<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 1)
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
DYNAMICS CORPORATION OF AMERICA
(Name of Subject Company)
------------------------
CTS CORPORATION
CTS FIRST ACQUISITION CORP.
(Bidders)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
268039 10 4
(CUSIP Number of Class of Securities)
JOSEPH P. WALKER
Chairman, President
and Chief Executive Officer
CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46314
Telephone: (219) 293-7511
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
------------------------
Copies to:
ROBERT A. PROFUSEK, ESQ.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 326-3939
MAY 16, 1997
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
<PAGE>
<TABLE>
<C> <S> <C>
1. CTS CORPORATION (EIN: 35-0225010)
- ----------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
- ----------------------------------------------------------------------------------------------------
3. SEC USE ONLY
- ----------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
BK
- ----------------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) / /
- ----------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Indiana
- ----------------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
100
- ----------------------------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW
(7) EXCLUDES CERTAIN SHARES / /
- ----------------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN
ROW (7)
0.0%
- ----------------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ----------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<C> <S> <C>
1. CTS FIRST ACQUISITION CORP. (EIN: Applied For)
- ----------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
- ----------------------------------------------------------------------------------------------------
3. SEC USE ONLY
- ----------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
BK
- ----------------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / /
- ----------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- ----------------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
0
- ----------------------------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES / /
- ----------------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT
IN ROW (7)
0%
- ----------------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ----------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
This Amendment No. 1 amends the Tender Offer Statement on Schedule 14D-1
filed with the Securities and Exchange Commission on May 16, 1997 by CTS
Corporation, an Indiana corporation ("CTS") and CTS First Acquisition Corp, a
New York corporation and a wholly owned subsidiary of CTS. Filed herewith is the
amended Offer To Purchase as mailed to the holders of the issued and outstanding
shares of Common Stock of Dynamics Corporation of America.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Offer to Purchase, dated May 16, 1997.
(2) Letter of Transmittal.*
(3) Notice of Guaranteed Delivery.*
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other
Nominees.*
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.*
(7) Summary Advertisement being published on May 16, 1997.*
(b) Not applicable
(c) (1) Agreement and Plan of Merger, dated as of May 9, 1997, among CTS,
Purchaser and the Company. (Incorporated herein by reference to Exhibit 2 to
Amendment No. 46 to the Schedule 13D of Dynamics Corporation of America, filed
May 12, 1997, with respect to its investment in CTS Corporation.)
(2) Employment Agreement, dated as of May 9, 1997, by and between CTS and
Joseph P. Walker.*
(3) Employment Agreement, dated as of May 9, 1997, by and among CTS, the
Company and Andrew Lozyniak. (Incorporated herein by reference to Exhibit 10.4
to Dynamics Corporation of America's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1997.)
(4) Employment Agreement, dated as of May 9, 1997, by and among CTS, the
Company and Patrick J. Dorme. (Incorporated herein by reference to Exhibit 10.5
to Dynamics Corporation of America's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1997.)
(5) Employment Agreement, dated as of May 9, 1997, by and among CTS, the
Company and Henry V. Kensing. (Incorporated herein by reference to Exhibit 10.6
to Dynamics Corporation of America's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1997.)
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
- ------------------------
* Previously filed.
4
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: May 19, 1997 CTS CORPORATION
By: /s/ JOSEPH P. WALKER
------------------------------------------
Joseph P. Walker
Chairman, President
and Chief Executive Officer
CTS FIRST ACQUISITION CORP.
By: /s/ /S/ JOSEPH P. WALKER
------------------------------------------
Joseph P. Walker
President
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
- --------- -----------
<S> <C> <C>
(a) (1) Offer to Purchase, dated May 16, 1997.
(2) Letter of Transmittal.*
(3) Notice of Guaranteed Delivery.*
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.*
(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.*
(7) Summary Advertisement being published on May 16, 1997.*
(b) Not applicable.
(c) (1) Agreement and Plan of Merger, dated as of May 9, 1997, among CTS, Purchaser and the Company.
(Incorporated herein by reference to Exhibit 2 to Amendment No. 46 to the Schedule 13D of
Dynamics Corporation of America, filed May 12, 1997, with respect to its investment in CTS
Corporation.)
(2) Employment Agreement, dated as of May 9, 1997, by and between CTS and Joseph P. Walker.*
(3) Employment Agreement, dated as of May 9, 1997, by and among CTS, the Company and Andrew
Lozyniak. (Incorporated herein by reference to Exhibit 10.4 to Dynamics Corporation of America's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997.)
(4) Employment Agreement, dated as of May 9, 1997, by and among CTS, the Company and Patrick J.
Dorme. (Incorporated herein by reference to Exhibit 10.5 to Dynamics Corporation of America's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997.)
(5) Employment Agreement, dated as of May 9, 1997, by and among CTS, the Company and Henry V.
Kensing. (Incorporated herein by reference to Exhibit 10.6 to Dynamics Corporation of America's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997.)
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
- ------------------------
* previously filed
6
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 49.9%
OF THE OUTSTANDING COMMON STOCK
OF
DYNAMICS CORPORATION OF AMERICA
AT
$55.00 NET PER SHARE,
BY
CTS FIRST ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CTS CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 13, 1997, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF DYNAMICS CORPORATION OF AMERICA (THE "COMPANY")
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER, AND RECOMMENDS
THAT HOLDERS OF SHARES OF COMMON STOCK OF THE COMPANY ("SHARES") WHO WISH TO
RECEIVE CASH FOR THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER. SEE ITEM 4 OF THE SCHEDULE 14D-9 MAILED TO SHAREHOLDERS
SIMULTANEOUSLY WITH THIS OFFER TO PURCHASE.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
WHICH CONSTITUTES AT LEAST 25% OF THE SHARES OUTSTANDING ON THE DATE OF PURCHASE
(THE "MINIMUM SHARE CONDITION") AND THE RECEIPT OF A LEGAL OPINION AS TO CERTAIN
TAX CONSEQUENCES OF THE MERGER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE "THE OFFER -- CONDITIONS OF
THE OFFER."
------------------------
According to the Company, there were 3,838,742 Shares outstanding as of May
8, 1997. Assuming no change in such number, the Offer is to purchase up to
1,915,500 Shares.
Any Shareholder desiring to tender all or any portion of the Shareholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such Shareholder's signature thereon guaranteed if required by
instructions to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile thereof) and any other required documents to the
Depositary and either deliver the certificates for such Shares to the Depositary
along with the Letter of Transmittal (or a facsimile thereof) or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in "The Offer
- -- Procedures for Tendering Shares" prior to the expiration of the Offer or (ii)
request such Shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such Shareholder.
Any Shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedures
for book-entry transfer described in this Offer To Purchase on a timely basis,
may tender such Shares by following the procedures for guaranteed delivery set
forth in "The Offer -- Procedures for Tendering Shares."
Questions and requests for assistance or for additional copies of this Offer
To Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other tender offer material, may be directed to the Information Agent at its
address and telephone number set forth on the back cover of this Offer To
Purchase.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
---------------
May 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
INTRODUCTION.............................................................................................. 1
SPECIAL CONSIDERATIONS RELATING TO THE COMBINATION........................................................ 3
Price Range of Shares and CTS Shares; Dividends................................................... 3
Fairness of the Offer............................................................................. 4
Interests of Certain Persons in the Offer and the Merger.......................................... 6
Board Representation.............................................................................. 7
Certain Effects of the Offer...................................................................... 7
Plans for the Company and CTS..................................................................... 9
Certain Federal Income Tax Consequences........................................................... 9
BACKGROUND OF THE COMBINATION............................................................................. 12
THE OFFER................................................................................................. 17
Terms of the Offer; Proration; Expiration Date.................................................... 17
Conditions of the Offer........................................................................... 19
Acceptance for Payment and Payment for Shares..................................................... 21
Procedures for Tendering Shares................................................................... 22
Withdrawal Rights................................................................................. 25
THE MERGER AND THE MERGER AGREEMENT....................................................................... 26
Agreements With Respect to the Offer.............................................................. 26
The Merger........................................................................................ 26
Procedures for Exchange of Certificates; Fractional Shares........................................ 26
Shareholder Approval of the Merger................................................................ 27
Representations and Warranties.................................................................... 28
Conduct of Business Pending Merger................................................................ 28
No-Shop Covenant.................................................................................. 29
Inducement Fee and Termination Fees............................................................... 30
Employee Benefits Matters......................................................................... 31
Indemnification; Directors' and Officers' Insurance............................................... 31
Conditions to the Consummation of the Merger...................................................... 32
Termination....................................................................................... 33
Amendments to CTS Charter and Bylaws.............................................................. 34
Dissenter's Rights................................................................................ 34
CERTAIN INFORMATION CONCERNING THE COMPANY................................................................ 34
General........................................................................................... 34
Selected Financial Information.................................................................... 34
Certain Projections............................................................................... 35
The Rights........................................................................................ 36
Certain Provisions of the Company's Certificate of Incorporation.................................. 37
CERTAIN INFORMATION CONCERNING PURCHASER AND CTS.......................................................... 37
Purchaser......................................................................................... 37
CTS............................................................................................... 37
Selected Financial Information.................................................................... 38
Certain Projections............................................................................... 39
Certain Employee Matters.......................................................................... 40
PRO FORMA FINANCIAL DATA.................................................................................. 41
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS............................................................ 47
General........................................................................................... 47
New York Business Combination Statute............................................................. 47
Antitrust......................................................................................... 47
Other............................................................................................. 49
MISCELLANEOUS............................................................................................. 49
Source and Amount of Funds........................................................................ 49
Fees and Expenses................................................................................. 50
Schedule 14D-1.................................................................................... 50
SCHEDULE I--INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF CTS AND PURCHASER........................................................... 51
</TABLE>
<PAGE>
To the Holders of Common Stock
of Dynamics Corporation of America:
INTRODUCTION
CTS First Acquisition Corp., a New York corporation (the "Purchaser"),
hereby offers to purchase up to 49.9% of the issued and outstanding shares of
Common Stock (the "Shares") of Dynamics Corporation of America, a New York
corporation (the "Company"), together with the associated purchase rights issued
pursuant to the Company Rights Agreement (the "Rights"), at a price of $55.00
per Share (the "Offer Price"), net to the seller in cash, without interest
thereon, on the terms and subject to the conditions set forth in this Offer To
Purchase and in the related Letter of Transmittal (which, as amended from time
to time, together constitute the "Offer"). According to the Company, there were
3,838,742 Shares outstanding as of May 8, 1997. Assuming no change in such
number, the Offer is to purchase 1,915,500 Shares (subject to increase in
accordance with the Merger Agreement in certain circumstances). Purchaser is a
newly formed wholly owned subsidiary of CTS Corporation, an Indiana corporation
("CTS").
