redemption shall have been satisfied or waived, except the
condition to the Redemption that
the Acquisition shall have occurred, which certificate shall
be supported by a certificate
from the Chief Executive Officer of NBC, to the same
effect. Accordingly, the Acquisition
will be consummated prior to the Redemption. The Redemption
was negotiated and approved by
the Special Transaction Committee on behalf of the
stockholders of the Company (other than
NBC and its affiliates). The Redemption will not be
consummated unless the Acquisition
shall have occurred. Accordingly, assuming satisfaction of
all other conditions to the
consummation of the Acquisition, approval by stockholders of
the Company of the Acquisition
Agreement shall result in consummation of the
Redemption. A vote in favor of the
Acquisition Agreement may preclude a stockholder of the
Company from challenging the
Acquisition and the other transactions described in
this Proxy Statement and from
participating in, and receiving damages, if any, as a result
of any action which has been or
may be filed on behalf of any or all of the stockholders with
respect to such transactions.
See below for a description of a class action and
derivative complaint relating to, among
other things, the Agreement and certain other
transactions described in this Proxy
Statement. The consideration for the Redemption and
purchase, will be the cancellation of
the outstanding principal of $17,500,000 under the
Subordinated Debenture owed to the
Company by NBC and crediting the next succeeding
principal payments in the amount of
$592,313 of Other Indebtedness with an outstanding
principal amount of $1,371,430 owed to
the Company by NBC. On November 16, 1993, the Board of
Directors of the Company approved
the Redemption. The Board of Directors of NBC has not yet
met to consider the terms of the
Redemption. See "PROPOSAL TO APPROVE ACQUISITION AGREEMENT
WITH CHURCH & TOWER, INC. AND
CHURCH & TOWER OF FLORIDA, INC. - Interest of Certain Persons
in Matters to be Acted Upon."
88
<PAGE>
Albert H. Kahn v. Nick A. Caporella, et al., Civil
Action No. 11890 was filed in
December 1990 by a stockholder of the Company in the
Court of Chancery of the State of
Delaware in and for New Castle County against the
Company, the members of the Board of
Directors, and against NBC, as a purported class action
and derivative lawsuit. In May
1993, plaintiff filed a motion to amend its class
action and shareholder derivative
complaint (the "Amended Complaint"). The class action
claims allege, among other things,
that the Board of Directors, and NBC as its largest
stockholder, breached their respective
fiduciary duties in approving (i) the distribution to the
Company's stockholders of all of
the common stock of NBC owned by it (the "Distribution")
and (ii) the exchange by NBC of
3,846,153 shares of Common Stock for certain indebtedness
of NBC held by the Company (the
"Exchange") (the Distribution and the Exchange are
hereinafter referred to as the "1991
Transaction"), in allegedly placing the interests of NBC
ahead of the interests of the other
stockholders of the Company. The derivative action claims
allege, among other things, that
the Board of Directors has breached its fiduciary duties
by approving executive officer
compensation arrangements, by financing NBC's operations
on a current basis, and by
permitting the interests of the Company to be subordinated to
those of NBC. In the lawsuit,
plaintiff seeks to rescind the 1991 Transaction and to
recover damages in an unspecified
amount.
The Amended Complaint alleges that the Special
Transaction Committee that approved the
1991 Transaction was not independent and that, therefore,
the 1991 Transaction was not
protected by the business judgment rule or in accordance
with a settlement agreement (the
"1990 Settlement") entered into in 1990 pertaining to certain
prior litigation. The Amended
Complaint also makes other allegations which involve (i)
further violations of the 1990
Settlement by the Company's engaging in certain
transactions not approved by the Special
Transaction Committee; (ii) the sale of a subsidiary of the
Company to a former officer of
the Company; (iii) the timing of the 1991 Transaction and
(iv) the treatment of executive
stock options in the 1991 Transaction.
In November 1993, plaintiff filed a class action
and derivative complaint, Civil
Action No. 13248 (the "1993 Complaint") against the
Company, the members of the Board of
Directors, CT, CTF, Jorge Mas Canosa, Jorge Mas and Juan
Carlos Mas (CT, CTF, Jorge Mas
Canosa, Jorge Mas and Juan Carlos Mas are referred to as the
"CT Defendants"). In December
1993, plaintiff amended the 1993 Complaint ("1993 Amended
Complaint"). The 1993 Amended
Complaint alleges, among other things, that (i) the Board
of Directors and NBC, as the
89
<PAGE>
Company's largest stockholder, breached their respective
fiduciary duties by approving the
Acquisition Agreement and the Redemption which, according
to the allegations of the 1993
Complaint, benefits Mr. Caporella at the expense of the
Company's stockholders, (ii) the CT
Defendants had knowledge of the fiduciary duties owed by NBC
and the Board of Directors and
knowingly and substantially participated in their breach
thereof; (iii) the Special
Transaction Committee of the Board of Directors which
approved the Acquisition Agreement and
the Redemption was not independent and, as such, was not
in accordance with the 1990
Settlement; (iv) the Board of Directors breached its
fiduciary duties by failing to take an
active and direct role in the sale of the Company and failing
to ensure the maximization of
shareholder value in the sale of control of the Company; and
(v) the Board of Directors and
NBC, as the Company's largest stockholder, breached their
respective fiduciary duties by
failing to disclose completely all material information
regarding the Acquisition Agreement
and the Redemption. The 1993 Complaint also claims
derivatively that each member of the
Board of Directors engaged in mismanagement, waste and
breach of their fiduciary duties in
managing the Company's affairs. The 1993 Amended Complaint
seeks, among other things, to
enjoin the Acquisition and Redemption or in the alternative,
rescission and damages in an
unspecified amount.
The Company believes that the allegations in the
complaint, the Amended Complaint, the
1993 Complaint and the 1993 Amended Complaint are without
merit, and intends to vigorously
defend this action.
CERTAIN CT AND CTF TRANSACTIONS
CT currently leases equipment storage facilities
from Jorge L. Mas Canosa and his
spouse, Irma Mas. The term of the lease expires on October
31, 1998, and the annual rent
under the lease is $48,000.
The Company's Certificate requires the affirmative vote
or consent of the holders of
four-fifths of all classes of the Company's stock entitled to
vote in elections of directors
of the Company (the "Voting Shares") in connection with
certain transactions with any
person, corporation or other entity ("Affiliated Entity")
beneficially owning 10% or more of
90
<PAGE>
the outstanding Voting Shares. The Certificate provides,
however, that the foregoing
provision is not applicable to such transactions if the
Board of Directors has approved by
resolution a memorandum of understanding (a "Memorandum
of Understanding") with such
Affiliated Entity with respect to such transactions prior to
the time such Affiliated Entity
became an Affiliated Entity. In order to induce the
stockholders of CT and CTF to enter
into the Acquisition Agreement and by eliminating the
effects of the foregoing provisions
of the Certificate, the Company entered into a Memorandum of
Understanding with each of Neff
Machinery, Neff Rental and Atlantic prior to execution of
the Acquisition Agreement. Each
of Neff Machinery, Neff Rental and Atlantic is a Florida
corporation controlled by the
stockholders of CT and CTF and accordingly, following
consummation of the Acquisition and by
virtue of the ownership of the Burnup Shares by the CT Group,
would be deemed affiliates of
the Company. CT and CTF currently rent and purchase
construction equipment from Neff
Machinery and Neff Rental. The Company anticipates that,
following the Acquisition, the
Company and its subsidiaries, including CT and CTF, will
from time to time purchase and
lease equipment and parts, and obtain services from, these
companies upon such terms and
conditions as the Board of Directors shall approve, which
terms and conditions will be no
less favorable to the stockholders of the Company than
those that would be obtained in
transactions of a similar type with unaffiliated third
parties. The stockholders of CT and
CTF have no present intentions of selling Neff Machinery,
Neff Rental or Atlantic to the
Company following consummation of the Acquisition. See
"PROPOSAL TO APPROVE ACQUISITION
AGREEMENT WITH CHURCH & TOWER, INC. AND CHURCH AND TOWER OF
FLORIDA, INC. - Memorandum of
Understanding."
Carlos & Abbott, P.A. a law firm of which Eliot C.
Abbott is a shareholder, has
provided legal services to CT and CTF and their
stockholders since 1983, and such
representation will continue following the Acquisition. For
the fiscal year ended March 31,
1993, such legal fees were approximately $52,000. It is
anticipated that Carlos & Abbott,
P.A. will also provide legal services to the Company if the
Acquisition is consummated.
91
<PAGE>
SELECTED FINANCIAL DATA
The following information sets forth selected
consolidated historical data of the
Company, the selected combined historical data of CT and CTF
and the pro forma consolidated
selected financial data giving effect to the
Acquisition and the Redemption. This
information should be read in conjunction with the
unaudited pro forma condensed
consolidated financial statements and the separate
historical consolidated financial
statements of the Company incorporated by reference herein
and combined financial statements
of CT and CTF and the notes thereto appearing elsewhere
herein. The financial information
relating to the CT Group contained in this Proxy Statement
was provided to the Company by
the CT Group in connection with the Acquisition for the
preparation of this Proxy Statement
and the Company has relied upon such financial information
in the preparation of this Proxy
Statement.
