<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CLARCOR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3714 36-0922490
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2323 SIXTH STREET
P.O. BOX 7007
ROCKFORD, ILLINOIS 61125
(815) 962-8867
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
BRUCE A. KLEIN
VICE PRESIDENT-FINANCE AND
CHIEF FINANCIAL OFFICER
2323 SIXTH STREET
P.O. BOX 7007
ROCKFORD, ILLINOIS 61125
(815) 962-8867
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C> <C>
DAVID J. BOYD, ESQ. JACK PAINTER, ESQ. RICHARD G. SCHMALZL, ESQ.
SIDLEY & AUSTIN 4440 CREEK ROAD GRAYDON, HEAD & RITCHEY
ONE FIRST NATIONAL PLAZA CINCINNATTI, OHIO 45242 1900 FIFTH THIRD CENTER
CHICAGO, ILLINOIS 60603 511 WALNUT STREET
CINCINNATI, OHIO 45202
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and the
effective time of the merger (the "Merger") of CUAC Inc., a wholly owned
subsidiary of CLARCOR Inc. ("CLARCOR"), with and into United Air Specialists,
Inc. ("UAS"), pursuant to the Merger Agreement described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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- -----------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM
OFFERING PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
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Common Stock, par value $1 per share.... 1,209,302 shares(1) N.A. $27,867,465(2) $8,444.69(3)
- -----------------------------------------------------------------------------------------------------------------
1,209,302
Preferred Stock Purchase Rights......... rights (1) (4) (4) (4)
- -----------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Based on the maximum number of shares of CLARCOR Common Stock issuable in
the Merger assuming the exercise of all currently outstanding options to
purchase shares of UAS Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f) under the Securities
Act by multiplying the average of the high and low sales prices of UAS
Common Stock on January 13, 1997, as reported in the consolidated reporting
system, by the number of shares of UAS Common Stock outstanding at the close
of business on January 13, 1997, assuming the exercise of all then
outstanding options to purchase shares of UAS Common Stock.
(3) Pursuant to 457(b) under the Securities Act, $4,902.59 of the registration
fee was paid on October 24, 1996 in connection with the filing of
preliminary proxy materials.
(4) The Preferred Stock Purchase Rights of CLARCOR initially are attached to and
trade with the shares of CLARCOR Common Stock being registered hereby. Value
attributable to such Preferred Stock Purchase Rights, if any, is reflected
in the market price of CLARCOR Common Stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
UNITED AIR SPECIALISTS, INC.
4440 CREEK ROAD
CINCINNATI, OHIO 45242
January 17, 1997
Dear Shareholder:
You are cordially invited to attend a special meeting (the "Special
Meeting") of shareholders of United Air Specialists, Inc. ("UAS") to be held on
February 14, 1997 at 10:00 a.m. (EST) at the corporate offices of UAS, 4440
Creek Road, Cincinnati, Ohio.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger dated as of September 23,
1996 (the "Merger Agreement") among CLARCOR Inc., a Delaware corporation
("CLARCOR"), CUAC Inc., an Ohio corporation and a wholly-owned subsidiary of
CLARCOR ("Sub"), and UAS, which provides for the merger (the "Merger") of Sub
with and into UAS, with UAS surviving as a wholly-owned subsidiary of CLARCOR.
CLARCOR manufactures, markets and distributes mobile, industrial and
environmental filtration products and consumer packaging products for both
domestic and international markets. For its fiscal year ended December 2, 1995,
CLARCOR had sales of approximately $290.2 million and net earnings of
approximately $22.0 million and sales of approximately $333.4 million and net
earnings of approximately $25.0 million for its fiscal year ended November 30,
1996. CLARCOR's common stock, par value $1 per share ("CLARCOR Common Stock") is
listed for trading under the symbol "CLC" on the New York Stock Exchange (the
"NYSE" ). On January 13, 1997, the last trading day prior to the date of the
accompanying Proxy Statement/Prospectus, the last reported sale price of CLARCOR
Common Stock, as reported on the NYSE Composite Transactions Tape, was $23.00
per share.
Subject to the terms and conditions of the Merger Agreement, each share of
UAS common stock, without par value ("UAS Common Stock"), outstanding
immediately prior to the Effective Time (as defined in the Merger Agreement) of
the Merger (other than shares owned directly or indirectly by CLARCOR or UAS,
which will be cancelled) will be converted into .3702116 of a share of CLARCOR
Common Stock, including the corresponding percentage of a right (collectively,
the "CLARCOR Rights") to purchase shares of Series B Junior Participating
Preferred Stock of CLARCOR, subject to adjustment based on the number of fully
diluted shares of UAS Common Stock outstanding immediately prior to the
Effective Time. Cash will be paid in lieu of any fractional share of CLARCOR
Common Stock.
If the per share closing price of CLARCOR Common Stock on the NYSE (as
shown in The Wall Street Journal, New York Stock Exchange Composite
Transactions) on any date (the "Calculation Date") occurring within ten business
days preceding the closing of the Merger, is less than the dollar amount
calculated by multiplying the Index Adjusted Price (as defined below) by 85%
(such amount, the "Minimum Per Share Price"), the Merger Agreement may be
terminated by UAS. The "Index Adjusted Price" is equal to the product obtained
by multiplying (A) $21 1/2 by (B) the decimal determined by dividing the S&P 500
Index on the Calculation Date by the S&P 500 Index on September 23, 1996
(provided that in no event may such decimal exceed 1.0).
The Board of Directors of UAS has unanimously determined that the Merger is
advisable and fair to and in the best interests of UAS and its shareholders and
has unanimously approved the Merger Agreement. THE UAS BOARD UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF UAS VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING. APPROVAL OF THE PROPOSAL TO ADOPT THE MERGER
AGREEMENT WILL ALSO AUTHORIZE THE UAS BOARD TO EXERCISE ITS DISCRETION WHETHER
TO PROCEED WITH THE MERGER IN THE EVENT UAS HAS THE RIGHT TO EXERCISE ITS
TERMINATION RIGHT IF THE CLOSING PRICE OF CLARCOR COMMON STOCK ON A CALCULATION
DATE IS LESS THAN THE APPLICABLE MINIMUM PER SHARE PRICE AS SPECIFIED IN THE
PRECEDING PARAGRAPH. UAS EXPECTS THAT THE UAS BOARD WOULD EXERCISE SUCH
DISCRETION AND DECIDE WHETHER TO TERMINATE THE MERGER AGREEMENT WITHOUT A
RESOLICITATION OF SHAREHOLDERS.
<PAGE> 3
In connection with the execution of the Merger Agreement, the holders of
UAS Common Stock representing 1,349,853 shares of UAS Common Stock
(approximately 46.2% of the shares of UAS Common Stock outstanding on the record
date for the Special Meeting), signed agreements obligating them, except in
certain circumstances, to vote in favor of adoption of the Merger Agreement and
against certain other actions. At the close of business on the record date for
the Special Meeting, directors and executive officers of UAS and their
affiliates were the beneficial owners of an aggregate of 1,447,219
(approximately 49.6%) of the shares of UAS Common Stock then outstanding. Such
shares include the shares subject to the voting agreements. UAS believes that
its directors, executive officers and their affiliates intend to vote all shares
of UAS Common Stock beneficially owned by them in favor of adoption of the
Merger without regard to whether such shares are subject to voting agreements.
This accompanying Proxy Statement/Prospectus constitutes the Proxy
Statement of UAS for the Special Meeting and also the Prospectus of CLARCOR
relating to the issuance of shares of CLARCOR Common Stock pursuant to the
Merger Agreement (including the issuance of shares of CLARCOR Common Stock
issuable upon exercise of specified options to purchase UAS Common Stock) and
the associated CLARCOR Rights.
Please give these materials your careful attention because the discussion
included therein is important to your decision on the matters being presented.
Whether or not you plan to attend the Special Meeting in person, please promptly
mark, sign and date the enclosed proxy and return it in the enclosed envelope to
ensure that your shares will be represented at the Special Meeting. If you
attend the Special Meeting in person, you may revoke your proxy at the meeting
by voting in person.
We look forward to seeing you at the Special Meeting.
Sincerely yours,
/s/ Durwood G. Rorie, Jr.
Durwood G. Rorie, Jr.
President and Chief Executive Officer
<PAGE> 4
UNITED AIR SPECIALISTS, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 14, 1997
To the Shareholders of United Air Specialists, Inc.:
A Special Meeting of the Shareholders of United Air Specialists, Inc.
("UAS") will be held on February 14, 1997, at 10:00 a.m. (EST) at the corporate
offices of UAS located at 4440 Creek Road, Cincinnati, Ohio for the following
purposes:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger dated as of September 23, 1996 (the "Merger Agreement")
among CLARCOR Inc., a Delaware corporation ("CLARCOR"), CUAC Inc., an Ohio
corporation and a wholly-owned subsidiary of CLARCOR ("Sub"), and UAS,
which provides for the merger (the "Merger") of Sub with and into UAS, with
UAS surviving as a wholly-owned subsidiary of CLARCOR. A conformed copy of
the Merger Agreement is attached to the accompanying Proxy
Statement/Prospectus as Annex I. Subject to the terms and conditions of the
Merger Agreement, each share of UAS common stock, without par value ("UAS
Common Stock"), outstanding immediately prior to the Effective Time (as
defined in the Merger Agreement) of the Merger (other than shares owned
directly or indirectly by CLARCOR or UAS, which will be cancelled) will be
converted into .3702116 of a share of CLARCOR Common Stock, including the
corresponding percentage of a right to purchase shares of Series B Junior
Participating Preferred Stock of CLARCOR, subject to adjustment based on
the number of fully diluted shares of UAS Common Stock outstanding
immediately prior to the Effective Time. Cash will be paid in lieu of any
fractional share of CLARCOR Common Stock. If the per share closing price of
CLARCOR Common Stock on the NYSE (as shown in The Wall Street Journal, New
York Stock Exchange Composite Transactions) on any date (the "Calculation
Date") occurring within ten business days preceding the closing of the
Merger, is less than the dollar amount calculated by multiplying the Index
Adjusted Price (as defined below) by 85% (such amount, the "Minimum Per
Share Price"), the Merger Agreement may be terminated by UAS. The "Index
Adjusted Price" is equal to the product obtained by multiplying (A) $21 1/2
by (B) the decimal determined by dividing the S&P 500 Index on the
Calculation Date by the S&P 500 Index on September 23, 1996 (provided that
in no event may such decimal exceed 1.0). Approval of the proposal to adopt
the Merger Agreement will also authorize the Board of Directors of UAS to
exercise its discretion whether to elect to exercise UAS's termination
right in the event the closing price of CLARCOR Common Stock on any
Calculation Date is less than the applicable Minimum Per Share Price
specified above. UAS expects that the UAS Board would exercise such
discretion and decide whether to terminate the Merger Agreement without a
resolicitation of shareholders.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Only shareholders of record of UAS Common Stock at the close of business on
January 6, 1997 are entitled to receive notice of and to vote at the Special
Meeting. See "UAS SPECIAL MEETING" in the accompanying Proxy
Statement/Prospectus.
Each shareholder is invited to attend the Special Meeting. Whether or not
you expect to attend the Special Meeting, please promptly mark, sign and date
the enclosed proxy and return it in the enclosed envelope. No postage is
required if mailed within the United States. Your proxy may be revoked at any
time prior to its exercise by giving notice thereof to UAS in writing or in open
meeting or by signing and returning
<PAGE> 5
to UAS a later dated proxy. Attendance at the UAS Special Meeting will not in
and of itself constitute the revocation of a proxy.
By Order of the Board of Directors,
/s/ Durwood G. Rorie
Durwood G. Rorie, Jr., President
and Chief Executive Officer
January 17, 1997
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF UAS COMMON STOCK IS REQUIRED FOR THE APPROVAL OF THE PROPOSAL TO ADOPT THE
MERGER AGREEMENT.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY. YOU SHOULD NOT SEND
IN YOUR STOCK CERTIFICATES WHEN RETURNING YOUR PROXY. IF THE MERGER IS
CONSUMMATED, YOU WILL BE NOTIFIED AND PROVIDED WITH INSTRUCTIONS FOR EXCHANGE OF
YOUR CERTIFICATES.
<PAGE> 6
UNITED AIR SPECIALISTS, INC.
PROXY STATEMENT
------------------------
CLARCOR INC.
PROSPECTUS
------------------------
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of Common Stock,
without par value ("UAS Common Stock"), of United Air Specialists, Inc., an Ohio
corporation ("UAS"), in connection with the solicitation of proxies by the Board
of Directors of UAS (the "UAS Board") for use at a Special Meeting of
Shareholders of UAS to be held on February 14, 1997 at 10:00 a.m. (EST) at the
corporate offices of UAS, 4440 Creek Road, Cincinnati, Ohio, and at any and all
adjournments or postponements thereof (the "UAS Special Meeting").
This Proxy Statement/Prospectus relates to the Agreement and Plan of Merger
dated as of September 23, 1996 (the "Merger Agreement") among CLARCOR Inc., a
Delaware corporation ("CLARCOR"), CUAC Inc., an Ohio corporation and a
wholly-owned subsidiary of CLARCOR ("Sub"), and UAS, which provides for the
merger (the "Merger") of Sub with and into UAS, with UAS surviving as a
wholly-owned subsidiary of CLARCOR. Subject to the terms and conditions of the
Merger Agreement, each share of UAS Common Stock outstanding immediately prior
to the Effective Time (as defined in the Merger Agreement) of the Merger (other
than shares owned directly or indirectly by CLARCOR or UAS, which will be
cancelled) will be converted into .3702116 of a share of Common Stock, par value
$1 per share, of CLARCOR ("CLARCOR Common Stock"), including the corresponding
percentage of a right (collectively, the "CLARCOR Rights") to purchase shares of
Series B Junior Participating Preferred Stock of CLARCOR ("CLARCOR Series B
Preferred Stock"), subject to adjustment based on the number of fully diluted
shares of UAS Common Stock outstanding immediately prior to the Effective Time.
Cash will be paid in lieu of any fractional share of CLARCOR Common Stock.
Notwithstanding the foregoing, holders of UAS Common Stock have the right to
dissent from the Merger and to receive payment of the fair value of their shares
upon full compliance with Section 1701.85 of the General Corporation Law of the
State of Ohio (the "OGCL"). See "DISSENTERS' RIGHTS." If holders of more than
10% of the outstanding shares of UAS Common Stock properly demand dissenters'
rights, CLARCOR has the right to decline to consummate the Merger. See "THE
MERGER AGREEMENT -- Conditions Precedent to the Merger."
The consummation of the Merger is subject, among other things, to the
adoption of the Merger Agreement by the affirmative vote of the holders of a
majority of the shares of UAS Common Stock outstanding on the Record Date (as
defined herein) and the receipt of certain regulatory approvals. The holders of
UAS Common Stock representing approximately 46.2% of the shares of UAS Common
Stock outstanding on the Record Date (as defined herein) have signed agreements
obligating them, except in certain circumstances, to vote in favor of adoption
of the Merger Agreement. See "VOTING AGREEMENTS." SEE "RISK FACTORS" ON PAGE 19
FOR A DESCRIPTION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY HOLDERS OF UAS
COMMON STOCK BEFORE VOTING. A conformed copy of the Merger Agreement is attached
hereto as Annex I.
This Proxy Statement/Prospectus also constitutes the Prospectus of CLARCOR
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
issuance (the "Share Issuance") of shares of CLARCOR Common Stock pursuant to
the Merger Agreement (including the issuance of shares of CLARCOR Common Stock
issuable upon exercise of Substitute Options (as hereinafter defined)) and the
associated CLARCOR Rights.
CLARCOR Common Stock is listed for trading under the symbol "CLC" on the
New York Stock Exchange (the "NYSE" ). UAS Common Stock is listed for trading
under the symbol "UASI" on The Nasdaq National Market ("Nasdaq"). Execution of
the Merger Agreement was publicly announced after the close of trading on
September 23, 1996. On that date, the last reported sale price of CLARCOR Common
Stock, as reported on the NYSE Composite Transactions Tape, was $21 3/4 per
share and the last reported sale price of UAS Common Stock, as reported by
Nasdaq, was $4 1/2 per share. On January 13, 1997, the last trading day prior to
the date of this Proxy Statement/Prospectus, the last reported sale price of
CLARCOR Common Stock, as reported on the NYSE Composite Transactions Tape, was
$23.00 per share and the last reported sale price of UAS Common Stock, as
reported by Nasdaq, was $8.5625 per share.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to holders of UAS Common Stock on or about January 17, 1997.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JANUARY 14, 1997.
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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<S> <C>
AVAILABLE INFORMATION.................................................................. 1
INCORPORATION OF DOCUMENTS BY REFERENCE................................................ 1
SUMMARY................................................................................ 3
UAS Special Meeting.................................................................. 3
Parties to the Merger Agreement...................................................... 4
The Merger........................................................................... 5
The Merger Agreement................................................................. 7
Comparison of Rights of Holders of CLARCOR Common Stock and UAS Common Stock......... 9
Dissenters' Rights................................................................... 10
CLARCOR Selected Consolidated Financial Data......................................... 11
UAS Selected Consolidated Financial Data............................................. 13
CLARCOR Selected Unaudited Pro Forma Combined Financial Data......................... 14
Comparative Per Share Data of CLARCOR and UAS........................................ 16
Market Prices and Dividends Paid..................................................... 17
Recent Developments.................................................................. 18
RISK FACTORS........................................................................... 19
UAS SPECIAL MEETING.................................................................... 19
Date, Place and Time................................................................. 19
Purpose.............................................................................. 19
Record Date; Voting Rights........................................................... 19
Quorum............................................................................... 19
Proxies.............................................................................. 19
Solicitation of Proxies.............................................................. 20
Required Vote........................................................................ 20
Dissenters' Rights................................................................... 20
PARTIES TO THE MERGER AGREEMENT........................................................ 21
CLARCOR.............................................................................. 21
UAS.................................................................................. 21
Sub.................................................................................. 21
THE MERGER............................................................................. 22
General.............................................................................. 22
Background of the Merger............................................................. 22
UAS's Reasons for the Merger; Recommendation of its Board of Directors............... 26
Opinion of UAS's Financial Advisor................................................... 27
Interests of Certain Persons in the Merger........................................... 31
Material Federal Income Tax Consequences............................................. 33
Anticipated Accounting Treatment..................................................... 35
Regulatory Approvals................................................................. 36
Percentage Ownership Interest of UAS Shareholders After the Merger................... 36
Stock Exchange Listing............................................................... 36
Delisting and Deregistration of UAS Common Stock..................................... 36
Resales of CLARCOR Common Stock...................................................... 36
THE MERGER AGREEMENT................................................................... 37
Conversion of Shares in the Merger................................................... 37
No Fractional Shares................................................................. 38
Adjustment of Conversion Number...................................................... 38
Exchange Agent; Procedures for Exchange of Certificates.............................. 38
Stock Options........................................................................ 40
Representations and Warranties....................................................... 40
Conduct of Business Pending the Merger............................................... 40
</TABLE>
i
<PAGE> 8
<TABLE>
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PAGE
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No Solicitation...................................................................... 43
Conditions Precedent to the Merger................................................... 43
Employee Benefits.................................................................... 43
Indemnification; Directors and Officers Insurance.................................... 45
Termination.......................................................................... 45
Fees and Expenses.................................................................... 46
Amendment............................................................................ 47
Waiver............................................................................... 47
VOTING AGREEMENTS...................................................................... 47
DESCRIPTION OF CLARCOR COMMON STOCK.................................................... 48
Dividend Rights...................................................................... 48
Voting Rights........................................................................ 49
Change of Control.................................................................... 49
Liquidation Rights................................................................... 51
Miscellaneous........................................................................ 51
COMPARISON OF RIGHTS OF HOLDERS OF CLARCOR COMMON STOCK AND UAS COMMON STOCK........... 52
Dividend Rights...................................................................... 52
Voting Rights........................................................................ 52
Directors............................................................................ 53
Call of Special Meetings............................................................. 54
Action by Stockholders Without a Meeting............................................. 54
Stockholder Proposals................................................................ 54
Amendment to Charter Document........................................................ 55
Amendment to By-laws................................................................. 55
Approval of Mergers and Asset Sales.................................................. 55
Rights of Appraisal.................................................................. 56
Indemnification of Directors and Officers............................................ 56
Anti-Takeover Provisions............................................................. 57
Rights of Inspection................................................................. 58
Liquidation Rights................................................................... 58
ADDITIONAL INFORMATION REGARDING UAS................................................... 58
Description of Business.............................................................. 58
Description of Property.............................................................. 63
Legal Proceedings.................................................................... 64
Market Price of UAS Common Stock and Related Matters................................. 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 65
Voting Securities and Principal Holders Thereof...................................... 69
DISSENTERS' RIGHTS..................................................................... 70
EXPERTS................................................................................ 72
LEGAL OPINIONS......................................................................... 73
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING...................................... 73
OTHER MATTERS.......................................................................... 73
UAS CONSOLIDATED FINANCIAL STATEMENTS.................................................. F-1
CLARCOR UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.............................. F-22
ANNEX I - AGREEMENT AND PLAN OF MERGER
ANNEX II - OPINION OF J. J. B. HILLIARD, W.L. LYONS, INC.
ANNEX III - SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW
</TABLE>
ii
<PAGE> 9
AVAILABLE INFORMATION
CLARCOR and UAS are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the SEC: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the SEC maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants who file electronically with the SEC. CLARCOR
and UAS file electronically with the SEC. Copies of such materials relating to
CLARCOR can be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
Copies of such materials relating to UAS can be inspected at the offices of
Nasdaq, 1735 K Street, N.W. Washington, D.C. 20006.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to the
Registration Statement and the Exhibits thereto for further information.
Statements contained or incorporated by reference herein concerning the
provisions of any agreement or other document filed as an Exhibit to the
Registration Statement or otherwise filed with the SEC are not necessarily
complete and reference is hereby made to the copy thereof so filed for more
detailed information, each such statement being qualified in its entirety by
such reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
PREVIOUSLY FILED BY CLARCOR WITH THE SEC THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS THERETO WHICH
ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF SHARES OF UAS COMMON
STOCK TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO CORPORATE SECRETARY, CLARCOR INC., 2323 SIXTH STREET, ROCKFORD,
ILLINOIS 61125, TELEPHONE NUMBER (815) 962-8867. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS PRIOR TO THE UAS SPECIAL MEETING, ANY REQUEST THEREFOR
SHOULD BE MADE NOT LATER THAN FEBRUARY 7, 1997.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed by CLARCOR with the SEC (file
number 1-11024) pursuant to the Exchange Act are incorporated herein by
reference:
1. CLARCOR's Annual Report on Form 10-K for the year ended December 2,
1995;
2. CLARCOR's Quarterly Reports on Form 10-Q for the quarters ended
March 2, June 1 and August 31, 1996;
3. CLARCOR's Current Reports on Form 8-K filed with the SEC on April
3, June 28 and September 25, 1996 and on January 6, 1997;
4. The information contained in CLARCOR's Proxy Statement for its
Annual Meeting of Shareholders held on March 28, 1996 on pages 1 through 11
and 14 under the captions "Election of Directors," "Beneficial Ownership of
the Company's Common Stock," "Compensation of Executive Officers and Other
Information" and "Compensation Committee Interlocks and Insider
Participation"; and
5. The description of the CLARCOR Rights contained in the Registration
Statement on Form 8-A filed by CLARCOR with the SEC on April 3, 1996,
including any amendments or reports filed for the purpose of updating such
description.
1
<PAGE> 10
All reports and other documents filed by CLARCOR pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the UAS Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
dates of filing of such reports and documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER CLARCOR OR UAS. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF CLARCOR OR UAS SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
As used herein, unless the context otherwise clearly requires: "CLARCOR"
refers to CLARCOR Inc. and its consolidated Subsidiaries and "UAS" refers to
United Air Specialists, Inc. and its consolidated Subsidiaries. Capitalized
terms not defined in this Proxy Statement/Prospectus have the respective
meanings specified in the Merger Agreement. All information contained herein
with respect to UAS Common Stock, including financial information presented on a
per share basis, has been adjusted to reflect a five-for-four stock split
effected on February 2, 1996 for holders of record on January 19, 1996 and the
three-for-one stock split effected on June 1, 1994 for holders of record on May
18, 1994.
------------------------
All information contained in this Proxy Statement/Prospectus with respect
to CLARCOR and Sub has been provided by CLARCOR. All information contained in
this Proxy Statement/Prospectus with respect to UAS has been provided by UAS.
2
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement/Prospectus. Reference is made
to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Proxy
Statement/Prospectus and the Annexes hereto.
------------------------
SHAREHOLDERS OF UAS ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS AND
THE ANNEXES HERETO IN THEIR ENTIRETY AND SHOULD CONSIDER CAREFULLY THE
INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS."
------------------------
UAS SPECIAL MEETING
DATE, PLACE AND TIME....... The UAS Special Meeting will be held on February
14, 1997 at 10:00 a.m. (EST) at the corporate
offices of UAS, 4440 Creek Road, Cincinnati, Ohio.
PURPOSE.................... To consider and vote upon a proposal to adopt the
Merger Agreement and to transact such other
business as may properly come before the UAS
Special Meeting. See "UAS SPECIAL
MEETING -- Purpose."
RECORD DATE; VOTING
RIGHTS..................... Only holders of record of UAS Common Stock at the
close of business on January 6, 1997 (the "Record
Date") are entitled to receive notice of and to
vote at the UAS Special Meeting. At the close of
business on the Record Date, there were 2,920,078
shares of UAS Common Stock outstanding, each of
which entitles the registered holder thereof to one
vote on each matter voted upon at the UAS Special
Meeting. See "UAS SPECIAL MEETING -- Record Date;
Voting Rights."
QUORUM..................... The holders of UAS Common Stock present in person
or by proxy at the UAS Special Meeting will
constitute a quorum for such meeting. See "UAS
SPECIAL MEETING -- Quorum."
REQUIRED VOTE.............. Adoption of the Merger Agreement will require the
affirmative vote of the holders of a majority of
the shares of UAS Common Stock outstanding on the
Record Date. Accordingly, since there were
2,920,078 shares of UAS Common Stock outstanding on
the Record Date, adoption of the Merger Agreement
will require the affirmative vote of holders of at
least 1,460,040 shares of UAS Common Stock. Brokers
who hold shares of UAS Common Stock as nominees
will not have discretionary authority to vote such
shares in the absence of instructions from the
beneficial owners thereof. Broker non-votes and
abstentions will have the effect of votes against
the proposal to adopt the Merger Agreement. See
"UAS SPECIAL MEETING -- Required Vote."
Approval of the proposal to adopt the Merger
Agreement will also authorize the UAS Board to
exercise its discretion whether to proceed with the
Merger in the event that, during the period
commencing ten business days prior to the Closing,
the closing per share price of CLARCOR Common Stock
on the NYSE (as published in The Wall Street
Journal, New York Stock Exchange Composite
Transactions) is less than a threshold amount
determined in accordance with the terms of the
Merger Agreement. UAS expects that the UAS Board
would exercise such discretion and decide whether
to terminate the Merger Agreement without a
resolicitation of shareholders. See "THE MERGER
AGREEMENT -- Termination."
3
<PAGE> 12
VOTING AGREEMENTS.......... The holders of UAS Common Stock representing
1,349,853 shares of UAS Common Stock (approximately
46.2% of the shares of UAS Common Stock outstanding
on the Record Date) have signed agreements
obligating them, except in certain circumstances,
to vote in favor of adoption of the Merger
Agreement and against certain other actions. See
"VOTING AGREEMENTS."
SHARE OWNERSHIP OF
MANAGEMENT............... At the close of business on the Record Date,
Directors and executive officers of UAS and their
affiliates were the beneficial owners of an
aggregate of 1,447,219 (approximately 49.6%) of the
shares of UAS Common Stock then outstanding. Such
shares include the shares subject to the voting
agreements described above. UAS believes that its
Directors, executive officers and their affiliates
intend to vote all shares of UAS Common Stock
beneficially owned by them in favor of adoption of
the Merger without regard to whether such shares
are subject to voting agreements. See "UAS SPECIAL
MEETING -- Required Vote."
PARTIES TO THE MERGER AGREEMENT
CLARCOR.................... CLARCOR manufactures, markets and distributes
mobile, industrial and environmental filtration
products and consumer packaging products for both
domestic and international markets. CLARCOR had
sales of approximately $290.2 million and net
earnings of approximately $22.0 million for its
fiscal year ended December 2, 1995 and sales of
approximately $333.4 million and net earnings of
approximately $25.0 million for its fiscal year
ended November 30, 1996. CLARCOR was organized in
1904 as an Illinois corporation and in 1969 was
reincorporated in the State of Delaware. Its
principal executive offices are located at 2323
Sixth Street, P.O. Box 7007, Rockford, Illinois
61125 and its telephone number is (815) 962-8867.
For further information concerning CLARCOR, see
"-- CLARCOR Selected Consolidated Financial Data,"
"-- Recent Developments," "PARTIES TO THE MERGER
AGREEMENT -- CLARCOR," "AVAILABLE INFORMATION" and
"INCORPORATION OF DOCUMENTS BY REFERENCE."
UAS........................ UAS is engaged in the design, manufacture and sale
of commercial and industrial air cleaners,
electrostatic fluid contamination control equipment
and high precision spraying equipment. UAS had
sales of approximately $40.8 million and net
earnings of approximately $1.5 million for its
fiscal year ended June 30, 1996. UAS was founded in
1966 and is incorporated in Ohio. Its principal
executive offices are located at 4440 Creek Road,
Cincinnati, Ohio 45242 and its telephone number is
(513) 891-0400. For further information concerning
UAS, see "-- UAS Selected Consolidated Financial
Data," "PARTIES TO THE MERGER AGREEMENT -- UAS,"
"ADDITIONAL INFORMATION REGARDING UAS," "UAS
CONSOLIDATED FINANCIAL STATEMENTS" and "AVAILABLE
INFORMATION."
SUB........................ Sub was incorporated in Ohio on September 19, 1996
solely for the purpose of consummating the Merger
and the other transactions contemplated by the
Merger Agreement. Sub has minimal assets and no
business and has carried on no activities which are
not directly related to its formation and its
execution of the Merger Agreement. Its principal
4
<PAGE> 13
executive offices are located at 2323 Sixth Street,
P.O. Box 7007, Rockford, Illinois 61125 and its
telephone number is (815) 962-8867. See "PARTIES TO
THE MERGER AGREEMENT -- Sub."
THE MERGER
RECOMMENDATION OF THE UAS
BOARD.................... The UAS Board has unanimously determined that the
Merger is advisable and fair to and in the best
interests of UAS and its shareholders and has
unanimously approved the Merger Agreement. THE UAS
BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF UAS VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT AT THE UAS SPECIAL MEETING. See "THE
MERGER -- UAS's Reasons for the Merger;
Recommendation of its Board of Directors."
OPINION OF UAS'S FINANCIAL
ADVISOR.................. J.J.B. Hilliard, W.L. Lyons, Inc. ("Hilliard
Lyons") has acted as financial advisor to UAS in
connection with the Merger and has delivered its
written opinion dated September 23, 1996, to the
UAS Board to the effect that, based upon and
subject to the various considerations set forth
therein, as of the date thereof, the consideration
to be received in the Merger by the holders of UAS
Common Stock is fair to such holders from a
financial point of view. The full text of such
written opinion, which sets forth the assumptions
made, matters considered and limitations on the
review undertaken, is attached hereto as Annex II
and should be read carefully in its entirety. See
"THE MERGER -- Opinion of UAS's Financial Advisor."
INTERESTS OF CERTAIN
PERSONS IN THE MERGER...... Members of the UAS Board and executive officers of
UAS have interests in the Merger in addition to
their interests as shareholders of UAS. In
connection with the execution of the Merger
Agreement, CLARCOR entered into an agreement with
UAS and Mr. Durwood G. Rorie, Jr. (the "Rorie
Non-Compete Agreement") and an agreement with UAS
and Mr. William A. Cheney (the "Cheney Non-Compete
Agreement" and together with the Rorie Non-Compete
Agreement, the "Non-Compete Agreements"). Messrs.
Rorie and Cheney are members of the UAS Board and
executive officers of UAS. The Rorie Non-Compete
Agreement provides for a lump sum payment in the
aggregate amount of $668,321.52 by CLARCOR to Mr.
Rorie at the Effective Time of the Merger in lieu
of certain lifetime monthly payments from UAS to
which Mr. Rorie would otherwise be entitled upon
termination of his employment. Such lifetime
monthly payments, the amount of which is determined
by calculating 1/24th of the average annual base
salary of Mr. Rorie for the three fiscal years
prior to the termination of his employment, would
be equal to $7,000 per month assuming that Mr.
Rorie's current annual base salary does not change
and that his employment terminates on June 30,
1998. This lump sum payment of $668,321.52, which
is equal to the net present value of lifetime
monthly payments of $6,750 (such amount is based on
Mr. Rorie's salary as of the date of the Merger
Agreement) assuming that Mr. Rorie's employment
terminates on June 30, 1998, is subject to
adjustment based upon the actual termination date
of Mr. Rorie's employment. In addition, the Rorie
Non-Compete Agreement amends certain non-compete
provisions
5
<PAGE> 14
applicable to Mr. Rorie, amends the methodology for
calculating Mr. Rorie's annual bonus beginning with
the fiscal year ending on June 30, 1997 and
unconditionally guarantees, to the extent of UAS's
obligation, the payment of Mr. Rorie's base salary,
annual bonus and certain insurance premiums as
discussed herein. Under the Cheney Non-Compete
Agreement, CLARCOR unconditionally guarantees, to
the extent of UAS's obligation, the payment to Mr.
Cheney of certain lifetime monthly payments based
on 1/24th of his average annual base salary for the
three fiscal years prior to the termination of his
employment in 1991. Such lifetime monthly payments,
which were increased by 10% effective March 1,
1995, currently are equal to $4,468.75 per month.
In addition, the Cheney Non-Compete Agreement
amends certain non-compete provisions applicable to
Mr. Cheney as discussed herein.
In addition, holders of options to purchase UAS
Common Stock, including, among others, members of
the UAS Board and certain executive officers of
UAS, will receive, subject to the terms and
conditions of the Merger Agreement, options to
purchase CLARCOR Common Stock in substitution for
certain options to purchase UAS Common Stock. The
holders of UAS Common Stock who have entered into
the agreements described herein under the caption
"VOTING AGREEMENTS" (which holders include Messrs.
Rorie and Cheney) are entitled thereby to certain
rights with respect to the registration under the
Securities Act of the shares of CLARCOR Common
Stock they receive pursuant to the Merger. The
Merger Agreement also requires that UAS provide
certain persons, including each member of the UAS
Board and each executive officer of UAS,
indemnification and directors' and officers'
insurance protection for six years after the
Effective Time. See "THE MERGER -- Interests of
Certain Persons in the Merger."
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES............. It is a condition to the consummation of the Merger
that CLARCOR and UAS receive an opinion from their
respective tax counsel to the effect that, among
other things, the Merger will constitute a
"reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and no gain or loss will be
recognized by the non-dissenting shareholders of
UAS upon the conversion of their shares of UAS
Common Stock into shares of CLARCOR Common Stock in
accordance with the Merger, except with respect to
cash, if any, received in lieu of fractional shares
of CLARCOR Common Stock. See "THE
MERGER -- Material Federal Income Tax Consequences"
and "THE MERGER AGREEMENT -- Conditions Precedent
to the Merger."
ANTICIPATED ACCOUNTING
TREATMENT................ The Merger is expected to be accounted for as a
pooling of interests in accordance with generally
accepted accounting principles. It is a condition
to the consummation of the Merger that CLARCOR
receive an opinion of Coopers & Lybrand L.L.P. that
the Merger will qualify for pooling of interests
accounting treatment. In connection with the
Merger, CLARCOR will take a one-time pre-tax
charge, currently estimated to be in the range of
$2.0 million to $3.0 million ($1.2 million to $1.8
million on an after-tax basis), in the quarter in
which the Merger is consummated to cover the costs
of combining CLARCOR and UAS and for other unusual
or nonrecurring items related to the Merger. See
6
<PAGE> 15
"SUMMARY -- CLARCOR Selected Unaudited Pro Forma
Combined Financial Data," "THE MERGER --
Anticipated Accounting Treatment," "THE AGREEMENT
-- Conditions Precedent to the Merger" and
"CLARCOR UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS."
REGULATORY APPROVALS....... The consummation of the Merger is conditioned upon
the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Under the HSR Act and the regulations
promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be
consummated until notifications have been given and
certain information has been furnished to the FTC
and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the
applicable waiting period has expired or been
terminated. Report forms relating to the Merger
were filed on behalf of CLARCOR and UAS under the
HSR Act with the FTC and the Antitrust Division.
The applicable waiting period expired on November
30, 1996. See "THE MERGER -- Regulatory Approvals"
and "THE MERGER AGREEMENT -- Conditions Precedent
to the Merger."
PERCENTAGE OWNERSHIP
INTEREST OF UAS
SHAREHOLDERS AFTER THE
MERGER................... After the Merger, based on the number of shares of
CLARCOR Common Stock outstanding on the Record Date
and assuming the issuance of approximately
1,081,047 shares of CLARCOR Common Stock at the
Effective Time, upon consummation of the Merger
there will be approximately 15,969,725 shares of
CLARCOR Common Stock outstanding at the Effective
Time (approximately 17,604,030 on a fully-diluted
basis), of which UAS shareholders will own
approximately 6.77% (approximately 6.87% on a fully
diluted basis). See "THE MERGER -- Percentage
Ownership Interest of UAS Shareholders After the
Merger."
THE MERGER AGREEMENT
CONVERSION OF SHARES IN THE
MERGER................... At the Effective Time of the Merger, Sub will be
merged with and into UAS, with UAS continuing as
the surviving corporation (the "Surviving
Corporation") and a wholly-owned subsidiary of
CLARCOR. As a result of the Merger, the separate
corporate existence of Sub will cease and UAS will
succeed to all the rights and be responsible for
all the obligations of Sub in accordance with the
OGCL. Subject to the terms and conditions of the
Merger Agreement, each share of UAS Common Stock
outstanding immediately prior to the Effective Time
of the Merger (other than shares owned directly or
indirectly by CLARCOR or UAS, which will be
cancelled) will be converted into .3702116 of a
share of CLARCOR Common Stock, including the
corresponding percentage of a CLARCOR Right,
subject to adjustment based on the number of fully
diluted shares of UAS Common Stock outstanding
immediately prior to the Effective Time. Cash will
be paid in lieu of any fractional share of CLARCOR
Common Stock. Notwithstanding the foregoing,
holders of UAS Common Stock have the right to
dissent from the Merger and to receive payment of
the fair cash value of their shares upon full
compliance with Section 1701.85 of the OGCL. See
"THE MERGER
7
<PAGE> 16
AGREEMENT -- Conversion of Shares in the Merger,"
"-- No Fractional Shares," "-- Adjustment of
Conversion Number" and "DISSENTERS' RIGHTS." If
holders of more than 10% of the outstanding shares
of UAS Common Stock properly demand dissenters'
rights, CLARCOR has the right to decline to
consummate the Merger. See "THE MERGER
AGREEMENT -- Conditions Precedent to the Merger."
EXCHANGE AGENT; PROCEDURES
FOR EXCHANGE OF
CERTIFICATES............. First Chicago Trust Company of New York has been
selected to act as Exchange Agent under the Merger
Agreement. As soon as practicable, but not later
than five business days after the Effective Time,
CLARCOR will deposit with the Exchange Agent, in
trust for the holders of certificates ("UAS
Certificates") which immediately prior to the
Effective Time represented shares of UAS Common
Stock converted in the Merger, certificates
("CLARCOR Certificates") representing the shares of
CLARCOR Common Stock issuable pursuant to the
Merger in accordance with the Merger Agreement. The
Exchange Agent will deliver the CLARCOR
Certificates upon the surrender for exchange of the
UAS Certificates. See "THE MERGER
AGREEMENT -- Exchange Agent; Procedures for
Exchange of Certificates."
PROCEDURES FOR EXCHANGE OF
CERTIFICATES............. As soon as practicable after the Effective Time,
the Exchange Agent will mail to each record holder
of a UAS Certificate a letter of transmittal. Upon
surrender for exchange to the Exchange Agent of all
UAS Certificates held by any record holder,
together with such letter of transmittal duly
executed, such holder will be entitled to receive
in exchange therefor: (i) a CLARCOR Certificate
representing the number of whole shares of CLARCOR
Common Stock into which the shares of UAS Common
Stock represented by the surrendered UAS
Certificates have been converted at the Effective
Time, (ii) cash in lieu of any fractional share of
CLARCOR Common Stock and (iii) certain dividends
and other distributions. See "THE MERGER
AGREEMENT -- Exchange Agent; Procedures for
Exchange of Certificates."
HOLDERS OF UAS COMMON STOCK SHOULD NOT FORWARD
THEIR UAS CERTIFICATES WITH THE ENCLOSED PROXY
CARD, NOR SHOULD THEY RETURN THEIR UAS CERTIFICATES
TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A
TRANSMITTAL LETTER.
STOCK OPTIONS.............. Each option to purchase UAS Common Stock (a "UAS
Stock Option") granted under a UAS Stock Plan (as
hereinafter defined) which is outstanding
immediately prior to the Effective Time will become
an option to purchase shares of CLARCOR Common
Stock. Appropriate adjustment will be made to the
number of shares of CLARCOR Common Stock subject
thereto and the associated exercise price. Each
such option will be otherwise exercisable upon the
same terms and conditions as were applicable to the
related UAS Stock Option. See "THE MERGER
AGREEMENT -- Stock Options."
NO SOLICITATION............ Subject to certain exceptions set forth in the
Merger Agreement, UAS has agreed that from and
after the date of the Merger Agreement, it will
not, directly or indirectly, solicit, initiate or
knowingly encourage (including by way of furnishing
non-public information) any Takeover Proposal (as
hereinafter defined) from any person, or engage in
or continue discussions or negotiations relating to
any Takeover Proposal
8
<PAGE> 17
and that it will use its reasonable best efforts to
prevent any of its directors, officers, employees,
attorneys, financial advisors, agents and other
authorized representatives and those of any of its
Subsidiaries from taking any such action. See "THE
MERGER AGREEMENT -- No Solicitation."
TERMINATION................ The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or
after approval by the shareholders of UAS of the
proposal to adopt the Merger Agreement, as
authorized by the respective boards of directors of
CLARCOR, Sub and UAS, as applicable: (i) by mutual
written consent of CLARCOR, Sub and UAS; (ii) by
either CLARCOR or UAS if the other (or Sub if UAS
is the terminating party) fails to comply in any
material respect with any of its covenants or
agreements contained in the Merger Agreement
required to be complied with prior to the date of
such termination or materially breaches any
representation or warranty that is not qualified as
to materiality or breaches any representation or
warranty that is so qualified (in each case after a
five business day cure period following notice of
such breach) or if the requisite UAS shareholder
approval is not obtained; (iii) by either CLARCOR
or UAS if (A) the Merger has not been effected on
or prior to the close of business on March 31,
1997, subject to certain limitations, or (B) any
court or other Governmental Entity having
jurisdiction has permanently enjoined, restrained
or otherwise prohibited the transactions
contemplated by the Merger Agreement by final and
nonappealable order or other action; (iv) by either
CLARCOR or UAS under specified circumstances
involving a competing transaction; (v) by CLARCOR
if the UAS Board withdraws or modifies its
recommendation of the Merger or its approval of the
Merger Agreement; (vi) by CLARCOR upon certain
transactions resulting in the acquisition of 20% or
more of the equity of, or 20% or more of the assets
of, UAS or certain of its subsidiaries; and (vii)
by UAS if, during the period commencing ten
business days preceding the Closing, the closing
price per share of CLARCOR Common Stock (as
published in The Wall Street Journal, New York
Stock Exchange Composite Transactions) is less than
a threshold amount determined in accordance with
the terms of the Merger Agreement. See "THE MERGER
AGREEMENT -- Termination."
FEES AND EXPENSES.......... The Merger Agreement provides for the payment of
break-up fees following a termination of the Merger
Agreement under certain circumstances. See "THE
MERGER AGREEMENT -- Fees and Expenses."
COMPARISON OF RIGHTS OF HOLDERS OF CLARCOR COMMON STOCK AND UAS COMMON STOCK
COMPARISON OF RIGHTS OF
HOLDERS OF CLARCOR COMMON
STOCK AND UAS COMMON
STOCK...................... See "COMPARISON OF RIGHTS OF HOLDERS OF CLARCOR
COMMON STOCK AND UAS COMMON STOCK" for a summary of
the material differences between the rights of
holders of CLARCOR Common Stock and the rights of
holders of UAS Common Stock.
9
<PAGE> 18
DISSENTERS' RIGHTS
DISSENTERS' RIGHTS......... Holders of UAS Common Stock have the right to
dissent from the Merger and to receive payment of
the fair cash value of their shares upon full
compliance with Section 1701.85 of the OGCL. A copy
of Section 1701.85 of the OGCL is attached hereto
as Annex III. Holders of CLARCOR Common Stock do
not have dissenters' rights with respect to the
Merger. See "DISSENTERS' RIGHTS." If holders of
more than 10% of the outstanding shares of UAS
Common Stock properly demand dissenters' rights,
CLARCOR has the right to decline to consummate the
Merger. See "THE MERGER AGREEMENT -- Conditions
Precedent to the Merger."
10
<PAGE> 19
CLARCOR SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for CLARCOR for each of the five years in the period ended December 2,
1995, which data has been derived from CLARCOR's audited consolidated financial
statements, and for the nine-month periods ended September 2, 1995 and August
31, 1996, which data has been derived from the unaudited consolidated interim
financial statements contained in CLARCOR's Quarterly Report on Form 10-Q for
the nine months ended August 31, 1996. Such CLARCOR selected historical
financial data should be read in conjunction with the audited Consolidated
Financial Statements, including the notes thereto, and other financial
information contained in CLARCOR's Annual Report on Form 10-K for the year ended
December 2, 1995, and the unaudited consolidated interim financial statements,
including the notes thereto, and other financial information contained in
CLARCOR's Quarterly Report on Form 10-Q for the nine months ended August 31,
1996, incorporated by reference herein. CLARCOR's fiscal year ends on the
Saturday closest to November 30 in each year. All references below to CLARCOR's
fiscal year ends are to November 30 for clarity of presentation. See "AVAILABLE
INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------- FISCAL YEAR ENDED NOVEMBER 30,
AUGUST 31, SEPTEMBER 2, --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales.............................. $242,583 $204,444 $290,194 $270,123 $225,319 $188,625 $179,538
Cost of sales........................ 174,234 146,173 209,653 192,456 155,615 129,287 120,370
-------- -------- -------- -------- -------- -------- --------
Gross profit......................... 68,349 58,271 80,541 77,667 69,704 59,338 59,168
Selling and administrative
expenses........................... 40,560 33,243 45,176 45,301 40,637 31,708 28,315
-------- -------- -------- -------- -------- -------- --------
Operating Profit....................... 27,789 25,028 35,365 32,366 29,067 27,630 30,853
Interest expense..................... (2,390) (1,804) (2,693) (2,788) (3,525) (3,803) (3,682)
Interest income...................... 641 609 830 548 875 298 1,122
Gain on sale of investment in
affiliate.......................... -- -- -- 4,166(a) -- -- --
Equity in net earnings of
affiliates......................... 142 73 246 959 745 873 332
Minority interests in earnings of
subsidiaries....................... (109) 61 (71) (2) -- -- --
Other income (expense)............... (166) 155 459 (2,689) (84) 307 (82)
-------- -------- -------- -------- -------- -------- --------
Earnings Before Income Taxes and
Cumulative Effect of Changes in
Accounting Methods and Discontinued
Operations........................... 25,907 24,122 34,136 32,560 27,078 25,305 28,543
Provision for income taxes........... 9,641 9,358 12,182 11,935 9,827 8,796 10,068
-------- -------- -------- -------- -------- -------- --------
Earnings Before Cumulative Effect of
Changes in Accounting Methods and
Discontinued Operations.............. 16,266 14,764 21,954 20,625 17,251 16,509 18,475
Earnings from discontinued
operations, net of income taxes.... -- -- -- -- -- -- 297(b)
Cumulative effect of changes in
accounting methods................. -- -- -- 630(c) -- (2,370)(d) --
-------- -------- -------- -------- -------- -------- --------
Net Earnings........................... $ 16,266 $ 14,764 $ 21,954 $ 21,255 $ 17,251 $ 14,139 $ 18,772
======== ======== ======== ======== ======== ======== ========
Weighted Average Shares
Outstanding(e)....................... 14,854 14,794 14,801 14,814 14,838 14,973 14,873
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA(E):
Earnings before cumulative effect of
changes in accounting methods and
discontinued operations............ $ 1.10 $ 1.00 $ 1.48 $ 1.39 $ 1.16 $ 1.10 $ 1.24
Earnings from discontinued
operations......................... -- -- -- -- -- -- 0.02(b)
Cumulative effect of changes in
accounting methods................. -- -- -- 0.04(c) -- (0.16)(d) --
-------- -------- -------- -------- -------- -------- --------
Net earnings......................... $ 1.10 $ 1.00 $ 1.48 $ 1.43 $ 1.16 $ 0.94 $ 1.26
======== ======== ======== ======== ======== ======== ========
Cash dividends per share............. $ 0.4800 $ 0.4725 $ 0.6325 $ 0.6225 $ 0.6100 $ 0.6000 $ 0.5500
======== ======== ======== ======== ======== ======== ========
</TABLE>
11
<PAGE> 20
<TABLE>
<CAPTION>
AT
------------------------- AT NOVEMBER 30,
AUGUST 31, SEPTEMBER 2, --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital...................... $ 74,894 $ 81,547 $ 75,110 $ 58,989 $ 52,873 $ 68,355 $ 54,637
Total assets......................... 238,569 216,266 223,262 188,448 173,567 161,255 157,999
Long-term debt(f).................... 37,035 36,333 34,417 17,013 24,617 29,325 35,834
Shareholders' equity................. 140,839 125,783 130,815 117,462 104,641 99,551 95,662
</TABLE>
- ---------------
(a) In October 1994, CLARCOR sold 75% of its 20% interest in G.U.D. Holdings
Limited, recognizing a pretax gain on the sale of $4,166.
(b) In June 1991, CLARCOR adopted a plan to dispose of its Precision Products
Group. Effective November 30, 1992, CLARCOR sold the Group for $20,700 in
cash and a $2,500 note receivable. The sale was recorded as of November 30,
1992 and resulted in a pretax gain of $1,342 offset by income tax effects
of $1,342. The results of this business are excluded from income from
continuing operations.
(c) CLARCOR adopted Statement of Financial Accounting Standards (SFAS) 109,
"Accounting for Income Taxes" in 1994. Net income reflects the cumulative
effect of adopting this standard.
(d) CLARCOR adopted Statement of Financial Accounting Standards (SFAS) 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in
1992. Net income reflects the cumulative effect of adopting this standard,
net of the related income tax benefit of $1,477.
(e) All data with respect to earnings per share and weighted average number of
shares outstanding has been retroactively adjusted to reflect a
three-for-two stock split declared January 20, 1992 and payable February
14, 1992 in the form of a 50% stock dividend.
(f) Long-term debt excludes the current portion of notes and capital leases.
12
<PAGE> 21
UAS SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for UAS for each of the five years in the period ended June 30, 1996, which
data has been derived from UAS's audited consolidated financial statements, and
for the three-month periods ended September 30, 1995 and 1996, which data has
been derived from the unaudited consolidated interim financial statements
contained in UAS's Quarterly Report on Form 10-Q for the three months ended
September 30, 1996, which are included elsewhere herein, and should be read in
conjunction with the Consolidated Financial Statements and notes thereto of UAS
and other financial information pertaining to UAS, which are included elsewhere
herein. See "ADDITIONAL INFORMATION REGARDING UAS," "UAS CONSOLIDATED FINANCIAL
STATEMENTS" and "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED JUNE 30,
----------------- -----------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $ 9,735 $ 9,893 $40,818 $34,831 $29,311 $28,843 $29,061
Cost of sales.................. 6,401 6,603 26,788 23,361 20,333 19,048 19,356
Gross profit................... 3,334 3,290 14,030 11,470 8,978 9,795 9,705
Selling, general and
administrative expenses(a).. 2,772 2,642 11,044 9,669 8,082 8,849 9,941
Operating income (loss)........ 562 648 2,986 1,801 896 946 (236)
Other expense.................. (110) (223) (792) (755) (603) (731) (592)
Income (loss) before income
taxes....................... 452 425 2,194 1,046 293 215 (828)
Provision (credit) for income
taxes....................... 176 171 690 314 121 133 (21)
Net income (loss).............. 276 254 1,504 732 172 82 (807)
Earnings (loss) per common
share....................... .09 .08 .49 .24 .06 .03 (.29)
Dividends per common share..... -- -- -- -- -- -- --
Weighted average number of
common shares outstanding... 3,192 3,090 3,089 3,035 2,991 2,841 2,836
BALANCE SHEET DATA:
Working capital................ $ 9,990 $ 8,933 $ 8,782 $ 7,961 $ 6,892 $ 6,848 $ 7,538
Total assets................... 21,991 22,083 22,052 21,450 18,281 19,861 22,305
Long-term obligations.......... 7,857 8,575 7,133 7,904 8,095 8,083 10,664
Shareholders' equity........... 8,326 6,801 8,024 6,512 5,714 5,478 5,871
</TABLE>
- ---------------
(a) Includes restructuring costs of $420 recorded in 1992.
13
<PAGE> 22
CLARCOR SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth selected unaudited pro forma combined
financial data for CLARCOR for each of the five years in the period ended
November 30, 1995 and for the nine-month periods ended August 31, 1996 and
September 2, 1995, which are presented to reflect the estimated impact on the
historical Consolidated Financial Statements of CLARCOR of the Merger, which
will be accounted for as a pooling of interests, and the issuance of
approximately 1,209,302 shares of CLARCOR Common Stock constituting the Share
Issuance. The Income Statement Data assumes that the Merger had been consummated
at the beginning of the earliest period presented. The Per Share Data is
calculated assuming that 1,209,302 shares were outstanding at the beginning of
the earliest period presented. The Balance Sheet Data assumes that the Merger
had been consummated on August 31, 1996. In connection with the Merger, CLARCOR
will take a one-time pre-tax charge estimated to be in the range of $2.0 million
to $3.0 million ($1.2 million to $1.8 million on an after-tax basis), in the
quarter in which the Merger is consummated to cover the costs of combining
CLARCOR and UAS and for other unusual and nonrecurring items. See the third
paragraph under "CLARCOR UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS -- Introduction" for a description of the components of such charge.
The unaudited combined pro forma financial data does not reflect any cost
savings or other synergies anticipated by CLARCOR's management as a result of
the Merger and are not necessarily indicative of the results of operations or
the financial position which would have occurred had the Merger been consummated
at the beginning of the earliest period presented, nor are they necessarily
indicative of CLARCOR's future results of operations or financial position. The
unaudited pro forma combined financial data should be read in conjunction with
the historical Consolidated Financial Statements of CLARCOR and UAS and the
CLARCOR Unaudited Pro Forma Combined Financial Statements, including the notes
thereto, incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS
BY REFERENCE," "CLARCOR UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS,"
"ADDITIONAL INFORMATION REGARDING UAS" and "UAS CONSOLIDATED FINANCIAL
STATEMENTS."