The Offer is being made to all holders of Shares ("Shareholders") pursuant
to an Agreement and Plan of Merger, dated as of May 9, 1997 (the "Merger
Agreement"), among CTS, Purchaser and the Company. The Merger Agreement
provides, among other things, for the commencement of the Offer by Purchaser and
further provides that, after the purchase of Shares pursuant to the Offer,
subject to the satisfaction or waiver of certain conditions, the Company will be
merged with and into Purchaser (the "Merger" and, together with the Offer, the
"Combination"), with Purchaser surviving the Merger (the "Surviving
Corporation") as a wholly owned subsidiary of CTS. In the Merger, subject to
certain exceptions, each Share issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") will be converted at the
Effective Time into the right to receive 0.88 (the "Exchange Ratio") fully paid
and nonassessable shares of Common Stock of CTS (the "CTS Shares") (the "Merger
Consideration"). In connection with the Merger, CTS declared a stock split in
the form of a 1:1 stock dividend (the "Stock Split") to be effective immediately
following the Effective Time. If the Stock Split is so effective, the Exchange
Ratio in the Merger will be 1.76 CTS Shares for each Share.
The Offer is intended by Purchaser and CTS as the first step in the
combination of the businesses of CTS and the Company. The purposes of the Offer
are (i) to permit Shareholders who desire to receive cash for their Shares
instead of CTS Shares the opportunity to do so and (ii) to limit the number of
CTS Shares issued in the Merger. The purpose of the Merger is to combine the
businesses of CTS and the Company.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS DETERMINED
THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY AND THE SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER, AND RECOMMENDS THAT
SHAREHOLDERS WHO WISH TO RECEIVE CASH FOR THEIR SHARES ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER. The Company has informed Purchaser
and CTS that the reasons underlying such determinations are as described in Item
4 of the Schedule 14D-9 mailed to Shareholders simultaneously with this Offer To
Purchase (the "Schedule 14D-9"). Wasserstein, Perella & Co., the Company's
financial advisor ("WP&Co."), has delivered to the Company its opinion (the
"WP&Co. Fairness Opinion") that the consideration to be received by the
Shareholders in the Offer and the Merger, taken together, pursuant to the Merger
Agreement is fair to the Shareholders from a financial point of view. A copy of
the WP&Co. Fairness Opinion, which sets forth a description of the assumptions
made, matters considered and limitations of the review undertaken, is included
as part of the Schedule 14D-9. Shareholders are urged to review the WP&Co.
Fairness Opinion in its entirety.
The Company beneficially owns 2,303,100 CTS Shares (the "Company-Owned CTS
Shares"), which represent 44.1% of the issued and outstanding CTS Shares and
24.5% of the CTS Shares having ordinary voting rights. Two officers of the
Company are members of CTS' five-member Board of Directors (the
1
<PAGE>
"CTS Board"). The entire CTS Board, as well as the members of the CTS Board who
are not employees of the Company (the "Unaffiliated CTS Directors") voting
separately, approved the Merger Agreement and the transactions contemplated
thereby, including the Offer, following a determination by the Unaffiliated CTS
Directors, and also by the entire CTS Board, that such transactions were fair to
and in the best interests of CTS and its shareholders (other than the Company).
The Offer is conditioned upon, among other things, (i) the satisfaction of
the Minimum Share Condition, (ii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), having expired or been terminated prior to the expiration of the Offer,
(iii) the receipt of a legal opinion as to certain tax consequences of the
Merger, (iv) the absence of certain litigation, orders or other legal matters,
(v) the representations and warranties of the Company in the Merger Agreement
being materially true and correct as of the Expiration Date and the covenants of
the Company in the Merger Agreement having been materially performed or complied
with, (vi) the absence of any material adverse change, or any development that
is reasonably likely to result in a material adverse change, in the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (vii) the Merger Agreement not having been
terminated in accordance with its terms, (viii) no person having acquired
beneficial ownership of Shares in excess of certain specified percentages, and
(ix) certain other conditions set forth in "The Offer -- Conditions of the
Offer."
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including the adoption of the Merger Agreement by the
requisite vote or consent of the Shareholders and the approval of the issuance
of CTS Shares by shareholders of CTS (the "CTS Shareholders"). Under the New
York Business Corporation Law (the "NYBCL"), the Shareholder vote necessary to
adopt the Merger Agreement is the affirmative vote of at least two-thirds of the
Shares, including Shares held by Purchaser and its affiliates. The affirmative
vote of the holders of a majority of the votes cast by CTS Shares at a meeting
of CTS Shareholders is required to approve the issuance of CTS Shares in
connection with the Merger. Pursuant to the Merger Agreement, (i) CTS has agreed
to vote all Shares beneficially owned by it, including Shares purchased in the
Offer, in favor of adoption of the Merger Agreement and (ii) the Company has
agreed to vote all CTS Shares beneficially owned by it that have voting rights
in favor of the issuance of CTS Shares in the Merger. The Merger Agreement is
more fully described in "The Merger and the Merger Agreement." Certain federal
income tax consequences of the Combination are described in "Special
Considerations Relating to the Combination -- Certain Federal Income Tax
Consequences."
Tendering Shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer or
the Merger. Purchaser will pay all charges and expenses of J.P. Morgan
Securities Inc., as the Dealer Manager ("J.P. Morgan" and, in such capacity, the
"Dealer Manager"), The First National Bank of Boston, as the depositary (the
"Depositary"), and MacKenzie Partners, Inc., as the information agent (the
"Information Agent"), in connection with the Offer.
The Rights Agreement, dated as of January 30, 1986, as amended (the "Company
Rights Agreement"), between the Company and The First National Bank of Boston,
as Rights Agent (the "Rights Agent"), has been amended to provide that (i) the
Rights issued thereunder will expire immediately prior to the Effective Time,
(ii) neither CTS nor any of its affiliates or associates will be deemed an
Acquiring Person, and (iii) neither a Distribution Date nor a Stock Acquisition
Date (as such terms are defined in the Company Rights Agreement) will occur by
reason of the execution of the Merger Agreement, the announcement or completion
of the Offer, the consummation of the Merger or the consummation of the other
transactions contemplated by the Merger Agreement. See "Certain Information
Concerning the Company -- The Rights." Unless the context otherwise requires,
all references to Shares include the associated Rights, and all references to
the Rights include the benefits that may inure to holders of the Rights pursuant
to the Company Rights Agreement, including the right to receive any payment due
upon
2
<PAGE>
redemption of the Rights. Purchaser believes that, as of May 16, 1997, the
Rights were not exercisable, Rights certificates had not been issued and the
Rights were evidenced by the Share Certificates.
INFORMATION APPEARING OR INCORPORATED HEREIN IN RESPECT OF THE COMPANY, THE
COMPANY BOARD AND THE WP&CO. FAIRNESS OPINION HAS BEEN FURNISHED TO PURCHASER
AND CTS BY THE COMPANY. WHILE PURCHASER AND CTS HAVE NO REASON, AS OF THE DATE
OF THIS OFFER TO PURCHASE, TO BELIEVE THAT SUCH INFORMATION IS INCORRECT IN ANY
MATERIAL RESPECT, NONE OF PURCHASER, CTS, THEIR RESPECTIVE AFFILIATES OR ANY
REPRESENTATIVE OF ANY OF THE FOREGOING ASSUMES ANY LIABILITY THEREFOR.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE SHAREHOLDERS OR THE CTS SHAREHOLDERS OR AN OFFER TO SELL OR SOLICITATION OF
OFFERS TO BUY CTS SHARES OR OTHER SECURITIES. ANY SUCH SOLICITATION WILL BE MADE
ONLY PURSUANT TO SEPARATE PROXY MATERIALS PURSUANT TO THE REQUIREMENTS OF
SECTION 14(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"), AND ANY OFFER WILL BE MADE ONLY THROUGH A REGISTRATION
STATEMENT AND PROSPECTUS PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, WHICH PROSPECTUS WILL ALSO CONSTITUTE A JOINT PROXY STATEMENT
FOR THE MEETINGS OF SHAREHOLDERS OF THE COMPANY AND CTS RELATING TO THE MERGER
(THE "JOINT PROXY STATEMENT/PROSPECTUS").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF CTS OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE SCHEDULE 14D-9
CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BY SHAREHOLDERS
BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
SPECIAL CONSIDERATIONS RELATING TO THE COMBINATION
PRICE RANGE OF SHARES AND CTS SHARES; DIVIDENDS
THE COMPANY. According to the Company's Form 10-K for the year ended
December 31, 1996 (the "Company 10-K"), the Shares are listed and principally
traded on the New York Stock Exchange, Inc. (the "NYSE") under the symbol "DYA."