92
<PAGE>
<TABLE>
<CAPTION>
The
Company
Selected
Historical Financial Data
(Dollars in Thousands Except Per Share Amounts)
Six Months
Ended Oct. 31,
Fiscal Years Ended April 30
1993 1992
1993 1992 1991 1990 1989
Statement of Operations Data:
<S> <C> <C>
<C> <C> <C> <C> <C>
Revenues $ 72,004 $ 73,834
$140,987 $ 153,521 $ 175,236 $ 192,712 $ 178,380
Costs and Expenses 74,023 73,439
151,917 157,114 174,155 192,007 174,695
Interest Expense 2,043 2,402
4,583 4,847 6,161 8,362 6,616
Interest and Other Income(1) (5,256) (2,781)
(2,255) (6,833) (2,388) (10,411) (15,503)
Income (Loss) Before Income
Taxes and Equity in Net
Income of NBC 1,194 774
(13,258) (1,607) (2,692) 2,754 12,572
Provisions (Credit) for 284 286
(3,950) (560) (1,082) 2,120 4,858
Income Taxes
Income (Loss) Before
Equity in Net Income of NBC 910 488
(9,308) (1,047) (1,610) 634 7,714
Equity in Net Income of NBC 0 0
0 0 828 151 1,525
Net Income (Loss) $910 $488 $
(9,308) $(1,047) $ (782) $ 785 $ 9,239
Average Shares Outstanding 8,815 8,768
8,768 8,768 9,460 9,662 10,304
(000)
Earnings (Loss) Per Share $ 0.10 $ 0.06 $
(1.06) $ (.12) $ (.08) $ .08 $ .90
Balance Sheet Data
(at end of period):
Capital Expenditures $1,133 $
4,338 $ 4,493 $ 4,395 $ 7,449 $ 9,533
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<PAGE>
Working Capital 14,220
16,199 21,798 21,103 50,907 48,934
Property - Net 17,904
18,036 19,211 23,933 28,544 30,202
Total Assets 103,393
108,917 118,460 122,673 158,922 150,697
Non-Current Debt 32,085
36,756 40,030 37,087 43,784 50,079
Deferred Income 4,390
3,612 3,218 4,272 4,424 4,766
Taxes-Non-Current
Shareholders' Equity 34,574
33,664 41,788 42,835 60,135 58,955
Number of Employees 2,225
2,255 2,250 2,565 3,151 3,174
Book Value Per Share $3.94
$3.84 $4.77 $4.89 $4.77 $4.69
</TABLE>
See the Notes to Consolidated Financial Statements
for information relating to
accounting policies and other disclosures.
(1) Includes gains on real estate transactions of
$2.4 million for the six months
ended October 31, 1993 and $5.6 million for the fiscal
year ended April 30, 1989. Also
includes gains (losses) related to subsidiaries sold of $1.1
million and ($7.4) million for
the fiscal years ended April 30, 1992 and 1991
respectively.
94
<PAGE>
<TABLE>
<CAPTION>
CT
Group
Selected
Historical Financial Data
(Dollars In Thousands, Except Earnings Per Common Share)
Nine Months Ended
September 30
Years Ended December 31
<S> <C> <C>
<C> <C> <C> <C> <C>
1993 1992
1992 1991 1990 1989 1988
Statement of Income Data:
Contract Revenue $37,034 $17,325
$34,136 $31,588 $18,640 $15,670 $14,807
Costs and Expenses 28,358 12,856
25,474 26,124 14,196 12,896 12,180
Income from Operations 8,676 4,469
8,662 5,464 4,444 2,774 2,627
Other Income (Expense) - Net (1,240) (154)
(340) 462 350 319 766
Income before Minority 7,436 4,315
8,322 5,926 4,794 3,093 3,393
Interest
Minority Interest (4) (43)
(42) (625) (36) 0 0
Net Income $7,432 $4,272
$8,280 $5,301 $4,758 $3,093 $3,393
Common Shares Outstanding 1,100 1,100
1,100 1,100 1,100 1,100 1,100
Earnings per Common Share (1) $6,756 $3,884
$7,527 $4,819 $4,325 $2,812 $3,085
Balance Sheet Data
(at end of period):
Working Capital $15,354
$13,752 $ 7,154 $5,209 $4,254 $3,762
Property - Net 4,867
3,657 2,406 2,100 2,039 1,752
Total Assets 27,499
24,432 11,733 8,849 7,613 6,849
Non-Current Debt 1,076
1,840 371 333 323 276
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<PAGE>
Stockholders' Equity 19,203
15,690 9,436 7,296 6,127 5,292
Book Value Per Share $17,457
$14,264 $ 8,574 $3,906 $5,570 $4,811
</TABLE>
See the Notes to the Combined Financial Statements of
the Church & Tower Group.
(1) Reflects the exchange of shares pursuant to a
business combination effected June 1,1992.
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<PAGE>
The Company and CT Group
Pro Forma Consolidated Selected
Fiinancial Data
The following pro forma consolidated statement of
operations information reflects the
effects of the Acquisition and the Redemption as if they
had occurred on January 1, 1992.
The amounts are provided for comparative purposes only and
do not purport to be indicative
of results which may be obtained in the future. The
following pro forma consolidated
balance sheet information which is presented reflects amounts
as if the Acquisition
Redemption occurred on September 30, 1993. See "Unaudited
Pro Forma Condensed Consolidated
Financial Statements" and the notes thereto for a
description of assumptions and
adjustments.
(Dollars in thousands except per share data)
Nine Months
Twelve Months
Ended September 30, 1993 Ended
December 31, 1992
Revenues $143,415
$178,126
Earnings (Loss) from Continuing
Operations (3,427)
525Earnings (Loss) per Share
from Continuing Operations ($.22)
$.03
Sept. 30, 1993
Working Capital $ 22,483
Total Assets 137,984
Non-Current Debt 35,160
Shareholders' Equity 43,231
Book Value per Share $ 2.73
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share
data for the Company and the CT
Group and combined unaudited pro forma per share data
giving effect to the Transaction.
This data should be read in conjunction with the
Selected Financial Data, Unaudited
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<PAGE>
Consolidated Condensed Proforma Financial Statements, and the
historical Financial
Statements of the Company and the CT Group and the notes
thereto included elsewhere herein.
The amounts are provided for comparative purposes only and
do not purport to be indicative
of results which may be obtained in the future.
98
<PAGE>
CT Group
The Company
Year 9 Months Year
9 Months
Ended Ended
Ended Ended
12/31/92 9/30/93
1/31/93 10/31/93
Earnings (Loss) per Share
from Continuing Operations
Historical (1) $4,592 $4,122
($.34) ($0.77)
Pro Forma
0.03 (0.22)
Equivalent Pro Forma(2) 308 (2,013)
As of
As of
9/30/93
10/31/93
Book Value per Share
Historical $17,457
$3.94
Pro Forma
2.73
Equivalent Pro Forma (2) 25,392
(1) Includes pro forma provision for income taxes
for the CT Group as if it were
taxed as a C corporation.
(2) Equivalent pro forma per share amounts are
calculated by multiplying the pro
forma amounts by the exchange ratio of 9,318
shares of Company Common Stock to
be issued for each share of CT Group common
stock.
THE COMPANY, CT AND CTF UNAUDITED PRO
FORMA
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following pro forma condensed consolidated
statements of operations of the Company
and the CT Group for the year ended December 31, 1992 and
the nine months ended September
30, 1993 are presented as if the Acquisition and the
Redemption had occurred on January 1,
1992. The pro forma condensed consolidated balance sheet is
presented as if the Acquisition
and Redemption had occurred on September 30, 1993.
It is anticipated that the Acquisition will be treated
as a "reverse acquisition" for
financial reporting purposes, with the CT Group considered to
be the acquiring entity. As a
result, the pro forma adjustments include adjustments to
reflect the estimated fair values
99
<PAGE>
of certain assets of the Company and the capital structure of
the CT Group has been adjusted
to reflect the outstanding capital structure of the surviving
legal entity. A final
determination of required purchase accounting adjustments
and of the fair value of the
assets and liabilities of the Company has not been made
as of the date of this Proxy
Statement. In addition, certain purchase accounting
adjustments have been made assuming a
fair value of $5.74 per share for the Company's Common
Stock. Actual adjustments will be
made based on the market price of the Common Stock
immediately prior to Closing.
Accordingly, the purchase accounting adjustments made in
connection with the development of
the pro forma financial information are preliminary and have
been made solely for purposes
of developing such pro forma financial information to comply
with disclosure requirements of
the SEC. The Company will undertake a study to determine
the fair value of its assets and
liabilities and will make appropriate purchase accounting
adjustments upon completion of
that study.
The pro forma condensed consolidated financial
statements are derived from the
historical financial statements of the Company and the CT
Group which are included elsewhere
in this Proxy Statement. The pro forma condensed
consolidated balance sheet combines the
Company's October 31, 1993 balance sheet with the CT
Group's September 30, 1993 balance
sheet. The pro forma condensed consolidated statements of
operations combine the Company's
historical statements of operations for the twelve months
ended January 31, 1993 and the
nine months ended October 31, 1993 with the CT Group's
historical statements of operations
for the fiscal year ended December 31, 1992 and the nine
months ended September 30, 1993,
respectively.
The financial information relating to the CT Group
contained in this Proxy Statement
was provided to the Company by the CT Group in connection
with the Acquisition for the
preparation of this Proxy Statement and the Company
has relied upon such financial
information in the preparation of this Proxy Statement.
The pro forma data is presented for informational
purposes only and may not be
indicative of the future results of operations or financial
position of the Company or the
CT Group, or what the results of operations or financial
position of the Company would have
been if the Acquisition and Redemption had occurred on the
dates set forth.
These pro forma condensed consolidated financial
statements should be read in
conjunction with the historical financial statements and
notes thereto of the Company and
the CT Group included elsewhere herein. See "Index to
Financial Statements."
100
<PAGE>
Burnup & Sims/CT Group
Pro Forma Financial Statements
Unaudited Consolidated Condensed
Balance Sheet
(In thousands)
CT Burnup ^
Pro Forma ^ Combined
Group & Sims ^
Adjust's ^ Pro Forma
ASSETS
Current Assets
Cash $14,163 $ 6,853
($4,580) (1) $ 16,436
Receivables 7,811 19,300
0 27,111
Other Current Assets 582 11,179
0 11,761
Total Current Assets 22,556 37,332
(4,580) 55,308
Investment in NBC 31,134
(18,918) (2) 12,216
Property - Net 4,867 17,904
21,499 (3) 44,270
Real Estate Investments 12,514
12,402 (3) 24,916
Goodwill 3,209
(3,209) (3) 0
Other Assets 76 1,300
(102) (3) 1,274
$27,499 $103,393
$ 7,092 $137,984
LIABILITIES AND EQUITY
Current Liabilities
Current Portion of Debt $597 $4,006
$1,000 (1) $ 5,603
Accounts Payable and 5,286 12,749
1,900 (4) 19,935
Accrued Expenses
Other Current Liabilities 1,320 6,357
(390) (5) 7,287
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Total Current 7,203 23,112
2,510 32,825
Liabilities
Other Liabilities 18 13,622
13,128 (6) 26,768
Long-Term Debt 1,075 32,085
2,000 (1) 35,160
Shareholders' Equity
Common Stock 6 1,602
(1,047) (7) 1,586
1,025 (8)
Capital Surplus 42 72,860
(73,429) (9) 41,645
30,933 (8)
11,239 (10)
Retained Earnings 19,169 34,252
(34,252) (11) 0
(7,930) (12)
(11,239) (10)
Treasury Stock (74,140)
74,154 (13) 0
(14)
Total Shareholders' 19,203 34,574
(10,546) 43,231
Equity
$27,499 $103,393
$ 7,092 $137,984
See Notes to Pro Forma Financial Statements.
