<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
THE CHERRY CORPORATION
AT
$26.40 NET PER SHARE
BY
CABO ACQUISITION CORP.
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 13, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER (THE
"MERGER AGREEMENT"), DATED AS OF JUNE 5, 2000, BETWEEN THE CHERRY CORPORATION
(THE "COMPANY") AND CABO ACQUISITION CORP. (THE "PURCHASER"). THE OFFER IS
CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES OF COMMON
STOCK OF THE COMPANY THAT REPRESENTS MORE THAN 67% OF THE THEN OUTSTANDING
SHARES (WHEN TAKEN TOGETHER WITH SHARES BENEFICIALLY OWNED BY PURCHASER AND
PETER B. CHERRY AND CERTAIN AFFILIATES OF PETER B. CHERRY (THE "CHERRY FAMILY
MEMBERS")), (II) THE ABSENCE OF A MATERIAL ADVERSE EFFECT WITH RESPECT TO THE
COMPANY, (III) THE COMPANY NOT BREACHING OR FAILING TO COMPLY IN ANY MATERIAL
RESPECT WITH ANY OF ITS MATERIAL OBLIGATIONS CONTAINED IN THE MERGER AGREEMENT,
AND (IV) THE COMPANY'S REPRESENTATIONS AND WARRANTIES CONTAINED IN THE MERGER
AGREEMENT BEING TRUE IN ALL MATERIAL RESPECTS. THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT AT A MEETING ON JUNE 4, 2000, BASED ON, AMONG OTHER THINGS,
THE RECOMMENDATION OF A SPECIAL COMMITTEE COMPRISED OF INDEPENDENT DIRECTORS
(I) DETERMINED THAT THE MERGER (AS DEFINED BELOW) IS ADVISABLE AND THAT THE
TERMS OF THE OFFER AND THE MERGER, THE MERGER AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN PURCHASER AND THE CHERRY FAMILY
MEMBERS), (II) APPROVED THE OFFER AND THE MERGER AND APPROVED THE MERGER
AGREEMENT, AND (III) RECOMMENDED THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND, IF REQUIRED BY LAW, APPROVE THE MERGER AND APPROVE AND ADOPT THE
MERGER AGREEMENT.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
THE DATE OF THIS OFFER IS JUNE 15, 2000
<PAGE>
IMPORTANT
Any holder of shares of common stock of the Company (the "Shares") desiring
to tender all or any portion of the Shares owned by such holder should either
(i) complete and sign the Letter of Transmittal (as defined below) or a copy
thereof in accordance with the instructions in the enclosed Letter of
Transmittal and mail or deliver it, together with the certificate(s) evidencing
tendered Shares, and any other required documents, to Harris Trust and Savings
Bank (the "Depositary"), (ii) where applicable, cause the holder's broker,
dealer, commercial bank, trust company or other nominee to tender the Shares
pursuant to the procedures for book-entry transfer of shares, or (iii) comply
with the guaranteed delivery procedures, in each case upon the terms set forth
in "THE TENDER OFFER--Procedures for Tendering Shares." Any holder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact the holder's broker, dealer, commercial bank,
trust company or other nominee if such holder desires to tender the Shares. See
"THE TENDER OFFER--Procedures for Tendering Shares."
Any holder who desires to tender Shares and whose certificate(s) evidencing
the Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in "THE TENDER OFFER--Procedures for Tendering Shares."
Questions and requests for assistance and additional copies of this Offer to
Purchase, the Letter of Transmittal or other related tender offer materials may
be obtained from Morrow & Co., Inc. (the "Information Agent") and Banc of
America Securities LLC (the "Dealer Manager") at their respective addresses and
telephone numbers set forth on the back cover of this Offer to Purchase.
Stockholders may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
<PAGE>
<TABLE>
<S> <C> <C>
SUMMARY TERM SHEET................................................ i
INTRODUCTION...................................................... 1
SPECIAL FACTORS................................................... 3
1. Background of the Offer and the Merger; Contacts with the
Company................................................... 3
2. Recommendation of the Special Committee and the Board of
Directors of the Company; Fairness of the Offer and the
Merger.................................................... 4
3. Opinion of Financial Advisor to the Special Committee....... 5
4. Purpose and Structure of the Offer and the Merger; Plans for
the Company............................................... 9
5. Position of Purchaser Regarding Fairness of the Offer and
the Merger................................................ 10
6. Rights of Stockholders in the Offer and the Merger.......... 11
7. The Merger Agreement and the Stockholder Agreement.......... 13
8. Interests of Certain Persons in the Offer and the Merger.... 20
9. Beneficial Ownership of Shares.............................. 20
10. Certain United States Federal Income Tax Consequences....... 22
THE TENDER OFFER.................................................. 23
1. Terms of the Offer.......................................... 23
2. Acceptance for Payment and Payment for Shares............... 24
3. Procedures for Tendering Shares............................. 25
4. Withdrawal Rights........................................... 27
5. Price Range of Shares....................................... 28
6. Certain Information Concerning the Company.................. 29
7. Certain Information Concerning Purchaser.................... 32
8. Source and Amount of Funds.................................. 33
9. Effect of the Offer on the Market for the Common Stock;
Exchange Act Registration................................. 33
10. Conditions of the Offer..................................... 34
11. Certain Legal Matters; Regulatory Approvals................. 35
12. Fees and Expenses........................................... 37
13. Miscellaneous............................................... 38
</TABLE>
<TABLE>
<S> <C>
SCHEDULE I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY................................... I-1
SCHEDULE II SECTION 262 OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE..................................... II-1
ANNEX A OPINION OF FINANCIAL ADVISOR TO THE SPECIAL
COMMITTEE................................................. A-1
ANNEX B AGREEMENT AND PLAN OF MERGER........................ B-1
ANNEX C STOCKHOLDER AGREEMENT............................... C-1
</TABLE>
<PAGE>
SUMMARY TERM SHEET
Purchaser is offering to purchase all of the outstanding common stock of the
Company for $26.40 per share in cash. The following are some of the questions
that you, as a stockholder of the Company, may have and answers to those
questions. The information in this summary is not complete and we urge you to
carefully read the remainder of this Offer to Purchase and the accompanying
Letter of Transmittal.
Q: WHO IS OFFERING TO BUY MY SECURITIES?
A: The offer is being made by CABO Acquisition Corp., a newly formed
Delaware corporation. CABO Acquisition Corp. was formed by Peter B. Cherry and
the Cherry Family Members. The Cherry Family Members own approximately 53% of
the Company's outstanding common stock through various entities. Mr. Cherry is
the President and Chairman of the Company. See "THE TENDER OFFER--Certain
Information Concerning Purchaser."
Q: WHAT SECURITIES AND AMOUNTS OF SECURITIES ARE SOUGHT IN THE OFFER?
A: We are making the Offer for any and all shares of common stock of the
Company not owned by Peter B. Cherry and certain affiliates of Peter B. Cherry.
Q: HOW MUCH IS THE PURCHASER OFFERING TO PAY AND WHAT IS THE FORM OF
PAYMENT?
A: We are offering to pay $26.40 per share in cash, without interest.
Q: DOES THE PURCHASER HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
A: Yes. The Company will loan us the funds necessary to acquire the shares
in the Offer. See "THE TENDER OFFER--Source and Amount of Funds."
Q: IS PURCHASER'S OR THE COMPANY'S FINANCIAL CONDITION RELEVANT TO MY
DECISION ON WHETHER TO TENDER IN THE OFFER?
A: Because tendering your shares in the Offer will end your ownership
interest in the Company, including the chance to receive any possible future
dividends or other payments in respect of the common stock, the Company's
financial condition may be relevant to your decision whether to tender in the
Offer. As such, we have provided certain summary historical financial
information concerning the Company in "THE OFFER--Certain Information Concerning
the Company." Since we are paying you cash for your shares and the offer is not
subject to any external financing condition, we do not believe that our
financial condition is important to your decision to tender in the Offer. See
"THE TENDER OFFER--Source and Amount of Funds."
Q: HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
A: You have until 12:00 Midnight, New York City time, on the expiration date
of July 13, 2000 to tender your shares. We will purchase all properly tendered
and not withdrawn shares promptly following the expiration date if the
conditions to our Offer are then met. After making these purchases, we may
continue for a limited period of time to purchase shares submitted to us. On the
other hand, if the conditions to our Offer are not met on the expiration date,
we may extend the offer. See "THE TENDER OFFER--Terms of the Offer."
Q: HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
A: If the Offer is extended past July 13, 2000, we will make a public
announcement of the new expiration date. See "THE TENDER OFFER--Terms of the
Offer."
Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF THE OFFER?
A: We are not obligated to purchase any shares which are validly tendered
unless that number of shares validly tendered and not withdrawn prior to the
expiration date represents more than 67% of the then outstanding shares (when
taken together with shares beneficially owned by Purchaser and the Cherry Family
Members). Furthermore, we are not obligated to purchase any shares which are
validly tendered if, among other things, there has occurred a material adverse
effect with respect to the Company, the Company has breached or failed to comply
in any material respect with any of its material obligations contained in the
Merger Agreement, or if the Company's representations and warranties contained
in the Merger Agreement are not true in all material respects. See "THE TENDER
OFFER--Conditions of the Offer."
i
<PAGE>
Q: HOW DO I TENDER MY SHARES?
A: If you hold your shares "of record," you can tender your shares by
sending the enclosed letter of transmittal along with your stock certificates to
the Depositary, Harris Trust and Savings Bank, at the address listed on the
enclosed letter of transmittal. See "THE TENDER OFFER--Procedures For Tendering
Shares."
If your broker holds your shares in "street name" for you, you must direct
your broker to tender. Please contact your broker.
Q: UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: You can withdraw tendered shares at any time prior to the expiration date
of July 13, 2000. If the expiration date is extended, you can withdraw tendered
shares at any time prior to the new expiration date. See "THE TENDER
OFFER--Withdrawal Rights."
Q: HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: You can withdraw shares that you have already tendered by sending a
notice of withdrawal to the Depositary. See "THE TENDER OFFER--Withdrawal
Rights."
Q: WHAT DOES MY BOARD OF DIRECTORS THINK OF THE OFFER?
A: Your Board of Directors recommends the Offer.
A special committee (the "Special Committee") of independent directors of
the Company, consisting of all of the directors except Peter B. Cherry,
evaluated the fairness of the Offer. The Special Committee negotiated the terms
of the Offer and recommended that the full board approve the Offer.
The Board of Directors by unanimous vote of all directors present at a
meeting on June 4, 2000, based on, among other things, the recommendation of the
Special Committee, (i) determined that the Merger is advisable and that the
terms of the Offer and the Merger, the Merger Agreement and the consummation of
the transactions contemplated thereby are fair to, and in the best interests of,
the Company and its stockholders (other than Purchaser and the Cherry Family
Members), (ii) approved the Offer and the Merger and approved the Merger
Agreement, and (iii) recommended that the stockholders of the Company accept the
Offer and, if required by law, approve the Merger and approve and adopt the
Merger Agreement. See "SPECIAL FACTORS--Recommendation of the Special Committee
and the Board of Directors of the Company; Fairness of the Offer and the
Merger."
Q: DID THE SPECIAL COMMITTEE RECEIVE ANY OPINIONS, APPRAISALS, OR REPORTS
REGARDING THE FAIRNESS OF THE OFFER?
A: Yes. The Special Committee received a written opinion, dated June 4,
2000, from Wasserstein Perella & Co., Inc. to the effect that, as of that date
and based on and subject to the assumptions and limitations contained in the
opinion, the price per share of $26.40 to be received in the Offer and the
Merger was fair, from a financial point of view, to the holders of shares of the
Company's common stock (other than Purchaser and its affiliates).
Q: WILL THE COMPANY CONTINUE AS A PUBLIC COMPANY?
A: No. The Offer is the first step in a going private transaction. If the
Offer is consummated, the Offer will be followed by a Merger that will result in
the Cherry Family Members owning 100% of the Company. As a result, the Company
will no longer be publicly owned. See "SPECIAL FACTORS--Purpose and Structure of
the Offer and the Merger; Plans for the Company."
Q: IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
A: Stockholders not tendering in the Offer will receive in the Merger the
same amount of cash per share which they would have received had they tendered
their shares in the Offer. Therefore, if the Merger takes place, the difference
to you between tendering your shares and not tendering your shares is that you
will be paid earlier if you tender your shares in the Offer. If the Offer is
consummated, and the number of shares acquired by Purchaser pursuant to the
Offer, when combined with the shares already owned by Purchaser and the Cherry
Family Members, is greater than 90% of the outstanding shares, then Purchaser
will immediately commence a merger of Purchaser with and into the Company under
Delaware law without soliciting approval of the Company's stockholders. See
"SPECIAL FACTORS--Rights of Stockholders in the Offer and the Merger."
ii
<PAGE>
Q: WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
A: On April 20, 2000, the last trading day before we announced the original
offer to purchase shares for $18.75 per share, the closing market price of the
Company's common stock reported on The Nasdaq National Market was $13.00 per
share.
On June 2, 2000, the last trading day before we announced the proposed offer
to purchase shares for $26.40 per share, the closing market price of the
Company's common stock reported on The Nasdaq National Market was $20.38 per
share. On June 14, 2000, the last trading day before we announced the
commencement of the Offer, the closing market price of the Company's common
stock reported on The Nasdaq National Market was $25.94 per share. We advise you
to obtain a recent quotation for the Company's common stock in deciding whether
to tender your shares. See "TENDER OFFER--Price Range of Shares."
Q: IF I OBJECT TO THE PRICE BEING OFFERED, WILL I HAVE APPRAISAL RIGHTS?
A: Yes. You may elect not to tender your shares, dissent from the Merger,
and have the fair value of your shares paid to you in cash provided that you
comply with the applicable provisions of the Delaware General Corporation Law.
See "SPECIAL FACTORS--Rights of Stockholders in the Offer and the Merger."
Q: WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
A: If you have more questions about the tender offer, you should contact:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, New York 10022
Call Collect: (212) 754-8000
Banks and Brokerage Firms, Please Call: (800) 662-5200
STOCKHOLDERS, PLEASE CALL: (800) 566-9061
[LOGO]
9 West 57th Street
New York, New York 10019
Toll Free: (888) 583-8900, extension: 6320
Call Collect: (212) 847-6320
Contact: Gregory S. Donat
iii
<PAGE>
To the Holders of Common Stock of
The Cherry Corporation:
INTRODUCTION
CABO Acquisition Corp., a Delaware corporation ("Purchaser"), hereby offers
to purchase any and all of the issued and outstanding shares of common stock,
par value $1.00 per share (the "Shares" or "Common Stock"), of The Cherry
Corporation, a Delaware corporation (the "Company"), not owned by the Cherry
Family Members (as defined below), at a price of $26.40 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as they may be amended and supplemented from time
to time, together constitute the "Offer").
Holders of Shares whose Shares are registered in their own name and who
tender directly to Harris Trust and Savings Bank, as depositary, will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by Purchaser pursuant to the Offer. Purchaser will pay all charges and
expenses incurred in connection with the Offer. See "THE TENDER OFFER--Fees and
Expenses."
As of May 5, 2000, there were 10,168,066 Shares outstanding and 526,830
Shares subject to outstanding vested stock options. Purchaser was formed by
Peter B. Cherry and certain affiliates of Peter B. Cherry (the "Cherry Family
Members"). The Cherry Family Members currently beneficially own approximately
53% of the issued and outstanding Shares of the Company (not taking into account
the outstanding stock options). Peter B. Cherry is the President and Chairman of
the Company.
The Offer is being made pursuant to the terms of the Agreement and Plan of
Merger, dated as of June 5, 2000 (the "Merger Agreement"), between Purchaser and
the Company. The Merger Agreement provides that, among other things, if
Purchaser acquires Shares pursuant to the Offer, following the completion of the
Offer and the satisfaction of the other conditions contained in the Merger
Agreement, Purchaser will be merged with and into the Company (the "Merger"),
with the Company continuing as the surviving corporation (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"),
except for Shares held by holders exercising their rights to dissent in
accordance with the Delaware General Corporation Law (the "DGCL") and Shares
held, directly or indirectly, by Purchaser and the Cherry Family Members, each
then outstanding Share will, by virtue of the Merger and without any action on
the part of the holder thereof, be canceled and be converted into the right to
receive an amount per Share (the "Merger Consideration") equal to the Offer
Price, without interest. The terms and conditions of the Merger Agreement are
more fully described in "SPECIAL FACTORS--The Merger Agreement and the
Stockholder Agreement."
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Harris Trust and Savings Bank, which
is acting as the depositary (the "Depositary"), Morrow & Co., Inc., which is
acting as the information agent (the "Information Agent"), and Banc of America
Securities LLC, which is acting as the dealer manager (when referred to in its
capacity as dealer manager, the "Dealer Manager"), incurred in connection with
the Offer. See "THE TENDER OFFER--Fees and Expenses."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT REPRESENTS MORE THAN 67% OF THE THEN OUTSTANDING SHARES (WHEN TAKEN
TOGETHER WITH SHARES BENEFICIALLY OWNED BY PURCHASER AND THE CHERRY FAMILY
MEMBERS) (THE "MINIMUM CONDITION"), (II) THE ABSENCE OF A MATERIAL ADVERSE
EFFECT WITH RESPECT TO THE COMPANY, (III) THE COMPANY NOT BREACHING OR FAILING
TO COMPLY IN ANY MATERIAL RESPECT WITH ANY OF ITS MATERIAL OBLIGATIONS CONTAINED
IN THE MERGER AGREEMENT AND (IV) THE COMPANY'S REPRESENTATIONS AND WARRANTIES
CONTAINED IN THE MERGER AGREEMENT BEING TRUE IN ALL MATERIAL RESPECTS. THE OFFER
IS ALSO SUBJECT TO THE OTHER TERMS AND CONDITIONS SET FORTH IN THIS OFFER TO
PURCHASE.
The Board, by unanimous vote of all directors present at a meeting on
June 4, 2000, based on, among other things, the recommendation of the Special
Committee, (i) determined that the Merger is advisable and that the terms of the
Offer and the Merger, the Merger Agreement and the consummation of the
transactions contemplated thereby are fair to, and in the best interests of, the
Company and its stockholders (other than Purchaser and the Cherry Family
Members), (ii) approved the Offer and the Merger and approved the Merger
Agreement, and (iii) recommended that the stockholders of the Company accept the
Offer and, if required by law, approve the Merger and approve and adopt the
Merger Agreement.
The Company has advised Purchaser that Wasserstein Perella & Co., Inc.,
financial advisor to the Special Committee ("Wasserstein Perella"), has
delivered to the Special Committee its written opinion, dated June 4, 2000, to
the effect that, as of that date and based on and subject to the assumptions and
limitations contained in the opinion, the $26.40 per Share cash consideration to
be received in the Offer and the Merger by the holders of Shares (other
<PAGE>
than Purchaser and its affiliates) was fair, from a financial point of view, to
such holders. A copy of Wasserstein Perella's opinion, which sets forth, among
other things, the opinions expressed, the assumptions made, procedures followed,
matters considered and limitations of the review undertaken in connection with
this opinion is attached as Annex A. HOLDERS OF SHARES ARE URGED TO READ THE
OPINION CAREFULLY IN ITS ENTIRETY.
Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval of the Merger Agreement and the
Merger by the requisite vote of stockholders of the Company. See "SPECIAL
FACTORS--The Merger Agreement and the Stockholder Agreement." The affirmative
vote of the holders of two-thirds of the outstanding Shares entitled to vote is
required to approve and adopt the Merger Agreement and approve the Merger. The
Cherry Family Members hold an aggregate of approximately 53% of the Company's
outstanding Shares. ACCORDINGLY, SINCE THE CHERRY FAMILY MEMBERS HAVE AGREED TO
CONTRIBUTE THEIR SHARES TO PURCHASER, WHICH REPRESENT 53% OF THE OUTSTANDING
SHARES, IF AN ADDITIONAL 14% OF THE OUTSTANDING SHARES ARE TENDERED AND
PURCHASED PURSUANT TO THE OFFER, THEN THE FAVORABLE VOTE TO APPROVE THE MERGER
WILL BE ASSURED.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
SPECIAL FACTORS
1. BACKGROUND OF THE OFFER AND THE MERGER; CONTACTS WITH THE COMPANY
Prior to April 2000, the Company had taken several steps designed to address
stockholder value. In December 1998, the Company completed a Dutch auction
tender offer in which it repurchased approximately 2.3 million shares of its
common stock at $15.50 per share. In June 1999, the Company declassified its
common stock from a Class A/Class B structure to a single class of common stock.
In April 2000, the Company sold its semiconductor business. Despite these
actions, throughout calendar 1999, the Shares traded in a range of $10.00 to
$15.50 per Share. Although the Shares traded as high as $26.00 following
announcements about the Company's examining strategic alternatives with respect
to its semiconductor business earlier this year, it traded above $20.00 per
Share for only a few days during the first quarter of 2000 and by the end of
March and early April was trading around $13.00. On April 17, the Shares closed
at $12.625.
On April 18, 2000, the Board received an offer letter from Peter B. Cherry,
proposing an acquisition of the Shares not owned by the Cherry Family Members
for $18.75 per share (the "Initial Proposal"). In that letter, it was noted that
Peter B. Cherry was the beneficial owner of more than 50% of the outstanding
shares. (Because the Company's charter requires a vote of two-thirds of the
outstanding shares entitled to vote to approve a merger, the Cherry Family
Members could effectively block the acquisition of the Company by another party,
but such an acquisition would require approval by a portion of shares not owned
by them to approve a merger with another entity which they control.)
On April 21, the Board met by telephone (with Peter B. Cherry absent) and
appointed the Special Committee. On the same date, the Special Committee met by
telephone and selected its chairman, selected its counsel, received a legal
briefing and established a process for selecting its financial advisor. On
April 20, the last trading day before such meeting, the Shares closed at $13.00.
On the morning of April 24, the Company issued a press release disclosing
the receipt of the Initial Proposal.
Between April 24 and 28, members of the Special Committee interviewed
various investment banking firms. Also during this period, putative class
actions were filed in respect of the Initial Proposal (the "Litigation").
On April 29, the Special Committee met again by telephone, received an
update on developments, decided to retain Wasserstein Perella as financial
advisor to the Special Committee and scheduled a telephone conference for May 4
and an in-person meeting for May 18.
On May 1, Wasserstein Perella sent a due diligence request to the Company.
On May 4, the Special Committee met again by telephone, received an update
on developments, approved engagement letters relating to the retention of
Sidley & Austin and Wasserstein Perella and decided to retain Morris, Nichols,
Arsht & Tunnel as Delaware legal counsel with respect to the Litigation.
From May 4 through May 15, Wasserstein Perella conducted due diligence
regarding the Company, including a conference call with representatives of Banc
of America Securities LLC, the Cherry Family Members' financial advisor (when
referred to in its capacity as such advisor, "Banc of America Securities"), (on
May 5) and an in-person meeting with management of the Company (on May 10).
On May 16, the Company issued a press release indicating that Wasserstein
Perella had been retained by the Special Committee and that the Litigation had
been filed.
On May 18, the Special Committee met in person. Among other things, it
received a progress report and preliminary valuation from Wasserstein Perella
and met with Peter B. Cherry and his legal and financial advisors. At that
meeting, the Special Committee indicated its willingness to consider a sale of
the Company and gave its preliminary negative reaction to the Initial Proposal.
It was agreed that the two sets of financial advisors would engage in further
discussions.
On May 22, Wasserstein Perella received a letter dated May 19 and addressed
to the Special Committee from a potential strategic purchaser (the "Third
Party"). The letter was unsolicited and proposed a $26.00 per Share purchase of
the Company, subject to agreement by the Cherry Family Members, due diligence
and other conditions (the "Third Party Proposal").
On May 22, the Special Committee met by telephone to discuss the Third Party
Proposal and instructed Wasserstein Perella to inform the Third Party that it
would respond in due course. On May 23, the Company issued a press release
disclosing the Third Party Proposal. Thereafter, several other parties contacted
Wasserstein Perella
3
<PAGE>
informally inquiring about the Company and indicating an interest in the Company
if the Cherry Family Members would sell their Shares. None of such parties
specified a transaction or price or range of prices. On May 27, Wasserstein
Perella received a letter dated May 26 from the Third Party, withdrawing the
Third Party Proposal. On May 30, the chairman of the Special Committee wrote to
the Third Party inviting it to reinstate the Third Party Proposal. (On June 6,
the chairman of the Special Committee received a letter from the Third Party
indicating that it would not do so.)
On May 30, as part of on-going discussions between financial advisors and in
preparation for a June 1 meeting of the Special Committee, a representative of
Banc of America Securities indicated to a representative of Wasserstein Perella
that the Cherry Family Members might be willing to increase their offer to
$24.00 per Share. The Wasserstein Perella representative indicated that an offer
at that level was likely to be rejected.
On June 1, the Special Committee met in person. Among other things, it
received a final valuation from Wasserstein Perella and reviewed with counsel
the major issues in the draft merger agreement. During the course of the
meeting, face-to-face negotiations over price took place between financial
advisors. At the end of the approximately 7-hour long meeting (including
recesses for purposes of negotiating), Peter B. Cherry revised his offer to a
price of $26.40 per Share (the "Revised Proposal"). Based upon the unanimous
views of the members of the Special Committee, the Special Committee indicated a
general favorable view toward the price, subject to further advice from
Wasserstein Perrella and resolution of significant issues in the draft merger
agreement.
From June 2 through June 4, counsel for the Special Committee and for Peter
B. Cherry negotiated the Merger Agreement and the Stockholder Agreement. The
last open issue on the agreements was resolved on the afternoon of June 4.
Immediately thereafter, the Special Committee met; all members were present,
other than Peter Guglielmi who was unavailable. Among other things, the Special
Committee received (i) a further report from Wasserstein Perella and the written
fairness opinion, (ii) a written report from the Company's chief financial
officer with respect to the pro forma impact of the Loan (as defined below), the
Offer and the Merger on the Company and (iii) a detailed briefing by counsel on
the terms of the Merger Agreement and the Stockholder Agreement (drafts of which
had been delivered to each member of the Special Committee before the meeting).
Based upon the factors described below in "SPECIAL FACTORS--Recommendation of
the Special Committee and the Board of Directors of the Company; Fairness of the
Offer and the Merger," the Special Committee, by unanimous action of those
present, resolved to recommend to the full Board the approval of the Revised
Proposal and the Merger Agreement. A meeting of the full Board was immediately
convened and, by unanimous action of those present, the Revised Proposal and the
Merger Agreement were approved.
During the evening of June 4, the Merger Agreement and Stockholder Agreement
were executed and delivered. The Company issued its press release with respect
to the Revised Proposal and Merger Agreement early on the morning of June 5.
2. RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF THE
COMPANY; FAIRNESS OF THE OFFER AND THE MERGER
The Special Committee considered each of the following factors in reaching
its decision that the transaction is fair to, and in the best interests of, the
Company's stockholders (other than Purchaser and the Cherry Family Members) and
in deciding to approve the Offer and the Merger and approve the Merger Agreement
and the transactions contemplated thereby:
a. Current and historical financial condition and results of operations of
the Company (including cash on the balance sheet).
b. Projections, including risks of achievement and the Company's historical
record of not achieving prior projections.
c. Relationship of the Offer Price to historic trading prices, including
the facts that (a) the stock has never traded above the Offer Price, (b) the
Offer Price represents a greater-than-100% premium to the closing price on the
day prior to the announcement of the Initial Proposal, and (c) the likelihood
that the Common Stock would revert to the trading patterns preceding the offer
from the Cherry Family Members if there was no transaction of any sort. In this
regard, however, the Special Committee was aware that the trading prices of the
Company's Shares may have been affected by factors such as the Company's small
market capitalization, the even smaller public float, the presence
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of a controlling position, the market's perception of the Company as a
"mini-conglomerate" and the absence of a following by sell-side equity analysts.
d. The view, in light of the foregoing factors, that continuing public
company status is not in the best interests of the stockholders.
e. The representations by the Cherry Family Members that they would not
sell their holdings and the preclusive effect that such position would have on
the ability of any other potential acquirer to acquire the Company. In light of
the Cherry Family Members' control position, the other alternatives available to
the Board. The fact that all holders of Common Stock had acquired their Shares
while on notice of the Cherry Family Members' control position.
f. The fact that an unsolicited conditional proposal for $26 per Share was
submitted but withdrawn, and that following the disclosure of the $26 proposal
several other informal inquiries were received and that one of such parties
observed that $26 appeared to be a "compelling" price.
g. The presentations made to the Special Committee by Wasserstein Perella
on May 18 (preliminary) and June 1 and June 4 (final), including the valuations
included therein.
h. The written fairness opinion of Wasserstein Perella.
i. The terms and conditions of the Merger Agreement and Ancillary
Agreements (as defined below) and the course of negotiations thereof.
j. The availability of dissenters' rights of appraisal.
k. The active and direct role of the members of the Special Committee in
the negotiations and the experience of such members both in their own businesses
and with the Company.