The following table sets forth, for the periods indicated, the high and low
sales prices per Share on the NYSE and the amount of cash dividends paid per
Share, as reported in the Company 10-K for periods in 1995 and 1996 and as
reported by published financial sources with respect to periods in 1997:
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter...................................................................... $ 26 3/4 $ 19 1/2
Second Quarter..................................................................... 24 3/4 22 1/4
Third Quarter...................................................................... 24 5/8 22 1/2
Fourth Quarter..................................................................... 25 7/8 21 5/8
Year Ended December 31, 1996:
First Quarter...................................................................... $ 24 7/8 $ 22 1/8
Second Quarter..................................................................... 27 7/8 23 1/4
Third Quarter...................................................................... 29 1/8 25
Fourth Quarter..................................................................... 29 1/4 27 7/8
Year Ended December 31, 1997:
First Quarter...................................................................... $ 38 1/8 $ 26 1/2
Second Quarter (through May 15, 1997).............................................. 54 3/4 39
<CAPTION>
CASH
DIVIDENDS
-----------
<S> <C>
Year Ended December 31, 1995:
First Quarter...................................................................... $ .10
Second Quarter..................................................................... -0-
Third Quarter...................................................................... .10
Fourth Quarter..................................................................... -0-
Year Ended December 31, 1996:
First Quarter...................................................................... $ .10
Second Quarter..................................................................... -0-
Third Quarter...................................................................... .10
Fourth Quarter..................................................................... -0-
Year Ended December 31, 1997:
First Quarter...................................................................... $ .10
Second Quarter (through May 15, 1997).............................................. -0-
</TABLE>
3
<PAGE>
On May 9, 1997, the last full trading day before the public announcement of
the Combination, the reported closing price of the Shares on the NYSE Composite
Tape was $44 3/8 per share. On May 15, 1997, the last full trading day prior to
the date hereof, the reported closing sales price of the Shares on the NYSE
Composite Tape was $54 5/8 per Share. Shareholders are urged to obtain current
market quotations for the Shares.
In 1984, the Company established a regular semi-annual dividend rate of
$0.10 per Share. Based on publicly available information, Purchaser does not
believe there are any present or future restrictions on the Company's ability to
continue this policy. The Merger Agreement provides that the Company may
continue to pay its regular semi-annual dividends until the Effective Time.
CTS. The CTS Shares are listed and principally traded on the NYSE under the
symbol "CTS." The following table sets forth, for the quarters indicated, the
high and low sales prices per share on the NYSE and the amount of cash dividends
paid per share for periods in 1995, 1996 and 1997:
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter...................................................................... $ 32 $ 27 3/8
Second Quarter..................................................................... 33 1/2 29 1/4
Third Quarter...................................................................... 34 1/2 29 15/16
Fourth Quarter..................................................................... 37 3/4 29 5/8
Year Ended December 31, 1996:
First Quarter...................................................................... $ 38 5/8 $ 36
Second Quarter..................................................................... 47 37 3/8
Third Quarter...................................................................... 47 40 1/2
Fourth Quarter..................................................................... 43 38 1/8
Year Ended December 31, 1997:
First Quarter...................................................................... $ 50 3/4 $ 41
Second Quarter (through May 15, 1997).............................................. 64 1/2 50
<CAPTION>
CASH
DIVIDENDS
-----------
<S> <C>
Year Ended December 31, 1995:
First Quarter...................................................................... $ .15
Second Quarter..................................................................... .15
Third Quarter...................................................................... .15
Fourth Quarter..................................................................... .15
Year Ended December 31, 1996:
First Quarter...................................................................... $ .15
Second Quarter..................................................................... .15
Third Quarter...................................................................... .18
Fourth Quarter..................................................................... .18
Year Ended December 31, 1997:
First Quarter...................................................................... $ .18
Second Quarter (through May 15, 1997).............................................. .18
</TABLE>
On May 9, 1997, the last full trading day before the public announcement of
the Combination, the reported closing price of CTS Shares on the NYSE Composite
Tape was $61 3/4 per share. On May 15, 1997, the last full trading day prior to
the date hereof, the reported closing sales price of shares of the Common Stock
on the NYSE Composite Tape was $61 7/8 per Share. Shareholders are urged to
obtain current market quotations for the CTS Shares.
In 1996, CTS increased its quarterly dividend rate from $0.15 to $0.18 per
CTS Share. The Merger Agreement permits CTS to continue to pay regular quarterly
dividends. The payment of dividends on the CTS Shares is a matter for the
discretion of the CTS Board and is subject to customary restrictions thereon.
FAIRNESS OF THE OFFER
The Company Board has determined that the Offer and the Merger are fair to
and in the best interests of the Company and the Shareholders, has approved the
Merger Agreement and the transactions contemplated thereby, including the Offer,
and has recommended that Shareholders who wish to receive cash for their Shares
accept the Offer and tender their Shares pursuant to the Offer. The Company has
informed Purchaser and CTS that the background and factors underlying such
determination are as described in Item 4 of the Schedule 14D-9, which is
incorporated herein by this reference. WP&Co. has delivered to the Company the
WP&Co. Fairness Opinion to the effect that the consideration in the Offer
4
<PAGE>
and the Merger, taken together, to be received by the Shareholders pursuant to
the Merger Agreement is fair to the Shareholders from a financial point of view.
A copy of the WP&Co. Fairness Opinion, which sets forth a description of the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Exhibit 12 to the Schedule 14D-9 and is incorporated herein by
this reference. Shareholders are urged to review the WP&Co. Fairness Opinion in
its entirety. Additional information concerning factors considered by, and the
determinations of, the Company Board regarding the Offer and the Merger is set
forth in Items 3 and 4 of the Schedule 14D-9 and is incorporated herein by
reference.
The CTS Board, including the Unaffiliated CTS Directors voting separately,
unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Offer, following a determination by the Unaffiliated CTS
Directors, and thereafter by the entire CTS Board, that such transactions were
fair to and in the best interests of CTS and the CTS Shareholders (other than
the Company). In making such determination, the CTS Board, and the Unaffiliated
CTS Directors, considered various factors, including (i) the business, financial
position, results of operations and prospects of CTS and the Company, and
potential synergies resulting from the Combination (estimated at not less than
$2.0 million, after tax, annually); (ii) the strategic fit between the Company's
frequency control and heat dissipating businesses and CTS' existing operations,
and the prospects for the Company's other operations; (iii) the expectation that
the Combination would be accretive to CTS' net earnings in 1997 (excluding one-
time transaction-related costs or charges) and thereafter; (iv) historical
market prices for Shares and CTS Shares; (v) the potential impact of the
Combination on market prices for CTS Shares as a result of the decrease in
concentration of the ownership thereof and increase in the liquidity of the
market for CTS Shares as well as the factors described above; (vi) the
commitment of members of the senior management team of the Company to continue
with the Company following the Combination under the terms of the Company
Employment Contracts to be effective as of the Effective Time (which replace
their existing employment/change-in-control severance agreements with the
Company); (vii) presentations by J.P. Morgan relating to the proposed
Combination; and (viii) the impact of the Combination on the non-shareholder
constituencies of CTS (including the employees, suppliers and customers of CTS
and communities in which offices or other facilities of CTS are located), which
were believed to be generally favorable. The foregoing discussion of the factors
considered and given weight by the CTS Board is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Combination, the CTS Board did not find it practicable to and did not
attempt to rank or assign relative weights to the foregoing factors. In
addition, individual members of the CTS Board may have given different weight to
different factors.
Each Shareholder must make his, her or its own decision whether to tender
Shares pursuant to the Offer, whether to sell or retain Shares and how to vote
or otherwise act in respect of the adoption of the Merger Agreement, and should
give careful consideration to the terms of, and consequences resulting from, the
Offer, the Merger and such other factors as such Shareholder determines to be
relevant. Whether or not the Offer Price represents an acceptable return on
investment for any particular Shareholder will necessarily depend on such
Shareholder's individual investment criteria, liquidity requirements and other
circumstances, as well as assumptions as to future events (including the
Company's and CTS' future results of operations), many of which events are
outside of the Company's and CTS' control. See "Certain Information Concerning
the Company -- Selected Financial Information" and "-- Certain Projections;"
"Certain Financial Information Concerning Purchaser and CTS -- Selected
Financial Information" and "-- Certain Projections;" and "Pro Forma Financial
Data." Moreover, any analysis of the value of an investment in the Shares and
CTS Shares is heavily dependent on the particular capitalization and discount
rates and other investment criteria an investor determines to be appropriate for
such investor's analysis.
5
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
DIRECTORS AND OFFICERS. Andrew Lozyniak, the Chairman of the Board and
President of the Company, and a director of the Company, is a director of CTS.