14
<PAGE> 23
CLARCOR SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table includes UAS data for each of the five fiscal years in
the period ended on September 30, 1995 and for the nine-month period ended June
30, 1996 and June 30, 1995. UAS has a fiscal year-end of June 30. For purposes
of this pro forma combined financial data, UAS's Income Statement and Per Share
data were restated to a September 30 year-end date and UAS's June 30, 1996
Balance Sheet Data was used to more closely approximate CLARCOR's year-end. For
ease of reference, all column headings used in such table refer to the
period-ended date of CLARCOR.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------- FISCAL YEAR ENDED NOVEMBER 30,
AUGUST 31, SEPTEMBER 2, --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ------------- -------- -------- -------- -------- --------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales......................... $273,508 $ 231,628 $327,271 $300,450 $253,211 $218,172 $212,938
Cost of sales................... 194,419 164,222 234,305 213,596 174,186 148,694 142,627
-------- -------- -------- -------- -------- -------- --------
Gross profit.................... 79,089 67,406 92,966 86,854 79,025 69,478 70,311
Selling and administrative
expenses...................... 48,962 40,828 55,403 53,666 49,065 41,248 38,641
Restructuring costs............. -- -- -- -- -- 420 --
-------- -------- -------- -------- -------- -------- --------
Operating Profit.................. 30,127 26,578 37,563 33,188 29,960 27,810 31,670
Interest expense................ (2,850) (2,306) (3,373) (3,298) (3,979) (4,438) (4,398)
Interest income................. 641 609 830 548 875 298 1,122
Gain on sale of investment in
affiliate..................... -- -- -- 4,166 -- -- --
Equity in net earnings of
affiliates.................... 142 73 246 959 745 873 332
Minority interests in earnings
of subsidiaries............... (109) 61 (71) (2) -- -- --
Other income (expense).......... (275) 10 268 (2,718) (380) 387 (419)
-------- -------- -------- -------- -------- -------- --------
Earnings Before Income Taxes and
Cumulative Effect of Changes in
Accounting Methods and
Discontinued Operations......... 27,676 25,025 35,463 32,843 27,221 24,930 28,307
Provision for income taxes...... 10,160 9,617 12,612 12,057 9,944 8,941 9,911
-------- -------- -------- -------- -------- -------- --------
Earnings Before Cumulative Effect
of Changes in Accounting Methods
and Discontinued Operations..... 17,516 15,408 22,851 20,786 17,277 15,989 18,396
Earnings from discontinued
operations, net of income
taxes......................... -- -- -- -- -- -- 297
Cumulative effect of changes in
accounting methods............ -- -- -- 630 -- (2,370) --
-------- -------- -------- -------- -------- -------- --------
Net Earnings...................... $ 17,516 $ 15,408 $ 22,851 $ 21,416 $ 17,277 $ 13,619 $ 18,693
======== ======== ======== ======== ======== ======== ========
Weighted Average Shares
Outstanding..................... 16,063 16,003 16,010 16,023 16,047 16,182 16,082
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Earnings before cumulative
effect of changes in
accounting methods and
discontinued operations....... $ 1.09 $ 0.96 $ 1.43 $ 1.30 $ 1.08 $ 0.99 $ 1.14
Earnings from discontinued
operations.................... -- -- -- -- -- -- 0.02
Cumulative effect of changes in
accounting methods............ -- -- -- 0.04 -- (0.15) --
-------- -------- -------- -------- -------- -------- --------
Net earnings.................... $ 1.09 $ 0.96 $ 1.43 $ 1.34 $ 1.08 $ 0.84 $ 1.16
======== ======== ======== ======== ======== ======== ========
Cash dividends declared per
share......................... $ 0.48 $ 0.47 $ 0.63 $ 0.62 $ 0.61 $ 0.60 $ 0.55
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital................. $ 81,876
Total assets.................... 260,620
Long-term debt.................. 44,168
Shareholders' equity............ 147,063
</TABLE>
See Notes to CLARCOR Unaudited Pro Forma Combined Financial Statements
appearing elsewhere in this Proxy Statement/Prospectus.
15
<PAGE> 24
COMPARATIVE PER SHARE DATA OF CLARCOR AND UAS
The following table sets forth certain per share data of CLARCOR and UAS on
both a historical and a pro forma combined basis. The pro forma earnings data
are derived from the Unaudited Pro Forma Combined Statements of Income appearing
elsewhere herein, which give effect to the Merger as a pooling of interests as
if the Merger had been consummated at the beginning of the earliest period
presented. The pro forma dividend data assume dividend payments consistent with
CLARCOR's historical payments. Book value data for all pro forma presentations
is based upon the number of outstanding shares of CLARCOR Common Stock, adjusted
to include the shares of CLARCOR Common Stock constituting the Share Issuance.
The information set forth below should be read in conjunction with the
historical Consolidated Financial Statements of CLARCOR and UAS and the CLARCOR
Unaudited Pro Forma Combined Financial Statements, including the notes thereto,
incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS
BY REFERENCE," "CLARCOR UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS,"
"ADDITIONAL INFORMATION REGARDING UAS" and "UAS CONSOLIDATED FINANCIAL
STATEMENTS."
The following table includes UAS historical financial information for the
three twelve-month periods ended September 30, 1995, 1994, and 1993 and for the
nine-month period ended June 30, 1996. The UAS historical data for the
twelve-month periods ended September 30 was calculated by adjusting the
historical year ended June 30 data to a September 30 year-end by including the
first quarter of the next year and excluding the first quarter of the current
year ended June 30. The UAS Equivalent per share data is calculated based on
CLARCOR unaudited pro forma data and an assumed conversion ratio in the Merger
of .3702116 shares of CLARCOR Common Stock for each share of UAS Common Stock.
The pro forma data does not reflect any cost savings or other synergies
anticipated by CLARCOR management as a result of the Merger. For ease of
reference, all column headings used in the table refer to the period-ended dates
of CLARCOR.
<TABLE>
<CAPTION>
AT OR FOR
THE
NINE MONTHS AT OR FOR THE
ENDED YEAR ENDED NOVEMBER 30,
AUGUST 31, -----------------------
1996 1995 1994 1993
----------- ------ ---- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
CLARCOR Historical
Earnings per share before cumulative effect of change in
accounting method....................................... $1.10 $1.48 $1.39 $1.16
Cash dividends declared per share.......................... 0.48 0.63 0.62 0.61
Book value per share....................................... 9.47 8.82
UAS Historical (Unaudited)
Earnings per share......................................... $0.41 $0.29 $0.06 $0.01
Cash dividends declared per share.......................... -- -- -- --
Book value per share....................................... 2.76 2.34
CLARCOR Unaudited Pro Forma
Earnings per share before cumulative effect of change in
accounting method....................................... $1.09 $1.43 $1.30 $1.08
Cash dividends declared per share.......................... 0.48 0.63 0.62 0.61
Book value per share....................................... 9.16 8.60
UAS Equivalent (Unaudited)
Earnings per share before cumulative effect of change in
accounting method....................................... $0.40 $0.53 $0.48 $0.40
Cash dividends declared per share.......................... 0.18 0.23 0.23 0.23
Book value per share....................................... 3.39 3.18
</TABLE>
16
<PAGE> 25
MARKET PRICES AND DIVIDENDS PAID
CLARCOR Common Stock is traded on the NYSE under the symbol "CLC." UAS
Common Stock trades on The Nasdaq National Market under the symbol "UASI." The
following table sets forth, for the periods indicated (which are the
period-ended dates of CLARCOR), the range of the high and low sales prices of
CLARCOR Common Stock as reported on the NYSE Composite Transactions Tape, and
UAS Common Stock, except as discussed below, as reported by Nasdaq, and the
dividends paid per share on CLARCOR Common Stock. UAS declared no dividends
during the periods shown. From December 1990 until June 6, 1995, transactions in
UAS Common Stock were not regularly publicly reported, and as a result, there
are no reported high and low bid quotations for UAS Common Stock for that
period. From June 6, 1995 through June 30, 1995, the high and low bid quotations
for UAS Common Stock, as reported by the National Quotation Bureau, Inc., were
$2.40 and $2.40, respectively. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
CLARCOR UAS
COMMON STOCK COMMON STOCK
---------------------------- ------------------
HIGH LOW DIVIDEND HIGH LOW
------ ------ -------- ------- -------
<S> <C> <C> <C> <C> <C>
1994
Quarter ended February 26, 1994................. 22.375 18.250 0.155 n/a n/a
Quarter ended May 28, 1994...................... 21.625 17.000 0.155 n/a n/a
Quarter ended August 27, 1994................... 20.125 15.875 0.155 n/a n/a
Quarter ended December 3, 1994.................. 21.500 18.500 0.158 n/a n/a
1995
Quarter ended March 4, 1995..................... 21.250 18.125 0.158 n/a n/a
Quarter ended June 3, 1995...................... 21.625 19.000 0.158 n/a n/a
Quarter ended September 2, 1995................. 23.750 21.500 0.158 $3.3000 $1.9200
Quarter ended December 2, 1995.................. 27.000 21.375 0.160 4.8000 2.7000
1996
Quarter ended March 2, 1996..................... 22.750 19.000 0.160 6.4000 4.0000
Quarter ended June 1, 1996...................... 22.250 18.625 0.160 5.3750 3.2500
Quarter ended August 31, 1996................... 25.125 19.000 0.160 5.0000 3.6250
Quarter ended November 30, 1996................. 22.625 20.375 0.163 8.3750 4.5000
1997
Quarter ending March 1, 1997
(through January 13, 1997)................... 23.875 22.000 -- 8.5625 7.7500
</TABLE>
Set forth below are the last reported per share sale prices of CLARCOR
Common Stock, as reported on the NYSE Composite Transactions Tape, and UAS
Common Stock, as reported by Nasdaq, on September 23, 1996, the last trading day
ending prior to the public announcement of the execution of the Merger
Agreement, and the equivalent pro forma sale price of UAS Common Stock on such
date, as determined by multiplying such last reported sale price of CLARCOR
Common Stock by .3702116:
<TABLE>
<S> <C>
CLARCOR Common Stock................................................ $21.75
UAS Common Stock.................................................... $ 4.50
UAS Equivalent...................................................... $ 8.05
</TABLE>
On January 13, 1997, the last trading day prior to the date of this Proxy
Statement/Prospectus, the last reported sale price of CLARCOR Common Stock, as
reported on the NYSE Composite Transactions Tape, was $23.00 per share and the
last reported sale price of UAS Common Stock, as reported by Nasdaq, was $8.5625
per share.
17
<PAGE> 26
RECENT DEVELOPMENTS
On January 6, 1997, CLARCOR announced net sales, net earnings and earnings
per share of $333.4 million, $25.0 million and $1.68, respectively, for its
fiscal year ended November 30, 1996. These figures compare with $290.2 million,
$22.0 million and $1.48 for CLARCOR'S previous fiscal year. Net sales for
CLARCOR's filtration products business increased by 17.5% to $259.6 million for
fiscal 1996 while net sales of consumer products increased 6.7% to $73.8
million. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY
REFERENCE."
18
<PAGE> 27
RISK FACTORS
In considering whether to adopt the Merger Agreement the shareholders of
UAS should consider that the percentage of a share of CLARCOR Common Stock into
which each share of UAS Common Stock will be converted is expressed in the
Merger Agreement as a fixed ratio and will not be adjusted in the event of any
increase or decrease in the price of either CLARCOR Common Stock or UAS Common
Stock.
UAS SPECIAL MEETING
DATE, PLACE AND TIME
The UAS Special Meeting will be held on February 14, 1997 at 10:00 a.m.
(EST) at the corporate offices of UAS, 4440 Creek Road, Cincinnati, Ohio.
PURPOSE
At the UAS Special Meeting, the shareholders of UAS will consider and vote
upon a proposal to adopt the Merger Agreement and to transact such other
business as may properly come before the UAS Special Meeting.
The UAS Board has unanimously determined that the Merger is advisable and
fair to and in the best interests of UAS and its shareholders and has
unanimously approved the Merger Agreement. THE UAS BOARD UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF UAS VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT
AT THE UAS SPECIAL MEETING. See "THE MERGER -- UAS's Reasons for the Merger;
Recommendation of its Board of Directors."
RECORD DATE; VOTING RIGHTS
Only holders of record of UAS Common Stock at the close of business on the
Record Date, January 6, 1997, are entitled to receive notice of and to vote at
the UAS Special Meeting. At the close of business on the Record Date, there were
2,920,078 shares of UAS Common Stock outstanding, each of which entitles the
registered holder thereof to one vote on each matter voted upon at the UAS
Special Meeting.
QUORUM
The holders of UAS Common Stock present in person or by proxy at the UAS
Special Meeting will constitute a quorum for such meeting. However, adoption of
the Merger Agreement requires the affirmative vote of a majority of the shares
of UAS Common Stock outstanding on the Record Date notwithstanding that a lesser
number of shares would constitute a quorum. See "-- Required Vote."
PROXIES
All shares of UAS Common Stock represented by properly executed proxies in
the enclosed form which are received in time for the UAS Special Meeting and
have not been revoked will be voted in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such shares will be
voted FOR adoption of the Merger Agreement. In addition, the persons designated
in such proxy will have discretion to vote upon any other matters as may
properly come before the UAS Special Meeting, including, without limitation, the
right to vote for any adjournment proposed by the UAS Board. It is intended that
such persons will vote on any such matters in accordance with the recommendation
of the UAS Board.
Any proxy in the enclosed form may be revoked by the shareholder executing
it at any time prior to its exercise by giving notice thereof to UAS in writing
or in open meeting or by signing and returning to UAS a later dated proxy.
Attendance at the UAS Special Meeting will not in and of itself constitute the
revocation of a proxy.
Votes at the UAS Special Meeting will be tabulated by financial management
employees of UAS. UAS has not established a procedure for confidential voting.
19
<PAGE> 28
SOLICITATION OF PROXIES
Proxies are being solicited hereby on behalf of the UAS Board. Pursuant to
the Merger Agreement, the entire cost of proxy solicitation for the UAS Special
Meeting, including the reasonable expenses of brokers, fiduciaries and other
nominees in forwarding solicitation material to beneficial owners, will be borne
by UAS, except that CLARCOR and UAS will share equally all printing expenses and
filing fees. In addition to the use of the mail, solicitation may be made by
personal interview, telephone, fax or otherwise by Directors, officers and other
employees of UAS. Such Directors, officers and other employees will not be
additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. If undertaken, the
expense of such solicitation is expected to be nominal.
REQUIRED VOTE
Adoption of the Merger Agreement will require the affirmative vote of the
holders of a majority of the shares of UAS Common Stock outstanding on the
Record Date. Accordingly, since there were 2,920,078 shares of UAS Common Stock
outstanding on the Record Date, adoption of the Merger Agreement will require
the affirmative vote of holders of at least 1,460,040 shares of UAS Common
Stock. Brokers who hold shares of UAS Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof. Broker non-votes and abstentions will have the
effect of votes against the proposal to adopt the Merger Agreement.
The holders of UAS Common Stock representing 1,349,853 shares of UAS Common
Stock (approximately 46.2% of the shares of UAS Common Stock outstanding on the
Record Date) have signed agreements obligating them, except in certain
circumstances, to vote in favor of adoption of the Merger Agreement and against
certain other actions. See "VOTING AGREEMENTS."
At the close of business on the Record Date, Directors and executive
officers of UAS and their affiliates were the beneficial owners of an aggregate
of 1,447,219 (approximately 49.6%) of the shares of UAS Common Stock then
outstanding. Such shares include the shares subject to the voting agreements
described above. UAS believes that its Directors, executive officers and their
affiliates intend to vote all shares of UAS Common Stock beneficially owned by
them in favor of adoption of the Merger without regard to whether such shares
are subject to voting agreements.
Approval of the proposal to adopt the Merger Agreement will also authorize
the UAS Board to exercise its discretion whether to proceed with the Merger in
the event that, during the period commencing ten business days prior to the
Closing, the closing per share price of CLARCOR Common Stock on the NYSE (as
published in The Wall Street Journal, New York Stock Exchange Composite
Transactions) is less than a threshold amount determined in accordance with the
terms of the Merger Agreement. UAS expects that the UAS Board would exercise
such discretion and decide whether to terminate the Merger Agreement without a
resolicitation of shareholders. See "THE MERGER AGREEMENT -- Termination."
DISSENTERS' RIGHTS
Holders of UAS Common Stock have the right to dissent from the Merger and
to receive payment of the fair cash value of their shares upon full compliance
with Section 1701.85 of the OGCL. A copy of Section 1701.85 of the OGCL is
attached hereto as Annex III. See "DISSENTERS' RIGHTS." If holders of more than
10% of the outstanding shares of UAS Common Stock properly demand dissenters'
rights, CLARCOR has the right to decline to consummate the Merger. See "THE
MERGER AGREEMENT -- Conditions Precedent to the Merger."
20
<PAGE> 29
PARTIES TO THE MERGER AGREEMENT
CLARCOR
CLARCOR manufactures, markets and distributes mobile, industrial and
environmental filtration products and consumer packaging products for both
domestic and international markets. CLARCOR had sales of approximately $290.2
million and net earnings of approximately $22.0 million for its fiscal year
ended December 2, 1995 and sales of approximately $333.4 million and net
earnings of approximately $25.0 million for its fiscal year ended November 30,
1996. CLARCOR was organized in 1904 as an Illinois corporation and in 1969 was
reincorporated in the State of Delaware. Its principal executive offices are
located at 2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125 and its
telephone number is (815) 962-8867. For further information concerning CLARCOR,
see "SUMMARY -- CLARCOR Selected Consolidated Financial Data," "-- Recent
Developments," "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY
REFERENCE."
UAS
UAS is engaged in the design, manufacture and sale of commercial and
industrial air cleaners, electrostatic fluid contamination control equipment and
high precision spraying equipment. UAS had sales of approximately $40.8 million
and net earnings of approximately $1.5 million for its fiscal year ended June
30, 1996. UAS was founded in 1966 and is incorporated in Ohio. Its principal
executive offices are located at 4440 Creek Road, Cincinnati, Ohio 45242 and its
telephone number is (513) 891-0400. For further information concerning UAS, see
"-- UAS Selected Consolidated Financial Data," "ADDITIONAL INFORMATION REGARDING
UAS," "UAS CONSOLIDATED FINANCIAL STATEMENTS" and "AVAILABLE INFORMATION."
SUB
Sub was incorporated in Ohio on September 19, 1996 solely for the purpose
of consummating the Merger and the other transactions contemplated by the Merger
Agreement. Sub has minimal assets and no business and has carried on no
activities which are not directly related to its formation and its execution of
the Merger Agreement. Its principal executive offices are located at 2323 Sixth
Street, P.O. Box 7007, Rockford, Illinois 61125 and its telephone number is
(815) 962-8867.
21
<PAGE> 30
THE MERGER
The description of the Merger and the Merger Agreement contained in this
Proxy Statement/Prospectus does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, a conformed copy of which is
attached hereto as Annex I and incorporated herein by reference.
GENERAL
At the Effective Time of the Merger, Sub will be merged with and into UAS,
with UAS surviving as a wholly-owned subsidiary (the "Surviving Corporation") of
CLARCOR. As a result of the Merger, the separate corporate existence of Sub will
cease and UAS will succeed to all the rights and be responsible for all the
obligations of Sub in accordance with the OGCL. Subject to the terms and
conditions of the Merger Agreement, each share of UAS Common Stock outstanding
immediately prior to the Effective Time of the Merger (other than shares owned
directly or indirectly by CLARCOR or UAS, which will be cancelled) will be
converted into .3702116 of a share of CLARCOR Common Stock, including the
corresponding percentage of a CLARCOR Right, subject to adjustment based on the
number of fully diluted shares of UAS Common Stock (i.e., the sum of the number
of outstanding shares of UAS Common Stock and the number of shares of UAS Common
Stock subject to outstanding UAS Stock Options) immediately prior to the
Effective Time. Cash will be paid in lieu of any fractional share of CLARCOR
Common Stock. Notwithstanding the foregoing, holders of UAS Common Stock have
the right to dissent from the Merger and to receive payment of the fair cash
value of their shares upon full compliance with Section 1701.85 of the OGCL. See
"THE MERGER AGREEMENT -- Adjustment of Conversion Number" and "DISSENTERS'
RIGHTS." If holders of more than 10% of the outstanding shares of UAS Common
Stock properly demand dissenters' rights, CLARCOR has the right to decline to
consummate the Merger. See "THE MERGER AGREEMENT -- Conditions Precedent to the
Merger."
The Merger will become effective when a certificate of merger (the
"Certificate of Merger"), executed in accordance with the relevant provisions of
the OGCL, is accepted for filing by the Secretary of State of the State of Ohio
unless the Certificate of Merger provides for a later date of effectiveness (not
to exceed 30 days after the date that the Certificate of Merger is so filed).
The filing of the Certificate of Merger will occur as soon as practicable
following the satisfaction or waiver of the conditions set forth in the Merger
Agreement, but in no event prior to the fifteenth day after the date of the UAS
Special Meeting. See "THE MERGER AGREEMENT -- Conditions Precedent to the
Merger."
BACKGROUND OF THE MERGER
From time to time over the past several years, UAS received unsolicited
contacts indicating an interest in acquiring or merging with UAS. Although UAS
desired to remain an independent company, the UAS Board authorized Mr. Rorie to
listen to any proposals that third parties might make and to discuss any such
contacts with the UAS Board as Mr. Rorie deemed appropriate. Such contacts
included discussions with CLARCOR in the spring of 1994 and the fall of 1995 in
which UAS and CLARCOR preliminarily explored the potential for establishing a
strategic relationship and their respective operations and management
philosophies. However, none of those discussions resulted in any negotiations of
the terms of any such transaction because UAS's management and Board of
Directors then believed that the long-term interests of UAS shareholders would
be best served by continuing to implement UAS's business strategy, including the
decision by UAS to become a reporting company under the Securities Exchange Act
of 1934 and to list shares of UAS Common Stock for trading on the Nasdaq
National Market.
In February 1996, CLARCOR again contacted UAS, and Messrs. Rorie and Cheney
met with Mr. Norman A. Johnson, President and Chief Operating Officer of
CLARCOR, and Mr. Bruce A. Klein, the Vice President-Finance and Chief Financial
Officer of CLARCOR. Messrs. Rorie and Cheney discussed with Messrs. Johnson and
Klein how UAS could fit with CLARCOR's operations and corporate structure, the
opportunities to expand the air filtration business on a combined basis,
CLARCOR's dividend and employee stock option policies and potential synergies
that could be obtained by centralizing corporate financial functions. The
CLARCOR representatives inquired as to UAS's current operating results and
potential for
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future growth and as to UAS's employment arrangements with UAS's executive
officers. They also discussed with Messrs. Rorie and Cheney CLARCOR's
preliminary views as to its valuation of UAS for purposes of any strategic
business combination. At that time, CLARCOR's preliminary view of the value of
UAS, as expressed to UAS, ranged from $6 to $7 per share of UAS Common Stock
(approximately $19,200,000 to $22,400,000 in total assuming that 3,200,000
shares of UAS Common Stock were outstanding).
In March 1996, Messrs. Rorie, Johnson and Klein again met to discuss the
reasons why CLARCOR and UAS would make a good strategic fit and the potential
timing of any such transaction. In that meeting, Mr. Rorie indicated that
CLARCOR's February, 1996 preliminary valuation of UAS was below UAS's subjective
estimate of UAS's true value and that UAS would continue to work on improving
its operating results to further increase value for UAS's shareholders. Messrs.
Rorie and Cheney believed that any offer to acquire UAS would have to exceed
$25.0 million before UAS would give serious consideration to accepting it.
In April 1996, Messrs. Rorie, Johnson and Klein had a telephone
conversation in which Mr. Rorie informed the CLARCOR representatives that UAS
was considering a variety of alternatives including a sale of the entire
company, the sale of UAS Common Stock in a public offering, the sale of a
substantial equity interest in UAS by one or more major shareholders or
remaining as an independent company. In response to Mr. Klein's inquiry, Mr.
Rorie declined to consider the possibility of selling one or more of UAS's
product lines or business segments.
Also in April 1996, Mr. Rorie was contacted by a business broker
representing a New York Stock Exchange listed company (the "Other Interested
Party") who expressed a possible interest on the part of the Other Interested
Party in acquiring UAS. In May 1996, Mr. Rorie subsequently met with the Other
Interested Party's representatives at which time they discussed the Other
Interested Party's background, business strategies and philosophies and whether
there was a potential strategic fit between UAS and the Other Interested Party.
Mr. Rorie agreed at the May meeting that he would be willing to meet with senior
officers of the Other Interested Party for further discussions.
In June 1996, Mr. Rorie met with the Senior Vice President of Financial
Planning and Development of the Other Interested Party. At this meeting, the
Other Interested Party confirmed its interest in acquiring UAS for $24.0 million
in cash. Subsequent to the June meeting, the Other Interested Party's
representative contacted Mr. Rorie by telephone in early July 1996 to clarify
that in acquiring UAS the Other Interested Party would not assume UAS's payment
obligations under its noncompetition arrangements with Messrs. Rorie and Cheney.
Mr. Rorie also informed the Other Interested Party that CLARCOR was also
discussing a possible transaction with UAS.
On July 9, 1996, Mr. Rorie and Mr. Lawrence E. Gloyd, Chairman and Chief
Executive Officer of CLARCOR, and Mr. Johnson met to discuss the various
alternatives that UAS was willing to consider and the future outlook for UAS. In
this meeting, Mr. Gloyd provided Mr. Rorie with a proposed term sheet which
outlined the significant terms for a transaction whereby UAS would become a
wholly-owned subsidiary of CLARCOR. These terms involved a $25.5 million
acquisition price, a fixed exchange ratio if the transaction was structured as a
merger, an agreement by Messrs. Rorie and Cheney to vote their UAS shares in
favor of the transaction, no material adverse change in UAS's business prior to
closing and other contingencies.
On August 1, 1996, Mr. Rorie, Mr. Ray Warrick, Senior Vice
President-Operations of UAS, Mr. William M. Rehl, III, Vice President-Finance
and Treasurer of UAS, and Mr. Johnson, and Mr. Klein met to engage in more
detailed discussions regarding CLARCOR's proposal to acquire UAS. At this
meeting, Messrs. Rorie, Warrick and Rehl discussed with CLARCOR UAS's banking
and finance arrangements, capital expenditure plans and programs to expand UAS's
business and sales. Messrs. Rorie and Warrick also discussed their belief that
resulting increases in operating expenses in fiscal year 1997 would result in
UAS earnings for 1997 being substantially similar to 1996 earnings results with
the positive effects of such increased expenses to be realized in the form of
anticipated greater earnings in fiscal year 1998. In the course of this
discussion, CLARCOR increased its proposal to $26.0 million. Mr. Johnson further
stated that CLARCOR would be willing to assume the payment obligations due to
Messrs. Rorie and Cheney under their noncompetition arrangements with UAS. Mr.
Rorie indicated that UAS would be more likely to favor a proposal whereby UAS
shareholders would receive CLARCOR Common Stock in a tax-free transaction
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rather than all cash. Mr. Rorie further informed CLARCOR at this meeting that
the Other Interested Party was also discussing a possible transaction with UAS.
On August 22, 1996, the UAS Board conducted a regularly scheduled meeting
in which Mr. Rorie updated all Board members on his prior informal discussions
with each director regarding the interest in UAS being expressed by CLARCOR and
the Other Interested Party. The UAS Board compared the two proposals and noted
that CLARCOR's proposal was higher than the Other Interested Party's proposal.
The UAS Board also noted that CLARCOR's business is more directly related to
UAS's business and is developing overseas where UAS already has a strong
presence whereas the Other Interested Party is a holding company conglomerate
engaged in many businesses unrelated to UAS's business.
Mr. Rorie also reported at the August 22 Board meeting that the Other
Interested Party had invited him to meet again on August 27, 1996, and the Board
directed Mr. Rorie to so meet and that Mr. Ray van der Horst, an audit partner
of Arthur Andersen LLP, should accompany him. Mr. Rorie further informed the UAS
Board that CLARCOR had indicated its intention to provide a proposed letter of
intent for a merger, and the Board directed Mr. Rorie to work with UAS's legal
counsel to review the draft when received and discuss it with CLARCOR so that it
would be in suitable form for the Board to review. The UAS Board also expressed
its collective view that CLARCOR, the Other Interested Party and any other third
party should all be treated equally and that no bona fide bidder should be
discouraged.
On August 27, 1996, Messrs. Rorie and van der Horst met with two executive
officers of the Other Interested Party and its representatives to further
discuss the Other Interested Party's proposal to acquire UAS. Much of the
discussion centered on UAS's financial information for its fiscal year ended
June 30, 1996 in relation to the Other Interested Party's valuation of UAS. The
Other Interested Party explained to Messrs. Rorie and van der Horst the
methodology it was using to value UAS, and determined that the highest offer
that it could justify making to acquire UAS was $25.5 million for the
outstanding UAS Common Stock. The Other Interested Party reiterated its interest
in UAS and stated that it was prepared to move quickly with an all cash offer.
Mr. Rorie responded that he would provide the UAS Board with the Other
Interested Party's offer and rationale and informed the Other Interested Party
that UAS had received a higher offer from CLARCOR, which offer the UAS Board
would also be considering.
On the afternoon of August 22, 1996, CLARCOR provided UAS with a draft
letter of intent outlining a merger with UAS. On August 29, 1996, Mr. Rorie and
UAS's counsel, Jack W. Painter, Esq., met with Messrs. Johnson and Klein of
CLARCOR and CLARCOR's legal counsel to discuss the terms of the letter of
intent, including the proposed consideration offered for UAS, whether such
consideration would be payable in stock of the acquiror, cash or a combination
of stock and cash, termination provisions and fees, indemnification of UAS
directors and officers for actions and events prior to any strategic
combination, UAS's ability to entertain competing offers and agreements with
UAS's largest shareholders desired by CLARCOR. In this meeting, CLARCOR
confirmed that it would value UAS's equity at $26.0 million and UAS shareholders
would receive 1,209,302 shares of CLARCOR Common Stock then valued at $21.50 per
share. On the following day, Messrs. Johnson and Klein again met with Mr. Rorie
and with Mr. Warrick to discuss CLARCOR's due diligence requirements and
estimates for UAS's first two fiscal quarters and for fiscal year 1997. In this
meeting, Messrs. Rorie and Warrick reaffirmed their belief as stated in the
August 1, 1996 meeting that such estimates reflected increases in UAS's
operating expenses in fiscal year 1997 that would result in UAS's earnings for
fiscal 1997 being substantially similar to fiscal 1996 earnings with the
positive effects of such increases to be realized in the form of greater
earnings in fiscal 1998. Further discussion of these terms were held by
representatives of UAS and CLARCOR on August 29 and 30.
On September 3, 1996, the UAS Board convened a special meeting to consider
the proposals from CLARCOR and the Other Interested Party. The Board first
discussed the need to engage independent financial advisors and agreed that
David F. Herche, one of UAS's non-management directors, would make the final
selection of an investment banker and serve as UAS's primary contact with such
financial advisor.
The UAS Board then discussed the financial terms and strategic fit of the
proposals that had been received from CLARCOR and the Other Interested Party.
The UAS Board considered that CLARCOR's business and UAS's business are
complementary to each other and that CLARCOR's proposal was for a
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stock-for-stock merger, thereby providing UAS shareholders with an ability to
obtain the benefits of any future increase in value that CLARCOR Common Stock
might have following the Merger. The UAS Board also considered that the Other
Interested Party, while engaged in some businesses similar to UAS, was in
essence a holding company for a diverse group of businesses and may be more
likely to dispose of UAS's business or assets following the transaction.
At the September 3 Board meeting, the UAS Board also considered that
CLARCOR's current proposal was higher than the Other Interested Party's proposal
notwithstanding that Mr. Rorie had requested the Other Interested Party to
consider increasing its offer in response to UAS's receipt of the higher CLARCOR
offer. The UAS Board also considered that CLARCOR's proposal would further
benefit UAS shareholders if such transaction could satisfy the conditions for a
tax-free merger whereas the Other Interested Party's proposal was for cash and
would be immediately taxable to UAS shareholders.
The UAS Board further discussed specific aspects of the CLARCOR term sheet,
including no-shop provisions, termination rights and fees, and CLARCOR's desire
for a right to purchase a substantial number of shares of UAS Common Stock in
the event the merger was not consummated. Upon a detailed discussion of these
provisions, the UAS Board determined that these terms were a necessary condition
of CLARCOR's offer, but that UAS management should negotiate to obtain the
lowest termination fees CLARCOR would accept, to eliminate CLARCOR's right to
buy shares of UAS Common Stock upon termination of the merger and to provide the
UAS Board with an ongoing ability to evaluate any competing proposals that might
subsequently arise in fulfillment of the UAS Board's fiduciary duty to
shareholders.
The UAS Board also directed Mr. Rorie to pursue with CLARCOR the
possibility of CLARCOR permitting UAS shareholders to choose between receiving
all CLARCOR Common Stock in a merger or receiving some of the consideration in
cash. The UAS Board requested Mr. Rorie to also contact the Other Interested
Party to determine whether such party would increase its offer. In connection
with all of these activities, the UAS Board requested Mr. Rorie to work with Mr.
Herche, as the Board's continuing representative in these discussions, and to
work with UAS's legal counsel in negotiating the terms of any draft agreements
with CLARCOR and/or the Other Interested Party.
During the Board meeting, Mr. Rorie contacted Mr. Klein to determine
whether CLARCOR would consider allowing UAS shareholders an election to receive
up to 49% of the merger consideration in cash. Mr. Klein responded that CLARCOR
was willing to proceed on an all stock or all cash basis, but that a combination
of stock and cash would not be acceptable to CLARCOR. Subsequent to the Board
meeting, Mr. Rorie also contacted the Other Interested Party, who informed Mr.
Rorie that it would not increase its offer and that it would withdraw its offer
to acquire UAS.
Also, on September 3, 1996, Mr. Painter telephoned Messrs. Klein and
Johnson and CLARCOR's outside legal counsel, and informed them that the UAS
Board objected to CLARCOR's desire for an option to acquire UAS Common Stock.
CLARCOR and UAS, through their legal counsel, had a number of telephone
conversations to discuss this issue until, on September 5, 1996, Mr. Klein and
CLARCOR's legal counsel telephoned Mr. Painter to inform him that CLARCOR would
not require such an option in connection with the proposed merger.
On September 9, 1996, the UAS Board engaged Hilliard Lyons to advise UAS as
to the fairness from a financial viewpoint of any transaction and to provide a
fairness opinion, if requested by the UAS Board.
The parties then commenced extensive negotiations regarding the terms of a
definitive merger agreement. These negotiations primarily were conducted by
UAS's and CLARCOR's respective legal counsel. Each party consulted with members
of its respective Board of Directors and senior officers regarding the essential
business and legal issues.
On September 18, 1996, Messrs. Rorie and Painter of UAS and Messrs. Gloyd,
Johnson and Klein of CLARCOR and CLARCOR's outside legal counsel met to further
negotiate the terms of a definitive merger agreement. Negotiations focused
primarily on the termination provisions and the amount of the termination fees
UAS would be required to pay if the merger did not close and the restrictions
desired by CLARCOR on UAS's ability to consider other proposals, if any, that
UAS might receive prior to the closing. Although the
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parties agreed upon the contractual provisions of most other aspects of the
proposed merger, the parties did not reach agreement on these key terms. In
addition, CLARCOR was continuing its due diligence of UAS and both UAS and
CLARCOR were further evaluating the tax-free nature of the transaction.
Following the September 18 meeting, counsel for both UAS and CLARCOR
continued to negotiate the definitive Merger Agreement and related documents.
Following consultation with their respective principals, on September 21,
counsel reached agreement on the termination provisions and the amount of
termination fees and UAS's ability to consider competing proposals. A final
draft of all documentation was delivered to all parties for review on September
22 and UAS scheduled a Board of Directors meeting for September 23.
On September 23, 1996, the UAS Board unanimously approved the Merger
Agreement and the related documents and authorized its respective officers to
execute such agreement. Thereafter, the Merger Agreement was executed and a
press release announcing the agreement was issued by each of UAS and CLARCOR.
UAS'S REASONS FOR THE MERGER; RECOMMENDATION OF ITS BOARD OF DIRECTORS
The UAS Board has unanimously determined that the Merger is advisable and
fair to and in the best interests of UAS and its shareholders and has
unanimously approved the Merger Agreement. Accordingly, the UAS Board
unanimously recommends that the shareholders of UAS vote in favor of adoption of
the Merger Agreement at the UAS Special Meeting.
In reaching its conclusion to approve the Merger Agreement, the UAS Board
considered a number of factors, including, without limitation, the following:
(i) The terms and conditions of the Merger Agreement, as reviewed by
and discussed with UAS's management and legal counsel. The UAS Board gave
consideration to, among other things, the structure of the proposed
business combination and the amount and form of consideration offered to
UAS's shareholders (which as of the date of the Merger Agreement
represented a premium of $3.54 above the last reported trading price of UAS
Common Stock prior to the public announcement of the execution of the
Merger Agreement, which does not require a reduction in the consideration
paid to UAS shareholders due to amounts payable to Messrs. Rorie and Cheney
and which provides the holders of UAS Common Stock with an opportunity to
benefit from an increase in value of CLARCOR Common Stock resulting from,
among other things, the Merger).
(ii) The historical market prices and trading volume of UAS Common
Stock and historical and projected earnings.
(iii) UAS's historical and recent operating results, its financial
condition, its borrowing and financing capacity and the UAS Board's and
management's evaluation of UAS's properties, assets and prospects.
(iv) The absence of any term or condition which in the UAS Board's
view was unduly onerous or could materially impede or impair the
consummation of the Merger.
(v) The financial condition, business reputation and future prospects
of CLARCOR, the liquidity of CLARCOR Common Stock and the ability of
CLARCOR to complete the Merger in a timely manner.
(vi) The UAS Board's belief that the Merger is in the best interests
of UAS and its shareholders under the present circumstances, based on
recommendations from UAS management and the consideration of all other
relevant factors including the strategic fit between UAS and CLARCOR.
(vii) The UAS Board's belief that the Merger Agreement would not
prohibit UAS from (i) participating in discussions or negotiations with, or
furnishing information to, persons or entities that might seek to engage in
discussions or negotiations, request information or make a proposal to
acquire UAS, if the UAS Board determines in good faith that such action is
required for the discharge of its fiduciary obligations and that the
proposal is a Superior Proposal (as such term is defined in the Merger
Agreement), and (ii) terminating the Merger Agreement and accepting an
alternative proposal if the
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UAS Board determines that such proposal is a Superior Proposal (subject to
payment of a $1,000,000 fee to CLARCOR (the "Termination Fee") upon such
termination). In connection with its review of the terms of the Merger
Agreement, the UAS Board gave consideration to the size and the structure
of the Termination Fee and the terms and conditions of the voting
agreements described herein under the caption "VOTING AGREEMENTS."
(viii) The written opinion of Hilliard Lyons, dated September 23,
1996, that on the basis of its review and analysis and subject to the
limitations set forth therein, the consideration to be received by holders
of UAS Common Stock pursuant to the Merger is fair, from a financial point
of view, to such holders.
In the course of its discussions, the UAS Board extensively discussed the
price that would be obtained by UAS shareholders, the tax-free nature of the
Merger, the liquidity of CLARCOR Common Stock and CLARCOR's strategic fit with
UAS. However, the UAS Board did not assign relative weights to the foregoing
factors or determine that any factor was of more importance than other factors.
Rather, the UAS Board viewed its position and recommendations as being based on
the totality of the information presented to and considered by it. Accordingly,
all of the foregoing factors impacted the UAS Board's decision to some extent.
THE UAS BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF UAS VOTE IN
FAVOR OF ADOPTION OF THE MERGER AGREEMENT AT THE UAS SPECIAL MEETING.
OPINION OF UAS'S FINANCIAL ADVISOR
Hilliard Lyons has acted as financial advisor to UAS in connection with the
Merger and has delivered its written opinion (the "Fairness Opinion") dated
September 23, 1996 to the UAS Board to the effect that, based upon and subject
to the various considerations set forth therein, as of the date thereof, the
consideration to be received in the Merger by the holders of UAS Common Stock is
fair to such holders from a financial point of view. No limitations were imposed
by the UAS Board upon Hilliard Lyons with respect to the investigations made or
the procedures followed by it in rendering the Fairness Opinion.
Hilliard Lyons was not requested by the UAS Board to make any
recommendation as to the form or amount of consideration to be paid by CLARCOR
pursuant to the Merger Agreement, which issues were resolved in arm's-length
negotiations between CLARCOR and UAS. Hilliard Lyons was not requested to, and
did not, solicit third-party indications of interest to acquire or merge with
all or any part of UAS.
THE FULL TEXT OF THE FAIRNESS OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
HERETO AS ANNEX II AND SHOULD BE READ CAREFULLY IN ITS ENTIRETY. THE SUMMARY OF
THE OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. THE FAIRNESS OPINION
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF UAS COMMON STOCK AS TO HOW
SUCH HOLDER SHOULD VOTE ON THE MERGER AGREEMENT OR ANY OTHER RECOMMENDATION
WHATSOEVER.
Prior to the time that Hilliard Lyons delivered the Fairness Opinion,
Hilliard Lyons presented its analysis and provided a verbal opinion to the UAS
Board to the effect that, based upon and subject to the various considerations
to be set forth in the written Fairness Opinion, the consideration to be
received in the Merger by the holders of UAS Common Stock is fair to such
holders from a financial point of view. In arriving at the Fairness Opinion,
Hilliard Lyons reviewed (i) certain publicly available business and financial
information relating to UAS and CLARCOR; (ii) the Merger Agreement; (iii)
summary financial forecasts provided by UAS for the fiscal years ending June 30,
1997 and 1998; (iv) certain financial and stock market data for UAS, CLARCOR and
other publicly held companies deemed comparable to UAS and CLARCOR by Hilliard
Lyons; (v) the financial terms of certain other merger and acquisition
transactions deemed comparable to the Merger by Hilliard Lyons; and (vi) such
other information as Hilliard Lyons deemed necessary. In addition, Hilliard
Lyons met with certain members of UAS management to discuss the past and current
business operations, financial condition and prospects of UAS. Hilliard Lyons
discussed with UAS management the proposal received by UAS from the Other
Interested Party. Hilliard Lyons also had discussions with certain
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members of CLARCOR management regarding the past and current business
operations, financial condition and prospects of CLARCOR, including earnings
projections for the quarter ending November 30, 1996 and the fiscal year ending
November 29, 1997.
In rendering the Fairness Opinion, Hilliard Lyons assumed and relied upon
the accuracy and completeness of all information supplied or otherwise made
available to it by UAS and CLARCOR and did not independently verify nor assume
any responsibility for independently verifying any of such information. With
respect to UAS's and CLARCOR's financial forecasts, Hilliard Lyons assumed that
they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of UAS's and CLARCOR's management,
respectively, as to the future financial performance of their respective
businesses, and Hilliard Lyons expressed no opinion with respect to such
forecasts or the assumptions on which they were based. Hilliard Lyons has not
made, nor obtained or assumed any responsibility for making or obtaining, any
independent evaluations or appraisals of any of the assets (including properties
and facilities) or liabilities of UAS or CLARCOR. Hilliard Lyons assumed that
the Merger would qualify as a tax-free reorganization for federal income tax
purposes within the meaning of Section 368(a) of the Code and would be accounted
for as a pooling of interests business combination in accordance with generally
accepted accounting principles. Hilliard Lyons' Fairness Opinion was based on
general economic, market, monetary and other conditions as they existed and
could be evaluated on, and the information made available to Hilliard Lyons as
of, the date of such opinion. Hilliard Lyons expressed no opinion as to the
likely trading ranges of UAS Common Stock prior to, or CLARCOR Common Stock
prior to or following, the consummation of the Merger, which may vary depending
on, among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities.
The following is a summary of the primary analyses performed by Hilliard
Lyons and presented to the UAS Board in connection with the preparation of the
Fairness Opinion.
Comparable Public Company Analysis. Hilliard Lyons performed a comparable
public company analysis in which it reviewed historical financial and operating
data, projections of future financial performance and market statistics of
selected publicly traded companies considered by Hilliard Lyons to be reasonably
comparable to UAS and CLARCOR, respectively. Selected public companies deemed
comparable to UAS by Hilliard Lyons include Air & Water Technologies Corp.,
Air-Cure Technologies, Inc., BHA Group, Inc., Crown Andersen, Inc., Donaldson
Company, Inc., Farr Company, Met-Pro Corp., Osmonics, Inc., Peerless
Manufacturing Company and Trion, Inc., (collectively, the "UAS Comparable
Group") which are engaged generally in the manufacture and/or distribution of
filtration products and/or equipment. Selected public companies deemed
comparable to CLARCOR by Hilliard Lyons include BHA Group, Inc., CECO
Environmental Corp., Donaldson Company, Inc., Farr Company, Lydall, Inc., MFRI,
Inc., Osmonics, Inc., Schawk, Inc., Mark IV Industries, Inc., Standard Motor
Products, Inc. and Stant Corp., (collectively, the "CLARCOR Comparable Group")
which are engaged in the manufacture and/or distribution of filtration products
and/or equipment (in the case of the first eight companies named) or which are
engaged in the manufacture and/or distribution of aftermarket automotive
components (in the case of the last three companies named).
Financial and market data reviewed by Hilliard Lyons included, among other
things, (i) market capitalization (defined as the product of shares outstanding
and price per share) as a multiple of latest twelve months sales, operating
income and earnings per share, (ii) market price as a multiple of 1996 and 1997
consensus estimate earnings per share, sourced from I/B/E/S International, and
(iii) enterprise value (defined as the sum of market capitalization plus
long-term debt less cash and equivalents) as a multiple of latest twelve months
sales, operating income and EBITDA (defined as earnings before interest, taxes,
depreciation and amortization expenses).
The average and median multiples were, respectively, as follows: (i) market
capitalization to latest twelve months sales of .82 and .63 for the UAS
Comparable Group and .90 and .78 for the CLARCOR Comparable Group, (ii) market
capitalization to latest twelve months operating income of 8.86 and 8.32 for the
UAS Comparable Group and 7.83 and 6.40 for the CLARCOR Comparable Group, (iii)
market capitalization to latest twelve months earnings per share of 15.86 and
15.67 for the UAS Comparable Group and 15.23 and
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14.42 for the CLARCOR Comparable Group, (iv) market price to estimated 1996
earnings per share of 15.39 and 15.06 for the UAS Comparable Group and 14.43 and
13.74 for the CLARCOR Comparable Group, (v) market price to estimated 1997
earnings per share of 12.64 and 12.74 for the UAS Comparable Group and 12.03 and
11.97 for the CLARCOR Comparable Group, (vi) enterprise value to latest twelve
months sales of .88 and .79 for the UAS Comparable Group and 1.03 and .91 for
the CLARCOR Comparable Group, (vii) enterprise value to latest twelve months
operating income of 8.89 and 9.25 for the UAS Comparable Group and 9.51 and 9.65
for the CLARCOR Comparable Group and (viii) enterprise value to latest twelve
months EBITDA of 7.56 and 7.34 for the UAS Comparable Group and 6.85 and 6.75
for the CLARCOR Comparable Group.
Hilliard Lyons then derived from this and other data, the ranges of these
multiples deemed most meaningful for its analysis and applied these multiples to
the relevant financial data of UAS and CLARCOR. No company used in the
comparable public company analysis was directly comparable in all material
respects to either UAS or CLARCOR. Accordingly, the analysis of the results of
the foregoing necessarily involved complex considerations and judgments
concerning differences in financial and operating characteristics of UAS,
CLARCOR and the companies in the UAS Comparable Group and the CLARCOR Comparable
Group and other factors that could affect the public trading value of UAS,
CLARCOR and the companies in the UAS Comparable Group and the CLARCOR Comparable
Group. Hilliard Lyons did not regard strict mathematical analysis (such as
determining the average or median), by itself, as a meaningful method of using
comparable public company data. In addition, this analysis did not reflect any
potential synergies resulting from the combination of UAS and CLARCOR. Further,
Hilliard Lyons gave less weight to the multiples of market capitalization to
latest twelve month sales and enterprise value to latest twelve months sales,
because of its view that these multiples were less indicative of value than the
other multiples identified above.
Based upon its comparable public company analysis, Hilliard Lyons derived
per share equity value reference ranges of $6.25 to $8.25 per share for UAS and
$19.25 to $23.50 per share for CLARCOR.
Discounted Cash Flow Analysis. Hilliard Lyons performed discounted cash
flow ("DCF") analyses of the projected cash flows of UAS for the fiscal years
1997 through 2001, based on, among other things, a thorough review of UAS
historical and current financial performance, its budget for fiscal 1997,
telephonic and in-person interviews with senior members of the UAS management
team and Hilliard Lyons' analytical judgment. In its DCF analysis, Hilliard
Lyons made various assumptions that it regarded as reasonable, including the
following for each of the fiscal years 1998 through 2001; (i) annual sales
growth of 12.2%; (ii) gross profit margin of 34.3%; (iii) an annual increase in
sales, general and administrative expenses of 10%; and (iv) annual growth in
capital expenditures of 6%. Hilliard Lyons calculated the theoretical discounted
present value for UAS by adding together the present value of (i) the projected
stream of free cash flow through the year 2001 and (ii) the projected value of
UAS at the end of the year 2001 (the "Terminal Value").
Hilliard Lyons utilized, in its DCF analyses, after-tax discount rates
ranging from 15.3 percent to 17.3 percent. Hilliard Lyons used three methods to
determine Terminal Value: (i) growth multiple of year-2001 cash flow, using a
rate of 8 percent for post-2001 growth in perpetuity; (ii) multiples of 8.0x to
9.0x projected year-2001 EBIT (defined as earnings before interest and taxes);
and (iii) multiples of 7.0x to 8.0x projected year-2001 EBITDA.
Based upon its DCF analysis, Hilliard Lyons derived a per share equity
value reference range of $6.25 to $8.00 per share for UAS.
Merger and Acquisition Transaction Analysis. Subject to the limitations
discussed above regarding the lack of exactness concerning the comparability of
other companies to UAS, Hilliard Lyons reviewed certain publicly announced
transactions involving the acquisition of certain companies which Hilliard Lyons
deemed comparable to UAS. Hilliard Lyons identified five transactions involving
acquisition targets engaged in the manufacture and/or distribution of filtration
products and/or equipment: the acquisition of Bionaire, Inc. by The Rival
Company; Flair Corporation by United Dominion Industries, Ltd; King Company,
Inc. by Flair Corporation; Purolator Products Company by Mark IV Industries,
Inc.; and Dollinger Corporation by Flair Corporation. With respect to these
transactions, Hilliard Lyons calculated certain valuation multiples
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<PAGE> 38
(including multiples of sales, EBITDA, net income and book value). Where data
was available, Hilliard Lyons calculated five separate valuation multiples for
each transaction: (i) equity purchase price as a multiple of sales, net income
and book value, and (ii) enterprise purchase price (defined as equity purchase
price plus long-term debt) as a multiple of sales and EBITDA. The average equity
purchase price multiples of sales, net income and book value were .64, 16.38 and
1.82, respectively. The median equity purchase price multiples of sales, net
income and book value were .59, 15.04 and 1.55, respectively. The average
enterprise purchase price multiples of sales and EBITDA were .82 and 8.39,
respectively. The median enterprise purchase price multiples of sales and EBITDA
were .70 and 9.00, respectively. The indicated average and median multiples were
applied to the relevant financial data of UAS.
Based upon its merger and acquisition transaction analysis, Hilliard Lyons
derived a per share equity value reference range of $6.50 to $8.75 for UAS.
Control Premium Analysis. Hilliard Lyons reviewed published compilations of
data regarding numerous merger and acquisition transactions across various
industries completed in the last six years. Such data compared the price paid
per share in each transaction to the prevailing market prices at various
intervals prior to the public announcement of such transaction. Hilliard Lyons'
control premium analysis revealed annual average premiums for the last six years
ranging from approximately 30 percent to 50 percent. Hilliard Lyons noted that
the premium applicable to the Merger was approximately 79 percent (based on (i)
the last trade in UAS Common Stock at $4.50 for September 17, 1996 (ii) the last
trade in CLARCOR Common Stock at $21.75 for September 20, 1996 and (iii) the
terms of the Merger Agreement), which premium was significantly above the range
of average premiums indicated by its analysis of control premiums.
Liquidity and Trading Analysis. Hilliard Lyons reviewed the six-month daily
and two-year weekly recorded trading volume for UAS, CLARCOR and each of the
companies in the UAS Comparable Group and CLARCOR Comparable Group. Hilliard
Lyons noted that the six-month daily average trading volume in UAS, as a
percentage of UAS's estimated float (defined as the number of shares outstanding
less any closely held shares and large, illiquid stakes) was 0.02 percent. This
compared with 0.12 percent for CLARCOR and an average of 0.12 percent for the
group of companies in the UAS Comparable Group and the CLARCOR Comparable Group.
Two-year weekly trading volume, as a percentage of estimated float for UAS,
CLARCOR and the group of companies in the UAS Comparable Group and the CLARCOR
Comparable Group averaged 0.05 percent, 0.42 percent and 0.57 percent,
respectively. In addition, Hilliard Lyons assessed (i) analyst coverage, (ii)
institutional ownership and (iii) bid-ask spreads (defined as the difference
between the bid price and ask price), where applicable, for UAS and each of the
companies in the UAS Comparable Group and CLARCOR Comparable Group. Hilliard
Lyons noted that UAS generally had less securities firm research analyst
coverage than CLARCOR and the group of companies in the UAS Comparable Group and
the CLARCOR Comparable Group. Estimated institutional ownership, as a percentage
of shares outstanding, was 0.67 percent and 59.29 percent for UAS and CLARCOR,
respectively, and averaged 35.48 percent for the group of companies in the UAS
Comparable Group and the CLARCOR Comparable Group. Finally, Hilliard Lyons noted
that the closing bid-ask spread on September 13, 1996, as a percentage of the
bid price, was 13.51 percent for UAS and averaged 6.69 percent for the nine
companies in the UAS Comparable Group and the CLARCOR Comparable Group, which
shares (like UAS and unlike CLARCOR) are traded in the over-the-counter market.
Hilliard Lyons noted that, collectively, the foregoing data demonstrates the
relative illiquidity of UAS Common Stock.
In arriving at its opinion and based upon the foregoing comparable public
company, discounted cash flow, merger and acquisition transaction, control
premium and liquidity and trading analyses, Hilliard Lyons performed other
objective and subjective analyses as Hilliard Lyons deemed necessary. Based on
all analyses and factors, Hilliard Lyons concluded that the consideration to be
received by the holders of UAS Common Stock in connection with the Merger is
fair to such holders from a financial point of view.
The preparation of a fairness opinion is not susceptible to partial
analysis or summary description. Hilliard Lyons believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all such analyses and factors, or of the above summary, without considering all
factors and analyses, could create an incomplete
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<PAGE> 39
view of the processes underlying the analyses set forth in Hilliard Lyons'
presentation to the UAS Board and its opinion. Hilliard Lyons has not indicated
that any of the analyses which it performed had a greater significance than any
other. The ranges of valuations resulting from any particular analysis described
above should not be taken to be the view of Hilliard Lyons of the actual values
of UAS and CLARCOR. In performing its analyses, Hilliard Lyons made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of UAS or
CLARCOR. The analyses performed by Hilliard Lyons are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Hilliard Lyons' analysis of the fairness, from a financial
point of view, of the consideration which the holders of UAS Common Stock would
receive in the Merger. In addition, analyses relating to value of businesses do
not purport to be appraisals or to reflect the prices at which a business
actually might be sold, or the prices at which a company might actually be sold,
or the prices at which securities might trade at the present time or at any time
in the future.
The Fairness Opinion states that it is for the information of the UAS Board
of Directors and is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering of securities or used for any other
purpose, without the written consent of Hilliard Lyons. Hilliard Lyons has
consented in writing to the inclusion of the Fairness Opinion as a part of this
Proxy Statement/Prospectus and to the discussion of such Fairness Opinion set
forth above.
Headquartered in Louisville, Kentucky, Hilliard Lyons is a nationally
recognized securities and investment banking firm which, as part of its
investment banking business, regularly is engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. The UAS Board selected Hilliard Lyons on the basis of its reputation,
expertise, independence and knowledge of UAS and its business.
Hilliard Lyons, in the ordinary course of its business, may actively trade
the securities of UAS and CLARCOR for its own account and for the accounts of
customers, and, accordingly may at any time hold a long or short position in
such securities. Hilliard Lyons has not performed investment banking services
for UAS or CLARCOR in the past.
Pursuant to the engagement letter, dated as of September 9, 1996 between
UAS and Hilliard Lyons, UAS has agreed to pay Hilliard Lyons a fee of $50,000 in
connection with the Fairness Opinion. Of this amount, $10,000 was earned upon
the execution of such engagement, with an additional $10,000 earned by Hilliard
Lyons upon providing its initial opinion to a representative of the UAS Board as
to the fairness, from a financial point of view, of the consideration to be
received by the holders of UAS Common Stock in the Merger. The remaining $30,000
was earned upon Hilliard Lyons' issuance of the Fairness Opinion to the UAS
Board. UAS also agreed to reimburse Hilliard Lyons for the expenses reasonably
incurred by Hilliard Lyons in connection with its engagement (including
reasonable counsel fees) and to indemnify Hilliard Lyons and its officers,
directors, employees, agents and controlling persons against certain expenses,
losses, claims, damages or liabilities incurred in connection with its services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the UAS Board with respect to adoption
of the Merger Agreement, UAS shareholders should be aware that members of the
UAS Board and executive officers of UAS have interests in the Merger in addition
to their interests as shareholders of UAS.
In connection with the execution of the Merger Agreement, CLARCOR entered
into the Non-Compete Agreements, each of which is described below. The
Non-Compete Agreements will not become effective unless and until the Effective
Time of the Merger occurs. Messrs. Rorie and Cheney are members of the UAS Board
and executive officers of UAS.
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<PAGE> 40
The Rorie Non-Compete Agreement amends and supplements certain compensation
arrangements currently in place between Mr. Rorie and UAS. In particular, the
annual bonus to be paid to Mr. Rorie by UAS pursuant to his employment agreement
(the "Rorie Employment Agreement"), which originally provided for payment by UAS
of an annual bonus in the amount of 2.5% of the pre-tax consolidated net profits
of UAS, has been amended to provide for payment by UAS of an annual bonus for
the fiscal year ended June 30, 1997 equal to 2.5% of the UAS pro forma pre-tax
income computed as if UAS was a stand-alone company for such entire fiscal year.
Thereafter, Mr. Rorie's annual bonus will be computed pursuant to the CLARCOR
Key Management Incentive Program. Also, CLARCOR has unconditionally guaranteed,
to the extent of UAS's obligation, the payment by UAS of the base salary and the
annual bonus payable to Mr. Rorie under the Rorie Employment Agreement, as well
as the payment of the premiums due by UAS to Northwestern Mutual Life Insurance
Company, and the performance by UAS of its other obligations under various
related insurance agreements, in connection with a split-dollar insurance policy
that is owned by Mr. Rorie insuring his life.