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<PAGE>
Burnup & Sims/CT Group
Pro Forma Financial Statements
Unaudited Consolidated Condensed Statement
of Operations
Twelve Months
(Dollar amounts in thousands except per
share data)
CT Burnup
Pro Forma Combined
Group & Sims
Adjust's Pro Forma
Revenues $34,136 $143,990
$ 0 $178,126
Costs and Expenses
Cost of Sales 22,163 126,233
0 148,396
General and Administrative 2,937 17,075
0 20,012
Depreciation and 371 6,600
(207) (14) 6,764
Amortization
Interest Expense 35 4,718
240 (15) 4,993
Other - Net 350 (5,906)
2,681 (16) (2,875)
Total Costs and 25,856 148,720
2,714 177,290
Expenses
Income (Loss) Before Income 8,280 (4,730)
(2,714) 836
Taxes
Provision (Credit) for 3,229 (17) (1,738)
(1,180) (18) 311
Income Taxes
Earnings (Loss)
from Continuing Operations $ 5,051 ($2,992)
($1,534) $ 525
Earnings (Loss) per Share
from Continuing Operations $ 4,592 ($0.34)
$ 0.03
Average Shares Outstanding 1 8,768
7,095 (19) 15,864
(000's)
103
<PAGE>
See Notes to Pro Forma Financial Statements.
104
<PAGE>
Burnup & Sims/CT Group
Pro Forma Financial Statements
Unaudited Consolidated Condensed Statement
of Operations
Nine Months
(Dollar amounts in thousands except per
share data)
CT Burnup
Pro Forma Combined
Group & Sims
Adjust's Pro Forma
Revenues $37,034 $106,381
$ 0 $143,415
^ Costs and Expenses
Cost of Sales 23,730 97,991
0 121,721
General and Administrative 4,075 14,695
0 18,770
Depreciation and 553 4,013
(53) 4,513
Amortization
(14)
Interest Expense 115 3,108
180 (15) 3,403
Other - Net 1,129 (4,045)
2,011 (16) (905)
Total Costs and Expenses 29,602 115,762
2,138 147,502
Income (Loss) Before Income 7,432 (9,381)
(2,138) (4,087)
Taxes
Provision (Credit) for 2,898 (17) (2,673)
(885) (18) (660)
Income Taxes
Earnings (Loss)
^ from Continuing Operations $4,534 ($6,708)
$ (1,253) ($3,427)
Earnings (Loss) per Share
from Continuing Operations $4,122 ($0.77)
($ 0.22)
Average Shares Outstanding 1 8,768
7,095 (19) 15,864
(000's)
See Notes to Pro Forma Financial Statements.
105
<PAGE>
Burnup & Sims/CT Group
Notes to Pro Forma Financial
Statements
Balance Sheet:
(1) CT Group dividend to be paid prior to Closing,
including notes payable of $3
million, payable in semi-annual installments of
$500,000.
(2) Exchange of Subordinated Debenture in the face
amount of $17,500,000 (book value
of $17,291,000) and $592,000 reduction of
Other Indebtedness for 3,153,847
shares of Common Stock ($17,883,000), net of
the allocation of the excess of
estimated fair value over the purchase price
($1,035,000). (See (3) below).
(3) Adjust Company's net assets to estimated fair
value, net of the excess of fair
value over the purchase price as follows (in
thousands):
Company's equity at October 31,
1993 $34,574
Bonus service pool and other costs,
net of tax (685)
Adjustment of net assets to fair
value
Property, net
$24,838
Real estate investments
14,513
Goodwill
(3,209)
Deferred taxes related to
property and
real estate adjustments
(15,347)
Net asset step up in basis
20,795
Redemption of 3,153,847 shares of
Common Stock(17,958)
Estimated fair value of Company's
net assets 36,726
106
<PAGE>
Purchase Price
Value of Common Stock (See (8)
below) $32,208
Estimated CT Group transaction
costs 500
Total purchase price
32,708
Excess of estimated fair value over
purchase price
$4,018
Allocation of excess of estimated
fair value over purchase price:
Investment in NBC
$1,035
Property, net
3,339
Real estate investments
2,111
Other assets
102
Deferred taxes related to above
adjustments(2,569)
Total
$4,018
(4) Estimated transaction costs of $900,000
including CT Group costs of $500,000
included in the purchase price, and
establishment of Company's bonus service
pool of $1,000,000.
(5) Current tax benefit of deductible transaction
costs incurred by the Company.
(6) Deferred taxes relating to step up in basis
($12,778,000) and estimated deferred
tax liability of CT Group upon termination of
Subchapter S status ($350,000).
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<PAGE>
(7) Eliminate par values of CT Group common stock
($6,000) the Company's retired
treasury stock ($726,000) and the shares redeemed
from NBC ($315,000).
(8) Record issuance of 10,250,000 shares of Common
Stock, based on the value of
5,614,492 shares of Common Stock to be
outstanding after the Redemption,
assuming a market price of $5.74 per share at
Closing as follows (in thousands):
Value of equity of the Company (5,614,492
x $5.74) $32,208
Par value of shares issued (10,250,000 x
$.10) (1,025)
Estimated transaction costs related to
Common Stock issued (250)
Credit to capital surplus
$30,933
(9) Adjust capital surplus for retirement of
Company's treasury stock ($73,414,000),
retirement of shares redeemed from NBC
($17,643,000, including estimated
transaction costs of $75,000) and elimination of
the resulting negative capital
surplus ($18,197,000); elimination of CT Group
treasury stock ($14,000); and
adjustment to reflect par values of Common
Stock outstanding subsequent to
Closing ($555,000).
(10) Reclassify undistributed earnings of CT Group
upon termination of Subchapter S
status at date of Closing.
(11) Record Company's bonus service pool, net of
tax ($610,000) and estimated
transaction costs ($325,000), and eliminate
resulting retained earnings
($33,317,000).
(12) Record CT Group dividend to be paid prior to
Closing ($7,580,000) and estimated
deferred tax liability of CT Group upon
termination of Subchapter S status
($350,000).
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<PAGE>
(13) Record retirement of Company's and CT Group's
treasury stock.
Statement of Operations:
(14) Elimination of Company's historical goodwill
amortization, net of adjustment for
additional depreciation assuming an average
life of 20 years for depreciable
tangible assets (primarily buildings).
(15) Increase in interest expense for notes payable
issued in connection with CT
Group dividend.
(16) Decrease in interest income for reduction of
Subordinated Debenture and Other
Indebtedness, and decrease in cash.
(17) Pro forma CT Group tax provision, assuming 39%
overall rate.
(18) Tax benefit of pro forma adjustments.
(19) Shares of Common Stock issued (10,250,000) net
of shares redeemed from NBC
(3,153,847) and CT Group shares eliminated
(1,100).
109
<PAGE>
CT AND CTF'S MANAGEMENT'S DISCUSSION
AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Management's discussion and analysis of financial
condition and results of operations
should be read in conjunction with the selected financial
data and financial statements and
notes to financial statements included elsewhere herein.
Results of Operations
Nine months ended September 30, 1993 compared to
September 30, 1992.
Results of operations for the nine months ended
September 30, 1993, reflect the
continued growth of the companies' revenue base.
Revenues for the nine months ended
September 30, 1993, were $37,034,193 compared to
$17,324,936 for the nine months ended
September 30, 1992. This increase resulted primarily from
an increase in the companies'
customer base and in the volume of work from Southern Bell
arising in connection with the
rebuilding necessitated by Hurricane Andrew, the expansion of
outside plant systems approved
under Southern Bell's increased Master Budget Plan and
the growth in private sector
telecommunication projects. The revenues generated by the
Southern Bell work constitutes
substantially all of the increase in total combined
revenues of CT and CTF. Accordingly,
the loss of all or a significant portion of work from
Southern Bell could have a material
adverse impact on the Company's results of operations.
Cost of revenues increased from $11,822,810 in the
prior year's period to $24,213,091
for the nine months ended September 30, 1993, and was 34% as
a percentage of revenues as of
September 30, 1993, and 31% as a percentage of
revenues as of September 30, 1992.
Consequently, the increase in gross profit from $5,502,126
in the prior year's period to
$12,821,102 for the nine months ended September 30, 1993 was
due primarily to an increase in
revenues without a commensurate increase in fixed costs.
110
<PAGE>
General and administrative expenses for the period
increased by $3,112,193 from
$1,033,105 in the prior year's period to $4,145,298 due
primarily to increases in certain
personnel costs related to the companies performance.
Depreciation (included in Cost of Contract
Revenue) increased by $276,628 from
$276,867 in the prior year's period to $553,495 primarily as
a result of the acquisition of
construction equipment and vehicles required to support the
volume increase.
Net income for the period in the amount of $7,431,869
includes a loss of approximately
$1,392,852 from the OCT Joint Venture (described below).
Fiscal Year Ended December 31, 1992, Compared to Fiscal
Year Ended December 31, 1991.
Revenues for the fiscal year ended December 31, 1992
were $34,135,788 compared to
$31,588,228 for the preceding fiscal year. The increase
resulted primarily from an increase
in the volume of business from existing customers.
Cost of revenues decreased from
$23,328,758 for the prior fiscal year to $22,460,792,
primarily as a result of overall
improvements in operational efficiency.
Gross profit increased from $8,259,470 in the prior
fiscal year to $11,674,996 and, as
a percentage of revenues increased from 26% to 34%
primarily due to the successful
completion of certain construction and telecommunications
projects.
General and administrative expenses increased from
$2,795,528 in the prior fiscal year
to $3,012,651 primarily as a result of an increase in the
variable costs associated with
increased revenues, but remained constant as a percentage of
revenues (9%).
Other income in fiscal year 1992 increased from
$283,238 in the prior fiscal year to
$382,800 due primarily to a gain on sale of assets of
approximately $85,000 and interest
income of approximately $200,000.