The Special Committee does not find it practicable to assign, nor did it
assign, specific relative weights to the foregoing factors in reaching its
opinion as to the fairness of the Offer and the Merger to the stockholders of
the Company (other than Purchaser and the Cherry Family Members).
3. OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
The Special Committee retained Wasserstein Perella to act as its financial
advisor in connection with the Offer and the Merger (collectively, the
"Transactions"). Wasserstein Perella has delivered a written opinion to the
Special Committee, dated June 4, 2000, to the effect that, subject to the
various assumptions and limitations set forth therein, as of the date thereof,
the $26.40 per Share cash consideration to be received by holders of Shares
(other than Purchaser and the Cherry Family Members) in the Transactions is fair
to such stockholders from a financial point of view. Wasserstein Perella was
engaged and acted solely as an advisor to the Special Committee and not as an
advisor to or agent of any other person, including the Company. Wasserstein
Perella's opinion is for the benefit and use of the Special Committee in its
consideration of the Transactions and may not be used for any other purpose.
THE FULL TEXT OF THE WRITTEN OPINION OF WASSERSTEIN PERELLA, DATED JUNE 4,
2000, WHICH SETS FORTH, AMONG OTHER THINGS, THE OPINIONS EXPRESSED, THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX A, AND
HOLDERS OF THE SHARES ARE URGED TO READ IT IN ITS ENTIRETY. WASSERSTEIN
PERELLA'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES
WITH RESPECT TO WHETHER OR NOT SUCH HOLDER SHOULD TENDER SHARES PURSUANT TO THE
OFFER OR AS TO HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER, AND
SHOULD NOT BE RELIED UPON BY ANY HOLDER AS SUCH. THE SUMMARY OF THE OPINION OF
WASSERSTEIN PERELLA SET FORTH HEREIN, WHICH SETS FORTH ALL THE MATERIAL ANALYSES
PERFORMED BY WASSERSTEIN PERELLA, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION ATTACHED AS ANNEX A.
In connection with rendering its opinion, Wasserstein Perella, among other
things, (i) reviewed the financial terms and provisions of the Merger Agreement;
(ii) reviewed and analyzed certain publicly available business and financial
information relating to the Company for recent years and interim periods to
date, as well as certain internal financial and operating information, including
financial forecasts, projections and analyses prepared by, or on behalf of, the
Company and provided to Wasserstein Perella for purposes of its analysis;
(iii) met with certain representatives of the Company and the Cherry Family
Members to review and discuss such information and, among other matters, the
Company's business, operations, assets, financial condition and prospects;
(iv) performed various discounted cash flow analyses and such other financial
analyses as Wasserstein Perella considered appropriate; (v) reviewed and
considered certain financial and stock market data relating to the Company and
compared that data with similar data for certain other companies, the securities
of which are publicly traded and that Wasserstein Perella believed may be
relevant or comparable in certain respects to the Company or one or more of its
businesses or assets; (vi) reviewed
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and considered the financial terms of certain recent acquisitions and business
combination transactions in the automotive electronics, computer peripherals and
switches and controls industry specifically, and in other industries generally,
which Wasserstein Perella believed to be reasonably comparable in certain
respects to the Transactions or otherwise relevant to its analysis; and
(vi) performed such other financial studies and investigations and reviewed such
other information as Wasserstein Perella considered appropriate. No limitations
were imposed by the Special Committee upon Wasserstein Perella with respect to
the investigations made or the procedures followed by it in rendering its
opinion. In the context of its engagement, Wasserstein Perella was not
authorized to solicit and did not solicit third party indications of interest in
acquiring all or any part of the Company or its assets, or investigate any
alternative transactions which may be available to the Company. In that regard,
Purchaser and representatives of the Cherry Family Members have represented and
warranted, and Wasserstein Perella assumed for purposes of its opinion, that
Purchaser and the Cherry Family Members, which own a majority of the outstanding
Shares, have no interest in selling any equity securities of the Company.
Wasserstein Perella noted that it was aware that an unsolicited proposal to
acquire the Company for $26.00 per Share was received by the Special Committee
following announcement of the Cherry Family Members' interest in acquiring the
Company, but was subsequently withdrawn, and, after the public disclosure of
such unsolicited proposal, several other informal inquiries regarding a
potential acquisition of the Company were received. Wasserstein Perella
expressed no opinion with respect to the values which may have been obtained for
the Company in a sale to a third party following an auction process.
In its review and analysis and in formulating its opinion, Wasserstein
Perella assumed and relied on the accuracy and completeness of all the
historical financial and other information provided to or discussed with it or
made publicly available, without assuming any responsibility for independent
verification of any of such information. Wasserstein Perella also assumed and
relied upon the reasonableness of the financial projections, forecasts, analyses
and other information furnished to Wasserstein Perella and assumed that such
projections, forecasts, analyses and other information were reasonably prepared
in good faith and on bases reflecting the best currently available judgments and
estimates of the Company's management as of June 4, 2000. However, Wasserstein
Perella noted that the Company also advised Wasserstein Perella that it had not
achieved its projected operating results in the past, and that there is a
reasonable likelihood that future operating results could be less than those
budgeted by the Company. Wasserstein Perella expressed no opinion with respect
to such projections, forecasts and analyses or the assumptions on which they
were based.
The Company does not publicly disclose internal management projections of
the type provided to Wasserstein Perella in connection with Wasserstein
Perella's analysis of the Transactions. Such projections were not prepared with
a view toward public disclosure, and holders of Shares are cautioned not to rely
on such projections. These projections were based on numerous variables and
assumptions that are inherently uncertain and may be beyond the control of
management. Accordingly, actual results could vary significantly from those set
forth in such projections. In addition, these projections were not prepared with
a view to compliance with the published guidelines of the Commission or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections and forecasts or generally accepted accounting principles
and are included in this Schedule TO only because such projections were included
in the information submitted to and received by the Special Committee and
Wasserstein Perella. None of the Company, the Cherry Family Members, Wasserstein
Perella or any other party to whom these projections were provided makes any
representation that the results indicated by such projections will occur. Any
prospective financial information included in this Schedule TO has been prepared
by the Company's management.
Wasserstein Perella also did not review any of the books and records of the
Company or assume any responsibility for conducting a physical inspection of the
properties or facilities of the Company, or for making or obtaining an
independent valuation or appraisal of the assets or liabilities of the Company,
and no such independent valuation or appraisal was provided to it. Wasserstein
Perella's opinion was based on economic and market conditions and other
circumstances as they existed and could be evaluated by it on June 4, 2000.
Wasserstein Perella's analysis assumes that the transactions described in the
Merger Agreement will be consummated on the terms set forth therein, without
material waiver or modification by any party thereto.
The following is a summary of the report presented by Wasserstein Perella to
the Special Committee in connection with the delivery of its opinion on June 4,
2000. A copy of the report presented by Wasserstein Perella to the Special
Committee on June 1, 2000 has been filed as an exhibit to the Schedule TO filed
with the Commission by the Purchaser and is available for inspection and copying
at the principal executive offices of the Company during its regular business
hours by any stockholder of the Company or his or her representative who has
been so designated in writing, upon written request and at the expense of the
requesting party. The summary set forth below does not purport to be a complete
description of Wasserstein Perella's report.
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DISCOUNTED CASH FLOW ANALYSIS. Wasserstein Perella performed three
different discounted cash flow analyses of the Company ("DCF") based on three
scenarios founded on the Company's budget for its fiscal years 2001-2003. The
Company's budget for its fiscal years 2001-2003 was reviewed by the Company's
Board, and Wasserstein Perella adjusted this budget only for the subsequent
change in the Dollar/Euro exchange rate and $2.2 million, $2.3 million and
$2.5 million corrections in earnings before interest and taxes ("EBIT"), which
Wasserstein Perella was advised were necessary due to mathematical errors in the
original budget, in the automotive electronics division in fiscal years
2001-2003, respectively (the "Company Budget"). The three scenarios created by
Wasserstein Perella were the following: (i) Budget/Improved Margins Case: fiscal
year 2001-2003 operating data was based on the Company Budget and assumes
improved margins in fiscal years 2004-2006 due to economies of scale generated
by fixed costs absorbed by increased sales volumes and from historically high
levels of capital investment (the "Budget/Improved Margins Case");
(ii) Budget/Flat Margins Case: fiscal year 2001-2003 operating data was based on
the Company Budget and assumes EBIT and earnings before interest, taxes,
depreciation and amortization ("EBITDA") remain flat at fiscal year 2003 levels
for fiscal years 2004-2006 (the "Budget/Flat Margins Case"); and (iii) Budget/
Recession Case: fiscal year 2001 operating data was based on the Company Budget
and assumes that the industries in which the Company operates will go through a
recession starting in fiscal year 2002 and slowly recover in 2003-2006 (the
"Budget/ Recession Case").
The Budget/Improved Margins Case resulted in the following projections,
among others: (i) sales growth (excluding intercompany sales eliminations) of
(3.5%), 8.7%, 16.4%, 5.0%, 5.0% and 5.0% for fiscal years 2001-2006,
respectively; (ii) EBIT of $16.6 million, $17.5 million, $31.6 million,
$37.6 million, $43.9 million and $50.6 million for fiscal years 2001-2006,
respectively; (iii) EBIT Margin (EBIT as a percent of sales) of 4.8%, 4.6%,
7.2%, 8.1%, 9.0% and 9.8% for fiscal years 2001-2006, respectively; (iv) EBITDA
of $41.9 million, $44.2 million, $61.5 million, $69.0 million, $76.9 million and
$85.2 million for fiscal years 2001-2006, respectively; (v) EBITDA Margin
(EBITDA as a percent of sales) of 12.0%, 11.7%, 14.0%, 14.9%, 15.7% and 16.6%
for fiscal years 2001-2006, respectively; and (vi) capital expenditures (as a
percent of sales) of 12.4%, 7.5%, 6.9%, 6.8%, 6.7% and 6.7% for fiscal years
2001-2006, respectively. The Budget/Flat Margins Case resulted in the following
projections, among others: (i) sales growth of (3.5%), 8.7%, 16.4%, 5.0%, 5.0%
and 5.0% for fiscal years 2001-2006, respectively; (ii) EBIT of $16.6 million,
$17.5 million, $31.6 million, $33.3 million, $35.1 million and $36.9 million for
fiscal years 2001-2006, respectively; (iii) EBIT Margin of 4.8%, 4.6%, 7.2%,
7.2%, 7.2% and 7.2% for fiscal years 2001-2006, respectively; (iv) EBITDA of
$41.9 million, $44.2 million, $61.5 million, $64.6 million, $67.8 million and
$71.2 million for fiscal years 2001-2006, respectively; (v) EBITDA Margin of
12.0%, 11.7%, 14.0%, 14.0%, 14.0% and 14.0% for fiscal years 2001-2006,
respectively; and (vi) capital expenditures of 12.4%, 7.5%, 6.9%, 6.8%, 6.7% and
6.7% for fiscal years 2001-2006, respectively. The Budget/Recession Case
resulted in the following projections, among others: (i) sales growth of (3.5%),
(4.5%), (1.0%), 5.0%, 5.0% and 5.0% for fiscal years 2001-2006, respectively;
(ii) EBIT of $16.6 million, $1.5 million, $11.2 million, $15.0 million,
$19.1 million and $23.4 million for fiscal years 2001-2006, respectively;
(iii) EBIT Margin of 4.8%, 0.4%, 3.4%, 4.3%, 5.3% and 6.1% for fiscal years
2001-2006, respectively; (iv) EBITDA of $41.9 million, $23.1 million,
$31.4 million, $34.9 million, $38.7 million and $43.9 million for fiscal years
2001-2006, respectively; (v) EBITDA Margin of 12.0%, 7.0%, 9.6%, 10.1%, 10.7%
and 11.5% for fiscal years 2001-2006, respectively; and (vi) capital
expenditures of 12.4%, 7.5%, 6.9%, 6.2%, 5.4% and 5.4% for fiscal years
2001-2006, respectively.
In performing the discounted cash flow analyses, Wasserstein Perella, using
the forecasts as described above, discounted the unlevered free cash flows of
the Company (unlevered net income, plus depreciation and amortization, less
changes in working capital and capital expenditures) over the specified forecast
period using risk adjusted discount rates of 11.0%, 12.0% and 13.0%. The sum of
the present values of such free cash flows for the Company was then added to the
present value of the Company's terminal value computed using a forward multiple
of EBITDA (a six-year forecast was used for all cases) of 4.0x, 5.0x, 6.0x and
7.0x. Wasserstein Perella also performed a DCF analysis for each of the
Budget/Improved Margins Case, the Budget/Flat Margins Case and the
Budget/Recession Case based on a perpetuity growth rate methodology using growth
rates of 1.0%, 2.0%, 3.0% and 4.0%. Based on these analyses, Wasserstein Perella
calculated the following implied price per Share ranges. The Budget/Improved
Margins Case resulted in a per Share DCF valuation range from $26.00 to $35.00.
The Budget/Flat Margins Case resulted in a per Share DCF valuation range from
$21.00 to $30.00. The Budget/Recession Case resulted in a per Share DCF
valuation range from $16.00 to $23.00.
COMPARABLE COMPANIES TRADING ANALYSIS. Wasserstein Perella reviewed and
compared certain financial information of the Company to corresponding financial
information for three publicly traded automotive electronics companies:
Stoneridge, Inc., BEI Technologies, Inc. and Littelfuse, Inc.; five publicly
traded computer peripherals companies: Astronics Corporation, Key Tronic
Corporation, Interlink Electronics, Inc., Cybex Computer Products
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Corporation and Printronix, Inc.; and four publicly traded switch and controls
companies: Ault Incorporated, C.P. Clare Corporation, Corrpro Companies, Inc.
and Powell Industries, Inc. (collectively, the "Comparable Companies"). Such
financial information was used to calculate latest 12 months ("LTM") multiples
of estimated calendar year 1999 and 2000 financial results, including (i) the
market equity value as of May 28, 2000 ("Market Value") as a multiple of each of
net income and book value and (ii) adjusted market value as of May 28, 2000
(defined generally as the Market Value plus net debt (short-and long-term debt
less cash)) ("Adjusted Market Value"), as a multiple of each of sales, EBITDA
and EBIT. Market Value and Adjusted Market Value multiples of the Company were
based on the closing price per Share on May 28, 2000 and the estimated fiscal
year 2001 financial results for the Company were those used in the Company
Budget described above in "--Discounted Cash Flow Analysis." Such analyses,
excluding certain multiples which Wasserstein Perella determined were not
meaningful, indicated that, as of May 28, 2000, (i) the Company traded at an
Adjusted Market Value multiple of 0.3x net sales, compared to a range of 0.6x to
0.8x for the Comparable Companies; (ii) the Company traded at an Adjusted Market
Value multiple of 2.7x EBITDA, as compared to a range of 5.1x to 6.9x for the
Comparable Companies; and (iii) the Company traded at an Adjusted Market Value
multiple of 6.8x EBIT, compared to a range of 12.7x to 17.3x for the Comparable
Companies. The above analysis, reflecting an aggregate of preliminary implied
valuations of the Company's Automotive Switches and Modules, Computer Keyboards
and Switches and Controls businesses without any value associated with overhead
and corporate expenses and eliminations, produced an implied per Share range of
$29.00 to $36.00.
COMPARABLE ACQUISITIONS ANALYSIS. Wasserstein Perella reviewed recent
automotive, computer peripherals and switches transactions from February 2, 1995
until June 2, 2000.
For each transaction, Wasserstein Perella calculated the multiple of the
announced purchase price (when available) attributable to the equity interest of
the target company paid in each transaction as a multiple of the seller's LTM
net income and book value and the multiple of adjusted purchase price (adjusted
to include the seller's debt assumed, if any) (when available) to the seller's
(i) LTM sales, (ii) LTM EBITDA and (iii) LTM EBIT.
The analysis of these transactions, excluding certain multiples which
Wasserstein Perella determined were not meaningful, yielded a range of multiples
of adjusted purchase price to (i) LTM sales of 0.6x to 0.8x, (ii) LTM EBITDA of
5.3x to 6.9x, (iii) LTM EBIT of 13.4x to 17.3x. Wasserstein Perella used these
comparable transaction multiples to calculate implied values for the Shares
based on the ranges of multiples derived from such transactions. The per Share
value implied by this analysis, reflecting an aggregate of preliminary implied
valuations of the Company's Automotive Switches and Modules, Computer Keyboards
and Switches and Controls businesses without any value associated with overhead
and corporate expenses and eliminations, ranged from $30.00 to $36.00.
BREAK-UP ANALYSIS. Wasserstein Perella performed an analysis of the Company
assuming the sale of the Company's two least profitable businesses, the
Automotive Switches and Modules and Switches and Controls businesses, and then
the sale of the remaining business, the Computer Keyboards business, in a
corporate tax-free transaction. The per Share value implied by this analysis,
reflecting an aggregate of preliminary implied valuations of the Company's
Automotive Switches and Modules, Computer Keyboards and Switches and Controls
businesses without any value associated with overhead and corporate expenses and
eliminations, ranged from $29.00 to $36.00.
STOCK PRICE AND PREMIUM ANALYSIS. Wasserstein Perella reviewed the weekly
stock market price and volume trading history of the Company from May 26, 1998
through May 28, 2000 (including a comparison of the relative stock price
performance of the Company as compared to the S&P 500, other automotive
electronics companies and computer peripherals companies). The Company's per
Share trading price over this period has ranged from $9.25 to $26.00 per Share.
Wasserstein Perella also reviewed 32 acquisition transactions by majority
shareholders of publicly held minority interests with values ranging from
$100 million to $3 billion to derive a range of premiums paid over the public
trading prices per share one day, one week and four weeks prior to the
announcement of such transactions since May 27, 1996. In connection therewith,
Wasserstein Perella noted, among other things, that (i) the reasons for, and
circumstances surrounding, each of the transactions analyzed were diverse,
(ii) the characteristics of the companies and parties involved were not
necessarily comparable to those of the Company and the Cherry Family Members and
(iii) premiums fluctuate based on perceived growth, synergies, strategic value,
the type of consideration utilized in the transaction, information in the
securities markets and other factors.
The foregoing analyses indicated that the medians of premiums paid in the
transactions over the public per share trading prices one day, one week and four
weeks prior to the announcement of such transactions were 23.5%, 24.7% and
27.7%, respectively, resulting in implied per Share values of $16.06, $15.74 and
$19.80, respectively. The Offer Price represents a premium of 103.1% over the
closing price per Share on April 20, 2000, the last trading day prior to
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the announcement of the Cherry Family Members' initial proposal to acquire all
Shares not owned by them at $18.75 per Share (the "Last Preannouncement Trading
Day"), and premiums over the trading price of the Shares one week and four weeks
prior to such date of 109.1% and 70.3%, respectively.
CERTAIN GENERAL MATTERS. No company or transaction used in the foregoing
analyses is identical to the Company or the Transactions. In addition, those
analyses and the discounted cash flow analyses are based and are heavily
dependent upon, among other factors, assumptions as to future performance and
other factors, and are therefore subject to the limitations described in
Wasserstein Perella's opinion. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
acquisition value or the public trading value of the companies to which they are
being compared and the Company.
A fairness analysis is a complex process and is not necessarily susceptible
to a partial analysis or summary description. Wasserstein Perella believes that
its analyses must be considered as a whole and that selecting portions of its
analyses, without considering the analyses taken as a whole, would create an
incomplete view of the process underlying the analyses performed in reaching its
opinion. In addition, Wasserstein Perella considered the results of all such
analyses and did not assign relative weights to any of the analyses, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Wasserstein Perella's view of the actual value of the
Company.
In performing its analyses, Wasserstein Perella made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company. The
analyses performed by Wasserstein Perella are not necessarily indicative of
actual values, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Wasserstein
Perella's opinion. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold.
The Special Committee retained Wasserstein Perella based upon its experience
and expertise. Wasserstein Perella is an internationally recognized investment
banking and advisory firm. Wasserstein Perella, as part of its investment
banking business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the course of its market-making and other trading activities,
Wasserstein Perella and its affiliates may, from time to time, have a long or
short position in, and may buy and sell, securities of the Company.
4. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER. The purpose of the Offer
and the Merger is to enable the Cherry Family Members, through Purchaser, to
acquire the entire equity interest in the Company. The Offer will enable the
Cherry Family Members to acquire as many outstanding Shares not beneficially
owned by the Cherry Family Members as possible as a first step in acquiring the
entire equity interest in the Company. Through the Merger, the Cherry Family
Members will acquire all Shares not purchased pursuant to the Offer. Upon
consummation of the Merger, the Company will be entirely owned by the Cherry
Family Members.
As described above, the Board has approved the Merger and the Merger
Agreement. In accordance with the DGCL, if the Purchaser owns more than 90% of
the Shares after completion of the Offer, Purchaser will effect a merger of
Purchaser with and into the Company under the DGCL without soliciting approval
of the Company's stockholders. If Purchaser owns more than 67%, but less than
90% of the Shares after the completion of the Offer, Purchaser will begin the
process of soliciting approval of the Company's stockholders for the merger of
Purchaser with and into the Company. Under the Company's certificate of
incorporation, the affirmative vote of holders of two-thirds of the outstanding
Shares entitled to vote is required to approve and adopt the Merger Agreement
and approve the Merger. If the number of Shares validly tendered and not
withdrawn in the Offer (when taken together with Shares beneficially owned by
Purchaser and the Cherry Family Members) represents less than 67% of the
Company's outstanding Shares, then the Purchaser will not be obligated to
purchase the tendered Shares or proceed with the Merger. IF THE NUMBER OF SHARES
TENDERED IN THE OFFER, WHEN TAKEN TOGETHER WITH THE NUMBER OF SHARES TO BE
CONTRIBUTED TO PURCHASER BY THE CHERRY FAMILY MEMBERS, REPRESENTS AT LEAST 67%
OF THE SHARES, AND THE SHARES ARE PURCHASED IN THE OFFER, THEN THE FAVORABLE
VOTE TO APPROVE THE MERGER IS ASSURED.
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PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER. Pursuant to the
Merger Agreement, upon completion of the Offer, Purchaser intends to effect the
Merger in accordance with the Merger Agreement. See "SPECIAL FACTORS--The Merger
Agreement and the Stockholder Agreement."
Upon consummation of the Merger, the Company will become a privately held
corporation. Accordingly, stockholders of the Company (other than Purchaser and
the Cherry Family Members) will not have the opportunity to participate in the
earnings and growth of the Surviving Corporation after the consummation of the
Merger and will not have any right to vote on corporate matters. In addition,
stockholders of the Company (other than Purchaser and the Cherry Family Members)
will not be entitled to share in any premium that might be payable by an
unrelated acquiror for all of the issued and outstanding Shares in a sale
transaction, if any, occurring after the consummation of the Merger. No such
transactions are pending at this time. However, stockholders of the Company
(other than Purchaser and the Cherry Family Members) will not face the risk of
losses generated by the Surviving Corporation's operations or any decrease in
the value of the Surviving Corporation after the consummation of the Merger.
Purchaser and each of the Cherry Family Members have represented to the
Company that they have no present plan or intention to cause the Purchaser or
the Company or any subsidiary of the Company, subsequent to the Offer and the
Merger, to engage in any extraordinary corporate transaction such as a merger,
reorganization or liquidation or a sale or transfer of a material amount of its
assets.
The Shares are currently traded on The Nasdaq National Market. However, as a
result of the Merger, Purchaser will be the sole stockholder of the Company and
there will be no public market for the Shares. Following the consummation of the
Merger, the Shares will no longer be quoted on The Nasdaq National Market and
the registration of the Shares under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), will be terminated. Accordingly, after the Merger
there will be no publicly traded equity securities of the Company. Moreover, the
Company will no longer be required to file periodic reports with the Commission
under the Exchange Act, and will no longer be required to comply with the proxy
rules of Regulation 14A under Section 14 of the Exchange Act. See "THE TENDER
OFFER--Effect of the Offer on the Market for the Common Stock; Exchange Act
Registration." It is expected that, if Shares are not accepted for payment by
Purchaser pursuant to the Offer and the Merger is not consummated, the Company's
current management, under the general direction of the Board, will continue to
manage the Company as an ongoing business.
The Merger Agreement provides that the director of Purchaser immediately
prior to the Effective Time, and the officers of the Company immediately prior
to the Effective Time, will be the director and the officers of the Surviving
Corporation after the Merger, until their respective successors are elected or
appointed and qualified in accordance with applicable law.
It is currently expected that the business and operations of the Surviving
Corporation after the Merger will be conducted substantially as they are
currently being conducted by the Company. Other than by virtue of the Merger and
the other transactions contemplated by the Merger Agreement and except as
otherwise described above or elsewhere in this Offer to Purchase, Purchaser has
no current plans or proposals that relate to or would result in: (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (ii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries; (iii) any material change in the Company's capitalization or
dividend policy or indebtedness; (iv) any change in the management of the
Company or any change in any material term of the employment contract of any
executive officer; or (v) any other material change in the Company's corporate
structure or business. However, the Surviving Corporation's management will
review proposals or may propose the acquisition or disposition of assets or
other changes in the Surviving Corporation's business, corporate structure,
capitalizations, management or individual policy that it considers to be in the
best interests of the Surviving Corporation and its stockholders. Management
may, from time to time, evaluate and revise the Company's business, operations
and properties and make such changes as are deemed appropriate.
5. POSITION OF PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER
Because Purchaser and its stockholders currently beneficially own a majority
of the outstanding Shares, Purchaser and the Cherry Family Members are deemed
"affiliates" of the Company engaging in a Rule 13e-3 transaction under
Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Accordingly, Purchaser is required to consider the fairness of the Offer
to the holders of the Shares (other than Purchaser and the Cherry Family
Members).
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Purchaser believes the Offer and the Merger to be substantially and
procedurally fair to the stockholders of the Company (other than Purchaser and
the Cherry Family Members). Purchaser has considered the following factors:
(i) The Board and the Special Committee concluded that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company (other than Purchaser and the Cherry Family
Members).
(ii) The historical and projected financial performance of the Company.
(iii) The Offer Price represents a 103.1% premium over the closing price
for the Shares on April 20, 2000, the last full trading day prior to the
announcement of the Initial Proposal.
(iv) The Offer Price represents a 29.5% premium over the closing price
for the Shares on June 2, 2000, the last full trading day prior to the
announcement of the execution of the Merger Agreement.
(v) The Offer is not subject to an external financing condition.
(vi) The Offer provides the stockholders of the Company (other than
Purchaser and the Cherry Family Members) who are considering selling their
Shares with the opportunity to sell their Shares at the Offer Price without
incurring the transaction costs typically associated with market sales.
(vii) The ability of stockholders of the Company (other than Purchaser
and the Cherry Family Members) who object to the Merger to obtain "fair
value" for their Shares if they exercise and perfect their appraisal rights
under the DGCL.
(viii) The terms of the Merger Agreement were determined through arm's
length negotiations between the Special Committee and its legal and
financial advisors, on the one hand, and representatives of Purchaser, on
the other hand, and provide for the Offer in order to allow stockholders of
the Company (other than Purchaser and the Cherry Family Members) to receive
payment for their Shares on an accelerated basis.
(ix) Notwithstanding that Wasserstein Perella's opinion, dated June 4,
2000, was provided solely for the information and assistance of the Special
Committee and that Purchaser is not entitled to rely on such opinion, the
fact that the Special Committee received an opinion from Wasserstein Perella
to the effect that, as of that date and based on and subject to the
assumptions and limitations set forth in the opinion, the $26.40 per Share
cash consideration to be received in the Offer and the Merger by the holders
of Shares (other than Purchaser and the Cherry Family Members) was fair,
from a financial point of view, to such holders.