In addition, the Rorie Non-Compete Agreement amends an agreement between
Mr. Rorie and UAS (the "Rorie Post-Employment Agreement") that provided for
lifetime monthly payments by UAS to Mr. Rorie upon the termination of his
employment equal to 1/24th of his average annual base salary for the three
fiscal years prior to the termination of his employment. At Mr. Rorie's present
base salary, such lifetime monthly payments would be equal to $7,000 per month
assuming that Mr. Rorie's employment with UAS will terminate on June 30, 1998.
The Rorie Non-Compete Agreement provides that, at the Effective Time of the
Merger and in lieu of such lifetime monthly payments, Mr. Rorie will receive a
lump sum payment from CLARCOR of $668,321.52, which equals the net present value
of lifetime monthly payments of $6,750 (such amount is based on Mr. Rorie's
salary as of the date of the Merger Agreement) assuming that Mr. Rorie's
employment with UAS will terminate on June 30, 1998. The Rorie Employment
Agreement will terminate on June 30, 2001. Upon the actual termination of Mr.
Rorie's employment with UAS, the net present value of such lifetime monthly
payments will be recalculated based on such actual termination date and an
adjusting payment will be made by either CLARCOR or Mr. Rorie to the other as
appropriate.
The Rorie Non-Compete Agreement further amends the non-compete provisions
contained in the Rorie Employment Agreement and the Rorie Post-Employment
Agreement to prohibit Mr. Rorie from engaging in certain competitive activities,
as described therein, in the United States, the United Kingdom or Germany during
the term of his employment and for a period of five years after the termination
of his employment and from disclosing certain confidential information regarding
UAS or any of its affiliates, including CLARCOR. In the event of a breach of
such covenants, the Rorie Non-Compete Agreement requires Mr. Rorie to repay to
CLARCOR 100% of the recalculated lump sump payment described above.
The Cheney Non-Compete Agreement amends and supplements certain provisions
of an agreement between Mr. Cheney and UAS (the "Cheney Post-Employment
Agreement") that provides for lifetime monthly payments by UAS to Mr. Cheney
equal to 1/24th of his average annual base salary for the three fiscal years
prior to termination of his employment, which UAS began paying to Mr. Cheney
upon the termination of his employment as Senior Vice President of UAS in 1991
and which were increased by 10% effective March 1, 1995. Such lifetime monthly
payments currently are equal to $4,468.75 per month. Pursuant to the Cheney
Non-Compete Agreement, CLARCOR unconditionally guarantees, to the extent of
UAS's obligation, the payment by UAS to Mr. Cheney of such lifetime monthly
payments. In addition, the Cheney Non-Compete Agreement amends the non-compete
provisions contained in the Cheney Post-Employment Agreement to provide
non-compete and confidentiality covenants similar to those provided in the Rorie
Non-Compete Agreement, such non-compete covenants to be in effect for a period
of five years from the Effective Time of the Merger. In the event of a breach of
such covenants, the Cheney Non-Compete Agreement requires Mr. Cheney to repay to
UAS 100% of all such lifetime monthly payments received by Mr. Cheney on and
after the Effective Time of the Merger and terminates the obligation of UAS to
pay, and the right of Mr. Cheney to receive, any such future payments.
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Directors and executive officers of UAS hold options to purchase UAS Common
Stock as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF EXERCISE
DIRECTOR OR EXECUTIVE OFFICER DATE OF GRANT UAS COMMON STOCK PRICE($)
- ---------------------------------------------------- ------------- ---------------- --------------
<S> <C> <C> <C>
Durwood G. Rorie, Jr................................ 10/20/92 187,500 1.33
Raymond E. Warrick, Jr.............................. 02/28/94 7,500 1.33
01/01/92 7,500 1.33
08/01/95 7,500 3.30
William M. Rehl, III................................ 02/28/94 1,875 1.33
01/01/92 5,625 1.33
08/01/95 3,750 3.30
David F. Herche..................................... 09/01/94 3,125 1.60
10/18/94 1,250 1.60
11/15/95 1,250 4.20
George T. Rehfeldt.................................. 08/01/95 3,125 3.30
11/15/95 1,250 4.20
</TABLE>
The options listed above will, if they are outstanding immediately prior to the
Effective Time, be converted into Substitute Options at the Effective Time. See
"THE MERGER AGREEMENT -- Stock Options."
The holders of UAS Common Stock who have entered into the agreements
described herein under the caption "VOTING AGREEMENTS" (which holders include
Messrs. Rorie and Cheney) are entitled thereby to certain rights with respect to
the registration under the Securities Act of the shares of CLARCOR Common Stock
they receive pursuant to the Merger. See "VOTING AGREEMENTS."
CLARCOR has agreed to cause UAS to (i) maintain continuously in effect, for
six years after the Effective Time, directors' and officers' liability insurance
covering those persons covered on the date of the Merger Agreement by UAS's
policies for acts or omissions occurring at or prior to the Effective Time on
terms no less favorable than coverages in effect on the date of the Merger
Agreement and (ii) indemnify and hold harmless (and advance expenses to) all
past and current directors, officers, employees and agents of UAS and of its
Subsidiaries, for claims made within six years after the Effective Time arising
out of acts or omissions occurring at or prior to the Effective Time, to the
same extent such persons were indemnified on the date of the Merger Agreement by
UAS pursuant to the Amended Articles of Incorporation of UAS (the "UAS Charter")
and Amended and Restated Code of Regulations of UAS (the "UAS Regulations"). See
"THE MERGER AGREEMENT -- Indemnification; Directors and Officers Insurance."
See "THE MERGER AGREEMENT -- Employee Benefits" for a description of the
benefits provided by the Merger Agreement for UAS employees generally.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the consummation of the Merger that CLARCOR receive an
opinion from its counsel, Sidley & Austin, and that UAS receive an opinion from
its counsel, Graydon, Head & Ritchey, substantially to the effect that for
federal income tax purposes: (i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and CLARCOR, Sub and UAS will each be a party to such
reorganization within the meaning of Section 368(b) of the Code; (ii) no gain or
loss will be recognized by, in the case of the opinion of Graydon, Head &
Ritchey, UAS, and, in the case of the opinion of Sidley & Austin, CLARCOR or
UAS, as a result of the Merger; (iii) no gain or loss will be recognized by the
non-dissenting shareholders of UAS upon the conversion of their shares of UAS
Common Stock into shares of CLARCOR Common Stock in accordance with the Merger,
except with respect to cash, if any, received in lieu of fractional shares of
CLARCOR Common Stock; (iv) the aggregate tax basis of the shares of CLARCOR
Common Stock received by a shareholder in exchange for shares of UAS Common
Stock in accordance with the Merger (including fractional shares of CLARCOR
Common Stock for which cash is received) will be the same as the aggregate tax
basis of such
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shares of UAS Common Stock; (v) the holding period for shares of CLARCOR Common
Stock received by a shareholder in exchange for shares of UAS Common Stock in
accordance with the Merger will include the period that such shares of UAS
Common Stock were held by the shareholder, provided such shares of UAS Common
Stock were held as capital assets by such shareholder at the Effective Time; and
(vi) a shareholder of UAS who receives cash in lieu of a fractional share of
CLARCOR Common Stock will recognize gain or loss equal to the difference, if
any, between such shareholder's basis in such fractional share and the amount of
cash received.
In rendering such opinions, Graydon, Head & Ritchey and Sidley & Austin
will rely upon representations contained in certificates of CLARCOR, UAS and
others and may condition such opinions on the receipt from each shareholder of
UAS holding a substantial amount of the shares of UAS Common Stock (a "Major
Shareholder") of a certificate which contains, among other things, a
representation that, as of the Effective Time, such Major Shareholder does not
intend to dispose of the shares of CLARCOR Common Stock to be received by such
Major Shareholder pursuant to the Merger. It is expected that each Major
Shareholder will deliver such a certificate.
A holder of UAS Common Stock who perfects dissenters' rights with respect
to his or her shares of UAS Common Stock should, in general, treat the
difference between the basis of the shares of UAS Common Stock held by such
person with respect to which such dissenters' rights are perfected and the
amount received in payment therefor as capital gain or loss. However, depending
on the holder's particular circumstances, such amount might be treated for
federal income tax purposes as dividend income. See "DISSENTERS' RIGHTS."
Stock Options. Holders of UAS Stock Options, whether such stock options are
Incentive Stock Options (within the meaning of Section 422(b) of the Code) or
Nonqualified Stock Options (defined as stock options which are not Incentive
Stock Options), will not recognize gain or loss solely as a result of UAS Stock
Options becoming Substitute Options.
Each holder of a Substitute Option which is a Nonqualified Stock Option (a
"Substitute Nonqualified Stock Option") will generally recognize ordinary
compensation income on the date such Substitute Nonqualified Stock Option is
exercised in an amount equal to the excess of the aggregate fair market value on
such date of the shares of CLARCOR Common Stock acquired upon such exercise over
the aggregate exercise price for such shares and UAS will be entitled to a
corresponding deduction. Notwithstanding the general rules described in the
preceding sentence, a person who is subject to restrictions on the resale of
CLARCOR Common Stock by reason of being an "affiliate" (as described below under
"-- Resales of CLARCOR Common Stock") ("Resale Restrictions") will not recognize
compensation income and UAS will not be entitled to a deduction until the Resale
Restrictions imposed on such person with respect to the shares of CLARCOR Common
Stock received upon the exercise of a Substitute Nonqualified Stock Option have
lapsed. Any person exercising a Substitute Nonqualified Stock Option who is
subject to Resale Restrictions can elect to recognize compensation income at the
same time and in the same manner as a recipient of shares of CLARCOR Common
Stock not subject to the Resale Restrictions by filing an election with the
Internal Revenue Service within 30 days after the shares of CLARCOR Common Stock
are transferred to such person. The tax basis of the shares of CLARCOR Common
Stock acquired upon exercise of a Substitute Nonqualified Stock Option will
generally be equal to the fair market value thereof on the date compensation
income with respect to such shares is recognized, and the holding period of such
shares, for the purpose of determining whether a subsequent sale thereof would
result in the recognition of short-term or long-term capital gain or loss, will
generally commence on such date.
The holder of a Substitute Option which is an Incentive Stock Option (a
"Substitute Incentive Stock Option") will not recognize income (except for
purposes of the alternative minimum tax) upon exercise of such Substitute
Incentive Stock Option. If the shares of CLARCOR Common Stock acquired upon
exercise of a Substitute Incentive Stock Option are held for the longer of two
years from the date the option was granted and one year from the date it was
exercised, any gain or loss arising from a subsequent disposition of such shares
will be taxed as long-term capital gain or loss, and UAS will not be entitled to
any deduction. If, however, such shares are disposed of within the
above-described period (a "Disqualifying Disposition"), then in the year of such
disposition the holder will recognize compensation taxable as ordinary income
equal to the
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<PAGE> 43
excess of (a) the lesser of (i) the aggregate amount realized upon such
disposition and (ii) the aggregate fair market value on the date of exercise of
the shares of CLARCOR Common Stock acquired upon such exercise over (b) the
aggregate exercise price for such shares and UAS will be entitled to a
corresponding deduction. Any amount realized upon such Disqualifying Disposition
in excess of the fair market value on the date of exercise of the shares of
CLARCOR Common Stock acquired upon such exercise will be taxed as long-term or
short-term capital gain, depending on how long such shares were held. In
general, the holding period for such shares will commence on the date of
exercise.
Notwithstanding the preceding paragraph, if a person who is subject to the
Resale Restrictions exercises a Substitute Incentive Stock Option at a time when
the Resale Restrictions would apply to the sale of the shares so acquired and
disposes of such shares in a Disqualifying Disposition, the amounts of income
and capital gain determined pursuant to the preceding paragraph will be
determined by reference to the fair market value of the shares at the time the
Resale Restrictions lapse, rather than on the date of exercise, and the holding
period for the shares will be deemed to have begun at that time rather than on
the date of exercise. It may be possible for a person who is subject to the
Resale Restrictions to instead be treated in the same manner as a holder who is
not subject to the Resale Restrictions by filing an election with the Internal
Revenue Service within 30 days after the shares of CLARCOR are transferred to
such holder; however, it is not clear whether such election will be recognized
by the Internal Revenue Service.
Amounts recognized as ordinary compensation income will be subject to
United States income tax at the recipient's ordinary income tax rate. In
addition, amounts recognized upon exercise of a Substitute Nonqualified Stock
Option as ordinary compensation income will also be (i) subject to the hospital
insurance portion of the tax under the Federal Insurance Contributions Act
("FICA Tax"), currently 1.45%, and (ii) depending on the recipient's individual
circumstances, subject in whole or in part to the old-age, survivors and
disability portion of the FICA Tax, currently 6.2%. Amounts recognized as
ordinary income upon a Disqualifying Disposition of shares acquired through
exercise of a Substitute Incentive Stock Option will not be subject to FICA Tax.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. IN
ADDITION, THE DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES THAT MAY
BE RELEVANT TO PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES OR
TO TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE (FOR EXAMPLE, INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES, TAX-EXEMPT
ORGANIZATIONS, FOREIGN CORPORATIONS, FOREIGN PARTNERSHIPS OR OTHER FOREIGN
ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES).
NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES, IF
ANY, OF THE MERGER UNDER APPLICABLE FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
THE FOREGOING DISCUSSION IS BASED UPON THE PROVISIONS OF THE CODE, APPLICABLE
TREASURY REGULATIONS THEREUNDER, INTERNAL REVENUE SERVICE RULINGS AND JUDICIAL
DECISIONS, AS IN EFFECT AS OF THE DATE HEREOF. THERE CAN BE NO ASSURANCE THAT
FUTURE LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS WILL
NOT AFFECT THE ACCURACY OF THE STATEMENTS OR CONCLUSIONS SET FORTH HEREIN. ANY
SUCH CHANGE COULD APPLY RETROACTIVELY AND COULD AFFECT THE ACCURACY OF SUCH
DISCUSSION. NO RULINGS HAVE OR WILL BE SOUGHT FROM THE INTERNAL REVENUE SERVICE
CONCERNING THE TAX CONSEQUENCES OF THE MERGER.
EACH SHAREHOLDER OF UAS IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS. EACH
HOLDER OF A UAS STOCK OPTION IS ALSO URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES REGARDING THE EXERCISE OF ANY SUBSTITUTE
OPTION.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a pooling of interests in
accordance with generally accepted accounting principles. Under this accounting
method, the recorded assets and liabilities of CLARCOR and UAS will be carried
forward at their recorded amounts to the combined enterprise, income of the
combined enterprise will include income of CLARCOR and UAS for the entire fiscal
year in which the
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Merger occurs and the reported income of CLARCOR and UAS for prior periods will
be combined and restated as income of the combined enterprise. See "THE MERGER
AGREEMENT -- Conditions Precedent to the Merger."
In connection with the Merger, CLARCOR will take a one-time pre-tax charge
in the quarter in which the Merger is consummated to cover the costs of
combining CLARCOR and UAS and for other unusual or nonrecurring items. Such
pre-tax charge, which is currently estimated to be in the range of $2.0 million
to $3.0 million, will include: (i) direct costs of the Merger, including fees
and expenses of legal counsel, independent auditors and financial advisors, (ii)
non-compete payments, (iii) costs of integrating the businesses of the two
companies and (iv) other unusual or non-recurring items related to the Merger.
The after-tax cost of such charge is currently estimated to be in the range of
$1.2 million to $1.8 million. The estimated charge and the nature of the costs
included therein are subject to change as CLARCOR's integration plan is
developed and more accurate estimates become possible. Moreover, the after-tax
cost of such estimated charge is likely to change depending upon the magnitude
of the pre-tax charge, the nature of the costs included therein, the tax laws of
the particular countries applicable to the entities incurring such costs and the
tax-paying status of such entities.
REGULATORY APPROVALS
The consummation of the Merger is conditioned upon the expiration or
termination of the applicable waiting period under the HSR Act. Under the HSR
Act and the regulations promulgated thereunder by the FTC, the Merger may not be
consummated until notifications have been given and certain information has been
furnished to the FTC and the Antitrust Division and the applicable waiting
period has expired or been terminated. Report forms relating to the Merger were
filed on behalf of CLARCOR and UAS under the HSR Act with the FTC and the
Antitrust Division. The applicable waiting period expired on November 30, 1996.
See "THE MERGER AGREEMENT -- Conditions Precedent to the Merger."
PERCENTAGE OWNERSHIP INTEREST OF UAS SHAREHOLDERS AFTER THE MERGER
After the Merger, based on the number of shares of CLARCOR Common Stock
outstanding on the Record Date and assuming the issuance of approximately
1,081,047 shares of CLARCOR Common Stock at the Effective Time, upon
consummation of the Merger there will be approximately 15,969,725 shares of
CLARCOR Common Stock outstanding at the Effective Time (approximately 17,604,030
on a fully-diluted basis), of which UAS shareholders will own approximately
6.77% (approximately 6.87% on a fully diluted basis).
STOCK EXCHANGE LISTING
It is a condition to the consummation of the Merger that the shares of
CLARCOR Common Stock constituting the Share Issuance be authorized for listing
on the NYSE upon official notice of issuance.
DELISTING AND DEREGISTRATION OF UAS COMMON STOCK
If the Merger is consummated, UAS Common Stock will no longer be traded on
Nasdaq and will be deregistered under the Exchange Act.
RESALES OF CLARCOR COMMON STOCK
All shares of CLARCOR Common Stock constituting the Share Issuance will be
freely transferable, except that shares received by any person who may be deemed
to be an "affiliate" (as used in paragraphs (c) and (d) of Rule 145 under the
Securities Act, including, without limitation, directors and certain executive
officers) of UAS for purposes of such Rule 145 may not be resold except in
transactions permitted by such Rule 145 or as otherwise permitted under the
Securities Act. See "THE MERGER AGREEMENT -- Conditions Precedent to the
Merger."
UAS has agreed to prepare and deliver to CLARCOR a list identifying each
person who, at the time of the UAS Special Meeting, may be deemed to be an
"affiliate" (as used in the preceding paragraph) of UAS
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and to use its reasonable best efforts to cause each person so identified to
deliver to CLARCOR on or prior to the Effective Time a written agreement, in the
form previously approved by CLARCOR and UAS, providing that such person will not
(i) sell, pledge, transfer or otherwise dispose of, or in any other way reduce
such person's risk relative to, any shares of UAS Common Stock or any shares of
CLARCOR Common Stock issued to such person in connection with the Merger, except
pursuant to an effective registration statement or in compliance with such Rule
145 or another exemption from the registration requirements of the Securities
Act or (ii) sell or in any other way reduce such person's risk relative to any
shares of CLARCOR Common Stock received in the Merger (within the meaning of
Section 201.01 of the SEC's Financial Reporting Release No. 1) during the period
(the "Resale Period") commencing 30 days prior to the Effective Time and ending
at such time as the financial results (including combined sales and net income)
covering at least 30 days of post-Merger operations have been published, except
as permitted by Staff Accounting Bulletin No. 76 issued by the SEC. CLARCOR has
agreed to satisfy the conditions set forth in Rule 144(c)(1) under the
Securities Act for so long as any such person is subject to the provisions of
Rule 145(d).
The holders of UAS Common Stock who have entered into the agreements
described herein under the caption "VOTING AGREEMENTS" are entitled thereby to
certain rights with respect to the registration under the Securities Act of the
shares of CLARCOR Common Stock they receive pursuant to the Merger. See "VOTING
AGREEMENTS."
THE MERGER AGREEMENT
CONVERSION OF SHARES IN THE MERGER
At the Effective Time, by virtue of the Merger and without any further
action on the part of any shareholder of UAS or Sub:
(i) each issued and outstanding share of Common Stock of Sub will be
converted into one share of Common Stock of the Surviving Corporation;
(ii) all shares of UAS Common Stock that are held in the treasury of
UAS or by any wholly-owned Subsidiary of UAS and any shares of UAS Common
Stock owned by CLARCOR or by any wholly-owned Subsidiary of CLARCOR will be
cancelled, and no capital stock of CLARCOR or other consideration will be
delivered in exchange therefor; and
(iii) each share of UAS Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
as described in subparagraph (ii) above) will be converted into .3698577
(the "Conversion Number") of a share of CLARCOR Common Stock, including the
corresponding percentage of a CLARCOR Right, provided cash will be paid in
lieu of any fractional share of CLARCOR Common Stock. See "-- No Fractional
Shares."
The Conversion Number is subject to adjustment under certain circumstances.
If the number of fully diluted shares of UAS Common Stock outstanding
immediately prior to the Effective Time does not change after the date hereof,
the Conversion Number, as adjusted, will be .3702116. See "-- Adjustment of
Conversion Number."
All shares of UAS Common Stock converted as provided in subparagraph (iii)
of the preceding paragraph will no longer be outstanding and will automatically
be cancelled and retired; and each holder of a UAS Certificate representing
immediately prior to the Effective Time any such shares of UAS Common Stock will
cease to have any rights with respect thereto, except the right to receive, as
hereinafter described: (i) certificates representing the number of whole shares
of CLARCOR Common Stock into which such shares of UAS Common Stock have been
converted, (ii) certain dividends and other distributions and (iii) cash,
without interest, in lieu of any fractional share of CLARCOR Common Stock. See
"-- Exchange Agent; Procedures for Exchange of Certificates."
Notwithstanding the foregoing, shares of UAS Common Stock that are
outstanding immediately prior to the Effective Time and which are held by UAS
shareholders who do not vote in favor of the proposal to adopt
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the Merger Agreement and who demand properly in writing the fair cash value for
such shares in accordance with Section 1701.85 of the OGCL (collectively, the
"Dissenting Shares") will not be converted into or represent the right to
receive the consideration described above. Such UAS shareholders will be
entitled to receive payment of the fair cash value of such shares of UAS Common
Stock held by them in accordance with the provisions of Section 1701.85 of the
OGCL, except that all Dissenting Shares held by UAS shareholders who fail to
perfect or who effectively withdraw or lose their rights to the fair cash value
of such shares of UAS Common Stock under Section 1701.85 of the OGCL will be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the CLARCOR Common Stock as described
above, without any interest thereon, upon surrender of the certificate or
certificates that formerly evidenced such shares of UAS Common Stock in the
manner described above. See "DISSENTERS' RIGHTS."
All references in this Proxy Statement/Prospectus to shares of CLARCOR
Common Stock to be received pursuant to the Merger in accordance with the Merger
Agreement will be deemed, from and after the Effective Time, to include the
associated CLARCOR Rights.
NO FRACTIONAL SHARES
No certificates or scrip representing a fractional share of CLARCOR Common
Stock will be issued upon the surrender of UAS Certificates for exchange; no
CLARCOR dividend or other distribution or stock split will relate to any such
fractional share; and no such fractional share will entitle the record or
beneficial owner thereof to any voting or other rights of a stockholder of
CLARCOR. In lieu of any such fractional share, each holder of shares of UAS
Common Stock who would otherwise have been entitled thereto upon the surrender
of UAS Certificates for exchange will be paid an amount in cash (without
interest), rounded to the nearest whole cent, determined by multiplying (i) the
per share closing price of CLARCOR Common Stock, as reported on the NYSE
Composite Transactions Tape, on the date on which the Effective Time shall occur
(or if CLARCOR Common Stock does not trade on the NYSE on such date, the first
day of trading in CLARCOR Common Stock on the NYSE thereafter) by (ii) the
fractional share to which such holder would otherwise be entitled.
ADJUSTMENT OF CONVERSION NUMBER
If the sum of the aggregate number of shares of UAS Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares owned
directly or indirectly by CLARCOR or UAS) and the aggregate number of shares of
UAS Common Stock issuable in connection with UAS Stock Options which are
outstanding immediately prior to the Effective Time pursuant to any UAS Stock
Plan is either less than or greater than 3,269,641, then the Conversion Number
will be adjusted so that it will equal the quotient, rounded up or down to the
seventh decimal place, obtained by dividing 1,209,302 by such sum.
On the date hereof, there are 2,920,078 shares of UAS Common Stock
outstanding, none of which are owned directly or indirectly by CLARCOR or UAS,
and 346,438 shares of UAS Common Stock are issuable upon exercise of UAS Stock
Options granted pursuant to UAS Stock Plans. If the sum of the numbers set forth
in the immediately preceding sentence does not change after the date hereof, the
Conversion Number, as adjusted, will be .3702116.
In addition, in the event of any reclassification, stock split or stock
dividend with respect to CLARCOR Common Stock, any change or conversion of
CLARCOR Common Stock into other securities or any other dividend or distribution
with respect to CLARCOR Common Stock (other than normal quarterly cash dividends
as the same may be modified from time to time in the ordinary course), or if a
record date with respect to any of the foregoing should occur, prior to the
Effective Time, appropriate and proportionate adjustments will be made to the
Conversion Number.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
First Chicago Trust Company of New York has been selected to act as
Exchange Agent under the Merger Agreement. As soon as practicable, but not later
than five business days after the Effective Time,
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CLARCOR will deposit with the Exchange Agent, in trust for the holders of UAS
Certificates, CLARCOR Certificates representing the shares of CLARCOR Common
Stock issuable pursuant to the Merger in accordance with the Merger Agreement.
The Exchange Agent will deliver the CLARCOR Certificates upon the surrender for
exchange of the UAS Certificates.
As soon as practicable after the Effective Time, the Exchange Agent will
mail to each record holder of a UAS Certificate a letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to the
UAS Certificates will pass, only upon actual delivery thereof to the Exchange
Agent, and will contain instructions for effecting the surrender of UAS
Certificates in exchange for the property described in the next sentence). Upon
surrender for cancellation to the Exchange Agent of all UAS Certificate(s) held
by any record holder, together with such letter of transmittal duly executed,
such holder will be entitled to receive in exchange therefor: (i) a CLARCOR
Certificate representing the number of whole shares of CLARCOR Common Stock into
which the shares of UAS Common Stock represented by the surrendered UAS
Certificate(s) have been converted at the Effective Time, (ii) cash in lieu of
any fractional share of CLARCOR Common Stock and (iii) the dividends and other
distributions described in the next paragraph. All UAS Certificates so
surrendered will be cancelled. All CLARCOR Certificates delivered upon the
surrender for exchange of any UAS Certificate in accordance with the terms of
the Merger Agreement (including the cash paid in respect of any such fractional
share or of any such dividends or distributions) will be deemed to have been
delivered (and paid) in full satisfaction of all rights pertaining to the shares
of UAS Common Stock represented by such surrendered UAS Certificate.
No dividends or other distributions that are declared on or after the
Effective Time on CLARCOR Common Stock, or are payable to the holders of record
thereof on or after the Effective Time, and no cash payment in lieu of any
fractional share of CLARCOR Common Stock, will be paid to any person entitled by
reason of the Merger to receive CLARCOR Certificates until the UAS
Certificate(s) of such person have been surrendered as described above. Subject
to applicable law, there will be paid to each person receiving a CLARCOR
Certificate: (i) at the time of such surrender or as promptly as practicable
thereafter, the amount of (A) any dividends or other distributions with respect
to the shares of CLARCOR Common Stock represented by such CLARCOR Certificate
having a record date on or after the Effective Time and a payment date prior to
such surrender and (B) any cash payable with respect to any fractional share of
CLARCOR Common Stock to which such person is entitled; and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
CLARCOR Common Stock having a record date on or after the Effective Time but
prior to such surrender and a payment date on or after such surrender. In no
event will the person entitled to receive such dividends or other distributions
be entitled to receive interest thereon. If any CLARCOR Certificate is to be
registered in a name other than that of the registered holder of a surrendered
UAS Certificate, or if any cash is to be paid to a person who is not such
registered holder, it will be a condition of the exchange that the UAS
Certificate(s) so surrendered be properly endorsed and otherwise in proper form
for transfer and that the person requesting such exchange pay to the Exchange
Agent any transfer or other taxes required by reason of the issuance of such
CLARCOR Certificate or such cash payment, or establish to the satisfaction of
the Exchange Agent that such taxes have been paid or are not applicable.
CLARCOR or the Exchange Agent will be entitled to deduct and withhold from
the consideration otherwise payable pursuant to the Merger Agreement to any
holder of UAS Common Shares such amounts as CLARCOR or the Exchange Agent are
required to deduct and withhold under the Code, or under any provision of state,
local or foreign tax law, with respect to the making of such distribution. To
the extent that amounts are so deducted and withheld by CLARCOR or the Exchange
Agent, such deducted and withheld amounts will be treated for all purposes of
the Merger Agreement as having been distributed to the holder of the shares of
UAS Common Stock in respect of which such deduction and withholding was made by
CLARCOR or the Exchange Agent.
At the Effective Time, the stock transfer books of UAS will be closed, and
no transfer of shares of UAS Common Stock will thereafter be made. Subject to
any applicable abandoned property, escheat or similar laws, if, after the
Effective Time, UAS Certificates are presented to the Surviving Corporation for
transfer, they will be cancelled and exchanged as described in the four
preceding paragraphs.
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HOLDERS OF UAS COMMON STOCK SHOULD NOT FORWARD THEIR UAS CERTIFICATES WITH
THE ENCLOSED PROXY CARD, NOR SHOULD THEY RETURN THEIR UAS CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL LETTER.
STOCK OPTIONS
Each UAS Stock Option granted pursuant to any stock option plan (other than
any "stock purchase plan" within the meaning of Section 423 of the Code) of UAS
in effect on the date of the Merger Agreement (the "UAS Stock Plans") which is
outstanding immediately prior to the Effective Time will become an option to
purchase the number of shares of CLARCOR Common Stock, increased to the nearest
whole share, determined by multiplying (i) the number of shares of UAS Common
Stock then subject to such UAS Stock Option by (ii) the Conversion Number, at an
exercise price per share of CLARCOR Common Stock (increased to the nearest whole
cent) equal to the exercise price per share of UAS Common Stock in effect at
such time divided by the Conversion Number. Each such option will be otherwise
exercisable upon the same terms and conditions as were then applicable to the
related UAS Stock Option, provided that any conditions to the exercise of UAS
Stock Options which are expressed in terms of the market price of UAS Common
Stock will be adjusted by dividing such price by the Conversion Number. UAS has
agreed to use its reasonable best efforts to obtain any necessary consents of
the holders of UAS Stock Options to effect the provisions of the Merger
Agreement described in this paragraph. In addition, UAS has agreed not to grant
any stock appreciation rights or limited stock appreciation rights and has
agreed that it will not permit cash payments to holders of UAS Stock Options in
lieu of the substitution therefor of Substitute Options in accordance with the
terms of the Merger Agreement. CLARCOR has agreed that, at the Effective Time,
the CLARCOR Common Stock issuable upon exercise of the Substitute Options will
be registered under the Securities Act. The terms of the Merger Agreement
described above are subject to any contrary provision contained in the
applicable UAS Stock Plan or in the option agreement with respect to any UAS
Stock Option outstanding thereunder.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
CLARCOR, UAS and Sub relating, among other things, to: (i) their organization,
existence, good standing, corporate power and similar corporate matters; (ii)
their capitalization; (iii) their authorization, execution, delivery and
performance and the enforceability of the Merger Agreement and related matters;
(iv) the absence of conflicts, violations and defaults under their certificate
or articles of incorporation and by-laws and certain other agreements and
documents; (v) the documents and reports filed with the SEC and the accuracy and
completeness of the information contained therein; (vi) the Registration
Statement and this Proxy Statement/Prospectus and the accuracy and completeness
of the information contained therein and herein; (vii) the absence of Material
Adverse Changes; (viii) the absence of certain violations or defaults; (ix)
their licenses and permits; (x) environmental and tax matters; (xi) pending or
threatened litigation; (xii) labor matters; (xiii) material contracts; (xiv)
employee benefit matters; (xv) undisclosed liabilities; (xvi) intellectual
properties; (xvii) the propriety of past payments; (xviii) takeover defense
mechanisms; and (xix) the availability of pooling of interests accounting
treatment. All representations and warranties of CLARCOR, UAS and Sub expire at
the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of CLARCOR and UAS has agreed that during the period from the date of
the Merger Agreement through the Effective Time, except as otherwise expressly
required or permitted by the Merger Agreement, it will, and will cause each of
its Subsidiaries to, in all material respects carry on its business in, and not
enter into any material transaction other than in accordance with, the ordinary
course of its business as being conducted at the date of the Merger Agreement
and, to the extent consistent therewith, use its reasonable best efforts to
preserve intact its business organization, keep available the services of its
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it, all to the end that its goodwill
and ongoing business will be unimpaired at the Effective Time. Each of CLARCOR
and
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UAS has agreed to promptly advise the other orally and in writing of any change
or event having, or which would reasonably be expected to have, a Material
Adverse Effect (as defined in the Merger Agreement) on CLARCOR or UAS, as the
case may be.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated or permitted by the Merger Agreement, CLARCOR has agreed
that it will not, and that it will not permit any of its Subsidiaries to,
without the prior written consent of UAS: (i) (A) declare, set aside or pay any
dividends on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such (other than regular quarterly dividends
of not more than $0.1625 per share, stock dividends on CLARCOR Common Stock and
dividends on, or distributions in respect of, the capital stock of any
Subsidiary of CLARCOR), (B) combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of its capital stock or those of any Subsidiary or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities; (ii) issue, deliver, sell, pledge, dispose of
or otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities,
equity equivalent or convertible securities (other than the issuance of shares
of CLARCOR Common Stock pursuant to a stock dividend or stock split or upon the
exercise of stock options and the issuance of stock options to employees of
CLARCOR or any of its Subsidiaries); (iii) amend its charter or organization
documents or by-laws; (iv) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than (A)
transactions that are in the ordinary course of business and consistent with
past practice and not material to CLARCOR and its Subsidiaries taken as a whole,
(B) dispositions for an aggregate consideration paid or payable to CLARCOR and
its Subsidiaries (valuing any non-cash consideration at its fair market value,
contingent payments at the maximum amount payable and treating any liabilities
assumed as consideration paid) in an amount not to exceed $30,000,000 or (C) as
set forth in the letter referenced in the Merger Agreement as the Parent Letter
(the "CLARCOR Letter"); (v) incur any indebtedness for borrowed money or
guarantee any such indebtedness, or make any loans, advances or capital
contributions to, or other investments in, any other person, other than (A)
borrowings or guarantees incurred in the ordinary course of business and
consistent with past practice (B) any loans, advances or capital contributions
to, or other investments in, CLARCOR or any wholly-owned Subsidiary of CLARCOR
or (C) as set forth in the CLARCOR Letter; (vi) enter into or adopt any
specified types of employee or welfare plan, or amend any such existing plan,
other than as required by law; (vii) violate or fail to perform any material
obligation or duty imposed upon CLARCOR or any Subsidiary of CLARCOR by any
applicable federal, state, local, foreign or provincial law, rule, regulation,
guideline or ordinance; (viii) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with past practice, with
respect to accounting policies or procedures; or (ix) authorize, recommend,
propose or announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated or permitted by the Merger Agreement, UAS has agreed that
it will not, and that it will not permit any of its Subsidiaries to, without the
prior written consent of CLARCOR: (i) (A) declare, set aside or pay any
dividends on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to its
shareholders in their capacity as such, (B) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of its capital stock or those
of any Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities; (ii) issue, deliver,
sell, pledge, dispose of or otherwise encumber any shares of its capital stock,
any other voting securities or equity equivalent or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities, equity equivalent or convertible securities (other than the issuance
of shares of UAS Common Stock upon the exercise of stock options outstanding on
the date of the Merger Agreement in accordance with their then current terms);
(iii) amend its charter or organization documents or by-laws; (iv) acquire or
agree to acquire, by merging or consolidating with, by purchasing a substantial
portion of the assets of or equity in or by any other manner, any business or
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any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, other than
(A) transactions that are in the ordinary course of business and consistent with
past practice and not material to UAS and its Subsidiaries taken as a whole or
(B) as set forth in the letter referenced in the Merger Agreement as the Company
Letter (the "UAS Letter"); (v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than (A)
transactions that are in the ordinary course of business and consistent with
past practice and not material to UAS and its Subsidiaries taken as a whole, (B)
dispositions for an aggregate consideration paid or payable to UAS and its
Subsidiaries (valuing any non-cash consideration at its fair market value and
any contingent payments at the maximum amount payable and treating any
liabilities assumed as consideration paid) in an amount not to exceed $150,000
or (C) as set forth in the UAS Letter; provided, however, that the aggregate
consideration received by UAS and its subsidiaries from all transactions
described by this clause (v) may not exceed $250,000 and the aggregate fair
market value (as determined in good faith by the UAS Board) of the assets sold,
leased or otherwise disposed of may not exceed $250,000; (vi) incur any
indebtedness for borrowed money or guarantee any such indebtedness, or make any
loans, advances or capital contributions to, or other investments in, any other
person, or retire any outstanding indebtedness for borrowed money, other than
(A) borrowings or guarantees incurred in the ordinary course of business and
consistent with past practice, (B) any loans, advances or capital contributions
to, or other investments in, UAS or any wholly-owned Subsidiary of UAS, or (C)
as set forth in the UAS Letter; (vii) enter into or adopt any specified types of
employee or welfare plan, or amend any such existing plan, other than as
required by law; (viii) increase the compensation payable or to become payable
to its officers or employees, except for increases in the ordinary course of
business and consistent with past practice, or grant any severance or
termination pay to, or enter into, or amend or modify, any employment, severance
or consulting agreement with, any director or officer of UAS or any of its
Subsidiaries, or establish, adopt, enter into or, except as may be required to
comply with applicable law, amend in any material respect or take action to
enhance in any material respect or accelerate any rights or benefits under, 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; (ix)
violate or fail to perform any material obligation or duty imposed upon UAS or
any Subsidiary of UAS by any applicable federal, state, local, foreign or
provincial law, rule, regulation, guideline or ordinance; (x) take any action,
other than reasonable and usual actions in the ordinary course of business
consistent with past practice, with respect to accounting policies or
procedures; or (xi) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Each of CLARCOR and UAS has also agreed that, subject to existing
contractual and legal restrictions applicable to it, it will, and will cause
each of its Subsidiaries to, afford, during normal business hours during the
period from the date of the Merger Agreement through the Effective Time, to the
accountants, counsel, financial advisors, officers and other representatives of
the other reasonable access to, and permit them to make such inspections as they
may reasonably request of, its properties, books, contracts, commitments and
records (including, without limitation, the work papers of independent public
accountants), and also permit such interviews with its officers and employees as
may be reasonably requested; and, during such period, CLARCOR and UAS will, and
will cause each of its respective Subsidiaries to, furnish promptly to the other
(i) a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or state
securities laws and (ii) all other information concerning its properties,
assets, business and personnel as the other may reasonably request. All
confidential information obtained by CLARCOR or UAS, as the case may be, will be
kept confidential pursuant to a confidentiality agreement between the parties.
Each of CLARCOR and UAS has further agreed that from the date of the Merger
Agreement through the Effective Time, unless the other parties to the Merger
Agreement otherwise agree in writing, neither it nor its respective Subsidiaries
will (i) knowingly take or fail to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) knowingly take or fail to take any action which action or
failure would jeopardize qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code.
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NO SOLICITATION
UAS has agreed that from and after the date of the Merger Agreement it will
not, directly or indirectly, solicit, initiate or knowingly encourage (including
by way of furnishing non-public information) any Takeover Proposal (as
hereinafter defined) from any person, or engage in or continue discussions or
negotiations relating to any Takeover Proposal and will use its reasonable best
efforts to prevent any of its directors, officers, employees, attorneys,
financial advisors, agents and other authorized representatives and those of any
of its Subsidiaries from taking any such action; provided, however, that UAS may
(i) engage in discussions or negotiations with, or furnish information
concerning UAS and its properties, assets and business to, any person which
makes, or indicates in writing an intention to make, a Superior Proposal (as
hereinafter defined) if the UAS Board shall conclude in good faith on the basis
of the written advice of its outside counsel that the failure to take such
action would violate the fiduciary obligations of the UAS Board under applicable
law or (ii) comply with Rule 14d-9 or 14e-2 under the Exchange Act with regard
to a Takeover Proposal. UAS must promptly notify CLARCOR upon receipt of any
Takeover Proposal, including the material terms and conditions thereof and the
identity of the person (or group) making such Takeover Proposal, and the name of
all persons to whom UAS has furnished any information and the nature of such
information. As used in the Merger Agreement and this Proxy
Statement/Prospectus: (i) "Takeover Proposal" means any proposal or offer for,
or any expression of interest (by public announcement or otherwise) by any
person (other than a proposal or offer by CLARCOR or any of its Subsidiaries or
Affiliates) in, any tender or exchange offer for 20% or more of the equity of
UAS, any merger, consolidation or other business combination involving UAS or
any of its Significant Subsidiaries (as hereinafter defined), any acquisition in
any manner of 20% or more of the equity of, or 20% or more of the assets of, UAS
or any of its Significant Subsidiaries or any inquiry by any person with respect
to UAS's willingness to receive or discuss any of the foregoing; (ii) "Superior
Proposal" means a bona fide, unsolicited proposal or offer made by any person
(or group) (other than CLARCOR or any of its Subsidiaries or Affiliates) to
acquire UAS pursuant to any Takeover Proposal on terms which a majority of the
members of the UAS Board determines in good faith, and in the exercise of
reasonable judgment (based on the advice of independent financial advisors), to
be more favorable to UAS and its shareholders than the transactions contemplated
by the Merger Agreement and for which any required financing is committed or
which, in the good faith and reasonable judgment of a majority of such members,
is reasonably capable of being financed by such person; and (iii) "Significant
Subsidiary" has the meaning specified in Rule 1-02(w) of Regulation S-X
promulgated by the SEC.
CONDITIONS PRECEDENT TO THE MERGER
The respective obligations of CLARCOR, UAS and Sub to effect the Merger are
subject, among other things, to the fulfillment of the following conditions at
or prior to the Effective Time: (i) approval of the Merger by the requisite vote
of the shareholders of UAS; (ii) the listing on the NYSE, upon official notice
of issuance, of the shares of CLARCOR Common Stock constituting the Share
Issuance; (iii) expiration or termination of the waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act, and the obtaining, making or occurrence of all authorizations, consents,
orders, declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity, which the
failure to obtain, make or occur would have the effect of making the Merger or
any of the transactions contemplated by the Merger Agreement illegal or would
have a Material Adverse Effect on CLARCOR or UAS (as the Surviving Corporation),
assuming the Merger had taken place; (iv) the absence of any stop order
suspending the effectiveness of the Registration Statement, any initiation of a
proceeding for such purpose or, to the knowledge of CLARCOR or UAS, any threat
of such a proceeding by the SEC; and (v) no court or other Governmental Entity
having jurisdiction over CLARCOR or UAS, or any of their respective
Subsidiaries, having enacted, issued, promulgated, enforced or entered any law,
rule, regulation, executive order, decree, injunction or other order then in
force which has the effect of making the Merger or any of the transactions
contemplated by the Merger Agreement illegal.
The obligation of UAS to effect the Merger is also subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions: (i) CLARCOR and Sub having performed in all material respects each
of its agreements contained in the Merger Agreement required to be performed at
or prior to the
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Effective Time, each of the representations and warranties of CLARCOR and Sub
contained in the Merger Agreement that is qualified by materiality being true
and correct at and as of the Effective Time as if made at and as of the
Effective Time and each of such representations and warranties that is not so
qualified being true and correct in all material respects at and as of the
Effective Time as if made at and as of the Effective Time, in each case except
as contemplated or permitted by the Merger Agreement, and UAS having received a
certificate signed on behalf of CLARCOR by its Chief Executive Officer and Chief
Financial Officer to such effect; (ii) UAS having received an opinion of
Graydon, Head & Ritchey relating to certain tax matters (see "THE
MERGER -- Material Federal Income Tax Consequences"); (iii) UAS having received
opinions from Sidley & Austin and Taft, Stettinius & Hollister relating to
certain corporate and securities law matters; (iv) CLARCOR having obtained any
necessary non-governmental consents and approvals required to consummate the
transactions contemplated by the Merger Agreement; (v) the Non-Compete
Agreements being effective at the Effective Time; and (vi) the absence since the
date of the Merger Agreement of any Material Adverse Change with respect to
CLARCOR and UAS having received a certificate signed on behalf of CLARCOR by its
Chief Executive Officer and Chief Financial Officer to such effect.
The respective obligations of CLARCOR and Sub to effect the Merger are also
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions: (i) UAS having performed in all material respects each of
its agreements contained in the Merger Agreement required to be performed at or
prior to the Effective Time, each of the representations and warranties of UAS
contained in the Merger Agreement that is qualified by materiality being true
and correct at and as of the Effective Time as if made at and as of the
Effective Time and each of such representations and warranties that is not so
qualified being true and correct in all material respects at and as of the
Effective Time as if made at and as of the Effective Time, in each case except
as contemplated or permitted by the Merger Agreement and CLARCOR having received
a certificate signed on behalf of UAS by its Chief Executive Officer and Chief
Financial Officer to such effect; (ii) CLARCOR having received an opinion of
Sidley & Austin relating to certain tax matters (see "THE MERGER -- Material
Federal Income Tax Consequences"); (iii) CLARCOR having received opinions from
Jack W. Painter, Esq., and Graydon, Head & Ritchey relating to certain corporate
and securities law matters; (iv) UAS having obtained any necessary
non-governmental consents and approvals required to consummate the transactions
contemplated by the Merger Agreement; (v) CLARCOR having received the written
agreements from the UAS Rule 145 affiliates described under "THE
MERGER -- Resales of CLARCOR Common Stock;" (vi) the absence of any pending or
threatened litigation by any Governmental Entity as a result of the Merger
Agreement or any of the transactions contemplated thereby which, if such
Governmental Entity were to prevail, would reasonably be expected, in the good
faith opinion of CLARCOR, to have a Material Adverse Effect on CLARCOR or UAS
(as the Surviving Corporation); (vii) CLARCOR having received an opinion of
Coopers & Lybrand L.L.P. that the Merger will qualify as a pooling of interests
under generally accepted accounting principles and CLARCOR having no reasonable
basis for believing that the Merger may not be accounted for as a pooling of
interests in accordance with generally accepted accounting principles; (viii)
the Non-Compete Agreements being effective at the Effective Time; (ix) certain
agreements specified in the Merger Agreement having been terminated and being of
no further force or effect; (x) the holders of not more than 10% of the issued
and outstanding shares of UAS Common Stock having properly demanded appraisal or
dissenters rights pursuant to the OGCL; and (xi) the absence since the date of
the Merger Agreement of any Material Adverse Change with respect to UAS and
CLARCOR having received a certificate signed on behalf of UAS by its Chief
Executive Officer and Chief Financial Officer to such effect.
EMPLOYEE BENEFITS
CLARCOR has agreed that, for a period of not less than one year after the
Effective Time, it will provide employee benefit plans (including perquisites)
for employees employed by UAS or any of its Subsidiaries immediately prior to
the Effective Time and for former employees of UAS receiving benefits on the
date of the Merger Agreement which are, in the aggregate, no less favorable than
those provided by UAS and its Subsidiaries on the date of the Merger Agreement,
it being understood that the UAS Stock Plans will be terminated and no further
options will be granted thereunder.
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INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
CLARCOR has agreed to cause UAS to (i) maintain continuously in effect, for
six years after the Effective Time, directors' and officers' liability insurance
covering those persons covered on the date of the Merger Agreement by UAS's
policies for acts or omissions occurring at or prior to the Effective Time on
terms no less favorable than coverages in effect on the date of the Merger
Agreement and (ii) indemnify and hold harmless (and advance expenses to) all
past and current directors, officers, employees and agents of UAS and of its
Subsidiaries, for claims made within six years after the Effective Time arising
out of acts or omissions occurring at or prior to the Effective Time, to the
same extent such persons were indemnified on the date of the Merger Agreement by
UAS pursuant to the UAS Charter and the UAS Regulations.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of UAS of the Merger
Agreement, as authorized by the respective boards of directors of CLARCOR, Sub
and UAS, as applicable:
(i) by mutual written consent of CLARCOR, Sub and UAS;
(ii) by either CLARCOR or UAS if (A) the other (or Sub if UAS is the
terminating party) fails to comply in any material respect with any of its
covenants or agreements contained in the Merger Agreement required to be
complied with prior to the date of such termination or materially breaches
any representation or warranty that is not qualified as to materiality or
breaches any representation or warranty that is so qualified (in each case
after a five business day cure period following notice of such breach) or
(B) the shareholders of UAS fail to approve the Merger;
(iii) by either CLARCOR or UAS if (A) the Merger has not been effected
on or prior to March 31, 1997, provided that the right so to terminate will
not be available to any party whose failure to fulfill any obligation of
the Merger Agreement has been the cause of, or resulted in, the failure of
the Merger to have occurred on or prior to such date, or (B) any court or
other Governmental Entity having jurisdiction has issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree, ruling or other action has become final and
nonappealable;
(iv) by either CLARCOR or UAS if the UAS Board determines that a
Takeover Proposal constitutes a Superior Proposal, provided that UAS may
not so terminate unless (A) 15 days have elapsed after delivery to CLARCOR
of a written notice of such determination and during such period UAS has
fully cooperated with CLARCOR, including the furnishing of specified
information, with the intent of enabling CLARCOR to agree to a modification
of the terms and conditions of the Merger Agreement so that the
transactions contemplated thereby may be effected and (B) at the end of
such period, the UAS Board continues reasonably to believe that such
Takeover Proposal constitutes a Superior Proposal and simultaneously
therewith UAS enters into a definitive acquisition, merger or similar
agreement to effect such Superior Proposal; provided, further, that CLARCOR
may only so terminate the Merger Agreement pursuant to this provision at
any time after the close of business on the tenth day following any date on
which the UAS Board determines that a Takeover Proposal constitutes a
Superior Proposal and only if, prior to such termination by CLARCOR, the
UAS Board has not rejected such Takeover Proposal and has not terminated
all discussions and negotiations pertaining to such Takeover Proposal;
provided, further, that the immediately preceding proviso will apply only
to the first Takeover Proposal determined by the UAS Board to be a Superior
Proposal; upon, and at any time after, any subsequent determination by the
UAS Board that any Takeover Proposal is a Superior Proposal, CLARCOR will
have the right to terminate the Merger Agreement;
(v) by CLARCOR if the UAS Board has not recommended, or has modified
or rescinded its recommendation of, the Merger to the shareholders of UAS,
or has modified or rescinded its approval of the Merger Agreement, or has
resolved to do any of the foregoing;
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(vi) by CLARCOR if any Takeover Proposal (other than the Merger)
involving UAS results in the acquisition by any person, entity or group
(other than CLARCOR or any of its Subsidiaries) of 20% or more of the
equity of, or 20% or more of the assets of, UAS or any of its Significant
Subsidiaries; or
(vii) by UAS if on any date (the "Calculation Date") occurring within
ten business days preceding the Closing, the per share closing price of
CLARCOR Common Stock on the NYSE (as shown in The Wall Street Journal, New
York Stock Exchange Composite Transactions) is less than the dollar amount
calculated by multiplying the Index Adjusted Price by 85%. The "Index
Adjusted Price" is equal to the product obtained by multiplying (A) $21 1/2
by (B) the decimal determined by dividing the S&P 500 Index on the
Calculation Date by the S&P 500 Index on the date of the Merger Agreement
(provided that in no event shall such decimal exceed 1.0).
FEES AND EXPENSES
Except for printing expenses and filing fees, which will be shared equally,
CLARCOR and UAS will each pay its own costs and expenses in connection with the
Merger Agreement and the transactions contemplated thereby, whether or not the
Merger is consummated. The Merger Agreement also provides for the payment of the
following amounts:
(i) If the Merger Agreement is terminated by CLARCOR because UAS has
failed to comply with a covenant or agreement or because UAS has breached a
representation or warranty, then UAS will be required to reimburse CLARCOR
upon demand for up to an aggregate of $400,000 of out-of-pocket fees and
expenses incurred or paid by or on behalf of CLARCOR and its Subsidiaries
in connection with the Merger Agreement and the transactions contemplated
thereby, including fees and expenses of counsel, financial advisors,
accountants, actuaries and consultants. In addition, if within one year
after the date of such termination, UAS enters into a definitive agreement
with respect to any Takeover Proposal, or if any Takeover Proposal has been
completed or the UAS Board recommends to the shareholders of UAS any
Takeover Proposal or adopts a resolution to do so, then, upon the earliest
of such occurrences, UAS is required to immediately pay to CLARCOR
$1,000,000, less any amount paid to CLARCOR as described in the immediately
preceding sentence; provided that no such amount will be payable to CLARCOR
if UAS would have had the right to terminate the Merger Agreement because
of (a) the failure of CLARCOR or Sub to comply with a covenant or
agreement, (b) the breach of a representation or warranty of CLARCOR or Sub
or (c) the failure of the shareholders of UAS to approve the Merger.
(ii) If the Merger Agreement is terminated by CLARCOR or UAS because
of the failure of the shareholders of UAS to approve the Merger and, within
one year after the date of such termination, UAS enters into a definitive
agreement with respect to any Takeover Proposal, or if any Takeover
Proposal has been completed or the UAS Board recommends to the shareholders
of UAS any Takeover Proposal or adopts a resolution to do so, then, upon
the earliest of such occurrences, UAS is required to immediately pay to
CLARCOR $1,000,000, provided that no such payment will be due by UAS unless
the UAS Board determines that such transaction is a Superior Proposal.
(iii) If the Merger Agreement is terminated by CLARCOR because (a) the
UAS Board determines that a Takeover Proposal constitutes a Superior
Proposal, (b) the UAS Board shall not have recommended, or shall have
modified or rescinded its recommendation of, the Merger to the shareholders
of UAS, or shall have modified or rescinded its approval of the Merger
Agreement, or resolved to do any of the foregoing, or (c) a Takeover
Proposal (other than the Merger) involving UAS results in the acquisition
by any person, entity or group (other than CLARCOR or any of its
Subsidiaries) of 20% or more of the equity of, or 20% or more of the assets
of, UAS or any of its Significant Subsidiaries, or if the Merger Agreement
is terminated by UAS because the UAS Board determines that a Takeover
Proposal constitutes a Superior Proposal, UAS is required to immediately
pay to CLARCOR $1,000,000; provided that if the Merger Agreement is
terminated by CLARCOR because the UAS Board determines that a Takeover
Proposal constitutes a Superior Proposal, UAS will be required to make such
payment only after the occurrence of the events described in clauses
(iv)(A) and (iv)(B) above under "-- Termination" unless UAS fails to timely
provide the written notice to, or cooperate fully with, CLARCOR as
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described in such clauses, provided, further, that if the Merger Agreement
is terminated by CLARCOR because the UAS Board has not recommended, or has
modified or rescinded its recommendation of, the Merger to the shareholders
of UAS, or has modified or rescinded its approval of the Merger Agreement,
or resolved to do any of the foregoing, UAS will not be required to make
such payment if (a) at the time that the UAS Board takes such action UAS is
entitled to terminate the Merger Agreement because the per share closing
price of CLARCOR Common Stock on the NYSE is below the threshold amount as
described in clause (vii) above under "-- Termination" (assuming that the
Calculation Date is a date occurring within ten business days preceding the
date the UAS Board takes such action) or (b) the UAS Board has taken such
action or actions in connection with a Superior Proposal.
(iv) If the Merger Agreement is terminated by UAS because either
CLARCOR or Sub has failed to comply with a covenant or agreement or because
either CLARCOR or Sub has breached a representation or warranty, then
CLARCOR will be required to reimburse UAS upon demand for up to an
aggregate of $400,000 of out-of-pocket fees and expenses incurred or paid
by or on behalf of UAS and its Subsidiaries in connection with the Merger
Agreement and the transactions contemplated thereby, including fees and
expenses of counsel, financial advisors, accountants, actuaries and
consultants.
See "-- Termination."
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by or pursuant
to action taken by their respective Boards of Directors, at any time before or
after approval by the shareholders of UAS of the proposal to adopt the Merger
Agreement; provided, however, that after any such approval, no amendment can be
made if applicable law would require further approval by such shareholders,
unless such further approval is obtained.
WAIVER
At any time prior to the Effective Time, the Merger Agreement permits the
parties thereto to: (i) extend the time for the performance of any of the
obligations or other acts of the other parties thereto; (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
instrument delivered pursuant thereto; and (iii) waive compliance with any of
the agreements or conditions contained therein which may legally be waived;
provided, however, that after approval by the shareholders of UAS of the
proposal to adopt the Merger Agreement, no waiver can be made if applicable law
would require further approval by such shareholders, unless such further
approval is obtained.