Patrick J. Dorme, Vice President-Finance, Chief Financial Officer and director
of the Company, is also a director of CTS. Certain of CTS' and Purchaser's
executive officers and directors (or their spouses) beneficially own Shares in
the amounts set forth on Schedule I hereto. On May 9, 1997, in connection with
the execution of the Merger Agreement, CTS, the Company and each of Mr.
Lozyniak, Mr. Dorme and Henry V. Kensing, Vice President, General Counsel and
Secretary of the Company, entered into employment contracts to be effective at
the Effective Time (collectively, the "Company Employment Contracts"). The
Company Employment Contracts and certain other matters relating to the interests
of Messrs. Lozyniak, Dorme and Kensing and other executive officers and
directors of the Company are described in Item 3(b) of the Schedule 14D-9, which
description is incorporated herein by this reference.
It is expected that Messrs. Lozyniak and Dorme will continue as members of
the CTS Board following the Effective Time. The failure to nominate either of
them for election as a member of the CTS Board following the Effective Time
constitutes grounds for termination by them of, and gives rise to the right to
receive severance benefits under, the Company Employment Contracts. The failure
to nominate either of Messrs. Lozyniak or Dorme for election to the CTS Board
also constitutes grounds for Mr. Kensing to receive such benefits. It is
anticipated that, as of the Effective Time, the CTS Board will initially be CTS'
current five-member board, which includes Joseph P. Walker, Chairman, President
and Chief Executive Officer of CTS, Messrs. Lozyniak and Dorme and the two
present independent directors of CTS. It is also contemplated that, as promptly
as practical following the Effective Time, the CTS Board will increase by at
least two additional directors who qualify as independent directors under NYSE
guidelines. See "-- Board Representation" for a description of certain
procedures set forth in the Merger Agreement relating to the election of
additional members of the CTS Board by the other members thereof. Mr. Lozyniak
will also join CTS' Office of the Chairman with Mr. Walker and will focus on
strategic issues while continuing to oversee the management of the Company's
continuing operations.
In addition, in connection with its approval of the Company Employment
Contracts, CTS approved, subject to the completion of the Merger and the
approval by CTS Shareholders, the award of an option to Mr. Lozyniak to purchase
100,000 CTS Shares at $62.50 per share. The option has a ten-year term from the
Effective Time and vests as to 20% of the CTS Shares covered thereby on each of
the first five annual anniversaries thereof, subject to immediate vesting if the
average closing price for CTS Shares equals or exceeds $70.00 over a
20-trading-day period and upon certain terminations of Mr. Lozyniak's
employment.
The CTS Board also approved option awards (having substantially similar
terms, and subject to the same conditions, as the option granted to Mr.
Lozyniak) to Joseph P. Walker, in respect of 200,000 CTS Shares, and certain
other executive officers of CTS in respect of 150,000 CTS Shares. In addition,
the CTS Board approved CTS' entry into an employment agreement with Mr. Walker
(the "CEO Employment Contract") to replace his existing employment agreement
(which was to expire by its terms on June 24, 1997). See "Certain Information
Concerning Purchaser and CTS -- Certain Employee Matters" for a discussion of
the CEO Employment Contract and certain other matters.
SECURITY OWNERSHIP. As of the date hereof, CTS beneficially owns 100 Shares
and Purchaser beneficially owns no Shares. As of the date hereof, no executive
officer or director of CTS or Purchaser, or to the knowledge of CTS or
Purchaser, any of their associates, beneficially owns, or has the right to
acquire, directly or indirectly, any Shares, except as set forth in Schedule I
hereto. Mr. Walker has informed the Company that he does not intend to tender
the Shares beneficially owned by him or his spouse pursuant to the Offer, and
each of CTS and Mr. Walker intend to vote Shares beneficially owned by them in
favor of the adoption of the Merger Agreement. Neither CTS nor Purchaser, nor,
to the knowledge of CTS or
6
<PAGE>
Purchaser, any of the executive officers and directors of CTS or Purchaser, has
engaged in any transaction in Shares in the past 60 days.
RELATED TRANSACTIONS. CTS paid the Company the following amounts for the
purchase of products from the Company in each of 1994, 1995 and 1996: $233,000,
$143,000 and $157,000, respectively. Purchaser and CTS believe that such
purchases were on substantially comparable terms to those that would have been
available in arms' length transactions involving unrelated persons. Each of
Messrs. Lozyniak and Dorme has received directors' fees from CTS. Mr. Dorme was
paid the following amounts: 1994: $23,500; 1995: $27,500; 1996: $28,000; and
1997 (through the date hereof): $11,833. Mr. Lozyniak was paid the following
amounts: 1994: $24,000; 1995: $28,000; 1996: $28,500; and 1997 (through the date
thereof): $12,000. Such directors' fees will no longer be payable to Messrs.
Lozyniak and Dorme after the Effective Time under the CTS Board's current
director compensation policies.
BOARD REPRESENTATION
The Merger Agreement provides that, promptly upon the purchase of Shares by
Purchaser pursuant to the Offer, and from time to time thereafter, CTS will be
entitled to designate such number of directors, rounded up to the next whole
number, as will give CTS representation on the Company Board proportionate with
the percentage of Shares purchased in the Offer, except that, if the number of
Shares purchased pursuant to the Offer equals or exceeds 49.9% of the
outstanding Shares, the Company has agreed that CTS' representatives will
constitute a majority of the Company Board. Following the election or
appointment of CTS' designees pursuant to the Merger Agreement and prior to the
Effective Time, any amendment or termination of the Merger Agreement by the
Company, extension by the Company for the performance or waiver of the
obligations or other acts of CTS or Purchaser or waiver of the Company's rights
thereunder requires the concurrence of a majority of the directors of the
Company then in office who were directors on the date of the Merger Agreement
and who voted to approve the Merger Agreement. Schedule I to the Schedule 14D-9
contains certain information about the persons expected to be designated by CTS
to be so nominated or elected to the Company Board.
As promptly as practicable following the Effective Time, CTS expects to
increase the CTS Board and add two additional directors who qualify as
independent directors under NYSE guidelines. The Merger Agreement provides that
any additional directors elected or nominated for election by the CTS Board must
be nominated by the unanimous vote of a committee of the CTS Board comprised of
two Unaffiliated CTS Directors and one member who is not an Unaffiliated CTS
Director (the "Board Committee"). Pursuant to the Merger Agreement, the Board
Committee will initially be composed of Mr. Walker, Mr. Lozyniak and Gerald H.
Frieling, Jr. The Merger Agreement further provides that, from the Effective
Time until the date immediately following the date of CTS' 1998 annual
shareholder meeting or any adjournment or postponement thereof, only a person
elected or nominated by the unanimous vote of the Board Committee may become an
additional director by action of the CTS Board. See "-- Interests of Certain
Persons in the Offer and the Merger" for a discussion of the expected
composition of the CTS Board following the Offer and the Merger. It is expected
that, following the Effective Time, the Board of Directors of the Surviving
Corporation will be composed of Mr. Lozyniak and not fewer than two employees of
CTS, including its Chairman and Chief Executive Officer.
CERTAIN EFFECTS OF THE OFFER
CTS has agreed with the Company to use reasonable efforts to cause the CTS
Shares to be issued in the Merger to be approved for listing on the NYSE prior
to the Effective Time, and Purchaser and CTS do not know of any reason why such
listing would not be approved. In connection with the Merger, immediately
following the Effective Time, the Shares will be delisted from the NYSE and
deregistered pursuant to Section 12(g)(4) of the Exchange Act.
7
<PAGE>
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
Shareholders, which could adversely affect the liquidity and market value of the
remaining Shares held by Shareholders between the time that Shares are purchased
in the Offer and the Effective Time or in the event that Shares are purchased in
the Offer and the Merger, for whatever reason, does not occur. Purchaser cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether such reduction would cause market prices
to be greater or less than the Offer Price.
Depending on the number of Shares purchased pursuant to the Offer, following
the completion of the Offer, the Shares may no longer meet the requirements of
the NYSE for continued listing and may, therefore, be delisted from such
exchange. According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of publicly held Shares
(excluding Shares held by officers, directors and their immediate families and
other concentrated holdings of 10% or more of the Shares) were less than
600,000, there were fewer than 1,200 holders of at least 100 shares or the
aggregate market value of the publicly held Shares was less than $5 million.
According to the Company, as of May 8, 1997, there were 3,838,742 Shares
outstanding and, as of February 26, 1997, there were 3,584 Shareholders of
record. Assuming no change in such number of Shares, the Offer is to purchase up
to 1,915,500 Shares (subject to increase in accordance with the Merger Agreement
in certain circumstances).
If, as a result of the purchase of Shares pursuant to the Offer, the Shares
no longer meet the requirements of the NYSE for continued listing and the
listing of Shares is discontinued, the market for the Shares could be adversely
affected. If the Shares no longer meet the NYSE listing requirements, it is
possible that the Shares would trade on another securities exchange or in the
over-the-counter market and that price quotations for the Shares would be
reported by such exchange or through the Nasdaq Stock Market, Inc.'s National
Market or other sources. The extent of the public market for the Shares and
availability of such quotations would, however, depend upon such factors as the
number of holders and/or the aggregate market value of the publicly held Shares
at such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Securities and Exchange Commission (the "Commission") if the
Shares are neither listed on a national securities exchange nor held by 300 or
more holders of record. Termination of the registration of the Shares under the
Exchange Act would substantially reduce the information required to be furnished
by the Company to holders of Shares and to the Commission and would make certain
of the provisions of the Exchange Act no longer applicable to the Company. Such
provisions include the short-swing profit recovery provisions of Section 16(b),
the requirement of furnishing a proxy statement pursuant to Section 14(a) in
connection with a Shareholders' meeting and the related requirement of providing
an annual report to Shareholders, and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 under the Securities Act.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares may no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as collateral
for loans made by brokers.