The Special Committee received a proposal to acquire the Company for $26.00
per Share following the announcement of the Cherry Family Members' interest in
acquiring the Company, but the Cherry Family Members did not consider the offer
because they are not interested in selling the Company.
Purchaser has reviewed the factors considered by the Board in support of its
decision, as described above, and has no basis to question their consideration
of or reliance on these factors. Purchaser does not find it practicable to
assign, nor did it assign, specific relative weights to the foregoing factors in
reaching its opinion as to the fairness of the Offer and the Merger to the
stockholders of the Company (other than Purchaser and the Cherry Family
Members).
6. RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER
No dissenter's or appraisal rights are available to stockholders in
connection with the Offer. If the Merger is consummated, however, record
stockholders of the Company who have not validly tendered their Shares or voted
in favor of the Merger (if a vote is required) will have certain rights under
the DGCL to an appraisal of, and to receive payment in cash of the fair value
of, their Shares (the "Appraisal Shares"). Stockholders who perfect appraisal
rights by complying with the procedures set forth in Section 262 of the DGCL
("Section 262"), a copy of which is attached as Schedule II to this Offer to
Purchase, will have the fair value of their Appraisal Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
determined by the Delaware Court of Chancery and will be entitled to receive a
cash payment equal to such fair value from the Surviving Corporation. Any such
judicial determination of the fair value of Shares could be based upon any
valuation method or combination of methods the court deems appropriate to use.
The value so determined could be more than, equal to, or less than the Offer
Price or Merger Consideration. In addition, such stockholders may be entitled to
receive payment of a fair rate of interest from the Effective Time on the amount
determined to be the fair value of their Appraisal Shares. THE PRESERVATION AND
EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE
PROVISIONS OF THE DGCL.
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Under Section 262, if the Merger is submitted to a vote of the stockholders
of the Company at a meeting thereof, the Company must, not less than 20 days
prior to the meeting held for the purpose of obtaining stockholder approval of
the Merger, notify each of the Company's stockholders entitled to appraisal
rights that such rights are available. If the Merger is approved without a vote
of the stockholders of the Company, the Company, either before the Effective
Time or within ten days thereafter, must notify each of the stockholders
entitled to appraisal rights of the approval of the Merger and that appraisal
rights are available. In either case, the notice must include a copy of
Section 262.
If the Merger is submitted to a vote of the stockholders of the Company at a
meeting thereof, a holder of Appraisal Shares wishing to exercise appraisal
rights will be required to deliver to the Company before the taking of the vote
on the Merger or within 20 days after the date of mailing the notice described
in the preceding paragraph, a written demand for appraisal of such holder's
Appraisal Shares. A holder of Appraisal Shares wishing to exercise such holder's
appraisal rights must be the record holder of such Appraisal Shares on the date
the written demand for appraisal is made and must continue to hold of record
such Appraisal Shares through the Effective Time. Accordingly, a holder of
Appraisal Shares who is the record holder of Appraisal Shares on the date the
written demand for appraisal is made, but who thereafter transfers such
Appraisal Shares prior to the Effective Time, will lose any right to appraisal
in respect of such Appraisal Shares.
If the Merger is approved without a vote of stockholders of the Company, a
holder of Appraisal Shares wishing to exercise appraisal rights will be required
to deliver to the Company, within 20 days after the date of mailing the notice
by the Company described above, a written demand for appraisal of such holder's
Appraisal Shares.
A demand for appraisal must be executed by or on behalf of the stockholder
of record and must reasonably inform the Company of the identity of the
stockholder of record and that such stockholder intends thereby to demand an
appraisal of such Appraisal Shares. A proxy or vote against the Merger shall not
constitute such a demand.
A person having a beneficial interest in Appraisal Shares that are held of
record in the name of another person, such as a broker, fiduciary, depository or
other nominee, will have to act to cause the record holder to execute the demand
for appraisal and to follow the requisite steps properly and in a timely manner
to perfect appraisal rights. If Appraisal Shares are owned of record by more
than one person, as in joint tenancy or tenancy in common, the demand will have
to be executed by or for all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute a demand for appraisal for a
stockholder of record, provided that the agent identifies the record owner and
expressly discloses, when the demand is made, that the agent is acting as agent
for the record owner. If a stockholder owns Appraisal Shares through a broker
who in turn holds the Appraisal Shares through a central securities depository
nominee such as CEDE & Co., a demand for appraisal of such Appraisal Shares will
have to be made by or on behalf of the depository nominee and must identify the
depository nominee as record holder of Appraisal Shares.
A record holder, such as a broker, fiduciary, depository or other nominee,
who holds Appraisal Shares as a nominee for others, will be able to exercise
appraisal rights with respect to the Appraisal Shares held for all or less than
all of the beneficial owners of those Appraisal Shares as to which such person
is the record owner. In such case, the written demand must set forth the number
of Shares covered by the demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Appraisal Shares standing in
the name of such record owner.
Within 120 days after the Effective Time, but not thereafter, the Company or
any stockholder who has complied with the statutory requirements summarized
above and who is otherwise entitled to appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
such holders' Appraisal Shares. There is no present intention on the part of
Purchaser to file an appraisal petition on behalf of the Company, and
stockholders who seek to exercise appraisal rights should not assume that the
Company will file such a petition or that the Company will initiate any
negotiations with respect to the fair value of Appraisal Shares. Accordingly, it
will be the obligation of the stockholders seeking appraisal rights to initiate
all necessary action to perfect any appraisal rights within the time prescribed
in Section 262. Within 120 days after the Effective Time, any stockholder who
has theretofore complied with the provisions of Section 262 will be entitled,
upon written request, to receive from the Company a statement setting forth the
aggregate number of Shares not voting in favor of the Merger (if applicable) and
with respect to which demands for appraisal were received as well as the number
of holders of such Shares. Such statement must be mailed within ten days after
the written request has been received by the Company.
If a petition for appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the fair value of their Appraisal
Shares,
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exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value from the Effective Time.
The costs of the proceeding may be determined by the Delaware Court of
Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. However, costs do not include attorneys' fees
or expert witness fees. Upon application of a stockholder, the Delaware Court of
Chancery may also order all or a portion of the expenses incurred by any
stockholder, including reasonable attorneys' fees and the fees and expenses of
experts, to be charged pro rata against the value of all of the Appraisal Shares
entitled to appraisal.
At any time within 60 days after the Effective Time, any stockholder shall
have the right to withdraw its demand for appraisal and to accept the Merger
Consideration. After this period, the stockholder may withdraw such holder's
demand for appraisal only with the consent of Purchaser. If any stockholder who
properly demands appraisal of such holder's Appraisal Shares under Section 262
fails to perfect, or effectively withdraws or loses, such holder's right to
appraisal as provided in the DGCL, the Appraisal Shares of such stockholder will
be converted into the right to receive the Merger Consideration. A stockholder
will fail to perfect, or effectively lose or withdraw, such stockholder's right
to appraisal if, among other things, no petition for appraisal is filed within
120 days after the Effective Time or if the stockholder delivers to the Company
a written withdrawal of such stockholder's demand for appraisal.
Purchaser has not made any provision in connection with the Offer or the
Merger to obtain counsel or appraisal services for unaffiliated security holders
at the expense of Purchaser. As of June 10, 2000, the Cherry Family Members
beneficially owned an aggregate of 5,455,666 Shares (representing approximately
53% of the then outstanding Shares). The directors and executive officers of the
Company (other than Peter B. Cherry), as a group, beneficially owned an
aggregate of 216,801 Shares (representing approximately 2.1% of the then
outstanding Shares).
7. THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT AND
THE STOCKHOLDER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT, WHICH
ARE INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS ATTACHED
TO THIS OFFER TO PURCHASE AS ANNEX B AND THE STOCKHOLDER AGREEMENT IS ATTACHED
TO THIS OFFER TO PURCHASE AS ANNEX C. CAPITALIZED TERMS NOT OTHERWISE DEFINED IN
THE FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer as promptly as practicable. The obligation of Purchaser to commence
the Offer and to accept for payment, and to pay for, any Shares tendered
pursuant to the Offer, is subject to the satisfaction of certain conditions that
are set forth below the caption "THE TENDER OFFER--Conditions of the Offer"
(such conditions, the "Offer Conditions"). Purchaser may waive any of the Offer
Conditions or make any other changes in the terms and conditions of the Offer
without the prior written consent of the Company or the Special Committee
subject to certain limitations. See "THE TENDER OFFER--Conditions of the Offer."
Notwithstanding the foregoing, Purchaser has agreed that, without the prior
written consent of the Company, no changes may be made that (i) reduce the
maximum number of Shares subject to the Offer, (ii) decrease the per Share
amount, (iii) change the form of consideration payable in the Offer,
(iv) impose any other conditions to the Offer or amend or modify any other terms
of the Offer in any manner adverse to the holder of Shares, or (v) except as
provided in the next sentence, extend the Offer. Under the terms of the Merger
Agreement, Purchaser may, without the consent of the Company, extend the Offer:
(i) if at the then scheduled expiration date of the Offer any of the Offer
Conditions shall not have been satisfied or waived, until such time as all such
conditions shall have been satisfied or waived; (ii) for any period required by
any statute or rule, regulation, interpretation or position of the Commission or
its staff applicable to the Offer; (iii) for any period required by applicable
law in connection with an increase in the consideration to be paid pursuant to
the Offer; and (iv) if all of the Offer Conditions are satisfied and the number
of Shares (together with the Shares held by the Purchaser and the Cherry Family
Members) that have been validly tendered and not withdrawn represent more than
67% of the then outstanding Shares (when taken together with Shares beneficially
owned by Purchaser and the Cherry Family Members) (the "Minimum Condition") but
represent less than 90% of the then issued and outstanding Shares, from time to
time, for an aggregate period of not more than ten business days beyond the
latest expiration date that would be permitted under clause (i), (ii) or
(iii) of this sentence. If all of the Offer Conditions have been satisfied,
Purchaser shall, as soon as practicable after the expiration of the Offer,
accept and pay for all Shares tendered. In addition, so long as the Shares
purchased in the Offer together with all Shares held by Purchaser and the Cherry
Family Members represent less than 90% of the then issued and outstanding
Shares, Purchaser may provide for a "subsequent offering period" to the extent
provided in Rule 14d-11 under the Exchange Act after the purchase of Shares
pursuant to the Offer.
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THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions set forth in the Merger Agreement and the applicable provisions of
the DGCL, Purchaser will be merged with and into the Company and the separate
existence of Purchaser will cease. The Company will be the Surviving Corporation
of the Merger and will be owned entirely by the Cherry Family Members. In the
Merger, each share of common stock of Purchaser outstanding immediately prior to
the Effective Time will be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $1.00 par value per share,
of the Surviving Corporation. At the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Purchaser or held by the Company, all of which shall be cancelled, and Shares
held by stockholders who perfect appraisal rights under the DGCL) will, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive the Merger Consideration. The Merger
Agreement provides that (subject to the provisions of the Merger Agreement and
the applicable provisions of the DGCL) the closing of the Merger shall occur
promptly following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of the conditions to the Merger set forth in the Merger
Agreement.
TREATMENT OF STOCK OPTIONS. The Merger Agreement provides that, if and to
the extent permissible under its stock plans, the Company will cause the vesting
of options held by persons who are employees of the Company at the Effective
Time to be accelerated and all outstanding restricted stock thereunder held by
such persons to be fully vested on a date no later than the date of the
Effective Time.
STOCKHOLDERS MEETING. The Merger Agreement provides that, if required by
applicable law, the Company, acting through the Board, shall (i) following the
expiration of the Offer, call a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of voting on the Merger Agreement and the transactions
contemplated thereby, (ii) hold the Stockholders Meeting as soon as practicable
after the purchase of Shares pursuant to the Offer and (iii) unless taking such
action would be inconsistent with the fiduciary duties of the Board or the
directors constituting the Special Committee to stockholders of the Company
imposed by law, as determined by such directors in good faith and after
consultation with independent legal counsel, recommend to its stockholders the
approval of the Merger Agreement and the transactions contemplated thereby;
provided, however, that the Board shall not be obligated to recommend the Merger
Agreement or the transactions contemplated thereby if, at or prior to the
Stockholders Meeting, a Superior Proposal (as defined below) has been received
and if with respect thereto the Special Committee or the Board determines in
good faith (after consultation with its legal counsel) that taking such action
would be inconsistent with its fiduciary duties to the stockholders of the
Company. If a Stockholders Meeting is called, the Company will use its
reasonable best efforts to solicit from the stockholders of the Company proxies
in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby and to secure the vote or consent of
stockholders required for such approval, unless otherwise required by applicable
fiduciary duties, as determined by such directors in good faith after
consultation with independent legal counsel. At the Stockholders Meeting,
Purchaser will cause all the Shares then owned by Purchaser or the Cherry Family
Members to be voted in favor of the Merger. The Merger Agreement provides that,
notwithstanding the foregoing, if Purchaser, or any direct or indirect
subsidiary of Purchaser, acquires at least 90 percent of the outstanding Shares
(assuming that all Shares owned by the Cherry Family Members are transferred to
Purchaser), the parties to the Merger Agreement shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the consummation of the Offer, without a meeting of
stockholders of the Company, in accordance with the "Short-Form Merger"
provisions of the DGCL. Unless Purchaser or other stockholders of the Company
execute consents in lieu of a stockholders meeting adequate to approve the
Merger, the Merger Agreement is required to be submitted to the stockholders of
the Company whether or not the Board determines at any time subsequent to
declaring its advisability that the Merger Agreement is no longer advisable and
recommends that the stockholders reject it.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to (i) the due
organization, existence, the qualification, good standing, corporate power and
authority of the Company and its subsidiaries, subject to certain limitations;
(ii) the due authorization, execution, and delivery of the Merger Agreement and
all agreements and documents contemplated thereby, including without limitation
all documentation concerning the Loan (the "Ancillary Documents") and the power
and authority to consummate the transactions contemplated thereby, and the
validity and enforceability thereof; (iii) the capitalization of the Company,
including the number of shares of capital stock of the Company outstanding;
(iv) subject to certain exceptions and limitations, the absence of consents and
approvals necessary for consummation of the transactions contemplated by the
Merger Agreement by the Company and the absence of any violations, breaches or
conflicts which would result from compliance by the Company with any provision
of the Merger Agreement; (v) absence of any material misstatements or omissions
in the
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information regarding the Special Committee's deliberations and recommendations
provided by the Special Committee specifically for inclusion in the
Schedule 14D-9, the Proxy Statement (that may be required to complete the Merger
under certain circumstances), the Offer Documents, and the Information Statement
(that may be required to complete the Merger under certain circumstances);
(vi) certain fees in connection with the transactions contemplated by the Merger
Agreement; (vii) the opinion of Wasserstein Perella; (viii) state takeover
statutes; and (ix) the required vote of stockholders of the Company with respect
to the transactions contemplated by the Merger Agreement.
Purchaser has also made certain representations and warranties, including
with respect to (i) the due incorporation, existence, good standing and, subject
to certain limitations, corporate power and authority of Purchaser; (ii) the due
authorization, execution and delivery of the Merger Agreement executed in
connection therewith and the power and authority to consummate the transactions
contemplated thereby, and the validity and enforceability thereof;
(iii) subject to certain exceptions and limitations, the absence of consents and
approvals necessary for consummation of the transactions contemplated by the
Merger Agreement by Purchaser and the absence of any violations, breaches or
conflicts which would result from compliance by Purchaser with any provision of
the Merger Agreement; (iv) the interim operations of Purchaser; (v) absence of
any material misstatements or omissions in this Offer to Purchase and the
Schedule TO and in the information provided by Purchaser specifically for
inclusion in the Schedule 14D-9, the Information Statement and the Proxy
Statement; (vi) Purchaser's and each Cherry Family Member's interest in not
selling any equity securities of the Company, and lack of present plan or
intention to engage in, or cause the Company or any subsidiary of the Company,
subsequent to the Offer or the Merger, to engage in any extraordinary corporate
transaction such as a merger, reorganization or liquidation or sale or transfer
of a material amount of its assets (an "Extraordinary Transaction"),
(vii) Peter B. Cherry's disclosure to the Company's Board of any proposals,
expressions of interest or offers which specified a price or range of prices or
value or range of values made by a third party with respect to any Extraordinary
Transaction from January 1, 1999 through June 5, 2000; (viii) certain fees in
connection with the transactions contemplated by the Merger Agreement; (ix) the
solvency of the Company after giving effect to the Offer, the Merger and the
financings contemplated by the Merger Agreement; and (x) Purchaser's belief that
as of June 5, 2000 pending litigation relating to the Company would not have a
material adverse effect on the Purchaser or make materially more costly the
Offer or the consummation of the Merger. No inaccuracy in any of the Company's
representations or warranties which is known to Peter B. Cherry as of the date
of the Merger Agreement shall cause such representation or warranty to be untrue
or inaccurate for any purpose under the Merger Agreement. No breach of any
agreement or obligation of the Company contained in the Merger Agreement caused
directly or indirectly by any action or inaction by Peter B. Cherry shall cause
such agreements or obligations to be breached for any purpose under the Merger
Agreement.
CONDUCT UNTIL THE MERGER. The Company has agreed that from the date of the
Merger Agreement to the Effective Time, unless as contemplated by the Merger
Agreement or Purchaser has consented in writing thereto, the Board shall not
authorize the Company or any of its subsidiaries to:
(i) amend its certificate of incorporation or by-laws;
(ii) issue, sell or pledge any shares of its capital stock or other
ownership interest in the Company or its subsidiaries, or any securities
convertible into or exchangeable for any such shares or other ownership
interest, or any rights, warrants or options to acquire or with respect to
any such shares of capital stock, ownership interest, or convertible or
exchangeable securities (or derivative instruments in respect of the
foregoing);
(iii) effect any stock split or otherwise change its capitalization as it
existed on the date of the Merger Agreement, or directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of its subsidiaries;
(iv) (A) accelerate or waive any or all of the goals, restrictions or
conditions imposed under any restricted stock award, or (B) issue, sell,
grant or award any shares of capital stock or any right to acquire shares of
capital stock under any Company stock plan (except as otherwise required by
such plan);
(v) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests (other than such payments by the subsidiaries to
the Company);
(vi) mortgage or otherwise encumber, subject to any encumbrance, or
sell, lease or otherwise dispose of any of its property or assets (including
capital stock of its subsidiaries), other than encumbrances that are
incurred in the ordinary course of business, the sale or disposition of
inventory in the ordinary course of business or the sale, lease, encumbrance
or other disposition of assets which, individually or in the aggregate, are
obsolete or not material to the Company and its subsidiaries taken as a
whole;
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(vii) (A) acquire by merger, purchase or any other manner, any business
or entity or any division thereof for consideration in excess of $1,000,000
in the aggregate; or (B) otherwise acquire any assets which would be
material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole, except for purchases of inventory, supplies
or capital equipment in the ordinary course of business consistent with past
practice and the acquisition of assets for consideration in excess of
$1,000,000 in the aggregate;
(viii) except for borrowings under existing or replacement credit
facilities and excepting transactions between the Company and any
subsidiary, incur or assume any long-term or short-term debt or issue any
debt securities or assume, guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the debt or
other obligations of any other person, other than obligations (other than
debt) of its subsidiaries incurred in the ordinary course of business;
(ix) (A) make any loans, advances or capital continuations to, or
investments in, any other person (other than to subsidiaries of the
Company), except with respect to commitments outstanding on the date of the
Merger Agreement, or (B) forgive any loans, advances or capital
contributions to, or investments in, any other person (other than with
respect to subsidiaries of the Company) for an amount in excess of $100,000
in the aggregate (as to clauses (A) and (B) collectively);
(x) except as contemplated by the Merger Agreement or in the ordinary
course of business (A) increase the compensation payable or to become
payable to its officers or employees, (B) other than in accordance with
existing policies and arrangements, grant any severance pay to the Company's
officers, directors or employees or (C) establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee, except to the extent required by applicable law or the terms of
a collective bargaining agreement or a contractual obligation existing on
the date of the Merger Agreement;
(xi) change any of the accounting principles or practices used by the
Company, except as may be required by generally accepted accounting
principles;
(xii) pay, discharge or satisfy any material claims, material liabilities
or material obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
of (A) any such material claims, material liabilities or material
obligations in the ordinary course of business or (B) material claims,
material liabilities or material obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) contained in the Company's filings with the Commission under the
Exchange Act since February 28, 2000;
(xiii) agree to the settlement of any claim or litigation, which
settlement would have a Material Adverse Effect (The Merger Agreement
defines a Material Adverse Effect as a change or effect that is materially
adverse to the business, operations, assets or financial condition of the
Company and its subsidiaries, taken as a whole.);
(xiv) make, change or rescind any material tax election (other than
recurring elections that customarily are made in connection with the filing
of any tax return; provided that any such elections are consistent with the
past practices of the Company or its subsidiaries, as the case may be); or
settle or compromise any material tax liability that is the subject of any
audit, claim for delinquent taxes, examination, action, suit, proceeding or
investigation by any taxing authority;
(xv) except as contemplated by the Merger Agreement or to the extent
required under existing employee and director benefit plans, agreements or
arrangements as in effect on the date of the Merger Agreement or as
contemplated by the Merger Agreement, accelerate the payment, right to
payment or vesting of any bonus, severance, profit sharing, retirement,
deferred compensation, stock option, insurance or other compensation or
benefits;
(xvi) other than in the ordinary course of business, enter into any
agreement, understanding or commitment that materially restrains, limits or
impedes the ability of the Company or any of its subsidiaries to compete
with or conduct any business or line of business, including geographic
limitations on the activities of the Company or any of its subsidiaries;
(xvii) materially modify, amend or terminate any material contract, or
waive, relinquish, release or terminate any right or claim, in each case,
except in the ordinary course of business;
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<PAGE>
(xviii) other than with respect to commitments outstanding as of the date
of the Merger Agreement, make any capital expenditures for the Company and
its subsidiaries in excess $4,000,000, in the aggregate;
(xix) take any action to cause the Common Stock to be delisted from the
Nasdaq Stock Market prior to the consummation of the Offer; or
(xx) agree in writing or otherwise to take any of the foregoing actions.
ACCESS TO INFORMATION. Under the Merger Agreement, from the date of the
Merger Agreement to the closing of the Merger, the Company shall, and shall
cause its subsidiaries to, (i) give Purchaser and its authorized representatives
reasonable access, upon notice and during business hours to all books, records,
personnel, offices and other facilities and properties of the Company and its
subsidiaries, (ii) permit Purchaser to make such copies and inspections thereof
as Purchaser may reasonably request and (iii) furnish Purchaser with such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Purchaser may from time to
time reasonably request; provided that, with certain specified limitations, no
investigation or information furnished pursuant to the Merger Agreement shall
affect any representations and warranties made by the Company or Purchaser
therein or the conditions to the obligations of Purchaser to consummate the
transactions contemplated thereby; provided further that such access shall be at
the expense of Purchaser. Purchaser has agreed to hold all information furnished
on a confidential basis by or on behalf of the Company or any of its
subsidiaries in confidence.
NO SOLICITATION. The Company has agreed in the Merger Agreement (a) that
from the date of the Merger Agreement to the Effective Time, neither it nor any
of its subsidiaries will, and it will direct its officers, directors, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or the Special Committee) not to, initiate, solicit
or knowingly encourage, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) to acquire the Company pursuant to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or in
excess of 20% of the assets or any equity securities of, the Company or any of
its material subsidiaries (any such proposal or offer being hereinafter referred
to as an "Alternative Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, afford access to the
properties, books or records of the Company or any of its subsidiaries to, or
have any discussions with, any person relating to an Alternative Proposal;
(b) that it would immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted theretofore
with respect to any of the foregoing; and (c) that it will notify Purchaser
promptly of the terms of such person's or entity's inquiry or proposal if any
such inquiries or proposals are received by the Company; provided, however, that
the no solicitation provision shall not prohibit the Company or its
subsidiaries, upon approval by the Special Committee, from (i) complying with
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to a tender
or exchange offer, or otherwise make any disclosure required by applicable law
to its stockholders related to an Alternative Proposal, or (ii) prior to the
acceptance for payment of shares of Common Stock by Purchaser pursuant to the
Offer, furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited bona fide Alternative
Proposal, only if (A) such proposal was not initially solicited, encouraged or
knowingly facilitated by the Company, its subsidiaries or their agents in
violation of the no solicitation provision of the Merger Agreement, (B) prior to
furnishing information to, or entering into discussions or negotiations with,
such person or entity, the Company provides written notice to Purchaser to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (C) the Special Committee
determines that such proposal is, or is likely to lead to a proposal that is,
more favorable from a financial point of view to the stockholders of the Company
as compared to the Offer and the Merger (such proposal meeting the requirements
of clauses (A), (B) and (C) being a "Superior Proposal"). The Company shall keep
Purchaser informed of the status of any such discussions or negotiations and the
terms of any proposal (but need not disclose the identity of such person or
entity) and, to the extent applicable, shall comply with Rule 14e-2(a)
promulgated under the Exchange Act with regard to an Alternative Proposal.
Nothing in the no solicitation provision of the Merger Agreement (x) permits the
Company to terminate the Merger Agreement (except as specifically provided in
the termination provisions of the Merger Agreement), (y) permits the Company to
enter into any agreement with respect to an Alternative Proposal during the term
of the Merger Agreement, or (z) affects any other obligation of the Company
under the Merger Agreement.
FEES AND EXPENSES. Except as set forth below, whether or not the Merger is
consummated, all fees, costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring such fees, costs and expenses.
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<PAGE>
In the Merger Agreement, the Company has agreed that, under certain
circumstances, it will reimburse Purchaser and the Cherry Family Members for
their reasonable out-of-pocket expenses incurred in connection with the Offer,
the Merger or the other transactions contemplated by the Merger Agreement. The
Company is obligated to pay such out-of-pocket expenses up to a maximum of
$1,000,000 under the following circumstances: (i) Purchaser terminates the
Merger Agreement prior to the acceptance of any Common Stock validly tendered
pursuant to the Offer, if the Special Committee shall have withdrawn or
modified, in a manner that is materially adverse to Purchaser, its approval or
recommendation of the Merger Agreement, the Offer, the Merger or any other
transaction contemplated by the Merger Agreement or shall have recommended
another merger, consolidation or business combination involving, or acquisition
of, the Company or its assets or another tender offer for Common Stock, or shall
have resolved to do any of the foregoing; or (ii) the Special Committee
terminates the Merger Agreement in accordance with its terms because of a
Superior Proposal which the Special Committee or the Board determines in good
faith (after consultation with its legal counsel) that the failure to take such
action would be inconsistent with its fiduciary duties to the stockholders of
the Company.
FILINGS; OTHER ACTIONS. The Merger Agreement provides that, subject to the
terms and conditions provided in the Merger Agreement, the Company and Purchaser
have agreed to:
(a) use their reasonable best efforts to cooperate with one another in
(i) determining which filings other than under the Exchange Act are required
to be made prior to the expiration of the Offer or the Effective Time with,
and which consents, approvals, permits or authorizations are required to be
obtained prior to the Effective Time from, governmental entities or other
third parties in connection with the execution and delivery of the Merger
Agreement and other ancillary documents and the consummation of the
transactions contemplated thereby and (ii) timely make all such filings and
timely seek all such consents, approvals, permits, authorizations and
waivers; and
(b) use their reasonable best efforts to take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper
or appropriate to consummate and make effective the transactions
contemplated by the Merger Agreement. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purpose
of the Merger Agreement, the proper officers and directors of Purchaser and
the Surviving Corporation are required to take all such necessary action.
CONDITIONS TO THE MERGER. The obligations of Purchaser and the Company to
effect the Merger are subject to the satisfaction or waiver, where permissible,
prior to the Effective Time, of the following conditions: (i) if approval of the
Merger Agreement and the Merger by the holders of Shares is required by
applicable law, the Merger Agreement and the Merger shall have been approved by
the requisite vote of such holders; (ii) no United States federal or state
governmental authority or other agency or commission or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order decree, injunction or other order which
is then in effect and prohibits or has the effect of prohibiting the
consummation of the Merger or makes the consummation of the Merger illegal;
(iii) any waiting period (and any extension thereof) applicable to the Offer and
the Merger under the HSR Act shall have terminated or expired; and (iv) the
Purchaser shall have accepted for payment and paid for all Shares validly
tendered pursuant to the Offer and not withdrawn; provided, however, that
neither the Company nor the Purchaser shall be entitled to invoke this
condition, if it shall have been the cause of the failure to purchase Shares so
tendered and not withdrawn in violation of the terms of the Offer.