VOTING AGREEMENTS
As a condition to CLARCOR's and Sub's execution of the Merger Agreement,
Mr. Rorie, Mrs. Margaret Stewart Rorie and Mr. Cheney each executed an Agreement
(a "Voting Agreement") pursuant to which they agreed to vote all shares of UAS
Common Stock held by them (including shares acquired after the date of the
Merger Agreement) in favor of the Merger and the adoption of the Merger
Agreement, against any action or agreement that would result in a breach of any
covenant, representation or warranty, or any other obligation or agreement, of
UAS under the Merger Agreement and, except with the advance written consent of
CLARCOR, against: (i) any extraordinary corporate transaction, such as a merger,
consolidation, or other business combination involving UAS or any of its
subsidiaries; (ii) a sale, lease or transfer of a material amount of assets of
UAS or any of its subsidiaries or a reorganization, recapitalization,
dissolution or liquidation of UAS or any of its subsidiaries; (iii) any change
in the UAS Board; (iv) any change in the capitalization of UAS or any amendment
to the UAS Charter or UAS Regulations; (v) any change in UAS's corporate
structure or business; or (vi) any other action that is intended, or that could
reasonably be expected, to impede, interfere with, delay, postpone or
discourage, or adversely affect the contemplated economic benefits to CLARCOR of
the Merger and the actions or transactions contemplated by the Merger Agreement.
The Voting Agreements also provide that Mr. and Mrs. Rorie and Mr. Cheney will
(i) not solicit third parties to purchase UAS; (ii) not dispose of any of their
shares of UAS Common Stock; and (iii) waive their appraisal rights under the
OGCL.
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The Voting Agreements further provide that prior to the closing of the
Merger, the parties thereto will enter into an agreement for registration of the
shares of CLARCOR Common Stock to be received by Mr. and Mrs. Rorie and Mr.
Cheney in the Merger, which agreement will provide for one "demand" registration
at the time that CLARCOR prepares its Annual Report on Form 10-K for the fiscal
year ended November 30, 1998, limited "piggyback" registration rights and such
other terms and conditions customary for transactions that are similar to the
Merger.
The Voting Agreements will automatically terminate upon the termination of
the Merger Agreement in accordance with its terms.
Mr. and Mrs. Rorie and Mr. Cheney held an aggregate of 1,349,853 shares of
UAS Common Stock on the Record Date. Such shares, which represent approximately
46.2% of the shares of UAS Common Stock outstanding on the Record Date, are
subject to the Voting Agreements.
The form of Voting Agreement has been filed as an Exhibit to the
Registration Statement of which this Proxy Statement/Prospectus is a part and is
incorporated herein by reference.
DESCRIPTION OF CLARCOR COMMON STOCK
The statements set forth under this heading with respect to the General
Corporation Law of the State of Delaware (the "DGCL"), CLARCOR's Restated
Certificate of Incorporation, as amended (the "CLARCOR Charter"), CLARCOR's
By-laws (the "CLARCOR By-laws") and the Rights Agreement dated as of March 28,
1996 (the "CLARCOR Rights Agreement") between CLARCOR and First Chicago Trust
Company of New York, as Rights Agent (copies of which have been filed as
Exhibits to the Registration Statement) are brief summaries thereof and do not
purport to be complete; such statements are subject to the detailed provisions
of the DGCL, the CLARCOR Charter, the CLARCOR By-laws and the CLARCOR Rights
Agreement. See "AVAILABLE INFORMATION."
The authorized capital stock of CLARCOR consists of 30,000,000 shares of
CLARCOR Common Stock and 1,300,000 shares of Preferred Stock, par value $1 (the
"CLARCOR Preferred Stock"), of which 300,000 shares have been designated as
CLARCOR Series B Preferred Stock. At the close of business on the Record Date,
there were 14,888,678 shares of CLARCOR Common Stock outstanding and no shares
of CLARCOR Preferred Stock outstanding.
The CLARCOR Board is authorized to provide for the issue from time to time
of CLARCOR Preferred Stock in series and, as to each series, to fix the
designation, the dividend rate or rates (and whether cumulative and, if so, from
what date, the payment date or dates and participating or other special rights)
and the voting powers, if any, the redemption price or prices and the other
terms of redemption, if any, applicable thereto, the amount or amounts payable
upon the voluntary and involuntary liquidation of CLARCOR, the terms of the
sinking fund, if any, the conversion or exchange privileges, if any, applicable
thereto and any other preferences, if any, which such series will have with
respect to any other class or series of capital stock of CLARCOR. Cumulative
dividends, dividend preferences and conversion, exchange and redemption
provisions, to the extent that some or all of these features may be present if
and when shares of CLARCOR Preferred Stock are issued, could have an adverse
effect on the availability of earnings for distribution to the holders of
CLARCOR Common Stock or for other corporate purposes.
DIVIDEND RIGHTS
The holders of CLARCOR Common Stock are entitled to receive, to the extent
permitted by law, such dividends as are declared from time to time by the
CLARCOR Board, subject to any preferential dividend rights of the holders of any
outstanding series of CLARCOR Preferred Stock. For historical information
regarding dividends paid by CLARCOR, see "SUMMARY -- Market Prices and Dividends
Paid."
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VOTING RIGHTS
The holders of CLARCOR Common Stock are entitled to one vote for each share
held on the books of the corporation on each matter submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of CLARCOR Common Stock entitled to vote in any election
of Directors may elect all of the Directors then standing for election. See
"-- Change of Control" for information regarding CLARCOR's classified Board of
Directors. Directors are elected by a plurality vote. Except as otherwise
required by the DGCL or the CLARCOR Charter or the CLARCOR By-laws, when a
quorum is present at any meeting of CLARCOR stockholders, the vote of the
holders of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote on the subject matter is required for the
transaction of business. The CLARCOR Charter provides that the sale, lease or
exchange of all or substantially all of the property and assets of CLARCOR
require the approval, given at a stockholders' meeting, of the holders of at
least two-thirds of the shares of capital stock outstanding and entitled to vote
thereon. Any action required or permitted to be taken by the stockholders of
CLARCOR must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing by such
stockholders. Special meetings of stockholders of CLARCOR may be called only by
a majority vote of the CLARCOR Board upon not less than ten nor more than fifty
days written notice.
Notwithstanding anything contained in the CLARCOR Charter, the affirmative
vote of the holders of shares representing at least 75% of the voting power of
all then outstanding shares of capital stock of CLARCOR entitled to vote
generally in the election of Directors ("CLARCOR Voting Stock"), voting together
as a single class, is required to amend or modify several portions of the
CLARCOR Charter, including: (i) the provisions setting the number, election,
term, appointment and removal of Directors, (ii) the provisions described in the
last sentence of the preceding paragraph, and (iii) the provisions described
herein under the caption "-- Change of Control" (Article XI of the CLARCOR
Charter) limiting the ability of an interested stockholder to participate in
certain business combinations with CLARCOR.
CHANGE OF CONTROL
The DGCL, the CLARCOR Charter, the CLARCOR By-laws and the CLARCOR Rights
Agreement contain provisions that could discourage or make more difficult a
change of control of CLARCOR. Such provisions are designed to protect the
stockholders of CLARCOR against coercive, unfair or inadequate tender offers and
other abusive takeover tactics and to encourage any person contemplating a
business combination with CLARCOR to negotiate with the CLARCOR Board for the
fair and equitable treatment of all stockholders of CLARCOR.
Charter Provisions. The CLARCOR Charter specifies that the CLARCOR Board
shall be divided into three classes (as nearly equal as possible) and shall
consist of not less than nine Directors elected for three-year staggered terms.
The Directors are given the authority to determine the exact number of Directors
constituting the entire CLARCOR Board and subject to the rights of the holders
of any outstanding series of CLARCOR Preferred Stock, to fill vacancies and
newly created directorships. Any Directors so elected will hold office until the
next election of the class to which such Directors have been elected. The
CLARCOR Charter also provides that, subject to the rights of the holders of any
outstanding series of CLARCOR Preferred Stock, any Director, or the entire
Board, may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of shares representing at least 75% of the
CLARCOR Voting Stock.
Article XI of the CLARCOR Charter applies to specified mergers,
consolidations, asset dispositions, securities issuances or transfers, adoption
of any plan of liquidation or dissolution, reclassifications and other
transactions involving a beneficial owner of 10% or more of the CLARCOR Voting
Stock and certain other interested stockholders. Article XI requires that any
such transaction be approved, in addition to any other vote required by law or
the CLARCOR Charter, by the affirmative vote of the holders of shares
representing at least 75% of the CLARCOR Voting Stock, voting together as a
single class, notwithstanding that no vote may otherwise be required, or that a
lesser percentage may be specified by law or in any agreement with a securities
exchange or otherwise. These special voting requirements do not apply if the
transaction is approved
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by two-thirds of the Continuing Directors (as defined in the CLARCOR Charter) or
the consideration offered to the stockholders of CLARCOR meets specified fair
price standards (including related procedural requirements as to the form of
consideration and continued payment of dividends).
The ability of the CLARCOR Board to issue and set the terms of CLARCOR
Preferred Stock could have the effect of making it more difficult for a third
person to acquire, or of discouraging a third person from attempting to acquire,
control of CLARCOR.
By-law Provisions. The CLARCOR By-laws provide that the only business which
may be conducted at a meeting of stockholders is (i) such as has been specified
in the notice of such meeting given by or at the direction of the CLARCOR Board,
(ii) otherwise properly brought before such meeting by or at the direction of
the CLARCOR Board or (iii) otherwise properly brought before the meeting by a
written notice (a "CLARCOR Stockholder Meeting Notice") which has been timely
delivered to CLARCOR by a stockholder of record. To be timely delivered, a
CLARCOR Stockholder Meeting Notice must be received by the Secretary of CLARCOR
not less than 60 nor more than 90 days prior to the meeting, provided, however,
that in the event less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of such meeting is
made. Each CLARCOR Stockholder Meeting Notice must contain specified
information, including a brief description of the business to be brought before
the meeting and the reasons for conducting such business, the name and address
of the stockholder intending to propose such business, the class and number of
shares of CLARCOR stock beneficially owned by such stockholder and any material
interest of such stockholder in such business. However, the only business that
can be conducted at a special meeting of stockholders is that which is brought
before the meeting pursuant to CLARCOR's notice of meeting.
The CLARCOR By-laws provide that nominations for Directors can be made only
by the CLARCOR Board or by any stockholder of record pursuant to notice (a
"CLARCOR Stockholder Nomination Notice") timely delivered to CLARCOR not less
than 60 nor more than 90 days prior to the applicable meeting, unless less than
70 days' notice or prior public disclosure of the date of such meeting has been
given or made, in which case a CLARCOR Stockholder Nomination Notice must be so
received not later than the close of business on the tenth day following the day
on which such notice was mailed or such public disclosure was made. Each CLARCOR
Stockholder Nomination Notice must contain specified information, including the
name and address of the stockholder and the class and number of shares of stock
of CLARCOR which are beneficially owned by such shareholder, the name, age,
business address and the residence address of each nominee, principal occupation
or employment of each nominee, and any other information relating to such
nominee as would be required to be included in a proxy statement filed under the
Exchange Act (including the consent of each such nominee to serve if elected).
Stockholder Rights Plan. Pursuant to the CLARCOR Rights Agreement, each
holder of an outstanding share of CLARCOR Common Stock has received, and each
person receiving a whole share of CLARCOR Common Stock constituting a portion of
the Share Issuance will receive, one CLARCOR Right entitling the holder thereof
to purchase from CLARCOR, at a price of $80 (the "CLARCOR Purchase Price"),
subject to adjustment, one one-hundredth of a share of CLARCOR Series B
Preferred Stock.
Until the earlier to occur of (i) 10 business days after the first public
announcement that a person or group (other than a CLARCOR related entity) has
become the beneficial owner of 15% or more of the outstanding shares of CLARCOR
Common Stock or (ii) 10 business days (unless extended by the CLARCOR Board in
accordance with the CLARCOR Rights Agreement) after the commencement of, or the
first public announcement of the intention to make, a tender or exchange offer
the consummation of which would result in any person or group (other than a
CLARCOR related entity) becoming such a 15% beneficial owner (the earlier of the
dates specified in clause (i) and (ii) being the "CLARCOR Distribution Date"),
the CLARCOR Rights will be evidenced by certificates representing CLARCOR Common
Stock, will be transferable only with the CLARCOR Common Stock and will not be
exercisable. After the CLARCOR Distribution Date, the CLARCOR Rights become
exercisable, and separate certificates evidencing the
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CLARCOR Rights will be mailed to the registered holders of outstanding shares of
CLARCOR Common Stock. Such separate certificates will thereafter constitute the
sole evidence of the CLARCOR Rights.
In the event that any person or group (other than a CLARCOR related entity)
becomes the beneficial owner of 15% or more of the outstanding shares of CLARCOR
Common Stock, proper provision will be made so that each registered holder of a
CLARCOR Right will thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current CLARCOR Purchase Price multiplied
by the number of one one-hundredths of a share of CLARCOR Series B Preferred
Stock for which a CLARCOR Right is then exercisable, the number of shares of
CLARCOR Common Stock having a market value of two times such price. After the
occurrence of the event described in the preceding sentence, all CLARCOR Rights
which are, or under circumstances specified in the CLARCOR Rights Agreement
were, beneficially owned by such person or group will be void. In addition,
after the first public announcement that any person or group has become such a
15% beneficial owner and subject to designated exceptions, if CLARCOR is
acquired in a merger or other business combination or if 50% or more of
CLARCOR's assets or earning power are sold or transferred, proper provision will
be made so that each registered holder of a CLARCOR Right (except CLARCOR Rights
which have become void) will thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current CLARCOR Purchase Price
multiplied by the number of one one-hundredths of a share of CLARCOR Series B
Preferred Stock for which a CLARCOR Right is then exercisable, the number of
common shares of the acquiring company which at the time of such transaction
will have a market value of two times such price.
Under certain circumstances, CLARCOR may redeem the CLARCOR Rights, in
whole, but not in part, at a price of $.01 per CLARCOR Right or exchange the
CLARCOR Rights (except Rights which have become void), in whole or in part, at
an exchange ratio of one share of CLARCOR Common Stock per CLARCOR Right, in
each case subject to adjustment. The CLARCOR Rights will expire on April 25,
2006, unless earlier redeemed or exchanged or unless such expiration date is
extended by the CLARCOR Board.
DGCL. Section 203 of the DGCL prohibits generally a public Delaware
corporation, including CLARCOR, from engaging in a Business Combination with an
Interested Stockholder for a period of three years after the date of the
transaction in which an Interested Stockholder became such, unless: (i) the
board of directors of such corporation approved, prior to the date such
Interested Stockholder became such, either such Business Combination or such
transaction; (ii) upon consummation of such transaction, such Interested
Stockholder owns at least 85% of the voting shares of such corporation
(excluding specified shares); or (iii) such Business Combination is approved by
the board of directors of such corporation and authorized by the affirmative
vote (at an annual or special meeting and not by written consent) of at least
66 2/3% of the outstanding voting shares of such corporation (excluding shares
held by such Interested Stockholder). A "Business Combination" includes (i)
mergers, consolidations and sales or other dispositions of 10% or more of the
assets of a corporation for or with an Interested Stockholder, (ii) certain
transactions resulting in the issuance or transfer to an Interested Stockholder
of any stock of such corporation or its subsidiaries and (iii) other
transactions resulting in a disproportionate financial benefit to an Interested
Stockholder. An "Interested Stockholder" is a person who, together with its
affiliates and associates, owns (or within a three year period did own) 15% or
more of a corporation's stock entitled to vote generally in the election of
directors.
LIQUIDATION RIGHTS
Upon the liquidation, dissolution or winding up of the affairs of CLARCOR,
the holders of CLARCOR Common Stock are entitled to share ratably in all assets
of CLARCOR available for distribution to such holders after the payment of all
debts and other liabilities, subject to the prior rights of the holders of any
outstanding series of CLARCOR Preferred Stock.
MISCELLANEOUS
The holders of CLARCOR Common Stock do not have preemptive, subscription,
redemption or conversion rights. The shares of CLARCOR Common Stock constituting
the Share Issuance upon issuance will be duly authorized, validly issued, fully
paid and nonassessable. The outstanding shares of CLARCOR
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Common Stock are, and the shares of CLARCOR Common Stock constituting the Share
Issuance upon notice of issuance will be, listed on the NYSE. First Chicago
Trust Company of New York is the transfer and dividend disbursing agent and
registrar for the CLARCOR Common Stock.
COMPARISON OF RIGHTS OF HOLDERS OF CLARCOR COMMON STOCK
AND UAS COMMON STOCK
The statements set forth under this heading with respect to the OGCL, the
DGCL, the UAS Charter, the UAS Regulations, the CLARCOR Charter, the CLARCOR
By-laws and the CLARCOR Rights Agreement (copies of which have been filed as
Exhibits to the Registration Statement) are brief summaries and do not purport
to be complete; such statements are subject to the detailed provisions of the
OGCL, the DGCL, the UAS Charter, the UAS Regulations, the CLARCOR Charter, the
CLARCOR By-laws and the CLARCOR Rights Agreement. See "AVAILABLE INFORMATION."
The following summary compares certain rights of the holders of UAS Common
Stock to the rights of the holders of CLARCOR Common Stock. The rights of UAS
shareholders are governed principally by the OGCL, the UAS Charter and the UAS
Regulations. Upon consummation of the Merger, such shareholders will become
holders of CLARCOR Common Stock and their rights will be governed principally by
the DGCL, the CLARCOR Charter and the CLARCOR By-laws.
DIVIDEND RIGHTS
The rights of UAS shareholders and CLARCOR stockholders with respect to the
receipt of dividends are substantially the same. See "DESCRIPTION OF CLARCOR
COMMON STOCK -- Dividend Rights."
Under the OGCL, a corporation may pay dividends in cash, property or shares
of the corporation, but such dividend may not exceed the combination of the
surplus (defined as the excess of assets over liabilities plus stated capital,
if any) and the difference between the reduction in surplus that results from
the immediate recognition of the transition obligation under Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), issued by the financial
accounting standards board and the aggregate amount of the transition obligation
that would have been recognized as of the date of the declaration of a dividend
or distribution if the corporation had elected to amortize its recognition of
the transition obligation under SFAS 106; provided, further, that it must notify
its shareholders if any portion of a dividend is paid out of capital surplus.
Under the DGCL, a corporation may pay dividends out of surplus (defined as
the excess, if any, of net assets over capital) or, if no such surplus exists,
out of its net profits for the fiscal year in which such dividends are declared
and/or for its preceding fiscal year, provided that dividends may not be paid
out of net profits if the capital of such corporation is less than the aggregate
amount of capital represented by the outstanding stock of all classes having a
preference upon the distribution of assets.
VOTING RIGHTS
Each share of UAS Common Stock and each share of CLARCOR Common Stock is
entitled to one vote on each matter submitted to a vote of stockholders. Neither
the holders of UAS Common Stock nor the holders of CLARCOR Common Stock have
cumulative voting rights in the election of directors.
Under the OGCL, unless the charter eliminates cumulative voting for
directors, each shareholder has the right to vote cumulatively in the election
of directors if certain notice requirements are satisfied. The UAS Charter
eliminates the rights of UAS shareholders to vote cumulatively in the election
of directors.
Under the DGCL, stockholders do not have the right to cumulate their votes
in the election of directors unless such right is granted in the charter. The
CLARCOR Charter does not grant such rights.
UAS Directors are elected by a plurality of the votes cast. Notwithstanding
the provisions of the OGCL, other matters submitted to a vote of the UAS
shareholders must be authorized by a majority of the votes cast by the
shareholders entitled to vote thereon at a duly organized meeting of
shareholders. For information
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regarding the comparable voting rights of the holders of CLARCOR Common Stock,
see "DESCRIPTION OF CLARCOR COMMON STOCK -- Voting Rights."
DIRECTORS
Number and Election of Directors; Removal. Under both the OGCL and the
DGCL, the charter document and the bylaws or the regulations of a corporation
may specify the number of directors. The UAS Regulations provide that the UAS
Board shall consist of not less than 3 nor more than 15 Directors, each serving
for a term of one year, with the UAS shareholders and the UAS Board having the
authority to determine the exact number of Directors; provided that at all times
no fewer than two directors must be independent directors (defined as a person
who is neither an officer or employee of UAS and who has no other relationship
with UAS which would reasonably be expected to interfere with the director's
independent judgment). The UAS shareholders or the UAS Board may fill vacancies
and newly created directorships. The UAS Regulations also provide that the
entire UAS Board or an individual Director may be removed from office with or
without cause by the affirmative vote of the holders of the majority of the
shares entitled to elect directors in place of those removed. Under the OGCL and
the UAS Regulations, the UAS Board may remove a Director under limited
circumstances.
The UAS Regulations provide that nominations for Director can be made by a
shareholder entitled to vote for the election of Directors at a shareholders
meeting only if written notice of such shareholder's intent to make such
nominations at such meeting is received by the Secretary of UAS in the manner
and within the time period specified in the UAS Regulations.
For information regarding the number, election, removal and nomination of
CLARCOR Directors and the classification of the CLARCOR Board, see "DESCRIPTION
OF CLARCOR COMMON STOCK -- Change of Control."
Fiduciary Duties of Directors. Under the OGCL, a director is required to
perform his duties as a director, including his duties as a member of any
committee of the directors upon which he may serve, in good faith, in a manner
he reasonably believes to be in or not opposed to the best interests of the
corporation, and with the care that an ordinarily prudent person in a like
position would use under similar circumstances. In determining what he
reasonably believes to be in the best interests of the corporation, a director
shall consider the interests of the corporation's shareholders and, in his
discretion, may consider (a) the interests of the corporation's employees,
suppliers, creditors, and customers, (b) the economy of the state and the
nation, (c) community and societal considerations, and (d) the long-term as well
as short-term interests of the corporation and its shareholders, including the
possibility that these interests may be best served by the continued
independence of the corporation.
Under the DGCL, the business and affairs of a corporation are managed by or
under the direction of its board of directors. In exercising their powers,
directors are charged with a fiduciary duty to protect the interests of the
corporation and to act in the best interests of its stockholders. In recognition
of the managerial prerogatives granted to the directors of a Delaware
corporation, Delaware law presumes that, in making a business decision, such
directors are disinterested and act on an informed basis, in good faith and in
the honest belief that the action taken was in the best interests of such
corporation, which presumption is known as the "business judgment rule." A party
challenging the propriety of a decision of a board of directors bears the burden
of rebutting the applicability of the presumption of the business judgment rule
by demonstrating that, in reaching their decision, the directors breached one or
more of their fiduciary duties -- good faith, loyalty and due care. If the
presumption is not rebutted, the business judgment rule attaches to protect the
directors and their decisions, and their business judgments will not be second
guessed by a Delaware court. Where, however, the presumption is rebutted, the
directors bear the burden of demonstrating the entire fairness of the relevant
transaction. Notwithstanding the foregoing, Delaware courts subject directors'
conduct to enhanced scrutiny in respect of defensive actions taken in response
to a threat to corporate control and approval of a transaction resulting in a
sale of such control.
Liability of Directors. Under the OGCL, a director is liable in damages for
any action he or she takes or fails to take as a director only if it is proved
by clear and convincing evidence that such action or failure to act
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involved an act or omission undertaken with either deliberate intent to cause
injury to the corporation or reckless disregard for the best interests of the
corporation. The limitation of liability will not apply to the improper payment
of dividends, distribution of assets, redemption or purchases of the
corporation's own shares, the making of certain loans or certain transactions
between the corporation and one or more interested directors. Moreover, the
statutory limitation of liability will not apply if at the time of the relevant
act or failure to act a corporation's charter or regulations specifically so
provide. Neither the UAS Charter nor the UAS Regulations contain a provision
denying the statutory limitation on liability.
The DGCL permits a corporation to include in its charter a provision
limiting or eliminating the liability of its directors to such corporation or
its stockholders for monetary damages arising from a breach of fiduciary duty,
except for: (i) a breach of the duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) a declaration of a
dividend or the authorization of the repurchase or redemption of stock in
violation of the DGCL or (iv) any transaction from which the director derived an
improper personal benefit. The CLARCOR Charter eliminates director liability to
the maximum extent permitted by the DGCL.
CALL OF SPECIAL MEETINGS
Under the OGCL, a special meeting of shareholders may be called by (i) the
holders of 25% of the outstanding shares of a corporation entitled to vote at
such meeting, unless the corporation's regulations specify another percentage,
which in no event may be greater than 50%; (ii) the directors by action at a
meeting or a majority of the directors acting without a meeting; (iii) the
chairman of the board, the president or, in case of the president's absence,
death or disability, the vice president authorized to exercise the authority of
the president. The UAS Regulations provide that special meetings of UAS
shareholders may be called by the Chairman of the Board, the President, the UAS
Board or the holders of 25% of the outstanding UAS Common Stock.
The DGCL permits special meetings of stockholders to be called by the board
of directors and such other persons, including stockholders, as the certificate
of incorporation or bylaws may provide. The DGCL does not require that
stockholders be given the right to call special meetings. As previously
described, meetings of stockholders of CLARCOR may be called only by the
affirmative vote of the Directors constituting a majority of the entire CLARCOR
Board.
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Under the OGCL, unless the charter or the regulations of the corporation
provide otherwise, any action that may be authorized or taken by shareholders at
a meeting may be authorized or taken without a meeting with the unanimous
written consent of all shareholders who would be entitled to notice of a meeting
of shareholders held for such purpose. The UAS Regulations permit the
shareholders of UAS to act by written consent in lieu of meeting.
The DGCL permits the stockholders of a corporation to consent in writing to
any action without a meeting, unless the certificate of incorporation of such
corporation provides otherwise, provided such consent is signed by stockholders
having at least the minimum number of votes required to authorize such action at
a meeting of stockholders at which all shares entitled to vote thereon were
present and voted. The CLARCOR Charter does not permit stockholders to act
without a meeting. See "DESCRIPTION OF CLARCOR COMMON STOCK -- Voting Rights."
STOCKHOLDER PROPOSALS
As described above, both the UAS Regulations and the CLARCOR Charter
restrict the manner in which nominations for Directors may be made by
stockholders. The UAS Regulations limit the ability of UAS shareholders to bring
other business before a meeting of shareholders. For business to be properly
brought before a meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the UAS Secretary. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal office of UAS not fewer than thirty nor more than sixty days prior to
the meeting; provided, however,
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that in the event that fewer than thirty days notice or prior public disclosure
of the date of the meeting is given or made to the shareholders, notice by a
shareholder to be timely must be received not later than the close of business
on the seventh day following the date on which such notice of the date of the
shareholders' meeting was mailed or such public disclosure was made. A
shareholders' notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the shareholder's meeting: (i) a brief
description of the business desired to be brought before the meeting; (ii) the
name and address, as they appear on the Corporation's books, of the shareholder
proposing such business; (iii) the class and number of UAS Shares beneficially
owned by such shareholder; and (iv) any material interest of the shareholder in
such business. The CLARCOR By-laws establish certain requirements that must be
satisfied by a stockholder in order to bring other business before a meeting of
stockholders. See "DESCRIPTION OF CLARCOR COMMON STOCK -- Change of Control."
AMENDMENT TO CHARTER DOCUMENT
To approve a charter amendment proposed by the UAS Board, the OGCL requires
the approval of shareholders holding two-thirds of the voting power of the
corporation or, in cases in which class voting is required, of shareholders
holding two-thirds of the voting power of each class, unless the corporation's
charter permits approval by the affirmative vote of a greater or lesser
proportion, but not less than a majority, of such voting power. The UAS Charter
permits the holders of a majority of the UAS Common Stock to adopt amendments to
the UAS Charter.
Under the DGCL and the CLARCOR Charter, charter amendments may generally be
approved by the CLARCOR Board and the affirmative vote of the holders of a
majority of the outstanding shares of voting stock entitled to vote thereon
except for certain amendments which require a super majority of the outstanding
shares of voting stock. See "DESCRIPTION OF CLARCOR COMMON STOCK -- Voting
Rights."
AMENDMENT TO BY-LAWS
The OGCL provides that only shareholders of a corporation have the power,
by the affirmative vote of the holders of the majority of the voting power, by
the written consent of the holders of two-thirds of the voting power or by such
greater or lower proportion of the voting power specified in the charter, but
not less than a majority, to adopt or amend that corporation's regulations. The
UAS Regulations require that such amendments be approved by the affirmative vote
of the holders of a majority of the voting power entitled to vote on such matter
at a meeting held for such purpose or by the written consent of the holders of
the shares entitling them to exercise a majority of the voting power.
Under the DGCL, holders of a majority of the voting power of a corporation
and, when provided in the certificate of incorporation, the directors of the
corporation, have the power to adopt, amend and repeal the by-laws of a
corporation. The CLARCOR Charter grants the Directors of CLARCOR such power.
APPROVAL OF MERGERS AND ASSET SALES
In addition to Board approval, the OGCL requires approval of certain
mergers, consolidations, dissolutions, dispositions of all or substantially all
of a corporation's assets, majority share acquisitions and combinations
involving the issuance of shares with one-sixth or more of the voting power of
the corporation, by the affirmative vote of holders of two-thirds of the voting
power of the corporation, unless the charter or the regulations specify a
different proportion (but not less than a majority). The UAS Charter provides
that any such actions may be authorized by the affirmative vote of the holders
of a majority of the outstanding shares of UAS Common Stock.
Under the DGCL, unless required by its charter (the CLARCOR Charter
containing no such requirement), no vote of the stockholders of a constituent
corporation surviving a merger is necessary to authorize such merger if: (i) the
agreement of merger does not amend the charter of such constituent corporation;
(ii) each share of stock of such constituent corporation outstanding prior to
such merger is to be an identical outstanding or treasury share of the surviving
corporation after such merger; (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such
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common stock are to be issued under such agreement of merger, or the number of
shares of common stock issued or initially issuable does not exceed 20% of the
number thereof outstanding immediately prior to such merger; and (iv) certain
other conditions are satisfied. In addition, the DGCL provides that a parent
corporation that is the record holder of at least 90% of the outstanding shares
of each class of stock of a subsidiary may merge such subsidiary into such
parent corporation without the approval of such subsidiary's stockholders or
board of directors. Whenever the approval of the stockholders of a corporation
is required for an agreement of merger or consolidation or for a sale, lease or
exchange of all or substantially all of its assets, such agreement, sale, lease
or exchange must be approved by the affirmative vote of the holders of a
majority of outstanding shares of such corporation entitled to vote thereon.
The CLARCOR Charter contains additional provisions relating to the approval
of certain mergers, consolidations and asset dispositions. See "DESCRIPTION OF
CLARCOR COMMON STOCK -- Voting Rights" and "-- Change of Control."
RIGHTS OF APPRAISAL
Under the OGCL, dissenting shareholders are entitled to appraisal rights in
connection with the lease, sale, exchange, transfer, or other disposition of all
or substantially all of the assets of a corporation, in connection with certain
amendments to the corporation's charter and in certain merger transactions.
Shareholders of an acquiring corporation are entitled to relief as dissenting
shareholders in any merger, combination, or majority share acquisition in which
such shareholders are entitled to vote on such merger. See "DISSENTERS' RIGHTS."
The DGCL provides for appraisal rights only in the case of certain mergers
or consolidations and not (unless the certificate of incorporation of a
corporation so provides, which the CLARCOR Charter does not) in the case of
other mergers, a sale or transfer of all or substantially all of its assets or
an amendment to its charter. Moreover, the DGCL does not provide appraisal
rights in connection with a merger or consolidation (unless the certificate of
incorporation so provides, which the CLARCOR Charter does not) to the holders of
shares of a constituent corporation listed on a national securities exchange (or
designated as a national market system security by the National Association of
Securities Dealers, Inc.) or held of record by more than 2,000 stockholders,
unless the applicable agreement of merger or consolidation requires the holders
of such shares to receive, in exchange for such shares, any property other than
shares of stock of the resulting or surviving corporation, shares of stock of
any other corporation listed on a national securities exchange (or designated as
described above) or held of record by more than 2,000 holders, cash in lieu of
fractional shares or any combination of the foregoing. In addition, the DGCL
denies appraisal rights to the stockholders of the surviving corporation in a
merger if such merger did not require for its approval the vote of the
stockholders of such surviving corporation. See "-- Approval of Mergers and
Asset Sales."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the OGCL, a corporation is permitted to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify them
under certain circumstances. The OGCL does not authorize indemnification by a
corporation of judgments against a director, officer, employee, or agent after a
finding of negligence or misconduct in the performance of his duty to the
corporation in a suit by or in the right of the corporation absent a court order
determining that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses as such court shall deem proper. The OGCL also
does not authorize indemnification by a corporation in connection with any
action or suit in which the only liability asserted against a director is with
respect to the improper payment of dividends, distributions of assets,
redemption or purchases of the corporation's own shares, and the making of
certain loans. Indemnification is required, however, to the extent such person
succeeds on the merits. In all other cases, if it is determined that a director,
officer, employee, or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
indemnification is discretionary except as otherwise provided by a corporation's
charter, regulations or contract.
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The UAS Regulations provide that UAS will, in all actions other than
derivative actions in the right of the Corporation, indemnify any director or
officer, and may indemnify other persons, to the fullest extent authorized by
the OGCL against expenses including attorneys' fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit or proceeding, if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. With respect to derivative
actions, the UAS Regulations provide that UAS will indemnify any director or
officer, and may in the case of another person, indemnify such person to the
fullest extent authorized by the OGCL against expenses, including attorneys'
fees actually and reasonably incurred in the defense and settlement of the
action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of UAS, except that no indemnification
shall be made in respect to any claim as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to UAS unless, and only to the extent that an appropriate court shall
determine upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses.
The statutory right to indemnification is not exclusive under the OGCL and
a corporation may, among other things, purchase insurance to indemnify officers,
directors and other persons. The UAS Regulations likewise provide that UAS may
purchase insurance to indemnify directors, officers, employees, or agents of
UAS.
With respect to the advancement of expenses, the OGCL provides that, unless
a corporation's charter or regulations specifically state that the provisions of
Section 1701.13(E)(5)(a) of the OGCL do not apply to the corporation or unless
the only liability asserted against a director is pursuant to Section 1701.95 of
the OGCL, expenses, including attorneys' fees, incurred by a director in
defending any action, including derivative actions, brought against the director
are required to be paid by the corporation as they are incurred, in advance of
the final disposition of the action, provided that the director agrees to repay
the amount advanced if it is proved by clear and convincing evidence in court
that his action or failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the corporation or with reckless disregard
for the best interests of the corporation and such director agrees to reasonably
cooperate with the corporation concerning such action. The UAS Regulations
provide that UAS will advance expenses to a director or officer under such
circumstances on condition that such director gives such an undertaking.
Section 145 of the DGCL generally provides that a corporation may indemnify
its officers and directors who were or are a party to any action, suit, or
proceeding by reason of the fact that he was a director, officer, or employee of
the corporation by, among other things, a majority vote of a quorum consisting
of directors who were not parties to such action, suit, or proceeding; provided
that such officers and directors acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation. The CLARCOR Charter provides for indemnification of officers,
directors, employees and agents to the fullest extent permitted by the DGCL.
Additionally, under the DGCL, advancement of expenses is permitted, but a
person receiving such advances must undertake to repay those expenses if it is
ultimately determined that he or she is not entitled to indemnification. The
CLARCOR Charter provides that CLARCOR will pay expenses incurred by directors,
officers, employees and agents in defending a proceeding in advance of the final
disposition of such proceeding to the fullest extent permitted by the DGCL.
ANTI-TAKEOVER PROVISIONS
Chapter 1704 of the OGCL prohibits an interested shareholder of an "issuing
public corporation" from engaging in a wide range of business combinations
similar to those prohibited by Section 203 of the Delaware Law. UAS is an
"issuing public corporation" under the OGCL. However, in contrast to Section 203
of the DGCL, under Chapter 1704, an interested shareholder includes a
shareholder who directly or indirectly exercises or directs the exercise of 10%
or more of the voting power of the corporation. Chapter 1704 restrictions do not
apply under certain circumstances including, but not limited to, the following:
(i) if, prior to
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the interested shareholder's share acquisition date, the directors of the
corporation have approved either the transactions or the interested
shareholder's acquisition of shares, and (ii) if the corporation, by action of
its shareholders holding at least 66 2/3% of the voting power of the
corporation, adopts an amendment to its articles of incorporation specifying
that Chapter 1704 shall not be applicable to the corporation. No such amendment
has been adopted by UAS. The UAS Board has adopted a resolution approving the
Merger for purposes of Chapter 1704.
Under Section 1701.831 of the OGCL, unless the charter or regulations of a
corporation otherwise provide, any "control share acquisition" of an "issuing
public corporation" can only be made with the prior approval of the
corporation's shareholders. A "control share acquisition" is defined as any
direct or indirect acquisition of shares of an "issuing public corporation"
that, when added to all other shares of that corporation in respect of which the
acquiring person may exercise or direct the exercise of voting power, would
enable that person, directly or indirectly, alone or with others, to exercise or
direct the exercise of levels of voting power in any of the following ranges: at
least 20% but less than 33 1/3%; at least 33 1/3% but less than 50%; or 50% or
more. The UAS Charter provides that the provisions of Section 1701.831 of the
OGCL shall not apply.
For information on comparable provisions of the DGCL, see "DGCL" under
"DESCRIPTION OF CLARCOR COMMON STOCK -- Change of Control."
RIGHTS OF INSPECTION
Under both the OGCL and the DGCL, every stockholder, upon proper written
demand stating the purpose thereof, may inspect the corporate books and records
as long as such inspection is for a proper purpose and during normal business
hours. Under both statutes, a "proper purpose" is any purpose reasonably related
to the interest of the inspecting person as a stockholder.
LIQUIDATION RIGHTS
The rights of the holders of UAS Common Stock upon the liquidation or
dissolution of UAS are substantially the same as the holders of CLARCOR Common
Stock upon the liquidation or dissolution of CLARCOR. See "DESCRIPTION OF
CLARCOR COMMON STOCK -- Liquidation Rights."
ADDITIONAL INFORMATION REGARDING UAS
Certain additional information concerning UAS is set forth below. Similar
information concerning CLARCOR is contained in the documents incorporated by
reference herein. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY
REFERENCE."
DESCRIPTION OF BUSINESS
UAS is engaged in the design, manufacture and sale of commercial and
industrial air cleaners, electrostatic fluid contamination control equipment and
high precision spraying equipment. UAS was founded in 1966 and is incorporated
in Ohio.
UAS's industry segments consist of the Air Quality Division and the Applied
Electrostatics Division. The following summarizes certain financial information
attributable to UAS's industry segments. For additional information, including
revenues, operating profit or loss and identifiable assets attributable to
geographical
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areas and export sales, see Note 10 of the Notes to UAS Consolidated Financial
Statements included in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Air Cleaning
Net sales....................... $35,800,000 $30,919,000 $ 26,068,000
Income from operations.......... 2,774,000 2,719,000 1,167,000
Assets.......................... 19,359,000 19,041,000 16,270,000
Applied Electrostatics
Net sales....................... $ 5,018,000 $ 3,912,000 $ 3,243,000
Income (loss) from operations... 212,000 (918,000) (271,000)
Assets.......................... 2,693,000 2,409,000 2,011,000
</TABLE>
AIR QUALITY DIVISION
UAS's air quality division manufactures and sells commercial and industrial
air cleaning equipment that removes contaminants from recirculated indoor air or
ventilates contaminated air outdoors and pollution control systems that remove
contaminants from process air exhausted outdoors. The products are marketed
under several brand names, including SMOKEETER(R) and Crystal-Aire(R) commercial
air cleaners, Fresh-X-Changer(R) heat recovery ventilators, SMOG-HOG(R)
industrial air cleaners and pollution control systems, and DUST-HOG(R) dust
collectors. These products represent a complete line of air cleaners with a wide
range of uses for maintaining high quality standards in both interior air and
exterior pollution control.
SMOKEETER(R) and Crystal-Aire(R) commercial air cleaners are used in
commercial establishments to remove indoor airborne contaminants including
tobacco smoke, dust, pollen and bacteria, and Fresh-X-Changer(R) heat recovery
ventilators are used by commercial establishments for ventilation of airborne
contaminants. SMOG-HOG(R) industrial air cleaners and air pollution control
systems are used in industrial facilities to remove indoor and exhausted
airborne contaminants caused by industrial processes, including smoke, mists and
dusts from welding, soldering, grinding, forging, casting, heat treating and
plastic and rubber forming. DUST-HOG(R) dust collection systems are used in
industrial facilities to remove airborne dust caused by a variety of industrial
processes, including woodworking, plastic processing, metalworking, blasting,
powder mixing and powder painting. The commercial establishments that use
SMOKEETER(R) and Crystal-Aire(R) include offices, restaurants, bars, bowling
centers and health care facilities. The industrial facilities that use
SMOG-HOG(R) and DUST-HOG(R) include manufacturers of industrial and commercial
machinery, fabricated metal products, transportation equipment, electronic and
electrical equipment, chemicals, food, rubber and plastics, and also various
types of trade contractors.
UAS's particulate collectors use three systems to collect airborne
contaminants -- two-stage electrostatic precipitators, media filtration and
mechanical filtration.
- Two-stage electrostatic precipitators are high efficiency electronic air
filters. In a two-stage electrostatic precipitator, air passes through an
ionizing section where airborne particles are electrically charged by
ions in an electrostatic field. The charged particles then enter a
collecting cell where the particles are repelled from charged plates and
collected on grounded plates within the cell. This process is highly
effective at capturing submicron particulate, including particulate found
in welding smoke, tobacco smoke and emissions of hydrocarbon smoke from
elevated temperature processes such as plastics and textile curing
operations.
- In a media filtration system, air passes through media filters that trap
airborne particles. Some of these filters, like cartridge collectors, can
collect submicron particulate, such as welding smoke, as well as larger
particulate. Other filters, like envelope collectors, are useful for
larger particulate such as that generated in woodworking, grinding and
dry chemical processing. In some systems, air passes through a prefilter
where large particles are collected and then passes through a second or
third media filter where smaller particles are collected.
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- In a mechanical filtration system, air passes through a cyclone separator
that uses gravity to collect large particles before the air is exhausted
from the device. These systems are useful only for larger particulate.
SMOG-HOG(R) and most SMOKEETER(R) and Crystal-Aire(R) products are
two-stage electrostatic precipitators that also use media filtration. Certain
models of SMOKEETER(R) and Crystal-Aire(R) products rely exclusively on media
filtration. DUST-HOG(R) products use both media filtration and mechanical
filtration.
UAS's Fresh-X-Changer(R) products are heat recovery ventilators that use
heat exchangers to exhaust indoor air and replace it with fresh air from
outdoors while transferring heat or cold from the exhausted air to the incoming
air without contaminating the incoming air.
UAS's indoor air cleaning equipment is used primarily to improve air
quality and comfort indoors, reduce health risks, facilitate compliance with
OSHA standards for indoor air quality, conserve energy by permitting the
recirculation of air or reducing loss of energy in exhausted air, reduce
cleaning and maintenance costs, and reclaim valuable liquids from smoke and
mist. UAS's air pollution control equipment is used primarily to remove
contaminants and odors from process air exhausted from buildings.
UAS manufactures all of its air quality equipment, except for
Fresh-X-Changer(R) products, at its facility in Cincinnati, Ohio, and purchases
its Fresh-X-Changer(R) products on a private-label basis from a Canadian
company. UAS manufactures standard models of air cleaning equipment and also
custom engineers and builds systems to customer specification.
UAS sells its air quality products worldwide. During fiscal year 1996,
approximately 63% of UAS's sales of air quality products were in the U.S. and
Canada, and approximately 37% were in international markets, principally the
United Kingdom, Germany and Japan. In the U.S. and Canada, UAS sells commercial
air cleaners through a network of approximately 51 stocking distributors (seven
of which are owned by UAS) that purchase equipment from UAS and resell it in
local market areas, and UAS sells industrial air cleaners and pollution control
equipment through its own sales personnel and about 37 manufacturers' agents and
about 236 dealers (some of the manufacturers' agents and dealers are also
distributors of commercial products). In international markets, UAS sells
commercial and industrial air quality products through a wholly-owned United
Kingdom subsidiary and a German branch and through distributors in about 25
other countries. In most cases, these international distributors resell products
without modifications, although UAS's personnel in the United Kingdom and
Germany and one or two of the larger international distributors make some
modifications for specific market needs.
Significant developments in the Air Quality Division in recent years
include the following:
- In 1994, UAS ceased manufacturing its Temp-X-Changer(R) industrial energy
recovery systems to better concentrate on its core industrial products.
- In 1993, UAS changed its method of sourcing air cleaner power packs by
closing its sub-assembly operation in Indiana and contracting with an
outside supplier for the purchase of power packs.
- In 1992, UAS introduced its Crystal-Aire(R) product line as part of its
strategy to emphasize the use of its commercial products for overall
indoor air quality in response to reduced smoking in the U.S. Also in
1992, UAS introduced its Fresh-X-Changer(R) line of heat recovery
ventilators.
- In 1991, UAS expanded its Cincinnati manufacturing facility by adding
17,500 square feet of additional production floor space.
- In 1989, UAS purchased the capital stock of PTS Industries, a
manufacturer of dust collection systems, and as a result acquired a
manufacturing facility in Anaheim, California. In 1994, UAS ceased
manufacturing at this facility and consolidated all dust collection
manufacturing in its Cincinnati manufacturing facility.
No single customer accounted for more than 10% of UAS's sales of air
quality products during the past three fiscal years.
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Air quality products represented 88%, 89% and 89% of total sales for the
fiscal years 1996, 1995 and 1994, respectively.
APPLIED ELECTROSTATICS DIVISION
This division manufactures and sells high-precision spraying equipment and
electrostatic fluid contamination control systems. UAS markets spraying systems
under the TotalStat(R) brand name. It markets fluid contamination control
systems under the Kleentek(TM) brand name and on a private label basis under the
Cleanstat(R) brand name.
Precision Spraying. TotalStat(R) spraying systems utilize electrostatic
technology to convert fluids into fine droplets and spray them onto substrates
of various kinds. These systems are used to spray electrically mid-range
resistive liquids, such as oil-based liquids, and are designed to provide a
precise amount of spray and to eliminate overspray. A typical application is the
coating of steel as it is processed in a rolling mill in steel-making
operations. In this application, the spraying system applies either a
corrosion-resistant oil or a die lubricant to prepare the steel for later
operations. Other applications include food-grade oils used as release agents to
prevent products from sticking onto process conveyors and oils to add flavor to
various baked products.
UAS began development of its TotalStat(R) products in 1987 and began
marketing TotalStat(R) systems in 1989. UAS's TotalStat(R) systems are used
primarily by customers engaged in the manufacture of steel and food products.
UAS manufactures its precision spraying products at its plant in
Cincinnati, Ohio. It sells these products in the U.S. through its own sales
personnel and in international markets through its own sales personnel and
several manufacturers' agents and distributors.
In 1995, UAS discontinued marketing spraying systems under the
Ultra-Spray(R) brand name. The discontinued Ultra-Spray(R) systems utilized
ultrasonic technology and were used to spray electrically conductive liquids,
such as water-based liquids.
Fluid Cleaning. UAS's Kleentek(TM) contamination control systems are
electrostatic fluid cleaners which are used to superclean hydraulic fluids or
lubricating oils in various kinds of machinery such as plastic injection, paper,
steel and hydraulic equipment. This supercleaning process provides several
benefits, including reduction of downtime, reduction of wear and tear on
internal surfaces and extension of the service life of expensive fluids.
UAS acts as the distributor of Kleentek(TM) products in the U.S., Canada
and the United Kingdom for Kleentek Industrial Company, Ltd., a Japanese
company, and has the right to use the Kleentek(TM) trademark under license from
Kleentek Industrial Company, Ltd. UAS markets Kleentek(TM) products in the U.S.
and Canada through its own personnel, a network of manufacturers' agents and two
sub-distributors, and in the United Kingdom through its United Kingdom
subsidiary.
UAS purchases its requirements of Kleentek(TM) products from Kleentek
Industrial Company, Ltd. In early 1994, UAS began manufacturing electrostatic
fluid cleaners at its Cincinnati, Ohio facility for resale by a customer on a
private label basis under the Cleanstat(R) trademark.
UAS's Kleentek(TM) and Cleanstat(R) products are used primarily by
customers engaged in plastic injection molding, steel making and general
machinery manufacturing.
No single customer accounted for more than 10% of UAS's sales of applied
electrostatic products during the past three fiscal years.
COMPETITION
In most of UAS's product lines, competition is primarily with a small
number of firms, and UAS is a significant or principal competitor. The principal
competitors in air quality in the U.S. and Canada are American Air Filter, the
Torit division of Donaldson Co., Inc., Farr, Inc., Trion Inc., Honeywell, Inc.,
and a
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number of smaller companies. The principal competitors in air quality outside
the U.S. and Canada include some of these companies as well as foreign
competitors who operate in one or more of UAS's international markets. The
principal competitors in applied electrostatics are GFG Corporation, Trion Inc.
and Duma for spraying systems and Pall Corporation for fluid cleaning systems.
UAS believes the principal areas of competition with respect to its air quality
and applied electrostatics products are quality, performance, price and customer
service and that its competitive advantage derives primarily from its reputation
for quality, performance and customer service.
FACILITIES
UAS's headquarters are located in Cincinnati, Ohio. UAS's United Kingdom
subsidiary is located in Warwick, England, and its German branch is located in
Wallau, Germany. UAS also owns seven distributorships in various American cities
which sell its commercial and industrial air quality products.
EMPLOYEES
As of September 1, 1996, UAS had approximately 350 employees. UAS employees
are not represented by a union. UAS believes its employee relations are
satisfactory.
MATERIALS AVAILABILITY
Raw materials and components used by UAS in the manufacturing process are
either readily available from a number of suppliers or are manufactured by UAS
from raw materials that also have such availability.
PATENTS, LICENSES AND TRADEMARKS
UAS either owns or licenses several patents and has others pending.
However, UAS relies primarily on its expertise and experience and believes that
its business success is not materially based on its patents.
UAS either owns or licenses a variety of trademarks and has others pending.
UAS believes the SMOKEETER(R), Crystal-Aire(R), SMOG-HOG(R), DUST-HOG(R),
TotalStat(R), UAS(R) and the UAS logo registered trademarks, which are owned by
UAS, are significant to its business.
RESEARCH AND DEVELOPMENT
The research and development activities of UAS are directed to product
development, product improvement and technology development. UAS sponsored
research and development costs in fiscal 1996, 1995 and 1994 were approximately
$685,000, $601,000 and $693,000, respectively. There was no customer sponsored
research and development in the past three fiscal years.
BACKLOG
The backlog of unfilled orders was approximately $4,325,000 at the end of
fiscal 1996, and UAS anticipates that substantially all of these orders will be
filled during fiscal 1997. The backlog of unfilled orders was approximately
$6,171,000 at the end of fiscal 1995. UAS's backlog at any time is not
necessarily indicative of future business performance.
ENVIRONMENTAL MATTERS
UAS is subject to environmental protection laws and regulations of federal,
state and local governmental authorities, including the Clean Water Act, the
Clean Air Act and OSHA requirements. Under the Clean Water Act, UAS is required
to obtain certain permits for the discharge of storm water. Under the Clean Air
Act, UAS is required to meet certain air emissions standards, particularly for
its paint booths and engineering test facility. Under OSHA, UAS is required to
meet certain safety standards, including those relating to equipment and
procedures, indoor air quality and data sheets on material used at UAS's
facilities. Compliance with these laws had no material effect on UAS's capital
expenditures, earnings or competitive position during fiscal 1996, and UAS
anticipates no such material effect during fiscal 1997.
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DESCRIPTION OF PROPERTY
The following is a summary of certain information pertaining to UAS's
principal facilities:
<TABLE>
<CAPTION>
APPROX
FLOOR
OWNED/ SPACE
LOCATION INDUSTRY SEGMENT PRINCIPAL USE LEASED (SQ. FT.)
- -------------------------------- ----------------------- ----------------------- ------- ---------
<S> <C> <C> <C> <C>
Blue Ash, Ohio.................. Air Quality Corporate Headquarters Owned 157,000
Applied Electrostatics Manufacturing
Sales and Service
Warwick, England................ Air Quality Manufacturing Owned 11,200
Applied Electrostatics Sales
Warwick, England................ Air Quality Service Owned 2,000
Wallau, Germany................. Air Quality Manufacturing Leased 7,700
Sales and Service
Fullerton, California........... Air Quality Sales and Service Leased 6,048
Troy, Michigan.................. Air Quality Sales and Service Leased 4,000
Fremont, California............. Air Quality Sales and Service Leased 3,300
Jackson, Mississippi............ Air Quality Sales and Service Leased 3,000
Louisville, Kentucky............ Air Quality Sales and Service Leased 4,500
Houston, Texas.................. Air Quality Sales and Service Leased 10,000
Phoenix, Arizona................ Air Quality Sales and Service Leased 3,233
</TABLE>
The corporate headquarters and primary manufacturing facility is located on
approximately 17 acres of land in Blue Ash, Ohio (a suburb of Cincinnati). This
facility was built in 1978 and was expanded in 1991 and 1993 to provide
additional production floor space.
This facility plus equipment has been financed through, and is pledged to
secure the repayment of, tax exempt Variable Rate Demand Industrial Revenue
Bonds ("IRB's") issued by the City of Blue Ash, Ohio. There are two series of
IRB's totalling $5 million in the aggregate. The balance outstanding on these
IRB's at September 30, 1996 was $1.648 million and $1.122 million from the
Series A Bonds and Series B Bonds, respectively.
UAS owns approximately 18 acres of land in Blue Ash, Ohio, adjacent to the
corporate headquarters and primary manufacturing facility. This real property is
unencumbered and was part of the original real property plot purchased in 1978.
UAS is holding this land for further expansion.
The two facilities located in Warwick, England are both owned by UAS's
subsidiary in the United Kingdom (UAS-UK, Ltd.). The manufacturing and sales
facility had been financed through a mortgage note payable to Barclay's Bank and
was pledged as security for the repayment of such debt. This mortgage note was
prepaid in full in May, 1996, and the facility is now owned by UAS-UK
unencumbered. (See Note 3 of Notes to Consolidated Financial Statements included
in this Proxy Statement/Prospectus). The service facility was purchased in cash
(in British Pounds Sterling) and is owned by UAS-UK, Ltd. unencumbered.
The Wallau, Germany manufacturing facility is leased, and the lease expires
in March, 1999.
The leases for UAS's sales and service facilities expire at various dates
through 1998. One location (Jackson, Mississippi) has a month-to-month lease.
UAS believes that its facilities are adequate for its present needs and
that its properties, including machinery and equipment, are generally in good
condition, well maintained and suitable for their intended uses.
UAS's facilities are substantially utilized on a single-shift basis but
would permit reasonably anticipated growth in UAS's business over the next
several years.
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LEGAL PROCEEDINGS
UAS is party to various legal proceedings arising from its operations. The
management of UAS believes that the outcome of these proceedings, individually
and in the aggregate, will have no material adverse effect on UAS's financial
position or results of operation.
MARKET PRICE OF UAS COMMON STOCK AND RELATED MATTERS
UAS Common Stock trades on the Nasdaq National Market under the symbol
UASI.
From December, 1990 until June 6, 1995, transactions in UAS Common Stock
were not regularly publicly reported, and as a result, there are no reported
high and low bid quotations for UAS Common Stock for that period. From June 6,
1995 through June 30, 1995, the high and low bid quotations for UAS Common
Stock, as reported by the National Quotation Bureau, Inc., were, respectively,
$2.40 and $2.40. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
The range of high and low bid information for UAS Common Stock for the
periods indicated starting July 1, 1995, as reported by Nasdaq, is as follows:
Fiscal Year 1996:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Quarter ended September 30, 1995..... $ 4.4000 $ 2.6000
Quarter ended December 31, 1995...... $ 4.2000 $ 3.6000
Quarter ended March 31, 1996......... $ 6.0000 $ 3.6250
Quarter ended June 30, 1996.......... $ 4.6250 $ 3.1250
</TABLE>
Fiscal Year 1997:
<TABLE>
<S> <C> <C>
Quarter ended September 30, 1996..... $ 8.3750 $ 3.6250
Quarter ending December 31, 1996..... $ 8.1250 $ 7.1250
Quarter ending March 31, 1997
(through January 13, 1997)......... $ 8.5625 $ 7.7500
</TABLE>
See "SUMMARY -- Comparative Per Share Data of CLARCOR and UAS" for
additional historical trading information with respect to CLARCOR Common Stock
and UAS Common Stock.
UAS has not paid cash dividends since 1990 and presently anticipates that
earnings, if any, will be retained for future development of its business and
that no cash dividends on UAS Common Stock will be declared in the foreseeable
future. In addition, UAS's loan agreement with Key Bank National Association
prohibits UAS from declaring or paying dividends if (a) the aggregate amount
expended in any fiscal year exceeds 50% of UAS's net income for the immediately
preceding year or (b) the aggregate amount expended subsequent to the Merger
exceeds $500,000.
As of December 27, 1996, there were approximately 245 record holders of UAS
Common Stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- FIRST QUARTER 1997 COMPARED TO FIRST QUARTER 1996
Net sales decreased $158,000, or about 2%, during the three-month period
ended September 30, 1996 from the $9,893,000 reported during the three-month
period ended September 30, 1995. This decrease is the net effect of a 1%
increase in Air Quality Division ("AQD") sales and a 12% decrease in Applied
Electrostatics Division ("AED") sales.
The increase in AQD sales is due primarily to a 39% increase in net sales
through the seven company-owned sales and service centers. The Houston center
alone saw an increase in business of over 290% due to a large turn-key job and
increased service business over the same quarter last year as a result of
acquiring a small service business in the Houston area. This increase was
partially offset by the German branch which reported a decrease in net sales,
expressed in U.S. dollars, of 16%. This decrease is attributable to a 10%
decline in volume with the remainder due to the unfavorable foreign exchange
impact of a stronger U.S. dollar.