8
<PAGE>
PLANS FOR THE COMPANY AND CTS
While it is anticipated that, following the Effective Time, the Company's
frequency control and heat dissipating product lines will be integrated into
complementary CTS operations, the Surviving Corporation is expected otherwise to
be operated as a subsidiary of CTS following the Merger. Except as described
elsewhere herein, Purchaser and CTS have no current plans or proposals that
would result in an extraordinary corporate transaction, such as a merger or
consolidation of the Surviving Corporation with or into any third entity, the
sale or transfer of substantially all of the Surviving Corporation's assets to a
third party or any other material changes in the Surviving Corporation's
business. Following the Effective Time, however, CTS intends to evaluate and
review the Surviving Corporation's operations and the potential opportunities
for synergies with CTS' operations, and to consider what, if any, changes would
be desirable in light of the results of such evaluations and reviews. After such
review, it is possible that CTS will seek to dispose of certain businesses or
assets of the Surviving Corporation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger. This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), the applicable Treasury Regulations
promulgated thereunder, judicial authorities, administrative rulings and other
applicable authorities, all as in effect as of the date hereof. Legislative,
judicial or administrative authorities are subject to change, possibly on a
retroactive basis, at any time and could alter or modify the statements and
conclusions set forth below. It is assumed for purposes of this discussion that
the Shares are held and will continue to be held as "capital assets" within the
meaning of Section 1221 of the Code (i.e., in general, property held for
investment). This discussion does not address all aspects of federal income
taxation that may be relevant to a particular Shareholder in light of such
Shareholder's particular investment circumstances, or those Shareholders subject
to special treatment under the federal income tax laws (for example, life
insurance companies, tax-exempt organizations, foreign corporations and
nonresident alien individuals) or to Shareholders who acquired their Shares
through the exercise of employee stock options or other compensation
arrangements. In addition, the discussion does not address any aspect of
foreign, state, local or estate and gift taxation that may be applicable to a
Shareholder. No ruling has been or will be sought from the Internal Revenue
Service (the "IRS") regarding the federal income tax consequences of the Offer
and the Merger and thus no assurance can be given that the IRS will agree with
the consequences described below.
CONSEQUENCES OF THE OFFER AND EXERCISE OF DISSENTER'S RIGHTS. The sale of
all of a Shareholder's Shares for cash pursuant to the Offer (or upon the
exercise of dissenter's rights (see "The Merger and the Merger Agreement --
Dissenter's Rights") in connection with the Merger), will be a taxable
transaction for federal income tax purposes. In general, a Shareholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount received and the adjusted tax basis in the Shares sold
pursuant to the Offer (or received upon the exercise of dissenter's rights).
Gain or loss must be determined specifically for each identifiable block of
Shares (I.E, Shares acquired at the same cost in a single transaction). Such
gain or loss will be capital gain or loss and will be long-term gain or loss if,
on the date of sale, the Shares were held for more than a year.
The foregoing assumes that a Shareholder who sells all of its Shares
pursuant to the Offer or who dissents to the Merger will not own or acquire any
CTS Shares or options with respect to CTS Shares, and will not be treated as
owning any CTS Shares after the Offer and the Merger by attribution from a
related party under Section 318 of the Code. The rules for determining whether
shares owned by a related party will be treated as owned by a Shareholder by
attribution are complex and may, in certain circumstances, be waived. A
Shareholder who participates in the Offer or dissents in the Merger should
consult a tax advisor if (i) such Shareholder owns or will acquire any CTS
Shares or options with respect to CTS Shares or (ii) a related party will own
CTS Shares after the consummation of the Offer and the Merger, in order to
9
<PAGE>
determine whether such shares will be attributed to such Shareholder and, if so,
the tax consequences of such attribution. If the Merger does not occur or occurs
but is treated as a taxable transaction for federal income tax purposes, this
paragraph would not apply.
CONSEQUENCES OF PARTICIPATION IN THE MERGER. The Offer and the Merger
should be treated as a single integrated transaction for federal income tax
purposes, and the following discussion assumes, as CTS and Purchaser expect to
be the case, that the Merger will qualify as a reorganization under Section
368(a) of the Code. In such event, in general, (i) no gain or loss will be
recognized by the Company, CTS or the Purchaser pursuant to the Offer and the
Merger, (ii) no gain or loss will be recognized by a Shareholder who does not
participate in the Offer and receives solely stock pursuant to the Merger,
except to the extent that cash is received in lieu of a fractional CTS Share, as
discussed below, and (iii) a Shareholder who receives a combination of cash and
CTS Shares for such Shareholder's Shares pursuant to the Offer and the Merger
will not recognize loss but will recognize gain, if any, to the extent of the
lesser of (1) the cash received in the Offer and (2) the excess of the sum of
the fair market value of the CTS Shares (including fractional shares) received
pursuant to the Merger and the amount of cash received pursuant to the Offer
over the Shareholder's adjusted tax basis in its Shares. For purposes of clause
(iii), gain or loss must be calculated separately for each identifiable block of
Shares surrendered pursuant to the Merger, and a loss realized on one block of
Shares may not be used to offset a gain realized on another block of Shares. A
Shareholder's recognized gain will be capital gain (and long-term capital gain
if, at the Effective Time, the Shares were held for more than one year), unless
the receipt of cash by the Shareholder has the effect of the distribution of a
dividend as provided in Section 356(a)(2) of the Code. The receipt of cash by a
Shareholder will not be considered to have the effect of a distribution of a
dividend if the Shareholder's disposition of the Shares pursuant to the Offer
effects a "meaningful reduction" in the Shareholder's stock interest or is
"substantially disproportionate" with respect to the Shareholder, within the
meaning of Section 302(b) of the Code. For purposes of making this
determination, ownership of CTS Shares by related parties may be attributed to
the Shareholder, as discussed above. The IRS has ruled that any reduction in
interest of a minority stockholder owning a small number of shares in a publicly
and widely held corporation who exercises no control over corporate affairs may
constitute a "meaningful reduction."
The qualification of the Merger as a reorganization under Section 368(a) of
the Code will be subject to certain facts and conditions, including that there
be "continuity of interest" by Shareholders in the CTS Shares. The Offer is
conditioned upon the receipt by the Company and CTS of an opinion, dated as of
the date of Purchaser's purchase of Shares pursuant to the Offer, from either
Jones, Day, Reavis & Pogue ("Jones Day"), transactional counsel to CTS and
Purchaser, or Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), special
counsel to the Company, to the effect that, based upon such representations,
assumptions and conditions as the firm delivering such opinion deems necessary
or appropriate, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that CTS,
Purchaser and the Company will each be a party to such reorganization within the
meaning of Section 368(b) of the Code. Because any such opinion will be rendered
as a condition to consummation of the Offer and not as of the Effective Time of
the Merger (except in the circumstances described below), no assurance can be
given that the facts and conditions necessary for the Merger to qualify as a
reorganization under Section 368(a) of the Code (which facts and conditions will
be assumed or represented by the parties for purposes of such opinion) will be
satisfied. If these facts and conditions are not satisfied, the Merger would be
a taxable transaction for federal income tax purposes. In that case,
Shareholders would recognize gain or loss on their exchange of Shares for CTS
Shares (or for CTS Shares and cash, as the case may be), and the Company would
be treated as if it sold all its assets to Purchaser in a taxable sale for
federal income tax purposes.
If Purchaser elects to proceed with the Merger in certain circumstances
where the Minimum Share Condition is not met, the parties' obligations to
consummate the Merger will be conditioned on their receipt of a similar opinion.
See "The Merger and the Merger Agreement -- Conditions to the Consummation of
the Merger."
10
<PAGE>
Each of the Company and CTS agreed in the Merger Agreement to use all
reasonable efforts to cause the Merger to qualify as a reorganization under the
meaning of Section 368(a) of the Code.
TAX BASIS AND HOLDING PERIOD OF CTS SHARES RECEIVED IN THE MERGER. Assuming
that the Merger qualifies as a reorganization under Section 368(a) of the Code,
the aggregate tax basis of the CTS Shares received by a Shareholder in the
Merger (including fractional shares deemed received) will be the same as the
aggregate tax basis of the Shares converted in the Merger, increased by the
amount of any gain recognized by the Shareholder (including any portion treated
as dividend income, as described above), and decreased by the amount of cash
received by the Shareholder pursuant to the Offer. The holding period of such
CTS Shares will include the holding period of the Shares converted in the
Merger, provided such Shares are held as a capital asset at the Effective Time.
If a Shareholder has different tax bases or holding periods in respect of its
Shares, it should consult its tax advisors prior to the Merger with regard to
identifying the bases or holding periods of the particular CTS Shares received
in the Merger, as several methods of determination may be available.