111
<PAGE>
In fiscal year 1992, as a result of non-payment of
certain change orders disputed by
Dade County in the aggregate amount of approximately
$9,500,000 with respect to the
Metro-Mover and landfill project, the OCT Joint Venture
incurred a loss. CT's portion of
such loss was $372,972 representing its twenty percent
(20%) interest in the OCT Joint
Venture. The OCT Joint Venture is contesting Dade County's
position with respect to the
change orders. In October 1993, the claims relating to the
landfill project were settled.
The claims relating to the Metro-Mover project currently
remain unresolved.
Net income for the period increased from $5,300,689
to $8,279,555 primarily as a
result of improved gross profit.
Also in fiscal year 1992, CTF negotiated a
settlement of certain outstanding
litigation. In accordance with the terms of the settlement
CTF paid $350,000, which amount
is reflected as an expense.
Fiscal Year Ended December 31, 1991, Compared to Fiscal
Year Ended December 31, 1990.
Revenues for the year ended December 31, 1991 were
$31,588,228 compared to $18,639,593
for the fiscal year ended December 31, 1990. The increase
reflects revenues recognized in
consolidation by the 9001 Joint Venture in connection with
construction of the detention
facility. Cost of revenues increased from $11,820,932
in the prior fiscal year to
$23,328,758 and, as a percentage of revenues, increased
from 63% to 74% primarily as a
result of the increased variable costs associated with the
detention facility project.
Gross profit for the period increased from
$6,818,661 in the prior fiscal year to
$8,259,470. The increase is the result primarily of the
increase in revenues recognized by
the 9001 Joint Venture.
112
<PAGE>
General and administrative expenses for the period
increased from $2,375,315 in the
prior fiscal year to $2,795,528 primarily as a result of
increased variable costs associated
with higher revenues.
In fiscal year 1991, other income decreased from
$349,915 in the prior fiscal year to
$283,238 due primarily to a decrease in interest income.
Net income for the period in the amount of $5,300,689
includes income of $179,051 from
the OCT Joint Venture and a loss of $625,542 incurred in
connection with the 9001 Joint
Venture.
Liquidity and Capital Resources
Liquidity and capital resources increased in the nine
months ended September 30, 1993
relative to the fiscal year ended December 31, 1992.
Total assets increased from $24,431,977 at December
31, 1992 to $27,499,394 at
September 30, 1993 or 20%. This growth in total assets
resulted primarily from an increase
in cash and cash equivalents from $10,190,412 at
December 31, 1992 to $14,163,536 at
September 30, 1993. The increase in cash and cash
equivalents is attributable primarily to
the retention of earnings generated from operating profits.
Prior to the Closing of the Acquisition, the CT Group
shall declare and pay dividends
in the aggregate amount of $11,500,000. Such dividends
will be paid as follows: (i)
$8,500,000 shall be paid in cash to the stockholders of CT
and CTF (of which approximately
$3,920,000 had been paid as of September 30, 1993), and
(ii) $3,000,000 will be paid by
issuance of a promissory note by the CT Group. The note
will be payable in semi-annual
equal principal payments of $500,000 bearing interest at the
prime rate plus two percent but
in no event less than 8% per annum. See Note 7 to the
Unaudited Financial Statements for
the CT Group.
113
<PAGE>
Working capital increased from $13,751,962 at
December 31, 1992 to $15,353,567 at
September 30, 1993. This increase resulted primarily from
an increase in current assets.
The current ratio of assets to liabilities approximated 3 to
1 for both periods presented.
CT and CTF each are privately-held companies and,
consequently, there is no public
market for their capital stock.
The companies' principal sources of liquidity were
internally generated cash, and, to
a lesser extent, trade financing.
In April 1993, CTF obtained an unsecured line of
credit for its general working
capital needs which currently provides for borrowings of
up to $2,000,000. Interest on
borrowings under the line of credit is at the prime
interest rate. No borrowings are
currently outstanding under the line. Following
consummation of the Acquisition, the
Company intends to explore various financing alternatives
available to it. Management of
the CT Group has held preliminary discussions with various
lenders and other third party
financing sources with respect to the working capital
needs of the Company following
consummation of Acquisition. There can be no assurances
that following consummation of the
Acquisition that the Company will be able to obtain a line of
credit on terms acceptable to
it.
CTF believes that there are no known material trend
variances with respect to its
capital resources. Management expects to meet its future
working capital needs as it has in
the past, primarily through cash flow from operations.
To the extent that additional sources of capital are
required, funding is anticipated
to be available via bank lines of credit or term financing.
114
<PAGE>
OUTSTANDING VOTING SECURITIES AND
VOTING RIGHTS
The Board of Directors has set the close of business
on ____________, 1994 as the
record date (the "Record Date") for determining
stockholders of the Company entitled to
notice of and to vote at the Meeting. As of the Record
Date, there were _____________
shares of Common Stock issued and outstanding, all of which
are entitled to be voted at the
Meeting. Each share of Common Stock is entitled to one
vote on each matter submitted to
stockholders for approval at the Meeting. Stockholders do
not have the right to cumulate
their votes for directors.
The attendance, in person or by proxy, of the holders
of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum.
The Class II director will be elected by a plurality of
the votes cast by the shares of
Common Stock represented in person or by proxy at the
Meeting. The affirmative votes of the
holders of a majority of the shares of Common Stock
represented in person or by proxy at the
Meeting will be required for approval of the Acquisition
Agreement and the affirmative votes
of the holders of a majority of the outstanding Common
Stock will be required for approval
of each of the amendments to the Certificate. The
affirmative votes of the holders of a
majority of the shares of Common Stock represented in person
or by proxy at the Meeting will
be required for approval of the Company's 1994 Stock Option
Plan for Non-Employee Directors
and the Company's 1994 Stock Incentive Plan. The proposed
amendments to the Certificate and
the adoption of the 1994 Stock Option Plan for
Non-Employee Directors and the 1994 Stock
Incentive Plan are contingent upon the consummation of the
Acquisition and, as such, will
not be effected unless the terms of the Acquisition
Agreement are approved at the Meeting.
Any other matter that may be submitted to a vote of the
stockholders will be approved if a
majority of the shares of Common Stock represented in person
or by proxy at the Meeting vote
in favor of the matter. The Board of Directors does not
know of any matter, except those
enumerated in this Proxy Statement, that will be submitted
to a vote of the stockholders at
the Meeting. If less than a majority of outstanding shares
entitled to vote are represented
at the Meeting, a majority of the shares so represented may
adjourn the Meeting to another
date, time or place, and notice need not be given of the new
date, time or place if the new
date, time or place is announced at the meeting before the
adjournment is taken.
115
<PAGE>
The Company's directors and named executive officers
are the record owners of 296,877
shares, representing approximately 3.3% of the outstanding
Common Stock and have indicated
that they intend to vote their shares in favor of the
reelection of Samuel C. Hathorn, Jr.
to the Board Directors, the approval of the terms of the
Acquisition Agreement, the approval
of each of the proposed amendments to the Certificate,
[the 1994 Stock Option Plan for
Non-Employee Directors and the 1994 Incentive Stock
Plan.] See "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF."
Prior to the Meeting, the Company will select one or
more inspectors of election for
the meeting. Such inspector(s) shall determine the
number of shares of Common Stock
represented at the Meeting, the existence of a quorum
and the validity and effect of
proxies, and shall receive, count and tabulate ballots and
votes to determine the results
thereof. Abstentions will be considered as shares
present and entitled to vote at the
Meeting and will be counted as votes cast at the Meeting,
but will not be counted as votes
cast for or against any given matter.
A broker or nominee holding shares registered in its
name, or in the name of its
nominee, which are beneficially owned by another person and
for which it has not received
instructions as to voting from the beneficial owner, may
have discretion to vote the
beneficial owner's shares with respect to all matters
addressed at the Meeting. Any such
shares which are not represented at the Meeting either in
person or by proxy will not be
considered as shares present at the Meeting, and will not be
considered to have cast votes
on any matters addressed at the Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF
The following tables set forth, as of the Record Date,
information with respect to the
beneficial ownership of the Common Stock by (i) each person
known by the Company to be the
beneficial owner of more than five percent of the
outstanding Common Stock, (ii) the
Company's Chief Executive Officer and each of the
Company's other four most highly
compensated executive officers whose total annual salary
and bonus for Fiscal 1993 was
$100,000 or more, (iii) each director of the Company, and
(iv) all directors and executive
116
<PAGE>
officers of the Company as a group. The Company is not
aware of any beneficial owner of
more than five percent of the outstanding Common Stock
other than as set forth in the
following table.
Security Ownership of Certain Beneficial Owners
Percentage of Percentage of
Class Prior to Class After
Name of Title Amount and Nature of
Acquisition Acquisition
Beneficial Owner of Class Beneficial Ownership(1)
and Redemption and Redemption
Nick A. Caporella Common 3,540,565(2)
40.4% 2.4%
One North University Drive
Fort Lauderdale, FL 33324
National Beverage Corp. Common 3,153,847
36.0% -0-
One North University Drive
Fort Lauderdale, FL 33324
Estate of Riley V. Sims(3) Common 673,743
7.7% 4.2%
2000 Presidential Way
West Palm Beach, FL 33401
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Security Ownership of Management
Percentage of Percentage of
Class Prior to Class After
Name and Address Title Amount and Nature of
Acquisition Acquisition
of Beneficial Owner of Class Beneficial Ownership(1)
and Redemption and Redemption
Samuel C. Hathorn, Jr. Common 5,200(4)
* *
Cecil D. Conlee Common 2,000
* *
Leo J. Hussey(5) Common 2,049
* *
William A. Morse Common
* *
George R. Bracken(5) Common 505
* *
Gerald W. Hartman(5) Common -0-
-0- -0-
All executive officers and
directors as a group
(nine persons) Common 3,450,724
39.4% 1.9%
________________________________
* Less than 1%.
(1) Unless otherwise indicated, each person has sole
voting and investment power with
respect to such shares.
(2) Includes (i) 3,153,847 shares owned by NBC (Mr.
Caporella is the general partner of
IBS Partners, Ltd., an entity which beneficially owns
74.7% of the outstanding capital
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<PAGE>
stock of NBC), (ii) options to purchase 100,000
shares at an exercise price at the
time of grant equal to $2.00 per share (which exercise
price decreases to the extent
of a corresponding increase in the market price of the
Common Stock in excess of $2.00
as reported on NASDAQ) and (iii) 12,500 shares held by
the wife of Mr. Caporella, as
to which Mr. Caporella disclaims beneficial ownership.