The decrease in AED sales is due primarily to a 21% decrease in the sales
of TotalStat(R) high precision electrostatic spraying systems from the same
quarter last year. Shipments of TotalStat(R) systems during the first quarter of
fiscal 1996 were higher due to working through a significant backlog caused by
production delays occurring in fiscal 1995. In fiscal 1997, both a lower backlog
and lower levels of new business have caused lower shipments of this product.
UAS's gross profit, as a percentage of net sales, increased during the
three-month period ending September 30, 1996 to 34.3% from 33.3% during the
three-month period ending September 30, 1995. This increase is due to a
favorable shift in sales mix towards the domestic company-owned sales and
service centers. The margins at these locations are higher, on average, due to
both service revenue and selling directly to the end user. Additionally, both
the personal property tax and real estate tax accruals were adjusted downward by
a total of $57,000 to better reflect the actual level of these assessments as of
September 30, 1996.
Selling, general and administrative expenses increased during the
three-month period ended September 30, 1996 by $130,000, or about 5%. This
increase is due primarily to selling expenses increasing by $150,000, or about
9%, while general and administrative expenses decreased by $20,000, or about 2%.
The increase in selling expenses is due primarily to increases in operating
expenses to improve the domestic distribution of UAS's core products. These
expenses to date have been primarily spent to recruit and hire new staff in
order to manage the various segments of our distribution network.
Lower interest costs are due primarily to the repayment of the UK mortgage
during May, 1996.
UAS's effective tax rate of 39.0% for the three-month period ended
September 30, 1996 is slightly lower than the effective tax rate of 40.2% for
the three-month period ended September 30, 1995. This decrease is due to the
effects of tax credits and annual carry-forwards offset by the effects of
foreign, state and local income taxes.
RESULTS OF OPERATIONS -- FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Sales. Net sales increased $5,987,000, or about 17%, in fiscal year 1996
from the $34,831,000 reported in the previous fiscal year. This increase is the
combined effect of a 16% increase in AQD sales and a 28% increase in AED sales.
The increase in AQD sales is due primarily to a 33% increase in net sales,
as expressed in U.S. dollars, of air cleaning equipment in both the UK and
Germany, a 41% increase in net sales to other foreign markets, a 41% increase in
net sales generated by the company-owned sales and service outlets, and a 13%
increase in net sales of domestic engineered air pollution control systems.
These increases are all the result of general improvements in economic
conditions of their respective markets and are attributable primarily to
increases in volume. The increases were partially offset by a 8% decrease in
domestic sales of both commercial and
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industrial core products. This decrease is due to the ineffectiveness of UAS's
current distribution system. Improvements in distribution will be UAS's primary
goal during fiscal year 1997 and will require short-term incremental operating
expenses to accomplish.
The increase in AED sales is due primarily to a 47% increase in the sales
of TotalStat(R) high precision spraying systems from the same period last year,
offset by a 12% reduction in the sales of Kleentek(TM) fluid contamination
control systems. This reduction is due to a departmental reorganization that has
reduced selling efforts. UAS has refocused selling efforts on Kleentek(TM) and
expects to see an improvement in sales as a result. The increase in TotalStat(R)
shipments is due to improvements in production and application engineering
efficiencies associated with this product line thus providing greater capacity
with respect to the number of systems that can be produced and shipped.
Margin, Costs and Expenses. UAS's gross profit, as a percentage of net
sales, increased in fiscal year 1996 to 34.4% from 32.9% the previous fiscal
year. This increase is due to a shift in the sales mix towards the company-owned
sales and service outlets domestically and in the UK and Germany. The margins at
these locations are higher, on average, due to both service revenue and selling
directly to the end user. Additionally, a shift in the sales mix towards
TotalStat(R) also had a favorable impact on the gross margin due to the
elimination of both shop floor and application engineering inefficiencies
present in previous years. This increase is also due to margin improvement
resulting from continued cost control efforts realized in both the manufacturing
and engineering areas. These gross margin gains were partially offset by a
$142,000 charge in fiscal year 1996 from UAS's use of last-in, first-out (LIFO)
pricing for its inventories compared to a $284,000 benefit recognized during the
previous fiscal year.
Selling, general and administrative expenses increased by $1,375,000, or
about 14% during fiscal year 1996 from $9,669,000 the previous fiscal year. This
increase is due to selling expenses increasing by $731,000, or about 12%, while
general and administrative expenses increased by $644,000, or about 19%. These
increases in selling, general and administrative expenses, expressed as a
percentage of net sales, are consistent with the increase in net sales in
comparison to the prior year. Additionally, the increase in selling expenses is
due to $104,000 in additional provisions for the allowance for doubtful
accounts. These additional provisions are general in nature and reflective of
the increase in the average accounts receivable levels realized during most of
fiscal year 1996. In addition, a provision of $125,000 was recorded to accrue
the cost of the National Sales Meeting. There was no such meeting held or
accrued for during fiscal year 1995.
Income Taxes. UAS's effective tax rate of 31% in fiscal year 1996 is below
the federal statutory rate due primarily to the utilization of tax credits
during fiscal year 1996. The decrease in the effective rate was partially offset
by the effects of state and local income taxes. UAS's effective tax rate of 30%
in fiscal year 1995 was below the federal statutory tax rate due primarily to a
decrease in the valuation allowance for future tax benefits. The lower effective
rate is also due to UAS utilizing its net operating loss carryforward in fiscal
year 1995 which had been reserved for in previous years.
RESULTS OF OPERATIONS -- FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Sales. Net sales increased by $5,520,000, or about 19%, in fiscal year 1995
from the $29,311,000 reported in the previous fiscal year. This overall increase
is composed of a 17% increase in AQD sales and a 27% increase in AED sales.
The increase in AQD sales is due primarily to a 21% increase in net sales
of domestic industrial air cleaning equipment and a 29% increase in net sales
generated by the company-owned sales and service outlets. The increase in net
sales of UAS domestic industrial air cleaners is due to increased shipments
generated by the UAS industrial dealer program, which effectively increased UAS
sales representation throughout the U.S., increased sales to key account
customers during fiscal year 1995, and overall economic improvements in the
market. The increase in net sales generated by the company-owned sales and
service outlets is due to a significant increase in both service revenue and
equipment orders received at all but two locations, and due to the addition of
sales from the San Francisco location which was acquired in October, 1993. The
German branch reported an increase in sales, expressed in U.S. dollars, of 31%.
About 52% of this increase is
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attributable to the overall economic improvements in the German markets, with
the balance due to the appreciation of the German mark versus the U.S. dollar as
compared to the previous fiscal year.
The increase in AED sales is due to an increase of 38% in the sales of
TotalStat(R) high precision electrostatic spraying systems from the previous
fiscal year. This increase is due primarily to the expansion of this product
line into international markets during fiscal year 1995.
Margins, Costs and Expenses. UAS's gross profit, as a percentage of net
sales, increased in fiscal year 1995 to 32.9% from 30.6% the previous fiscal
year. This increase is due to a shift in the sales mix towards the company-owned
sales and service outlets domestically and in the UK and Germany. The margins at
these locations are higher, on average, due to both service revenue and selling
directly to the end user. This increase in gross profit is also due to margin
improvement resulting from the consolidation of all of UAS's production capacity
into the Cincinnati facility, and a $284,000 credit in fiscal year 1995 from
UAS's use of last-in, first-out (LIFO) pricing for its inventories compared to a
$9,000 credit during the previous fiscal year.
Selling, general and administrative expenses increased by $1,587,000, or
20%, during fiscal year 1995 from $8,082,000 the previous fiscal year. This
increase is due to selling expenses increasing by $995,000, or about 19%, while
general and administrative expenses increased by $592,000, or about 21%. The
increase in selling expenses is primarily due to the adding of four sales
managers. These sales managers were added to increase support for UAS's current
distribution network. Approximately $109,000 of the increase is due to the
appreciation of both the German mark and the British pound versus the U.S.
dollar compared to the previous fiscal year, and the remaining difference
represents additional selling expenses associated with the increased sales
volume.
The increase in general and administrative expenses is the result of filing
fees and increased legal, outside accounting and printing costs associated with
the initial filing of UAS's Form 10 registration statement with the SEC, plus
required quarterly filings of a Form 10-Q and general SEC compliance.
Approximately $96,000 of the increase is due to the appreciation of both the
German mark and the British pound versus the U.S. dollar as compared to the
previous fiscal year, and the remaining difference represents additional support
expenses associated with the increased sales volume.
Higher interest costs were due solely to the higher level of short-term
interest rates during fiscal year 1995 as compared to the previous fiscal year.
Income Taxes. UAS's effective tax rate of 30% in fiscal year 1995 is below
the federal statutory rate due primarily to a decrease in the valuation
allowance for future tax benefits. The decrease is due to UAS utilizing its net
operating loss carryforwards in fiscal year 1995 which had been reserved for in
previous fiscal years. This decrease in the effective rate discussed above was
partially offset by the effects of foreign, state and local income taxes. UAS's
effective tax rate of 41% in fiscal year 1994 exceeded the federal statutory
rate due primarily to foreign, state and local income taxes.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal year 1996, working capital increased by $821,000 to
$8,782,000 from $7,961,000 at the beginning of the fiscal year. Long-term debt,
including current maturities, decreased by $1,246,000 to $7,831,000. The current
ratio increased from 2.18 at the beginning of the fiscal year to 2.33 at the end
of the fiscal year. The increase in the current ratio is primarily the result of
significant increases in current assets, particularly cash, versus a slight
decline in the level of current liabilities. Trade accounts receivable decreased
by $388,000, or about 6%, as compared to June 30, 1995. The receivable turnover
ratio improved again during fiscal year 1996 to 6.65 from 5.92 in the previous
fiscal year. Inventories increased slightly by $179,000, or about 3%, as
compared to June 30, 1995. This increase in inventories is due to the increased
Kan-Ban stocking levels necessary to minimize stock-outs and provide a more
orderly flow of production throughput. The inventory turnover ratio of 4.00
during fiscal year 1996 is slightly below the inventory turnover ratio of 4.20
achieved in the previous fiscal year. Accounts payable decreased by $590,000, or
about 22%, as compared to June 30, 1995, and this decrease relates primarily to
a change in disbursement frequency from semi-weekly to
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weekly. Accrued liabilities increased $938,000, or about 32%, as compared to
June 30, 1995. This increase is primarily due to an increase in income taxes
payable due to UAS's higher earnings in fiscal year 1996.
During fiscal year 1996, UAS's operating activities provided $2,427,000 of
cash compared with $927,000 provided in the previous fiscal year. Expenditures
for new property, plant and equipment was $891,000 in fiscal year 1996 compared
to $738,000 in the previous fiscal year. UAS used cash to retire debt in the
amount of $1,387,000 during fiscal year 1996. This debt retirement includes
prepaying the UK mortgage of $355,000 as well as scheduled principal repayments
on both the IRB's and the German note payable. UAS entered into a
sales-leaseback agreement in December 1995 with KeyCorp Leasing, Ltd. and Finn
Power International to acquire an automatic Finn Power punching cell for
$1,295,000.
The ratio of total liabilities to total net worth was 1.75 at the end of
fiscal year 1996 compared to 2.29 at the end of fiscal year 1995. This
significant decrease is due to the lower levels of debt along with a significant
increase in equity as a result of current year earnings.
In August, 1996, UAS settled the lawsuit entitled The Quaker Oats Company
v. Franz Haas Machinery of America, Incorporated v. United Air Specialists, Inc.
This lawsuit arose out of the sale by Franz Haas Machinery of America,
Incorporated ("Haas") to The Quaker Oats Company of waffle-making equipment
incorporating TotalStat(R) oil-spraying equipment sold by UAS to Haas. UAS's
obligation related to this settlement has been fully accrued for at June 30,
1996.
At September 30, 1996, UAS had cash of $1,193,000 and working capital of
$9,990,000. Trade accounts receivable increased by $223,000, or 4%, while
inventories also increased by $234,000, or 3%, as compared to June 30, 1996. The
increase in trade accounts receivable is due primarily to delays in the
collection of $295,000 from two significant customers associated with the same
project. These delays are simply procedural and the cash is expected to be paid
early in the second quarter of fiscal 1997. The increase in inventories is
primarily due to increasing stocking levels of various sub-components to
eliminate "bottlenecks" between various departments in the Cincinnati production
facility. These "buffer" stocks are designed to improve the flow of goods
through assembly areas in a more orderly fashion. Accounts payable decreased by
$81,000, or 4%, relating primarily to the normal cycle of payments. Accrued
expenses decreased by $780,000, or 32%, due primarily to the cash payment
associated with the settlement of the Quaker/Haas lawsuit in August, 1996.
UAS entered into an agreement with Symix, Inc. in May, 1996 to provide a
management information systems software package and related hardware for a total
of $890,000. In September, 1996, UAS entered into a sales leaseback agreement
with KeyCorp Leasing, Ltd. for approximately $519,000. This lease has been
structured as an operating lease. It is expected that the remaining $371,000 of
the management information system project will also be financed through an
operating lease agreement with KeyCorp Leasing, Ltd. This portion of the
financing should be finalized during the second and third quarters of fiscal
1997.
In November, 1996, UAS entered into a $6 million revolving line of credit
and $1 million five-year term loan with Key Bank. The proceeds of these loans
will be used to retire the existing credit lines with Key Bank (formerly Society
National Bank) and Star Bank, which total $6,050,000, with $1,552,000 unused as
of November 30, 1996.
Cash flows from operations, as well as UAS's existing credit lines, are
expected to fund working capital needs over the next 12 months.
EFFECTS OF INFLATION
UAS's results of operations have not been significantly affected by
inflation during the past three fiscal years. Selling prices for UAS's products
have risen slightly while moderate increases in the cost of direct labor and
purchased materials generally have been offset by production efficiencies.
UAS MANAGEMENT'S OUTLOOK
Management of UAS is generally optimistic about the prospects for fiscal
year 1997. UAS's fiscal year 1997 plan currently calls for significant
investments to improve the distribution of its core products and to
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capitalize on various product and market opportunities. In the short term,
incremental operating expenses will be recognized to accomplish these
objectives.
UAS expects that the effects of such increased expenses will be offset by
increased net sales such that operating results for fiscal year 1997 will be
substantially similar to the results obtained in fiscal year 1996. UAS further
anticipates that the investments contemplated to be made in fiscal year 1997
will improve UAS's operating income in fiscal year 1998, although there can be
no assurances in this regard.
These statements are forward-looking and involve a number of risks and
uncertainties. The factors that could cause actual results to differ materially
include the following: the timing of costs relating to stepped-up marketing
efforts; the effects of those efforts; the ability to achieve targeted cost
savings; a general softening of the economy; competitive factors and pricing
pressures; and risk factors listed from time to time in UAS's reports filed with
the SEC.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of December 31, 1996, certain
information with regard to the beneficial ownership of UAS Common Stock by (i)
each of UAS's present shareholders known to hold more than five percent of the
outstanding shares of UAS Common Stock, (ii) each director and executive officer
of UAS whose total annual salary and bonus exceeded $100,000 in UAS's fiscal
1996 individually, and (iii) all directors and executive officers of UAS as a
group. In addition, CLARCOR may be deemed to beneficially own the shares of UAS
Common Stock subject to the Voting Agreements. See "VOTING AGREEMENTS."
<TABLE>
<CAPTION>
PERCENTAGE OF UAS
COMMON STOCK
NAME OF BENEFICIAL OWNER SHARES OWNED OWNED(1)
------------------------------------------- ------------ -----------------
<S> <C> <C>
Durwood G. Rorie, Jr.(2)(3)(4)(6).......... 931,776 29.98
William A. Cheney(3)(5)(6)................. 609,827 20.88
Brian D. Colls(2).......................... 71,596 2.45
Raymond E. Warrick, Jr.(2)................. 29,145 *
David F. Herche(2)......................... 11,875 *
George T. Rehfeldt(2)...................... 5,000 *
All UAS directors and executive officers as
a group - seven persons(2)............... 1,672,844 53.18
Nobuaki Hasegawa(3)(7)..................... 167,000 5.72
</TABLE>
* Less than 1%
- ---------------
Notes:
(1) The percentage of ownership figures assume 2,920,078 shares outstanding as
of December 31, 1996, plus, with respect to each individual or group named,
the number of common shares subject to options held by the individual or
group which are exercisable or convertible on or before March 1, 1997.
(2) The beneficial ownership number includes shares subject to options which are
currently exercisable or which become exercisable on or before March 1, 1997
as follows: Mr. Rorie, 187,500; Mr. Colls, none; Mr. Warrick, 18,750; Mr.
Herche, 5,625; Mr. Rehfeldt, 4,375; and all directors and executive officers
as a group (seven persons), 225,625. Certain of the options issued by UAS
are exercisable only if the fair market value of a share of UAS Common Stock
is at least $6.60 per share on the date immediately preceding the exercise
date. The beneficial ownership numbers in this footnote assume that the fair
market value of UAS Common Stock exceeds $6.60 per share through March 1,
1997.
(3) The business addresses of those shareholders beneficially owning at least 5%
of UAS Common Stock are as follows: Mr. Rorie, 4440 Creek Road, Cincinnati,
Ohio 45242; Mr. Cheney, 4440 Creek Road,
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<PAGE> 78
Cincinnati, Ohio 45242; and Nobuaki Hasegawa, 5-4, 2-Chome, Showa-Machi,
Kita-Ku, Tokyo, 114, Japan.
(4) The beneficial ownership number includes 525,078 shares owned by Mr. Rorie's
wife, of which Mr. Rorie disclaims beneficial ownership, 750 shares owned by
Mr. Rorie as Custodian for his granddaughter, and 2,000 shares owned by a
Trust of which Mr. Rorie is trustee with sole voting and investment power
and Mr. Rorie's daughter is the beneficiary.
(5) The beneficial ownership number includes 604,827 shares owned by the W. A.
Cheney Family Trust, of which Mr. Cheney is trustee with sole voting and
investment power and Mr. Cheney's children and grandchildren are the
beneficiaries, and 4,250 shares owned by Mr. Cheney's wife, of which Mr.
Cheney disclaims beneficial ownership.
(6) Mr. Rorie and Mr. Cheney are parties to a Stock Transfer Restriction,
Purchase and Redemption Agreement, which restricts the sale, assignment,
transfer, pledge, hypothecation or other disposition of the shares of UAS
Common Stock held by them. The Agreement provides that before either Mr.
Rorie (or his wife) or Mr. Cheney (or the W. A. Cheney Family Trust) may
dispose of shares, the shareholder disposing of shares must first give the
other party and UAS the right of first refusal to purchase the shares on the
terms specified in the Agreement. UAS and the other parties to such
Agreement have waived the requirements thereto in connection with the
Merger.
(7) Mr. Hasegawa owns 12,000 shares and Meiko Mercantile, Ltd., a company of
which Mr. Hasegawa is a shareholder, owns 155,000 shares. UAS believes that
Nobuaki Hasegawa is the beneficial owner of the UAS Common Stock held by
Meiko Mercantile, Ltd.
DISSENTERS' RIGHTS
Holders of UAS Common Stock have the right to dissent from the Merger and
to receive payment of the fair value of their shares upon full compliance with
Section 1701.85 of the OGCL. UAS shareholders seeking to exercise dissenters'
rights are referred to herein as "Dissenting Shareholders." Holders of CLARCOR
Common Stock do not have dissenters' rights with respect to the Merger.
The following is a summary of the principal steps a UAS shareholder must
take to perfect dissenters' rights under Section 1701.85 of the OGCL. This
summary does not purport to be complete and is qualified in its entirety by
reference to Section 1701.85, a copy of which is attached hereto as Annex III.
Any UAS shareholder contemplating the exercise of dissenters' rights is urged to
review carefully such provisions and to consult an attorney, since dissenters'
rights will be lost if the procedural requirements under Section 1701.85 are not
fully and precisely satisfied. To perfect dissenters' rights with respect to any
shares of UAS Common Stock so that they become Dissenting Shares as described in
this Proxy Statement/Prospectus, a Dissenting Shareholder must satisfy each of
the following conditions:
No Vote in Favor of Adoption of the Merger Agreement. UAS Common Stock held
by the Dissenting Shareholder must not be voted at the UAS Special Meeting in
favor of adoption of the Merger Agreement. This requirement will be satisfied if
a proxy is signed and returned with instructions to vote against the Merger or
to abstain from such vote, if no proxy is returned and no vote is cast at the
UAS Special Meeting in favor of adoption of the Merger Agreement, or if the
Dissenting Shareholder revokes a proxy and thereafter abstains from voting with
respect to adoption of the Merger Agreement or votes against adoption of the
Merger Agreement at the UAS Special Meeting. A vote in favor of adoption of the
Merger Agreement at the UAS Special Meeting constitutes a waiver of dissenters'
rights. A proxy that is returned signed but on which no voting preference is
indicated will be voted in favor of adoption of the Merger Agreement and will
constitute a waiver of dissenters' rights. A Dissenting Shareholder may revoke
his or her proxy at any time prior to its exercise by complying with the
procedures set forth herein under "THE UAS SPECIAL MEETING -- Proxies."
Filing Written Demand. Not later than ten days after the taking of the vote
on the proposal to adopt the Merger Agreement, a Dissenting Shareholder must
deliver to UAS a written demand (the "Demand") for payment of the fair cash
value of the shares of UAS Common Stock with respect to which the Dissenting
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Shareholder seeks payment. Each Demand should be delivered to UAS at 4440 Creek
Road, Cincinnati, Ohio, 45242, Attention: Secretary. It is recommended, although
not required, that such Demand be sent by registered or certified mail, return
receipt requested. Voting against adoption of the Merger Agreement will not
itself constitute a Demand. UAS will not send any further notice to UAS
shareholders as to the date on which such ten-day period expires.
A Demand must identify the name and address of the holder of record of the
shares of UAS Common Stock with respect to which payment is sought, the number
and class of such shares and the amount claimed by such holder as the fair cash
value thereof. A beneficial owner of shares must, in all cases, have the record
holder of such shares submit the Demand in respect thereof. A Demand must be
signed by the shareholder of record (or by the duly authorized representative of
such shareholder) exactly as the shareholder's name appears on the shareholder
records of UAS. A Demand with respect to shares owned jointly by more than one
person must identify and be signed by all of the holders of record. Any person
signing a Demand on behalf of a partnership or corporation or in any other
representative capacity (such as an attorney-in-fact, executor, administrator,
trustee or guardian) must indicate the nature of the representative capacity
and, if requested, must furnish written proof of his or her capacity and his or
her authority to sign such Demand.
Because only holders of record of UAS Common Stock at the close of business
on the Record Date may exercise dissenters' rights, any person who beneficially
owns shares that are held of record by a broker, fiduciary, nominee, or other
holder and who wishes to exercise dissenters' rights must instruct the record
holder of the shares to satisfy the conditions outlined above. If a record
holder does not satisfy, in a timely manner, all of the conditions outlined in
this section, the dissenters' rights for all of the shares held by such record
holder will be lost.
From the time the Demand is given until either the termination of the
rights and obligations arising from such Demand or the purchase of the related
shares of UAS Common Stock by UAS, all rights accruing to the holder thereof,
including voting and dividend or distribution rights, will be suspended. If any
dividend or distribution is paid in money on UAS Common Stock or CLARCOR Common
Stock during the suspension, an amount equal to the dividend or distribution
which would have been payable on such shares, but for such suspension, will be
paid to the holder of record thereof as a credit upon the fair cash value of
such shares. If the right to receive the fair cash value is terminated other
than by the purchase of such shares by UAS, all rights will be restored to the
Dissenting Shareholder and any distribution that would have been made to the
holder of record of such shares, but for the suspension, will be made to the
holder of record at the time of the termination.
If UAS sends to a Dissenting Shareholder, at the address specified in the
Demand, a request for the certificates representing the related shares of UAS
Common Stock, the Dissenting Shareholder, within fifteen days from the date of
sending such request, is required to deliver to UAS the certificates requested.
UAS will then endorse the certificates with a legend to the effect that a demand
for the fair cash value of such shares has been made, and promptly return such
endorsed certificates to the Dissenting Shareholder. Failure on the part of the
Dissenting Shareholder to deliver such certificates upon such request will
terminate his or her rights as a Dissenting Shareholder, at the option of UAS,
exercised by written notice to the Dissenting Shareholder within twenty days
after the lapse of the fifteen-day period, unless a court, for good cause shown,
otherwise directs.
Petitions to be Filed in Court. Within three months after the service of
the Demand, if UAS and the Dissenting Shareholder do not reach an agreement on
the fair cash value of the shares of UAS Common Stock subject to the Demand, the
Dissenting Shareholder or UAS may file a complaint in the Court of Common Pleas
in Hamilton County, Ohio (the "Common Pleas Court"), or join or be joined in an
action similarly brought by another Dissenting Shareholder, for a judicial
determination of the fair cash value of the shares of UAS Common Stock held by
such Dissenting Shareholder(s). UAS does not intend to file any complaint for a
judicial determination of the fair cash value of any shares of UAS Common Stock.
Upon the motion of the complainant, the Common Pleas Court will hold a
hearing to determine whether the Dissenting Shareholder is entitled to be paid
the fair cash value of his or her shares of UAS Common Stock. If the Common
Pleas Court finds that the Dissenting Shareholder is so entitled, it may appoint
one or
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more appraisers to receive evidence and to recommend a decision on the amount of
such fair cash value. The Common Pleas Court is thereafter required to make a
finding as to the fair cash value of such shares and to render a judgement
against UAS for the payment thereof, with interest at such rate and from such
date as the Common Pleas Courts considers equitable. Costs of the proceeding,
including reasonable compensation to the appraiser or appraisers, to be fixed by
the Common Pleas Court, are to be apportioned or assessed as the Common Pleas
Court considers equitable. Payment of the fair cash value of such shares is
required to be made within 30 days after the date of final determination of such
value or the Effective Time of the Merger, whichever is later, only upon
surrender to UAS of the certificates representing the shares of UAS Common Stock
for which payment is made.
Fair cash value is the amount which a willing seller, under no compulsion
to sell, would be willing to accept, and which a willing buyer, under no
compulsion to purchase, would be willing to pay, but in no event may the fair
cash value exceed the amount specified in the Demand. Because the Merger
requires the approval of the UAS shareholders, the fair cash value is to be
determined as of the day prior to the day of the UAS Special Meeting. In
computing this value, any appreciation or depreciation in the market value of
the shares of UAS Common Stock held by the Dissenting Shareholder resulting from
the Merger is excluded.
The dissenters' rights of any Dissenting Shareholder will terminate if,
among other things, (i) he or she has not complied with Section 1701.85 of the
OGCL (unless the UAS Board waives compliance), (ii) the Merger is abandoned or
otherwise not carried out or such Dissenting Shareholder withdraws his or her
Demand with the consent of the UAS Board or (iii) no agreement has been reached
between UAS and the Dissenting Shareholder as to the fair cash value for the
shares and neither the Dissenting Shareholder nor UAS shall have timely filed or
joined in a complaint in the Common Pleas Court. For a discussion of the tax
consequences to the shareholder exercising dissenters' rights; see "THE
MERGER -- Material Federal Income Tax Consequences."
If holders of more than 10% of the outstanding shares of UAS Common Stock
properly demand dissenters' rights, CLARCOR has the right to decline to
consummate the Merger. See "THE MERGER AGREEMENT -- Conditions Precedent to the
Merger."
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT, A UAS
SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST EITHER NOT SIGN AND
RETURN A PROXY CARD OR, IF HE OR SHE SIGNS AND RETURNS A PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.
EXPERTS
The consolidated financial statements incorporated by reference in, and the
consolidated financial statement schedule appearing in, CLARCOR's Annual Report
on Form 10-K for the year ended December 2, 1995 have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report included
therein and incorporated herein by reference. Such consolidated financial
statements and schedule are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of UAS, included herein
and elsewhere in the Registration Statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included elsewhere herein and elsewhere in the
Registration Statement, in reliance upon the authority of such firm as experts
in giving said reports.
Representatives of Arthur Andersen LLP are expected to be present at the
UAS Special Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
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<PAGE> 81
LEGAL OPINIONS
The validity of the shares of CLARCOR Common Stock being offered hereby is
being passed upon for CLARCOR by Sidley & Austin, counsel to CLARCOR.
Sidley & Austin has also delivered an opinion to CLARCOR concerning certain
federal income tax consequences of the Merger. Graydon, Head & Ritchey, counsel
to UAS, has delivered an opinion to UAS concerning certain federal income tax
consequences of the Merger. See "THE MERGER AGREEMENT -- Conditions Precedent to
the Merger" and "THE MERGER -- Material Federal Income Tax Consequences."
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
If the Merger is not consummated, any proposals of UAS shareholders
intended to be presented at the 1997 Annual Meeting of Shareholders of UAS will
be considered for inclusion in the Proxy Statement for such meeting if they are
received by UAS before the close of business on June 14, 1997.
OTHER MATTERS
The UAS Board is not aware of any business which will be presented at the
UAS Special Meeting other than as set forth herein and in the accompanying
Notice of Special Meeting. However, if any other matters are properly presented
at the UAS Special Meeting, the persons designated in the proxies will have
discretion to vote thereon. It is intended that such persons will vote on any
such matters in accordance with the recommendation of the UAS Board.
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<PAGE> 82
UNITED AIR SPECIALISTS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets As of June 30, 1996 and 1995............................. F-3
Consolidated Statements of Income For the Years Ended June 30, 1996, 1995 and 1994... F-4
Consolidated Statements of Shareholders' Investment For the Years Ended June 30,
1996, 1995 and 1994................................................................ F-5
Consolidated Statements of Cash Flows For the Years Ended June 30, 1996, 1995 and
1994............................................................................... F-6
Notes to Consolidated Financial Statements, June 30, 1996, 1995 and 1994............. F-7
Schedule II -- Valuation and Qualifying Accounts For the Years Ended June 30, 1996,
1995 and 1994...................................................................... F-17
Consolidated Balance Sheets As of September 30, 1996 (unaudited) and June 30, 1996... F-18
Unaudited Consolidated Statements of Income For the Quarters Ended September 30, 1996
and 1995........................................................................... F-19
Unaudited Consolidated Statements of Cash Flows For the Quarters Ended September 30,
1996 and 1995...................................................................... F-20
Notes to Unaudited Consolidated Financial Statements................................. F-21
</TABLE>
F-1
<PAGE> 83
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO UNITED AIR SPECIALISTS, INC.:
We have audited the accompanying consolidated balance sheets of UNITED AIR
SPECIALISTS, INC. (an Ohio corporation) and subsidiaries as of June 30, 1996 and
1995, and the related consolidated statements of income, shareholders'
investment and cash flows for each of the three years in the period ended June
30, 1996. These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and the
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United Air Specialists, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index is presented for purposes of complying with the Securities Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
August 22, 1996 (except with respect to the subsequent
event discussed in Note 14, as to which the date is
September 24, 1996)
F-2
<PAGE> 84
UNITED AIR SPECIALISTS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................. $ 1,441,294 $ 816,599
Accounts receivable, less allowance for doubtful accounts of
$250,000 and $169,000 at June 30, 1996 and 1995............... 5,940,014 6,328,194
Inventories (Note 1)............................................. 6,781,477 6,602,524
Future tax benefit (Note 4)...................................... 633,015 409,011
Prepaid expenses and other current assets........................ 610,378 556,569
------------ ------------
Total current assets........................................ 15,406,178 14,712,897
------------ ------------
PROPERTY, PLANT AND EQUIPMENT (Note 3):
Land and land improvements....................................... 686,512 689,880
Buildings and leasehold improvements............................. 4,616,252 4,472,324
Machinery, equipment and furniture............................... 6,819,794 6,847,748
Autos and trucks................................................. 881,625 766,040
Construction in progress......................................... 96,264 127,345
------------ ------------
13,100,447 12,903,337
Less-accumulated depreciation and amortization................... (7,291,150) (6,915,562)
------------ ------------
5,809,297 5,987,775
------------ ------------
OTHER ASSETS
Intangible assets, net of accumulated amortization of $360,415
and $317,277 at June 30, 1996 and 1995 (Note 1)............... 402,661 445,799
Other noncurrent assets.......................................... 433,413 303,343
------------ ------------
$22,051,549 $21,449,814
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Notes payable (Note 3)........................................... -- 351,900
Current portion of long-term obligations (Note 3)................ 697,477 821,249
Accounts payable................................................. 2,078,852 2,668,532
Accrued payroll.................................................. 585,342 537,297
Accrued commissions payable...................................... 323,754 478,164
Other accrued expenses........................................... 2,418,636 1,760,130
Income taxes payable............................................. 519,963 134,318
------------ ------------
Total current liabilities................................... 6,624,024 6,751,590
------------ ------------
LONG-TERM OBLIGATIONS, less current portion shown above (Note 3):
Industrial Revenue Bonds......................................... 2,606,250 2,822,500
Borrowings under lines of credit................................. 3,875,000 3,645,000
Mortgage note payable............................................ -- 324,521
Other............................................................ 651,927 1,111,987
------------ ------------
7,133,177 7,904,008
DEFERRED INCOME TAXES (Note 4)..................................... 270,169 281,952
COMMITMENTS (Note 7)
SHAREHOLDERS' INVESTMENT, per accompanying statements:
Common stock, no par value; authorized 4,000,000 shares in 1996
and 1995, issued and outstanding 2,912,265 and 2,276,908
shares in 1996 and 1995, respectively; stated at (Notes 1 and
5)............................................................ 963,266 947,956
Retained earnings (Note 1 and 6)................................. 7,060,913 5,564,308
------------ ------------
8,024,179 6,512,264
------------ ------------
$22,051,549 $21,449,814
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 85
UNITED AIR SPECIALISTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES............................................. $40,818,046 $34,830,641 $29,310,925
COST OF SALES......................................... 26,787,922 23,360,765 20,333,155
----------- ----------- -----------
Gross profit................................... 14,030,124 11,469,876 8,977,770
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 11,044,229 9,669,145 8,081,648
----------- ----------- -----------
Income from operations......................... 2,985,895 1,800,731 896,122
OTHER INCOME (EXPENSE)
Interest, net....................................... (637,995) (651,359) (488,891)
Other, net.......................................... (154,145) (103,034) (113,734)
----------- ----------- -----------
Income before provision for income taxes....... 2,193,755 1,046,338 293,497
PROVISION FOR INCOME TAXES (Note 4)................... 690,000 314,000 121,000
----------- ----------- -----------
Net income..................................... $ 1,503,755 $ 732,338 $ 172,497
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1).......... 3,089,238 3,034,781 2,991,283
=========== =========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (Note
1).................................................. $.49 $.24 $.06
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 86
UNITED AIR SPECIALISTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
OUTSTANDING
--------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1993........................... 759,999 $952,391 $4,525,780 $5,478,171
ADD (DEDUCT):
Common stock issued............................ 3,500 2,083 10,168 12,251
Common stock redeemed.......................... (3,537) (4,333) (21,153) (25,486)
Net income..................................... -- -- 172,497 172,497
Three-for-one stock split (Note 1)............. 1,522,696 -- -- --
Current year translation adjustment
(Note 1 and 6).............................. -- -- 76,228 76,228
--------- -------- ---------- ----------
BALANCE, June 30, 1994........................... 2,282,658 950,141 4,763,520 5,713,661
ADD (DEDUCT):
Common stock issued............................ 100 25 129 154
Common stock redeemed.......................... (5,850) (2,210) (11,602) (13,812)
Net income..................................... -- -- 732,338 732,338
Current year translation adjustment
(Note 1 and 6).............................. -- -- 79,923 79,923
--------- -------- ---------- ----------
BALANCE, June 30, 1995........................... 2,276,908 947,956 5,564,308 6,512,264
ADD (DEDUCT):
Common stock issued............................ 55,400 15,379 75,082 90,461
Common stock redeemed.......................... (1,703) (69) (332) (401)
Net income..................................... -- -- 1,503,755 1,503,755
Five-for-four stock split (Note 1)............. 581,660 -- -- --
Current year translation adjustment
(Note 1 and 6).............................. -- -- (81,900) (81,900)
--------- -------- ---------- ----------
BALANCE, JUNE 30, 1996........................... 2,912,265 $963,266 $7,060,913 $8,024,179
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 87
UNITED AIR SPECIALISTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 1,503,755 $ 732,338 $ 172,497
Adjustments to reconcile to net cash provided by
operating activities --
Depreciation and amortization.................... 961,195 875,625 873,814
Deferred income taxes............................ (235,787) 171,797 54,629
Net increase in current assets other than cash... (42,643) (2,952,586) (1,061)
Net increase (decrease) in accounts payable and
accrued liabilities............................ 412,349 2,144,579 (230,977)
Other, net....................................... (171,677) (44,733) (111,829)
----------- ----------- -----------
Net cash provided by operations................ 2,427,192 927,020 757,073
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed asset additions............................... (890,826) (738,187) (625,273)
Fixed assets retired, net........................... 167,603 158,736 63,831
Cash paid for acquisition of distributorship........ (40,000) (65,000) (100,000)
Industrial Revenue Bond proceeds released from
trust............................................ -- -- 1,522,145
----------- ----------- -----------
Net cash provided by (used in) investing
activities.................................. (763,223) (644,451) 860,703
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Industrial Revenue Bonds............... (195,000) (178,750) (1,557,550)
Increase (decrease) in lines of credit.............. 230,000 (1,177,865) 8,500
(Decrease) increase in other notes payable.......... (1,191,706) 1,131,481 (421,659)
Common stock issued................................. 90,060 154 12,251
Common stock redeemed............................... (401) (13,812) (25,486)
----------- ----------- -----------
Net cash used in financing activities.......... (1,067,047) (238,792) (1,983,944)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............... 27,773 51,454 10,967
----------- ----------- -----------
Net increase (decrease) in cash................ 624,695 95,231 (355,201)
CASH, beginning of year............................... 816,599 721,368 1,076,569
----------- ----------- -----------
CASH, end of year..................................... $ 1,441,294 $ 816,599 $ 721,368
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.............................. $ 630,000 $ 647,000 $ 568,000
=========== =========== ===========
Cash paid for taxes................................. $ 520,000 $ 49,000 $ 59,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 88
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF OPERATIONS
United Air Specialists, Inc. and subsidiaries (the Company), is engaged in
the business of manufacturing and selling commercial and industrial air
cleaners, fluid contamination control equipment and high precision fluid
spraying systems. The Company has manufacturing operations in the United States
and sales and service centers in the United States, the United Kingdom and
Germany. The Company's primary markets are the United States, Europe and the Far
East.
B. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company
and all of its wholly-owned domestic and foreign subsidiaries. All material
intercompany balances and transactions have been eliminated.
C. ESTIMATES
In preparing the consolidated financial statements in conformity with
generally accepted accounting principles, management has made, where necessary,
estimates and judgments based on currently available information that affect
certain of the amounts reflected in the consolidated financial statements.
Actual results could differ from those estimates.
D. CASH
Cash includes cash on hand, demand deposits and highly liquid investments
with an initial maturity of three months or less.
E. TRANSLATION OF FOREIGN CURRENCY
Assets and liabilities of foreign operations are translated using year-end
exchange rates. Revenues and expenses are translated using exchange rates
prevailing during the year. Currency translation adjustments are recorded as a
component of shareholders' investment and not included in income until realized
(see Note 6).
F. INVENTORIES
The Company's inventories consist of the following components:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials......................................... $3,806,271 $3,622,582
Work-in-process....................................... 2,186,387 2,349,916
Finished goods........................................ 788,819 630,026
---------- ----------
$6,781,477 $6,602,524
========== ==========
</TABLE>
The Company values approximately 65% of its inventories at last-in,
first-out cost, which does not exceed market. All other inventories are
accounted for under the lower of first-in, first-out (FIFO) cost or market
method. If the FIFO method of inventory accounting had been used to value all
inventory, inventories would have increased by approximately $554,000, $412,000
and $696,000 at June 30, 1996, 1995 and 1994, respectively, and net income for
the years then ended would have increased by approximately $142,000 ($.05 per
share) at June 30, 1996 and decreased by approximately $284,000 ($.09 per
share), and $9,000 ($.00 per share) at June 30, 1995 and 1994, respectively.
F-7
<PAGE> 89
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization of property, plant
and equipment using both straight-line and accelerated methods over the
estimated useful lives or lease lives of the various classes of assets. The
lives range from 3 to 40 years.
Intangible assets include goodwill and covenants not to compete and are
being amortized on a straight-line basis with lives ranging from 5 to 40 years.
The Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of the intangible
asset may warrant revision or that the remaining balance may not be recoverable.
H. REVENUE RECOGNITION
The Company recognizes revenue as products are shipped and services are
rendered. Provisions for estimated future warranty costs are recorded as
products are shipped.
I. PRODUCT DEVELOPMENT COSTS
Costs incurred in the development of new products and significant
modifications to existing products are expensed as incurred. When development
products become commercially salable, the sales and related costs are classified
in income from operations. Total product development costs charged against
income in 1996, 1995 and 1994 aggregated approximately $685,000, $601,000 and
$693,000, respectively.
J. ADVERTISING COSTS
The Company expenses the costs of advertising when these costs are
incurred. Advertising expense consists of direct mailings, trade journal, and
other advertising. Advertising expense was approximately $821,000, $728,000 and
$527,000 in 1996, 1995 and 1994, respectively.
K. INCOME TAXES
The Company provides for deferred taxes (future tax benefits) resulting
from temporary differences between financial and taxable income. These temporary
differences are primarily product warranty costs, bad debt reserves,
depreciation, and certain accrued liabilities and reserves.
L. EARNINGS PER SHARE
Earnings per common and common equivalent share are based on the weighted
average number of common and common equivalent shares outstanding. Fully diluted
earnings per share approximate primary earnings per share.
On April 28, 1994, the Company's Board of Directors approved a
three-for-one stock split to be effective June 1, 1994 for shareholders of
record on May 18, 1994. On January 8, 1996, the Company's Board of Directors
approved a five-for-four stock split to be effective February 2, 1996 for
shareholders of record on January 19, 1996. All data with respect to earnings
per share and weighted average number of shares outstanding has been
retroactively adjusted to reflect these stock splits.
M. ACQUISITIONS
On June 30, 1995, the Company purchased the assets of Air Cleaning
Specialists (Phoenix distributorship), an Arizona Corporation engaged in the
business of selling and servicing air cleaning equipment. The purchase price of
this business was $165,000 and consisted of $65,000 paid in cash at the closing,
forgiveness of $20,000 of indebtedness owed to the Company by the seller and a
note in the amount of $80,000 (see
F-8
<PAGE> 90
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 3). The assets of this acquired business have been recorded on the June 30,
1995 balance sheet at their fair market value.
Additional consideration will be paid to the seller of this business in
future periods under a noncompete agreement. In 1996, $87,000 of expense was
recognized related to this noncompete agreement. Additional payments will be
calculated on a quarterly basis as a percentage of net sales of the business
acquired (10% in 1997 and 8% in 1998 and 1999). The maximum amount of the sum of
these payments is limited to $185,000.
N. NON-CASH TRANSACTIONS
In December 1995, the Company purchased production equipment valued at
$1.26 million and immediately executed a sale and leaseback transaction. This
lease has been accounted for as an operating lease. During 1994, the Company
acquired a distributor and recognized a deferred liability as part of the
purchase price.
O. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The Company has entered into forward foreign currency contracts to hedge
certain currency transactions for periods consistent with the terms of the
underlying transactions. These contracts are used to hedge the Company's
exposure on certain of its purchases denominated in foreign currencies. While
the forward contracts affect the Company's results of operations, they do not
subject the Company to risk from exchange rate movements because gains and
losses on these contracts offset gains and losses on the transactions being
hedged. At June 30, 1996, the Company had one foreign currency contract
outstanding to exchange pounds sterling for approximately $210,000 U.S. dollars.
This contract expires within 30 days of June 30, 1996.
P. RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 balances to
be consistent with the current year presentation.
2. NEW ACCOUNTING STANDARDS
A. SFAS 121 -- "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF"
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 ("SFAS 121") which establishes standards on accounting for the
impairment of long-lived assets, goodwill and intangibles. The Company is
required to adopt SFAS 121 no later than July 1, 1996. The Company believes that
the adoption of this standard will not have a material impact on its
consolidated financial statements.
B. SFAS 123 -- "ACCOUNTING FOR STOCK-BASED COMPENSATION"
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 ("SFAS 123"). SFAS 123, which establishes standards for stock-based
compensation plans, suggests a fair-value-based method of accounting for
employee stock options. However, this statement allows an entity to continue to
measure compensation cost using the intrinsic-value-based method of accounting
prescribed in APB Opinion No. 25. Entities which elect to remain with the
accounting prescribed in APB No. 25 must make pro forma disclosures of net
income and earnings per share as if the fair-value-based method had been
applied. The Company intends to continue to account for its stock options using
the intrinsic-value-based method of APB No. 25 and will be required to implement
the disclosures required by SFAS 123 in its 1997 financial statements.
F-9
<PAGE> 91
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. NOTES PAYABLE AND LONG-TERM OBLIGATIONS
On June 7, 1995, the Company borrowed $271,900 under a $1,300,000 unsecured
demand loan. The proceeds of this borrowing were used as a deposit on the
acquisition of production equipment (see Note 7). The interest rate on this
borrowing was prime. This borrowing was repaid in December 1995.
In connection with the acquisition of the Phoenix distributorship, the
Company executed a note payable in the amount of $80,000 as part of the purchase
price of this business. This note carried a 6% interest rate and was paid in
full on April 1, 1996.
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Industrial Revenue Bonds, variable interest rate, currently at 3.4%
to 3.6%, due in annual installments through 2005, secured by land,
building and equipment............................................. $2,822,500 $3,017,500
Mortgage note payable, denominated in British pounds sterling,
variable interest rate, secured by land and building, repaid in
full in May 1996................................................... -- 354,807
Borrowings under domestic long-term lines of credit, at prime
interest rate...................................................... 3,875,000 3,645,000
Note payable to bank, denominated in Deutsche marks, FIBOR plus
2 3/4%, payable in equal quarterly installments through 1998,
currently at 6.22%................................................. 861,263 1,327,041
Other borrowings, various interest rates, due through 1999........... 271,891 380,909
---------- ----------
7,830,654 8,725,257
Less: current portion................................................ (697,477) (821,249)
---------- ----------
Long-term obligations................................................ $7,133,177 $7,904,008
========== ==========
</TABLE>
Maturities of long-term obligations, including the domestic long-term lines
of credit which are subject to renewal as discussed below, are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 697,477
1998.............................................................. 3,909,943
1999.............................................................. 1,124,484
2000.............................................................. 291,250
2001.............................................................. 316,500
Thereafter........................................................ 1,491,000
----------
$7,830,654
==========
</TABLE>
The Industrial Revenue Bonds are backed by a letter of credit which
requires an annual fee of 1.25% of the outstanding balance. This letter of
credit expires in May 2001.
Under the terms of the domestic long-term line of credit agreements, the
Company has the right, subject to certain restrictions, to borrow up to
$6,050,000 at the prime interest rate. There is an annual commitment fee of 3/8%
on the unused portions of the lines of credit. The Company may borrow, repay,
and reborrow under these lines of credit at any time. One line of credit
($2,550,000 outstanding at June 30, 1996) is renewed annually subject to the
Company not being in default of covenants in the loan agreement as well as no
material adverse change occurring in the Company's financial condition, and has
been extended through November 1, 1997. At June 30, 1996, available borrowings
under this agreement are $1,450,000.
The second line of credit ($1,325,000 outstanding at June 30, 1996) is
renewed annually on May 15th subject to the Company not being in default of
covenants in the loan agreement as well as no material adverse change occurring
in the Company's financial condition, and has been extended through May 1997. In
addition,
F-10
<PAGE> 92
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
if the second line of credit is not renewed in the following year, it will
convert to a two-year term note which will be due in equal quarterly
installments. At June 30, 1996, available borrowings are $676,000 under this
agreement, which has been reduced for outstanding letters of credit of
approximately $49,000.
In connection with its debt agreements, the Company has agreed, among other
things, (1) not to exceed certain limits in dividend payments and repurchases of
stock; (2) to maintain certain working capital levels and meet certain financial
ratio requirements; (3) not to exceed certain limits in annual capital
expenditures; and (4) to limit additional indebtedness.
4. INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Provision for income taxes currently payable --
Federal...................................... $ 697,000 $107,000 $ 47,000
State and local.............................. 35,000 35,000 20,000
Foreign...................................... 194,000 -- --
--------- -------- --------
926,000 142,000 67,000
Provision for deferred income taxes............ (236,000) 172,000 54,000
--------- -------- --------
Total provision................................ $ 690,000 $314,000 $121,000
========= ======== ========
</TABLE>
The following is a reconciliation between the income tax provision at the
statutory federal rate and the actual income tax provision:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Provision for income taxes at statutory rate... $ 746,000 $356,000 $ 88,000
Increase (decrease) in taxes resulting from --
State and local taxes........................ 35,000 35,000 14,000
Foreign taxes................................ (49,000) 14,000 7,000
Valuation allowance.......................... 195,000 (80,000) 11,000
Foreign tax credits.......................... (273,000) -- --
Other........................................ 36,000 (11,000) 1,000
-------- ------- -------
Actual provision for income taxes.............. $ 690,000 $314,000 $121,000
======== ======= =======
</TABLE>
F-11
<PAGE> 93
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net future tax benefit consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation over book depreciation.............. $(270,000) $(282,000)
Deferred tax assets:
Foreign tax credits.................................. 295,000 --
Warranty............................................. 213,000 103,000
Vacation............................................. 44,000 40,000
Employee benefits.................................... 54,000 63,000
Allowance for doubtful accounts...................... 70,000 59,000
Inventory............................................ 55,000 64,000
Other................................................ 197,000 180,000
Valuation allowance.................................. (295,000) (100,000)
--------- ---------
Total deferred tax assets....................... 633,000 409,000
--------- ---------
Net future tax benefit................................. $ 363,000 $ 127,000
========= =========
</TABLE>
The Company has provided a valuation allowance related to future tax
credits which may not be realizable. The Company has established a Foreign Sales
Corporation (FSC) in the U.S. Virgin Islands.
5. EMPLOYEE STOCK OPTION PLANS
Under the stock option plans approved by the shareholders in 1985, 1991 and
1994, 531,250 shares of common stock were reserved for the granting of options
to officers and other key employees. These options vest 50% one year from the
grant date, and the remaining 50% vest after the second year. Certain options
cannot be exercised until the Company's common stock exceeds a certain market
price. Activity related to stock options is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Outstanding at beginning of period................. 377,000 416,000 419,000
Granted (from $3.30 to $4.20)...................... 57,000 18,000 80,000
Expired or canceled................................ (8,000) (57,000) (69,000)
Exercised.......................................... (65,000) -- (14,000)
------- ------- -------
Outstanding at end of period (from $1.33 to
$4.20)........................................... 361,000 377,000 416,000
======= ======= =======
Exercisable at end of period (from $1.33 to
$4.20)........................................... 275,000 320,000 238,000
======= ======= =======
</TABLE>
6. CURRENCY TRANSLATION
The Company complies with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation," for translating foreign currency denominated
financial statements in reporting its consolidated financial position. The
statement provides that the net cumulative translation adjustment be recorded as
a
F-12
<PAGE> 94
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
separate component of shareholders' investment. An analysis of the cumulative
translation adjustment (on which no deferred taxes were provided) included in
shareholders' investment at June 30 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Cumulative translation loss, beginning of year............... $ (5,436) $(85,359) $(161,587)
Aggregate translation gain (loss), during the year........... (81,900) 79,923 76,228
-------- -------- ---------
Cumulative translation loss, end of year..................... $(87,336) $ (5,436) $ (85,359)
======== ======== =========
</TABLE>
7. COMMITMENTS
The Company leases certain plant, office facilities, automobiles and
machinery and equipment under operating leases which expire through 2003. Total
rentals charged against income with respect to such property in 1996, 1995 and
1994 aggregated approximately $388,000, $281,000 and $250,000, respectively. The
minimum commitments for the above leases at June 30, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
------------------------------------------------------------------
<S> <C>
1997......................................................... $ 478,729
1998......................................................... 428,128
1999......................................................... 381,557
2000......................................................... 317,615
2001......................................................... 250,783
Thereafter................................................... 344,258
----------
$2,201,070
==========
</TABLE>
The Company has contracts with a current officer and also a now retired
officer of the Company which provide for annual payments of specified
percentages of their final base income in exchange for noncompete covenants upon
retirement from active service. Payments under the contract to the retired
officer during 1996 and 1995 were approximately $50,000.
Effective May 1996, a stock repurchase program was authorized which allows
the Company to repurchase up to $240,000 of common stock from certain officers.
Additionally, the Company has a stock repurchase agreement with a minority
shareholder which requires it to repurchase the minority shareholder's interest
if the Company's chief executive officer leaves the Company other than by normal
retirement or death. The repurchase price would be the greater of 78% of book
value or the average market value of the stock for the five-day period prior to
the event triggering the redemption.
During August 1996, the Company settled the lawsuit filed against them in
1995 which alleged defective performance of a product. The Company's obligation
related to this settlement has been fully accrued at June 30, 1996.
The Company is also party to various other legal proceedings arising from
its operations. The management of the Company believes that the outcome of these
proceedings, individually and in the aggregate, will have no material adverse
effect on the Company's financial position or results of operations.
8. EMPLOYEE BENEFIT PLAN
The Company maintains an employee savings plan (a 401(k) plan). The Company
matches a percentage of an employee's contribution. The Company's matching
contributions are funded currently. The cost of the matching program and
administrative costs charged to income was approximately $70,000 in 1996,
$67,000 in 1995 and $51,000 in 1994.
F-13
<PAGE> 95
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. BUSINESS SEGMENTS
The following tables summarize the Company's industry segment data for
1996, 1995 and 1994:
<TABLE>
<CAPTION>
APPLIED
CONSOLIDATED AIR ELECTRO-
1996 SEGMENTS CLEANING STATICS
- ------------------------------------------------------ ------------ ----------- ---------------
<S> <C> <C> <C>
Net sales to unaffiliated customers................... $ 40,818,000 $35,800,000 $ 5,018,000
Income from operations................................ 2,986,000 2,774,000 212,000
Assets................................................ 22,052,000 19,359,000 2,693,000
Depreciation and amortization......................... 961,000 887,000 74,000
Capital expenditures.................................. 891,000 835,000 56,000
1995
- ------------------------------------------------------
Net sales to unaffiliated customers................... $ 34,831,000 $30,919,000 $ 3,912,000
Income (loss) from operations......................... 1,801,000 2,719,000 (918,000)
Assets................................................ 21,450,000 19,041,000 2,409,000
Depreciation and amortization......................... 876,000 813,000 63,000
Capital expenditures.................................. 738,000 687,000 51,000
1994
- ------------------------------------------------------
Net sales to unaffiliated customers................... $ 29,311,000 $26,068,000 $ 3,243,000
Income (loss) from operations......................... 896,000 1,167,000 (271,000)
Assets................................................ 18,281,000 16,270,000 2,011,000
Depreciation and amortization......................... 874,000 778,000 96,000
Capital expenditures.................................. 625,000 556,000 69,000
</TABLE>
10. GEOGRAPHIC MARKETS
The Company has a significant concentration of operations in Europe. The
Company's sales in the European market were $10,197,000, $7,692,000 and
$5,991,000 in 1996, 1995 and 1994, respectively. Sales and profitability of the
Company's European operations are vulnerable to the economic conditions in these
countries. At June 30, 1996 and 1995, the Company's European operations had
identifiable assets of approximately $5,500,000 and $4,435,000, respectively,
and net assets of $2,280,000 and $1,702,000, respectively.
11. MAJOR CUSTOMER
Net sales to one customer, who is a minority shareholder of the Company,
represent approximately 6% of total net sales in 1996, 1995 and 1994. Accounts
receivable from this same customer represent approximately 9% of total accounts
receivable at June 30, 1996 and 1995.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of cash and cash equivalents, short-term
borrowings, long-term debt and foreign currency contracts.
F-14
<PAGE> 96
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the fair value of these instruments in
comparison to their carrying value:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------------------- -------------------------
CARRYING OR CARRYING OR
NOTIONAL FAIR NOTIONAL FAIR
VALUE VALUE VALUE VALUE
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... $ 1,441,294 $1,441,294 $ 816,599 $ 816,599
Short-term borrowings......................... 697,477 697,477 1,173,149 1,173,149
Long-term debt................................ 7,133,177 7,133,177 7,904,008 7,904,008
Foreign currency contracts.................... 207,476 209,801 170,132 171,076
</TABLE>
The following methods and assumptions were used to estimate the fair value
of financial instruments:
A. CASH AND CASH EQUIVALENTS
The carrying amount of cash and cash equivalents approximates its fair
value.
B. SHORT-TERM BORROWINGS
The carrying value of these borrowings approximates its fair value due to
the short-term maturities of these instruments.
C. LONG-TERM DEBT
All of the Company's long-term borrowings carry variable interest rates.
The carrying amount of these borrowings approximates its fair value.