CASH RECEIVED IN LIEU OF A FRACTIONAL CTS SHARE. Cash received by a
Shareholder in lieu of a fractional CTS Share will be treated as received in
redemption of such fractional CTS Share and, generally, gain or loss will be
recognized, measured by the difference between the amount of cash received and
the portion of the basis of the Shares exchanged that is allocable to such
fractional CTS Share. In general, such gain or loss will constitute capital gain
or loss, and will be long-term capital gain or loss if the holding period for
such Shares was greater than one year at the Effective Time.
PROPOSED LEGISLATION. Legislation has been proposed which would reduce
capital gains rates for federal income tax purposes. However, there can be no
assurance that such legislation will be enacted, or as to the effective date or
final terms thereof. Shareholders are therefore urged to consult their own tax
advisors with respect thereto.
BACKUP TAX WITHHOLDING. Under the Code, a Shareholder may be subject, under
certain circumstances, to "backup withholding" at a 31% rate with respect to
payments made in connection with the Offer or the Merger. Backup withholding
generally applies if the Shareholder (i) fails to furnish his or her social
security number or other taxpayer identification number ("TIN"), (ii) furnishes
an incorrect TIN, (iii) fails properly to report interest or dividends to the
IRS, or (iv) under certain circumstances, fails to provide a certified statement
to the IRS, signed under penalties of perjury, that the TIN provided is his or
her correct number and that he or she is not subject to backup withholding.
Backup withholding is not an additional tax but merely an advance payment, which
may be refunded to the extent it results in an overpayment of tax. Certain
persons generally are exempt from backup withholding, including corporations and
financial institutions. Certain penalties apply for failure to furnish correct
information and for failure to include the reportable payments in income. Each
Shareholder should consult with the Shareholder's tax advisor as to his or her
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE OFFER
AND THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
11
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BACKGROUND OF THE COMBINATION
On March 27, 1997, WHX Corporation ("WHX") sent a letter to the Company
proposing to acquire the Company in a merger in which all of the outstanding
Shares would be converted into the right to receive $40 per Share in cash (the
"WHX Merger Proposal"). In its March 27, 1997 letter, WHX stated it had no
interest in increasing the equity stake which the Company holds in CTS, or in
changing the nature of the current relationship between the Company and CTS. WHX
also stated that it would be prepared to increase its offer to the Company if
additional information demonstrated that a higher price was warranted, and asked
the Company to respond by the close of business on the next day (which was Good
Friday). Mr. Lozyniak advised WHX that he would not be able to review the WHX
Merger Proposal with the Company Board until the following week and would
communicate further with WHX promptly thereafter.
On March 31, 1997, WHX announced an offer to purchase up to 649,000 Shares,
subject to downward adjustment, at a price of $40 per Share in cash (the
"Initial WHX Tender Offer"). WHX also filed preliminary proxy materials with the
Commission on March 31, 1997 relating to the solicitation of proxies by WHX for
use at the Company's 1997 annual meeting of Shareholders (the "Company Annual
Meeting") to (i) elect four WHX nominees to the Company Board, (ii) adopt
changes to the Company's By-laws to (a) permit holders of at least 9.9% of the
outstanding Shares to call a special meeting of Shareholders and (b) permit the
removal of directors at any time with or without cause, and (iii) repeal any
By-law changes adopted by the Company Board after March 14, 1997 and prior to
the adoption of such resolution.
To obtain advice and assistance in considering the WHX Merger Proposal and
the Initial WHX Tender Offer or an alternative business combination, the Company
engaged WP&Co. as its financial advisor and Skadden Arps as its outside counsel.
On April 5, 1997, Joseph P. Walker and Andrew Lozyniak met to discuss a
possible business transaction. Mr. Walker indicated a price range of $45.00 per
Share, payable in CTS Shares and cash, for such a transaction. Mr. Lozyniak
indicated in this meeting that he would be willing to instruct the Company's
advisors to pursue further discussions of a possible transaction, but did not
respond to Mr. Walker's price indication.
To obtain advice and assistance in considering possible strategic benefits
that could result from a business combination and the issues that would be
required to be considered if such a transaction were to be pursued, CTS engaged
J.P. Morgan as CTS' financial advisor pursuant to an engagement letter dated
April 9, 1997, Sommer & Barnard as counsel in respect to matters of Indiana law
and possible litigation and Jones Day as transactional counsel. From April 16,
1997 through April 25, 1997, representatives of J.P. Morgan met on various
occasions with certain members of senior management of the Company and
representatives of WP&Co. to discuss certain aspects of the business, operations
and prospects of the Company. In connection therewith, the Company furnished
J.P. Morgan certain Company projections. See "Certain Information Concerning the
Company -- Certain Projections."
On April 9, 1997, WHX amended the Initial WHX Tender Offer (as amended, the
"Second WHX Tender Offer"), among other things, to increase the tender offer
price and WHX Merger Proposal price to $45 per Share. In an effort to move
forward from the discussions conducted at the April 5, 1997 meeting,
representatives of CTS delivered to representatives of the Company a draft
merger agreement on April 9, 1997. In response, representatives of the Company
informed representatives of CTS that, while the Company was not prepared at that
time to commence negotiations of the detailed terms of a business combination
transaction, the proposed draft merger agreement was unacceptable, particularly
provisions therein requiring the Company to grant to CTS an option on the CTS
Shares beneficially owned by the Company, a ten-year standstill that would
operate regardless of whether the transaction closed and a fiduciary-out
provision that was limited to superior acquisition proposals meeting specified
criteria.
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On April 9 and 11, 1997, the Company Board met to discuss the Second WHX
Tender Offer and possible actions to be taken by the Company. At the April 11,
1997 meeting, the Company Board unanimously rejected the Second WHX Tender Offer
as inadequate and not in the best interests of the Shareholders of the Company
and unanimously recommended that Shareholders reject the Second WHX Tender Offer
and not tender their Shares pursuant thereto. The Company Board also determined
to explore alternative transactions to maximize Shareholder value, including a
possible business combination with CTS. In reaching its determination to reject
the Second WHX Tender Offer, the Company Board considered a number of factors,
including the opinion of WP&Co. to the effect that, based upon and subject to
the matters reviewed with the Company Board, the $45 per Share cash
consideration offered to holders of Shares pursuant to the Second WHX Tender
Offer was inadequate from a financial point of view to such holders.
At the April 11, 1997 meeting, the Company Board also (i) postponed the
Company Annual Meeting to August 1, 1997, (ii) added two directors to the
Company Board (resulting in the Company Board being divided into three, rather
than two, classes), (iii) amended the Company's By-laws to (a) eliminate the
Shareholders' ability to remove directors without cause, (b) raise to two-thirds
the percentage of Shares needed to call a special meeting of Shareholders, (c)
add advance notice provisions for Shareholders to nominate persons for election
to the Company Board or to propose business at annual or special Shareholders'
meetings, and (d) remove an inconsistent and ineffective, provision purporting
to allow the holders of a majority of the Shares to amend the By-laws (the
Company's Restated Certificate of Incorporation, as amended (the "Company
Charter"), which controls over the By-laws, provides for an 80% vote to amend
the By-laws), and (iv) approved certain employee benefits matters. As a result
of these actions, it will take at least two annual meetings to replace a
majority of the Company Board. As discussed below, WHX has challenged the
validity of certain of these actions in litigation.
At an April 11, 1997 meeting, the CTS Board considered, on a preliminary
basis, alternatives that may be available to it in the circumstances (Messrs.
Lozyniak and Dorme having excused themselves from such discussion), including
the matters discussed in the meeting between Messrs. Walker and Lozyniak at
their April 5, 1997 meeting.
On April 14, 1997, the Company commenced litigation against WHX in Federal
District Court in Connecticut (the "Connecticut Court") alleging, among other
things, violations of the federal securities laws. On April 17, 1997, WHX filed
a counterclaim in the action pending in the Connecticut Court seeking a
declaratory judgment that Article XV of the Company Charter is invalid and
unenforceable. Article XV provides, in general, that 80% of the outstanding
voting stock of the Company is required to approve a merger of the Company with
another person if the other person is the "beneficial owner" of 5% or more of
the outstanding voting stock of the Company unless the Company Board approves
such a merger before the acquisition of such ownership. See "Certain Information
Concerning the Company -- Certain Provisions of the Company's Certificate of
Incorporation." The NYBCL only requires a two-thirds approval by shareholders.
Subsequently, WHX amended its counterclaim, among other things, to challenge
certain actions taken by the Company Board at its April 11, 1997 meeting.
On April 14, 1997, the Company and CTS signed a confidentiality agreement
providing that, subject to the terms of the agreement, each company would keep
confidential certain non-public information furnished by the other. Starting
April 16, 1997, representatives of the Company, including representatives of
WP&Co. and financial and operational executives of the Company, commenced
discussions with representatives of CTS, including representatives of J.P.
Morgan, concerning the operations of the Company and areas of potential synergy
between the Company and CTS.
On April 16, 1997, Mr. Walker, Mr. Lozyniak and representatives of J.P.
Morgan, WP&Co., Jones Day and Skadden Arps met to discuss a potential business
combination transaction. The specific price proposed by CTS to be paid therein
was not discussed at that meeting. On April 17, 1997, representatives of CTS
informed representatives of the Company that the price proposed to be paid by
CTS was at $50.00 per
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Share, consisting of approximately 50% cash and approximately 50% CTS Shares.
This proposal of CTS was rejected by representatives of the Company in a
conference call with representatives of CTS later that day.