TERMINATION. The Merger Agreement, notwithstanding approval thereof by the
stockholders of the Company, may be terminated at any time prior to the
Effective Time:
(c) by mutual written consent of Purchaser and the Special Committee;
(d) by Purchaser or the Special Committee,
(i) if either (x) the purchase of Shares pursuant to the Offer has
not been consummated on or before October 2, 2000 or (y) the Effective
Time shall not have occurred on or before December 1, 2000 (provided that
the right to terminate the Merger Agreement pursuant to this clause (i)
shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of or resulted
in the failure of the consummation of the purchase of Shares pursuant to
the Offer on or before October 2, 2000 or the Effective Time to occur on
or before December 1, 2000);
(ii) if there shall be any law that makes consummation of the Offer
or the Merger illegal or prohibited, or if any court of competent
jurisdiction in the U.S. shall have issued an order, judgment, decree or
ruling, or
18
<PAGE>
taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, judgment, decree, ruling or other action shall
have become final and non-appealable;
(e) by the Special Committee,
(i) if there is a Superior Proposal and with respect thereto Special
Committee or the Board determines in good faith (after consultation with
its legal counsel), that the failure to take such action would be
inconsistent with its fiduciary duties to stockholders of the Company; or
(ii) if Purchaser shall have breached in any material respect any of
its representations, warranties or covenants contained in the Merger
Agreement; or
(f) by Purchaser,
(i) prior to the acceptance of any Shares validly tendered pursuant
to the Offer, if the Special Committee shall have withdrawn or modified,
in a manner that is materially adverse to Purchaser, its approval or
recommendation of the Merger Agreement, the Offer, the Merger or any
other transaction contemplated by the Merger Agreement or if the Special
Committee shall have recommended another merger, consolidation or
business combination involving, or acquisition of, the Company or its
assets or another tender offer for the Shares, or the Special Committee
shall have resolved to do any of the foregoing; or
(ii) if the Company shall have breached in any material respect any
of its representations, warranties or covenants contained in the Merger
Agreement; or
(iii) if the Company fails to timely provide the Loan described in the
Merger Agreement.
INDEMNIFICATION. Each of Purchaser and the Company agrees that all rights
to indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of its
subsidiaries as provided under the DGCL and in the Company's Certificate of
Incorporation or Bylaws or the charter and bylaws of the Company's subsidiaries
as in effect on the date of the Merger Agreement with respect to matters
occurring up to and including the Effective Time shall survive the purchase of
any Shares under the Offer and the Merger. Without limiting the generality of
the foregoing, in the event any person entitled to indemnification becomes
involved in any claim, action, proceeding or investigation after the purchase of
any Shares under the Offer, the Company shall periodically advance to such
person his or her reasonable legal and other reasonably incurred expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to such person providing an undertaking to reimburse all
amounts so advanced unless it is determined that such person is entitled to
indemnification. The Merger Agreement provides that Purchaser and the Company
will maintain in effect, for not less than six years after the later to occur of
the purchase of any Shares under the Offer or the Effective Time, the Company's
current directors and officers insurance policies, if such insurance is
obtainable (or policies of at least the same coverage containing terms and
conditions no less advantageous to the current and all former directors and
officers of the Company), with respect to acts or failures to act up to and
including the Effective Time, including acts relating to the transactions
contemplated by the Merger Agreement; provided, however, that in order to
maintain or procure such coverage, the Surviving Corporation shall not be
required to maintain or obtain policies providing such coverage except to the
extent such coverage can be provided at an annual cost of no greater than 150%
the most recent annual premium paid by the Company prior to the date of the
Merger Agreement (the "Cap"); and provided, further, that if equivalent coverage
cannot be obtained, or can be obtained only by paying an annual premium in
excess of the Cap, the Purchaser or the Surviving Corporation will only be
required to obtain only as much coverage as can be obtained by paying an annual
premium equal to the Cap.
AMENDMENT. To the extent permitted by applicable law, the Merger Agreement
may be amended by action taken by or on behalf of the boards of directors of the
Company and Purchaser and, in the case of the Company, with the approval of the
Special Committee at any time before or after adoption of the Merger Agreement
by the stockholders of the Company (if required); provided, however, that after
any such stockholder approval (if required), no amendment shall be made which
decreases the Merger Consideration or which adversely affects the rights of, or
the income tax consequences to, the Company's stockholders (other than Purchaser
and the Cherry Family Members) thereunder without the approval of such
stockholders. The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of Purchaser and the Company.
THE STOCKHOLDER AGREEMENT. The Cherry Family Members have entered into a
Stockholder Agreement pursuant to which, among other things, the Cherry Family
Members have agreed not to tender their Shares in the Offer and,
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<PAGE>
prior to consummation of the Offer, to contribute to Purchaser the Shares they
own in exchange for shares of capital stock of Purchaser. In addition, Purchaser
and the Cherry Family Members have agreed at a Stockholders Meeting or in any
other circumstances upon which a vote, consent, or other approval with respect
to the Merger or the Merger Agreement is sought, to cause all Shares and all
Shares acquired by Purchaser in the Offer to be present and voted in favor of
the Merger, the adoption of the Merger Agreement and the approval of the terms
thereof and each transaction contemplated by the Merger Agreement.
8. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendations of the Board and the Special Committee,
stockholders should be aware that certain officers and directors of Purchaser
and the Company have interests in the Offer and the Merger which are described
below and which may present them with certain potential conflicts of interest.
The Cherry Family Members control approximately 53% of the outstanding Shares.
Consequently, the stockholders of Purchaser control the Company. Peter B.
Cherry, one of the Cherry Family Members, is the President and Chairman of the
Company, as well as the sole director and officer of Purchaser.
As of June 10, 2000, the directors and executive officers of the Company
(other than Peter B. Cherry), as a group, beneficially owned an aggregate of
216,801 Shares (representing 2.1% of the then outstanding Shares). As of
June 10, 2000, the members of the Special Committee beneficially owned an
aggregate of 95,166 Shares (representing less than one percent of the then
outstanding Shares). All such Shares held by directors and executive officers
(other than Shares held by Peter B. Cherry) will be treated in the Offer and the
Merger in the same manner as Shares held by the stockholders of the Company
(other than Purchaser and the Cherry Family Members). In the aggregate, the
directors and executive officers of the Company (other than Peter B. Cherry)
will be entitled to receive approximately $5.7 million for their Shares upon
consummation of the Offer and the Merger and the members of the Special
Committee will be entitled to receive an aggregate of approximately
$2.5 million for their Shares upon consummation of the Offer and the Merger.
The Company's executive officers and senior managers may elect not to tender
pursuant to the Offer if Purchaser decides to allow executive officers and
senior managers to retain an equity interest in the Surviving Corporation.
Purchaser has yet to make this determination. In addition, the executive
officers and senior managers may elect to convert their options to purchase
Shares into stock appreciation rights of the Surviving Corporation, if
available. If executive officers and senior managers are not permitted to retain
an equity interest in the Surviving Corporation, or if such stock appreciation
rights are not available, then the executive officers and senior managers may
elect to tender their Shares pursuant to the Offer, and any Shares not tendered
and any options to purchase Shares that are outstanding after completion of the
Offer will be exchanged pursuant to the Merger.
The Merger Agreement provides that all rights to indemnification existing in
favor of the present or former directors, officers, employees, fiduciaries and
agents of the Company or any of its subsidiaries as provided under the DGCL and
in the Company's certificate of incorporation or by-laws or the charter and
by-laws of the Company's subsidiaries with respect to matters occurring up to
and including the Effective Time will survive the Merger. In addition, Purchaser
and the Company are required to maintain for not less than six years after the
Effective Time the current directors' and officers' liability insurance policies
maintained by the Company and its subsidiaries.
The Special Committee and the Board were aware of these actual and potential
conflicts of interest and considered them along with the other matters described
above under "--Recommendation of the Special Committee and the Board of
Directors of the Company; Fairness of the Offer and the Merger."
It is currently contemplated that certain affiliates of the Cherry Family
Members may sell up to 90,136 Shares in the open market during the Offer period
at or below the Offer Price. If these Shares are sold, Peter B. Cherry will be
entitled to one-third of the income from the proceeds of the sale of
45,000 Shares, and Virginia Cherry, Peter B. Cherry's mother, will be entitled
to receive the proceeds of the sale of 766 Shares. These Shares were not
included when calculating the Cherry Family Members' ownership of approximately
53% of the outstanding Shares.
Peter B. Cherry has been the President of the Company since 1982. During
fiscal 2000 and fiscal 1999, he has received compensation for services in the
amount of $439,335 and $584,460, respectively. Mr. Cherry holds options to
purchase an aggregate of 136,000 Shares with a weighted average exercise price
of $16.73 per Share.
9. BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information, as of June 10, 2000,
based upon reports filed by such persons with the Commission, regarding the
ownership of Shares by the Cherry Family Members, all directors and executive
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<PAGE>
officers of the Company and all persons whom the Company believes own more than
5% of the Shares. Based upon disclosures made by the Company in the
Schedule 14D-9, Purchaser understands that all directors, affiliates and
subsidiaries of the Company (other than the Cherry Family Members) intend to
tender the Shares held of record or beneficially owned by them. The Company's
executive officers and senior managers may elect not to tender pursuant to the
Offer if Purchaser decides to allow executive officers and senior managers to
retain an equity interest in the Surviving Corporation. Purchaser has yet to
make this determination. In addition, the executive officers and senior managers
may elect to convert their options to purchase Shares into stock appreciation
rights of the Surviving Corporation, if available. If executive officers and
senior managers are not permitted to retain an equity interest in the Surviving
Corporation, or if such stock appreciation rights are not available, then the
executive officers and senior managers may elect to tender their Shares pursuant
to the Offer, and any Shares not tendered and any options to purchase Shares
that are outstanding after completion of the Offer will be exchanged pursuant to
the Merger. As of June 15, 2000, Purchaser does not own any Shares. The Cherry
Family Members have agreed to contribute to Purchaser all of their Shares in
exchange for shares of capital stock of Purchaser immediately prior to
Purchaser's purchase of Shares in the Offer.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OWNED PERCENT
---- ---------------- --------
<S> <C> <C>
Cherry Family Members................................... 5,455,666(a)(b) 52.9%
Peter B. Cherry......................................... 5,533,380(a)(c)(d)(e) 54.1
Heartland Advisors...................................... 949,800 9.3
Franklin Advisors, Inc.................................. 643,800 6.3
Robert B. McDermott..................................... 61,658(e) *
Klaus D. Lauterbach..................................... 43,878(e) *
Dan A. King............................................. 41,267(e) *
Robert G. Terwall....................................... 28,668(e) *
Thomas L. Martin, Jr.................................... 8,858(e) *
Charles W. Denny........................................ 5,458(e) *
Peter A. Guglielmi...................................... 9,458(e) *
W. Ed Tyler............................................. 4,617(e) *
Henry J. West........................................... 5,117(e) *
All executive officers and directors as group
(11 persons).......................................... 5,750,181(e) 55.7%
</TABLE>
------------------------
* Less than 1%
(a) The table includes 741,454 shares of Common Stock held by trusts for the
benefit of Catherine C. Rousey, of which Peter B. Cherry is the sole trustee
in one trust with 284,000 shares and Peter B. Cherry and Virginia B. Cherry
(his mother) are trustees in the other trust with 457,454 shares. As
trustees they have the power to vote the Shares and to make dispositions.
The table also includes 931,114 shares in a Virginia Cherry Trust and
927,784 shares in a Walter Cherry Trust. Peter B. Cherry is sole trustee for
the Virginia and Walter Cherry Trusts.
(b) Includes options to purchase 136,000 Shares, of which options to purchase
62,666 are currently vested.
(c) Includes the 9,182 shares held in a charitable foundation by Mr. Cherry and
his wife, 45,000 shares held in a trust for the children of Walter L. Cherry
and 1,044 Shares in the Walter L. Cherry Estate. Peter and Virginia Cherry
are the co-executors of the estate.
(d) The table includes 95,822 shares of Common Stock held by Mr. Cherry's wife
as trustee for their children.
(e) The total number of Shares for officers and directors includes Shares held
under options exercisable within 60 days as follows: Peter B. Cherry,
62,666; Dan A. King, 20,999; Klaus D. Lauterbach, 24,000; Robert G. Terwall,
19,499; Robert B. McDermott, 4,458; Thomas L. Martin, Jr., 4,458;
Charles W. Denny, 4,458; Peter A. Guglielmi, 4,458; W. Ed Tyler, 4,617; and
Henry J. West, 4,617, and all executive officers and directors as a group,
161,229.
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10. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO HOLDERS WHOSE SHARES ARE PURCHASED
PURSUANT TO THE OFFER OR WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE
CASH IN THE MERGER. THE SUMMARY IS BASED ON THE PROVISIONS OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), APPLICABLE CURRENT AND PROPOSED
UNITED STATES TREASURY REGULATIONS ISSUED THEREUNDER, JUDICIAL AUTHORITY AND
ADMINISTRATIVE RULINGS AND PRACTICE, ALL OF WHICH ARE SUBJECT TO CHANGE,
POSSIBLY WITH RETROACTIVE EFFECT, AT ANY TIME AND, THEREFORE, THE FOLLOWING
STATEMENTS AND CONCLUSIONS COULD BE ALTERED OR MODIFIED. THE DISCUSSION DOES NOT
ADDRESS HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE NOT CAPITAL ASSETS, NOR DOES
IT ADDRESS HOLDERS WHO HOLD SHARES AS PART OF A HEDGING, "STRADDLE," CONVERSION
OR OTHER INTEGRATED TRANSACTION, OR WHO RECEIVED SHARES UPON CONVERSION OF
SECURITIES OR EXERCISE OF WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT
TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO
HOLDERS OF SHARES WHO ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, UNITED STATES
EXPATRIATES OR NON-U.S. PERSONS). FURTHERMORE, THE DISCUSSION DOES NOT ADDRESS
THE TAX TREATMENT OF HOLDERS WHO EXERCISE DISSENTERS' RIGHTS IN THE MERGER, NOR
DOES IT ADDRESS ANY ASPECT OF FOREIGN, STATE OR LOCAL TAXATION OR ESTATE AND
GIFT TAXATION. FOR PURPOSES OF THIS SECTION, NON-U.S. PERSONS MEANS PERSONS WHO
ARE NEITHER CITIZENS NOR RESIDENTS OF THE UNITED STATES.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH
HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE
PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes under the Code (and also may
be a taxable transaction under applicable state, local, foreign and other income
tax laws). In general, for federal income tax purposes, a holder of Shares will
recognize gain or loss in an amount equal to the difference between the holder's
adjusted tax basis in the Shares sold pursuant to the Offer or converted into
the right to receive cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss and will be long-term gain or loss if, on the date of sale
(or, if applicable, the Effective Time), the Shares were held for more than one
year.
Under the United States federal income tax backup withholding rules,
payments in connection with the Offer or the Merger may be subject to "backup
withholding" at a rate of 31%. In order to avoid backup withholding, each
tendering stockholder, unless an exemption applies, must provide the Depositary
with such stockholder's correct taxpayer identification number and certify that
such stockholder is not subject to such backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. Backup withholding is
not an additional tax but merely an advance payment, which may be refunded to
the extent it results in an overpayment of tax. Certain persons generally are
entitled to exemption from backup withholding, including corporations, financial
institutions and certain foreign individuals. Each stockholder should consult
with such holder's own tax advisor as to such holder's qualification for
exemption from backup withholding, if applicable, and the procedure for
obtaining such exemption.
All stockholders surrendering Shares pursuant to the Offer should complete
and sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification necessary
to avoid backup withholding (unless an applicable exemption exists and is proved
in a manner satisfactory to Purchaser and the Depositary). Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
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<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for any and all Shares
validly tendered prior to the Expiration Date and not withdrawn in accordance
with the procedures set forth below in "--Withdrawal Rights" as soon as
practicable after the Expiration Date. The term "Expiration Date" means 12:00
Midnight, New York City time, on Thursday, July 13, 2000 unless and until
Purchaser, in its sole discretion (but subject to the terms of the Merger
Agreement), shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire.
The Offer is subject to certain conditions set forth below in "--Conditions
of the Offer." If the Offer Conditions are not satisfied or any of the events
specified in "--Conditions of the Offer" have occurred or are determined by
Purchaser to have occurred prior to the Expiration Date, Purchaser, subject to
the terms of the Merger Agreement, expressly reserves the right (but is not
obligated) to (i) terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders, (ii) waive all the
unsatisfied conditions, subject to Purchaser's receipt of the Company's approval
for a waiver of the conditions relating to government action, HSR Act,
termination of the Merger Agreement or the Offer and the failure to receive the
Minimum Condition, and, to the extent permitted by law, accept for payment and
pay for all Shares validly tendered prior to the Expiration Date and not
theretofore withdrawn, (iii) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (iv) amend the Offer.
Subject to the above and the other terms of the Merger Agreement, the
applicable rules and regulations of the Commission and applicable law, Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, to waive any Offer Condition or otherwise amend the Offer in any
respect by giving oral or written notice of such waiver or amendment to the
Depositary. Notwithstanding the foregoing, Purchaser has agreed that, without
the prior written consent of the company, no changes may be made that
(i) reduce the maximum number of Shares subject to the Offer, (ii) decrease the
Offer Price, (iii) change the form of consideration payable in the Offer,
(iv) impose any other conditions to the Offer or amend or modify any other terms
of the Offer in any manner adverse to holders of Shares or (v) except as
provided in the paragraph below, extend the Offer.
In the Merger Agreement, Purchaser has agreed that it will not, without the
prior consent of the Company, extend the Offer except that Purchaser may,
without the consent of the Company, extend the Offer: (i) if at the then
scheduled Expiration Date of the Offer any of the Offer Conditions shall not
have been satisfied or waived, until such time as all such conditions shall have
been satisfied or waived; (ii) for any period required by any statute or rule,
regulation, interpretation or position of the Commission or its staff applicable
to the Offer; (iii) for any period required by applicable law in connection with
an increase in the consideration to be paid pursuant to the Offer; and (iv) if
all of the Offer Conditions are satisfied but the Shares that have been
tendered, together with the Shares held by the Purchaser and the Cherry Family
Members, represent less than 90% of the then issued and outstanding Shares, from
time to time, for an aggregate period of not more than ten business days (for
all such extensions under this clause (iv)) beyond the latest expiration date
that would be permitted under clause (i), (ii) or (iii) of this sentence. During
any such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer. Tendering stockholders will continue to have the right to
withdraw any tendered Shares during such extension. See "--Withdrawal Rights."
Under no circumstances will interest be paid on the purchase price for tendered
Shares, whether or not the Offer is extended.
Any such extension, delay, termination, waiver or amendment will be
followed, as promptly as practicable, by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m.,
Eastern time, on the next business day after the previously scheduled Expiration
Date in accordance with the public announcement requirements of Rule 14e-1 of
the Exchange Act. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to stockholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser will have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service or as otherwise
may be required by applicable law.
23
<PAGE>
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material Offer Condition,
Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or a change in
the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to stockholders and
investor response.
Pursuant to Rule 14d-11, under the Exchange Act, Purchaser may, subject to
certain conditions, provide a subsequent offering period of from three business
days to twenty business days in length following the purchase of Shares on the
Expiration Date (the "Subsequent Offering Period"). Purchaser currently intends
to provide a Subsequent Offering Period if the Cherry Family Members and
Purchaser own less than 90% of the outstanding Shares following expiration of
the initial offering period. Purchaser may extend the Subsequent Offering Period
for an aggregate period ending on the earlier of (i) the tenth business day
after the latest expiration date that Purchaser is able to extend the Offer
under the Merger Agreement, and (ii) the time at which the Cherry Family Members
and Purchaser became the owners of at least 90% of the outstanding Shares. A
Subsequent Offering Period is an additional period of time, following the
expiration of the Offer and the purchase of Shares in the Offer, during which
stockholders may tender Shares that had not been purchased in the Offer. A
Subsequent Offering Period is not an extension of the Offer which already will
have been completed.
During a Subsequent Offering Period, tendering stockholders will not have
withdrawal rights and Purchaser will promptly purchase and pay for any Shares
tendered at the same price paid in the Offer. Rule 14d-11 provides that
Purchaser may provide a Subsequent Offering Period so long as, among other
things, (i) the initial twenty business days period of the Offer has expired;
(ii) the Purchaser offers the same form and amount of consideration for Shares
in the Subsequent Offering Period as in the Offer; (iii) Purchaser accepts and
promptly pays for all Shares tendered during the Offer prior to the Expiration
Date; (iv) Purchaser announces the results of the Offer, including the
approximate number and percentage of Shares deposited in the Offer, no later
than 9:00 a.m. Eastern time on the next business day after the Expiration Date
and immediately begins the Subsequent Offering Period; and (v) Purchaser
immediately accepts and promptly pays for Shares as they are tendered during the
Subsequent Offering Period. In the event Purchaser elects to extend the
Subsequent Offering Period, it will notify stockholders of the Company
consistent with the requirements of the Commission.
PURSUANT TO RULE 14D-7 UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS APPLY TO
SHARES TENDERED DURING THE SUBSEQUENT OFFERING PERIOD. THE OFFER PRICE WILL BE
PAID TO STOCKHOLDERS TENDERING SHARES IN THE SUBSEQUENT OFFERING PERIOD.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings in respect of the Shares for the purpose of
disseminating this Offer to Purchase, the Letter of Transmittal and other
relevant materials to stockholders. This Offer to Purchase, the Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares whose names appear on the Company's list of stockholders and will be
furnished, for subsequent transmittal to beneficial owners of Shares, to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's list of
stockholders or, where applicable, who are listed as participants in the
security position listing of The Depository Trust Company.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), Purchaser will purchase, by accepting for payment, and
will pay for, all Shares validly tendered prior to the Expiration Date (and not
properly withdrawn in accordance with "--Withdrawal Rights") as promptly as
practicable after the Expiration Date. Subject to applicable rules of the
Commission and the terms of the Merger Agreement, Purchaser expressly reserves
the right, in its discretion, to delay acceptance for payment of, or payment
for, Shares in order to comply, in whole or in part, with any applicable law.
See "--Terms of the Offer," and "--Certain Legal Matters; Regulatory Approvals."
The reservation by Purchaser of the right to delay the acceptance or
purchase of, or payment for, the Shares is subject to the provisions of
Rule 14e-1(c) under the Exchange Act, which requires the Purchaser to pay the
consideration offered or to return the Shares deposited by, or on behalf of,
stockholders, promptly after the termination or withdrawal of the Offer.
24
<PAGE>
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in "--Procedures for Tendering
Shares", (ii) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed with any required signature
guarantees, or an Agent's Message (as defined below) in connection with a
book-entry transfer and (iii) any other documents required to be included with
the Letter of Transmittal under the terms and subject to the conditions thereof
and of this Offer to Purchase.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from a participant in the Book-Entry Transfer
Facility tendering the Shares that such participant has received and has agreed
to be bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted pursuant
to the Offer will be made by deposit of the Offer Price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting payments to such tendering
stockholders whose Shares have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID
BY PURCHASER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT OR ANY EXTENSION OF
THE OFFER.
If any validly tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Certificates are
submitted evidencing more Shares than are tendered, certificates evidencing
Shares not purchased will be returned, without expense, to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in "--Procedures for Tendering Shares," such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), as
promptly as practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to assign to one or more affiliates, or to any
wholly owned subsidiary, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but any such assignment will not relieve
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer, a stockholder must, prior to the Expiration Date, either (i) deliver to
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase (a) a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) with any required signature guarantees,
(b) the Certificates representing Shares to be tendered and (c) any other
documents required to be included with the Letter of Transmittal under the terms
and subject to the conditions thereof and of this Offer to Purchase, (ii) cause
such stockholder's broker, dealer, commercial bank, trust company or nominee to
tender applicable Shares pursuant to the procedures for book-entry transfer
described below or (iii) comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
25
<PAGE>
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by (i) causing such securities to be
transferred in accordance with the Book-Entry Transfer Facility's procedures
into the Depositary's account and (ii) causing the Letter of Transmittal to be
delivered to the Depositary by means of an Agent's Message. Although delivery of
Shares may be effected through book-entry transfer, either the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF DOCUMENTS OR INSTRUCTIONS TO
THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. All signatures on a Letter of Transmittal must be
guaranteed by a member firm in good standing of the Securities Transfer Agents
Medallion Program, or by any other firm which is a bank, broker, dealer, credit
union or savings association (each of the foregoing being referred to as an
"Eligible Institution" and collectively as "Eligible Institutions"), unless the
Shares tendered thereby are tendered (i) by the registered holder of Shares who
has not completed the box labeled "Special Delivery Instructions" or the box
labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution (as defined in the Letter of
Transmittal). See Instruction 1 to the Letter of Transmittal.
If a Certificate is registered in the name of a person other than the signer
of the Letter of Transmittal, or if payment is to be made, or a Certificate not
accepted for payment or not tendered is to be returned to, a person other than
the registered holder(s), then the Certificate must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Certificate, with the signature(s) on such
certificate or stock powers guaranteed as described above. See Instructions 1, 5
and 7 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Certificates are not immediately available or
time will not permit all required documents to reach the Depositary on or prior
to the Expiration Date or the procedures for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser, is received by the
Depositary prior to the Expiration Date; and
(iii) the Certificates for all tendered Shares in proper form for transfer,
together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required
signature guarantee (or, in the case of a book-entry transfer, a
Book-Entry Confirmation along with an Agent's Message) and any other
documents required by such Letter of Transmittal, are received by the
Depositary within three Trading Days after the date of execution of the
Notice of Guaranteed Delivery. A "Trading Day" is any day on which The
Nasdaq National Market is open for business.
Any Notice of Guaranteed Delivery may be delivered by hand, transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
OTHER REQUIREMENTS. Notwithstanding any other provision hereof, payment for
Shares accepted for payment pursuant to the Offer will, in all cases, be made
only after timely receipt by the Depositary of (i) Certificates evidencing such
Shares or a Book-Entry Confirmation of the delivery of such Shares (unless
Purchaser elects, in its sole discretion, to make payment for such Shares
pending receipt of the Certificates or a Book-Entry Confirmation, if available,
with respect to such Certificates), (ii) a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE OF THE SHARES TO
BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
26
<PAGE>
TENDER CONSTITUTES A BINDING AGREEMENT. The valid tender of Shares pursuant
to one of the procedures described above will constitute a binding agreement
between the tendering stockholder and Purchaser on the terms and subject to the
conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including, but not limited to, time of receipt) and acceptance for
payment of any tendered Shares pursuant to any of the procedures described above
will be determined by Purchaser, in its sole discretion, whose determination
will be final and binding on all parties. Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the Offer Conditions
(subject to the terms of the Merger Agreement and the Company's consent with
respect to certain Offer Conditions) or any defect or irregularity in any tender
with respect to Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser or any of its
affiliates, the Depositary, the Information Agent or any other person or entity
will be under any duty to give any notification of any defects or irregularities
in tenders or incur any liability for failure to give any such notification.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal (or delivering
an Agent's Message) as set forth above, a tendering stockholder irrevocably
appoints each designee of Purchaser as such stockholder's attorney-in-fact and
proxy, with full power of substitution, to vote in such manner as such
attorney-in-fact and proxy (or any substitute thereof) shall deem proper in its
sole discretion, and to otherwise act (including pursuant to written consent) to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by Purchaser (and any and all
dividends, distributions, rights or other securities issued or issuable in
respect of such Shares on or after Expiration Date). All such proxies shall be
considered coupled with an interest in the tendered Shares and shall be
irrevocable. This appointment will be effective if, when, and only to the extent
that, Purchaser accepts such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares and other securities will, without further action, be revoked,
and no subsequent proxies may be given (and, if given, will not be deemed
effective). The designees of Purchaser will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as Purchaser in its
sole discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's stockholders, by written consent in lieu of any such
meeting or otherwise. Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's acceptance
for payment of such Shares, Purchaser must be able to exercise all rights
(including, without limitation, all voting rights) with respect to such Shares
and receive all dividends and distributions.