D. FOREIGN CURRENCY CONTRACTS
The fair value of foreign currency contracts is the amount the Company
would receive or pay to terminate these arrangements. The fair value is based on
quoted market prices of contracts with similar maturities.
F-15
<PAGE> 97
UNITED AIR SPECIALISTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. QUARTERLY DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996
----------------------------------------------------------------------------------------
NET GROSS NET EARNINGS
QUARTER SALES PROFIT INCOME PER SHARE
-------------------------------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
First........................... $ 9,893,348 $ 3,290,377 $ 254,000 .08
Second.......................... 10,959,182 3,752,299 377,000 .12
Third........................... 9,402,128 3,181,405 314,000 .10
Fourth.......................... 10,563,388 3,806,043 558,755 .19
----------- ----------- ---------- ---
Total........................... $40,818,046 $14,030,124 $1,503,755 .49
=========== =========== ========== ===
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------------------------
NET GROSS NET EARNINGS
QUARTER SALES PROFIT INCOME PER SHARE
--------------------------------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
First............................ $ 7,647,342 $ 2,335,182 $ 88,844 .03
Second........................... 7,857,520 2,342,600 59,934 .02
Third............................ 9,319,568 3,038,945 226,809 .08
Fourth........................... 10,006,211 3,753,149 356,751 .11
----------- ----------- -------- ---
Total............................ $34,830,641 $11,469,876 $732,338 .24
=========== =========== ======== ===
</TABLE>
14. SUBSEQUENT EVENT
On September 24, 1996, the Company announced that it had signed a
definitive agreement to merge with CLARCOR Inc., a manufacturer of filtration
and packaging products. The Company's Board of Directors has approved the
transaction which will involve an exchange of stock. Each share of United Air
Specialists, Inc. (UAS) stock will be exchanged for .3702116 shares of CLARCOR
common stock. The exchange rate is subject to adjustment based upon the actual
number of UAS common stock outstanding at the closing. The completion of this
transaction is subject to shareholder and regulatory approval. The transaction
has been structured as a tax-free reorganization which will be accounted for as
a pooling of interests.
F-16
<PAGE> 98
SCHEDULE II
UNITED AIR SPECIALISTS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE, CHARGED TO CHARGED TO BALANCE,
AT BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(A) DEDUCTIONS PERIOD
- -------------------------------- ------------ ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1996
Allowance for
Doubtful Accounts.......... $169,000 $ 104,174 $ 7,646 $ (30,820) $ 250,000
Deferred Taxes
Valuation Allowance........ $100,000 $ 195,000 $ 295,000
YEAR ENDED JUNE 30, 1995
Allowance for
Doubtful Accounts.......... $115,000 $ 136,410 $25,449 $ (107,859) $ 169,000
Deferred Taxes
Valuation Allowance........ $179,984 $ (79,984) $ 100,000
YEAR ENDED JUNE 30, 1994
Allowance for
Doubtful Accounts.......... $285,000 $ (101,672) $30,022 $ (98,350) $ 115,000
Deferred Taxes
Valuation Allowance........ $140,355 $ 39,629 $ 179,984
</TABLE>
- ---------------
(a) primarily the collection of previously written-off accounts.
F-17
<PAGE> 99
UNITED AIR SPECIALISTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................. $ 1,193,438 $ 1,441,294
Accounts receivable, less allowance for doubtful accounts of
$225,000 at September 30, 1996 and $250,000 at June 30,
1996.......................................................... 6,162,919 5,940,014
Inventories...................................................... 7,015,293 6,781,477
Prepaid expenses and other....................................... 522,847 610,378
Future tax benefit............................................... 633,015 633,015
------------ -----------
Total current assets........................................ 15,527,512 15,406,178
------------ -----------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements....................................... 693,783 686,512
Buildings and leasehold improvements............................. 4,737,643 4,616,252
Machinery, equipment and furniture............................... 6,904,250 6,819,794
Autos and trucks................................................. 892,640 881,625
Construction in progress......................................... 169,895 96,264
----------- -----------
13,398,211 13,100,447
Less: accumulated depreciation and amortization.................. (7,510,566) (7,291,150)
----------- -----------
5,887,645 5,809,297
----------- -----------
OTHER ASSETS
Intangibles, net of accumulated amortization of $371,200 at
September 30, 1996 and $360,415 at June 30, 1996.............. 391,876 402,661
Other, net....................................................... 183,930 433,413
------------ -----------
$ 21,990,963 $22,051,549
============ ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long-term obligations......................... $ 690,817 $ 697,477
Accounts payable................................................. 1,997,628 2,078,852
Accrued expenses................................................. 1,638,427 2,418,636
Accrued payroll.................................................. 283,201 585,342
Accrued commissions.............................................. 285,075 323,754
Income taxes payable............................................. 642,732 519,963
------------ -----------
Total current liabilities................................... 5,537,880 6,624,024
------------ -----------
LONG-TERM OBLIGATIONS, less current portion shown above:
Industrial Revenue Bonds......................................... 2,547,500 2,606,250
Borrowings under lines of credit................................. 4,727,500 3,875,000
Other............................................................ 582,017 651,927
------------ -----------
7,857,017 7,133,177
------------ -----------
DEFERRED INCOME TAXES.............................................. 270,169 270,169
------------ -----------
SHAREHOLDERS' INVESTMENT:
Common stock, no par value; authorized 4,000,000 shares;
2,908,828 and 2,912,265 shares outstanding at September 30,
1996 and June 30, 1996, respectively; stated at............... 963,266 963,266
Retained earnings................................................ 7,424,249 7,148,249
Cumulative translation adjustment................................ (61,618) (87,336)
------------ -----------
8,325,897 8,024,179
------------ -----------
$ 21,990,963 $22,051,549
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-18
<PAGE> 100
UNITED AIR SPECIALISTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
NET SALES......................................................... $9,734,991 $9,893,348
COST OF SALES..................................................... 6,400,550 6,602,971
---------- ----------
Gross Profit............................................... 3,334,441 3,290,377
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...................... 2,771,998 2,641,952
---------- ----------
Income from operations..................................... 562,443 648,425
OTHER INCOME (EXPENSE):
Interest expense................................................ (146,361) (179,689)
Interest income................................................. 2,328 1,626
Other........................................................... 34,075 (45,409)
---------- ----------
Income before provision for income taxes................... 452,485 424,953
PROVISION FOR INCOME TAXES........................................ 176,485 170,953
---------- ----------
Net income................................................. $ 276,000 $ 254,000
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING............................... 3,191,689 3,090,465
========== ==========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE................................................ $.09 $.08
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-19
<PAGE> 101
UNITED AIR SPECIALISTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
----------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 276,000 $ 254,000
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and amortization................................. 274,736 219,793
Net increase in receivables................................... (191,434) (834,574)
Net increase (decrease) in allowance for doubtful accounts.... (25,000) 117,850
Net increase in inventories................................... (222,295) (50,878)
Net decrease in accounts payable.............................. (82,371) (401,793)
Net increase (decrease) in accrued expenses................... (1,000,763) 102,305
Other......................................................... 224,892 33,991
----------- ---------
Net cash used in operations................................. (746,235) (559,306)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed asset additions............................................ (277,741) (306,701)
Fixed assets retired............................................. 62,463 58,334
----------- ---------
Net cash used in investing activities....................... (215,278) (248,367)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Industrial Revenue Bonds............................ (52,500) (47,500)
Increase in lines of credit borrowings........................... 852,500 855,000
Repayment of foreign notes payable............................... (86,061) (91,941)
Decrease in long-term obligations................................ (5,056) (39,868)
Common stock issued.............................................. -- 82,572
----------- ---------
Net cash provided by financing activities................... 708,883 758,263
----------- ---------
Net decrease in cash........................................ (252,630) (49,410)
Effect of foreign currency translation adjustment on cash........ 4,774 (7,917)
CASH, beginning of period.......................................... 1,441,294 816,599
----------- ---------
CASH, end of period................................................ $ 1,193,438 $ 759,272
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................... $ 114,800 $ 182,600
=========== =========
Cash paid for taxes.............................................. $ 16,800 $ 21,100
=========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-20
<PAGE> 102
UNITED AIR SPECIALISTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The consolidated financial statements included herein have not been
examined by independent public accountants, but include all adjustments
(consisting of normal recurring entries) which are, in the opinion of
management, necessary for a fair statement of the results for such periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the requirements of the Securities and Exchange
Commission, although UAS believes that the disclosures included in these
financial statements are adequate to make the information not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in UAS's latest Form 10-K.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.
(2) INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ----------
<S> <C> <C>
Raw materials......................................... $ 3,954,645 $3,806,271
Work-in-process....................................... 2,280,649 2,186,387
Finished goods........................................ 779,999 788,819
---------- ----------
$ 7,015,293 $6,781,477
========== ==========
</TABLE>
(3) INCOME TAXES
The provisions for income taxes were computed at the estimated annualized
effective tax rates utilizing current tax law in effect.
(4) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the weighted
average number of common and common equivalent shares outstanding during each
period, increased by the effect of dilutive stock options as computed applying
the treasury stock method. All data with respect to earnings per common and
common equivalent share and weighted average number of shares outstanding have
been retroactively adjusted to reflect a five-for-four stock split which became
effective on February 2, 1996.
(5) PENDING MERGER
On September 24, 1996, UAS announced that it had signed a definitive
agreement to merge with CLARCOR, a manufacturer of filtration and packaging
products. The Board of Directors of UAS has approved the transaction which will
involve an exchange of stock. Each share of UAS Common Stock will be exchanged
for .3702116 shares of CLARCOR Common Stock. The exchange rate is subject to
adjustment based upon the actual number of fully diluted shares of UAS Common
Stock outstanding at the closing. The completion of this transaction is subject
to shareholder and regulatory approval.
F-21
<PAGE> 103
CLARCOR INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
INDEX
<TABLE>
<S> <C>
Introduction......................................................................... F-23
Unaudited Pro Forma Combined Balance Sheet as of August 31, 1996..................... F-24
Unaudited Pro Forma Combined Statement of Income for the Nine Months Ended
August 31, 1996.................................................................... F-25
Unaudited Pro Forma Combined Statement of Income for the Nine Months Ended
September 2, 1995.................................................................. F-26
Unaudited Pro Forma Combined Statement of Income for the Year Ended November 30,
1995............................................................................... F-27
Unaudited Pro Forma Combined Statement of Income for the Year Ended November 30,
1994............................................................................... F-28
Unaudited Pro Forma Combined Statement of Income for the Year Ended November 30,
1993............................................................................... F-29
Unaudited Pro Forma Combined Statement of Income for the Year Ended November 30,
1992............................................................................... F-30
Unaudited Pro Forma Combined Statement of Income for the Year Ended November 30,
1991............................................................................... F-31
Notes to Unaudited Pro Forma Combined Financial Statements........................... F-32
</TABLE>
F-22
<PAGE> 104
CLARCOR INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited pro forma combined financial statements (the
"Unaudited Pro Forma Financial Statements") have been presented to reflect the
estimated impact on the historical Consolidated Financial Statements of CLARCOR
of the Merger and the issuance of approximately 1,209,302 shares of CLARCOR
Common Stock constituting the Share Issuance. The Merger will be accounted for
as a pooling of interests.
The Unaudited Pro Forma Combined Statements of Income for each of the five
years in the period ended November 30, 1995 and for the nine-month periods ended
August 31, 1995 and 1996 assume that the Merger had been consummated at the
beginning of the earliest period presented. The Unaudited Pro Forma Combined
Balance Sheet at August 31, 1996 assumes that the Merger had been consummated on
August 31, 1996.
CLARCOR will take a one-time pre-tax charge covering the costs of the
Merger for integrating the combined operations and for other unusual and
nonrecurring items in the quarter in which the Merger is consummated. Such
pre-tax charge, which is currently estimated to be in the range of $2.0 million
to $3.0 million, will include: (i) the costs of integrating the businesses of
the two companies; (ii) the direct costs of the Merger, including the fees of
financial advisors, legal counsel and independent auditors; (iii) the non-
compete payments; and (iv) other unusual and nonrecurring items. The after-tax
cost of such charge is currently estimated to be in the range of $1.2 million to
$1.8 million and the larger amount has been charged to Shareholders' Equity in
the Pro Forma Combined Balance Sheet at August 31, 1996. The estimated charge
and the nature of the costs included therein are subject to change as CLARCOR's
integration plan is developed and more accurate estimates become possible.
Moreover, the after-tax cost of such estimated charge is likely to change
depending upon the magnitude of the pre-tax charge, the nature of the costs
included therein, the tax laws of the particular countries applicable to the
entities incurring such costs and the tax-paying status of such entities.
The Unaudited Pro Forma Financial Statements give effect only to the
reclassifications and adjustments set forth in the accompanying Notes to
Unaudited Pro Forma Combined Financial Financial Statements and do not reflect
any cost savings and other synergies anticipated by CLARCOR's management as a
result of the Merger. The Unaudited Pro Forma Financial Statements are not
necessarily indicative of the results of operations or the financial position
which would have occurred had the Merger been consummated at the beginning of
the earliest period presented, nor is it necessarily indicative of CLARCOR's
future results of operations or financial position.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the historical Consolidated Financial Statements of CLARCOR and UAS
incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS
BY REFERENCE," "ADDITIONAL INFORMATION REGARDING UAS" and "UAS CONSOLIDATED
FINANCIAL STATEMENTS."
The Unaudited Pro Forma Financial Statements include financial data for UAS
for each of the five fiscal years ended in the period ended September 30, 1995
and for the nine-month periods ended June 30, 1996 and June 30, 1995. UAS has a
fiscal year-end of June 30. For purposes of these pro forma combined financial
statements, UAS's income statement data was restated to a September 30 year-end
date and UAS's June 30, 1996 balance sheet data was used to more closely
approximate CLARCOR's year-end. For ease of reference, all column headings used
in the Unaudited Pro Forma Financial Statements refer to the period-ended date
of CLARCOR.
F-23
<PAGE> 105
UNAUDITED PRO FORMA COMBINED BALANCE SHEET(1)
AS OF AUGUST 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
CLARCOR UAS PRO FORMA
--------------- ------------- (NOTES 1 AND 2)
AS OF AS OF -------------------------
AUGUST 31, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED
--------------- ------------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term cash investments...... $ 1,521 $ 1,441 $ 2,962
Accounts receivable, net.................. 55,465 5,940 61,405
Inventories............................... 54,632 6,782 61,414
Prepaid expenses.......................... 3,464 610 4,074
Other..................................... 4,035 633 4,668
-------- ------- ------- --------
Total current assets................... 119,117 15,406 -- 134,523
Plant assets, net........................... 77,112 5,809 82,921
Marketable equity securities, at fair
value..................................... 5,306 -- 5,306
Excess of cost over fair value of assets
acquired, less accumulated amortization... 15,283 403 15,686
Pension assets.............................. 12,253 -- 12,253
Other noncurrent assets..................... 9,498 433 9,931
-------- ------- ------- --------
$ 238,569 $22,051 $ -- $260,620
======== ======= ======= ========
LIABILITIES
Current liabilities:
Current portion of long-term debt......... $ 7,515 $ 697 8,212
Accounts payable.......................... 19,401 2,079 3,000 24,480
Income taxes.............................. 1,979 520 (1,200) 1,299
Other accrued liabilities................. 15,328 3,328 18,656
-------- ------- ------- --------
Total current liabilities.............. 44,223 6,624 1,800 52,647
Long-term debt, less current portion........ 37,035 7,133 44,168
Long-term pension liabilities............... 6,536 -- 6,536
Other long-term liabilities................. 9,052 270 9,322
Minority interest........................... 884 -- 884
SHAREHOLDERS' EQUITY
Capital stock............................... 14,878 963 15,841
Retained earnings........................... 124,357 7,148 (1,800) 129,705
Other shareholders' equity.................. 1,604 (87) 1,517
-------- ------- ------- --------
Total shareholders' equity............. 140,839 8,024 (1,800) 147,063
-------- ------- ------- --------
Total liabilities and shareholders'
equity............................... $ 238,569 $22,051 $ -- $260,620
======== ======= ======= ========
</TABLE>
- ---------------
(1) Reflects the financial position of CLARCOR on a pro forma basis assuming the
Merger had been consummated on August 31, 1996.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-24
<PAGE> 106
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE NINE MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
CLARCOR UAS PRO FORMA
--------------- ------------- (NOTES 1 AND 2)
PERIOD ENDED PERIOD ENDED -----------------------
AUGUST 31, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED
--------------- ------------- ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales..................................... $ 242,583 $30,925 $273,508
Cost of sales............................... 174,234 20,185 194,419
-------- ------- ------ --------
Gross profit................................ 68,349 10,740 -- 79,089
Selling and administrative expenses......... 40,560 8,402 48,962
-------- ------- ------ --------
Operating Profit.............................. 27,789 2,338 -- 30,127
Interest expense............................ (2,390) (460) (2,850)
Interest income............................. 641 -- 641
Equity in net earnings of affiliates........ 142 -- 142
Minority interests in earnings of
subsidiaries............................. (109) -- (109)
Other income (expense)...................... (166) (109) (275)
-------- ------- ------ --------
Earnings Before Income Taxes.................. 25,907 1,769 -- 27,676
Provision for income taxes.................. 9,641 519 10,160
-------- ------- ------ --------
Net Earnings.................................. $ 16,266 $ 1,250 $ -- $ 17,516
======== ======= ====== ========
14,854 1,209 16,063
Weighted Average Shares Outstanding........... ======== ====== ========
$1.10 $1.09
Net Earnings Per Share........................ ======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-25
<PAGE> 107
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE NINE MONTHS ENDED SEPTEMBER 2, 1995
<TABLE>
<CAPTION> PRO FORMA
HISTORICAL (NOTES 1 AND 2)
----------------------------------- -----------------------
CLARCOR UAS
------------------ -------------
PERIOD ENDED PERIOD ENDED
SEPTEMBER 2, 1995 JUNE 30, 1995 ADJUSTMENTS COMBINED
------------------ ------------- ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales.................................... $204,444 $27,184 $231,628
Cost of sales.............................. 146,173 18,049 164,222
-------- ------- ------ --------
Gross profit............................... 58,271 9,135 -- 67,406
Selling and administrative expenses........ 33,243 7,585 40,828
-------- ------- ------ --------
Operating Profit............................. 25,028 1,550 -- 26,578
Interest expense........................... (1,804) (502) (2,306)
Interest income............................ 609 -- 609
Equity in net earnings of affiliates....... 73 -- 73
Minority interests in earnings of
subsidiaries............................ 61 -- 61
Other income (expense)..................... 155 (145) 10
-------- ------- ------ --------
Earnings Before Income Taxes................. 24,122 903 -- 25,025
Provision for income taxes................. 9,358 259 -- 9,617
-------- ------- ------ --------
Net Earnings................................. $ 14,764 $ 644 $ -- $ 15,408
======== ======= ====== ========
Weighted Average Shares Outstanding.......... 14,794 1,209 16,003
====== ===== ======
Net Earnings Per Share....................... $1.00 $0.96
===== =====
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-26
<PAGE> 108
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
CLARCOR UAS PRO FORMA
----------------- ------------------ (NOTES 1 AND 2)
YEAR ENDED YEAR ENDED -----------------------
NOVEMBER 30, 1995 SEPTEMBER 30, 1995 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................ $ 290,194 $ 37,077 $327,271
Cost of sales.......................... 209,653 24,652 234,305
-------- ------- ------ --------
Gross profit........................... 80,541 12,425 -- 92,966
Selling and administrative expenses.... 45,176 10,227 55,403
-------- ------- ------ --------
Operating Profit......................... 35,365 2,198 -- 37,563
Interest expense....................... (2,693) (680) (3,373)
Interest income........................ 830 -- 830
Equity in net earnings of affiliates... 246 -- 246
Minority interest in earnings of
subsidiaries........................ (71) -- (71)
Other income (expense)................. 459 (191) 268
-------- ------- ------ --------
Earnings Before Income Taxes............. 34,136 1,327 -- 35,463
Provision for income taxes............. 12,182 430 12,612
-------- ------- ------ --------
Net Earnings............................. $ 21,954 $ 897 $ -- $ 22,851
======== ======= ====== ========
Weighted Average Shares Outstanding...... 14,801 1,209 16,010
======== ====== ========
Net Earnings Per Share................... $1.48 $1.43
======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-27
<PAGE> 109
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
CLARCOR UAS PRO FORMA
----------------- ------------------ (NOTES 1 AND 2)
YEAR ENDED YEAR ENDED -----------------------
NOVEMBER 30, 1994 SEPTEMBER 30, 1994 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................ $ 270,123 $ 30,327 $300,450
Cost of sales.......................... 192,456 21,140 213,596
-------- ------- ------ --------
Gross profit........................... 77,667 9,187 -- 86,854
Selling and administrative expenses.... 45,301 8,365 -- 53,666
-------- ------- ------ --------
Operating Profit......................... 32,366 822 -- 33,188
Interest expense....................... (2,788) (510) (3,298)
Interest income........................ 548 -- 548
Gain on sale of investment in
affiliate........................... 4,166 -- 4,166
Equity in net earnings of affiliates... 959 -- 959
Minority interests in earnings of
subsidiaries........................ (2) -- (2)
Other income (expense)................. (2,689) (29) (2,718)
-------- ------- ------ --------
Earnings Before Income Taxes and
Cumulative Effect of Change in
Accounting Method...................... 32,560 283 -- 32,843
Provision for income taxes............. 11,935 122 -- 12,057
-------- ------- ------ --------
Earnings Before Cumulative Effect of
Change in Accounting Method............ 20,625 161 -- 20,786
Cumulative effect of changes in
accounting methods.................. 630(2) -- -- 630
-------- ------- ------ --------
Net Earnings............................. $ 21,255 $ 161 $ -- $ 21,416
======== ======= ====== ========
Weighted Average Shares Outstanding...... 14,814 1,209 16,023
======== ====== ========
PER SHARE DATA:
Earnings Before Cumulative Effect of
Change in Accounting Method............ $1.39 $1.30
Cumulative Effect of Change in Accounting
Method................................. 0.04(2) 0.04
-------- --------
Net Earnings Per Share................... $1.43 $1.34
======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
(2) CLARCOR adopted Statement of Financial Accounting Standards (SFAS) 109,
"Accounting for Income Taxes" in 1994. Net income reflects the cumulative
effect of adopting this standard.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-28
<PAGE> 110
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
CLARCOR UAS PRO FORMA
----------------- ------------------ (NOTES 1 AND 2)
YEAR ENDED YEAR ENDED -----------------------
NOVEMBER 30, 1993 SEPTEMBER 30, 1993 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............................... $ 225,319 $ 27,892 $253,211
Cost of sales......................... 155,615 18,571 174,186
-------- ------- ------ --------
Gross profit.......................... 69,704 9,321 -- 79,025
Selling and administrative expenses... 40,637 8,428 49,065
-------- ------- ------ --------
Operating Profit........................ 29,067 893 -- 29,960
Interest expense...................... (3,525) (454) (3,979)
Interest income....................... 875 -- 875
Equity in net earnings of
affiliates......................... 745 -- 745
Other income (expense)................ (84) (296) (380)
-------- ------- ------ --------
Earnings Before Income Taxes............ 27,078 143 -- 27,221
Provision for income taxes............ 9,827 117 9,944
-------- ------- ------ --------
Net Earnings............................ $ 17,251 $ 26 $ -- $ 17,277
======== ======= ====== ========
14,838 1,209 16,047
Weighted Average Shares Outstanding..... ======== ====== ========
$1.16 $1.08
Net Earnings Per Share.................. ======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-29
<PAGE> 111
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED NOVEMBER 30, 1992
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
CLARCOR UAS PRO FORMA
----------------- ------------------ (NOTES 1 AND 2)
YEAR ENDED YEAR ENDED -----------------------
NOVEMBER 30, 1992 SEPTEMBER 30, 1992 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............................... $ 188,625 $ 29,547 $218,172
Cost of sales......................... 129,287 19,407 148,694
-------- ------- --------
Gross profit.......................... 59,338 10,140 -- 69,478
Selling and administrative expenses... 31,708 9,540 41,248
Restructuring costs................... -- 420(3) 420
-------- ------- ------ --------
Operating Profit........................ 27,630 180 -- 27,810
Interest expense...................... (3,803) (635) (4,438)
Interest income....................... 298 -- 298
Equity in net earnings of
affiliates......................... 873 -- 873
Other income (expense)................ 307 80 387
-------- ------- --------
Earnings (Loss) Before Income Taxes and
Cumulative Effect of Change in
Accounting Method..................... 25,305 (375) -- 24,930
Provision for income taxes............ 8,796 145 8,941
-------- ------- ------ --------
Earnings (Loss) Before Cumulative Effect
of Change in Accounting Method........ 16,509 (520) -- 15,989
Cumulative effect of changes in
accounting methods................. (2,370)(2) -- -- (2,370)
-------- ------- ------ --------
Net Earnings (Loss)..................... $ 14,139 $ (520) $ -- $ 13,619
======== ======= ====== ========
14,973 1,209 16,182
Weighted Average Shares Outstanding..... ======== ====== ========
PER SHARE DATA:
Earnings Before Cumulative Effect of
Change in Accounting Method........... $ 1.10 $ 0.99
Cumulative Effect of Change in
Accounting Method..................... (0.16)(2) (0.15)
-------- --------
$ 0.94 $ 0.84
Net Earnings Per Share.................. ======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
(2) CLARCOR adopted Statement of Financial Accounting Standards (SFAS) 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in
1992. Net income reflects the cumulative effect of adopting this standard,
net of the related income tax benefit of $1,477.
(3) During 1992, UAS recorded restructuring costs of $420 representing
provisions for the closing of a sub-assembly manufacturing operation as well
as the consolidation of the UAS-California manufacturing operation with the
primary manufacturing facility in Cincinnati, Ohio.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-30
<PAGE> 112
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED NOVEMBER 30, 1991
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL (NOTES 1 AND 2)
--------------------------------------- -----------------------
CLARCOR UAS
----------------- ------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1991 SEPTEMBER 30, 1991 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................ $ 179,538 $ 33,400 $212,938
Cost of sales.......................... 120,370 22,257 142,627
-------- ------- ------ --------
Gross profit........................... 59,168 11,143 -- 70,311
Selling and administrative expenses.... 28,315 10,326 38,641
-------- ------- ------ --------
Operating Profit......................... 30,853 817 -- 31,670
Interest expense....................... (3,682) (716) (4,398)
Interest income........................ 1,122 -- 1,122
Equity in net earnings of affiliates... 332 -- 332
Other income (expense)................. (82) (337) (419)
-------- ------- ------ --------
Earnings (Loss) Before Income Taxes and
Discontinued Operations................ 28,543 (236) -- 28,307
Provision (Benefit) for income taxes... 10,068 (157) 9,911
-------- ------- ------ --------
Earnings (Loss) Before Discontinued
Operations............................. 18,475 (79) -- 18,396
Earnings from Discontinued Operations,
Net of Income Taxes.................... 297(2) -- -- 297
-------- ------- ------ --------
Net Earnings (Loss)...................... $ 18,772 $ (79) $ -- $ 18,693
======== ======= ====== ========
Weighted Average Shares Outstanding...... 14,873 1,209 16,082
======== ====== ========
PER SHARE DATA:
Earnings Before Discontinued
Operations............................. $1.24 $1.14
Earnings from Discontinued Operations.... 0.02(2) 0.02
-------- --------
Net Earnings Per Share................... $1.26 $1.16
======== ========
</TABLE>
- ---------------
(1) Reflects the results of operations of CLARCOR on a pro forma basis assuming
the Merger had been consummated at the beginning of the earliest period
presented.
(2) In June 1991, CLARCOR adopted a plan to dispose of its Precision Products
Group. Effective November 30, 1992, CLARCOR sold the Group for $20,700 in
cash and a $2,500 note receivable. The sale was recorded as of November 30,
1992 and resulted in a pretax gain of $1,342 offset by income tax effects of
$1,342. The results of this business are excluded from income from
continuing operations.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-31
<PAGE> 113
CLARCOR INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Statements of Income reflect CLARCOR's
results of operations for each of the five years in the period ended November
30, 1995 and the nine-month periods ended August 31, 1996 and September 2, 1995
on a pro forma basis assuming the Merger had been consummated at the beginning
of the earliest period presented. The Unaudited Pro Forma Combined Balance Sheet
assumes that the Merger had been consummated on August 31, 1996.
CLARCOR and UAS have fiscal year-ends of November 30 and June 30,
respectively. In preparing the accompanying unaudited pro forma combined
financial data, UAS's historical income statements were adjusted to a September
30 year-end date and UAS's June 30, 1996 balance sheet was used to more closely
approximate CLARCOR's year-end.
CLARCOR's management believes that the assumptions used in preparing the
Unaudited Pro Forma Combined Financial Statements provide a reasonable basis for
presenting all of the significant effects of the Merger, that the pro forma
adjustments give appropriate effect to those assumptions and that the pro forma
adjustments are properly applied in the Unaudited Pro Forma Combined Financial
Statements.
The pro forma results are not indicative of the results of operations had
the merger taken place at the beginning of the year or of future results of the
combined companies.
NOTE 2. PRO FORMA ADJUSTMENTS
(a) Accounts Payable, Income Taxes and Retained Earnings -- See the third
paragraph under "UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS --
Introduction" for information relating to the components of the
estimated one-time pre-tax charge of $3.0 million ($1.8 million
after-tax).
(b) Weighted Average Shares Outstanding -- Net Earnings Per Share of
CLARCOR Common Stock is computed on the basis of the Weighted Average
Shares Outstanding for each period. The Per Share Data is calculated
assuming that the 1,209,302 shares of CLARCOR Common Stock constituting
the Share Issuance were outstanding at the beginning of the earliest
period presented.
F-32
<PAGE> 114
ANNEX I
CONFORMED
AGREEMENT AND PLAN OF MERGER
AMONG
CLARCOR INC.,
CUAC INC.
AND
UNITED AIR SPECIALISTS, INC.
DATED AS OF SEPTEMBER 23, 1996
<PAGE> 115
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<S> <C> <C>
Section 1.1 The Merger................................................................ I-1
Section 1.2 Effective Time............................................................ I-1
Section 1.3 Effects of the Merger..................................................... I-1
Section 1.4 Articles of Incorporation and Regulations; Officers and Directors......... I-2
Section 1.5 Conversion of Securities.................................................. I-2
Section 1.6 Parent to Make Stock Certificates Available............................... I-3
Section 1.7 Dividends; Transfer Taxes; Withholding.................................... I-3
Section 1.8 No Fractional Shares...................................................... I-4
Section 1.9 Return of Exchange Fund................................................... I-4
Section 1.10 Adjustment of Conversion Number........................................... I-4
Section 1.11 No Further Ownership Rights in Company Common Stock....................... I-4
Section 1.12 Closing of Company Transfer Books......................................... I-4
Section 1.13 Further Assurances........................................................ I-4
Section 1.14 Closing................................................................... I-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power.......................................... I-5
Section 2.2 Capital Structure......................................................... I-5
Section 2.3 Authority................................................................. I-6
Section 2.4 Consents and Approvals; No Violation...................................... I-6
Section 2.5 SEC Documents and Other Reports........................................... I-7
Section 2.6 Registration Statement and Proxy Statement................................ I-7
Section 2.7 Absence of Certain Changes or Events...................................... I-7
Section 2.8 No Existing Violation, Default, Etc. ..................................... I-8
Section 2.9 Licenses and Permits...................................................... I-8
Section 2.10 Environmental Matters..................................................... I-9
Section 2.11 Tax Matters............................................................... I-9
Section 2.12 Actions and Proceedings................................................... I-9
Section 2.13 Labor Matters............................................................. I-9
Section 2.14 Contracts................................................................. I-10
Section 2.15 ERISA..................................................................... I-10
Section 2.16 Liabilities............................................................... I-11
Section 2.17 Intellectual Properties................................................... I-11
Section 2.18 Propriety of Past Payments................................................ I-11
Section 2.19 Takeover Statutes......................................................... I-11
Section 2.20 Pooling of Interests; Reorganization...................................... I-11
Section 2.21 Operations of Sub......................................................... I-11
Section 2.22 Brokers................................................................... I-11
</TABLE>
I-i
<PAGE> 116
<TABLE>
<S> <C> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power.......................................... I-12
Section 3.2 Capital Structure......................................................... I-12
Section 3.3 Authority................................................................. I-12
Section 3.4 Consents and Approvals; No Violation...................................... I-12
Section 3.5 Company SEC Documents and Financial Statements............................ I-13
Section 3.6 Registration Statement and Proxy Statement................................ I-13
Section 3.7 Absence of Certain Changes or Events...................................... I-14
Section 3.8 No Existing Violation, Default, Etc. ..................................... I-14
Section 3.9 Licenses and Permits...................................................... I-14
Section 3.10 Environmental Matters..................................................... I-15
Section 3.11 Tax Matters............................................................... I-15
Section 3.12 Actions and Proceedings................................................... I-15
Section 3.13 Labor Matters............................................................. I-16
Section 3.14 Contracts................................................................. I-16
Section 3.15 ERISA..................................................................... I-16
Section 3.16 Liabilities............................................................... I-17
Section 3.17 Intellectual Properties................................................... I-17
Section 3.18 Propriety of Past Payments................................................ I-17
Section 3.19 Opinion of Financial Advisor.............................................. I-17
Section 3.20 Takeover Statutes......................................................... I-17
Section 3.21 Pooling of Interests; Reorganization...................................... I-18
Section 3.22 Brokers................................................................... I-18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.................................... I-18
Section 4.2 No Solicitation........................................................... I-20
Section 4.3 Third Party Standstill Agreements......................................... I-21
Section 4.4 Pooling of Interests; Reorganization...................................... I-21
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting....................................................... I-21
Section 5.2 Preparation of the Registration Statement and the Proxy Statement......... I-21
Section 5.3 Comfort Letters........................................................... I-22
Section 5.4 Access to Information..................................................... I-22
Section 5.5 Compliance with the Securities Act........................................ I-22
Section 5.6 Stock Exchange Listings................................................... I-23
Section 5.7 Fees and Expenses......................................................... I-23
Section 5.8 Company Stock Options..................................................... I-24
Section 5.9 Reasonable Best Efforts; Pooling of Interests............................. I-24
Section 5.10 Public Announcements...................................................... I-25
Section 5.11 Real Estate Transfer and Gains Tax........................................ I-25
Section 5.12 Takeover Statutes......................................................... I-25
Section 5.13 Indemnification; Directors and Officers Insurance......................... I-25
Section 5.14 Notification of Certain Matters........................................... I-25
Section 5.15 Reorganization Status..................................................... I-26
Section 5.16 Employee Benefit Plans.................................................... I-26
</TABLE>
I-ii
<PAGE> 117
<TABLE>
<S> <C> <C>
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger................ I-26
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.............. I-26
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.......... I-29
ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 Termination............................................................... I-32
Section 7.2 Effect of Termination..................................................... I-34
Section 7.3 Amendment................................................................. I-34
Section 7.4 Waiver.................................................................... I-34
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties............................ I-34
Section 8.2 Notices................................................................... I-34
Section 8.3 Interpretation............................................................ I-35
Section 8.4 Counterparts.............................................................. I-35
Section 8.5 Entire Agreement; No Third-Party Beneficiaries............................ I-35
Section 8.6 Governing Law............................................................. I-35
Section 8.7 Assignment................................................................ I-36
Section 8.8 Severability.............................................................. I-36
Section 8.9 Enforcement of this Agreement............................................. I-36
</TABLE>
I-iii
<PAGE> 118
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of September 23, 1996 (this
"Agreement") among CLARCOR Inc., a Delaware corporation ("Parent"), CUAC Inc.,
an Ohio corporation and a wholly-owned subsidiary of Parent ("Sub"), and United
Air Specialists, Inc., an Ohio corporation (the "Company") (Sub and the Company
being hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions herein set forth,
whereby each issued and outstanding share of Common Stock, without par value, of
the Company ("Company Common Shares"), not owned directly or indirectly by
Parent or the Company, will be converted into shares of Common Stock, par value
$1 per share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
herein set forth, and in accordance with the General Corporation Law of the
State of Ohio (the "OGCL"), Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub in accordance with the OGCL.
Notwithstanding any provision of this Agreement to the contrary, at the election
of Parent, any direct wholly-owned Subsidiary (as hereinafter defined) of Parent
may be substituted for Sub as a constituent corporation in the Merger. In such
event, the parties hereto agree to execute an appropriate amendment to this
Agreement, in form and substance reasonably satisfactory to Parent and the
Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when a
certificate of merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the OGCL, is accepted for filing by the Secretary of
State of the State of Ohio; provided, however, that, upon the mutual consent of
the Constituent Corporations, the Certificate of Merger may provide for a later
date of effectiveness of the Merger, but not to exceed 30 days after the date
that the Certificate of Merger is accepted for filing. When used in this
Agreement, the term "Effective Time" means the later of the date and time at
which the Certificate of Merger is accepted for filing or such later date and
time as is established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver of the conditions to the Merger herein set forth.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1701.82 of the OGCL.
I-1
<PAGE> 119
Section 1.4 Articles of Incorporation and Regulations; Officers and
Directors. (a) The Articles of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended at the Effective Time
as a result of the Merger so that the first sentence of Article Fourth thereof
reads in its entirety as follows: "The authorized capital stock of the
corporation shall be 1,000 shares of Common Stock, without par value". As so
amended, such Articles of Incorporation shall be the Articles of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The Regulations of the Company, as in effect immediately prior to the
Effective Time, shall be the Regulations of the Surviving Corporation at the
Effective Time as a result of the Merger until thereafter changed or amended as
provided therein or in the Articles of Incorporation of the Surviving
Corporation or as provided by applicable law.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of any shareholder of either of
the Constituent Corporations:
(a) Each issued and outstanding share of Common Stock, par value $1
per share, of Sub shall be converted into one share of Common Stock of the
Surviving Corporation.
(b) All Company Common Shares that are held in the treasury of the
Company or by any wholly-owned Subsidiary of the Company and any Company
Common Shares owned by Parent or by any wholly-owned Subsidiary of Parent
shall be cancelled and no capital stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10, each Company
Common Share issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 1.5(b)) shall
be converted into .3698577 (such number being hereinafter referred to as
the "Conversion Number") shares of validly issued, fully paid and
nonassessable Parent Common Stock, including the corresponding number of
rights (such rights being hereinafter referred to collectively as the
"Parent Rights") to purchase shares of Series B Junior Participating
Preferred Stock of Parent (the "Parent Series B Preferred Stock") pursuant
to the Stockholders Rights Agreement dated as of March 28, 1996 (the
"Parent Rights Agreement") between Parent and First Chicago Trust Company
of New York, as Rights Agent. Prior to the Distribution Date (as defined in
the Parent Rights Agreement), all references in this Agreement to Parent
Common Stock to be received in accordance with the Merger shall be deemed
to include the associated Parent Rights. All such Company Common Shares,
when so converted, shall no longer be outstanding and shall automatically
be cancelled and retired; and each holder of a certificate representing any
such Company Common Shares shall cease to have any rights with respect
thereto, except the right to receive (i) certificates representing the
shares of Parent Common Stock into which such Company Common Shares have
been converted, (ii) any dividends and other distributions in accordance
with Section 1.7 and (iii) any cash, without interest, to be paid in lieu
of any fractional share of Parent Common Stock in accordance with Section
1.8.
(d) Notwithstanding any other provisions of this Agreement to the
contrary, Company Common Shares that are outstanding immediately prior to
the Effective Time and which are held by shareholders who shall not have
voted in favor of the Merger or consented thereto in writing and who shall
have demanded properly in writing appraisal for such shares in accordance
with Section 1701.85 of the OGCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive the
consideration provided in Section 1.5(c). Such shareholders shall be
entitled to receive payment of the appraised value of such Company Common
Shares held by them in accordance with the provisions of such Section
1701.85, except that all Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such Company Common Shares under such Section
1701.85 shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
consideration, without any interest thereon, upon surrender of the
certificate or certificates that formerly evidenced such Company Common
Shares in the manner provided in Section 1.5(c).
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Section 1.6 Parent to Make Stock Certificates Available. (a) Exchange of
Certificates. Parent shall authorize a commercial bank (or such other person or
persons as shall be acceptable to Parent and the Company) to act as exchange
agent hereunder (the "Exchange Agent"). As soon as practicable, but not later
than five business days after the Effective Time, Parent shall deposit with the
Exchange Agent, in trust for the holders of certificates (the "Company
Certificates") which immediately prior to the Effective Time represented Company
Common Shares converted in the Merger, certificates (the "Parent Certificates")
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto in
accordance with Section 1.7, being hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 1.5(c) in exchange for the outstanding
Company Common Shares.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each record holder of a Company Certificate a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Company Certificates shall pass, only upon actual
delivery thereof to the Exchange Agent and shall contain instructions for use in
effecting the surrender of the Company Certificates in exchange for the property
described in the next sentence). Upon surrender for cancellation to the Exchange
Agent of all Company Certificate(s) held by any record holder of a Company
Certificate, together with such letter of transmittal duly executed, such holder
shall be entitled to receive in exchange therefor a Parent Certificate
representing the number of whole shares of Parent Common Stock into which the
Company Common Shares represented by the surrendered Company Certificate(s)
shall have been converted at the Effective Time pursuant to this Article I, cash
in lieu of any fractional share of Parent Common Stock in accordance with
Section 1.8 and certain dividends and other distributions in accordance with
Section 1.7; and the Company Certificate(s) so surrendered shall forthwith be
cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, shall be paid to any person entitled by reason of the Merger to receive
Parent Certificates representing Parent Common Stock, and no cash payment in
lieu of any fractional share of Parent Common Stock shall be paid to any such
person pursuant to Section 1.8, until such person shall have surrendered its
Company Certificate(s) as provided in Section 1.6. Subject to applicable law,
there shall be paid to each person receiving a Parent Certificate representing
such shares of Parent Common Stock: (i) at the time of such surrender or as
promptly as practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to the shares of Parent Common Stock
represented by such Parent Certificate and having a record date on or after the
Effective Time and a payment date prior to such surrender; and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
Parent Common Stock and having a record date on or after the Effective Time but
prior to such surrender and a payment date on or subsequent to such surrender.
In no event shall the person entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or Parent Certificate representing shares of Parent
Common Stock is to be paid to or issued in a name other than that in which the
Company Certificate surrendered in exchange therefor is registered, it shall be
a condition of such exchange that the Company Certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of such Parent Certificate and
the distribution of such cash payment in a name other than that of the
registered holder of the Company Certificate so surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Company Common Shares such amounts as Parent or the Exchange Agent
are required to deduct and withhold under the Code, or any provision of state,
local or foreign tax law, with respect to the making of such payment. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Company Common Shares in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
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Section 1.8 No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Company Certificates pursuant to this ARTICLE I; no dividend or
other distribution by Parent and no stock split shall relate to any such
fractional share; and no such fractional share shall entitle the record or
beneficial owner thereof to vote or to any other rights of a stockholder of
Parent. In lieu of any such fractional share, each holder of Company Common
Shares who would otherwise have been entitled thereto upon the surrender of
Company Certificate(s) for exchange pursuant to this Article I will be paid an
amount in cash (without interest) rounded to the nearest whole cent, determined
by multiplying (i) the per share closing price on the New York Stock Exchange,
Inc. (the "NYSE") of Parent Common Stock (as reported in the NYSE Composite
Transactions) on the date on which the Effective Time shall occur (or, if the
Parent Common Stock shall not trade on the NYSE on such date, the first day of
trading in Parent Common Stock on the NYSE thereafter) by (ii) the fractional
share to which such holder would otherwise be entitled.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former holders of Company Common Shares for
one year after the Effective Time shall be delivered to Parent, upon its
request, and any such former holders who have not theretofore complied with this
ARTICLE I shall thereafter look only to Parent for payment of their claim for
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to such shares of
Parent Common Stock. Neither Parent nor the Company shall be liable to any
former holder of Company Common Shares for any such shares of Parent Common
Stock held in the Exchange Fund which is delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
Section 1.10 Adjustment of Conversion Number. In the event that the sum of
the aggregate number of Company Common Shares issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled in accordance
with Section 1.5(b)) and the aggregate number of Company Common Shares issuable
in connection with the Company Stock Options which are outstanding immediately
prior to the Effective Time pursuant to the Company Stock Plans (as defined in
Section 5.8) is either less than or greater than 3,269,641, then the Conversion
Number shall be adjusted such that it will equal the quotient, rounded up or
down to the seventh decimal place, obtained by dividing 1,209,302 by such sum,
and all references in this Agreement to the Conversion Number shall be deemed to
be to the Conversion Number as so adjusted. In addition, in the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock, any change or conversion of Parent Common Stock into other securities or
any other dividend or distribution with respect to Parent Common Stock (other
than normal quarterly cash dividends as the same may be modified from time to
time in the ordinary course), or if a record date with respect to any of the
foregoing should occur, prior to the Effective Time, appropriate and
proportionate adjustments shall be made to the Conversion Number, and thereafter
all references in this Agreement to the Conversion Number shall be deemed to be
to the Conversion Number as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of any
Company Certificate in accordance with the terms hereof (including any cash paid
pursuant to Section 1.7 or 1.8) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the Company Common Shares
represented by such Company Certificate.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed, and no transfer of Company
Common Shares shall thereafter be made. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged as provided in this Article I.
Section 1.13 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (ii) otherwise to carry out the purposes of this
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Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either Constituent Corporation, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title and interest in, to and under any of the rights, privileges,
powers, franchises, properties or assets of such Constituent Corporation and
otherwise to carry out the purposes of this Agreement.
Section 1.14 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sidley & Austin,
One First National Plaza, Chicago, Illinois at 10:00 a.m., local time, on the
day on which the last of the conditions set forth in Article VI shall have been
fulfilled or waived, or at such other time and place as Parent and the Company
may agree, but in no event prior to the fifteenth day after the date of the
Company Stockholder Meeting (as hereinafter defined).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, and all of its outstanding shares
of capital stock are owned directly by Parent; and each of Parent and Sub has
the requisite corporate power and authority to carry on its business as now
being conducted. Each Subsidiary of Parent is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. Parent and each of its
Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent. For
purposes of this Agreement: (i) "Material Adverse Change" or "Material Adverse
Effect" means, when used with respect to Parent or the Company, as the case may
be, any change or effect that is or would reasonably be expected (so far as can
be foreseen at the time) to be materially adverse to the business, properties,
assets, liabilities, condition (financial or otherwise) or results of operations
of Parent and its Subsidiaries taken as a whole, or the Company and its
Subsidiaries taken as a whole, as the case may be; provided, however, that (A)
no Material Adverse Change or Material Adverse Effect shall be deemed to have
occurred by reason of a change or effect resulting from general economic
conditions, general industry conditions or a general deterioration in the
financial markets and (B) if the Company's results of operations for the first
and second quarters of fiscal year 1997 are not materially less than the
forecasted results of operations for such quarters set forth in the forecasts
previously delivered by the Company to Parent and included in the Company Letter
(as hereinafter defined), such results shall not be considered to be a Material
Adverse Change or a Material Adverse Effect; and (ii) "Subsidiary" means any
corporation, partnership, joint venture or other legal entity of which Parent or
the Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the capital
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity.
Section 2.2 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of: 30,000,000 shares of Parent Common Stock;
and 1,300,000 shares of Preferred Stock, without par value (the "Parent
Preferred Stock"), of which 300,000 shares have been designated as "Series B
Junior Participating Preferred Stock" (the "Parent Series B Preferred Stock").
At the close of business on August 30, 1996, 14,877,612 shares of Parent Common
Stock were issued and outstanding, all of which were validly issued, are fully
paid and nonassessable and are free of preemptive rights. No shares of Parent
Preferred Stock have been issued. All of the shares of Parent Common Stock
issuable in exchange for Company Common Shares at the
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Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. As of the date of this Agreement, except for this Agreement, except (a)
as provided in Parent's Restated Certificate of Incorporation, (b) for the
Parent Rights, and (c) except for stock options covering not in excess of
1,334,800 shares of Parent Common Stock (collectively, the "Parent Stock
Options"), there are no options, warrants, calls, rights or agreements to which
Parent or any of its Subsidiaries is a party or by which any of them is bound
obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of Parent or
any such Subsidiary or obligating Parent or any such Subsidiary to grant, extend
or enter into any such option, warrant, call, right or agreement. Each
outstanding share of capital stock of each Subsidiary of Parent is duly
authorized, validly issued, fully paid and nonassessable and, except as
disclosed in the Parent SEC Documents or the Parent Letter (as such terms are
hereinafter defined), each such share is beneficially owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever. Exhibit 21 to
Parent's Annual Report on Form 10-K for the fiscal year ended December 2, 1995,
as filed with the Securities and Exchange Commission (the "SEC") (the "Parent
Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC.
Section 2.3 Authority. The Board of Directors of Parent has declared as
advisable and fair to and in the best interests of the stockholders of Parent
the Merger, and the issuance (the "Parent Share Issuance") of shares of Parent
Common Stock in accordance with the Merger and has approved this Agreement. The
Board of Directors and sole shareholder of Sub has approved this Agreement.
Parent has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Sub has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Agreement has been duly executed and delivered by Parent
and Sub and (assuming the valid authorization, execution and delivery thereof by
the Company and the validity and binding effect thereof on the Company)
constitutes the valid and binding obligation of Sub and Parent, enforceable
against Sub and Parent in accordance with its terms. The Parent Share Issuance
and the filing of a registration statement on Form S-4 with the SEC by Parent
under the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), for the purpose of
registering the shares of Parent Common Stock to be issued in connection with
the Merger (together with any amendments or supplements thereto, whether prior
to or after the effective date thereof, the "Registration Statement") have been
duly authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Except as set forth in
the letter dated and delivered to the Company on the date hereof (the "Parent
Letter"), which relates to this Agreement and is designated therein as being the
Parent Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under: (i) any provision of the Restated Certificate
of Incorporation or By-laws of Parent or the comparable charter or organization
documents or by-laws of any of its Subsidiaries as amended, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, agreement, instrument,
permit, concession, franchise or license applicable to Parent or any of its
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such violations, defaults, rights, liens, security interests, charges
or encumbrances that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Parent and would not materially
impair the ability of Parent or Sub to perform their respective obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any domestic (federal and state), foreign or supranational court,
commission, governmental body,
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regulatory agency, authority or tribunal (a "Governmental Entity") is required
by or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Sub and Parent or is necessary for
the consummation of the Merger and the other transactions contemplated by this
Agreement, except: (i) in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act and the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) for the filing of the Certificate of Merger with the Secretary of
State of the State of Ohio, (iii) for such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which the Company or any of its Subsidiaries
conducts any business or owns any property or assets and (iv) for such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to obtain or make would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent and would not
materially impair the ability of Parent or Sub to perform their respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed all
required documents with the SEC since January 1, 1991 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in the Parent SEC Documents
complied as to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the respective periods then
ended (subject, in the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein). Since
December 2, 1995, Parent has not made any change in the accounting practices or
policies applied in the preparation of its financial statements.
Section 2.6 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Company Stockholder Meeting (as defined in
Section 5.1) will (i) in the case of the Registration Statement, at the time it
becomes effective, 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 not misleading or (ii) in the case of the Proxy
Statement, at the time of the mailing of the Proxy Statement, the time of the
Company Stockholder Meeting and at the Effective Time, 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 are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent, its directors and
officers or any of its Subsidiaries shall occur which is required to be
described in the Proxy Statement or the Registration Statement, such event shall
be so described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, to the extent required by law, disseminated to the
shareholders of the Company. The Registration Statement will comply (with
respect to Parent) as to form in all material respects with the provisions of
the Securities Act, and the Proxy Statement will comply (with respect to Parent)
as to form in all material respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Documents or the Parent Letter, since December 2, 1995: (i)
Parent and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be
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expected to result in a Material Adverse Effect on Parent; (ii) Parent and its
Subsidiaries have not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that has had or that would reasonably be expected to
have a Material Adverse Effect on Parent; (iii) there has been no material
change in the indebtedness of Parent and its Subsidiaries, no change in the
outstanding shares of capital stock of Parent except for the issuance of shares
of Parent Common Stock pursuant to the Parent Stock Options and no dividend or
distribution of any kind declared, paid or made by Parent on any class of its
capital stock except for regular quarterly dividends of not more than $0.1625
per share on Parent Common Stock and (iv) there has been no event causing a
Material Adverse Effect on Parent, nor any development that would, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect on Parent; and except as set forth in the Parent Letter, during the
period from December 2, 1995 through the date of this Agreement, neither Parent
nor any of its Subsidiaries has taken any action that, if taken during the
period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 4.1(a).
Section 2.8 No Existing Violation, Default, Etc. Neither Parent nor any of
its Subsidiaries is in violation of (i) its charter or other organization
documents or by-laws, (ii) any applicable law, ordinance or administrative or
governmental rule or regulation or (iii) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except for any violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent. The
properties, assets and operations of Parent and its Subsidiaries are in
compliance in all material respects with all applicable federal, state, local
and foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and the protection and clean-up of the environment and activities
or conditions related thereto, including, without limitation, those relating to
the generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of Parent or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance in all material respects with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as would not, individually or in the aggregate with
any such other interference or prevention, reasonably be expected to have a
Material Adverse Effect on Parent. The term "hazardous materials" shall mean
those substances that are regulated by or form the basis for liability under any
applicable Environmental Laws.
Except as may be set forth in the Parent SEC Documents or the Parent
Letter, prior to the date of this Agreement, no event of default or event that,
but for the giving of notice or lapse of time, or both, would constitute an
event of default exists or, upon the consummation by Parent of the transactions
contemplated by this Agreement, will exist under any loan or credit agreement,
note, bond, mortgage, indenture or guarantee of indebtedness for borrowed money
or any other material lease, agreement or instrument to which Parent or any of
its Subsidiaries is a party or by which Parent or any such Subsidiary or any of
their respective properties, assets or business is bound.
Section 2.9 Licenses and Permits. Parent and its Subsidiaries have
received such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate Governmental Entities
(the "Parent Licenses") as are necessary to own or lease and operate their
respective properties and to conduct their respective businesses substantially
in the manner described in the Parent SEC Documents and as currently owned or
leased and conducted, and all such Parent Licenses are valid and in full force
and effect, except for any such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances which the failure to
have or to be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Parent
and its Subsidiaries are in compliance in all material respects with their
respective obligations under the Parent Licenses, with only such exceptions as,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent, and no event has occurred that allows, or
after notice or lapse of time, or both, would allow, revocation or termination
of any material Parent License.
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Section 2.10 Environmental Matters. Except as set forth in the Parent SEC
Documents or the Parent Letter, neither Parent nor any of its Subsidiaries is
the subject of any federal, state, local, foreign or provincial investigation,
and neither Parent nor any of its Subsidiaries has received any notice or claim
(or is aware of any facts that would form a reasonable basis for any claim), or
entered into any negotiations or agreements with any other person, relating to
any liability or remedial action, or potential liability or remedial action,
under any Environmental Laws that would reasonably be expected to have a
Material Adverse Effect on Parent; and there are no pending, reasonably
anticipated or, to the knowledge of Parent, threatened actions, suits or
proceedings against or affecting Parent, any of its Subsidiaries or any of their
respective properties, assets or operations asserting any such liability or
seeking any such remedial action in connection with any Environmental Laws that
would reasonably be expected to have a Material Adverse Effect on Parent.
Section 2.11 Tax Matters. Except as otherwise set forth in the Parent
Letter: (i) Parent and each of its Subsidiaries have filed all federal, and all
material state, local and foreign, Tax Returns (as hereinafter defined),
required to have been filed on or prior to the date hereof or appropriate
extensions therefor have been properly obtained; (ii) all Taxes (as hereinafter
defined), shown to be due on such Tax Returns have been timely paid or
extensions for payment have been duly obtained, or such Taxes are being timely
and properly contested; (iii) neither Parent nor any of its Subsidiaries has
waived any statute of limitations in respect of its Taxes; (iv) any such Tax
Returns relating to federal and state income Taxes have been audited by the
Internal Revenue Service or the appropriate state taxing authority or the period
for assessment of the Taxes in respect of which such Tax Returns were required
to be filed has expired; (v) no issues that have been raised in writing by the
relevant taxing authority in connection with the audit of such Tax Returns are
currently pending; and (vi) all deficiencies asserted or assessments made as a
result of any audit of such Tax Returns by any taxing authority have been paid
in full or adequately provided for or are being timely and properly contested.
For purposes of this Agreement: (i) "Taxes" means any federal, state, local or
foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Entity and (ii) "Tax Return"
means any return, report or similar statement (including any attached schedules)
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax. The charges, accruals and reserves on the books of Parent and its
Subsidiaries in respect of Taxes and other governmental charges are adequate. To
the knowledge of Parent, the representations set forth in the Parent Tax
Certificate (as defined in SECTION 6.2(B)) attached to the Parent Letter are
true and correct in all material respects.