The CTS Board met on April 24, 1997. At this meeting, the CTS Board
determined that it would be appropriate to establish a directorate committee
comprised of the two CTS directors who were not employed by either CTS or the
Company to facilitate discussions of a possible business combination transaction
between CTS and the Company (the "CTS Board Committee"). On April 25, 1997, the
day of CTS' 1997 annual meeting of shareholders (the "CTS Annual Meeting"),
representatives of the Company and of other shareholders of CTS discussed the
possible adjournment of the CTS Annual Meeting. Following discussions between
representatives of CTS and the Company, the CTS Annual Meeting was adjourned to
June 16, 1997.
On April 29, 1997, the Connecticut Court entered a preliminary injunction
against WHX in connection with the Initial WHX Tender Offer. The Connecticut
Court ordered WHX to make further and complete disclosures on certain issues and
to extend its tender offer for an additional 20 days.
On April 30, 1997, WHX amended the Second WHX Tender Offer to provide that
WHX is offering to purchase any and all outstanding Shares and to condition its
tender offer on the inapplicability of the Company Rights Plan and Section 912
of the NYBCL, which prohibits certain transactions, including mergers, between a
New York corporation, such as the Company, and a stockholder that beneficially
owns 20% or more of the outstanding voting stock of such corporation for a
period of five years after the acquisition of such ownership, unless the
acquisition of such ownership is approved in advance by the board of directors
of the company (as so amended, the "Third WHX Tender Offer"). The Third WHX
Tender Offer is scheduled to expire on May 20, 1997.
During April 29-30, 1997, the CTS Board Committee received presentations
from WP&Co. and J.P. Morgan as to such firms' views regarding the Company and
CTS and the possible terms of a business combination transaction involving the
two companies. In addition, the CTS Board Committee conducted discussions with
representatives of CTS and the Company with respect to other matters relevant to
a possible business combination transaction.
On April 30, 1997, the Company executed a confidentiality agreement with a
substantial multinational entity that has existing relationships with CTS and
has from time to time indicated a desire to pursue a substantial equity
investment, business combination or other transaction with CTS (the "Third
Party"). The confidentiality agreement contained an 18-month standstill
provision that prohibited the Third Party from, among other things, making any
proposal to acquire securities or assets of the Company. Thereafter,
representatives of the Company met with representatives of the Third Party and
provided the Third Party with certain information concerning the Company.
Representatives of CTS had engaged in preliminary discussions with
representatives of the Third Party on April 29, 1997.
On May 1, 1997, representatives of J.P. Morgan met with representatives of
WP&Co. and informally discussed a possible $55.00 per Share offer for the
Company, with approximately 50% of the consideration in cash and 50% in CTS
Shares. A meeting of the CTS Board was held on May 2, 1997, at which the status
of efforts regarding the possible business combination with the Company was
reviewed with the CTS Board (Messrs. Lozyniak and Dorme having excused
themselves from such discussion). It was the consensus of the Unaffiliated CTS
Directors that the parties should continue to pursue a possible business
combination transaction with the Company. Commencing on May 5, 1997,
representatives of the Company and CTS engaged in substantially continuous
negotiations of the terms for such a transaction, including definitive
documentation.
The Company Board met on May 7, 1997 to discuss the status of negotiations
and the terms of a possible transaction with CTS. The Company Board also adopted
an amendment to the Company Rights
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Plan to prevent the Rights from separating from the Shares as a result of WHX
amending its offer to purchase any and all Shares.
On May 7, 1997, a meeting of the CTS Board was held at which the possible
business combination with the Company was reviewed with the assistance of J.P.
Morgan, Sommer & Barnard and Jones Day. The presentations to and discussions by
the CTS Board (Messrs. Lozyniak and Dorme having excused themselves therefrom)
were wide-ranging and detailed, and included, among other things, (i) a
presentation by Sommer & Barnard regarding the duties of directors in
considering a possible business combination, (ii) a review by senior management
of the discussions conducted to date with representatives of the Company, (iii)
a detailed review by Jones Day of the draft merger documentation and the status
of discussions thereon between the parties, (iv) a review by senior management
as to how a combination could be implemented, including the expected composition
of the board of directors and senior management of the combined company, and (v)
a presentation by J.P. Morgan of its preliminary views of the possible
transaction. The CTS Board also received presentations regarding the terms of
the Company Employment Contracts and the CEO Employment Contract.
The CTS Board also met in the morning of May 9, 1997. At that meeting, the
CTS Board as an entirety, and the Unaffiliated CTS Directors separately,
approved the Combination.
Later in the morning of May 9, 1997, the Company received a letter from the
Third Party proposing to acquire the Company at $54 per Share in cash, subject
to a number of conditions, including satisfactory completion of financial,
legal, tax and environmental due diligence, exclusive negotiation between the
Company and the Third Party regarding the acquisition of the Company (which
would have required the cessation of negotiations between the Company and CTS)
and a $10 million break-up fee (the "Third Party Proposal"). The Third Party
also sent a letter to CTS that same morning indicating an intention to pursue
the possible acquisition of the Company and a desire to work with CTS'
management in connection therewith.
Representatives of CTS contacted representatives of the Company in the
morning of May 9, 1997 to report that CTS had approved the Merger Agreement
earlier that morning, that CTS had received the above-described letter from the
Third Party, that CTS believed that the Merger Agreement had been substantially
negotiated and could be signed later that day, that CTS had invested substantial
time and effort negotiating with the Company and that CTS did not wish to invest
further time and effort discussing a transaction with the Company if the Company
were not willing to sign a Merger Agreement on the terms which had been
discussed. Accordingly, representatives of CTS informed representatives of the
Company that CTS would terminate further discussions of a business combination
if the Merger Agreement were not approved by the Company and signed that day.
Representatives of CTS also said that CTS would not increase the consideration
it was proposing in the Combination. In light of the Third Party Proposal,
representatives of the Company proposed that CTS reduce the break-up fee
contemplated by the draft merger documents which the parties had been
discussing. CTS agreed in these discussions to reduce the fee to $2 million upon
signing and $4 million under certain circumstances.
Later that day, the Company Board met to continue the discussions begun on
May 7, 1997 regarding a possible business combination transaction with CTS. At
the meeting, the Company Board considered the Third Party Proposal, the Third
WHX Tender Offer and CTS' proposal. The Company Board received a presentation by
representatives of WP&Co. relating to financial considerations with respect to
the transactions contemplated by the Merger Agreement with CTS. Representatives
of WP&Co. delivered the WP&Co.'s Fairness Opinion. See "Special Considerations
Relating to the Combination -- Fairness of Offer." For a further description of
the Company Board's deliberations, and a discussion of the reasons for its
recommendation, see Item 4 of the Schedule 14D-9, which is incorporated herein
by this reference.
During the deliberations of the Company Board on May 9, 1997,
representatives of the Third Party sent a second letter to the Company that
removed the due diligence condition in its first letter and clarified that its
proposal was not subject to the consent of or approval by CTS. Representatives
of the Company
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<PAGE>
held further discussions with representatives of CTS regarding the break-up fee
proposed by CTS, as a result of which CTS agreed to reduce the fee to $2 million
upon the signing of the Merger Agreement and $3 million under certain
circumstances. See "The Merger and the Merger Agreement -- Inducement Fee and
Termination Fees."
The Company Board did not communicate with the Third Party regarding the
Third Party Proposal in light of (i) the fact that, while there could be no
assurance that the Company and the Third Party could agree as to the final terms
of a merger agreement, the Company and CTS had substantially negotiated the
terms of the Merger Agreement, (ii) CTS' statement that if the Merger Agreement
were not approved that day it would terminate further discussions of a business
combination transaction, (iii) WP&Co.'s opinion as to the fairness of the
consideration provided for in the Merger Agreement (and the fact that
representatives of WP&Co. were aware of the Third Party Proposal when they
delivered such opinion), and (iv) the Company Board's belief that the break-up
fee and other features of the Merger Agreement would not deter a more attractive
offer to acquire the Company.
After discussion and further analysis, at its May 9, 1997 meeting, the
Company Board unanimously determined to approve the Offer and the Merger. See
"Special Considerations Relating to the Combination -- Fairness of the Offer."
In addition, the Company Board unanimously recommended that (i) Shareholders who
wish to receive cash for their Shares accept the Offer and tender their Shares
pursuant thereto and (ii) Shareholders vote in favor of approval and adoption of
the Merger Agreement and the Merger. At the May 9, 1997 meeting, the Company
Board also reaffirmed its determination that the Third WHX Tender Offer was
inadequate and not in the best interests of the Company and its Shareholders and
reaffirmed its recommendation to the Shareholders that they reject the Third WHX
Tender Offer and not tender their Shares pursuant thereto. Finally, the Company
Board also adopted an amendment to the Company Rights Plan to make it
inapplicable to the Offer, the Merger and the other transactions contemplated by
the Merger Agreement. See "Introduction."
CTS and the Company signed the Merger Agreement on the evening of May 9,
1997 and publicly announced the transaction on May 11, 1997.
WHX has sent a notice, dated May 8, 1997, to the Company, in compliance with
the Company's advance-notice By-law provisions adopted on April 11, 1997 (i)
nominating six persons for election to the Company Board at the Company Annual
Meeting and (ii) proposing that a non-binding Shareholder resolution be
presented to the Shareholders at the Company Annual Meeting recommending that
the Company Board take all actions necessary, including removing any
anti-takeover devices of the Company, to effect the Third WHX Tender Offer or to
effect a transaction with a third party for cash consideration in excess of $45
per Share. On May 9, 1997, WHX filed revised preliminary proxy materials with
the Commission relating to the solicitation of proxies by WHX for use at the
Company Annual Meeting regarding these matters.