BACKUP WITHHOLDING. Under United States federal income tax law, the amount
of any payments made by the Depositary to stockholders (other than corporate and
certain other exempt stockholders) pursuant to the Offer may be subject to
backup withholding tax at a rate of 31%. To avoid such backup withholding tax
with respect to payments made pursuant to the Offer, a non-exempt, tendering
stockholder must provide the Depositary with such stockholder's correct taxpayer
identification number and certify under penalties of perjury that such
stockholder is not subject to backup withholding tax by completing the
Substitute Form W-9 included as part of the Letter of Transmittal. If backup
withholding applies with respect to a stockholder or if a stockholder fails to
deliver a completed Substitute Form W-9 to the Depositary or otherwise establish
an exemption, the Depositary is required to withhold 31% of any payments made to
such stockholder. See "SPECIAL FACTORS--Certain United States Federal Income Tax
Consequences" of this Offer to Purchase and the information set forth under the
heading "Important Tax Information" contained in the Letter of Transmittal.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after August 14, 2000, or at such later time as
may apply if the Offer is extended.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn
27
<PAGE>
except to the extent that tendering stockholders are entitled to withdrawal
rights as described below. Any such delay will be an extension of the Offer to
the extent required by law. Under no circumstances will interest on the Offer
Price be paid by the Purchaser, regardless of any extension of the Offer or any
delay in making payment.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn, and the name of the registered
holder of such Shares, if different from that of the person who tendered such
Shares. If Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Certificates, the serial numbers shown on such Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless such Shares have been
tendered for the account of an Eligible Institution. Shares tendered pursuant to
the procedure for book-entry transfer as set forth in "--Procedures for
Tendering Shares" may be withdrawn only by means of the withdrawal procedures
made available by the Book-Entry Transfer Facility, must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with the Book-Entry Transfer
Facility's procedures.
Withdrawals of tendered Shares may not be rescinded without Purchaser's
consent and any Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by
Purchaser in its sole discretion, which determination will be final and binding.
None of Purchaser or any of its affiliates, the Depositary, or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn may be re-tendered at any time prior to the
Expiration Date by following any of the procedures described in "--Procedures
for Tendering Shares."
5. PRICE RANGE OF SHARES
The Shares trade on The Nasdaq National Market under the symbol "CHER." In
June 1999, the stockholders of the Company approved the reclassification of each
share of the Company's voting and nonvoting stock into one Share. The following
table sets forth, for the quarters indicated, the high and low sales prices for
the Company's Shares since June 1999, and for the periods prior to June 1999,
the Company's former voting common stock. The Company did not pay cash dividends
on any class of its common stock during the periods set forth below.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal 1999:
First Quarter............................................. $19.00 $16.25
Second Quarter............................................ 17.31 10.50
Third Quarter............................................. 15.38 9.50
Fourth Quarter............................................ 15.50 12.00
Fiscal 2000:
First Quarter............................................. $14.50 $12.00
Second Quarter............................................ 15.75 12.25
Third Quarter............................................. 13.25 9.75
Fourth Quarter............................................ 25.00 10.00
Fiscal 2001:
First Quarter............................................. $26.00 $12.38
Second Quarter (through June 14, 2000).................... $26.00 $19.50
</TABLE>
On April 20, 2000, the last full trading day prior to the announcement of
Initial Proposal, the reported closing sales price of the Common Stock on The
Nasdaq National Market was $13.00 per Share. On June 2, 2000, the last full
trading day prior to the public announcement of the Offer, the reported closing
sales price of the Common Stock on The Nasdaq National Market was $20.38 per
Share. On June 14, 2000, the last trading day prior to the date of this Offer to
Purchase, the reported closing sales price of the Common Stock on The Nasdaq
National Market was $25.94 per share. Stockholders are urged to obtain current
market quotations for the Common Stock.
28
<PAGE>
6. CERTAIN INFORMATION CONCERNING THE COMPANY
THE COMPANY. The information concerning the Company contained in this Offer
to Purchase, including financial information, has been taken from or is based
upon publicly available documents and records on file with the Commission and
other public sources. None of Purchaser, the Cherry Family Members nor any of
their affiliates assumes any responsibility for the accuracy or completeness of
the information concerning the Company contained in such documents and records
or for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information but which are
unknown to them.
The Company designs, manufactures and sells proprietary and custom
electrical and electronic components used by a broad range of original equipment
manufacturers ("OEMs") and distributors in the automotive, computer and consumer
and commercial markets. The Company has three major business segments:
Automotive Switches and Modules, Computer Keyboards, and Switches and Controls.
In April 2000, the Company sold its semiconductor subsidiary, Cherry
Semiconductor Corporation ("CSC"), that was located in Rhode Island. Therefore
CSC has been treated as a discontinued operation and removed from the Company
information and reported as a discontinued operation in the financial
information.
The Company's Automotive Switches and Modules segment designs, manufactures
and sells switches, switch assemblies, sensors and electronic modules for
automotive manufacturers and suppliers worldwide. Automobile special-use
switches and switch assemblies are used in a variety of applications including
latches, safety and direct operated controls, such as door and trunk electric
latches, cruise control and overdrive applications, central door locks, power
windows, seats and mirrors. Applications for the Company's electronic control
modules include power seat adjustments and hydraulic systems for sunroofs and
convertible tops. Hall-effect sensors can be used in applications where a
magnetically actuated solid state device is desirable, such as a position sensor
for occupant safety systems. Automotive products are custom made for major U.S.,
European and Japanese Tier 1 suppliers and OEMs. The Company's automotive
customers have generally paid for the tooling and other special manufacturing
requirements.
The Computer Keyboards segment designs, manufactures and sells keyboards and
related products for computer applications. The Company sells standard and
advanced performance keyboards for use with personal computers; data entry,
point-of-sale and reservation terminals; word processing systems; and other
computer input applications. Advanced performance keyboards include integrated
magnetic-stripe readers, chip-card readers and/or bar code scanners, as well as
fingerprint recognition, which incorporates biometric technology for security
applications.
The Switches and Controls segment designs, manufactures and sells switches,
sensors, electronic controls and displays, infrared controls and multifunction
modules used in appliances, office equipment, postage machines, motorcycle
controls, industrial controls, exercise equipment and personal computers.
Snap-action switches are generally manufactured to customer specifications by
modifying the Company's standard products. Switches are used in various
appliances, office equipment and control and measurement device applications.
Plasma display products are primarily sold to the entertainment industry as
readouts for electronic games. Electronic controls are used in office equipment
and appliances. Hall-effect sensors can be used in a wide range of office,
industrial and exercise equipment applications to measure speed or position
involving harsh environments. Inflation has not been a material factor in any
segment.
The Company's executive offices are located at 3600 Sunset Avenue, Waukegan,
Illinois 60087, and its telephone number is (847) 662-9200. The Company has
facilities or offices in Pleasant Prairie, Wisconsin, the Federal Republic of
Germany, the United Kingdom, France, Hong Kong, the Czech Republic, Australia
and Mexico. Additionally, the Company operates in Japan and India through 50%
owned affiliates. The Company was incorporated in 1953 in the State of Illinois
and reincorporated in the State of Delaware in 1978.
During the last five years, neither the Company, nor, to the best of its
knowledge, any of the persons listed on Schedule I hereto (i) has been convicted
in a criminal proceeding (excluding traffic violations and similar misdemeanors)
or (ii) was a party to any judicial or administrative proceeding that resulted
in a judgment, decree or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
In December 1998, the Company completed a "Dutch Auction" self tender offer
and acquired 2,340,926 Shares for an aggregate purchase price of approximately
$36.6 million at a price of $15.50 per share. At various times in 1999,
depending on market conditions, the Company repurchased an aggregate of 154,000
Shares, at the then prevailing market prices on the open market or through
private transactions, for an aggregate purchase price of $2.0 million.
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Certain information concerning the directors and executive officers of the
Company is set forth in Schedule I hereto.
FINANCIAL INFORMATION. Certain financial information relating to the
Company is hereby incorporated by reference to the audited financial statements
for the Company's 1999 and 2000 fiscal years set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended February 29, 2000 (the "2000
10-K"), beginning on page F-1 of such report. This report may be inspected at,
and copies may be obtained from, the same places and in the manner set forth
below in this section under "--Available Information."
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been derived from the
financial statements contained in the 2000 10-K. More comprehensive financial
information is included in these reports and other documents filed by the
Company with the Commission. The financial information that follows is qualified
in its entirety by reference to these reports and other documents, including the
financial statements and related notes contained therein.
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THE CHERRY CORPORATION
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's Form 10-K for
the fiscal year ending February 29, 2000, incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED THE LAST
DAY OF FEBRUARY
(IN THOUSANDS EXCEPT SHARE, PER SHARE AND RATIO DATA) -----------------------
2000 1999
---------- ----------
<S> <C> <C>
SUMMARY OF OPERATIONS
Net sales................................................. $360,727 359,881
Gross profit.............................................. 92,002 98,260
Operating expenses........................................ 82,439 77,409
Profit from continuing operations......................... 9,563 20,851
Other income, net......................................... 1,542 982
Earnings before interest and taxes........................ 11,105 21,833
Interest expense, net..................................... 2,877 790
Earnings from continuing operations before income taxes... 8,228 21,043
Income tax provision...................................... 2,363 7,097
Net earnings from continuing operations................... 5,865 13,946
As a percent of sales..................................... 1.6% 3.9%
Earnings from discontinued operations, net of income
taxes................................................... $6,390 4,906
Net earnings.............................................. 12,255 18,852
Return on average stockholder's equity.................. 7.2% 10.7%
OTHER STATISTICS:
Average shares outstanding:
Basic................................................... 10,122,279 12,105,269
Diluted................................................. 10,184,674 12,196,670
Basic earnings per share:
Continuing operations................................... $.58 1.15
Discontinued operations................................. .63 .41
---------- ----------
Basic net earnings.................................... $1.21 1.56
Diluted earnings per share:
Continuing operations................................... $.57 1.15
Discontinued operations................................. .63 .40
---------- ----------
Diluted net earnings.................................. $1.20 1.55
Dividends per share....................................... -- --
Capital expenditures, net................................. 27,601 31,830
Depreciation and amortization............................. 24,788 23,761
Net cash provided by operating activities................. 32,468 33,826
Ratio of earnings to fixed charges........................ 3.6x 14.0x
LAST DAY OF FEBRUARY
-----------------------
2000 1999
---------- ----------
FINANCIAL POSITION:
Cash and equivalents...................................... $13,602 13,720
Working capital(1)........................................ 59,676 49,338
Current ratio(1).......................................... 1.5x 1.9x
Net assets of discontinued operations..................... 78,738 79,161
Total assets.............................................. 312,118 320,496
Long-term debt............................................ 4,732 75,389
Total debt................................................ 84,531 95,148
Stockholders' equity...................................... 174,151 167,669
Stockholders' equity per share............................ $17.28 16.47
Debt-to-Capital ratio (debt, net of cash)................. 28.9% 32.7%
</TABLE>
------------------------
(1) Net assets of discontinued operations are excluded from the working capital
and current ratio for fiscal 1999 to eliminate distortions. For fiscal 2000,
the net assets were included so that they matched accelerations of long term
debt to current maturities that were directly related to the sale of the
discontinued operation.
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RECENT DEVELOPMENTS. In April 2000, the Company sold its wholly owned
subsidiary, Cherry Semiconductor Corporation, to Semiconductor Components
Industries, L.L.C. ("SCI"), a wholly owned subsidiary of SCG Holding
Corporation. SCI purchased all of the outstanding shares of common stock of CSC
for a cash purchase price of $250 million subject to certain adjustments. The
sale closed on April 3, 2000. The net proceeds to the Company after taking into
account the expenses of the sale and the related tax payments is anticipated to
be approximately $175 million. For additional information about the sale of CSC,
see the Company's Form 8-K dated April 18, 2000, which may be obtained in the
manner set forth below in this section under "--Available Information."
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters is required
to be disclosed in reports filed with the Commission. These reports and other
information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection and copying
at prescribed rates at regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic filings
filed through the Commission's Electronic Data Gathering, Analysis and
Retrieval, or EDGAR system, including those made by or in respect of the
Company, are publicly available through the Commission's home page on the
Internet at http://www.sec.gov.
7. CERTAIN INFORMATION CONCERNING PURCHASER
PURCHASER. Purchaser, a newly incorporated Delaware corporation, has not
conducted any business other than in connection with the Offer and the Merger
Agreement. Until immediately prior to the time that Purchaser acquires the
Shares in the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities, or will engage in any significant activities
other than those incident to its formation and the transactions contemplated by
the Offer and Merger. All of the issued and outstanding shares of capital stock
of Purchaser are held by the Cherry Family Members who also own about 53% of the
outstanding Shares. The principal address of Purchaser is 3600 Sunset Avenue,
Waukegan, Illinois 60087. The telephone number of Purchaser is (847) 662-9200.
Peter B. Cherry is the sole director and officer of Purchaser. He is also
the President and Chairman of the Company. His business address is 3600 Sunset
Avenue, Waukegan, Illinois 60087. He is a U.S. citizen.
Except as described in this Offer to Purchase (i) neither Purchaser nor, to
the best of its knowledge, Peter B. Cherry or any of the Cherry Family Members,
or any associate or majority-owned subsidiary of Purchaser, beneficially owns or
has any right to acquire, directly or indirectly, any equity securities of the
Company and (ii) neither of Purchaser nor, to the best of its knowledge, any of
the persons or entities referred to above has effected any transaction in such
equity securities during the past 60 days.
It is currently contemplated that certain affiliates of the Cherry Family
Members may sell up to 90,136 Shares in the open market during the Offer period
at or below the Offer Price. If these Shares are sold, Peter B. Cherry will be
entitled to one-third of the income from the proceeds of the sale of
45,000 Shares, and Virginia Cherry, Peter B. Cherry's mother, will be entitled
to receive the proceeds from the sale of 766 Shares. These Shares were not
included when calculating the Cherry Family Members' ownership of approximately
53% of the outstanding Shares.
Except as described in this Offer to Purchase, neither Purchaser nor, to the
best of its knowledge, Peter B. Cherry or any of the Cherry Family Members has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or voting of such securities, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies.
Except as set forth in this Offer to Purchase, since March 1, 1998, neither
Purchaser, nor to the best of its knowledge, Peter B. Cherry or any of the
Cherry Family Members has had any business relationship or transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
March 1, 1998, there have been no contacts, negotiations or transactions between
any of Purchaser or its affiliates or, to the best of its knowledge, Peter B.
Cherry or any of the Cherry Family Members, on the one hand, and the
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<PAGE>
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
During the last five years, neither Purchaser, nor, to the best of its
knowledge, Peter B. Cherry or any of the Cherry Family Members (i) has been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) was a party to any judicial or administrative proceeding
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws.
AVAILABLE INFORMATION. Purchaser is not subject to the informational
reporting requirements of the Exchange Act, nor is it required to file reports
and other information with the Commission relating to its businesses, financial
condition or other matters. Except as otherwise disclosed in this Offer to
Purchase, Purchaser has not made and is not making, any provision in connection
with the Offer or the Merger to grant unaffiliated security holders access to
the files of Purchaser. However, pursuant to Rule 14d-3 under the Exchange Act,
Purchaser filed with the Commission the Schedule TO, together with exhibits,
including this Offer to Purchase and the Merger Agreement, which provides
certain additional information with respect to the Offer. The Schedule TO and
any amendments thereto, including exhibits, should be available for inspection
and copies should be obtainable at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
information should also be obtainable (i) by mail, upon payment of the
Commission's customary charges, by writing to the Commission's principal office
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York, NY
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661 and (ii) by accessing the Commission's website on the Internet at
http://www.sec.gov.
8. SOURCE AND AMOUNT OF FUNDS
Purchaser estimates that the total amount of funds required for it to
purchase all Shares validly tendered and not withdrawn pursuant to the Offer, to
consummate the Merger and to pay all related costs and expenses will be
approximately $150 million. The Offer is not conditioned upon any external
financing arrangements, except that the Company is required to make a loan to
Purchaser contemporaneously with the consummation of the Offer in a maximum
amount equal to the number of Shares not owned by Purchaser or the Cherry Family
Members (on a fully diluted basis) multiplied by the Offer Price, but not to
exceed $150 million (the "Loan"). The Loan will be due one hundred twenty days
from funding and will bear interest at the greater of the Company's cost of
funding or the prime rate plus 0.25%. As security for the Loan, the Merger
Agreement states that the Purchaser and the Cherry Family Members will pledge
all of their Shares that they own in addition to Shares acquired in the Offer.
The Loan will have other terms and conditions for Loans of this nature.
Purchaser will also pay a loan fee equal to 3/8% of the loaned amount to be
delivered by a note upon funding of the Loan and which shall be payable at the
maturity of the Loan.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") place restrictions on the amount of
credit that may be extended for the purposes of purchasing margin stock,
including if such credit is secured directly or indirectly by margin stock.
Purchaser believes that the Loan will be in full compliance with the margin
regulations.
9. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON STOCK; EXCHANGE ACT
REGISTRATION
MARKET FOR SHARES. The purchase of Shares pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Shares held by the
public.
STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers for continued inclusion on The Nasdaq National
Market, which requires that an issuer either (i) have at least 750,000 publicly
held shares, held by at least 400 round lot stockholders, with a market value of
at least $5,000,000, have at least two market makers, have net tangible assets
of at least $4 million, and have a minimum bid price of $1 or (ii) have at least
1,100,000 publicly held shares, held by at least 400 round lot stockholders,
with a market value of at least $15,000,000, have a minimum bid price of $5,
have at least 4 market makers and have either (A) a market capitalization of at
least $50,000,000 or (B) total assets and revenues each of at least $50,000,000.
If The Nasdaq National Market were to cease to publish quotations for the
Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported by
other sources. The extent of the public market for such Shares and the
availability of such quotations would depend,
33
<PAGE>
however, upon such factors as the number of stockholders and/or the aggregate
market value of such securities remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration under the Exchange Act as described below, and other
factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by 300 or more holders of record.
Termination of registration under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a
proxy statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings, the related requirement of furnishing an annual report
to stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act may be impaired or eliminated. Purchaser intends to seek to cause
the Company to apply for termination of registration of the Common Stock under
the Exchange Act as soon after the consummation of the Offer as the requirements
for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities," as such
term is defined under the regulations of the Federal Reserve Board, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of the Shares. Depending upon factors similar to those described
above regarding listing and market quotations, it is possible that, following
the Offer, the Shares would no longer constitute "margin securities" for the
purposes of the margin regulations of the Federal Reserve Board and therefore
could no longer be used as collateral for loans made by brokers. In any event,
the Shares will cease to be "margin securities" if registration of the Shares
under the Exchange Act is terminated.
10. CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement,
Purchaser is not required to accept for payment or, subject to any applicable
rules and regulations of the Commission, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
shares after the termination or withdrawal of the Offer), to pay for any shares
of Common Stock tendered pursuant to the Offer not theretofore accepted for
payment or paid for, and may terminate or amend the Offer if at any time on or
after the date of the Merger Agreement and before the acceptance of such Shares
for payment or the payment therefor, any of the following conditions exist or
shall occur and remain in effect (other than as a result of any action or
inaction of Purchaser that constitutes a breach of the Merger Agreement):
(a) there shall have been instituted, pending or threatened any
litigation by the Government of the United States or by any agency or
instrumentality thereof (i) challenging the acquisition by Purchaser (or the
Cherry Family Members) of shares of Common Stock pursuant to the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger, (ii) seeking to make the purchase of or payment for some or all
of the shares of Common Stock pursuant to the Offer or the Merger illegal,
(iii) that would be reasonably likely to require divestiture by the
Purchaser or the Cherry Family Members of any Shares, (iv) that would be
reasonably likely to impose material limitations on the ability of Purchaser
or the Cherry Family Members to exercise full rights of ownership of the
shares of Common Stock purchased by it, including, without limitation, the
right to vote the shares purchased by it on all matters properly presented
to the stockholders of the Company, (v) that would be reasonably likely to
make materially more costly (A) the making of the Offer, (B) the acceptance
for payment of, or payment for, some or all of the Shares pursuant to the
Offer, (C) the purchase of Shares pursuant to the Offer or (D) the
consummation of the Merger, or (vi) otherwise have a Material Adverse Effect
on the Company; or
(b) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), has not expired or
been terminated; or
(c) there shall have been a subsequent development (including any
settlement or final settlement offer from counsel for the plaintiffs) in any
action or proceeding pending on June 5, 2000 relating to the Company or any
of
34
<PAGE>
its subsidiaries or there shall have been instituted any new action or
proceeding subsequent to June 5, 2000 that would (i) have a Material Adverse
Effect on Purchaser or the Company and its subsidiaries taken as a whole, or
(ii) make materially more costly (A) the making of the Offer, (B) the
acceptance for payment of, or payment for, some or all of the shares
pursuant to the Offer, (C) the purchase of shares pursuant to the Offer or
(D) the consummation of the Merger, or (iii) would materially and adversely
affect the results of operations of the Company; or
(d) there shall have been any action taken, or any law promulgated,
enacted, entered, enforced or deemed applicable to the Offer or the Merger
by any governmental entity that would be reasonably likely to result in any
of the consequences referred to in subsection (a) above; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) (i) any of the representations and warranties made by the Company in
the Merger Agreement that are qualified by materiality or Material Adverse
Effect shall not have been true and correct in all respects when made, or
shall thereafter have ceased to be true and correct in all respects as if
made at the scheduled or extended expiration of the Offer (except to the
extent that any such representation or warranty refers specifically to
another date, in which case such representation or warranty shall be true
and correct in all respects as of such other date), or the other
representations and warranties made by the Company in the Merger Agreement
shall not have been true and correct in all material respects when made, or
shall thereafter have ceased to be true and correct in all material respects
as if made at the scheduled or extended expiration of the Offer (except to
the extent that any such representation or warranty refers specifically to
another date, in which case such representation or warranty shall be true
and correct in all material respects as of such other date), or (ii) the
Company shall have breached or failed to comply in any material respect with
any of its material obligations under the Merger Agreement; or
(g) Purchaser and the Special Committee shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder; or
(h) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer, that number of shares of Common Stock that
represents more than 67% of the then outstanding shares of Common Stock
(when taken together with Shares beneficially owned by Purchaser and the
Cherry Family Members); or
(i) there shall have been a Material Adverse Effect with respect to the
Company, or there shall have been a change or event which could reasonably
be expected to have a Material Adverse Effect on the Company; or
(j) the Company fails to provide and fund the Loan pursuant to the terms
agreed upon in the Merger Agreement.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser and may be waived by Purchaser, in whole or in part, at
any time and from time to time in its discretion other than those set forth in
clauses (a), (b), (e), (g) and (h) above, which also require a waiver by the
Company. The failure by Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right, the waiver of any such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts and circumstances, and each such right
will be deemed an ongoing right which may be asserted at any time and from time
to time. Should the Offer be terminated pursuant to the foregoing provisions,
all tendered shares of Common Stock not theretofore accepted for payment shall
promptly be returned by the Depositary to the tendering stockholders.
11. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as otherwise disclosed herein, Purchaser is not aware of
(i) any license or regulatory permit that appears to be material to the business
of the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or the
Merger or otherwise, or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by Purchaser as
contemplated herein. Should any such approval or other action be required,
Purchaser currently contemplates that it would seek such approval or action.
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "--Conditions of the Offer." While, except
as described in this Offer to Purchase, Purchaser does not currently intend to
delay the acceptance for payment of Shares tendered pursuant to the Offer
pending the outcome of any such matter, there can be no assurance that any such
approval or action, if needed, would be obtained, or would be obtained without
substantial conditions, that adverse consequences might not result to the
business of the
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Company or Purchaser or that certain parts of the businesses of the Company or
Purchaser might not have to be disposed of in the event that such approvals were
not obtained or any other actions were not taken.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to the date the interested stockholder became
an interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became an interested stockholder. The Company has represented to
Purchaser in the Merger Agreement that the Board has taken all necessary action
so that the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" will not apply to the execution, delivery or performance
of the Merger Agreement, the Offer, the Merger or the transactions contemplated
by the Merger Agreement.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of holders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not believe that any state takeover statutes apply to the
Offer. Purchaser has not currently complied with any state takeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Merger is intended as a waiver of such right. In the event it is
asserted that one or more state takeover laws is applicable to the Offer or the
Merger, and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See "--Conditions of the
Offer."
ANTITRUST. In the event that a filing is required to be made under the HSR
Act and the rules promulgated thereunder by the Federal Trade Commission (the
"FTC"), the Purchaser expects to promptly file a Notification and Report Form
with respect to the Offer under the HSR Act. The waiting period under the HSR
Act with respect to the Offer will expire at 11:59 p.m., New York City time, on
the fifteenth day after the date on which the Purchaser's forms are filed,
unless early termination of the waiting period is granted. However, the
Department of Justice (the "DOJ") or the FTC may extend the waiting period by
requesting additional information or documentary material from Purchaser. If
such a request is made, such waiting period will expire at 11:59 p.m., New York
City time, on the tenth day after substantial compliance by Purchaser with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Purchaser. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the DOJ or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. If a filing
under the HSR Act is required, Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period requirements
imposed by the HSR Act with respect to the Offer have been satisfied.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
Purchaser's acquisition of Shares, the DOJ or the FTC could take such action
under the Antitrust Laws as it
36
<PAGE>
deems necessary or desirable in the public interest, including seeking to enjoin
the acquisition of Shares pursuant to the Offer or otherwise seeking divestiture
of Shares acquired by Purchaser or divestiture of substantial assets of
Purchaser or its subsidiaries. Private parties, as well as state governments,
may also bring legal action under the Antitrust Laws under certain
circumstances.
Although Purchaser believes that the acquisition of the Shares pursuant to
the Offer would not violate the Antitrust Laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the outcome will be. See "--Conditions to the Offer" for
certain conditions to Offer, including conditions with respect to litigation and
certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
CERTAIN LITIGATION. In April 2000, four class action complaints, captioned
DONALD SINCLAIR V. PETER B. CHERRY, ALFRED S. BUDNICK, DR. THOMAS L.
MARTIN, JR., ROBERT B. MCDERMOTT, PETER A. GUGLIELMI, CHARLES W. DENNY, W. ED
TYLER, HENRY J. WEST AND THE CHERRY CORPORATION (CASE NO. 18007 NC); JOHN SHAW
V. PETER B. CHERRY, ALFRED S. BUDNICK, DR. THOMAS L. MARTIN, JR., ROBERT B.
MCDERMOTT, PETER A. GUGLIELMI, CHARLES W. DENNY, W. ED TYLER, HENRY J. WEST AND
THE CHERRY CORPORATION (CASE NO. 18008 NC); GARRETT LONG V. PETER B. CHERRY,
ALFRED S. BUDNICK, DR. THOMAS L. MARTIN, JR., ROBERT B. MCDERMOTT, PETER A.
GUGLIELMI, CHARLES W. DENNY, W. ED TYLER, HENRY J. WEST AND THE CHERRY
CORPORATION (CASE NO. 18009 NC); and JOHN MCKENZIE V. PETER B. CHERRY,
ALFRED S. BUDNICK, DR. THOMAS L. MARTIN, JR., ROBERT B. MCDERMOTT, PETER A.
GUGLIELMI, CHARLES W. DENNY, W. ED TYLER, HENRY J. WEST AND THE CHERRY
CORPORATION (CASE NO. 180012 NC), were filed in the Court of Chancery of the
State of Delaware in and for New Castle County against the Company and current
and former directors. On May 9, 2000, another similar class action suit was
filed in the same court captioned EDWARD LYNN V. PETER B. CHERRY, ALFRED S.
BUDNICK, DR. THOMAS L. MARTIN, JR., ROBERT B. MCDERMOTT, PETER A. GUGLIELMI,
CHARLES W. DENNY, W. ED TYLER, HENRY J. WEST AND THE CHERRY CORPORATION (CASE
NO. 18044 NC). The foregoing actions purport to be brought on behalf of all
public stockholders of the Company in connection with the Initial Proposal made
by Purchaser to acquire the Company. The actions allege, among other things,
that the per share price offered by Purchaser is unfair and inadequate to the
Company's public stockholders and that the individual defendants have breached
their fiduciary duties. The complaints seek as relief, among other things,
preliminary and permanent injunctive relief enjoining the proposed transaction
and monetary damages in an unspecified amount. The defendants believe that they
have meritorious defenses to these actions and intend to vigorously defend
themselves. On June 6, 2000, a proposed consolidation order was submitted to the
Court of Chancery, seeking to consolidate all of the cases before one judge.