Section 2.12 Actions and Proceedings. Except as set forth in the Parent
SEC Documents or the Parent Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or affecting
Parent or any of its Subsidiaries, any of its or their current or former
directors, officers, employees, consultants, agents or stockholders, as such,
any of its or their properties, assets or business or any Parent Plan (as
defined in Section 2.15) that would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent. Except as set forth in
the Parent Letter, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries, any of its or their current or former directors, officers,
employees, consultants, agents or stockholders, as such, any of its or their
properties, assets or business or any Parent Plan that if brought (if not now
pending) would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent. There are no actions, suits or claims or
legal, administrative or arbitration proceedings or investigations or labor
disputes pending or, to the knowledge of Parent, threatened against or affecting
Parent or any of its Subsidiaries, any of its or their current or former
directors, officers, employees, consultants, agents or stockholders, as such,
any of its or their properties, assets or business or any Parent Plan relating
to the transactions contemplated by this Agreement.
Section 2.13 Labor Matters. Except as disclosed in the Parent SEC
Documents or the Parent Letter, neither Parent nor any of its Subsidiaries has
any labor contracts, collective bargaining agreements or material employment or
consulting agreements with any persons employed by or otherwise performing
services primarily for Parent or any of its Subsidiaries (the "Parent Business
Personnel") or any representative of any
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Parent Business Personnel. Except as disclosed in the Parent SEC Documents or
the Parent Letter, neither Parent nor any of its Subsidiaries has engaged in any
unfair labor practice with respect to Parent Business Personnel, and there is no
unfair labor practice complaint pending against Parent or any of its
Subsidiaries with respect to Parent Business Personnel. There is no labor
strike, dispute, slowdown or stoppage pending or, to the knowledge of Parent,
threatened against or affecting Parent or any of its Subsidiaries that would
reasonably be expected to have a Material Adverse Effect on Parent, and neither
Parent nor any of its Subsidiaries has experienced any primary work stoppage or
other material labor difficulty involving its employees during the last five
years that has had or would reasonably be expected to have a Material Adverse
Effect on Parent. Parent is in compliance with the requirements of the Workers
Adjustment and Retraining Notification Act (the "WARN Act") and has no
liabilities pursuant to the WARN Act.
Section 2.14 Contracts. All of the material contracts of Parent and its
Subsidiaries that are required to be described in the Parent SEC Documents or to
be filed as exhibits thereto have been described or filed as required. Neither
Parent or any of its Subsidiaries nor, to the knowledge of Parent, any other
party is in breach of or default under any such contracts which are currently in
effect, except for such breaches and defaults which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent.
Section 2.15 ERISA. Each Parent Plan complies in all material respects
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the Code and all other applicable laws and administrative or governmental rules
and regulations. No "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Parent Plan for which the 30-day notice
requirement has not been waived (other than with respect to the transactions
contemplated by this Agreement), and no condition exists which would subject
Parent or any ERISA Affiliate (as hereinafter defined) to any fine under Section
4071 of ERISA; except as disclosed in the Parent Letter, neither Parent nor any
of its ERISA Affiliates has withdrawn from any Parent Plan or Parent
Multiemployer Plan (as hereinafter defined) or has taken, or is currently
considering taking, any action to do so; and no action has been taken, or is
currently being considered, to terminate any Parent Plan subject to Title IV of
ERISA. No Parent Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. To the knowledge of Parent, there are no actions, suits or claims
pending or threatened (other than routine claims for benefits) with respect to
any Parent Plan which would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of
its ERISA Affiliates has incurred or would reasonably be expected to incur any
material liability under or pursuant to Title IV of ERISA. No prohibited
transactions described in Section 406 of ERISA or Section 4975 of the Code have
occurred which would reasonably be expected to result in material liability to
Parent or its Subsidiaries. Except as set forth in the Parent Letter, all Parent
Plans that are intended to be qualified under Section 401(a) of the Code have
received a favorable determination letter as to such qualification from the
Internal Revenue Service, and no event has occurred, either by reason of any
action or failure to act, which would cause the loss of any such qualification.
Parent is not aware of any reason why any Parent Plan is not so qualified in
operation. Neither Parent nor any of its ERISA Affiliates has been notified by
any Parent Multiemployer Plan that such Parent Multiemployer Plan is currently
in reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Parent Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA. Parent and its Subsidiaries have
complied with the health care continuation requirements of Part 6 of Title I of
ERISA. Except as set forth in the Parent Letter, the execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any compensation or benefits payable by Parent or its Subsidiaries to
or in respect of any employee or other person. As used in this Agreement: (i)
"Parent Plan" means a "pension plan" (as defined in Section 3(2) of ERISA, other
than a Parent Multiemployer Plan) or a "welfare plan" (as defined in Section
3(1) of ERISA) established or maintained by Parent or any of its ERISA
Affiliates or to which Parent or any of its ERISA Affiliates has contributed or
otherwise may have any liability; (ii) "Parent Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which Parent
or any of its ERISA Affiliates is or has been obligated to contribute or
otherwise may have any liability; and (iii) with respect to
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any person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated thereunder or pursuant to Section 4001(b)
of ERISA and the regulations promulgated thereunder.
Section 2.16 Liabilities. Except as fully reflected or reserved against in
the consolidated financial statements included in the Parent Annual Report to
Stockholders for the fiscal year ended December 2, 1995, or disclosed in the
footnotes thereto, Parent and its Subsidiaries had no liabilities (including,
without limitation, Tax liabilities) at the date of such consolidated financial
statements, absolute or contingent, that would reasonably be expected to have a
Material Adverse Effect on Parent or not incurred in the ordinary course of
business. Except as so reflected, reserved or disclosed, Parent and its
Subsidiaries have no commitments which would reasonably be expected to have a
Material Adverse Effect on Parent.
Section 2.17 Intellectual Properties. All of the material patents,
trademarks, trademark registrations, servicemarks, mailing lists, trade names,
copyrights and other proprietary intellectual property rights that are owned by
Parent and its Subsidiaries or used in their respective businesses are valid and
in full force and effect. Neither Parent nor any of its Subsidiaries is
infringing upon, or otherwise violating, the rights of any person with respect
to any material patent, patent right, trademark, servicemark, software license,
software use agreement, license trade name, copyright or registration thereof.
Section 2.18 Propriety of Past Payments. Since January 1, 1991: (i) no
funds or assets of Parent or any of its Subsidiaries have been used for illegal
purposes, (ii) no unrecorded fund or assets of Parent or any of its Subsidiaries
has been established for any purpose, (iii) no accumulation or use of the
corporate funds of Parent or any of its Subsidiaries has been made without being
properly accounted for on the respective books and records of Parent or such
Subsidiary, (iv) all payments by or on behalf of Parent or any of its
Subsidiaries have been duly and properly recorded and accounted for on the books
and records of Parent and its Subsidiaries, (v) no false or artificial entry has
been made on the books and records of Parent or any of its Subsidiaries for any
reason, (vi) no payment has been made by or on behalf of Parent or any of its
Subsidiaries with the understanding that any part of such payment is to be used
for any purpose other than that described in the documents supporting such
payment and (vii) neither Parent nor any of its Subsidiaries has made any
illegal contributions to any political party or candidate, either domestic or
foreign, except for such uses, payments, contributions or actions which, or the
cessation of which, would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent or result in material adverse
publicity for Parent.
Section 2.19 Takeover Statutes. The Board of Directors of Parent has duly
taken all action (which is valid and binding on Parent), to the extent
necessary, to provide a valid and irrevocable exemption from Section 203 of the
Delaware General Corporation Law and Article Eleventh of the Restated
Certificate of Incorporation of Parent for all of the transactions contemplated
by this Agreement. No "fair price," "moratorium," "control share acquisition" or
similar takeover statute or regulation enacted under any federal or state or
other foreign law ("Takeover Statute") applicable to Parent or Sub is applicable
to the Merger or the other transactions contemplated hereby.
Section 2.20 Pooling of Interests; Reorganization. To the knowledge of
Parent after due investigation, neither Parent nor any of its Subsidiaries has
(i) taken any action or failed to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 2.21 Operations of Sub. Sub has been formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
Section 2.22 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio and has the requisite corporate power and authority to carry on
its business as now being conducted. Each Subsidiary of the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. Except as
disclosed in the Company Letter (as hereinafter defined), the Company and each
of its Subsidiaries are duly qualified to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
Section 3.2 Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of: 4,000,000 Company Common Shares. On
the date hereof, 2,908,828 Company Common Shares were issued and outstanding,
all of which were validly issued, are fully paid and nonassessable and are free
of preemptive rights. As of the date of this Agreement, except as provided in
the Company's Articles of Incorporation, as amended, except as set forth in the
Company Letter (as hereinafter defined), and except for stock options issued
prior to the date hereof covering not in excess of 360,813 Company Common Shares
(collectively, the "Company Stock Options"), there are no options, warrants,
calls, rights or agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any such Subsidiary
or obligating the Company or any such Subsidiary to grant, extend or enter into
any such option, warrant, call, right or agreement. Each outstanding share of
capital stock of each Subsidiary of the Company is duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in the Company SEC
Documents or the Company Letter (as such term is hereinafter defined), each such
share is beneficially owned by the Company or another Subsidiary of the Company,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever. Exhibit 21 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995, as filed with the
SEC (the "Company Annual Report"), is a true, accurate and correct statement in
all material respects of all of the information required to be set forth therein
by the regulations of the SEC.
Section 3.3 Authority. The Board of Directors of the Company has declared
as advisable and fair to and in the best interests of the shareholders of the
Company the Merger and approved this Agreement, and the Company has all
requisite power and authority to enter into this Agreement and, subject to
approval of the Merger by the shareholders of the Company, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of this Agreement, to approval
of the Merger by the shareholders of the Company. This Agreement has been duly
executed and delivered by the Company and (assuming the valid authorization,
execution and delivery thereof by Sub and Parent and the validity and binding
effect thereof on Sub and Parent) constitutes the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms. The
filing of the Proxy Statement with the SEC has been duly authorized by the
Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Except as set forth in
the letter dated and delivered to Parent on the date hereof (the "Company
Letter"), which relates to this Agreement and is designated therein as being the
Company Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or
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result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of its Subsidiaries
under: (i) any provision of the Articles of Incorporation or Regulations of the
Company or the comparable charter or organization documents or by-laws of any of
its Subsidiaries as amended, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, other than, in the case of clauses (ii) and (iii), any such
violations, defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on the Company and would not materially impair the
ability of the Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except: (i) in connection, or in compliance,
with the provisions of the HSR Act, the Securities Act and the Exchange Act,
(ii) for the filing of the Certificate of Merger with the Secretary of State of
the State of Ohio, (iii) for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries conducts any
business or owns any property or assets and (iv) for such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to obtain or make would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company and would not
materially impair the ability of the Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 3.5 Company SEC Documents and Financial Statements. The Company
has filed all required documents with the SEC since January 1, 1991 (the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company Letter includes the consolidated balance sheets of
the Company and its consolidated subsidiaries as of June 30, 1996 and 1995 and
the related consolidated statements of income (the "Statements of Income"),
stockholders' investment and cash flows for each of the fiscal years then ended,
together with the appropriate notes to such financial statements, accompanied by
the report thereon of Arthur Andersen LLP, independent public accountants (the
"Audited Financial Statements"). The consolidated financial statements of the
Company included in the Company SEC Documents and the Company Letter complied as
to form in all material respects with the applicable accounting requirements and
the published rules and regulations with respect thereto. The consolidated
financial statements included in the Company SEC Documents and the Audited
Financial Statements have been prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the respective periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). None of the financial statements referred to in
this Section 3.5 contains any material items of special or nonrecurring income
except as expressly specified therein. Since June 30, 1996, the Company has not
made any change in the accounting practices or policies applied in the
preparation of its financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (i) in the
case of the Registration Statement, at the time it becomes effective, 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 not misleading or (ii) in the case of the Proxy Statement, at the time
of
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the mailing of the Proxy Statement, the time of the Company Stockholder Meeting
and at the Effective Time, 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 are made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its directors and officers or any of its
Subsidiaries shall occur which is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the shareholders of the Company.
The Registration Statement will comply (with respect to the Company) as to form
in all material respects with the provisions of the Securities Act, and the
Proxy Statement will comply (with respect to the Company) as to form in all
material respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Documents or the Company Letter, since June 30, 1996: (i) the
Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be expected to result in a Material Adverse
Effect on the Company; (ii) the Company and its Subsidiaries have not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance) that
has had or that would reasonably be expected to have a Material Adverse Effect
on the Company; (iii) there has been no material change in the indebtedness of
the Company and its Subsidiaries, no change in the outstanding shares of capital
stock of the Company except for the issuance of Company Common Shares pursuant
to the Company Stock Options and no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock; (iv)
there has been no event causing a Material Adverse Effect on the Company, nor
any development that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company; and except as
set forth in the Company Letter, during the period from June 30, 1996 through
the date of this Agreement, neither the Company nor any of its Subsidiaries has
taken any action that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section
4.1(b).
Section 3.8 No Existing Violation, Default, Etc. Neither the Company nor
any of its Subsidiaries is in violation of (i) its charter or other organization
documents or by-laws, (ii) any applicable law, ordinance or administrative or
governmental rule or regulation or (iii) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except for any violations that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company. The properties, assets and operations of the Company and its
Subsidiaries are in compliance in all material respects with all applicable
Worker Safety Laws and Environmental Laws, except for any violations that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company. With respect to such properties, assets
and operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance in all material respects with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as would not, individually or in the aggregate with
any such other interference or prevention, reasonably be expected to have a
Material Adverse Effect on the Company.
Except as may be set forth in the Company SEC Documents or the Company
Letter, prior to the date of this Agreement, no event of default or event that,
but for the giving of notice or lapse of time, or both, would constitute an
event of default exists or, upon the consummation by the Company of the
transactions contemplated by this Agreement, will exist under any loan or credit
agreement, note, bond, mortgage, indenture or guarantee of indebtedness for
borrowed money or any other material lease, agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary or any of their respective properties, assets or business is
bound.
Section 3.9 Licenses and Permits. The Company and its Subsidiaries have
received such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate
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Governmental Entities (the "Company Licenses") as are necessary to own or lease
and operate their respective properties and to conduct their respective
businesses substantially in the manner described in the Company SEC Documents
and as currently owned or leased and conducted, and all such Company Licenses
are valid and in full force and effect, except for any such certificates,
permits, licenses, franchises, consents, approvals, orders, authorizations and
clearances which the failure to have or to be in full force and effect would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Company and its Subsidiaries are in
compliance in all material respects with their respective obligations under the
Company Licenses, with only such exceptions as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company, and no event has occurred that allows, or after notice or lapse of
time, or both, would allow, revocation or termination of any material Company
License.
Section 3.10 Environmental Matters. Except as set forth in the Company SEC
Documents or the Company Letter, neither the Company nor any of its Subsidiaries
is the subject of any federal, state, local, foreign or provincial
investigation, and neither the Company nor any of its Subsidiaries has received
any notice or claim (or is aware of any facts that would form a reasonable basis
for any claim), or entered into any negotiations or agreements with any other
person, relating to any liability or remedial action, or potential liability or
remedial action, under any Environmental Laws that would reasonably be expected
to have a Material Adverse Effect on the Company; and there are no pending,
reasonably anticipated or, to the knowledge of the Company, threatened actions,
suits or proceedings against or affecting the Company, any of its Subsidiaries
or any of their respective properties, assets or operations asserting any such
liability or seeking any such remedial action in connection with any
Environmental Laws that would reasonably be expected to have a Material Adverse
Effect on the Company.
Section 3.11 Tax Matters. Except as otherwise set forth in the Company
Letter: (i) the Company and each of its Subsidiaries have filed all federal, and
all material state, local and foreign, Tax Returns required to have been filed
on or prior to the date hereof or appropriate extensions therefor have been
properly obtained; (ii) all Taxes shown to be due on such Tax Returns have been
timely paid or extensions for payment have been properly obtained, or such Taxes
are being timely and properly contested; (iii) neither the Company nor any of
its Subsidiaries has waived any statute of limitations in respect of its Taxes;
(iv) any such Tax Returns relating to federal and state income Taxes have been
audited by the Internal Revenue Service or the appropriate state taxing
authority or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired; (v) no issues that have been
raised in writing by the relevant taxing authority in connection with the audit
of such Tax Returns are currently pending; and (vi) all deficiencies asserted or
assessments made as a result of any audit of such Tax Returns by any taxing
authority have been paid in full or adequately provided for or are being timely
and properly contested. Except as set forth in the Company Letter, the charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Taxes and other governmental charges are adequate. To the knowledge
of the Company, the representations set forth in the Company Tax Certificate (as
defined in Section 6.2(b)) attached to the Company Letter are true and correct
in all material respects.
Section 3.12 Actions and Proceedings. Except as set forth in the Company
SEC Documents or the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or affecting
the Company or any of its Subsidiaries, or any of its or their current or former
directors, officers, employees, consultants, agents or stockholders, as such,
any of its or their properties, assets or business or any Company Plan (as
defined in Section 3.15) that would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company. Except as set
forth in the Company Letter or the Company SEC Documents, there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries, any of its or their current
or former directors, officers, employees, consultants, agents or stockholders,
as such, any of its or their properties, assets or business or any Company Plan
that if brought (if not now pending) would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
There are no actions, suits or claims or legal, administrative or arbitration
proceedings or investigations or labor disputes pending or, to the
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knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, any of its or their current or former directors, officers,
employees, consultants, agents or stockholders, as such, any of its or their
properties, assets or business or any Company Plan relating to the transactions
contemplated by this Agreement.
Section 3.13 Labor Matters. Except as disclosed in the Company SEC
Documents or the Company Letter, neither the Company nor any of its Subsidiaries
has any labor contracts, collective bargaining agreements or material employment
or consulting agreements with any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries (the "Company
Business Personnel") or any representative of any Company Business Personnel.
Except as disclosed in the Company SEC Documents or the Company Letter, neither
the Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to Company Business Personnel, and there is no unfair labor
practice complaint pending against the Company or any or its Subsidiaries with
respect to Company Business Personnel. There is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries that would
reasonably be expected to have a Material Adverse Effect on the Company, and
neither the Company nor any of its Subsidiaries has experienced any primary work
stoppage or other material labor difficulty involving its employees during the
last five years that has had or would reasonably be expected to have a Material
Adverse Effect on the Company. The Company is in compliance with the
requirements of the Workers Adjustment and Retraining Notification Act (the
"WARN Act") and has no liabilities pursuant to the WARN Act.
Section 3.14 Contracts. All of the material contracts of the Company and
its Subsidiaries are listed and described in the Company Letter or if required
to be described in the Company SEC Documents or to be filed as exhibits thereto
have been described or filed as required. For the purposes of this Section 3.14,
the term "material" means contracts required to be disclosed by Item 601(10) of
Regulation S-K promulgated by the SEC. Neither the Company or any of its
Subsidiaries nor, to the knowledge of the Company, any other party is in breach
of or default under any such contracts which are currently in effect, except for
such breaches and defaults which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 3.15 ERISA. Each Company Plan complies in all material respects
with ERISA, the Code and all other applicable laws and administrative or
governmental rules and regulations. No "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred with respect to any Company Plan for which
the 30-day notice requirement has not been waived (other than with respect to
the transactions contemplated by this Agreement), and no condition exists which
would subject the Company or any ERISA Affiliate to any fine under Section 4071
of ERISA; except as disclosed in the Company Letter neither the Company nor any
of its ERISA Affiliates has withdrawn from any Company Plan or Company
Multiemployer Plan (as hereinafter defined) or has taken, or is currently
considering taking, any action to do so; and no action has been taken, or is
currently being considered, to terminate any Company Plan subject to Title IV of
ERISA. No Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. To the knowledge of the Company, there are no actions, suits or
claims pending or threatened (other than routine claims for benefits) with
respect to any Company Plan which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Neither the Company nor any of its ERISA Affiliates has incurred or would
reasonably be expected to incur any material liability under or pursuant to
Title IV of ERISA. No prohibited transactions described in Section 406 of ERISA
or Section 4975 of the Code have occurred which would reasonably be expected to
result in material liability to the Company or its Subsidiaries. Except as set
forth in the Company Letter, all Company Plans that are intended to be qualified
under Section 401(a) of the Code have received a favorable determination letter
as to such qualification from the Internal Revenue Service, and no event has
occurred, either by reason of any action or failure to act, which would cause
the loss of any such qualification. Except as set forth in the Company Letter,
the Company is not aware of any reason why any Company Plan is not so qualified
in operation. Neither the Company nor any of its ERISA Affiliates has been
notified by any Company Multiemployer Plan that such Company Multiemployer Plan
is currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such
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Company Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA. The Company and its Subsidiaries have complied with the
health care continuation requirements of Part 6 of Title I of ERISA. Except as
set forth in the Company Letter, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in an increase in the
amount of compensation or benefits or accelerate the vesting or timing of
payment of any compensation or benefits payable by the Company or its
Subsidiaries to or in respect of any employee or other person. As used in this
Agreement: (i) "Company Plan" means a "pension plan" (as defined in Section 3(2)
of ERISA, other than a Company Multiemployer Plan) or a "welfare plan" (as
defined in Section 3(1) of ERISA) established or maintained by the Company or
any of its ERISA Affiliates or to which the Company or any of its ERISA
Affiliates has contributed or otherwise may have any liability; and (ii)
"Company Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or
has been obligated to contribute or otherwise may have any liability.
Section 3.16 Liabilities. Except as fully reflected or reserved against in
the consolidated financial statements referred to in Section 3.5, or disclosed
in the footnotes thereto, or as set forth in Items 1-3 of Section 3.16 of the
Company Letter, the Company and its Subsidiaries had no liabilities (including,
without limitation, Tax liabilities) at the date of such consolidated financial
statements, absolute or contingent, that would reasonably be expected to have a
Material Adverse Effect on the Company or, except as disclosed in the Company
Letter or the Company SEC Documents, were not incurred in the ordinary course of
business. Except as so reflected, reserved or disclosed, or as disclosed in the
Company Letter or the Company SEC Documents, the Company and its Subsidiaries
have no commitments which would reasonably be expected to have a Material
Adverse Effect on the Company.
Section 3.17 Intellectual Properties. Except as disclosed in the Company
Letter, all of the material patents, trademarks, trademark registrations,
servicemarks, mailing lists, trade names, copyrights and other proprietary
intellectual property rights that are owned by the Company and its Subsidiaries
or used in their respective businesses are valid and in full force and effect.
Neither the Company nor any of its Subsidiaries is infringing upon, or otherwise
violating, the rights of any person with respect to any material patent, patent
right, trademark, servicemark, software license, software use agreement, license
trade name, copyright or registration thereof.
Section 3.18 Propriety of Past Payments. Except as disclosed in the
Company Letter, since January 1, 1991: (i) no funds or assets of the Company or
any of its Subsidiaries have been used for illegal purposes, (ii) no unrecorded
fund or assets of the Company or any of its Subsidiaries has been established
for any purpose, (iii) no accumulation or use of the corporate funds of the
Company or any of its Subsidiaries has been made without being properly
accounted for on the respective books and records of the Company or such
Subsidiary, (iv) all payments by or on behalf of the Company or any of its
Subsidiaries have been duly and properly recorded and accounted for on the books
and records of the Company and its Subsidiaries, (v) no false or artificial
entry has been made on the books and records of the Company or any of its
Subsidiaries for any reason, (vi) no payment has been made by or on behalf of
the Company or any of its Subsidiaries with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment and (vii) neither the Company nor any of its
Subsidiaries has made any illegal contributions to any political party or
candidate, either domestic or foreign, except for such uses, payments,
contributions or actions which, or the cessation of which, would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company or result in material adverse publicity for the Company.
Section 3.19 Opinion of Financial Advisor. The Company has received the
opinion of J.J.B. Hilliard, W.L. Lyons Inc., dated the date hereof, to the
effect that, as of the date hereof, the consideration to be received in the
Merger by the Company's shareholders is fair to the Company's shareholders from
a financial point of view, a copy of which opinion has been delivered to Parent.
Section 3.20 Takeover Statutes. The Board of Directors of the Company has
duly taken all necessary action (which is valid and binding on the Company) to
provide a valid and irrevocable exemption from
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Sections 1704.01 through 1707.042 of the OGCL for all of the transactions
contemplated by this Agreement. No Takeover Statute applicable to the Company is
applicable to the Merger or the other transactions contemplated hereby.
Section 3.21 Pooling of Interests; Reorganization. To the knowledge of the
Company after due investigation, neither the Company nor any of its Subsidiaries
has (i) taken any action or failed to take any action which action or failure
would jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (ii) taken any action or failed to take any action which
action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.22 Brokers. No broker, investment banker or other person, other
than J.J.B. Hilliard, W.L. Lyons Inc., the fees and expenses of which will be
paid by the Company (as reflected in an agreement between J.J.B. Hilliard, W.L.
Lyons Inc. and the Company, a copy of which has been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. (a) Actions by
Parent. During the period from the date of this Agreement through the Effective
Time, except as otherwise expressly required by this Agreement or as set forth
in the Parent Letter, Parent shall, and shall cause each of its Subsidiaries to,
in all material respects carry on its business in, and not enter into any
material transaction other than in accordance with, the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use its
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it, all to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement,
Parent shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of the Company:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than (I) regular quarterly dividends of not more
than $0.1625 per share on Parent Common Stock, (II) stock dividends on
Parent Common Stock and \(III) any dividends on, or distributions in
respect of, the capital stock of any Subsidiary of Parent); (B) combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock; or (C) purchase, redeem or otherwise acquire
any shares of its capital stock or those of any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent
or convertible securities (other than the issuance of shares of Parent
Common Stock pursuant to a stock dividend or stock split or upon the
exercise of Parent Stock Options and the issuance of stock options to
employees of Parent or any of its Subsidiaries);
(iii) amend its charter or organization documents or by-laws;
(iv) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business and consistent with past practice
and not material to Parent and its Subsidiaries taken as a whole or (B)
dispositions for an aggregate consideration paid or payable to Parent and
its Subsidiaries (valuing any non-cash consideration at its fair
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market value and any contingent payments at the maximum amount payable and
treating any liabilities assumed as consideration paid) of not to exceed
$30,000,000 or (C) as set forth in the Parent Letter;
(v) incur any indebtedness for borrowed money or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) borrowings or
guarantees incurred in the ordinary course of business and consistent with
past practice, (B) any loans, advances or capital contributions to, or
other investments in, Parent or any wholly-owned Subsidiary of Parent or
(C) as set forth in the Parent Letter;
(vi) enter into or adopt any Parent Plan, or amend any existing Parent
Plan, other than as required by law;
(vii) violate or fail to perform any material obligation or duty
imposed upon Parent or any Subsidiary by any applicable federal, state,
local, foreign or provincial law, rule, regulation, guideline or ordinance;
(viii) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures; or
(ix) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Parent shall promptly advise the Company orally and in writing of any
change or event having, or which would reasonably be expected to have, a
Material Adverse Effect on Parent.
(b) Actions by the Company. During the period from the date of this
Agreement through the Effective Time, except as otherwise expressly required by
this Agreement or as set forth in the Company Letter, the Company shall, and
shall cause each of its Subsidiaries to, in all material respects carry on its
business in, and not enter into any material transaction other than in
accordance with, the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use its reasonable best efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it, all to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such; (B) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock; or (C)
purchase, redeem or otherwise acquire any shares of its capital stock or
those of any Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent
or convertible securities (other than the issuance of Company Common Shares
upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms);
(iii) amend its charter or organization documents or Regulations;
(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing a substantial portion of the assets of or equity in or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than (A) transactions that are in the
ordinary course of business and consistent with past practice and not
material to the Company and its Subsidiaries taken as a whole or (B) as set
forth in the Company Letter;
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(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business and consistent with past practice
and not material to the Company and its Subsidiaries taken as a whole or
(B) dispositions for an aggregate consideration paid or payable to the
Company and its Subsidiaries (valuing any non-cash consideration at its
fair market value and any contingent payments at the maximum amount payable
and treating any liabilities assumed as consideration paid) of not to
exceed $150,000 or (C) as set forth in the Company Letter; provided,
however, that the aggregate consideration received by the Company and its
Subsidiaries from all transactions permitted by this clause (v) shall not
exceed $250,000 and the aggregate fair market value (as determined in good
faith by the Board of Directors of the Company) of the assets sold, leased
or otherwise disposed of shall not exceed $250,000;
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness, or make any loans, advances or capital contributions to, or
other investments in, any other person, or retire any currently outstanding
indebtedness for borrowed money, other than (A) borrowings or guarantees
incurred in the ordinary course of business and consistent with past
practice, (B) any loans, advances or capital contributions to, or other
investments in, the Company or any wholly-owned Subsidiary of the Company
or (C) as set forth in the Company Letter;
(vii) enter into or adopt any Company Plan, or amend any existing
Company Plan, other than as required by law;
(viii) increase the compensation payable or to become payable to its
officers or employees, except for increases in the ordinary course of
business and consistent with past practice, or grant any severance or
termination pay to, or enter into, or amend or modify, any employment,
severance or consulting agreement with, any director or officer of the
Company or any of its Subsidiaries, or establish, adopt, enter into, or,
except as may be required to comply with applicable law, amend in any
material respect or take action to enhance in any material respect or
accelerate any rights or benefits under, 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;
(ix) violate or fail to perform any material obligation or duty
imposed upon the Company or any Subsidiary by any applicable federal,
state, local, foreign or provincial law, rule, regulation, guideline or
ordinance;
(x) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures; or
(xi) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
The Company shall promptly advise Parent orally and in writing of any
change or event having, or which would reasonably be expected to have, a
Material Adverse Effect on the Company.
Section 4.2 No Solicitation. From and after the date hereof, the Company
shall not, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing non-public information) any Takeover Proposal
(as hereinafter defined) from any person, or engage in or continue discussions
or negotiations relating to any Takeover Proposal and shall use its reasonable
best efforts to prevent any of its directors, officers, employees, attorneys,
financial advisors, agents and other authorized representatives and those of any
of its Subsidiaries from taking any such action; provided, however, that the
Company may (i) engage in discussions or negotiations with, or furnish
information concerning the Company and its properties, assets and business to,
any person which makes, or indicates in writing an intention to make, a Superior
Proposal (as hereinafter defined) if the Board of Directors of the Company shall
conclude in good faith on the basis of the written advice of its outside counsel
that the failure to take such action would violate the fiduciary obligations of
such Board of Directors under applicable law, or (ii) comply with Rule 14d-9 or
14e-2 promulgated by the SEC under the Exchange Act with regard to a Takeover
Proposal. The Company shall promptly notify Parent upon receipt of any Takeover
Proposal, including the material terms and
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conditions thereof and the identity of the person (or group) making such
Takeover Proposal, and the name of all persons to whom the Company has furnished
any information and the nature of such information. As used in this Agreement:
(i) "Takeover Proposal" means any proposal or offer for, or any expression of
interest (by public announcement or otherwise) by any person (other than a
proposal or offer by Parent or any of its Subsidiaries or Affiliates) in, any
tender or exchange offer for 20% or more of the equity of the Company, any
merger, consolidation or other business combination involving the Company or any
of its Significant Subsidiaries (as hereinafter defined), any acquisition in any
manner of 20% or more of the equity of, or 20% or more of the assets of, the
Company or any of its Significant Subsidiaries or any inquiry by any person with
respect to the Company's willingness to receive or discuss any of the foregoing;
(ii) "Superior Proposal" means a bona fide unsolicited proposal or offer made by
any person (or group) (other than Parent or its Subsidiaries or Affiliates) to
acquire the Company pursuant to any Takeover Proposal on terms which a majority
of the members of the Board of Directors of the Company determines in good
faith, and in the exercise of reasonable judgment (based on the advice of
independent financial advisors), to be more favorable to the Company and its
shareholders than the transactions contemplated hereby and for which any
required financing is committed or which, in the good faith and reasonable
judgment of a majority of such members, is reasonably capable of being financed
by such person; and (iii) "Significant Subsidiary" has the meaning specified in
Rule 1-02(w) of Regulation S-X promulgated by the Securities and Exchange
Commission.
Section 4.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent). During such period, the Company shall
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreement, including, but not limited to, by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States of America or of any
state having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the period from
the date of this Agreement through the Effective Time, unless the other parties
hereto shall otherwise agree in writing, none of Parent, the Company or any of
their respective Subsidiaries shall (i) knowingly take or fail to take any
action which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (ii) knowingly take or fail to
take any action which action or failure would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. The Company shall call a meeting of its
stockholders (the "Company Stockholder Meeting") to be held as promptly as
practicable following the effectiveness of the Registration Statement for the
purpose of voting upon the Merger. The Company shall, through its Board of
Directors, recommend to its stockholders approval of such matters and shall not
withdraw such recommendation; provided, however, that such Board of Directors
shall not be required to make, and shall be entitled to withdraw, such
recommendation if such Board of Directors concludes in good faith on the basis
of the written advice of its outside counsel that the making of, or the failure
to withdraw, such recommendation would violate the fiduciary obligations of such
Board of Directors under applicable law. The respective Boards of Directors of
the Company, Parent and Sub shall not withdraw their respective declarations
that the Merger is advisable unless, in any such case, any such Board of
Directors concludes in good faith on the basis of the written advice of its
outside counsel that the failure to rescind such determination would violate the
fiduciary obligations of such Board of Directors under applicable law.
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement. The Company and Parent shall promptly prepare and file with the SEC
the Registration Statement, which will include the Proxy Statement. Each of the
Company and Parent shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is now not so
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qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in connection with the
Merger and upon any exercise of the Substitute Options (as defined in SECTION
5.8). The Company shall furnish all information concerning the Company and the
holders of Company Common Shares as may be reasonably requested by Parent in
connection with any such action.
Section 5.3 Comfort Letters. (a) The Company shall use its reasonable best
efforts to cause to be delivered to Parent "comfort" letters of Arthur Andersen
LLP, the Company's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time, and
addressed to Parent and the Company, in form and substance reasonably
satisfactory to Parent and as is reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) Parent shall use its reasonable best efforts to cause to be delivered
to the Company "comfort" letters of Coopers & Lybrand LLP, Parent's independent
public accountants, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, and addressed to the Company and
Parent, in form and substance reasonably satisfactory to the Company and as is
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
Section 5.4 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Parent (which Parent represents
and warrants are not material) or to the Company (which the Company represents
and warrants are not material), Parent and the Company shall, and shall cause
each of its respective Subsidiaries to, afford, during normal business hours
during the period from the date of this Agreement through the Effective Time, to
the accountants, counsel, financial advisors, officers and other representatives
of the other reasonable access to, and permit them to make such inspections as
they may reasonably request of, the other's properties, books, contracts,
commitments and records (including, without limitation, the work papers of
independent public accountants) and permit such interviews with its officers and
employees as may be reasonably requested; and, during such period, Parent and
the Company shall, and shall cause each of its respective Subsidiaries to,
furnish promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its properties, assets, business and personnel as the other may
reasonably request. No investigation pursuant to this Section 5.4 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information obtained by
Parent or the Company pursuant to this Section 5.4 shall be kept confidential in
accordance with the Confidentiality Agreement dated January 15, 1996, as the
same has been amended to date, between Parent and the Company.
Section 5.5 Compliance with the Securities Act. Prior to the Effective
Time, the Company shall cause to be prepared and delivered to Parent a list
(reasonably satisfactory to counsel for Parent) identifying all persons who, at
the time of the Company Stockholder Meeting, may be deemed to be an "affiliate"
of the Company, as such term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the "Rule 145 Affiliates"). The Company shall use its
reasonable best efforts to cause each person who is identified as a Rule 145
Affiliate in such list to deliver to Parent on or prior to the Effective Time a
written agreement, in the form previously approved by the parties hereto, that
such Rule 145 Affiliate shall not (i) sell, pledge, transfer or otherwise
dispose of any shares of Parent Common Stock issued to such Rule 145 Affiliate
in connection with the Merger, except pursuant to an effective registration
statement or in compliance with such Rule 145 or another exemption from the
registration requirements of the Securities Act and (ii) sell or in any other
way reduce such Rule 145 Affiliate's risk relative to any shares of Parent
Common Stock received in the Merger (within the meaning of Section 201.01 of the
SEC's Financial Reporting Release No. 1) until such time as the financial
results (including combined sales and net income) covering at least 30 days of
post-Merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC. After the Effective Time, Parent
shall satisfy the conditions set forth in Rule 144(c)(1) promulgated by the SEC
under the Securities Act for so long as any Rule 145 Affiliate is subject to the
provisions of Rule 145(d).
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Section 5.6 Stock Exchange Listings. Parent shall use its reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Parent Common Stock to be issued in connection with the Merger and upon any
exercise of the Substitute Options.
Section 5.7 Fees and Expenses. (a) Except as otherwise provided in this
Section 5.7 and in Section 5.11, whether or not the Merger shall be consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, the fees and
disbursements of counsel, financial advisors, accountants, actuaries and
consultants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and filing fees shall be divided equally
between Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by Parent pursuant to Section 7.1(b)(i) or
Section 7.1(d), then, in either such case, the Company shall (without prejudice
to any other rights of Parent against the Company) reimburse Parent upon demand
for all out-of-pocket fees and expenses incurred or paid by or on behalf of
Parent and its Subsidiaries in connection with this Agreement and the
transactions contemplated hereby, including all fees and expenses of counsel,
financial advisors, accountants, actuaries and consultants; provided, however,
that the Company shall not be obligated to make aggregate payments pursuant to
this sentence in excess of $400,000. In addition, if within one year after the
date of such termination, the Company shall enter into a definitive agreement
with respect to any Takeover Proposal, or if any Takeover Proposal shall have
been completed or the Board of Directors of the Company shall have recommended
to the shareholders of the Company any Takeover Proposal or adopted a resolution
to do so, then, upon the earliest of such occurrences, the Company shall
immediately pay to Parent an amount in cash equal to $1,000,000, less any amount
paid to Parent pursuant to the immediately preceding sentence; provided that no
amount shall be payable to Parent pursuant to this sentence in the event that
the Company would have had the right to terminate this Agreement pursuant to
Section 7.1(c) or 7.1(d).
(c) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by Parent pursuant to Section 7.1(b)(ii) or
by the Company pursuant to Section 7.1(c)(ii) and, in either such case, within
one year after the date of such termination, any of the occurrences described in
the second sentence of Section 5.7(b) shall have occurred, the Company shall
immediately pay to Parent an amount in cash equal to $1,000,000; provided that
no payment shall be due by the Company under this Section 5.7(c) unless the
Board of Directors of the Company determines that such transaction is a Superior
Proposal.
(d) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by Parent pursuant to Section 7.1(f), Section
7.1(g) or Section 7.1(h) or by the Company pursuant to Section 7.1(f), the
Company shall immediately pay to Parent an amount in cash equal to $1,000,000;
provided that in the event that this Agreement is terminated by Parent: (i)
pursuant to Section 7.1(f), the Company shall be required to pay such cash
amount to Parent only upon the occurrence of the events set forth in clauses (i)
and (ii) thereof unless the Company shall have failed to timely provide such
written notice to, or cooperated fully with, Parent as required by such clause
(i); and (ii) pursuant to Section 7.1(g), the Company shall not be required to
pay such cash amount to Parent if, (A) at the time that the Board of Directors
of the Company took such action described in Section 7.1(g), the Company would
have been entitled to terminate this Agreement pursuant to Section
7.1(i)(assuming, for the purpose of this clause (A) that the Calculation Date
(as such term is used in Section 7.1(i)) is a date occurring within ten business
days preceding the date the Board of Directors of the Company took such action);
or (B) the Board of Directors of the Company shall have taken the action or
actions specified by Section 7.1(g) in connection with a Superior Proposal.
(e) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by the Company pursuant to Section 7.1(c)(i)
or Section 7.1(d), then, in either such case, Parent shall (without prejudice to
any other rights of the Company against Parent) reimburse the Company upon
demand for all out-of-pocket fees and expenses incurred or paid by or on behalf
of the Company and its Subsidiaries in connection with this Agreement and the
transactions contemplated hereby, including all fees
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and expenses of counsel, financial advisors, accountants, actuaries and
consultants; provided, however, that Parent shall not be obligated to make
aggregate payments pursuant to this sentence in excess of $400,000.
Section 5.8 Company Stock Options. Not later than the Effective Time,
each Company Stock Option which is outstanding immediately prior to the
Effective Time pursuant to any stock option plan (other than any "stock purchase
plan" within the meaning of Section 423 of the Code) of the Company in effect on
the date hereof (the "Company Stock Plans") shall become and represent an option
to purchase the number of shares of Parent Common Stock (a "Substitute Option"),
increased to the nearest whole share, determined by multiplying (i) the number
of Company Common Shares subject to such Company Stock Option immediately prior
to the Effective Time by (ii) the Conversion Number, at an exercise price per
share of Parent Common Stock (increased to the nearest whole cent) equal to the
exercise price per Company Common Share immediately prior to the Effective Time
divided by the Conversion Number. After the Effective Time, except as provided
above in this Section 5.8, each Substitute Option shall be exercisable upon the
same terms and conditions as were applicable to the related Company Stock Option
immediately prior to the Effective Time; provided, that any conditions to the
exercise of the Company Stock Options which are expressed in terms of the market
price of the Company Common Stock shall be adjusted by dividing such price by
the Conversion Number. This Section 5.8 shall be subject to any contrary
provision contained in the applicable Company Stock Plan or in the option
agreement with respect to any Company Stock Option outstanding thereunder, but
the Company shall use its reasonable best efforts to obtain any necessary
consents of the holders of such Company Stock Options to effect this Section
5.8. The Company shall not grant any stock appreciation rights or limited stock
appreciation rights and shall not permit cash payments to holders of Company
Stock Options in lieu of the substitution therefor of Substitute Options as
provided in this Section 5.8. At the Effective Time, the Parent Common Stock
issuable upon exercise of the Substitute Options shall be registered under the
Securities Act.
Section 5.9 Reasonable Best Efforts; Pooling of Interests. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable, to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including, but
not limited to: (i) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from all Governmental Entities and the making of
all necessary registrations and filings with, and the taking of all other
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity (including those in
connection with the HSR Act and any Takeover Statute); (ii) the obtaining of all
necessary consents, approvals or waivers from persons other than Governmental
Entities; (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by this Agreement.
(b) Each of Parent and the Company shall take, together with its respective
accountants, all actions reasonably necessary in order to obtain a favorable
determination from the SEC that the Merger may be accounted for as a pooling of
interests in accordance with generally accepted accounting principles.
(c) Each party hereto shall use its reasonable best efforts not to take any
action, or to enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or to
result in a breach of any of its covenants in this Agreement.
(d) Notwithstanding any provision in this Agreement to the contrary: (i)
neither Parent nor the Company shall be obligated to use its reasonable best
efforts or to take any action pursuant to this SECTION 5.9 if the Board of
Directors of Parent or the Company, as the case may be, shall conclude in good
faith on the basis of the written advice of its outside counsel that such action
would violate the fiduciary obligations of such Board of Directors under
applicable law; and (ii) in connection with any filing or
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submission required or action to be taken by either Parent or the Company to
effect the Merger and to consummate the other transactions contemplated hereby,
the Company shall not, without Parent's prior written consent, commit to any
divestiture transaction, and, except as may be set forth in the Parent Letter,
neither Parent nor any of its Affiliates shall be required to divest or hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to, or its ability to retain, the Company or any material
portions thereof or any of the business, product lines, properties or assets of
Parent or any of its Affiliates.
Section 5.10 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation and without the approval (which need not be in writing and
shall not unreasonably be withheld) of the other, except as may be required by
applicable law or by existing obligations pursuant to any listing agreement with
any national securities exchange or with NASDAQ.
Section 5.11 Real Estate Transfer and Gains Tax. Parent and the Company
agree that either the Company or the Surviving Corporation shall pay all state
or local taxes, if any (collectively, the "Gains Taxes"), attributable to the
transfer of the beneficial ownership of the Company's and its Subsidiaries' real
properties, and any penalties or interest with respect thereto, payable in
connection with the consummation of the Merger. The Company shall cooperate with
Parent in the filing of any returns with respect to the Gains Taxes, including
supplying in a timely manner a complete list of all real property interests held
by the Company and its Subsidiaries and any information with respect to such
properties that is reasonably necessary to complete such returns. The portion of
the consideration allocable to the real properties of the Company and its
Subsidiaries shall be determined by Parent in its reasonable discretion. The
shareholders of the Company shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section 5.11 in the preparation of any
return with respect to the Gains Taxes.
Section 5.12 Takeover Statutes. If any Takeover Statute shall become
applicable to the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use their reasonable best efforts to
grant such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise act to minimize the effects
of any such statute or regulation on the transactions contemplated hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. Parent
shall cause the Surviving Corporation to (a) maintain continuously in effect,
for six years after the Effective Time, directors' and officers' liability
insurance covering those persons currently covered by the Company's policies for
acts or omissions occurring at or prior to the Effective Time on terms no less
favorable than current coverages and (b) indemnify and hold harmless (and
advance expenses to) all past and current directors, officers, employees and
agents of the Company and of its Subsidiaries, for claims made within six years
after the Effective Time arising out of acts or omissions occurring at or prior
to the Effective Time, to the same extent such persons are currently indemnified
by the Company pursuant to the Company's Amended Articles of Incorporation and
Amended and Restated Code of Regulations.
Section 5.14 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (B) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied; and (ii) any failure of Parent or the
Company, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.14 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
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Section 5.15 Reorganization Status. Parent agrees that it will not take
any action after the Effective Time that would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code for
failure to satisfy the "continuity of business enterprise" requirements of such
a reorganization.
Section 5.16 Employee Benefit Plans. For a period of not less than one
year after the Effective Time, Parent will provide employee benefit plans
(including perquisites) for employees employed by the Company or any of its
Subsidiaries immediately prior to the Effective Time and for former employees of
the Company currently receiving benefits which are, in the aggregate, no less
favorable than those currently provided by the Company and its Subsidiaries, it
being understood that the Company Stock Plans will be terminated and no further
options will be granted under the Company Stock Plans.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. The Merger shall have been duly approved by
the requisite vote of the shareholders of the Company in accordance with
applicable law and the Articles of Incorporation and Regulations of the
Company.
(b) Stock Exchange Listings. The shares of Parent Common Stock
issuable in accordance with the Merger and upon exercise of the Substitute
Options shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any Governmental Entity, which the failure to
obtain, make or occur would have the effect of making the Merger or any
of the transactions contemplated hereby illegal or would have a Material
Adverse Effect on Parent or the Company (as the Surviving Corporation),
assuming the Merger had taken place, shall have been obtained, shall
have been made or shall have occurred.
(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall
have been initiated or, to the knowledge of Parent or the Company,
threatened by the SEC. All necessary state securities authorizations
(including approvals in connection with any Takeover Statutes) shall have
been received.
(e) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect
and has the effect of making the Merger or any of the transactions
contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed at or prior
to the Effective Time, each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
be true and correct at and as of the
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Effective Time as if made at and as of the Effective Time and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made
at and as of the Effective Time, in each case except as contemplated or
permitted by this Agreement; and the Company shall have received a
certificate signed on behalf of Parent by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of
Graydon, Head & Ritchey, in form and substance reasonably satisfactory to
the Company, dated the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing as of the
Effective Time, for federal income tax purposes:
(i) The Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent
will each be a party to such reorganization within the meaning of
Section 368(b) of the Code;
(ii) No gain or loss will be recognized by the Company as a result
of the Merger;
(iii) No gain or loss will be recognized by the non-dissenting
shareholders of the Company upon the conversion of their Company Common
Shares into shares of Parent Common Stock in accordance with the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent Common Stock
received by a shareholder in exchange for Company Common Shares in
accordance with the Merger (including fractional shares of Parent Common
Stock for which cash is received) will be the same as the aggregate tax
basis of such Company Common Shares;
(v) The holding period for shares of Parent Common Stock received
by a shareholder in exchange for Company Common Shares in accordance
with the Merger will include the period that such Company Common Shares
were held by the shareholder, provided such Company Common Shares were
held as capital assets by such shareholder at the Effective Time; and
(vi) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common stock will recognize gain or loss
equal to the difference, if any, between such shareholder's basis in
such fractional share and the amount of cash received.
In rendering such opinion, Graydon, Head & Ritchey may receive and rely
upon representations contained in a certificate of the Company substantially in
the form attached to the Company Letter (the "Company Tax Certificate"), a
certificate of Parent substantially in the form attached to the Parent Letter
(the "Parent Tax Certificate") and other appropriate certificates of the
Company, Parent and others, and may condition such opinion on the receipt from
each shareholder of the Company holding a substantial amount of the Company
Common Shares (a "Major Shareholder") of a certificate substantially in the form
attached to the Company Letter (the "Shareholder Certificate").
(c) Opinion of Sidley & Austin. The Company shall have received an opinion
from Sidley & Austin, dated the Effective Time, substantially to the effect
that:
(i) The incorporation, existence and good standing in their respective
jurisdictions of incorporation of Parent and Sub are as stated in the first
sentence of Section 2.1; the authorized shares of capital stock of Parent
are as stated in the first sentence of Section 2.2; and all outstanding
shares of Parent Common Stock have been duly and validly authorized and
issued, are fully paid and nonassessable and have not been issued in
violation of any preemptive right of any stockholders;
(ii) Each of Parent and Sub has full corporate power and authority to
execute, deliver and perform this Agreement, and this Agreement has been
duly authorized, executed and delivered by Parent and Sub and (assuming its
due and valid authorization, execution and delivery by the Company and its
validity and binding effect upon the Company) constitutes the legal, valid
and binding obligation of Parent and Sub enforceable against Parent and Sub
in accordance with its terms, except to the extent enforceability
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may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws of general applicability relating
to or affecting the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(iii) The execution and performance by Parent and Sub of this
Agreement will not violate the Restated Certificate of Incorporation or
By-laws of Parent or the Articles of Incorporation or Regulations of Sub;
(iv) To the knowledge of such counsel, the execution and performance
by Parent and Sub of this Agreement will not violate, result in a breach of
or constitute a default under any material indenture, mortgage, evidence of
indebtedness, lease, agreement, instrument, law, rule, regulation,
judgment, order or decree to which Parent or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or
assets are bound;
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or other Governmental Entity which has
not been obtained is required on behalf of Parent or any of its
Subsidiaries for the consummation of the transactions contemplated by this
Agreement;
(vi) To the knowledge of such counsel, there are no actions, suits or
proceedings, pending or overtly threatened, against or affecting Parent or
any of its Subsidiaries, at law or in equity or before or by any court or
other Governmental Entity or before any arbitrator, which seek to restrain,
prohibit or invalidate any of the transactions contemplated by this
Agreement;
(vii) (A) At the time the Registration Statement became effective, the
Registration Statement (other than the financial statements, financial
data, statistical data and supporting schedules included therein, and
information relating to or supplied by the Company, as to which such
counsel need express no opinion) complied as to form in all material
respects with the requirements of the Securities Act; and (B) in the course
of the preparation of the Registration Statement and the Proxy Statement,
such counsel has considered the information set forth therein in light of
the matters required to be set forth therein, and has participated in
conferences with officers and representatives of the Company and Parent,
including their respective counsel and independent public accountants,
during the course of which the contents of the Registration Statement and
the Proxy Statement and related matters were discussed; such counsel has
not independently checked the accuracy or completeness of, or otherwise
verified, and accordingly is not passing upon, and does not assume
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Proxy Statement;
such counsel has relied as to materiality, to a large extent, upon the
judgment of officers and representatives of the Company and Parent;
however, as a result of such consideration and participation, nothing has
come to such counsel's attention which causes such counsel to believe that
the Registration Statement (other than the financial statements, financial
data, statistical data and supporting schedules included therein, and
information relating to or supplied by the Company, as to which such
counsel need express no belief), at the time it became effective, contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Proxy Statement (other than the
financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by the
Company, as to which such counsel need express no belief), at the time the
Registration Statement became effective and at the time of the Company
Stockholder Meeting, included any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
(viii) The shares of Parent Common Stock being issued at the Effective
Time pursuant to this Agreement have been duly authorized and validly
issued and are fully paid and nonassessable.
In rendering such opinion, Sidley & Austin may rely as to matters of fact
upon the representations contained herein and in certificates of officers of
Parent and its Subsidiaries delivered to such counsel and certificates of public
officials. Such opinion may state that it is limited to the General Corporation
Law of the
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State of Delaware, the laws of the State of Illinois and the federal laws of the
United States of America and that, insofar as the laws of the State of Ohio are
applicable, such counsel has relied upon the opinion of Taft, Stettinius &
Hollister delivered to the Company pursuant to Section 6.2(d).
(d) Opinion of Taft, Stettinius & Hollister. The Company shall have
received an opinion of Taft, Stettinius & Hollister, dated the Effective Time,
substantially to the effect that: (i) Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio; (ii)
Sub has full corporate power and authority to execute, deliver and perform this
Agreement; (iii) this Agreement has been duly authorized, executed and delivered
by Sub and (assuming its due and valid authorization, execution and delivery by
Parent and the Company and its validity and binding effect upon the Company)
constitutes the legal, valid and binding obligation of Parent and Sub
enforceable against Parent and Sub in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law); and (iv) the Merger has been
duly consummated and become effective in accordance with the OGCL. In rendering
such opinion, Taft, Stettinius & Hollister may rely as to matters of fact upon
the representations contained herein and in certificates of officers of Parent
and its Subsidiaries delivered to such counsel and certificates of public
officials. Such opinion may state that it is limited to the laws of the State of
Ohio.
(e) Consents Under Agreements. Parent shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, lease or other agreement or instrument, except where the failure
to obtain the same would not reasonably be expected, in the good faith opinion
of the Company, individually or in the aggregate, to have a Material Adverse
Effect on Parent or upon the consummation of the transactions contemplated
hereby.
(f) Non-Compete Agreements. The Agreement, dated as of September 23, 1996,
by and among Parent, the Company and Durwood G. Rorie, Jr. ("Rorie"), and the
Agreement, dated as of September 23, 1996, by and among Parent, the Company and
William A. Cheney ("Cheney") (collectively, the "Non-Compete Agreements") shall
become effective at the Effective Time.
(g) Material Adverse Change. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to Parent; and the Company
shall have received a certificate signed on behalf of Parent by its Chief
Executive Officer and its Chief Financial Officer to such effect.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligation of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed at or prior
to the Effective Time, each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall
be true and correct at and as of the Effective Time as if made at and as of
the Effective Time and each of such representations and warranties that is
not so qualified shall be true and correct in all material respects at and
as of the Effective Time as if made at and as of the Effective Time, in
each case except as contemplated or permitted by this Agreement; and Parent
shall have received a certificate signed on behalf of the Company by its
Chief Executive Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley &
Austin, in form and substance reasonably satisfactory to Parent, dated the
Effective Time, substantially to the effect that, on the basis of
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facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) The Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent
will each be a party to such reorganization within the meaning of
Section 368(b) of the Code;
(ii) No gain or loss will be recognized by Parent or the Company as
a result of the Merger;
(iii) No gain or loss will be recognized by the non-dissenting
shareholders of the Company upon the conversion of their Company Common
Shares into shares of Parent Common Stock in accordance with the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent Common Stock
received by a shareholder in exchange for Company Common Shares in
accordance with the Merger (including fractional shares of Parent Common
Stock for which cash is received) will be the same as the aggregate tax
basis of such Company Common Shares;
(v) The holding period for shares of Parent Common Stock received
by a shareholder in exchange for Company Common Shares in accordance
with the Merger will include the period that such Company Common Shares
were held by the shareholder, provided such Company Common Shares were
held as capital assets by such shareholder at the Effective Time; and
(vi) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss
equal to the difference, if any, between such shareholder's basis in
such fractional share and the amount of cash received.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations contained in a certificate of the Company substantially in
the form of the Company Tax Certificate, a certificate of Parent
substantially in the form of the Parent Tax Certificate and other
appropriate certificates of the Company, Parent and others, and may
condition such opinion on the receipt from each Major Shareholder of a
Shareholder Certificate.