(3) Mr. Sims passed away on the 13th day of January 1993.
(4) Includes 200 shares held by the children of Mr.
Hathorn, as to which Mr. Hathorn
disclaims beneficial ownership.
(5) In July 1993, Messrs. Hussey, Bracken and Hartman
were issued options to purchase
40,000, 4,500 and 25,000 shares of Common Stock,
respectively under the Company's then
existing stock option plan and all options previously
held by them were canceled. See
"EXECUTIVE COMPENSATION - Aggregate Fiscal Year-End
Stock Option Value Table." The
exercise price of such options at the time of
grant was $2.00 per share (which
exercise price decreases to the extent of a
corresponding increase in the market price
of the Common Stock in excess of $2.00 as reported
on NASDAQ) and the options are
scheduled to vest at various times. The Acquisition
Agreement provides that all of
these options will become immediately exercisable if
such employee's employment with
the Company is terminated under certain circumstances
during the twelve month period
after October 15, 1993. The foregoing table does
not reflect ownership of these
options. All options held by Mr. Caporella are
currently exercisable. See "PROPOSAL
TO APPROVE ACQUISITION AGREEMENT WITH CHURCH &
TOWER, INC. AND CHURCH & TOWER OF
FLORIDA, INC. - Certain Effects of the Acquisition --
Outstanding Stock Options."
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors
and executive officers, and persons who own more than ten
percent of the outstanding Common
Stock, to file with the SEC initial reports of ownership and
reports of changes in ownership
119
<PAGE>
of Common Stock. Such persons are required by SEC
regulation to furnish the Company with
copies of all such reports they file.
To the Company's knowledge, based solely on a review
of the copies of such reports
furnished to the Company and written representations that
no other reports were required,
all Section 16(a) filing requirements applicable to its
officers, directors and greater than
ten percent beneficial owners have been complied with.
120
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CHURCH & TOWER GROUP
PAGE
Independent Auditors' Report
F-2*
Consolidated Financial Statements:
Combined Balance Sheets as of December 31, 1992 and 1991
F-3
Combined Statements of Income and Retained Earnings
for the Years Ended December 31, 1992, 1991 and 1990
F-4
Combined Statements of Cash Flows
for the Years Ended December 31, 1992, 1991 and 1990
F-5
Notes to Consolidated Financial Statements
F-6
Combined Balance Sheets as of September 30, 1993
(Unaudited) F-12
Combined Statements of Income and Retained Earnings
for the Nine Months Ended September 30, 1993 and
1992 (Unaudited)
F-13
Combined Statements of Cash Flows for the Nine
Months Ended September 30, 1993 and 1992 (Unaudited)
F-14
Notes to Consolidated Financial Statements
September 30, 1993 (Unaudited)
F-15
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Church & Tower Group
Miami, Florida
We have audited the combined balance sheets of Church
& Tower Group (the "Group"), as
of December 31, 1992 and 1991, and the related combined
statements of income and retained
earnings, and of cash flows for each of the three years
ended December 31, 1992. These
financial statements are the responsibility of the Group's
management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We did not audit the financial statements of 9001 Joint
Venture, a partnership that is
majority-owned by a company in the Group, which
statements reflect total assets of
$3,064,573 and $2,737,787 as of December 31, 1992 and 1991,
respectively, and total revenues
of $8,240,290, $14,495,378 and $463,079 for the three years
ended December 31, 1992. Those
statements were audited by other auditors whose report has
been furnished to us, and our
opinion, insofar as it relates to the amounts included for
9001 Joint Venture, is based
solely on the report of the other auditors.
We conducted our audits in accordance with
generally accepted auditing standards.
Those standards require that we plan and perform the audit
to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial
statement presentation. We believe that our audits and
the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports
of other auditors, the combined
financial statements referred to above present fairly,
in all material respects, the
F-2
<PAGE>
financial position of Church & Tower Group as of December 31,
1992 and 1991, and the results
of their operations and their cash flows for each of the
three years ended December 31, 1992
in conformity with generally accepted accounting principles.
VICIANA & SCHAFFER
CERTIFIED PUBLIC ACCOUNTANTS
Coral Gables, Florida
June 15, 1993 (except for Note 7, as to
which the date is January 10, 1994)
F-3
<PAGE>
The financial information relating to the CT Group
contained in this Proxy Statement
was provided to the Company by the CT Group in connection
with the Acquisition for the
preparation of this Proxy Statement and the Company has
relied upon such financial
information in the preparation of this Proxy Statement.
Required Historical Financials for CT
and CTF
CHURCH & TOWER GROUP
COMBINED BALANCE SHEETS
December 31,
1992 1991
Assets
Current Assets
Cash and cash equivalents
$10,190,412 $ 5,610,961
Accounts receivable
6,091,821 1,538,800
Contract receivable from Metro-Dade County
2,542,833 1,784,188
Balance due from commercial bank on a
promissory note
989,271 -
Other receivables and current assets
821,643 86,272
Total Current Assets
20,635,980 9,020,221
Investment in joint ventures
5,000 262,727
Property and equipment, net
3,655,855 2,406,117
Other non-current assets
135,142 44,105
Total Assets
$24,431,977 $11,733,170
Liabilities and Stockholders' Equity
F-4
<PAGE>
Current Liabilities
Accounts payable and accrued expenses
$ 4,097,885 $ 1,447,476
Billings in excess of costs and estimated earnings
on uncompleted contracts with Metro-Dade County
1,527,012 242,917
Current maturities of long-term notes payable
696,387 8,804
Other current liabilities
346,962 167,338
Deficit in joint venture's capital account
215,772 -
Total Current Liabilities
6,884,018 1,866,535
Minority interest in consolidated joint venture
17,751 59,496
Notes payable
1,839,770 33,379
Due to The Mas Group, Inc., a related entity
- 337,743
Total Liabilities
8,741,539 2,297,153
Stockholders' Equity
Common stock
6,000 5,400
Additional paid-in capital
42,000 42,000
Treasury stock
(14,169) (14,169)
Retained earnings
15,656,607 9,402,786
Total Stockholders' Equity
15,690,438 9,436,017
Total Liabilities and Stockholders' Equity
$24,431,977 $11,733,170
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
CHURCH & TOWER GROUP
COMBINED STATEMENTS OF INCOME AND
RETAINED EARNINGS
Years
Ended December 31,
1992
1991 1990
Contract Revenue $34,135,788
$31,588,228 $18,639,593
Cost of Contract Revenue 22,460,792
23,328,758 11,820,932
Gross Profit 11,674,996
8,259,470 6,818,661
General and Administrative expenses 3,012,651
2,795,528 2,375,315
Income from operations 8,662,345
5,463,942 4,443,346
Income (loss) from joint ventures (372,972)
179,051 -
Other income 382,800
283,238 349,915
Settlement of litigation (350,000)
- -
Income before minority interest 8,322,173
5,926,231 4,793,261
Minority interest in net income of (42,618)
(625,542) (36,530)
consolidated joint venture
Net income 8,279,555
5,300,689 4,756,731
Retained earnings at beginning of year 9,402,786
7,262,852 6,094,184
Less:
Distributions to stockholders 2,025,134
3,160,755 3,588,063
Additional stock issued upon merger of
CCI and CT 600
- -
Retained earnings at end of year $15,656,607 $
9,402,786 $ 7,262,852
F-6
<PAGE>
The accompanying notes are an integral part of these
financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
CHURCH &
TOWER GROUP
COMBINED
STATEMENTS OF CASH FLOWS
Years Ended December 31,
<S> <C>
<C> <C>
1992
1991 1990
Cash flows from operating activities:
Net Income $ 8,279,555
$ 5,300,689 $ 4,756,731
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 371,488
359,236 281,098
(Increase) decrease in accounts receivable (4,553,021)
994,082 (961,462)
(Increase) in contract receivable from (758,645)
(1,423,863) (360,352)
Metro-Dade County
(Increase) decrease in other assets (550,032)
111,775 14,996
Decrease in net value of equipment 2,772
27,774 -
Increase (decrease) in accounts payable and 2,618,009
667,310 (100,759)
accrued expenses
Increase (decrease) in other current 111,747
(167,472) 23,313
liabilities
Minority Interest in net Income 42,618
625,542 36,530
Acquisition of minority partner interest (84,363)
- -
Increase (decrease) in joint venture capital 621,077
(155,000) 155,000
account
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 1,284,095
56,109 186,808
The net of various minor amounts (23,194)
- -
F-8
<PAGE>
Net cash provided by operating activities 7,362,106
6,396,182 4,031,903
Cash flows from Investing activities:
Paid in capital -
- 300
Cash Inflow from principal received on -
- 24,000
mortgage
Return of Investment in unconsolidated venture 48,000
- -
Investment in unconsolidated venture (190,578)
- -
Investment in joint venture (5,000)
- -
Investment in note receivable (50,000)
- -
Deposit on equipment (168,000)
- -
Purchase of equipment (1,574,636)
(355,062) (342,773)
Net cash used in investing activities (1,940,214)
(355,062) (318,473)
Cash flows from financing activities:
Loan to related entity -
- (229,525)
Proceeds received from notes payable 1,700,000
- -
Payments received from related company 47,246
- -
Principal payments on notes payable (201,751)
(14,728) (227,818)
Insurance proceeds for repairs of hurricane 50,000
- -
damages
Repairs of hurricane damages (17,038)
- -
Expenses paid for related company (61,154)
- -
Distributions to stockholders (2,025,134)
(3,160,755) (3,588,063)
Distributions to partners of consolidated -
(602,549) -
joint venture
Payment to The Mas Group, Inc. (334,610)
- -
Net cash used in financing activities (842,441)
(3,778,032) (4,045,406)
Net increase (decrease) in cash and cash 4,579,451
2,263,088 (331,976)
equivalents
Cash and cash equivalents at beginning of year 5,610,961
3,347,873 3,679,849
F-9
<PAGE>
Cash and cash equivalents at end of year $10,190,412
$ 5,610,961 $ 3,347,873
Supplemental Disclosure of Cash Flow
Information: $ 33,525
$ 4,496 $ -
Cash paid for Interest
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-10
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES:
Church & Tower Group (the "Group") represents the
combination of two Florida Corporations
(three at December 31, 1991), Church & Tower of Florida,
Inc. ("CT Florida") and Church &
Tower, Inc. (CT), which are owned by members of the Mas
family.