12. FEES AND EXPENSES
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby will be paid by the party incurring such fees
and expenses, except that the Company will pay for all fees and expenses
relating to the filing, printing and mailing of the documents in connection with
the Schedule 14D-9 and the Proxy Statement.
The Purchaser has retained Morrow & Co., Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials to
the beneficial owners of shares. The Information Agent will receive reasonable
and customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws.
The Purchaser has engaged Banc of America Securities to act as the Dealer
Manager in connection with the Offer. Banc of America Securities has also been
retained by Peter B. Cherry to be the exclusive financial advisor to Peter B.
Cherry in connection with the Offer and the Merger. Pursuant to the terms of
Banc of America Securities' engagement, Peter B. Cherry has agreed to pay Banc
of America Securities for its services in connection with the Offer and the
Merger an aggregate advisory fee of $2 million (which includes payment for
services as the Dealer Manager). In the course of business, Banc of America
Securities and its affiliates may actively trade or hold the securities of the
Company for their own account or for the account of customers and accordingly,
may at any time hold a long or short position in such securities. The Purchaser
has also agreed to reimburse Banc of America Securities for all reasonable
out-of-pocket fees, expenses and costs, including reasonable fees and expenses
of legal
37
<PAGE>
counsel, and to indemnify Banc of America Securities and certain related persons
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The Purchaser has retained Harris Trust and Savings Bank as the Depositary.
The Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws.
Estimated fees and expenses to be incurred by the Purchaser in connection
with the Offer are as follows:
<TABLE>
<S> <C>
Special Committee's Financial Advisor's Fees................ $1,313,750
Purchaser's Financial Advisor's Fees........................ 2,000,000
Legal, Accounting and Other Professional Fees............... 1,500,000
Printing, Proxy Solicitation and Mailing Costs.............. 300,000
Special Committee Fees...................................... 150,000
Filing Fee.................................................. 27,664
Financing Fees.............................................. 562,500
Miscellaneous............................................... 146,086
----------
Total..................................................... $6,000,000
==========
</TABLE>
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request only, be reimbursed by the Purchaser for customary
mailing and handling expenses incurred by it in forwarding material to their
customers.
13. MISCELLANEOUS
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with such state statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
Purchaser cannot comply with any such state statute, the Offer will not be made
to (and tenders will not be accepted from or on behalf of) the stockholders in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of Purchaser by one or more registered brokers or
under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the Commission a Tender Offer Statement on Schedule
TO, and the Company has filed a Tender Offer Solicitation/Recommendation on
Schedule 14D-9 together with exhibits, pursuant to Regulation M-A and
Rule 14D-9, respectively, under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. Such
Schedules and any amendments thereto, including exhibits, may be inspected at,
and copies may be obtained from, the same places and in the manner set forth in
"--Certain Information Concerning the Company--Additional Information" (except
that they will not be available at the regional offices of the Commission).
June 15, 2000
CABO Acquisition Corp.
38
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following two tables set forth the name and present principal occupation
or employment, and material occupations, positions, offices or employment for
the past five years, of each director and executive officer of the Company as of
June 5, 2000. Unless otherwise indicated, each such person is a citizen of the
United States and the business address of each such person is c/o The Cherry
Corporation, 3600 Sunset Avenue, Waukegan, Illinois 60087.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<S> <C>
Peter B. Cherry................................... Chairman of the Board since 1992 and President
since 1982.
Klaus D. Lauterbach............................... Vice President of the Company since June 1992;
General Manager of Cherry GmbH since 1990;
Assistant General Manager prior to 1990.
Dan A. King....................................... Vice President of Finance and Administration since
September 1997; V. P. of Finance since June
1995; Secretary in 1993; Treasurer and Corporate
Controller prior to 1993.
Kevin G. Powers................................... Corporate Controller and Assistant Secretary since
June 1995; Assistant Treasurer 1993-1995.
Robert G. Terwall................................. Vice President of the Company since June 1997;
General Manager of Cherry Electrical Products
Division since 1986.
Kenneth C. Kunin.................................. Vice President of the Company since November 1999;
General Manager of Cherry Automotive Division
since November 1999; Director of New Business
Development from January 1999; Director of
Automotive Engineering prior to 1999.
</TABLE>
I-1
<PAGE>
DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
NAME AND OTHER DIRECTORSHIPS
---- --------------------------------------------------
<S> <C>
Peter B. Cherry................................... Chairman of the Board and President.
Thomas L. Martin.................................. President Emeritus of Illinois Institute of
Technology.
Robert B. McDermott............................... Consultant, formerly partner, law firm of
McDermott, Will & Emery; Mr. McDermott is also a
director of Maynard Oil Company.
Peter A. Guglielmi................................ Director, since 1993, Executive Vice President,
since 1990, Chief Financial Officer, 1990-1999,
and Treasurer, 1988-1999, Tellabs Inc. (voice
and data communications equipment manufacturer),
President, Tellabs International, Inc.
1993-1997. Mr. Guglielmi is also a director of
Internet Communications Corp. and Uniphase
Corporation.
Charles W. Denny.................................. Chairman, since 1997, Chief Executive Officer and
President, 1992-1998, Schneider Electric-North
American Division (formerly Groupe Schneider-
North America), President and Chief Operating
Officer, 1992-1997, Square D Company (electrical
distribution and industrial control products
manufacturer). Mr. Denny is also a director of
Woodhead Industries, Inc.
W. Ed Tyler....................................... Director, President and Chief Executive Officer
since April 1998, Moore Corporation Limited (print
and digital communication products and
services), formerly Executive Vice President,
1995-1998, and Sector President, Information
Management Sector since 1996, Sector President,
Networked Services Sector, 1994-1996, R. R.
Donnelley & Sons Co. (printing and printing
related services). Mr. Tyler is also a director
of Vista Information Solutions, Inc. and First
Industrial Realty Trust, Inc.
Henry J. West..................................... Group Vice President, since 1992, The Marmon Group
(international association of manufacturing and
service businesses).
</TABLE>
I-2
<PAGE>
SCHEDULE II
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of the State of Delaware who holds
shares of stock on the date of the making of a demand pursuant to subsection
(d) of this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither voted
in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
II-1
<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within
II-2
<PAGE>
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 339, L.
`98, eff. 7-1-98.)
II-3
<PAGE>
ANNEX A
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
June 4, 2000
Special Committee of the Board of Directors
The Cherry Corporation
3600 Sunset Avenue
Waukegan, IL 60087
Members of the Special Committee of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders (other than Mr. Peter Cherry and his
affiliates and family trusts (Mr. Cherry and such affiliates and family trusts
are collectively referred to herein as the "Cherry Group")) of shares of common
stock, par value $1.00 per share (the "Shares"), of The Cherry Corporation, a
Delaware corporation (the "Company"), of the consideration to be received by
such holders in the Transactions (as defined below) pursuant to the Agreement
and Plan of Merger, dated as of June 5, 2000, by and between the Company and
CABO Acquisition Corp. ("Purchaser") (the "Merger Agreement"). The Merger
Agreement provides for, among other things, a cash tender offer (the "Tender
Offer") by Purchaser to acquire all of the outstanding Shares, other than Shares
held by members of the Cherry Group, at a price of $26.40 per Share, net to the
seller in cash (the "Cash Price"), and for a subsequent merger of Purchaser with
and into the Company pursuant to which each outstanding Share (other than as
provided in the Merger Agreement) will be converted into the right to receive
the Cash Price (the "Merger" and, together with the Tender Offer, the
"Transactions"). The terms and conditions of the Transactions are set forth in
more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed the financial
terms and provisions of a draft of the Merger Agreement and, for purposes
hereof, we have assumed that the financial terms and provisions of the final
form of the Merger Agreement will not differ in any material respect from the
draft provided to us. We have also reviewed and analyzed certain publicly
available business and financial information relating to the Company for recent
years and interim periods to date, as well as certain internal financial and
operating information, including financial forecasts, projections and analyses
prepared by or on behalf of the Company and provided to us for purposes of our
analysis. We have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and prospects.
We have performed various discounted cash flow analyses and such other
financial analyses as we considered appropriate for purposes of this opinion. We
have reviewed and considered certain financial and stock market data relating to
the Company, and we have compared that data with similar data for certain other
companies, the securities of which are publicly traded, that we believe may be
relevant or comparable in certain respects to the Company or one or more of its
businesses or assets, and we have reviewed and considered the financial terms of
certain recent acquisitions and business combination transactions in certain
industries we deem relevant. We have also performed such other financial studies
and investigations and reviewed such other information as we considered
appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the historical financial
and other information provided to or discussed with us or publicly available,
and we have not assumed any responsibility for independent verification of any
of such information. We also have assumed and relied upon the reasonableness of
the financial projections, forecasts, analyses and other information provided to
us, and we have assumed that such projections, forecasts and analyses and other
information were reasonably prepared in good faith and on bases reflecting the
best currently available judgments and estimates of the Company's management.
The Company has advised us that it historically has failed to achieve its
projected operating results, and that there is a reasonable likelihood that
future operating results could be materially less than those presently projected
by the Company. We express no opinion with respect to such projections,
forecasts and analyses or the assumptions on which they are based. In addition,
we have not reviewed any of the books and records of the Company, or assumed any
responsibility for conducting a physical inspection of the properties or
facilities of the Company, or for making or obtaining an independent valuation
or appraisal of the assets or liabilities of the Company, and no such
independent valuation or appraisal was provided to us. Our opinion is
necessarily based on economic and market conditions and other circumstances as
they exist and can be evaluated by us as of the date hereof. We have assumed
that the transactions described in the Merger Agreement will be consummated on
the terms set forth therein, without material waiver or modification by any
party thereto.
The Cherry Group owns a majority of the outstanding Shares, and Purchaser
and representatives of the Cherry Group have represented and warranted, and we
have assumed for purposes hereof, that Purchaser and the Cherry
<PAGE>
Group have no interest in selling any equity securities of the Company.
Accordingly, in the context of our engagement, we were not authorized to and
have not solicited third party indications of interest in acquiring all or any
part of the Company or its assets, or investigated any alternative transactions
which may be available to the Company. We are aware that an unsolicited proposal
to acquire the Company for $26.00 per Share was received by you following
announcement of the Cherry Group's interest in acquiring the Company, but was
subsequently withdrawn, and, after the public disclosure of such unsolicited
proposal, several other inquiries regarding a potential acquisition of the
Company were received. We express no opinion with respect to the values which
may have been obtained for the Company in a sale to a third party following an
auction process.
We are acting as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") in connection with the
proposed Transactions and will receive a fee for our services, including
rendering this opinion, a significant portion of which is contingent upon the
completion of the proposed Transactions and the amount of consideration received
by holders of the Shares (other than the Cherry Group) in the Transactions.
In the ordinary course of our business, we may actively trade the securities
of the Company for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Our opinion addresses only the fairness from a financial point of view to
the holders of the Shares (other than the members of the Cherry Group) of the
consideration to be received by such stockholders pursuant to the Transactions,
and we do not express any views on any other terms of the Transactions.
Specifically, our opinion does not address the Special Committee's underlying
business decision to recommend the Transactions. In addition, our opinion does
not address the solvency of the Company following the Transactions or at any
time.
It is understood that this letter is for the benefit and use of the Special
Committee in its consideration of the Transactions, and except for inclusion in
its entirety in any proxy statement required to be circulated to stockholders of
the Company relating to the Merger or tender offer recommendation statement on
Schedule 14D-9 from the Company to holders of Shares relating to the
Transactions, may not be used for any other purpose or reproduced, disseminated,
quoted or referred to at any time, in any manner or for any purpose without our
prior written consent. This opinion does not constitute a recommendation to any
stockholder with respect to whether such holder should tender Shares pursuant to
the Tender Offer or as to how such holder should vote with respect to the
Merger, and should not be relied upon by any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that, as of the date hereof,
the Cash Price to be received by the holders of Shares (other than members of
the Cherry Group) in the Transactions is fair to such holders from a financial
point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
A-2
<PAGE>
ANNEX B
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June 5, 2000,
between Cabo Acquisition Corp., a Delaware corporation ("PURCHASER"), and The
Cherry Corporation, a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, Purchaser and the Cherry Family Members (as defined below),
beneficially and of record own an aggregate of 5,455,666 shares (the "PURCHASER
SHARES") of common stock, par value $1.00 per share (the "SHARES" or the "COMMON
STOCK"), of the Company, constituting approximately 52% of the total outstanding
Shares, and has proposed to the Company that Purchaser acquire all of the
remaining issued and outstanding Shares;
WHEREAS, the special committee of the independent directors of the board of
directors of the Company (the "COMPANY BOARD") established to consider
Purchaser's proposal (the "SPECIAL COMMITTEE") has recommended that the Company
Board approve the Offer (as defined below), and approve and authorize the Merger
(as defined below) and this Agreement;
WHEREAS, in furtherance of Purchaser's acquisition of all the remaining
issued and outstanding Shares, by executing this agreement Purchaser agrees to
make a cash tender offer (the "OFFER") in compliance with Section 14(d)(i) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to acquire
any and all of the issued and outstanding Shares for $26.40 per Share (the "PER
SHARE AMOUNT"), net to the sellers in cash, upon the terms and subject to the
conditions of this Agreement and the Offer and thereafter to proceed with the
Merger, upon the terms and subject to the conditions of this Agreement and the
Merger;
WHEREAS, the respective boards of directors of Purchaser and the Company
have deemed it advisable and in the best interests of their respective
stockholders to consummate and have approved, and the stockholders of Purchaser
have deemed it advisable and in their best interests and have approved, the
merger of Purchaser with and into the Company (the "MERGER"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Company Board has approved the Offer and resolved to recommend
the Offer to the Company's stockholders;
WHEREAS, in order to induce the Company to enter into this Agreement,
concurrently herewith certain shareholders of the Company (collectively, the
"CHERRY FAMILY MEMBERS") are entering into a Stockholder Agreement dated as of
the date hereof (the "STOCKHOLDER AGREEMENT") pursuant to which, among other
things, the Cherry Family Members have agreed not to tender their shares in the
Offer and, prior to consummation of the Offer, to contribute to Purchaser the
Shares they own in exchange for shares of capital stock of Purchaser; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. THE OFFER.
1.1 THE OFFER.
(a) Subject to the provisions of this Agreement and this Agreement not
having been terminated, Purchaser shall commence, as promptly as
practicable, but in no event later than the date required by applicable
United States securities laws within the meaning of Rule 14d-2 under the
Exchange Act, the Offer. The obligation of Purchaser to commence the Offer
and to accept for payment, and to pay for any shares of Common Stock
tendered pursuant to the Offer shall be subject only to the satisfaction of
the conditions set forth in EXHIBIT A (the "OFFER CONDITIONS"). Subject to
the provisions of this Agreement, the Offer shall initially expire on the
20th business day from and after the date the Offer is commenced, including
the date of the commencement of the Offer as the first business day in
accordance with Rule 14d-2, unless this Agreement is terminated in
accordance with ARTICLE 8, in which case the Offer (whether or not
previously extended in accordance with the terms hereof) shall expire on
such date of termination.
B-1
<PAGE>
(b) Purchaser expressly reserves the right to waive any condition set
forth on EXHIBIT A without the consent of the Company, other than those set
forth in Sections (a), (b), (e), (g) and (h). Notwithstanding anything to
the contrary contained herein, without the prior written consent of the
Company, Purchaser shall not (i) reduce the maximum number of Shares subject
to the Offer, (ii) decrease the Per Share Amount, (iii) change the form of
consideration payable in the Offer, (iv) impose any other conditions to the
Offer or amend or modify any other terms of the Offer in any manner adverse
to the holders of Shares or (v) except as provided in the next sentence,
extend the Offer. Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, extend the Offer at any time and from time to time:
(i) if at the then scheduled expiration date of the Offer any of the Offer
Conditions shall not have been satisfied or waived, until such time as all
such conditions shall have been satisfied or waived; (ii) for any period
required by any statute or rule, regulation, interpretation or position of
the Securities and Exchange Commission (the "SEC") or its staff applicable
to the Offer; (iii) for any period required by applicable law in connection
with an increase in the consideration to be paid pursuant to the Offer; and
(iv) if all of the Offer Conditions are satisfied and the number of Shares
(together with the Shares held by the Purchaser and the Cherry Family
Members)that have been validly tendered and not withdrawn meet the Minimum
Condition (as defined in EXHIBIT A) but represent less than 90% of the then
issued and outstanding Shares, from time to time, for an aggregate period of
not more than ten (10) business days (for all such extensions under this
clause (iv)) beyond the latest expiration date that would be permitted under
clause (i), (ii) or (iii) of this sentence. So long as this Agreement is in
effect and the Offer Conditions have not been satisfied or waived, Purchaser
shall cause the Offer not to expire. Subject to and in accordance with the
terms and conditions of the Offer and this Agreement (but subject to the
right of termination in accordance with ARTICLE 8), Purchaser shall accept
for payment and pay for, in accordance with the terms of the Offer, all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the expiration of the Offer, and in any event in
compliance with the obligations respecting prompt payment pursuant to
Rule 14e-1(c) under the Exchange Act. In addition to the foregoing, so long
as the Shares purchased under the Offer together with all the Shares held by
Purchaser and the Cherry Family Members represent less than 90% of the then
issued and outstanding Shares, Purchaser may provide for a "subsequent
offering period" to the extent provided in Rule 14d-11 under the Exchange
Act after the purchase of Shares pursuant to the Offer.
1.2 ACTIONS BY PURCHASER.
(a) As soon as reasonably practicable following execution of this
Agreement, Purchaser shall file with the SEC a Tender Offer Statement and a
Rule 13e-3 Transaction Statement on Schedule TO, including all exhibits
thereto (together with all amendments and supplements thereto, the "SCHEDULE
TO") with respect to the Offer, the Merger and the other transactions
contemplated hereby. The Schedule TO shall contain or incorporate by
reference an offer to purchase (the "OFFER TO PURCHASE") and forms of the
related letter of transmittal and any related documents (the Schedule TO,
the Offer to Purchase and such other documents, together with all
supplements or amendments thereto, collectively, the "OFFER DOCUMENTS"). The
Offer Documents shall comply in all material respects with the requirements
of the Exchange Act. On the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, the Offer Documents
shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by
Purchaser with respect to information supplied by the Company in writing
expressly for inclusion in the Offer Documents. Purchaser agrees to correct
promptly, and the Company agrees to notify Purchaser promptly as to, any
information provided by it in writing expressly for use in the Offer
Documents, if and to the extent such information shall have become false or
misleading in any material respect, and Purchaser further agrees to take all
steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to all of the holders of Shares, in each
case as and to the extent required by applicable federal securities laws.
The Special Committee and its counsel shall be given reasonable opportunity
to review and comment upon the Offer Documents prior to their filing with
the SEC or dissemination to the stockholders of the Company. Purchaser
agrees to provide the Company and its counsel and the Special Committee and
its counsel in writing any comments Purchaser or its counsel may receive
from the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments. Purchaser shall use its reasonable best efforts
after consultation with the Company and its counsel and the Special
Committee and its counsel to respond to such comments of and requests by the
SEC promptly and shall provide the Company and the Special Committee and its
counsel with copies of any written responses and telephonic notification of
any verbal responses by Purchaser or its counsel.
B-2
<PAGE>
1.3 ACTIONS BY THE COMPANY.
(a) The Company hereby approves of the Offer and represents and warrants
that (i) the Special Committee has recommended that the Company Board
approve the Offer and the Merger, and approve and authorize this Agreement,
and the other transactions contemplated hereby and (ii) the Company Board at
a meeting duly called and held, has, by vote of all directors and based on
the recommendation of the Special Committee described in the preceding
clause (i) duly adopted resolutions: (A) approving the Offer and the Merger
and approving and adopting this Agreement, (B) determining that the Merger
is advisable and that the terms of the Offer and Merger are fair to, and in
the best interests of, the Company and the Company's stockholders (other
than the Purchaser and the Cherry Family Members), and (C) recommending that
the Company's stockholders (other than the Purchaser and the Cherry Family
Members) accept the Offer and, if approval is required by applicable law,
approve the Merger and approve and adopt this Agreement. The Company hereby
consents to the inclusion in the Offer Documents of the recommendation of
the Company Board and the recommendation of the Special Committee described
in the first sentence of this SECTION 1.3(a). The Company shall provide for
inclusion in the Offer Documents any information reasonably requested by
Purchaser, and to the extent requested by Purchaser, the Company shall
cooperate in the preparation of the Offer Documents. The Company further
represents and warrants that (i) the Special Committee has been duly
authorized and constituted, and (ii) the Special Committee, at a meeting
thereof duly called, determined that this Agreement, the Merger and the
Offer are fair to and in the best interests of the stockholders of the
Company (other than the Purchaser and the Cherry Family Members). Nothing in
this Agreement shall limit the right of the Special Committee or the Board
of Directors to withdraw, amend or modify its recommendation of the Offer,
the Merger or this Agreement (or publicly announce its intention to do so)
if a Superior Proposal (as defined below) shall have been proposed and if
with respect thereto the Special Committee or the Board of Directors
determines in good faith (after consultation with its legal counsel) that
the failure to take such action would be inconsistent with its fiduciary
duties to the stockholders of the Company. It is agreed that the public
announcement of the receipt of an Alternative Proposal or that the Special
Committee or the Board of Directors is considering such Alternative Proposal
shall not constitute such withdrawal, amendment or modification.
(b) As soon as reasonably practicable on the date of the commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9,
together with all amendments and supplements thereto, "SCHEDULE 14D-9")
containing the recommendations of the Company Board and the Special
Committee described in SECTION 1.3(a) and shall disseminate the
Schedule 14D-9 to the stockholders of the Company to the extent required by
Rule 14d-9 promulgated under the Exchange Act and any other applicable
federal or state securities laws. To the extent practicable, the Company
shall cooperate with Purchaser in mailing or otherwise disseminating the
Schedule 14D-9 with the appropriate Offer Documents to the Company's
stockholders. Purchaser and its counsel shall be given an opportunity to
review and comment upon the Schedule 14D-9 prior to the filing thereof with
the SEC. The Schedule 14D-9 shall comply in all material respects with the
requirements of the Exchange Act. On the date filed with the SEC and on the
date first published, sent or given to the Company's stockholders, the
Schedule 14D-9 shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation is made
by the Company with respect to information supplied by Purchaser in writing
expressly for inclusion in the Schedule 14D-9. The Company agrees to correct
promptly, and Purchaser agrees to notify the Company promptly as to, any
information provided by it for use in the Schedule 14D-9, if and to the
extent such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to
be disseminated to all of the holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company agrees to
provide Purchaser and its counsel in writing any comments the Company or its
counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments. The Company
agrees to use its reasonable best efforts, after consultation with
Purchaser, to respond promptly to all such comments of and requests by the
SEC. The Company shall provide Purchaser copies of any written responses and
telephonic notification of any verbal responses by the Company and its
counsel.
(c) In connection with the Offer, the Company shall promptly, or shall
cause its transfer agent to promptly, furnish Purchaser with mailing labels
containing the names and addresses of the record holders of Shares, each as
of the most recent date together with copies of all lists of stockholders
and security position listings and all other information in the Company's
possession or control, to the extent reasonably available, regarding the
beneficial
B-3
<PAGE>
owners of Common Stock, and shall furnish to Purchaser such information and
assistance (including updated lists of stockholders, security position
listings and computer files) as Purchaser may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Purchaser shall hold in confidence the
information contained in any of such labels, lists and files, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated in accordance with SECTION 8.1, shall deliver and
cause its agents to deliver to the Company all copies of such information
then in their possession or control.
(d) Contemporaneously with the consummation of the Offer, the Company
shall make a loan to Purchaser (the "LOAN") on the terms described on
Exhibit B hereto (the "LOAN COMMITMENT"). Pursuant to the Loan Commitment,
the Purchaser shall pledge all shares of Common Stock held by Purchaser as
security for the Loan including all Shares purchased pursuant to the Offer.
Prior to the consummation of the Offer and the making of the Loan, the
Cherry Family Members will pursuant to the Stockholder Agreement, and the
Purchaser will permit them to, contribute to Purchaser all of the Shares
they own, in each case in exchange for shares of capital stock of Purchaser.
ARTICLE 2
2. THE MERGER.
2.1 THE MERGER. At the Effective Time (as defined below), subject to the
terms and conditions of this Agreement and the applicable provisions of the
Delaware General Corporation Law (the "DGCL"), Purchaser shall be merged
with and into the Company and the separate corporate existence of Purchaser
shall thereupon cease. The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION").
The Merger shall have the effects specified in the DGCL.
2.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "CLOSING") shall take place at the offices of
McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois 60606, at
10:00 a.m., local time, as soon as practicable following the satisfaction
(or waiver if permissible) of the conditions set forth in ARTICLE 7. The
date on which the Closing occurs is hereinafter referred to as the "CLOSING
DATE."
2.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
ARTICLE 7 shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated as provided in ARTICLE 8 (and
subject to SECTION 3.6), the parties hereto shall cause a certificate of
merger meeting the requirements of Section 251 of the DGCL ("CERTIFICATE OF
MERGER") to be properly executed and filed with the Secretary of State of
the State of Delaware in accordance with such Section on the Closing Date.
The Merger shall become effective at the time of filing of the Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the DGCL or at such later time which the parties hereto shall have
agreed upon and designated in such filing as the effective time of the
Merger (the "EFFECTIVE TIME").
2.4 CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION. Unless otherwise agreed by the Company and Purchaser
prior to the Closing, at the Effective Time:
(a) The certificate of incorporation of Purchaser as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law and the terms thereof;
(b) The by-laws of Purchaser as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation, until
duly amended in accordance with applicable law, the terms thereof, and
the Surviving Corporation's certificate of incorporation;
(c) The officers of the Company immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
duly appointed or elected in accordance with applicable law and the
Surviving Corporation's certificate of incorporation and by-laws; and
(d) The directors of Purchaser immediately prior to the Effective
Time shall be the directors of the Surviving Corporation from and after
the Effective Time, until their successors are duly appointed or elected
in accordance with applicable law, and the Surviving Corporation's
certificate of incorporation and by-laws.
B-4
<PAGE>
ARTICLE 3
3. EFFECT OF THE MERGER ON SECURITIES OF PURCHASER AND THE COMPANY.
3.1 PURCHASER STOCK. At the Effective Time, each share of common stock,
$1.00 par value per share, of Purchaser that is outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and non-assessable share of common stock, $1.00
par value per share, of the Surviving Corporation.
3.2 COMPANY SECURITIES.
(a) Other than as set forth in the immediately following sentence, at
the Effective Time, each share of Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Purchaser, the Company or the holder
thereof, be converted into the right to receive the Per Share Amount or any
higher per share price as may be paid in the Offer, without interest (the
"MERGER CONSIDERATION") in accordance with SECTION 3.3 upon the surrender of
a certificate or certificates (a "CERTIFICATE") representing such shares of
Common Stock. The following Shares shall not be converted into the right to
receive the Per Share Amount at the Effective Time: (i) shares of Common
Stock owned by Purchaser, or any wholly owned subsidiary of Purchaser, or
held by the Company, all of which shall be canceled; and (ii) Dissenting
Shares (as defined below).
(b) Each Share issued and held in the Company's treasury at the
Effective Time, or held by Purchaser, or any wholly owned subsidiary of
Purchaser, shall, by virtue of the Merger and without any action on the part
of Purchaser, the Company or the holder thereof, cease to be outstanding and
shall be canceled and retired without payment of any consideration therefor.
(c) The Company shall, immediately prior to the Effective Time,
(A) terminate each Company stock option, stock appreciation right,
restricted stock or similar plan, and any other plan, program or arrangement
providing for the issuance, grant or purchase of any other interest in
respect of the capital stock of the Company or any of its subsidiaries, and
(B) amend the provisions of any other Company employee benefit plan, or
related trust or funding vehicle, providing for the issuance, holding,
transfer or grant of any Shares, or any interest in respect of any Shares
(such plans set forth in clauses (A) or (B), collectively, the "COMPANY
STOCK PLANS"), to provide no continuing rights to acquire, hold, transfer,
or grant any Shares or any interest in any Shares. With respect to the
Company's stock option plans, if and to the extent permissible under the
Company Stock Plans, prior to the Effective Time, the Company shall cause
all vesting of options held by persons who are employees of the Company at
the Effective Time to be accelerated and all outstanding restricted stock
thereunder held by such persons to be fully vested on a date no later than
the date of the Effective Time.