(c) Opinion of Jack W. Painter, ESQ. Parent shall have received an
opinion from Jack W. Painter, Esq., dated the Effective Time, substantially
to the effect that:
(i) The Company is a corporation in good standing under the laws of
the State of Ohio, and the authorized shares of the capital stock of the
Company are as stated in the first sentence of Section 3.2;
(ii) The Company has full corporate power and authority to execute,
deliver and perform this Agreement, and this Agreement has been duly
authorized, executed and delivered by the Company and (assuming its due
and valid authorization, execution and delivery by Parent and Sub and
its validity and binding effect upon Parent and Sub) constitutes the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general
applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at
law);
(iii) The execution and performance by the Company of this
Agreement will not violate the Articles of Incorporation or Regulations
of the Company or the charter or organization documents or by-laws of
any of its Subsidiaries;
(iv) To the knowledge of such counsel, the execution and
performance by the Company of this Agreement will not violate, result in
a breach of or constitute a default under any material indenture,
mortgage, evidence of indebtedness, lease, agreement, instrument, law,
rule, regulation, judgment,
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order or decree to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or
assets are bound;
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or other Governmental Entity which
has not been obtained is required on behalf of the Company or any of its
Subsidiaries for consummation of the transactions contemplated by this
Agreement;
(vi) To the knowledge of such counsel, there are no actions, suits
or proceedings, pending or overtly threatened, against or affecting the
Company or any of its Subsidiaries, at law or in equity or before or by
any court or other Governmental Entity or before any arbitrator, which
seek to restrain, prohibit or invalidate any of the transactions
contemplated by this Agreement; and
(vii) (A) At the time the Registration Statement became effective,
the Registration Statement (other than the financial statements,
financial data, statistical data and supporting schedules included
therein, and information relating to or supplied by Parent, as to which
such counsel need express no opinion) complied as to form in all
material respects with the requirements of the Securities Act; and (B)
in the course of the preparation of the Registration Statement and the
Proxy Statement, such counsel has considered the information set forth
therein in light of the matters required to be set forth therein, and
has participated in conferences with officers and representatives of the
Company and Parent, including their respective counsel and independent
public accountants, during the course of which the contents of the
Registration Statement and the Proxy Statement and related matters were
discussed; such counsel has not independently checked the accuracy or
completeness of, or otherwise verified, and accordingly is not passing
upon, and does not assume responsibility for, the accuracy, completeness
or fairness of the statements contained in the Registration Statement or
the Proxy Statement; such counsel has relied as to materiality, to a
large extent, upon the judgment of officers and representatives of the
Company and Parent; however, as a result of such consideration and
participation, nothing has come to such counsel's attention which causes
such counsel to believe that the Registration Statement (other than the
financial statements, financial data, statistical data and supporting
schedules included therein, and information relating to or supplied by
Parent, as to which such counsel need express no belief), at the time it
became effective, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Proxy Statement (other than the financial statements, financial data,
statistical data and supporting schedules included therein, and
information relating to or supplied by Parent, as to which such counsel
need express no belief), at the time the Registration Statement became
effective and at the time of the Company Stockholder Meeting, included
any untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
upon the representations contained herein and on certificates of officers
of the Company delivered to such counsel and certificates of public
officials. Such opinion may state that it is limited to the laws of the
State of Ohio, the General Corporation law of the State of Delaware and the
federal laws of the United States of America.
(d) Opinion of Graydon, Head & Ritchey. Parent shall have received an
opinion from Graydon, Head & Ritchey, dated the Effective Time,
substantially to the effect that (i) the Company is a corporation duly
organized and validly existing under the laws of the State of Ohio; and
(ii) all outstanding Company Common Shares have been duly and validly
authorized and issued, are fully paid and nonassessable and have not been
issued in violation of any preemptive right of shareholders.
In rendering such opinion, such counsel may rely as to matters of fact
upon the representations contained herein and in certificates of officers
of the Company delivered to such counsel. Such opinion may state that it is
limited to the laws of the State of Ohio.
(e) Consents Under Agreements. The Company shall have obtained the
consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(c)) whose consent or
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approval shall be required in connection with the transactions contemplated
hereby under any indenture, mortgage, evidence of indebtedness, lease or
other agreement or instrument, except where the failure to obtain the same
would not reasonably be expected, in the good faith opinion of Parent,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or Parent or upon the consummation of the transactions contemplated
hereby.
(f) Affiliate Agreements. Parent shall have received the written
agreements from the Rule 145 Affiliates of the Company described in Section
5.5.
(g) Litigation. There shall not have been instituted or be pending,
or threatened, any suit, action or proceeding before any Governmental
Entity as a result of this Agreement or any of the transactions
contemplated hereby which, if such Governmental Entity were to prevail,
would reasonably be expected, in the good faith opinion of Parent, to have
a Material Adverse Effect on Parent or the Company (as the Surviving
Corporation).
(h) Accounting. Parent shall have received an opinion of Coopers &
Lybrand LLP, in form and substance reasonably satisfactory to Parent, that
the Merger will qualify as a pooling of interests under generally accepted
accounting principles; and based on such opinion and such other advice as
Parent may deem relevant, Parent shall have no reasonable basis for
believing that the Merger may not be accounted for as a pooling of
interests in accordance with generally accepted accounting principles.
(i) Non-Compete Agreements. The Non-Compete Agreements shall become
effective at the Effective Time.
(j) The following agreements shall have been terminated and be of no
further force or effect prior to the Effective Time: (i) Stock Transfer,
Restriction, Purchase and Redemption Agreement, dated December 2, 1985,
between Rorie, Cheney and the Company; (ii) Transfer of Stock Agreement,
dated August 1, 1994, between Rorie, Margaret Stewart Rorie, Cheney, the W.
A. Cheney Family Trust and the Company; and (iii) Stock Purchase and Sale
Agreement, dated January 2, 1992, among Meiko Mercantile, Limited, Cheney
and Rorie.
(k) Appraisal Rights. The holders of not more than 10% of the issued
and outstanding Company Common Shares shall have properly demanded
appraisal or dissenters rights pursuant to the OGCL.
(l) Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change with respect to the Company; and
Parent shall have received a certificate signed on behalf of the Company by
its Chief Executive Officer and its Chief Financial Officer of the Company
to such effect.
ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval by the
shareholders of the Company of the matters presented in connection with the
Merger:
(a) by mutual written consent of Parent, Sub and the Company, as
authorized by their respective Boards of Directors;
(b) by Parent, as authorized by its Board of Directors, if (i) the
Company shall have failed to comply in any material respect with any of its
covenants or agreements contained in this Agreement required to be complied
with prior to the date of such termination, which failure to comply has not
been cured within five business days after receipt by the Company of notice
of such failure to comply, or (ii) the shareholders of the Company shall
not approve the Merger at the Company Stockholder Meeting or any
adjournment thereof;
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(c) by the Company, as authorized by its Board of Directors, if (i)
Parent or Sub shall have failed to comply in any material respect with any
of its respective covenants or agreements contained in this Agreement
required to be complied with prior to the date of such termination, which
failure to comply has not been cured within five business days after
receipt by Parent of notice of such failure to comply, or (ii) the
shareholders of the Company shall not approve the Merger at the Company
Stockholder Meeting or any adjournment thereof;
(d) by either Parent or the Company, as authorized by its Board of
Directors, if there has been (i) a material breach by the other (or Sub if
the Company is the terminating party) of any representation or warranty
that is not qualified as to materiality or (ii) a breach by the other (or
Sub if the Company is the terminating party) of any representation or
warranty that is qualified as to materiality, in each case which breach has
not been cured within five business days after receipt by the breaching
party of notice of the breach;
(e) by either Parent or the Company, as authorized by its Board of
Directors, if: (i) the Merger has not been effected on or prior to the
close of business on March 31, 1997; provided, however, that the right to
terminate this Agreement pursuant to this clause (e) shall not be available
to any party whose failure to fulfill any obligation of this Agreement has
been the cause of, or resulted in, the failure of the Merger to have
occurred on or prior to such date; or (ii) any court or other Governmental
Entity having jurisdiction over a party hereto shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and nonappealable;
(f) by either Parent or the Company, as authorized by its Board of
Directors, if the Board of Directors of the Company shall determine that a
Takeover Proposal constitutes a Superior Proposal; provided, however, that
the Company may not terminate this Agreement pursuant to this clause (f)
unless (i) 15 days shall have elapsed after delivery to Parent of a written
notice of such determination by such Board of Directors and during such
15-day period the Company shall have fully cooperated with Parent,
including, without limitation, informing Parent of the terms and conditions
of such Takeover Proposal and the identity of the person or group making
such Takeover Proposal, with the intent of enabling Parent to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, and (ii) at the end of
such 15-day period such Board of Directors shall continue reasonably to
believe that such Takeover Proposal constitutes a Superior Proposal and
simultaneously therewith the Company shall enter into a definitive
acquisition, merger or similar agreement to effect such Superior Proposal;
provided, further, that Parent may only terminate this Agreement pursuant
to this clause (f) at any time after the close of business on the 10th day
following any date on which the Board of Directors of the Company
determines that a Takeover Proposal constitutes a Superior Proposal and
only if, prior to such termination by Parent, the Board of Directors of the
Company has not rejected such Takeover Proposal and has not terminated all
discussions and negotiations pertaining to such Takeover Proposal;
provided, further that the immediately preceding proviso shall apply only
to the first Takeover Proposal determined by the Board of Directors of the
Company to be a Superior Proposal; upon, and at any time after, any
subsequent determination by the Board of Directors of the Company that any
Takeover Proposal is a Superior Proposal, Parent shall have the right to
terminate this Agreement pursuant to this clause (f);
(g) by Parent, as authorized by its Board of Directors, if the Board
of Directors of the Company shall not have recommended the Merger to the
Company's shareholders, or shall have resolved not to make such
recommendation, or shall have modified or rescinded its recommendation of
the Merger to the Company's shareholders as being advisable and fair to and
in the best interests of the Company and its shareholders, or shall have
modified or rescinded its approval of this Agreement, or shall have
resolved to do any of the foregoing;
(h) by Parent, as authorized by its Board of Directors, if any
Takeover Proposal (other than the Merger) involving the Company shall
result in the acquisition by any person, entity or group (other than
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the Parent or any of its Subsidiaries) of 20% or more of the equity of, or
20% or more of the assets of, the Company or any of its Significant
Subsidiaries; or
(i) by the Company, as authorized by its Board of Directors, in the
event that on any date (the "Calculation Date") occurring within ten
business days preceding the Closing, the per share closing price of Parent
Common Stock on the NYSE (as shown in The Wall Street Journal, New York
Stock Exchange Composite Transactions) is less than the dollar amount
calculated by multiplying the Index Adjusted Price by 85%. The "Index
Adjusted Price" is equal to the product obtained by multiplying (A) 21 1/2
by (B) the decimal determined by dividing the S&P 500 Index on the
Calculation Date by the S&P 500 Index on the date of this Agreement
(provided that in no event shall such decimal exceed 100%).
The right of Parent or the Company to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of such party, whether prior to or
after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement by either Parent or the Company as provided in Section 7.1, this
Agreement shall forthwith become void without any liability hereunder on the
part of the Company, Parent, Sub or their respective directors or officers,
except for the last sentence of Section 5.4 and the entirety of Section 5.7,
which shall survive any such termination; provided, however, that nothing
contained in this Section 7.2 shall relieve any party hereto from any liability
for any breach of this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval by the shareholders of the Company of the
matters presented to them in connection with the Merger; provided, however, that
after any such approval, no amendment shall be made if applicable law would
require further approval by such shareholders, unless such further approval
shall be obtained. This Agreement shall not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any instrument delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived; provided, however, that
after approval by the shareholders of the Company of the matters presented to
them in connection with the Merger, no waiver shall be made if applicable law
would require further approval by such shareholders, unless such further
approval shall be obtained. Any agreement on the part of any 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 VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall survive the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when
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telecopied (with a confirmatory copy sent by overnight courier) to the other
parties hereto at the following addresses (or at such other address for any
party as shall be specified by like notice):
(a) if to Parent or Sub, to
CLARCOR Inc.
2323 Sixth Street
Rockford, IL 61104
Attention: Bruce A. Klein
Vice President-Finance and
Chief Financial Officer
Tel. 815/961-5717
Fax 815/968-5879
with a copy to:
David J. Boyd, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Tel. 312/853-7444
Fax 312/853-7036
(b) if to the Company, to
United Air Specialists, Inc.
4440 Creek Road
Cincinnati, OH 45242-2832
Attention: Durwood G. Rorie, Jr.
President
Tel. 513/891-0400
Fax 513/984-2684
with a copy to:
Jack W. Painter, Esq.
5820 Graves Lake Drive
Cincinnati, OH 45243
Tel. 513/395-4010
Fax 513/561-1396
Section 8.3 Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each of the parties hereto and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, except as provided in the last sentence of Section 5.4, constitutes
the entire agreement of the parties hereto and supersedes all prior agreements
and understandings, both written and oral, among such parties with respect to
the subject matter hereof. This Agreement, except for the provisions of Section
5.13, is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.6 Governing Law. Except to the extent that the laws of the State
of Ohio are mandatorily applicable to the Merger, 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 conflict of laws of such state.
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<PAGE> 153
Section 8.7 Assignment. Except as provided in the next to last sentence of
Section 1.1, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
Section 8.8 Severability. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party hereto. Upon any determination that any term or
other provision hereof is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of such parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the terms or provisions
of this Agreement were not performed in accordance with their specific wording
or were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States of America or any state having jurisdiction, such
remedy being in addition to any other remedy to which any party may be entitled
at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed and attested by their respective officers thereunto duly
authorized, all as of the date first written above.
<TABLE>
<S> <C>
CLARCOR INC.
By: /s/ LAWRENCE E. GLOYD
----------------------------------------------
Lawrence E. Gloyd
Chairman and Chief Executive Officer
Attest: /s/ MARCIA S. BLAYLOCK
- -----------------------------------------------
Marcia S. Blaylock
Vice President and Corporate Secretary
CUAC INC.
By: /s/ LAWRENCE E. GLOYD
----------------------------------------------
Lawrence E. Gloyd
President
Attest: /s/ MARCIA S. BLAYLOCK
- -----------------------------------------------
Marcia S. Blaylock
Vice President and Corporate
Secretary
UNITED AIR SPECIALISTS, INC.
By: /s/ DURWOOD G. RORIE
----------------------------------------------
Durwood G. Rorie
President and CEO
Attest: /s/ WILLIAM A. CHENEY
- -----------------------------------------------
William A. Cheney
Secretary
</TABLE>
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<PAGE> 154
ANNEX II
[J. J. B. HILLIARD, W. L. LYONS, INC. LETTERHEAD]
September 23, 1996
Board of Directors
United Air Specialists, Inc.
4440 Creek Road
Cincinnati, OH 45242-2832
Gentlemen:
You have requested our opinion as to the fairness to the shareholders of
United Air Specialists, Inc. (the "Company"), from a financial point of view, of
the merger transaction under the terms set forth in a definitive merger
agreement dated and signed September 23, 1996 among CLARCOR Inc. ("Parent"),
CUAC Inc. ("Sub") and the Company (the "Agreement"). The Agreement provides for
the merger (the "Merger") of Sub with and into the Company pursuant to which,
among other things, each common share of the Company will be converted into
.3698577 shares of common stock of Parent ("Parent Common Stock"), including the
corresponding number of rights to purchase shares of Parent Series B Preferred
Stock pursuant to the Parent Rights Agreement (as defined in the Agreement), and
the right to receive cash in lieu of fractional shares.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and Parent. We have
reviewed certain other information, including summary financial forecasts,
provided to us by the Company and Parent. We have met with the Company's
management to discuss the business and prospects of the Company, and the results
of their discussions with management of Parent with respect to the historical
and current operating results and financial condition and the prospects of
Parent. We have also discussed with management of the Company a proposal
received by it from a third party. Such proposal related to a proposed
acquisition of the Company by such third party. We were not requested to, and do
not, express any opinion as to the fairness to the shareholders of the Company,
from a financial point of view, of such proposed acquisition. We have also had
discussions with management of Parent regarding Parent's historical and current
operating results and financial condition, and its prospects following the
Merger.
We have considered certain financial and stock market data of the Company
and Parent, and have compared that data with similar data for other publicly
held companies in businesses we deem comparable to those of the Company and
Parent. We have also considered the financial terms of certain other business
combinations. We also considered such other information, financial studies,
analyses and investigations, and financial, economic and market criteria, that
we deemed relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate.
(With respect to the financial forecasts of the Company and Parent, we have
assumed that they have been reasonably prepared in accordance with accepted
industry practice and reflect the best currently available estimates and
judgments of the Company's and Parent's management as to the expected future
financial performance of the Company or Parent, as the case may be.) In
addition, we have not made an independent evaluation or appraisal of the assets
of the Company or Parent, nor have we been furnished with any such appraisals.
We were not requested to, and did not, solicit third party indications of
interest to acquire or merge with all or any part of the Company.
<PAGE> 155
Board of Directors
September 23, 1996
Page 2
We have assumed that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, of 1986, as
amended. We have further assumed that the Merger will be accounted for as a
pooling of interests.
Our opinion is based on general economic, market, monetary and other
conditions as they exist and can be evaluated on, and on the information made
available to us as of, the date hereof. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. We are expressing no opinion herein
as to the prices at which the Parent Common Stock will trade either prior to or
following the Merger. Our opinion does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote on the Merger.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services. In addition, we will receive a
fee for rendering this opinion. In the ordinary course of our business, we may
actively trade the securities of both the Company and Parent 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.
It is understood that this letter is for the information of the Board of
Directors and is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering of securities, nor shall this letter be
used for any other purposes, without our prior written consent.
On the basis of and subject to the foregoing and other matters that we deem
relevant, we are of the opinion that, as of the date hereof, the consideration
to be received in the Merger by the Company's shareholders is fair to the
Company's shareholders from a financial point of view.
Very truly yours,
J.J.B. HILLIARD, W.L. LYONS, INC.
<PAGE> 156
SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW.
ANNEX III
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph, by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of
<PAGE> 157
the facts, including the vote and the facts entitling the dissenting shareholder
to the relief demanded. No answer to such a complaint is required. Upon the
filing of such a complaint, the court, on motion of the petitioner, shall enter
an order fixing a date for a hearing on the complaint and requiring that a copy
of the complaint and a notice of the filing and of the date for hearing be given
to the respondent or defendant in the manner in which summons is required to be
served or substituted service is required to be made in other cases. On the day
fixed for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken, and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay fair
cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption, of the action involved;
(c) the dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation filed or joined in a complaint under division (B) of
this section within the period provided in that division.
III-2
<PAGE> 158
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination. (Last amended by S.B. 74, L. '94, eff. 7-1-94.)
III-3
<PAGE> 159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
provisions permitting corporations organized thereunder to indemnify directors,
officers, employees and agents from liability under certain circumstances. The
Certificate of Incorporation of the Registrant, as amended, provides
indemnification for directors, officers, employees and agents to the extent
permitted by the DGCL, eliminates to the extent permitted by the law the
personal liability of directors for monetary damages to the Registrant and its
stockholders and permits the Registrant to insure its directors, officers,
employees and agents against certain liabilities as to which they may not be
indemnified under the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of Exhibits included as part of this
Registration Statement. Items marked with an asterisk are filed herewith.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 23, 1996 among CLARCOR Inc., CUAC
Inc. and United Air Specialists, Inc. (included as Annex I to the Proxy
Statement/Prospectus). Schedules to the Agreement and Plan of Merger are omitted
pursuant to Item 601(b)(2) of Regulation S-K. CLARCOR hereby agrees to furnish copies
of such Schedules to the SEC upon request.
2.2 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and Durwood
G. Rorie, Jr. is incorporated by reference to Exhibit 10.1 to CLARCOR's Current
Report on Form 8-K dated September 23, 1996.
2.3 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and William
A. Cheney is incorporated by reference to Exhibit 10.2 to CLARCOR's Current Report on
Form 8-K dated September 23, 1996.
2.4 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and
Margaret Stewart Rorie is incorporated by reference to Exhibit 10.3 to CLARCOR's
Current Report on Form 8-K dated September 23, 1996.
4.1 CLARCOR's Restated Certificate of Incorporation is hereby incorporated by reference
to Exhibit 3.1 to CLARCOR's Annual Report on Form 10-K for the fiscal year ended
November 30, 1983.
4.2 Amendment to ARTICLE NINTH of CLARCOR's Restated Certificate of Incorporation is
hereby incorporated by reference to Exhibit 3.1(a) to CLARCOR's Annual Report on Form
10-K for the fiscal year ended November 30, 1988.
4.3 Amendment changing name of CLARCOR to CLARCOR Inc. is hereby incorporated by
reference to Exhibit 3.1(b) to CLARCOR's Annual Report on Form 10-K for the fiscal
year ended November 30, 1988.
4.4 Amendment to ARTICLE FOURTH of CLARCOR's Restated Certificate of Incorporation is
hereby incorporated by reference to Exhibit 3.1(c) to CLARCOR's Annual Report on Form
10-K for the fiscal year ended November 30, 1990.
*4.5 Certificate of Designations of Series B Junior Participating Preferred Stock of
CLARCOR as filed with the Secretary of State of the State of Delaware on April 2,
1996.
4.6 CLARCOR By-laws, as amended to date, are incorporated by reference to Exhibit 3.2 to
CLARCOR's Annual Report on Form 10-K for the fiscal year ended November 30, 1995.
4.7 Stockholder Rights Agreement dated as of March 28, 1996 between CLARCOR and the First
Chicago Trust Company of New York, as Rights Agent, is incorporated by reference to
Exhibit 4 to CLARCOR's Current Report on Form 8-K filed on April 3, 1996.
</TABLE>
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<PAGE> 160
<TABLE>
<S> <C>
4.8 The instruments defining the rights of holders of long-term debt securities of
CLARCOR and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K. CLARCOR hereby agrees to furnish copies of these instruments to the
SEC upon request.
*5.1 Opinion of Sidley & Austin regarding the legality of the securities being registered.
*8.1 Opinion of Sidley & Austin regarding certain federal income tax consequences of the
Merger.
*8.2 Opinion of Graydon, Head & Ritchey regarding certain federal income tax consequences
of the Merger.
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Sidley & Austin (included in the opinions filed as Exhibits 5.1 and 8.1 to
this Registration Statement).
23.4 Consent of Graydon, Head & Ritchey (included in the opinion filed as Exhibit 8.2 to
this Registration Statement).
*23.5 Consent of J.J.B. Hilliard, W.L. Lyons, Inc.
*24.1 Powers of Attorney.
*99.1 Form of proxy to be mailed to the stockholders of UAS.
</TABLE>
- ---------------
(b) The financial statement schedules required to be included pursuant to
this Item are not included herein because they are not applicable or the
required information is shown in the financial information included or
incorporated by reference herein.
(c) The opinion of J.J.B. Hilliard, W.L. Lyons, Inc. is included as Annex
II to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE> 161
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to the paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rockford,
State of Illinois, on January 14, 1997.
CLARCOR INC.
By: LAWRENCE E. GLOYD
Lawrence E. Gloyd
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------------------------- -----------------
<C> <S> <C>
LAWRENCE E. GLOYD Chairman of the Board and Chief Executive January 14, 1997
- ------------------------------ Officer
Lawrence E. Gloyd
NORMAN E. JOHNSON President and Chief Operating Officer and January 14, 1997
- ------------------------------ Director
Norman E. Johnson
BRUCE A. KLEIN Vice President -- Finance and Chief January 14, 1997
- ------------------------------ Financial Officer (Principal Financial
Bruce A. Klein Officer)
WILLIAM F. KNESE Vice President, Treasurer and Controller January 14, 1997
- ------------------------------ (Principal Accounting Officer)
William F. Knese
* Director
- ------------------------------
J. Marc Adam
* Director
- ------------------------------
Milton R. Brown
* Director
- ------------------------------
Carl J. Dargene
* Director
- ------------------------------
Dudley J. Godfrey, Jr.
* Director
- ------------------------------
Stanton K. Smith, Jr.
* Director
- ------------------------------
Don A. Wolf
* By: BRUCE A. KLEIN January 14, 1997
----------------------------
Bruce A. Klein,
Attorney-in-Fact
</TABLE>
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<PAGE> 163
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 23, 1996 among CLARCOR Inc.,
CUAC Inc. and United Air Specialists, Inc. (included as Annex I to the Proxy
Statement/Prospectus). Schedules to the Agreement and Plan of Merger are omitted
pursuant to Item 601(b)(2) of Regulation S-K. CLARCOR hereby agrees to furnish
copies of such Schedules to the SEC upon request.
2.2 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and
Durwood G. Rorie, Jr. is incorporated by reference to Exhibit 10.1 to CLARCOR's
Current Report on Form 8-K dated September 23, 1996.
2.3 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and
William A. Cheney is incorporated by reference to Exhibit 10.2 to CLARCOR's
Current Report on Form 8-K dated September 23, 1996.
2.4 Stockholder Agreement dated as of September 23, 1996 between CLARCOR Inc. and
Margaret Stewart Rorie is incorporated by reference to Exhibit 10.3 to CLARCOR's
Current Report on Form 8-K dated September 23, 1996.
4.1 CLARCOR's Restated Certificate of Incorporation is hereby incorporated by
reference to Exhibit 3.1 to CLARCOR's Annual Report on Form 10-K for the fiscal
year ended November 30, 1983.
4.2 Amendment to ARTICLE NINTH of CLARCOR's Restated Certificate of Incorporation is
hereby incorporated by reference to Exhibit 3.1(a) to CLARCOR's Annual Report on
Form 10-K for the fiscal year ended November 30, 1988.
4.3 Amendment changing name of CLARCOR to CLARCOR Inc. is hereby incorporated by
reference to Exhibit 3.1(b) to CLARCOR's Annual Report on Form 10-K for the
fiscal year ended November 30, 1988.
4.4 Amendment to ARTICLE FOURTH of CLARCOR's Restated Certificate of Incorporation is
hereby incorporated by reference to Exhibit 3.1(c) to CLARCOR's Annual Report on
Form 10-K for the fiscal year ended November 30, 1990.
*4.5 Certificate of Designations of Series B Preferred Junior Participating Stock of
CLARCOR as filed with the Secretary of State of the State of Delaware on April 2,
1996.
4.6 CLARCOR By-laws, as amended to date, are incorporated by reference to Exhibit 3.2
to CLARCOR's Annual Report on Form 10-K for the fiscal year ended November 30,
1995.
4.7 Stockholder Rights Agreement dated as of March 28, 1996 between CLARCOR and the
First Chicago Trust Company of New York, as Rights Agent, is incorporated by
reference to Exhibit 4 to CLARCOR's Current Report on Form 8-K filed on April 3,
1996.
4.8 The instruments defining the rights of holders of long-term debt securities of
CLARCOR and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K. CLARCOR hereby agrees to furnish copies of these instruments to
the SEC upon request.
*5.1 Opinion of Sidley & Austin regarding the legality of the securities being
registered.
*8.1 Opinion of Sidley & Austin regarding certain federal income tax consequences of
the Merger.
*8.2 Opinion of Graydon, Head & Ritchey regarding certain federal income tax
consequences of the Merger.
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Sidley & Austin (included in the opinions filed as Exhibits 5.1 and
8.1 to this Registration Statement).
</TABLE>
<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23.4 Consent of Graydon, Head & Ritchey (included in the opinion filed as Exhibit 8.2
to this Registration Statement).
*23.5 Consent of J.J.B. Hilliard, W.L. Lyons, Inc.
*24.1 Powers of Attorney.
*99.1 Form of proxy to be mailed to the stockholders of UAS.
</TABLE>
- ---------------
* Filed Herewith
<PAGE> 1
EXHIBIT 4.5
CERTIFICATE OF DESIGNATIONS
OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
CLARCOR INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
CLARCOR Inc. a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that, pursuant to authority conferred upon its Board of Directors by its
Certificate of Incorporation, as amended, and by the provisions of Section 151
of the General Corporation Law of the State of Delaware, the following
resolution was adopted by its Board of Directors at a meeting duly called and
held on March 28, 1996:
RESOLVED, that, pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board") by the provisions of the Certificate
of Incorporation, as amended, of the Corporation and by the provisions of
Section 151 of the General Corporation Law of the State of Delaware, there is
hereby created a series of Preferred Stock of the Corporation, which series
shall have the following powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations or restrictions thereof, in addition to those set forth in the
Certificate of Incorporation, as amended, of the Corporation:
Section 1. Designation of Series; Number of Shares. The series of
Preferred Stock established hereby shall be designated the "Series B Junior
Participating Preferred Stock" (the "Series B Preferred Stock") and the
authorized number of shares constituting the Series B Preferred Stock shall be
300,000. Such number of authorized shares may be increased or decreased, from
time to time, by resolution of the Board; provided, however, that no such
decrease shall reduce the number of authorized shares of the Series B Preferred
Stock to a number less than the number of shares of the Series B Preferred Stock
then outstanding, plus the number of shares of the Series B
-1-
<PAGE> 2
Preferred Stock then reserved for issuance upon the exercise of any outstanding
options, warrants or rights or the exercise of any conversion or exchange
privilege contained in any outstanding security issued by the Corporation.
Section 2. Dividends and Distributions. (A) Subject to the rights of
the holders of shares of any other series of the Preferred Stock (or shares of
any other class of capital stock of the Corporation) ranking senior to the
Series B Preferred Stock with respect to dividends, the holders of shares of the
Series B Preferred Stock, in preference to the holders of shares of Common Stock
and of any other class of capital stock of the Corporation ranking junior to the
Series B Preferred Stock with respect to dividends, shall be entitled to
receive, when, as and if declared by the Board out of funds legally available
therefor, quarterly dividends payable in cash on the last Friday of January,
April, July and October in each year (each such date being a "Dividend Payment
Date"), commencing on the first Dividend Payment Date after the initial issuance
of a share or fractional share of the Series B Preferred Stock, in an amount per
share (rounded to the nearest whole cent) equal to the greater of (a) $64 and
(b) 100 times the aggregate per share amount of all cash dividends, plus 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions (other than a dividend payable in shares of Common Stock
or a distribution in connection with the subdivision of the outstanding shares
of Common Stock, by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Dividend Payment Date or, with respect to the
first Dividend Payment Date, since the initial issuance of a share or fractional
share of the Series B Preferred Stock. The multiple of 100 (the "Dividend
Multiple") set forth in the preceding sentence shall be adjusted from time to
time as hereinafter provided in this paragraph (A). In the event that the
Corporation shall at any time after the effective date of this Certificate of
Designations (i) declare or pay any dividend on the Common Stock payable in
shares of Common Stock or (ii) effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each such case, the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends per share which the holders of shares of the Series B Preferred Stock
shall be entitled to receive shall be the Dividend Multiple in effect
immediately prior to such event multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.
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<PAGE> 3
(B) The Board shall declare, out of funds legally available therefor,
a dividend or distribution on the Series B Preferred Stock, as provided in
paragraph (A) of this Section 2, immediately after it has declared a dividend or
distribution on the Common Stock (other than a dividend payable in shares of
Common Stock); provided, however, that, in the event that no dividend or
distribution shall have been declared on the Common Stock during the period
between any Dividend Payment Date and the next subsequent Dividend Payment Date,
a dividend of $64 per share on the Series B Preferred Stock shall nevertheless
be payable on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on the
outstanding shares of the Series B Preferred Stock from the Dividend Payment
Date next preceding the date of issuance of such shares, unless such date of
issuance shall be prior to the record date for the first Dividend Payment Date,
in which case dividends on such shares shall begin to accrue and be cumulative
from the date of issuance of such shares, or unless such date of issuance shall
be after the close of business on the record date with respect to any Dividend
Payment Date and on or prior to such Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from such
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on shares of the Series B Preferred Stock in an amount less than
the total amount of dividends then accrued shall be allocated pro rata among
such shares. The Board may fix a record date for the determination of the
holders of shares of the Series B Preferred Stock entitled to receive payment of
any dividend or distribution declared thereon, which record date shall be not
more than the number of days prior to the date fixed for such payment permitted
by applicable law.
Section 3. Voting Rights. In addition to any other voting rights
required by applicable law, the holders of shares of the Series B Preferred
Stock shall have the following voting rights:
(A) Each share of the Series B Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. The multiple of 100 (the "Voting Multiple")
set forth in the preceding sentence shall be adjusted from time to time as
hereinafter provided in this paragraph (A). In the event that the Corporation
shall at any time after the effective date of this Certificate of Designations
(i) declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consol-
-3-
<PAGE> 4
idation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each such case,
the Voting Multiple thereafter applicable to the determination of the number of
votes per share to which the holders of shares of the Series B Preferred Stock
shall be entitled shall be the Voting Multiple in effect immediately prior to
such event multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided in this Certificate of Designations,
in any other Certificate of Designations establishing another series of the
Preferred Stock (or any series of any other class of capital stock of the
Corporation) or by applicable law, the holders of the Series B Preferred Stock,
the holders of the Common Stock and the holders of any other class of capital
stock of the Corporation having general voting rights shall vote together as a
single class on all matters submitted to a vote of the stockholders of the
Corporation.
(C) Except as otherwise provided in this Certificate of Designations
or by applicable law, the holders of the Series B Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent provided in paragraph (B) of this Section 3) for the taking of any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever dividends or other distributions payable on the Series B
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
outstanding shares of the Series B Preferred Stock shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of any class of capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) to the Series B Preferred Stock;
-4-
<PAGE> 5
(ii) declare or pay dividends, or make any other distributions,
on any shares of any class of capital stock of the Corporation ranking
on a parity (either as to dividends or upon liquidation, dissolution
or winding up of the Corporation) with the Series B Preferred Stock,
except dividends paid ratably on the Series B Preferred Stock and all
such parity stock on which dividends are accrued and unpaid in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem, purchase or otherwise acquire for consideration any
shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up
of the Corporation) to the Series B Preferred Stock, except that the
Corporation may at any time redeem, purchase or otherwise acquire any
shares of such junior stock in exchange for other shares of any class
of capital stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up of the
Corporation) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of the Series B Preferred Stock or any shares of any class of capital
stock of the Corporation ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up of the Corporation)
with the Series B Preferred Stock, or redeem any shares of such
parity stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board) to the holders
of all such shares upon such terms and conditions as the Board, after
taking into consideration the respective annual dividend rates and the
other relative powers, preferences and rights of the respective series
and classes of such shares, shall determine in good faith will result
in fair and equitable treatment among the respective holders of shares
of all such series and classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of any class of
capital stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
-5-
<PAGE> 6
Section 5. Reacquired Shares. Any shares of the Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after such purchase or
acquisition. All such cancelled shares shall thereupon become authorized and
unissued shares of Preferred Stock and may be reissued as part of any new series
of the Preferred Stock, subject to the conditions and restrictions on issuance
set forth in the Certificate of Incorporation of the Corporation, as amended
from time to time, in any other Certificate of Designations establishing another
series of the Preferred Stock (or any series of any other class of capital stock
of the Corporation) or in any applicable law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation (whether voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made (a) to the holders of shares of any
class of capital stock of the Corporation ranking junior (either as to dividends
or upon liquidation, dissolution or winding up of the Corporation) to the Series
B Preferred Stock unless, prior thereto, the holder of each outstanding share of
the Series B Preferred Stock shall have received an amount equal to the accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, plus an amount equal to the greater of (i) $100.00 and
(ii) an aggregate amount, subject to adjustment as hereinafter provided in this
Section 6, equal to 100 times the aggregate per share amount to be distributed
to the holders of the Common Stock or (b) to the holders of shares of any class
of capital stock of the Corporation ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up of the Corporation) with the
Series B Preferred Stock, except distributions made ratably on the Series B
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event that the Corporation shall at any time
after the effective date of this Certificate of Designations (a) declare or pay
any dividend on the Common Stock payable in shares of Common Stock or (b) effect
a subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then, in each such case, the aggregate amount per share which the holders of
shares of the Series B Preferred Stock shall thereafter be entitled to receive
pursuant to clause (a)(ii) of the preceding sentence shall be the aggregate
amount per share in effect pursuant to such clause immediately prior to such
event multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such event and the
denominator of
-6-
<PAGE> 7
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the
Corporation shall be a party to any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are converted or
changed into or exchanged for other capital stock, securities, cash or other
property, or any combination thereof, then, in each such case, each share of the
Series B Preferred Stock shall at the same time be similarly converted or
changed into or exchanged for an aggregate amount, subject to adjustment as
hereinafter provided in this Section 7, equal to 100 times the aggregate amount
of capital stock, securities, cash and/or other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is being
converted or changed or exchanged. In the event that the Corporation shall at
any time after the effective date of this Certificate of Designations (a)
declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the aggregate amount per
share which the holders of shares of the Series B Preferred Stock shall
thereafter be entitled to receive pursuant to the preceding sentence shall be
the aggregate amount per share in effect pursuant to such sentence immediately
prior to such event multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of the Series B Preferred Stock
shall not be redeemable at any time.
Section 9. Rank. Unless otherwise provided in the Certificate of
Designations establishing another series of the Preferred Stock after the
effective date of this Certificate of Designations, the Series B Preferred Stock
shall rank, as to the payment of dividends and the making of any other
distribution of assets of the Corporation, senior to the Common Stock, but
junior to all other series of the Preferred Stock.
Section 10. Amendments. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences and rights of the Series B Preferred Stock so as
to adversely affect any thereof without the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the Series B Preferred Stock,
voting separately as a single class.
-7-
<PAGE> 8
Section 11. Fractional Shares. Fractional shares of the Series B
Preferred Stock may be issued, but, unless the Board shall otherwise determine,
only in multiples of one one-hundredth of a share. The holder of any fractional
share of the Series B Preferred Stock shall be entitled to receive dividends,
participate in distributions, exercise voting rights and have the benefit of all
other powers, preferences and rights relating to the Series B Preferred Stock in
the same proportion as such fractional share bears to a whole share.
IN WITNESS WHEREOF, CLARCOR Inc. has caused this Certificate of
Designations to be executed and attested by its duly authorized officers this
29th day of March, 1996.
CLARCOR INC.
By Lawrence E. Gloyd
---------------------------
(Corporate Seal) Name: Lawrence E. Gloyd
Title: Chairman and Chief
Executive Officer
Attest:
By Marcia S. Blaylock
-------------------------
Name: Marcia S. Blaylock
Title: Vice President and
Corporate Secretary
-8-
<PAGE> 1
EXHIBIT 5.1
[SIDLEY & AUSTIN LETTERHEAD]
January 14, 1997
CLARCOR Inc.
2323 Sixth Street
P.O. Box 7007
Rockford, Illinois 61125
Re: Registration of 1,209,302 Shares of Common Stock
and Associated Preferred Stock Purchase Rights
Ladies and Gentlemen:
We have acted as counsel to CLARCOR Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), of the Company's registration statement on Form
S-4 (the "Registration Statement") relating to the registration of 1,209,302
shares of common stock, $1 par value, of the Company ("Company Common Stock"),
together with 1,209,302 Series B Junior Participating Preferred Stock Purchase
Rights (the "Rights") associated therewith, to be issued pursuant to the terms
of the Agreement and Plan of Merger dated as of September 23, 1996 (the "Merger
Agreement") among the Company, CUAC Inc., an Ohio corporation and a wholly-owned
subsidiary of the Company ("Sub"), and United Air Specialists, Inc., an Ohio
corporation ("UAS"), which provides for the merger (the "Merger") of Sub with
and into UAS, with UAS surviving as a wholly-owned subsidiary of the Company.
Pursuant to the Merger Agreement: (a) each share of common stock, without par
value, of UAS ("UAS Common Stock") outstanding immediately prior to the
effective time of the Merger will be converted into a fractional share of
Company Common Stock (the shares of Company Common Stock to be issued in the
Merger being hereinafter referred to as the "Merger Shares"); and (b) each
option to purchase UAS Common Stock granted under a UAS Stock Plan (as defined
in the Merger Agreement) which is outstanding immediately prior to the
Effective Time will become an option (a "Substitute Option") to purchase
shares of Company Common Stock (the "Stock Option Shares"). The Merger Shares
and the Stock Option Shares are hereinafter sometimes referred to collectively
as the "New Shares." The terms of the Rights are set forth in the Stockholder
Rights Agreement dated as of March 28, 1996 (the "Rights Agreement"), between
the Company and The First Chicago Trust Company of New York, as Rights Agent.
For the purpose of rendering the opinions expressed below, we have
reviewed the Merger Agreement, the Registration Statement and the Exhibits to
the latter. We have also examined the originals, or copies of originals
certified or otherwise identified to our
<PAGE> 2
CLARCOR Inc.
January 14, 1997
Page 2
satisfaction, of the corporate records of the Company and of
such other agreements, documents, instruments and certificates of public
officials, officers and representatives of the Company and other persons, have
examined such questions of law and have satisfied ourselves as to such matters
of fact as we have deemed relevant and necessary as a basis for the opinions
expressed below. We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to us for our examination.
Based on the foregoing, it is our opinion that:
1. The Company is duly incorporated and validly existing under the
laws of the State of Delaware.
2. Each Merger Share will be legally issued, fully paid and
non-assessable when: (i) the Registration Statement, as finally amended, shall
have become effective under the Securities Act; and (ii) the Merger shall have
become effective under the General Corporation Law of the State of Ohio.
3. Each Stock Option Share will be legally issued, fully paid and
non-assessable when: (i) the Registration Statement, as finally amended, shall
have become effective under the Securities Act; (ii) the Merger shall have
become effective under the General Corporation Law of the State of Ohio, and
(iii) a certificate representing such Stock Option Share shall have been duly
executed, countersigned and registered and duly delivered upon receipt of the
agreed consideration therefor (not less than the par value thereof) determined
in accordance with the terms of the written agreement applicable to the related
Substitute Option.
4. Each Right associated with a New Share will be legally issued when:
(i) such Right shall have been duly issued in accordance with the terms of the
Rights Agreement; and (ii) the associated Merger Share or Stock Option Share
shall have been duly issued as set forth in paragraph 2 or 3, respectively.
The foregoing opinions are limited to the federal laws of the United
States of America and the General Corporation Law of the State of Delaware. We
express no opinion as to the application of the securities or blue sky laws of
the various states to the issuance or sale of the New Shares or the associated
Rights.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made
part of the Registration Statement.
Very truly yours,
SIDLEY & AUSTIN
<PAGE> 1
EXHIBIT 8.1
[SIDLEY & AUSTIN LETTERHEAD]
January 14, 1997
CLARCOR Inc.
2323 Sixth Street
Rockford, IL 61104
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger dated as of September 23,
1996 (the "Merger Agreement") among CLARCOR, Inc., a Delaware corporation
("Parent"), CUAC Inc., an Ohio corporation and a direct wholly-owned subsidiary
of Parent ("Sub"), and United Air Specialists, Inc., an Ohio corporation (the
"Company"), which provides for the merger (the "Merger") of Sub with and into
the Company on the terms and conditions therein set forth, the time at which the
Merger becomes effective being hereinafter referred to as the "Effective Time."
Capitalized terms not defined herein have the meanings specified in the Merger
Agreement.
As provided in the Merger Agreement, at the Effective Time, by reason
of the Merger: (i) all outstanding Company Common Shares then held in the
treasury of the Company or by any wholly-owned subsidiary of the Company and any
Company Common Shares then owned by Parent, Sub or any other wholly-owned
subsidiary of Parent will be canceled and no capital stock of Parent or other
consideration will be delivered in exchange therefor; (ii) each then outstanding
share of capital stock of Sub will be converted into one share of Common Stock
of the Surviving Corporation; and (iii) each then outstanding Company Common
Share (other than shares canceled as described in clause (i) above and shares in
respect of which dissenters' rights are properly exercised) will be converted
into .3702116 of a share of Parent Common Stock (subject to adjustment in
certain circumstances) including the corresponding percentage of Parent Rights,
with cash being paid in lieu of fractional shares of Parent Common Stock.
Accordingly, immediately following the Merger, the former holders of Company
Common Shares will hold Parent Common Stock and the associated Parent Rights
issued in the Merger (and cash in lieu of any fractional shares of Parent
Common Stock) and the Company, as the corporation surviving the Merger, will be
a wholly-owned subsidiary of Parent. The Merger and the Merger Agreement are
more fully described in Parent's Registration Statement on Form S-4 (the
<PAGE> 2
CLARCOR Inc.
January 14, 1997
Page 2
"Registration Statement") relating to the registration of 1,209,302 shares of
Parent Common Stock and associated Parent Rights, which is being filed by
Parent with the Securities and Exchange Commission pursuant to the Securities
Act of l933, as amended. The Registration Statement includes the Proxy
Statement/Prospectus (the "Prospectus") of Parent and the Company.
In rendering the opinions expressed below, we have relied upon the
accuracy of the facts, information and representations and the completeness of
the covenants contained in the Merger Agreement, the Prospectus and such other
documents as we have deemed relevant and necessary. Such opinions are
conditioned, among other things, not only upon such accuracy and completeness as
of the date hereof, but also the continuing accuracy and completeness thereof as
of the Effective Time. Moreover, we have assumed the absence of any change to
any of such instruments between the date hereof and the Effective Time.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with original documents of all copies submitted to us
for our examination. We have also assumed that: (i) the transactions related to
the Merger or contemplated by the Merger Agreement will be consummated (A) in
accordance with the Merger Agreement and (B) as described in the Prospectus;
(ii) the Merger will qualify as a statutory merger under the laws of the State
of Ohio; (iii) the accuracy as of the date hereof, and the continuing accuracy
as of the Effective Time, of the written statements made by executives of Parent
and the Company contained in the Parent Tax Certificate and the Company Tax
Certificate, respectively, and the written statements made by certain
shareholders of the Company in the Shareholder Certificates. We have not
independently verified any factual matters relating to the Merger in connection
with or apart from our preparation of this letter and accordingly this letter
does not take into account any matters not set forth herein which might have
been disclosed by independent verification.
In rendering the opinions expressed below, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Regulations promulgated thereunder by the United States Treasury
Department (the "Regulations"), pertinent judicial authorities, rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that the Code, the Regulations and such judicial
decisions, administrative interpretations and other authorities are subject to
change at any time and, in some circumstances, with retroactive effect; and any
such change could affect the opinions stated herein.
<PAGE> 3
CLARCOR Inc.
January 14, 1997
Page 3
Based upon and subject to the foregoing, it is our opinion, as counsel
for Parent, that:
(1) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to such reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by Parent or the Company as a
result of the Merger.
(3) No gain or loss will be recognized by the non-dissenting
shareholders of the Company upon the conversion of their Company Common Shares
into shares of Parent Common Stock in accordance with the Merger, except with
respect to cash, if any, received in lieu of fractional shares of Parent Common
Stock.
(4) The aggregate tax basis of the shares of Parent Common Stock
received by a shareholder in exchange for Company Common Shares in accordance
with the Merger (including fractional shares of Parent Common Stock for which
cash is received) will be the same as the aggregate tax basis of such Company
Common Shares.
(5) The holding period for shares of Parent Common Stock received by
a shareholder in exchange for Company Common Shares in accordance with the
Merger will include the period that such Company Common Shares were held by the
shareholder, provided such Company Common Shares were held as capital assets by
such shareholder at the Effective Time.
(6) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal to the
difference, if any, between such shareholder's basis in such fractional share
and the amount of cash received.
Except as expressly set forth in paragraphs 1 through 6, inclusive,
you have not requested, and we do not herein express, any opinion concerning the
tax consequences of, or any other matters related to, the Merger.
We assume no obligation to update or supplement this letter to reflect
any facts or circumstances which may hereafter come to our attention with
respect to the opinions expressed
<PAGE> 4
CLARCOR Inc.
January 14, 1997
Page 4
above, including any changes in applicable law which may hereafter occur.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement.
Very truly yours,
Sidley & Austin
<PAGE> 1
Exhibit 8.2
January 14, 1997
United Air Specialists, Inc.
4440 Creek Road
Cincinnati, Ohio 45242
Ladies and Gentlemen:
You have requested our opinion with respect to certain federal income
tax consequences of the proposed merger ("Merger") of CUAC INC., an Ohio
corporation ("Sub") and a direct wholly-owned subsidiary of CLARCOR, Inc., a
Delaware corporation ("Parent"), with and into United Air Specialists, Inc. an
Ohio corporation ("Company"), on the terms and conditions set forth in the
Agreement and Plan of Merger dated as of September 23, 1996 (the "Merger
Agreement"). Capitalized terms not defined herein have the meanings specified
in the Merger Agreement. The opinion rendered herein is intended to satisfy
the requirement of the Securities and Exchange Commission for an opinion
relating to the federal income tax consequences of the Merger if it closes as
planned.
As provided in the Merger Agreement, at the time the Merger becomes
effective (the "Effective Time"), by reason of the Merger: (i) all outstanding
Company Common Shares then held in the treasury of the Company or by any
wholly-owned subsidiary of the Company and any Company Common Shares then owned
by Parent, Sub or any other wholly-owed subsidiary of Parent will be canceled
and no capital stock of Parent or other consideration will be delivered in
exchange therefor; (ii) each then outstanding share of capital stock of Sub
will be converted into one share of Common Stock of the Surviving Corporation
and (iii) each then outstanding Company Common Share (other than shares
canceled as described in clause (i) above and shares in respect of which
dissenters' rights are properly exercised) will be converted into .3702116 of
a share of Parent Common Stock (subject to adjustment in certain circumstances)
including the corresponding percentage of Parent Rights, with cash being paid
in lieu of fractional shares of Parent Common Stock. Accordingly, immediately
following the Merger, the former holders of Company Common Shares will hold
Parent Common Stock and the associated Parent Rights issued in the Merger (and
cash in lieu of any fractional shares of Parent Common Stock) and the Company,
as the surviving corporation, will be a wholly-owned subsidiary of Parent. The
Merger and the Merger Agreement are more fully described in Parent's
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration of the 1,209,302 shares of Parent Common Stock and associated
<PAGE> 2
United Air Specialists, Inc.
January 14, 1997
Page 2
Parent Rights, which is being filed by Parent with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. The Registration
Statement includes the Proxy Statement/Prospectus (the "Prospectus") of Parent
and the Company.
In rendering the opinions expressed below, we have relied upon the
accuracy of the facts, information and representations and the completeness of
the covenants contained in the Merger Agreement, the Prospectus, the
Certificates referred to below and such other documents as we have deemed
relevant and necessary. Such opinions are conditioned, among other things, not
only upon such accuracy and completeness as of the date hereof, but also the
continuing accuracy and completeness thereof as of the Effective Time.
Moreover, we have assumed the absence of any change to any of such instruments
between the date hereof and the Effective Time.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with original documents of all copies submitted to
us for our examination. We have also assumed that: (i) the transactions related
to the Merger or contemplated by the Merger Agreement will be consummated (A)
in accordance with the Merger Agreement and (B) as described in the Prospectus;
(ii) the Merger will qualify as a statutory merger under the laws of the State
of Ohio; (iii) the accuracy as of the date hereof, and the continuing accuracy
as of the Effective Time, of the written statements made by executives of
Parent and the Company contained in the Parent Tax Certificate and the Company
Tax Certificate, respectively, and the written statements made by certain
shareholders of the Company in the Shareholder Certificates (the
"Certificates"). We have not independently verified any factual matters
relating to the Merger in connection with or apart from our preparation of this
opinion and accordingly our opinion does not take into account any matters not
set forth herein or in the Prospectus which might have been disclosed by
independent verification.
In rendering the opinion expressed below, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Regulations promulgated thereunder by the United States Treasury
Department (the "Regulations"), pertinent judicial authorities, rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that the Code, the Regulations and such judicial
decisions, administrative interpretations and other authorities are subject to
change at any time and, in some circumstances, with retroactive effect; and any
such change could affect the opinions stated herein. This opinion represents
our best legal judgment, but it has no binding effect or official status of any
kind, and no assurance can be given that contrary positions may not be taken by
the IRS or a court considering the issues.
Based upon and subject to the foregoing, it is our opinion, as counsel
for the Company, that:
<PAGE> 3
United Air Specialists, Inc.
January 14, 1997
Page 3
(1) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to such reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by the Company as a result of
the Merger.
(3) No gain or loss will be recognized by the non-dissenting
shareholders of the Company upon the conversion of their Company Common Shares
into shares of Parent Common Stock in accordance with the Merger, except with
respect to cash, if any, received in lieu of fractional shares of Parent Common
Stock.
(4) The aggregate tax basis of the shares of Parent Common Stock
received by a shareholder in exchange for Company Common Shares in accordance
with the Merger (including fractional shares of Parent Common Stock for which
cash is received) will be the same as the aggregate tax basis of such Company
Common Shares.
(5) The holding period for shares of Parent Common Stock received by a
shareholder in exchange for Company Common Shares in accordance with the Merger
will include the period that such Company Common Shares were held by the
shareholder, provided such Company Common Shares were held as capital assets by
such shareholder at the Effective Time.
(6) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal to
the difference, if any, between such shareholder's basis in such fractional
share and the amount of cash received.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger as expressly set forth in paragraphs 1 through 6, inclusive, which
are the only matters as to which you have requested our opinion. We do not
address any other federal income tax consequences of the Merger or other
matters of federal law and have not considered matters (including state or
local tax consequences) arising under the laws of any jurisdiction other than
matters of federal law arising under the laws of the United States.
We assume no obligation to update or supplement this letter to reflect any
facts or circumstances which may hereafter come to our attention with respect
to the opinions expressed above, including any changes in applicable law which
may hereafter occur.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement relating to shares of Parent Common Stock and the
associated Parent Rights that may be issued in connection with the Merger and
to the reference to our firm in the Prospectus.
Very truly yours,
Graydon, Head & Ritchey
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of CLARCOR Inc. on Form S-4 of our reports dated January 8, 1996, on
our audits of the consolidated financial statements of CLARCOR Inc. and
Subsidiaries as of November 30, 1995 and 1994, and for the years ended November
30, 1995, 1994, and 1993, and the financial statement schedule for the years
ended November 30, 1995, 1994, and 1993, which reports were included or
incorporated by reference in CLARCOR's Annual Report on Form 10-K for the year
ended December 2, 1995. We also consent to the reference to our firm
under the caption "Experts".
Coopers & Lybrand L.L.P.
Chicago, Illinois
January 14, 1997
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report,
on the Company's financial statements and schedules as of June 30, 1996 and
1995 and for the periods ended June 30, 1996, 1995 and 1994, and to all
references to our Firm included in this registration statement.
Cincinnati, Ohio
January 14, 1997
Arthur Andersen LLP
<PAGE> 1
EXHIBIT 23.5
Consent
We hereby consent to the inclusion of our letter opinion dated
September 23, 1996 and addressed to the Board of Directors of United Air
Specialists, Inc. as Annex II of the Proxy Statement/Prospectus of United Air
Specialists, Inc. and CLARCOR Inc. included in the Registration Statement on
Form S-4 filed by CLARCOR Inc. with respect to the proposed merger of United
Air Specialists, Inc. with a wholly-owned subsidiary of CLARCOR, to the
references to our firm therein, and to the discussion of our opinion therein
under the heading "Opinion of UAS's Financial Advisor".
J.J.B. HILLIARD, W.L. LYONS, INC.
January 14, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned persons whose
signature appear immediately below, does hereby constitute and appoint Lawrence
E. Gloyd, Norman E. Johnson, Bruce A. Klein, and each of them, with full power
to act alone, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign on behalf of the undersigned a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the registration
under the Securities Act of the shares of Common Stock, $1 par value, of
CLARCOR Inc., a Delaware corporation (the "Company"), to be issued pursuant to
the terms of the Agreement and Plan of Merger dated as of September 23, 1996
(the "Merger Agreement") among the Company, CUAC Inc., an Ohio corporation and
a wholly-owned subsidiary of the Company ("Sub"), and United Air Specialists,
Inc., an Ohio corporation ("UAS"), which provides for the merger of Sub with
and into UAS with UAS surviving as a wholly-owned subsidiary of the Company,
such shares of Common Stock to include those shares issuable upon the exercise
of Substitute Options (as defined in the Merger Agreement), together with the
Parent Rights (as defined in the Merger Agreement) associated therewith, and to
execute any and all amendments to the Registration Statement, whether filed
prior or subsequent to the time the Registration Statement becomes effective,
including amendments filed on Form S-8, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any one
of them, or his substitute or their substitutes, lawfully do or cause to be
done by virtue hereof.
<PAGE> 2
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of,
September 1996.
Lawrence E. Gloyd Carl J. Dargene
- -------------------------- --------------------------
Lawrence E. Gloyd Carl J. Dargene
Norman E. Johnson J. Marc Adam
- -------------------------- --------------------------
Norman E. Johnson J. Marc Adam
Stanton K. Smith, Jr. Dudley J. Godfrey, Jr.
- -------------------------- --------------------------
Stanton K. Smith, Jr. Dudley J. Godfrey, Jr.
Milton R. Brown
--------------------------
Milton R. Brown
Don A. Wolf
--------------------------
Don A. Wolf
Bruce A. Klein William F. Knese
- -------------------------- --------------------------
Bruce A. Klein William F. Knese
<PAGE> 1
Exhibit 99.1
UNITED AIR SPECIALISTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR A SPECIAL MEETING OF SHAREHOLDERS
P The undersigned hereby constitutes and appoints William A.
R Cheney and Durwood G. Rorie, and each of them, his true and lawful
O agents and proxies with full power of substitution in each, to
X represent the undersigned at a Special Meeting of Shareholders of
Y United Air Specialists, Inc. (the "Company") to be held at the
corporate offices of the Company, 4440 Creek Road, Cincinnati, Ohio
on February 14, 1997 at 10:00 a.m. (EST), and at any
adjournments thereof, on all matters coming before said meeting.
(change of address)
-----------------------------
-----------------------------
-----------------------------
-----------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
PLEASE DETACH CARD AND RETURN TOP PORTION ONLY IN THE ENVELOPE PROVIDED.
<PAGE> 2
UAIR
SHARES IN YOUR NAME
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
FOR AGAINST ABSTAIN
1. Proposal to adopt the Merger Agreement
among the Company, CLARCOR Inc. and CUAC Inc. / / / / / /
providing for the merger of CUAC Inc. with and
into the Company (including authorization for the
Company's Board of Directors to exercise its
discretion whether to proceed with the merger if,
during the ten business day period preceding the
closing of the merger, the closing price of
CLARCOR Common Stock is less than the threshold
set forth in the Merger Agreement).
Change
of / /
Address
Attend / /
Meeting
SIGNATURE(S) DATE
------------------------------ ---------------
SIGNATURE(S) DATE
------------------------------ ---------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
DETACH CARD