CT Florida is engaged in the construction and maintenance
of outside plant for utility
companies servicing the geographical areas of Dade County
and Broward County's southeast
area.
CT Florida holds three Master Contracts with the telephone
company (Southern Bell), its
principal client, which will expire at various times
through 1996, and provide for CT
Florida to receive price increases based on the annual
increment in the Consumer Price
Index. CT Florida also provides services under individual
contracts with the telephone
company in Dade and Broward Counties which are not covered
by the aforementioned contracts,
and is subcontracted by Miami-Dade Water & Sewer to do
paving and sidewalk repairs. Total
revenues and accounts receivable recognized from Southern
Bell and Miami-Dade Water & Sewer
were approximately as follows:
December 31 December 31
December 31
1990 1992
1991
Southern Bell:
F-11
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
Revenues for the year ended $22.3 million
$15.7 million $15.7 million
Accounts receivable 5.7 million
1.4 million 2.1 million
Miami-Dade Water & Sewer:
Revenues for the year ended 1.9 million
1.1 million 1.8 million
Accounts receivable 108,000
19,000 209,000
CT was incorporated in 1990 under the laws of the State of
Florida to engage in construction
contracts.
In 1990, CT, together with another construction contractor,
formed a partnership known as
"9001 Joint Venture" for the purpose of constructing a
detention center for the Metro-Dade
County government. From its initial 60% interest in the
partnership, CT increased its
participation to 89.8% for 1991 and to 99.7% for 1992.
Total revenues recognized with the
Metro-Dade County government were approximately $9.6 million,
$14.5 million and $0.5 million
for the years ended December 31, 1992, 1991 and 1990,
respectively.
CT is also in partnership, since September of 1990, with
an international construction
contractor in a venture known as "OCT Joint Venture." In
this venture, CT has had a 20%
interest in the two governmental projects undertaken thus
far: an extension to the Downtown
Miami Metromover (98% complete as of December 31, 1992),
and a landfill in the southern
section of Dade County (39% complete as of the
aforementioned date). The results of
operations of this venture are reported under the equity
method of accounting.
F-12
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
Effective June 1, 1992, CT merged its operations with those
of Communication Contractors,
Inc. (CCI). CCI, which was wholly owned by a member
of the Mas family, provided
construction subcontractor services (manpower and equipment)
to CT Florida during the year
ended December 31, 1991 and for the period from January 1,
1992 through May 31, 1992. The
business combination between CT and CCI was accounted for
under the pooling-of-interests
method. The 100 common shares owned by the sole stockholder
of CCI were exchanged for 700
common shares of the surviving corporation (CT).
Principles of Combination
The combined financial statements include the accounts of CT
Florida, CT consolidated (which
includes the accounts of CT and of its majority owned
subsidiary, "9001 Joint Venture", and
wherein all significant intercompany transactions and
balances have been eliminated) and CCI
(as applicable). All significant intercompany
transactions and balances have been
eliminated.
Revenue and Cost Recognition
CT Florida recognizes revenues and related costs whenever
specific work orders, as covered
by the Master Contracts, are completed. Indirect costs
and administrative expenses are
charged to operations as incurred.
F-13
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
Revenue from long-term construction contracts, as reported
by CT's consolidated venture
("9001 Joint Venture") is recognized under the
percentage-of-completion method. Under this
method, the percentage of contract revenue to be recognized
currently is computed as that
percentage of estimated total revenue that incurred costs
to date bear to estimated total
costs, after giving effect to estimates of costs to
complete based upon most recent
information. General and administrative costs of the venture
are expenses as incurred.
Revenue Increase
As a result of Southern Bell's rehabilitation program in
South Florida in the aftermath of
Hurricane Andrew, and CT Florida's ability to successfully
bid on many new projects, revenue
in 1992 increased approximately 32% over prior year's
revenues.
Income Taxes
The companies in the Group (CT Florida, CT consolidated and
CCI, until its merger with CT)
have elected to be taxed under the Subchapter S provisions
of the Internal Revenue Code,
which provides that corporate earnings are to be included in
the Federal Income Tax Returns
of the individual stockholders. Accordingly, no
provision for income taxes has been
recorded in the accompanying combined statements of income.
As further explained in Note 7, the stockholders of the Group
have entered into an agreement
under which the Group will be acquired by Burnup & Sims Inc.,
a publicly traded company. As
a result of this acquisition, the Group will be taxed as a C
corporation.
F-14
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
In February 1992, the Financial Accounting Standards Board
issued Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes, effective for years
beginning after December 15, 1992. The adoption of SFAS
109 by the Group is expected to
result in a deferred tax liability of approximately
$350,000 due to the tax effect of
temporary differences between the carrying amounts of
assets for financial reporting
purposes and the amounts used for income tax purposes.
Cash and Cash Equivalents
For the purpose of reporting cash flows, the Group has
defined cash equivalents as those
highly liquid investments purchased with an original maturity
of three months or less.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Group has rented and purchased construction equipment
from other entities related to it
by common management and control. During the years 1992,
1991 and 1990, these related
transactions amounted to $1,817,867, $1,102,197 and $472,305,
respectively.
NOTE 3 - BACKLOG
F-15
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
The backlog of uncompleted contracts in progress for the
"9001 Joint Venture" at December
31, 1992, 1991 and 1990 amounted to approximately $9
million, $18.5 million and $14.6
million, respectively.
F-16
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
NOTES 4 - NOTES PAYABLE
December 31,
1992
1991
CT is liable to a commercial bank on a 7.7%
interest rate note, requiring monthly
payments of principal of $41,667 plus
accrued interest, beginning in February 1993
and maturing in January 1997. The face
amount of the note is $2 million, of which
$989,271 was received subsequent to December $2,000,000
-
31, 1992. The note is collateralized with
all receivables and equipment of CT.
CT is also liable to a commercial bank on a
note with interest at 0.5% over the prime
rate (6.5% at December 31, 1992). The note
is payable in monthly payments of principal
of $19,444 plus accrued interest beginning
in May 1992 and maturing in April 1995. The 502,778
-
note is collateralized with all receivables
and equipment of CT.
F-17
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
CT Florida is indebted to a financial
institution on a 10% interest rate note
payable, requiring monthly payments of $689,
including interest. The note is
collateralized with a mortgage on the land, 33,379
42,183
building and improvements where the
administrative offices are located.
2,536,157
42,183
Less: current portion (696,387)
(8,804)
$1,839,770
$ 33,379
Principal maturities for the following years
are as follows:
1993 $696,387
1994 738,548
1995 541,872
1996 506,365
1997 48,696
1998 4,289
$2,536,157
F-18
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, and consist of:
December
31,
1992
1991
Land, buildings and improvements $ 682,489
$ 714,956
Construction and excavation equipment 1,702,430
1,604,870
Trucks, automobiles and radio 2,412,003
995,056
equipment
Tools and portable equipment 147,707
147,705
Office furniture and equipment 457,471
399,318
Leasehold improvements 60,847
60,847
5,462,947
3,922,752
Less accumulated depreciation (1,807,092)
(1,516,635)
$3,655,855
$2,406,117
Depreciation estimates for property and equipment (excluding
land) were computed using the
straight-line method, with useful lives of 10-31 years for
buildings and improvements, 5
years for leasehold improvements, 7 years for trucks and
automobiles, and 10 years for all
other assets.
F-19
<PAGE>
CHURCH & TOWER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
Years Ended December 31, 1992 and 1991
NOTE 6 - CONTINGENCIES
In connection with certain construction contracts entered
into by affiliates through common
ownership, the company has signed jointly and severally,
together with other affiliates,
certain agreements of indemnity (Agreements) in the
aggregate amount of approximately
$75,000,000, of which approximately $54,000,000 have been
performed. The Agreements are to
secure the affiliates' fulfillment of obligations and
performance of the related contracts.
Management believes that no losses will be sustained from
these Agreements.
NOTE 7 - SUBSEQUENT EVENTS
On August 17, 1993 and December 27, 1993, the Group
declared dividends of $3,900,000 and
$7,600,000. Of the dividends declared, $8,500,000 has
been paid in cash and $3,000,000
remains payable in the form of two promissory notes,
payable in semi-annual principal
payments commencing August 1, 1994 of $500,000, bearing
interest at the prime rate plus 2%,
but in any event not less than 8%.
On October 15, 1993, the stockholders of the Group entered
into an agreement, as amended,
under which the Group will be acquired by Burnup & Sims Inc.,
a publicly traded company with
business activities similar to the Group. As a result of the
acquisition, the shareholders
of the Group will obtain approximately 65% of the
combined entity. The acquisition is
subject to approval of, among other things, the shareholders
of Burnup & Sims Inc.
F-20
<PAGE>
As a result of this acquisition, the Group will be taxed as a
C corporation. Undistributed
earnings at December 31, 1992, after giving effect to the
above-mentioned dividends, amount
to approximately $3,800,000.
F-21
<PAGE>
Required Historical Financials for CT
and CTF
CHURCH & TOWER GROUP
COMBINED BALANCE SHEETS
as of September 30, 1993
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents
$14,163,536
Accounts Receivable
5,300,855
Contract Receivable from Metro-Dade County
2,510,009
Other Receivables and Current Assets
582,040
Total Current Assets
22,556,440
Property and Equipment, net
4,866,810
Other Non-Current Assets
76,144
Total Assets
$27,499,394
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $
5,285,956
Current Maturities of Long-Term Notes Payable
596,699
Other Current Liabilities
311,594
Deficit in Joint Venture's Capital Account
1,008,624
Total Current Liabilities
7,202,873
F-22
<PAGE>
Minority Interest in Consolidated Joint Venture
18,399
Notes Payable
1,075,593
Total Liabilities
8,296,865
STOCKHOLDERS' EQUITY
Common Stock
6,000
Additional Paid-in Capital
42,000
Treasury Stock
(14,169)
Retained Earnings
19,168,698
Total Stockholders' Equity
19,202,529
Total Liabilities and Stockholders' Equity
$27,499,394
The accompanying notes are an integral part of these
financial statements
F-23
<PAGE>
CHURCH & TOWER GROUP
COMBINED STATEMENTS OF INCOME AND
RETAINED EARNINGS
(Unaudited)
Nine Months
Ended September 30,
1993
1992
Contract Revenue $37,034,193
$17,324,936
Cost of Contract Revenue 24,213,091
11,822,810
Gross Profit 12,821,102
5,502,126
General and Administrative Expenses 4,145,298
1,033,105
Income from Operations 8,675,804
4,469,021
Income (Loss) from Joint Venture (1,392,852)
(304,920)
Other Income 153,331
150,965
Income Before Minority Interest 7,436,283
4,315,066
Minority Interest in Net Income of
Consolidated Joint Venture (4,414)
(42,880)
Net Income 7,431,869
4,272,186
Retained Earnings at Beginning of Period 15,656,607
9,402,786
Less:
Distributions to Stockholders 3,919,778
1,055,213
Retained Earnings at End of Period $19,168,698
$12,619,759
F-24
<PAGE>
The accompanying notes are an integral part of these
financial statements.