3.3 EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK.
(a) Prior to the Effective Time, Purchaser shall appoint a commercial
bank or trust company, subject to the reasonable satisfaction of the
Company, to act as paying agent hereunder for payment of the Merger
Consideration upon surrender of Certificates (the "PAYING AGENT"). Purchaser
shall take all steps necessary to cause the Surviving Corporation to provide
the Paying Agent with cash in amounts necessary to pay for all the shares of
Common Stock pursuant to SECTION 3.2(a) and pursuant to SECTION 3.2(c), as
and when such amounts are needed by the Paying Agent. Such amounts shall
hereinafter be referred to as the "EXCHANGE FUND."
(b) As soon as practicable after the Effective Time, Purchaser shall
cause the Paying Agent to mail to each holder of record of shares of Common
Stock (i) a letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to such Certificates shall pass, only
upon delivery of the Certificates to the Paying Agent and which letter shall
be in such form and have such other provisions as are customary for letters
of this nature and (ii) instructions for effecting the surrender of such
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate to the Paying Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be reasonably required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
the amount of cash into which shares of Common Stock theretofore represented
by such Certificate shall have been converted pursuant to SECTION 3.2, and
the shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or will accrue on the cash payable upon
surrender of any Certificate. In the event of a transfer of ownership of
Shares that is not registered in the transfer records of the Company,
payment may be made with respect to such Common Stock to such a transferee
if the Certificate representing such shares of Common Stock is presented to
the Paying Agent, accompanied by all documents
B-5
<PAGE>
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this SECTION 3.3, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed, at any time after the
Effective Time, to represent only the right to receive on such surrender the
amount, without any interest thereon, of cash into which shares of Common
Stock theretofore represented by such Certificate shall have been converted
pursuant to SECTION 3.2.
(c) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time. From and after the Effective Time,
the holders of Certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided herein or by applicable
law. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided in
this ARTICLE 3.
(d) Any portion of the Exchange Fund (including the proceeds of any
interest and other income received by the Paying Agent in respect of all
such funds) that remains unclaimed by the former stockholders of the Company
six months after the Effective Time shall be delivered to the Surviving
Corporation. Any former stockholders of the Company who have not theretofore
complied with this ARTICLE 3 may thereafter look only to the Surviving
Corporation for payment of any Merger Consideration, without any interest
thereon, that may be payable in respect of each share of Common Stock such
stockholder holds as determined pursuant to this Agreement.
(e) None of Purchaser, the Company, the Surviving Corporation, the
Paying Agent or any other Person shall be liable to any former holder of
shares of Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim which may be made against it with respect to such
Certificate, the Paying Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration payable in respect thereof
pursuant to this Agreement.
(g) If so specified in the Offer Documents, Purchaser, the Company, the
Surviving Corporation and the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable to a holder of Shares
pursuant to the Offer or Merger such amounts as Purchaser, the Company, the
Surviving Corporation and the Exchange Agent are required to deduct and
withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "CODE"), or any provision of state,
local or foreign tax law. To the extent amounts are so withheld by
Purchaser, the Company, the Surviving Corporation or the Exchange Agent, the
withheld amounts (i) shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which the
deduction and withholding was made, and (ii) shall be promptly paid over to
the applicable taxing authority.
3.4 ADJUSTMENT OF MERGER CONSIDERATION. In the event that, subsequent to
the date of this Agreement but prior to the Effective Time, the outstanding
shares of Common Stock shall have been changed into a different number of
shares or a different class as a result of a stock split, reverse stock
split, stock dividend, subdivision, reclassification, split, combination,
exchange, recapitalization or other similar transaction, the Merger
Consideration shall be appropriately adjusted to eliminate the effects of
that event.
3.5 DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any provision of
this Agreement to the contrary, if required by the DGCL, but only to the
extent required thereby, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by holders of such Shares who
have properly exercised appraisal rights with respect thereto in accordance
with Section 262 of the DGCL (the "DISSENTING SHARES") will not be
exchangeable for the right to receive the Merger Consideration. Each holder
of such Dissenting Shares will be entitled to receive payment of the
appraised value of such Shares in accordance with the provisions of
Section 262 of the DGCL unless and until such holder fails to perfect or
effectively waives, withdraws or loses his or her rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails
to perfect or effectively waives, withdraws or loses such right, such Shares
will thereupon be treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest or dividends thereon. The Company will
give Purchaser prompt notice of any demands received by the Company for
appraisals of Shares, any withdrawals of such demands and any instruments
served pursuant to Section 262 of the DGCL, and the
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Purchaser shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall cooperate with
Purchaser and shall not, except with the prior written consent of Purchaser,
voluntarily make any payment with respect to any demands for appraisal or
offer to settle or settle any such demands.
3.6 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the
provisions of SECTION 6.3, in the event that Purchaser, or any direct or
indirect subsidiary of Purchaser, shall acquire at least 90 percent of the
outstanding Shares (assuming that all Shares owned by the Cherry Family
Members are transferred to Purchaser in accordance with the Stockholder
Agreement), the parties hereto shall, at the request of Purchaser, take all
necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the consummation of the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE 4
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Purchaser as of the date of this Agreement as
follows:
4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of the Company
and each of its subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to own or lease and operate its properties and
carry on its business as now conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not result, individually or in the aggregate, in a Material Adverse
Effect (as hereinafter defined). For purposes of this Agreement, a "Material
Adverse Effect" means a change or effect that is materially adverse to the
business, operations, assets, or financial condition of the Company and its
subsidiaries, taken as a whole, or the Purchaser, as applicable in a
particular case,
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. (a) The Company
has the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby, including
without limitation all documentation concerning the Loan (the "ANCILLARY
DOCUMENTS"), to which the Company is a party, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by the Company of this
Agreement and the Ancillary Documents to which the Company is a party and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action (including without limitation the approval of the Company Board), and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Ancillary Documents to which the Company is
a party or to consummate the transactions contemplated hereby and thereby
(other than the approval of this Agreement by the holders of two-thirds of
the Shares and other than, in the case of this Agreement, the filing of the
Certificate of Merger as required by the DGCL). This Agreement has been, and
any Ancillary Document to which the Company is a party at the time of
execution will have been, duly and validly executed and delivered by the
Company, and (assuming this Agreement and such Ancillary Documents to which
Purchaser is a party each constitutes a valid and binding obligation of
Purchaser) constitutes and will constitute valid and binding obligations of
the Company, enforceable in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
4.3 CAPITALIZATION, ETC. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock. As of the close of business
on May 5, 2000, (a) 10,168,066 shares of Common Stock are outstanding,
(b) 2,494,926 shares of Common Stock are held by the Company in its
treasury, and (c) no shares of capital stock of the Company are held by
Company's subsidiaries. The Company has no outstanding options to acquire
Common Stock or bonds, debentures, notes or other obligations entitling the
holders thereof to vote (or which are convertible into or exercisable for
securities having the right to vote) with the holders of the Common Stock on
any matter. All issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except for stock options or other rights issued pursuant to the
Company Stock Plans, there are no other shares of capital stock or voting
securities of the Company, and no existing options, warrants, calls,
subscriptions, convertible securities, and no stock appreciation rights or
limited stock appreciation rights or other rights (including rights of first
refusal), agreements or commitments which obligate the Company or any of its
subsidiaries to issue, transfer or sell any shares of capital stock of, or
equity interests in, or any material assets of, the Company or any of its
subsidiaries. There are no outstanding
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obligations of the Company or any subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company. There are no
voting trusts or other agreements or understandings to which the Company or
any of its subsidiaries is a party with respect to the voting of capital
stock of the Company or any of its subsidiaries.
4.4 NO VIOLATION.
(a) Assuming that all consents, approvals, authorizations and other
actions described in this Section have been obtained and all filings and
obligations described in this Section have been made, neither the execution
and delivery by the Company of this Agreement or any of the Ancillary
Documents, nor (assuming requisite shareholder approval is obtained) the
consummation by the Company of the transactions contemplated hereby or
thereby, will: (i) violate, conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws of the Company or
any material Subsidiary; (ii) other than (A) the filings provided for in
SECTION 2.3, the filing of a premerger notification and report form by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and the filings required under the Exchange Act,
(B) such filings and consents as may be required under any environmental,
health or safety law or regulation pertaining to any notification,
disclosure or required approval triggered by the Offer, the Merger or by the
transactions contemplated by this Agreement, (C) such filings,
authorizations, orders and approvals as may be required to obtain the State
Takeover Approvals, (D) applicable requirements, if any, of Blue Sky Laws or
the Nasdaq National Market, Inc., (E) as may be required under foreign laws,
require any consent, approval or authorization of, or declaration, filing or
registration with, any foreign, federal, state or local judicial,
legislative, executive, administrative or regulatory body or authority or
any court, arbitration board or tribunal ("GOVERNMENTAL ENTITY"), the lack
of which, individually or in the aggregate, would have a Material Adverse
Effect on the Company or, by law, prevent or materially delay the
consummation of the transactions contemplated hereby; or (iii) violate any
foreign, federal, state or local law, statute, ordinance, rule, regulation,
order, judgment or decree ("LAWS"), applicable to the Company, any of its
Subsidiaries or any of their respective assets other than any violations
which do not have a Material Adverse Effect on the Company.
(b) For purposes of this Agreement, a "Subsidiary" means, with respect
to Purchaser, the Company or any other Person, any entity of which
Purchaser, the Company or such other Person, as the case may be (either
alone or through or together with any other Subsidiary), owns, directly or
indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
4.5 COMPANY OFFER DOCUMENTS.
(a) None of the information provided by the Special Committee or its
advisors in writing with respect to its deliberations and recommendations
specifically for inclusion in the Schedule 14D-9, the Offer Documents, the
Information Statement (as defined below), or the Proxy Statement (as defined
below) (the "COMMITTEE INFORMATION") at the time such document is filed with
the SEC or first published, sent or given to the Company's stockholders,
will contain any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading except that no representation is made by the
Company with respect to information supplied by Purchaser in writing
expressly for inclusion in the Schedule 14D-9 or any amendment or
supplement. If at any time prior to the first purchase of Shares under the
Offer, the Special Committee shall obtain knowledge of any facts with
respect to the Committee Information that would require the supplement or
amendment to the Schedule 14D-9 in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
or to comply with applicable Laws, such amendment or supplement shall be
promptly filed with the SEC and, as required by Law, disseminated to the
stockholders of the Company. In the event Purchaser shall advise the Company
as to its obtaining knowledge of any facts that would make it necessary to
supplement or amend any of the foregoing documents, the Company shall
promptly amend or supplement such document and distribute the same to its
stockholders as required.
4.6 BROKERS. Except for Wasserstein, Perella & Co., Inc. (the "FINANCIAL
ADVISOR"), the arrangements of which have been disclosed to Purchaser in
writing, no broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement that is based upon any
arrangement made by or on behalf of the Company.
4.7 OPINION OF FINANCIAL ADVISOR. The Special Committee has received the
written opinion of the Financial Advisor to the effect that, as of the date
of this Agreement, the Per Share Amount to be received, in
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the Offer and the Merger by the holders of Shares (other than Purchaser and
its affiliates) of the Company pursuant to the Offer and the Merger is fair,
from a financial point of view, to such holders of Shares (other than
Purchaser and its affiliates) (the "OPINION"). The Company hereby represents
and warrants that it has been authorized by the Financial Advisor to permit
the inclusion of the Opinion and references thereto and the Financial
Advisor's presentation to the Company's Board of Directors, subject to prior
review and consent by the Financial Advisor (such consent not to be
unreasonably withheld), in the Offer to Purchase, the Schedule TO, the
Schedule 14D-9 and the Information Statement. Other than the fee owed to the
Financial Advisor for providing the Opinion and the indemnification
obligations of the Company to the Financial Advisor related to the Financial
Advisor's Opinion, neither the Company nor the Company's directors has any
continuing obligation to the Financial Advisor.
4.8 STATE TAKEOVER STATUTES. The Company Board has taken all necessary
action so that the restrictions contained in Section 203 of the DGCL
applicable to a "business combination" (as defined in such Section 203) will
not apply to the execution, delivery or performance of the Agreement or to
the Offer, the Merger or the transactions contemplated hereby.
4.9 REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger may be
consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required to adopt this Agreement, the Ancillary
Documents and to approve the Merger and the transactions contemplated hereby
and thereby, is the affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock.
ARTICLE 5
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents
and warrants to the Company as of the date of this Agreement as follows:
5.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Purchaser is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own, operate and lease its properties and
carry on its business as now conducted, except where the failure to have
such power and authority, individually or in the aggregate, would not
materially adversely affect the ability of Purchaser to consummate the
transactions contemplated hereby and by the Ancillary Documents.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Purchaser has the
requisite corporate power and authority to execute and deliver this
Agreement and the Ancillary Documents and to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Ancillary Documents to which the Purchaser is a party and the consummation
by Purchaser of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Purchaser are necessary to authorize
this Agreement and the Ancillary Documents to which the Purchaser is a party
or to consummate the transactions contemplated hereby and thereby other
than, in the case of this Agreement, the filing of the Certificate of Merger
as required by the DGCL. This Agreement has been, and any Ancillary
Documents to which the Purchaser is a party at the time of execution will
have been, duly and validly executed and delivered by Purchaser, and
(assuming this Agreement and such Ancillary Documents to which the Purchaser
is a party each constitutes a valid and binding obligation of the Company)
constitutes and will constitute the valid and binding obligations of
Purchaser, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
5.3 NO VIOLATION. Assuming that all consents, approvals, authorizations
and other actions described in this Section have been obtained and all
filings and obligations described in this Section have been made, neither
the execution and delivery of this Agreement or any of the Ancillary
Documents by Purchaser, nor the consummation by it of the transactions
contemplated hereby or thereby, will (i) violate, conflict with or result in
any breach of any provision of the certificate of incorporation or by-laws
of Purchaser; (ii) other than the filings provided for in SECTION 2.3 and
the filings required under the Exchange Act, require any consent, approval
or authorization of, or declaration, filing or registration with, any
Governmental Entity, the lack of which, individually or in the aggregate,
would have a Material Adverse Effect on the ability of Purchaser to
consummate the transactions contemplated hereby or prevent or materially
delay the consummation of the transactions contemplated hereby,
(iii) violate any Laws applicable to Purchaser or any of its assets, or
(iv) violate, conflict with or result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time
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or both, would constitute a default) under, result in the termination or in
a right of termination of, accelerate the performance required by or benefit
obtainable under, result in the creation of any Encumbrance upon any of the
properties of Purchaser under, or result in there being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which Purchaser is a party or by which Purchaser
or any of its properties is bound, other than any violations in the case of
clause (iv) which do not have a Material Adverse Effect on Purchaser.
5.4 INTERIM OPERATIONS OF PURCHASER. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations as
contemplated hereby.
5.5 INFORMATION SUPPLIED. None of the Offer Documents or any amendment
or supplement thereto, at the respective times such documents are filed with
the SEC or first published, sent or given to the Company's stockholders,
will contain any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading except that no representation is made by
Purchaser with respect to information supplied by the Company specifically
for inclusion in the Offer Documents or any amendment or supplement. None of
the information supplied or to be supplied by Purchaser in writing expressly
for inclusion or incorporation by reference in (a) the Schedule 14D-9,
(b) the information to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the "INFORMATION
STATEMENT") or (c) the proxy statement (together with any amendments or
supplements thereto, the "PROXY STATEMENT"), will, (i) in the case of the
Schedule 14D-9 and the Information Statement, at the respective times such
documents are filed with the SEC or first published, sent or given to the
Company's stockholders, or (ii) in the case of the Proxy Statement, at the
time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholder Meeting (as defined below), contain any untrue
statements of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time the Purchaser shall obtain knowledge of any
facts with respect to itself, any of its officers and directors or any of
its subsidiaries that would require the supplement or amendment to the Offer
Documents or the information supplied by Purchaser for inclusion or
incorporation by reference in the Schedule 14D-9, the Information Statement
or the Proxy Statement, in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, or to
comply with applicable Laws, such amendment or supplement shall be promptly
filed with the SEC and, as required by Law, disseminated to the stockholders
of the Company, and in the event the Company shall advise Purchaser as to
its obtaining knowledge of any facts that would make it necessary to
supplement or amend any of the foregoing documents, Purchaser shall promptly
amend or supplement such document as required and distribute the same to the
Company's stockholders. The Offer Documents will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is
made by Purchaser with respect to statements made or incorporated by
reference therein based on the information supplied in writing by the
Company expressly for inclusion or incorporation by reference therein.
5.6 NO SALE; DISCLOSURE. Neither Purchaser nor any Cherry Family Members
has any interest in selling any equity securities of the Company. Neither
Purchaser nor any Cherry Family Members has any present plan or intention to
engage in, or cause the Company or any subsidiary of the Company, subsequent
to the Offer or the Merger, to engage in any extraordinary corporate
transaction such as a merger, reorganization or liquidation or a sale or
transfer of a material amount of its assets (an "EXTRAORDINARY
TRANSACTION"). Peter Cherry has disclosed to the Board of Directors of the
Company any proposals, expressions of interest or offers in any case which
specified a price or range of prices or value or range of values made by any
third party with respect to any Extraordinary Transaction from January 1,
1999 through the date hereof.
5.7 BROKERS. Except for Banc of America Securities LLC (the fees and
expenses of which shall be borne by the Purchaser), no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this
Agreement that is based upon any arrangement made by or on behalf of the
Purchaser or Cherry Family Members.
5.8 SOLVENCY. After giving effect to the Offer, the Merger and the
financings contemplated by this Agreement and any other transactions
contemplated by this Agreement, the Surviving Corporation will not (i) be
insolvent, (ii) have unreasonably small capital with which to engage in its
business, or (iii) have incurred debts
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beyond its ability to pay such debts as they mature and, further, the
capital of the Surviving Corporation will not become impaired thereby.
5.9 PENDING LITIGATION. Purchaser acknowledges that it believes that as
of June 5, 2000 actions and proceedings pending on the date hereof relating
to the Company or any of its subsidiaries would not (i) have a Material
Adverse Effect on Purchaser or the Company and its subsidiaries taken as a
whole, or (ii) make materially more costly (A) the making of the Offer,
(B) the acceptance for payment of, or payment for, some or all of the shares
pursuant to the Offer, (C) the purchase of shares pursuant to the Offer or
(D) the consummation of the Merger.
ARTICLE 6
6. COVENANTS.
6.1 ALTERNATIVE PROPOSALS. The Company agrees (a) that, between the date
hereof and the Effective Time, neither it nor any of its subsidiaries shall,
and it shall direct its officers, directors, agents and representatives
(including, without limitation, any investment banker, attorney or
accountant retained by it or the Special Committee) not to, initiate,
solicit or knowingly encourage, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) to acquire the Company pursuant to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or in excess of 20% of the assets or equity securities of,
the Company or any of its material Subsidiaries (any such proposal or offer
being hereinafter referred to as an "ALTERNATIVE PROPOSAL") or engage in any
negotiations concerning, or provide any confidential information or data to,
afford access to the properties, books or records of the Company or any of
its Subsidiaries to, or have any discussions with, any Person relating to an
Alternative Proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing; and
(c) that it will notify Purchaser promptly of the terms of such Person's or
entity's inquiry or proposal if any such inquiries or proposals are received
by the Company; PROVIDED, HOWEVER, that nothing contained in this SECTION
6.1 shall prohibit the Company or its subsidiaries, upon approval of the
Special Committee, from (i) complying with Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer, or
otherwise make any disclosure required by applicable Law to its stockholders
related to an Alternative Proposal, or (ii) prior to the acceptance for
payment of shares of Common Stock by Purchaser pursuant to the Offer,
furnishing information to, or entering into discussions or negotiations
with, any Person or entity that makes an unsolicited bona fide Alternative
Proposal, only if (A) such proposal was not initially solicited, encouraged
or knowingly facilitated by the Company, its Subsidiaries or their agents in
violation of this SECTION 6.1, (B) prior to furnishing information to, or
entering into discussions or negotiations with, such Person or entity, the
Company provides written notice to Purchaser to the effect that it is
furnishing information to, or entering into discussions or negotiations
with, such Person or entity, and (C) the Special Committee determines that
such proposal is, or is likely to lead to a proposal that is, more favorable
from a financial point of view to the stockholders of the Company as
compared to the Offer and the Merger (such proposal meeting the requirements
of clauses (A), (B) and (C) being a "SUPERIOR PROPOSAL"). The Company shall
keep Purchaser informed of the status of any such discussions or
negotiations and the terms of any proposal (but need not disclose the
identity of such Person or entity) and, to the extent applicable, shall
comply with Rule 14e-2(a) promulgated under the Exchange Act with regard to
an Alternative Proposal. Nothing in this SECTION 6.1 shall (x) permit the
Company to terminate this Agreement (except as specifically provided in
ARTICLE 8 hereof), (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal during the term of this Agreement, or
(z) affect any other obligation of the Company under this Agreement
6.2 INTERIM OPERATIONS.
(a) Except as otherwise contemplated by this Agreement, from and after
the date of this Agreement until the Effective Time, unless Purchaser has
consented in writing thereto or this Agreement has been terminated pursuant
to ARTICLE 8 hereof, the Board of Directors of the Company shall not
authorize the Company or any of its Subsidiaries to:
(i) amend its certificate of incorporation or by-laws;
(ii) issue, sell or pledge any shares of its capital stock or other
ownership interest in the Company or its subsidiaries, or any securities
convertible into or exchangeable for any such shares or ownership
interest, or
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any rights, warrants or options to acquire or with respect to any such
shares of capital stock, ownership interest, or convertible or
exchangeable securities (or derivative instruments in respect of the
foregoing);
(iii) effect any stock split or otherwise change its capitalization as
it exists on the date hereof, or directly or indirectly redeem, purchase
or otherwise acquire any shares of its capital stock or capital stock of
its subsidiaries;
(iv) (A) accelerate or waive any or all of the goals, restrictions or
conditions imposed under any restricted stock award, or (B) issue, sell,
grant or award any shares of capital stock or any right to acquire shares
of capital stock under any Company Stock Plan (except as otherwise
required by such plan);
(v) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock
or other ownership interests (other than such payments by the
subsidiaries to the Company);
(vi) mortgage or otherwise encumber or subject to any encumbrance, or
sell, lease or otherwise dispose of any of its property or assets
(including capital stock of its subsidiaries), other than Encumbrances
that are incurred in the ordinary course of business, the sale or
disposition of inventory in the ordinary course of business or the sale,
lease, encumbrance or other disposition of assets which, individually or
in the aggregate, are obsolete or not material to the Company and its
subsidiaries taken as a whole;
(vii) (A) acquire by merger, purchase or any other manner, any
business or entity or any division thereof for consideration in excess of
$1,000,000 in the aggregate; or (B) otherwise acquire any assets which
would be material, individually or in the aggregate, to the Company and
its subsidiaries taken as a whole, except for purchases of inventory,
supplies or capital equipment in the ordinary course of business and the
acquisition of assets for consideration in excess of $1,000,000 in the
aggregate;
(viii) except for borrowings under existing or replacement credit
facilities and excepting transactions between the Company and any
Subsidiary, incur or assume any long-term or short-term debt or issue any
debt securities or assume, guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the debt or
other obligations of any other Person, other than obligations (other than
debt) of its subsidiaries incurred in the ordinary course of business;
(ix) (A) make any loans, advances or capital contributions to, or
investments in, any other Person (other than subsidiaries of the
Company), except with respect to commitments outstanding as of the date
hereof, in the ordinary course of business, or (B) forgive any loans,
advances or capital contributions to, or investments in, any other Person
(other than subsidiaries of the Company), for an aggregate amount in
excess of $100,000 (as to clauses (A) and (B) collectively);
(x) except as contemplated by this Agreement or in the ordinary
course of business (A) increase the compensation payable or to become
payable to its officers or employees, (B) other than in accordance with
existing policies and arrangements, grant any severance pay to its
officers, directors or employees or (C) establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except to the extent required by
applicable law or the terms or a collective bargaining agreement or a
contractual obligation existing on the date hereof;
(xi) change any of the accounting principles or practices used by the
Company, except as may be required by GAAP;
(xii) pay, discharge or satisfy any material claims, material
liabilities or material obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction (A) of any such material claims, material liabilities or
material obligations in the ordinary course of business or (B) of
material claims, material liabilities or material obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) contained in the Company's filings with
the SEC under the Exchange Act since February 28, 2000;
(xiii) agree to the settlement of any claim or litigation, which
settlement would have a Material Adverse Effect;
(xiv) make, change or rescind any material tax election (other than
recurring elections that customarily are made in connection with the
filing of any tax return; provided that any such elections are consistent
with
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the past practices of the Company or its subsidiaries, as the case may
be) or settle or compromise any material tax liability that is the
subject of any audit, claim for delinquent taxes, examination, action,
suit, proceeding or investigation by any taxing authority;
(xv) except as contemplated by this Agreement or to the extent
required under existing employee and director benefit plans, agreements
or arrangements as in effect on the date of this Agreement or as
contemplated by this Agreement, accelerate the payment, right to payment
or vesting of any bonus, severance, profit sharing, retirement, deferred
compensation, stock option, insurance or other compensation or benefits;
(xvi) other than in the ordinary course of business, enter into any
agreement, understanding or commitment that materially restrains, limits
or impedes the ability of the Company or any of its subsidiaries to
compete with or conduct any business or line of business, including
geographic limitations on the activities of the Company or any of its
subsidiaries;
(xvii) materially modify, amend or terminate any material contract, or
waive, relinquish, release or terminate any right or claim, in each case,
except in the ordinary course of business;
(xviii) other than with respect to commitments outstanding as of the
date hereof, make any capital expenditures in the aggregate for the
Company and its subsidiaries in excess of $4,000,000, in the aggregate;
(xix) take any action to cause the Common Stock to be delisted from
the Nasdaq Stock Market prior to the completion of the Offer; and
(xx) agree in writing or otherwise to take any of the foregoing
actions.
6.3 COMPANY STOCKHOLDER APPROVAL; INFORMATION STATEMENT.
(a) If approval or action in respect of the Merger by the stockholders
of the Company is required by applicable Law, the Company, acting through
the Company Board, shall (i) following the expiration of the Offer, call a
meeting of its stockholders (the "STOCKHOLDERS MEETING") for the purpose of
voting upon this Agreement and the transactions contemplated hereby,
(ii) unless Purchaser or other stockholders execute consents in lieu of a
meeting adequate to approve the Merger, hold the Stockholders Meeting as
soon as practicable following the purchase of shares of Common Stock
pursuant to the Offer, and (iii) unless taking such action would be
inconsistent with the fiduciary duties of the directors of the Company or of
the Company's directors constituting the Special Committee to stockholders
of the Company imposed by Law, as determined by such directors in good
faith, and after consultation with independent legal counsel, recommend to
its stockholders the approval of this Agreement and the transactions
contemplated hereby; PROVIDED, HOWEVER, that the Company Board shall not be
obligated to recommend this Agreement and the transactions contemplated
hereby if, at or prior to the Stockholders Meeting, a Superior Proposal has
been received and if with respect thereto the Special Committee or the Board
of Directors determines in good faith (after consultation with its legal
counsel) that taking such action would be inconsistent with its fiduciary
duties to the stockholders of the Company. In the event a Stockholders
Meeting is called, unless Purchaser or other stockholders execute consents
in lieu of a meeting adequate to approve the Merger, the Company shall use
its reasonable best efforts to solicit from the stockholders of the Company
proxies in favor of the approval and adoption of this Agreement, and the
transactions contemplated hereby and to secure the vote or consent of
stockholders required by the condition specified in ARTICLE 7 to approve and
adopt this Agreement, unless otherwise required by the applicable fiduciary
duties of the directors of the Company or of the Company's directors
constituting the Special Committee, as determined by such directors in good
faith, and after consultation with independent legal counsel. Unless
Purchaser or other stockholders execute consents in lieu of a meeting
adequate to approve the Merger, this Agreement must be submitted to the
stockholders of the Company whether or not the Company Board determines at
any time subsequent to declaring its advisability that the Agreement is no
longer advisable and recommends that the stockholders reject it.