F-25
<PAGE>
CHURCH & TOWER GROUP
COMBINED STATEMENT OF CASH
FLOWS
(Unaudited)
Nine Months Ended September 30
1993 1992
Cash Flows from Operating Activities:
Net Income
$7,431,869 $4,272,186
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) in Operating Activities:
Depreciation
553,495 276,867
(Increase) Decrease in Accounts and Contracts
Receivable 823,790 (1,650,163)
(Increase) Decrease in Other Receivables & Current
Assets 239,603 (199,073)
(Increase) Decrease in Other Assets
58,998 38,719
Increase (Decrease) in Accounts Payable & Accrued
Expenses 1,188,071 (4,829)
Increase (Decrease) in Billings in Excess of Costs
(1,527,012) 678,770
Increase (Decrease) in Other Current Liabilities
(35,368) (106,656)
Minority Interest in Net Income
648 42,882
Deficit in Unconsolidated Venture
1,392,852 0
Net Cash Provided by Operating Activities
10,126,946 3,348,703
F-26
<PAGE>
Cash Flows from Investing Activities:
Investment in Joint Venture
5,000 209,712
Investment in Unconsolidated Venture
(600,000) 0
Purchase of Equipment
53,088
(1,764,450)
Net Cash Provided (Used) in Investing Activities
262,800
(2,359,450)
Cash Flows from Financing Activities:
Debt Borrowings
989,271 257,238
Debt Repayments
(863,865) 0
Distributions to Stockholders
(1,055,213)
(3,919,778)
Net Cash Provided (Used) in Financing Activities
(797,975)
(3,794,372)
Net Increase in Cash & Cash Equivalents
3,973,124 2,813,528
Cash & Equivalents - Beginning of period
10,190,412 5,610,961
Cash & Equivalents - End of period
$14,163,536 $8,424,489
The accompanying notes are an integral part of these
financial statements.
F-27
<PAGE>
CHURCH & TOWER GROUP
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1993 (Unaudited)
1. General
The accompanying combined financial statements for
Church & Tower Group (the "Group")
have been prepared in accordance with generally
accepted accounting principles for
interim financial information. They do not include all
information and notes required
by generally accepted accounting principles for
complete financial statements. In the
opinion of management, all adjustments (consisting
of normal recurring accruals)
considered necessary for a fair presentation have
been included. The results of
operations are not necessarily indicative of results
which might be expected for the
entire fiscal year. The condensed consolidated
financial statements should be read in
conjunction with the combined financial statements
and notes thereto for the year
ended December 31, 1992.
2. Principles of Combination
The combined financial statements include the accounts
of Church & Tower of Florida,
Inc. ("CT Florida") and Church & Tower, Inc. ("CT
Consolidated") (which includes the
accounts of CT and of its majority owned subsidiary,
"9001 Joint Venture," and wherein
all significant intercompany transactions and
balances have been eliminated). All
significant intercompany transactions and balances
have been eliminated. The
financial statements of 9001 Joint Venture, a
partnership that is majority-owned by a
company in the Group reflect total assets of
$3,064,573 as of September 30, 1993, and
total revenues of $10,672,627 and $4,127,700 for the
nine months ended September 30,
1993 and 1992, respectively.
F-28
<PAGE>
3. Income Taxes
The companies in the Group have elected to be taxed
under the Subchapter S provisions
of the Internal Revenue Code, which provides that
corporate earnings are to be
included in the Federal Income Tax Returns of
the individual stockholders.
Accordingly, no provision for income taxes has been
recorded in the accompanying
combined statements of income.
4. Related Party Transactions
The Group has rented and purchased construction
equipment from other entities related
to it by common management and control. During the
nine months ended September 30,
1993 and September 30, 1992 these related
transactions amounted to $1,352,399 and
$1,375,292 respectively.
F-29
<PAGE>
CHURCH & TOWER GROUP
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1993 (Unaudited)
(Continued...)
5. Notes Payable
September 30, 1993
Note Due to Bank 7.7%
$1,672,292
Less: Current portion
596,699
Non-Current Notes Payable
$1,075,593
6. Property and equipment
Property and equipment
are recorded at cost, and
consists of:
September 30, 1993
F-30
<PAGE>
Land, Buildings and improvements
$ 682,489
Construction and excavation
2,889,128
equipment
2,816,437
Truck, automobiles and radio
297,046
equipment
481,450
Tools and portable equipment
60,847
Office furniture and equipment
7,227,397
Leasehold improvements
Less accumulated depreciation
(2,360,587)
Property and equipment - Net
$ 4,866,810
Depreciation expense amounted to $553,495 and
$276,867 for the nine months ended
September 30, 1993 and 1992, respectively.
7. Contingencies
In connection with certain construction contracts
entered into by affiliates through
common ownership, the company has signed jointly and
severally, together with other
affiliates, certain agreements of indemnity
("Agreements") in the aggregate amount of
approximately $75,000,000, of which approximately
$13,000,000 remains incomplete. The
Agreements are to secure the affiliates' fulfillment of
obligations and performance of
the related contracts.
Management believes that no losses will be sustained
from these Agreements.
8. Subsequent Events
F-31
<PAGE>
On December 27, 1993, the Group declared dividends of
$7,600,000. Of the dividends
declared, $4,600,000 has been paid in cash and
$3,000,000 remains payable in the form
of a promissory note, payable in semi-annual payments
of $500,000, bearing interest a
the prime rate plus 2%, but in any event not less than
8%.
A proforma balance sheet at September 30, 1993 after
giving effect to this dividend
represents the following:
Current Assets $17,956,440
Total Assets 22,899,394
Current Liabilities 7,702,873
Total Liabilities 11,296,865
Stockholders' Equity 11,602,529
On October 15, 1993, the stockholders of the Group
entered into an agreement under
which the Group will be acquired by Burnup & Sims Inc.,
a publicly traded company with
business activities similar to the Group. As a
result of this acquisition, the
shareholders of the Group will obtain approximately
65% of the combined entity. The
acquisition is subject to approval of, among other
things, the shareholders of Burnup
& Sims.
As a result of this acquisition, the Group will
be taxed as a C corporation.
Undistributed earnings at December 31, 1992, after
giving effect to the above
mentioned dividends amount to approximately $3,800,000.
F-32
<PAGE>
STOCKHOLDER PROPOSALS FOR ANNUAL
MEETING
Proposals of stockholders intended to be presented
at the 1994 Annual Meeting of
Burnup Stockholders must be received by Burnup at its
principal executive offices no later
than May 1, 1994 for inclusion in the proxy materials.
Such proposals should meet the
applicable requirements of the Exchange Act and the Rules and
Regulations thereunder.
INDEPENDENT AUDITORS
The firm of Deloitte & Touche currently serves as
independent auditors of the Company.
Representatives of Deloitte & Touche are expected to attend
the Meeting. They will have an
opportunity to make a statement if they desire to do so and
will be available to respond to
appropriate questions. No accountant has been selected or
recommended for the Company's
1994 fiscal year.
The consolidated financial statements of the Company as
of April 30, 1993 and 1992 and
for each of the three years in the period ended April 30,
1993 incorporated by reference in
this Proxy Statement have been audited by Deloitte & Touche,
independent auditors.
The combined financial statements of the CT Group as of
December 31, 1992 and 1991 and
for each of the three years in the period ended December
31, 1992 included in this Proxy
Statement have been audited by Viciana & Shafer, P.A.,
independent auditors.
AVAILABLE INFORMATION
The Company is subject to the informational
requirements of the Securities Exchange
Act of 1934, and, in accordance therewith, files
reports, proxy statements and other
123
<PAGE>
financial information with the Securities and Exchange
Commission (the "Commission"). Such
reports, proxy statements and other information may be
inspected and copies at the public
reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Such reports, proxy
statements and other information
should also be available for inspection and copying at
the regional offices of the
Commission located at 1375 Peachtree Street, N.E., Suite
788, Atlanta, Georgia 30367 and 7
World Trade Center, New York, New York 10048. Copies of such
material can also be obtained
from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
124
<PAGE>
INCORPORATION BY REFERENCE
The following documents are hereby incorporated by
reference into and made a part of
this Proxy Statement:
1. The Company's Annual Report on Form 10-K for the
year ended April 30, 1993, as
amended.
2. The Company's Quarterly Report on Form 10-Q for
the quarter ended October 31,
1993.
By Order of the Board of
Directors,
Nick A. Caporella
Chairman of the Board of
Directors
President and Chief
Executive Officer
Fort Lauderdale, Florida
__________________, 1994
125
<PAGE>
APPENDICES
Appendix A - Agreement dated as of October 15,
1993, among Burnup &
Sims Inc., and the stockholders of Church &
Tower, Inc.
and Church & Tower of Florida, Inc. and
First and Second Amendment each
dated as of November 23, 1993 . . . . . .
. . . . . . . . . . . . . A-1
Appendix B - Opinion of PaineWebber Incorporated .
. . . . . . . . . . . . . B-1
Appendix C - Form of Agreement dated _______ __,
1994, between
Burnup & Sims Inc. and National Beverage
Corp*. . . . . . . . . . . . C-1
Appendix D - Certificate of Incorporation* . . . .
. . . . . . . . . . . . . D-1
Appendix E - Proposed Amended and Restated
Certificate
of Incorporation* . . . . . . . . . . . . .
. . . . . . . . . . . . . E-1
Appendix F - Burnup & Sims 1994 Stock Option Plan
for Non-Employee Directors* . . . . . . . .
. . . . . . . . . . . . . F-1
Appendix G - Burnup & Sims 1994 Stock Incentive
Plan*. . . . . . . . . . . . G-1
* Previously filed.
126
<PAGE>
127
<PAGE>
EXHIBIT INDEX
LOCATION OF
EXHIBIT IN
SEQUENTIAL
NUMBERING
EXHIBIT
SYSTEM
Appendix A Agreement dated as of October 15, 1993,
among Burnup & Sims Inc., and the
stockholders of Church & Tower, Inc. and
Church & Tower of Florida, Inc. and
First and Second Amendment each dated
as of November 23, 1993
Appendix B Opinion of PaineWebber Incorporated
Appendix C Form of Agreement dated _______ __,
1994, between Burnup & Sims Inc. and
National Beverage Corp.*
Appendix D Certificate of Incorporation*
Appendix E Proposed Amended and Restated
Certificate of Incorporation*
Appendix F Burnup & Sims 1994 Stock Option Plan For
Non-Employee Directors*
Appendix G Burnup & Sims 1994 Stock Incentive Plan*
*Previously filed.
128
<PAGE>
EXHIBIT A
SECOND AMENDMENT
THIS SECOND AMENDMENT TO AGREEMENT ("Second
Amendment") is made as
of the 23rd day of November 1993, by and among Jorge L. Mas,
Jorge Mas, Juan
Carlos Mas and Jose Ramon Mas (each, a "Seller" and together,
"Sellers"), and
Burnup & Sims Inc., a Delaware corporation with principal
offices at One
North University Drive, Fort Lauderdale, FL 33324 ("Burnup").
All
capitalized terms used but not defined herein have the
meanings specified in
the Agreement (as defined below).
WHEREAS, the parties hereto have executed and
delivered the
Agreement dated as of October 15, 1993, as amended by that
First Amendment
dated November 23, 1993, pursuant to which Burnup has agreed
to purchase, and
the Sellers have agreed to sell, the Shares in exchange for
the Burnup Shares
(the "Agreement");
WHEREAS, the parties desire to amend the Agreement
to clarify the
Disclosure Schedule.
NOW, THEREFORE, the parties, intending to be legally
bound and in
consideration of the promises herein contained, agree as
follows:
Section 1. Amendment to Disclosure Schedule.
Section 4.2 of the
Disclosure Schedule is hereby amended by deleting the text
thereof in its
entirety and substituting the following:
$11,500,000, $8,500,000 of which will be paid
prior to the
Closing Date in cash (of which $3,920,000 was
paid as of
September 30, 1993) and the remainder of which
will be paid by
delivery prior to the Closing Date of
promissory note in the
principal amount of $3,000,000, payable to
Sellers in six
consecutive semiannual installments of $500,000
each,
commencing on August 1, 1994, together with
interest accrued
DC-126359.1
<PAGE>
thereon, computed at a per annum rate equal to
two percent
(2%) above the rate announced by First Union
National Bank of
Florida from time to time as its prime rate,
which shall in no
event be less than eight percent (8%).
Section 2. No Other Amendments. Except as amended
hereby, the
Agreement shall remain in full force and effect in accordance
with its terms
and all references to the Agreement therein or elsewhere shall
mean the
Agreement as amended by this Second Amendment. All references
to the Second
Amendment in the Agreement or elsewhere shall mean this Second
Amendment.
Section 3. Counterparts. This Second Amendment may
be executed in
one or more counterparts, each of which when so executed and
delivered shall
be an original, but all such counterparts shall together
constitute one and
the same instrument. Each counterpart may consist of a number
of copies
hereof, each signed by less than all, but together signed by
all of the
parties hereto.
Section 4. Governing Law. This Second Amendment
shall be governed
and construed in accordance with the laws of the State of
Florida without
regard to any applicable principles of conflicts of law.
Burnup agrees to
the irrevocable designation of the Secretary of State of the
State of Florida
as its agent upon whom process against it may be served. Each
of Sellers
agrees to the irrevocable designation of Eliot C. Abbott as
his agent upon
whom process against him may be served. Each of the parties
hereto agrees to
personal jurisdiction in any action brought under this Second
Amendment in
any court, Federal or State, within the State of Florida
having subject
matter jurisdiction over such action. The parties to this
Second Amendment
agree that any suit, action, claim, counterclaim or proceeding
arising out of
or relating to this Second Amendment shall be instituted or
brought in the
United States District Court for the Southern District of
Florida, or, in the
absence of jurisdiction, the state court located in Dade
County. Each party
hereto waives any objection which it may have now or hereafter
to the laying
of the venue of any such suit, action, claim, counterclaim or
proceeding, and
irrevocable submits to the jurisdiction of any such court in
any such suit,
action, claim, counterclaim or proceeding.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Second
Amendment as of the date first written above.
SELLERS:
/s/ Jorge L. Mas
Name: Jorge L. Mas
/s/ Jorge Mas
Name: Jorge Mas
/s/ Juan Carlos Mas
Name: Juan Carlos Mas
/s/ Jose Ramon Mas
Name: Jose Ramon Mas
Attest: BURNUP & SIMS INC.
By: /s/ Margaret M. Madden By: /s/ Nick A. Caporella
Name: Margaret M. Madden Name: Nick A. Caporella
Title: Vice President Title: Chief Executive
Officer
and Secretary and President
<PAGE>
Exhibit B
January 18, 1994
Special Transaction Committee
of the Board of Directors
Burnup & Sims Inc.
One North University Drive
Fort Lauderdale, FL 33324
Gentlemen:
Burnup & Sims Inc. (the "Company") has entered into an
agreement dated
as of October 15, 1993, as amended by the First Amendment and
the Second
Amendment, each dated as of November 23, 1993 (the
"Agreement") with the
shareholders of Church & Tower, Inc. ("CT") and the
shareholders of Church &
Tower of Florida, Inc. ("CTF" and collectively with CT, "CT
Group") pursuant
to which the Company will acquire all of the issued and
outstanding common
stock of CT Group (the "Acquisition"). In connection with the
Acquisition,
the shareholders of CT Group will receive 10,250,000 shares of
the Company's
common stock, par value $0.10 per share ("Common Stock"). In
addition, the
Agreement provides that as a condition to the Acquisition,
National Beverage
Corp. ("NBC") will agree to exchange all of the Company's
common stock owned
by NBC (approximately 3.154 million shares) for the
cancellation of
$17,500,000 of 14% Subordinated Debentures issued by NBC to
the Company and
by crediting the next succeeding principal payments in the
amount of $592,313
of a $2,050,000 Promissory Note issued by NBC to the Company
(the
"Exchange"). The Acquisition and the Exchange shall be
collectively referred
to herein as the Transaction.
You have asked us whether or not, in our opinion, each of
the
Acquisition, the Exchange and the Transaction is fair, from a
financial point
of view, to the Company and its holders of Common Stock other
than NBC and
its affiliates.
DC-126363.1
<PAGE>
In arriving at the opinion set forth below, we have,
among other things:
1. Reviewed the audited financial statements for CT and
CTF for the
three fiscal years ended December 31, 1992, and
reviewed the
unaudited financial statements for CT and CTF for
the six months
ended June 30, 1993;
2. Reviewed the combined audited financial statements
for the CT Group
for the three years ended December 31, 1992, and
reviewed the
unaudited combined financial statements for the CT
Group for the
nine months ended September 30, 1993;
3. Reviewed the Company's Annual Reports, Forms 10-K
and related
financial information for the three fiscal years
ended April 30,
1993 and the Company's Form 10-Q and the related
unaudited
financial information for the six months ended
October 31, 1993;
4. Reviewed an estimated income statement for the CT
Group for the
year ended December 31, 1993 and an estimated income
statement for
the Company for the year ended April 30, 1994;
5. Conducted discussions with members of senior
management of the CT
Group and the Company concerning their respective
businesses and
prospects;
6. Reviewed the summary appraisal reports dated June
and July of 1991
and an updated market analysis dated August 12, 1993
prepared by an
outside appraisal firm with respect to certain of
the Company's
real estate assets;
7. Reviewed the historical market prices and trading
activity of the
Company's common stock and compared them with that
of certain
publicly traded companies which we deemed to be
reasonably similar
to the Company;
8. Compared the results of operations of the CT Group
and the Company
and compared them with that of certain publicly
traded companies
which we deemed to be reasonably similar to the CT
Group and the
Company, respectively;
<PAGE>
9. Reviewed the terms of the 14% Subordinated Debenture
in the
principal amount of $17,500,000 and the Promissory
Note in the
principal amount of $2,050,000 issued by NBC to the
Company;
10. Reviewed the Agreement; and
11. Reviewed such other financial studies and analyses
and performed
such other investigations and took into account such
other matters
as we deemed necessary, including our assessment of
general
economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy
and
completeness of all information supplied or otherwise made
available to us by
the Company and the CT Group, and we have not independently
verified such
information or undertaken an independent appraisal of the
assets of the CT
Group or the Company. This opinion does not address the
relative merits of
the Transaction and any other transactions or other business
strategies
discussed by the Board of Directors of the Company as
alternatives to the
Transaction or the decision of the Board of Directors of the
Company to
proceed with the Transaction. This opinion does not
constitute a
recommendation to any holder of Common Stock of the Company as
to how such
holders of Common Stock should vote on the Acquisition. Our
opinion has been
prepared solely for the use of the Special Transaction
Committee of the Board
of Directors of the Company and shall not be reproduced,
summarized,
described or referred to or given to any other person or
otherwise made
public without PaineWebber's prior written consent, except for
inclusion in
full in the proxy statement to be sent to the Company's
holders of Common
Stock in connection with obtaining shareholder approval of the
Acquisition.
No opinion is expressed herein as to the price at which the
securities to be
issued in the Transaction may trade at any time.
In rendering this opinion, we have not been engaged to
act as an agent
or fiduciary of, and the Company has expressly waived any
duties or
liabilities we may otherwise be deemed to have had to, the
Company's equity
holders or any other third party.
On the basis of, and subject to the foregoing, we are of
the opinion
that each of the Acquisition, the Exchange and the Transaction
is fair, from
<PAGE>
a financial point of view, to the Company and its holders of
Common Stock
other than NBC and its affiliates.
Very truly yours,
PAINEWEBBER INCORPORATED
/s/ PaineWebber
Incorporated
By:
_____________________________
<PAGE>