(b) If required by applicable Law, the Company will, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement or, if applicable, an Information Statement with
the SEC with respect to the Stockholders Meeting and will use its best
efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement or, if applicable, Information Statement, to be cleared by
the SEC. The Company will notify Purchaser of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or, if applicable,
Information Statement, or for additional information and will supply
Purchaser promptly with copies of all correspondence between the
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Company or any of its representatives, on the one hand, and the SEC, on the
other hand, with respect to the Proxy Statement or the Merger. The Company
shall give Purchaser and its counsel the opportunity to review the Proxy
Statement or, if applicable, Information Statement, prior to it being filed
with the SEC and shall give Purchaser and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all
responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Purchaser agrees to
use its best efforts to cooperate with the Company in preparation of the
Proxy Statement or any amendment or supplement thereto, and in promptly
responding to all comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement or, if applicable, Information
Statement, has been declared effective by the SEC, the Company shall mail
the Proxy Statement or, if applicable, Information Statement, to the
stockholders of the Company. If at any time prior to the approval of this
Agreement by the Company's stockholders there shall occur any event which
should be set forth in an amendment or supplement to the Proxy Statement or,
if applicable, Information Statement, the Company will prepare and mail to
its stockholders such an amendment or supplement.
(c) Subject to the terms of this Agreement, the Company shall use its
reasonable best efforts to obtain the necessary approvals by its
stockholders of the Merger, this Agreement and the transactions contemplated
hereby.
(d) Purchaser agrees to cause all shares of Common Stock purchased by
Purchaser pursuant to the Offer and all other shares of Common Stock owned
by Purchaser or the Cherry Family Members to be voted in favor of the
approval of the Merger or to sign a written consent in lieu of a meeting in
favor of approval of the Merger.
6.4 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company, and Purchaser shall: (a) use their reasonable best
efforts to cooperate with one another in (i) determining which filings other
than under the Exchange Act are required to be made prior to the expiration
of the Offer or the Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the Effective
Time from, Governmental Entities or other third parties in connection with
the execution and delivery of this Agreement and any other Ancillary
Documents and the consummation of the transactions contemplated hereby and
thereby and (ii) timely making all filings under the Exchange Act and all
such other filings and timely seek all required consents, approvals,
permits, authorizations and waivers; and (b) use their reasonable best
efforts to take, or cause to be taken, all other action and do, or cause to
be done, all other things necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement. If, at any
time after the Effective Time, any further action is necessary or desirable
to carry out the purpose of this Agreement, the proper officers and
directors of Purchaser and the Surviving Corporation shall take all such
necessary action.
6.5 ACCESS TO INFORMATION.
(a) From the date of this Agreement until the Closing, the Company
shall, and shall cause its subsidiaries to: (i) give Purchaser and its
authorized representatives reasonable access, upon notice and during
business hours to all books, records, personnel, offices and other
facilities and properties of the Company and its subsidiaries, (ii) permit
Purchaser to make such copies and inspections thereof as Purchaser may
reasonably request and (iii) furnish Purchaser with such financial and
operating data and other information with respect to the business and
properties of the Company and its subsidiaries as Purchaser may from time to
time reasonably request; PROVIDED that, subject to SECTION 9.1, no
investigation or information furnished pursuant to this SECTION 6.5 shall
affect any representation or warranty made herein by any party hereto or the
conditions to the obligations of Purchaser to consummate the transactions
contemplated by this Agreement; PROVIDED, FURTHER, that such access shall be
at the expense of Purchaser.
(b) Purchaser will, and will cause its employees, agents and
representatives and the Cherry Family Members to hold in strict confidence,
and not use except in furtherance of the Offer and the Merger, any
confidential or proprietary data or information obtained from or on behalf
of the Company or any of its subsidiaries under SECTION 6.5.
6.6 PUBLICITY. The initial press release relating to this Agreement
shall be issued jointly by the Company and Purchaser. Thereafter, the
Company and Purchaser shall obtain the prior consent of each other before
issuing any press release or otherwise making public announcement with
respect to the transactions contemplated hereby, except as may be required
by Law or any listing agreement with any national securities exchange with
respect thereto.
6.7 FURTHER ACTION. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and
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execute such documents as may be reasonably required to effect the
transactions contemplated hereby, including the Merger.
6.8 INDEMNIFICATION AND INSURANCE.
(a) Each of Purchaser and the Company agrees that all rights to
indemnification existing in favor of the present or former directors,
officers, employees, fiduciaries and agents of the Company or any of its
subsidiaries as provided under the DGCL and in the Company's Certificate of
Incorporation or Bylaws or the charter and bylaws of the Company's
subsidiaries as in effect on the date hereof with respect to matters
occurring up to and including the Effective Time shall survive the purchase
of any Shares under the Offer and the Merger. Without limiting the
generality of the foregoing, in the event any person entitled to
indemnification under this Section 6.8(a) becomes involved in any claim,
action, proceeding or investigation after the purchase of any Shares under
the Offer, the Company shall periodically advance to such person his or her
reasonable legal and other reasonably incurred expenses (including the cost
of any investigation and preparation incurred in connection therewith),
subject to such person providing an undertaking to reimburse all amounts so
advanced unless it is determined that such person is entitled to
indemnification.
(b) Purchaser and the Company will maintain in effect for not less than
six years after the later to occur of the purchase of any Shares under the
Offer or the Effective Time, the Company's current directors and officers
insurance policies, if such insurance is obtainable (or policies of at least
the same coverage containing terms and conditions no less advantageous to
the current and all former directors and officers of the Company) with
respect to acts or failures to act up to and including the Effective Time,
including acts relating to the transactions contemplated by this Agreement;
provided, however, that in order to maintain or procure such coverage, the
Surviving Corporation shall not be required to maintain or obtain policies
providing such coverage except to the extent such coverage can be provided
at an annual cost of no greater than 150% of the most recent annual premium
paid by the Company prior to the date hereof (the "CAP"); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained
only by paying an annual premium in excess of the Cap, Purchaser or the
Surviving Corporation shall only be required to obtain as much coverage as
can be obtained by paying an annual premium equal to the Cap.
(c) The provisions of this SECTION 6.8 are intended to be for the
benefit of, and shall be enforceable by, each of the Company's current
directors and officers and their heirs and personal representatives.
ARTICLE 7
7. CONDITIONS.
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction or waiver, where permissible, prior to the Effective Time,
of the following conditions:
(a) If approval of this Agreement and the Merger by the holders of
Common Stock is required by applicable Law, this Agreement and the Merger
shall have been approved by the requisite vote of such holders.
(b) No United States federal or state governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order which is then in effect
and prohibits or has the effect of prohibiting the consummation of the
Merger or makes such consummation illegal.
(c) Any waiting period (and any extension thereof) applicable to the
Offer and the Merger under the Hart-Scott-Rodino Act shall have terminated
or expired.
(d) The Purchaser shall have accepted for payment and paid for all
Shares validly tendered pursuant to the Offer and not withdrawn; PROVIDED,
HOWEVER, that neither the Company nor the Purchaser shall be entitled to
invoke this condition, if it shall have been the cause of the failure to
purchase shares so tendered and not withdrawn in violation of the terms of
the Offer.
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ARTICLE 8
8. TERMINATION.
8.1 TERMINATION. This Agreement, notwithstanding approval thereof by the
stockholders of the Company, may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of Purchaser and the Special Committee; or
(b) by the Purchaser or the Special Committee:
(i) if either (x) the purchase of Shares pursuant to the Offer has
not been consummated on or before October 2, 2000, or (y) the Effective
Time shall not have occurred on or before December 1, 2000 (provided that
the right to terminate this Agreement pursuant to this clause (i) shall
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of
consummation of the purchase of Shares pursuant to the Offer on or before
October 2, 2000 or the Effective Time to occur on or before December 1,
2000; or
(ii) if there shall be any Law that makes consummation of the Offer
or the Merger illegal or prohibited, or if any court of competent
jurisdiction in the United States shall have issued an order, judgment,
decree or ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment, decree, ruling
or other action shall have become final and non-appealable; or
(c) by the Special Committee:
(i) if there is a Superior Proposal and if with respect thereto the
Special Committee or the Board of Directors determines in good faith
(after consultation with its legal counsel) that the failure to take such
action would be inconsistent with its fiduciary duties to the
stockholders of the Company; or
(ii) if Purchaser shall have breached in any material respect any of
its representations, warranties or covenants contained in this Agreement;
or
(d) by Purchaser:
(i) prior to the acceptance of any Common Stock validly tendered
pursuant to the Offer, if the Special Committee shall have withdrawn or
modified, in a manner that is materially adverse to Purchaser, its
approval or recommendation of this Agreement, the Offer, the Merger or
any other transaction contemplated hereby or shall have recommended
another merger, consolidation or business combination involving, or
acquisition of, the Company or its assets or another tender offer for
Common Stock, or shall have resolved to do any of the foregoing; or
(ii) if the Company shall have breached in any material respect any
of its representations, warranties or covenants contained in this
Agreement; or
(iii) if the Company fails to timely provide the Loan described in
SECTION 1.3(d).
8.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this ARTICLE
8, all obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this SECTION 8.2 and SECTIONS 6.5(b),
9.6 and 9.7, and there shall be no liability on the part of the Company,
Purchaser or their respective officers or directors, except for any breach
of a party's obligations under such provisions. If this Agreement shall
terminate pursuant to SECTION 8.1(c)(i) or SECTION 8.1(d)(i), no later than
10 days after such termination, the Company shall reimburse Purchaser and
the Cherry Family Members for the reasonable out-of-pocket expenses of
Purchaser and the Cherry Family Members, incurred in connection with or
arising out of the Offer, the Merger or the transactions contemplated hereby
or by the Ancillary Documents, reasonable attorneys' fees, up to a maximum
of $1,000,000. Each of the Company and the Purchaser acknowledges that the
agreements contained in this SECTION 8.2 are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, Purchaser and the Company would not enter into this Agreement.
Notwithstanding the foregoing, no party hereto shall be relieved from
liability for any breach of this Agreement.
8.3 AMENDMENT. To the extent permitted by applicable law, this Agreement
may be amended by action taken by or on behalf of the board of directors of
each of the parties hereto and, in the case of the Company, with the
approval of the Special Committee at any time before or after adoption of
this Agreement by the stockholders of the Company (if required); PROVIDED,
HOWEVER, that after any such stockholder approval
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(if required), no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of, or the income tax
consequences to, the Company's stockholders (other than Purchaser and the
Cherry Family Members) hereunder without the approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed
on behalf of all of the parties.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto, by action taken by its board of directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein; PROVIDED, HOWEVER, that, if the Company seeks to
make such extension or waiver as provided in (a), (b) or (c) above, it must
first obtain the approval of the Special Committee. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE 9
9. ADDITIONAL AGREEMENTS; GENERAL PROVISIONS.
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No inaccuracy in any of
the Company's representations or warranties which is known to Peter Cherry
as of the date hereof shall cause such representation or warranty to be
untrue or inaccurate for any purpose under this Agreement. No breach of any
agreement or obligation of the Company contained herein caused directly or
indirectly by any action or inaction by Peter Cherry shall cause such
agreements or obligations to be breached for any purpose under this
Agreement.
9.2 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement, or in any instrument
delivered pursuant to this Agreement, shall survive the Effective Time.
9.3 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or
made as of the date of receipt and shall be delivered personally or mailed
by registered or certified mail (postage prepaid, return receipt requested),
or sent by overnight courier or sent by facsimile, to the applicable party
at the following addresses or facsimile numbers (or at such other address or
telecopy number for a party as shall be specified by like notice):
If to Purchaser:
Cabo Acquisition Corp.
c/o Peter B. Cherry
The Cherry Corporation
3600 Sunset Avenue
Waukegan, Illinois 60087
Facsimile: (847) 360-3390
Attention: Peter B. Cherry
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Suite 4400
Chicago, IL 60606-5096
Facsimile: (312) 984-3669
Attention: William J. Quinlan
Helen R. Friedli, P.C.
If to the Company:
The Cherry Corporation
3600 Sunset Avenue
Waukegan, Illinois 60087
Facsimile: (847) 360-3390
Attention: Robert B. McDermott
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With a copy to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Facsimile: (312) 853-7036
Attention: Thomas A. Cole, Esq.
Imad I. Qasim, Esq.
9.4 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that either
Purchaser may assign its rights hereunder (including, without limitation,
the right to make the Offer and/or to purchase shares of Common Stock
pursuant to the Offer) to a wholly owned subsidiary of Purchaser; and,
further provided that nothing shall relieve the assignor from its
obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
SECTION 6.8 which may be enforced directly by the beneficiaries thereof,
nothing in this Agreement, expressed or implied, is intended to confer on
any Person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 ENTIRE AGREEMENT. This Agreement, the Stockholder Agreement, the
Exhibits, the Ancillary Documents and any other documents delivered by the
parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its
rules of conflict of laws. Each of the Company and Purchaser hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the United States District Court for the State of Delaware
or any court of the State of Delaware (the "DELAWARE COURTS") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating
thereto except in such courts), waives any objection to the laying of venue
of any such litigation in the Delaware Courts and agrees not to plead or
claim in any Delaware Court that such litigation brought therein has been
brought in an inconvenient forum. Purchaser hereby appoints The Corporation
Trust Company as agent for service of process. The address of such agent for
service of process is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
9.7 FEES AND EXPENSES. Except as otherwise provided in SECTION 8.2,
whether or not the Merger is consummated, all fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees, costs and expenses.
9.8 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "KNOWLEDGE" of any party hereto shall mean the knowledge of any
of the executive officers of that party.
(ii) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
9.9 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever. The table of contents
contained in this Agreement is for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.10 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and
words denoting natural Persons shall include corporations and partnerships
and vice versa. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be understood to be followed by the words
"without limitation."
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9.11 WAIVERS. No action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in
this Agreement or in any of the Ancillary Documents. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
9.12 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
9.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court,
this being in addition to any other remedy to which they are entitled at law
or in equity.
9.14 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which, when so executed and delivered,
shall be an original. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
THE CHERRY CORPORATION
By: /s/ ROBERT B. MCDERMOTT
--------------------------------------
Name: Robert B. McDermott
Title: Chairman, Special Committee to
the Board of Directors
CABO ACQUISITION CORP.
By: /s/ PETER B. CHERRY
--------------------------------------
Name: Peter B. Cherry
Title: President
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EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement, Purchaser
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered shares after
the termination or withdrawal of the Offer) to pay for any shares of Common
Stock tendered pursuant to the Offer not theretofore accepted for payment or
paid for, and may terminate or amend the Offer if at any time on or after the
date of this Agreement and before the acceptance of such Shares for payment or
the payment therefor, any of the following conditions exist or shall occur and
remain in effect (other than as a result of any action or inaction of Purchaser
that constitutes a breach of this Agreement):
(a) there shall have been instituted, pending or threatened any
litigation by the Government of the United States or by any agency or
instrumentality thereof (i) challenging the acquisition by Purchaser (or the
Cherry Family Members) of shares of Common Stock pursuant to the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger, (ii) seeking to make the purchase of or payment for some or all
of the shares of Common Stock pursuant to the Offer or the Merger illegal,
(iii) that would be reasonably likely to require divestiture by the
Purchaser or the Cherry Family Members of any Shares, (iv) that would be
reasonably likely to impose material limitations on the ability of Purchaser
or the Cherry Family Members to exercise full rights of ownership of the
shares of Common Stock purchased by it, including, without limitation, the
right to vote the shares purchased by it on all matters properly presented
to the stockholders of the Company, (v) that would be reasonably likely to
make materially more costly (A) the making of the Offer, (B) the acceptance
for payment of, or payment for, some or all of the Shares pursuant to the
Offer, (C) the purchase of Shares pursuant to the Offer or (D) the
consummation of the Merger, or (vi) that would otherwise have a Material
Adverse Effect on the Company; or
(b) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") has not expired or been
terminated; or
(c) there shall have been a subsequent development (including any
settlement or final settlement offer from counsel for the plaintiffs) in any
action or proceeding pending on June 5, 2000 relating to the Company or any
of its subsidiaries or there shall have been instituted any new action or
proceeding subsequent to June 5, 2000 that would (i) have a Material Adverse
Effect on Purchaser or the Company and its subsidiaries taken as a whole, or
(ii) make materially more costly (A) the making of the Offer, (B) the
acceptance for payment of, or payment for, some or all of the shares
pursuant to the Offer, (C) the purchase of shares pursuant to the Offer or
(D) the consummation of the Merger, or (iii) would materially and adversely
affect the results of operations of the Company; or
(d) there shall have been any action taken, or any Law promulgated,
enacted, entered, enforced or deemed applicable to the Offer or the Merger
by any Governmental Entity that would be reasonably likely to result in any
of the consequences referred to in subsection (a) above; or
(e) this Agreement shall have been terminated in accordance with its
terms; or
(f) (i) any of the representations and warranties made by the Company in
this Agreement that are qualified by materiality or Material Adverse Effect
shall not have been true and correct in all respects when made, or shall
thereafter have ceased to be true and correct in all respects as if made at
the scheduled or extended expiration of the Offer (except to the extent that
any such representation or warranty refers specifically to another date, in
which case such representation or warranty shall be true and correct in all
respects as of such other date), or the other representations and warranties
made by the Company in this Agreement shall not have been true and correct
in all material respects when made, or shall thereafter have ceased to be
true and correct in all material respects as if made at the scheduled or
extended expiration of the Offer (except to the extent that any such
representation or warranty refers specifically to another date, in which
case such representation or warranty shall be true and correct in all
material respects as of such other date) or (ii) the Company shall have
breached or failed to comply in any material respect with any of its
material obligations under this Agreement; or
(g) Purchaser and the Special Committee shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder; or
(h) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer, that number of shares of Common Stock that
represents more than 67% of the then outstanding shares of Common
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<PAGE>
Stock (when taken together with Shares beneficially owned by Purchaser and
the Cherry Family Members) (the "MINIMUM CONDITION"); or
(i) there shall have been a Material Adverse Effect with respect to the
Company, or there shall have been a change or event which could reasonably
be expected to have a Material Adverse Effect on the Company; or
(j) the Company fails to provide and fund the Loan pursuant to the Loan
Commitment.
The foregoing conditions are for the sole benefit of Purchaser and may,
except as provided in SECTION 1.1(b) of the Agreement, be waived by Purchaser,
in whole or in part, at any time and from time to time, in the sole discretion
of Purchaser. The failure by Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right, the waiver of such
right with respect to any particular facts or circumstances shall not be deemed
a waiver with respect to any other facts or circumstances, and each right will
be deemed an ongoing right which may be asserted at any time and from time to
time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Common Stock not theretofore accepted for payment shall
promptly be returned by the depositary to the tendering stockholders.
B-21
<PAGE>
EXHIBIT B
TERMS OF LOAN
Maturity: 120 days from funding
Interest: The greater of the Company's cost of funding and prime plus 0.25%
Maximum Amount: An amount equal to the number of shares of Common Stock not
owned by Purchaser or the Cherry Family Members (on a fully diluted basis)
MULTIPLIED BY the Per Share Amount, but not to exceed $150 million
Security: All shares of Common Stock owned by Purchaser and the Cherry Family
Members PLUS shares of Common Stock purchased in the Offer
Other Terms and Conditions: Customary for Loans of this nature
Loan Fee: An amount equal to 3/8% of the loaned amount to be delivered by a note
upon the funding of the Loan, which note shall be payable at the maturity of the
Loan
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<PAGE>
ANNEX C
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of June 5, 2000 (this "AGREEMENT"), by the
undersigned stockholders (the "STOCKHOLDERS") of The Cherry Corporation, a
Delaware corporation (the "COMPANY"), for the benefit of the Company.
RECITALS
WHEREAS, the Company and Cabo Acquisition Corp., a Delaware corporation
("PURCHASER") are entering into an Agreement and Plan of Merger, dated as of
June 5, 2000 (the "MERGER AGREEMENT"), whereby, upon the terms and subject to
the conditions set forth in the Merger Agreement, each issued and outstanding
share of Common Stock, par value $1.00 per share, of the Company (the "COMMON
STOCK"), not owned directly or indirectly by the Stockholders will be acquired
by the Purchaser for $26.40 per share;
WHEREAS, each Stockholder owns of record and/or holds employee stock options
to acquire (whether or not vested) that number of shares of Common Stock
appearing under his name on the signature page hereof (such shares of Common
Stock, together with any other shares of capital stock of the Company acquired
by such Stockholder after the date hereof and during the term of this Agreement,
being collectively referred to herein as the "SUBJECT SHARES"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Company has required that the Stockholders agree, and in order to
induce the Company to enter into the Merger Agreement the Stockholders have
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth herein, the Stockholder agrees as follows:
1. COVENANTS OF STOCKHOLDER. Until the termination of the Stockholders'
obligations in accordance with Section 4, each Stockholder agrees as follows:
(a) At the Stockholder Meeting (or at any adjournment thereof) or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger or the Merger Agreement is sought, the Stockholder
shall cause all Subject Shares and all shares of Common Stock acquired by
the Purchaser in the Offer to be present and voted in favor of the Merger,
the adoption of the Merger Agreement and the approval of the terms thereof
and each of the other transactions contemplated by the Merger Agreement.
(b) The Stockholder shall cooperate with the Company to support and to
consummate and make effective the Offer, the Merger and the other
transactions contemplated by the Merger Agreement and shall, as stockholders
of Purchaser, take all actions as shall be required of them as stockholders
to authorize and direct the Purchaser to fulfill its obligations under the
Merger Agreement and the Loan Agreement.
(c) The Stockholder shall not tender any Subject Shares in the Offer or,
except as contemplated by clause (d), otherwise sell, transfer or assign
record or beneficial ownership in any Subject Shares.
(d) Immediately prior to the funding of the Loan by the Company to the
Purchaser, all Subject Shares will be transferred by the Stockholder to the
Purchaser in a capital contribution and the Stockholder will cause the
Purchaser to retain the Subject Shares and shares acquired in the Offer
through the Effective Time.
(e) Except by means of the exercise of currently outstanding employee
stock options, the Stockholder will not acquire shares of Common Stock.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
represents and warrants to the Company as follows:
(a) The Stockholder is the record owner of, and has good title to, the
Subject Shares. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the Subject Shares. The
Stockholder has the sole right to vote, and the sole power of disposition
with respect to, the Subject Shares, and none of the Subject Shares is
subject to any voting trust, proxy or other agreement, arrangement or
restriction with respect to the voting or disposition of such Subject
Shares, except as contemplated by this Agreement.
(b) This Agreement has been duly executed and delivered by the
Stockholder. Assuming the due authorization, execution and delivery of this
Agreement by the Company, this Agreement constitutes the valid and binding
C-1
<PAGE>
agreement of the Stockholder enforceable against the Stockholder in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application which may affect the enforcement of creditors' rights
generally and by general equitable principles. The execution and delivery
and performance of this Agreement by the Stockholder does not and will not
conflict with any agreement, order or other instrument binding upon the
Stockholder, nor (except for filings required under the HSR Act and the
Exchange Act) require the Stockholder to make or obtain any regulatory
filing or approval.
(c) The Subject Shares held by the Stockholders, collectively,
represent, in the aggregate approximately 52% of the outstanding shares of
Common Stock. The Stockholder has no interest in selling the Subject Shares.
The Stockholder has no present plan or intention to cause the Purchaser or
the Company or any subsidiary of the Company, subsequent to the Offer or the
Merger, to engage in any extraordinary corporate transaction such as a
merger, reorganization or liquidation or a sale or transfer of a material
amount of its assets (an "EXTRAORDINARY TRANSACTION").
(d) The Stockholders, collectively, are the record and beneficial owners
of, and have good title to, 100% of the outstanding shares capital stock of
the Purchaser and will remain so through the Effective Time. The
Stockholders, collectively, have the sole right to vote and the sole power
of disposition with respect to such shares and will retain such right and
power through the Effective Time. The representations and warranties of the
Purchaser in the Merger Agreement are, to the best knowledge of the
Stockholder, true and correct.
3. REPRESENTATION AND WARRANTY OF PETER CHERRY. Peter Cherry represents
and warrants to the Company that he has disclosed to the Board of Directors of
the Company any proposals, expressions of interest or offers in any case which
specified a price or range of prices or value or range of values made by any
third party with respect to any Extraordinary Transaction from January 1, 1999
through the date hereof.
4. TERMINATION. The obligations of the Stockholder hereunder shall
terminate upon the earlier of the termination of the Merger Agreement pursuant
to Section 8.1 thereof or the Effective Time. No such termination shall relieve
the Stockholder from any liability in connection with this Agreement incurred
prior to such termination.
5. SUCCESSORS, ASSIGNS AND TRANSFEREES BOUND. Any successor, assignee or
transferee (including a successor, assignee or transferee as a result of the
death of the Stockholder, such as an executor or heir) shall be bound by the
terms hereof, and the Stockholder shall take any and all actions necessary to
obtain the written confirmation from such successor, assignee or transferee that
it is bound by the terms hereof.
6. REMEDIES. The Stockholder acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by it,
and that any such breach would cause the Company irreparable harm. Accordingly,
the Stockholder agrees that in the event of any breach or threatened breach of
this Agreement, the Company, in addition to any other remedies at law or in
equity it may have, shall be entitled, without the requirement of posting a bond
or other security, to equitable relief, including injunctive relief and specific
performance.
7. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
8. AMENDMENT. This Agreement may be amended only by means of a written
instrument executed and delivered by both the Stockholders and the Company; in
the case of the Company, any such amendment shall be effective only if
authorized by action of the Special Committee.
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
10. CAPITALIZED TERMS. Capitalized terms used in this Agreement that are
not defined herein shall have such meanings as set forth in the Merger
Agreement.
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<PAGE>
11. COUNTERPARTS. For the convenience of the parties, this Agreement may
be executed in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
<TABLE>
<S> <C> <C>
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as trustee of the Peter Cherry
Trust under Agreement dated February 28, 1983
Number of shares of Common Stock owned on the date
hereof: 1,000,042
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as the General Partner of PBC
Investments, L.P.
Number of shares of Common Stock owned on the date
hereof: 622,764
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as the General Partner of Cherry
Investments, L.P.
Number of shares of Common Stock owned on the date
hereof: 1,097,011
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as trustee of the Virginia
Cherry Trust under Agreement dated January 18, 1978
Number of share of Common Stock owned on the date
hereof: 931,114
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, individually as an option holder
Number of shares of Common Stock covered by options
on the date hereof: 136,000
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as trustee of the Walter Cherry
Trust under Agreement dated January 18, 1978
Number of shares of Common Stock owned on the date
hereof: 927,281
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as trustee under the Catherine
Moore Trust
Number of shares of Common Stock owned on the date
hereof: 284,000
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C>
/s/ PETER CHERRY
---------------------------------------------------
Name: Peter Cherry, as co-trustee under the
Catherine Moore Trust under Agreement dated
February 26, 1982
/s/ VIRGINIA CHERRY
---------------------------------------------------
Name: Virginia Cherry, as co-trustee under the
Catherine Moore Trust under Agreement dated
February 26, 1982
Number of shares of Common Stock owned on the date
hereof: 457,454
Accepted and Agreed
to as of the date set forth above:
THE CHERRY CORPORATION
By: /s/ ROBERT B. MCDERMOTT
-------------------------------------------
Name: Robert B. McDermott
Title: Chairman, Special Committee of the
Board of Directors
</TABLE>
C-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for Shares and any other
required documents should be sent or delivered by each stockholder or his or her
broker, dealer, commercial bank, trust company or nominee to the Depositary at
one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
Harris Trust and Savings Bank
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Harris Trust and Savings Bank (212) 701-7636 Harris Trust and Savings Bank
c/o Harris Trust Company of New York FOR INFORMATION TELEPHONE: c/o Harris Trust Company of New York
Wall Street Station (212) 701-7624 Receive Window
P.O. Box 1010 Wall Street Plaza
New York, New York 10268-1010 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
Any requests for assistance or additional copies of the Offer to Purchase,
the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed
to the Information Agent or the Dealer Manager at the telephone numbers and
locations listed below. Stockholders may also contact their local broker,
dealer, commercial bank, trust company or nominee for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, New York 10022
Call Collect: (212) 754-8000
Banks and Brokerage Firms, Please Call: (800) 662-5200
STOCKHOLDERS, PLEASE CALL: (800) 566-9061
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
9 West 57th Street
New York, New York 10019
Toll Free: (888) 583-8900, extension: 6320
Call Collect: (212) 847-6320
Contact: Gregory S. Donat