On May 14, 1997, a representative of WHX stated in an analyst conference
call that WHX was reviewing its options with respect to the Company.
On May 16, 1997, Purchaser commenced the Offer.
16
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THE OFFER
TERMS OF THE OFFER; PRORATION; EXPIRATION DATE.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with the procedures set forth under "-- Withdrawal Rights" and which
represent up to 49.9% of the total number of Shares. The term "Expiration Date"
means 12:00 Midnight, New York City time, on Friday, June 13, 1997, unless and
until Purchaser, in accordance with the terms of the Offer and the Merger
Agreement, shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by Purchaser, shall expire.
Promptly after the Expiration Date, Purchaser will notify each tendering
Shareholder as to the number of Shares out of the total number of Shares
tendered by the Shareholders which Purchaser has accepted for purchase.
If more than 49.9% of the Shares are validly tendered prior to the
Expiration Date and not properly withdrawn, Purchaser will, upon the terms and
subject to the conditions of the Offer, accept for payment and pay for only
49.9% of the Shares on a pro rata basis, with adjustments to avoid purchases of
fractional Shares, based upon the number of Shares validly tendered prior to the
Expiration Date and not properly withdrawn.
Because of the difficulty of determining precisely the number of Shares
validly tendered and not withdrawn, if proration is required, Purchaser would
not expect to be able to announce the final results of proration or pay for
Shares until at least five NYSE trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Shareholders may obtain such
preliminary information from the Information Agent and may also be able to
obtain such preliminary information from their brokers.
The Offer is conditioned upon, among other things, (i) the satisfaction of
the Minimum Share Condition, (ii) any applicable waiting period under the HSR
Act having expired or been terminated prior to the expiration of the Offer,
(iii) the receipt of a legal opinion as to certain tax consequences of the
Merger, (iv) the absence of certain litigation, orders or other legal matters,
(v) the representations and warranties of the Company in the Merger Agreement
being materially true and correct as of the Expiration Date and the covenants of
the Company in the Merger Agreement having been materially performed or complied
with, (vi) the absence of any material adverse change, or any development that
is reasonably likely to result in a material adverse change, in the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (vii) the Merger Agreement not having been
terminated in accordance with its terms, (viii) no person having acquired
beneficial ownership of Shares in excess of certain specified percentages, and
(ix) certain other conditions contained in this Offer. See
"-- Conditions of the Offer." Subject to the terms of the Merger Agreement,
Purchaser expressly reserves the right (but will not be obligated) to waive any
or all of the conditions of the Offer. Pursuant to the Merger Agreement, in the
event any condition to the Offer is not satisfied or waived at the time the
Expiration Date would otherwise occur, (1) Purchaser must extend the Expiration
Date for an aggregate of 20 additional business days (the "First Extension
Period") to the extent necessary to permit such condition to be satisfied and
(2) Purchaser may, in its sole discretion, extend the Expiration Date for up to
20 additional business days after the First Extension Period. Subject to the
terms of the Merger Agreement and the rights of tendering Shareholders to
withdraw their Shares in accordance with the procedures set forth under
"-- Withdrawal Rights," Purchaser will retain all tendered Shares until the
Expiration Date.
Subject to the terms of the Merger Agreement described in the immediately
succeeding paragraph and to applicable law, Purchaser expressly reserves the
right to extend the period of time during which the
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<PAGE>
Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. Purchaser also
expressly reserves the right, subject to applicable law (including applicable
rules of the Commission) and to the terms of the Merger Agreement, at any time
or from time to time, (i) to delay acceptance for payment of, or payment for,
any Shares, regardless of whether the Shares were theretofore accepted for
payment, or to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," by giving oral
or written notice of such delay in payment or termination to the Depositary, and
(ii) to waive any conditions or otherwise amend the Offer in any respect, by
giving oral or written notice to the Depositary. Any extension, delay in
payment, termination or amendment will be followed as promptly as practicable by
public announcement, the announcement in the case of an extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser will have no
obligation to publish, advertise or otherwise communicate any such announcement,
otherwise than by issuing a release to the Dow Jones News Service or as
otherwise may be required by law. The reservation by Purchaser of the right to
delay acceptance for payment of, or payment for, Shares is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Purchaser pay the consideration offered or return the Shares deposited by or on
behalf of Shareholders promptly after the termination or withdrawal of the
Offer. Any delay in acceptance for payment or payment beyond the time permitted
by applicable law will be effectuated by an extension of the period of time
during which the Offer is open.
Pursuant to the terms of the Merger Agreement, without the prior written
consent of the Company, Purchaser has agreed not to (and CTS has agreed to cause
Purchaser not to) (i) decrease the Offer Price or change the form of the Offer
consideration, (ii) change the conditions to the Offer or impose additional
conditions to the Offer, (iii) increase the number of Shares to be purchased
pursuant to the Offer to more than 50.1% of the Shares (calculated on a fully
diluted basis), (iv) extend the Expiration Date (except as required by
applicable law and except as described in the second preceding paragraph), or
(v) amend any term of the Offer in any manner materially adverse to the
Shareholders (including without limitation to result in any extension which
would be inconsistent with the preceding provisions of this sentence); provided,
however, that, (a) subject to applicable legal requirements, CTS may cause
Purchaser to waive any condition to the Offer other than the Minimum Share
Condition and the Tax Opinion Condition (see "-- Conditions of the Offer") in
CTS' sole discretion and (b) the Offer may be extended in connection with an
increase in the consideration to be paid pursuant to the Offer to comply with
applicable rules and regulations of the Commission. Assuming the prior
satisfaction or waiver of the conditions to the Offer, CTS will cause Purchaser
to accept for payment, and pay for, in accordance with the terms of the Offer,
all Shares (up to 49.9% of the total number of Shares unless increased in
accordance with the Merger Agreement) validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the Expiration Date.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the changed terms or information. In the Commission's view, an
offer should generally remain open for a minimum of five business days from the
date a material change is first published, sent or given to shareholders. With
respect to a change in price or a change in percentage of securities sought
(other than an increase in the number of shares sought not in excess of 2% of
the shares), a minimum ten business day period is required to allow for adequate
dissemination to shareholders and investor response. As used in this Offer To
Purchase, except for references to provisions in the Merger Agreement, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Accordingly, if, prior to the
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<PAGE>
Expiration Date, Purchaser increases or decreases the number of Shares being
sought (including a change in or waiver of the Minimum Share Condition), or
increases or decreases the consideration offered pursuant to the Offer, and if
the Offer is scheduled to expire at any time earlier than the period ending on
the tenth business day from the date that notice of such increase or decrease is
first published, sent or given to holders of Shares, the Offer will be extended
at least until the expiration of such ten business day period.
As of the date of this Offer To Purchase, the Rights are evidenced by the
certificates representing Shares and do not trade separately. Accordingly, by
tendering a certificate representing Shares, a Shareholder is automatically
tendering a similar number of associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate
certificates representing rights ("Rights Certificates") are issued,
Shareholders will be required to tender one Right for each Share tendered in
order to effect a valid tender of such Share.
The Company has provided Purchaser with its Shareholder list and security
position listings for the purpose of disseminating the Offer to the
Shareholders. This Offer To Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record Shareholders and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser will not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares,
and may postpone the acceptance for payment or, subject to the restrictions
referred to above, payment for any Shares tendered, and, subject to the terms of
the Merger Agreement, may amend or terminate the Offer (whether or not any
Shares have theretofore been purchased or paid for pursuant to the Offer) unless
each of the following conditions have been satisfied: (i) the Minimum Share
Condition; (ii) any applicable waiting periods under the HSR Act shall have
expired or been terminated prior to the expiration of the Offer; (iii) either
Jones Day or Skadden Arps shall have delivered to CTS and the Company an
opinion, dated as of the date of purchase, to the effect that, based upon such
representations, assumptions and conditions as the firm delivering such opinion
deems necessary or appropriate, the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that CTS, Purchaser and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code (the "Tax
Opinion Condition"), and (iv) if at any time on or after the date of the Merger
Agreement and before acceptance for payment of, or payment for, such Shares,
none of the following events shall have occurred and be continuing:
(a) any United States or foreign governmental entity or authority or any
United States or foreign court of competent jurisdiction in the United
States or any foreign country shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which (1) restricts,
prevents or prohibits consummation of the transactions contemplated by the
Merger Agreement, including the Offer or the Merger, (2) prohibits, limits
or otherwise adversely affects the ownership or operation by CTS or any of
its subsidiaries of all or any portion of the business or assets of the
Company and its subsidiaries or compels the Company, CTS or any of their
subsidiaries to dispose of or hold separate all or any portion of the
business or assets of the Company and its subsidiaries, or (3) imposes
limitations on the ability of CTS, Purchaser or any other subsidiary of CTS
to exercise effectively full rights of ownership of any Shares, including
without limitation the right to vote any Shares acquired by Purchaser
pursuant to the Offer or otherwise on all matters properly presented to the
Shareholders, including
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without limitation the approval and adoption of the Merger Agreement and the
transactions contemplated thereby;
(b) there shall be instituted or pending any action or proceeding before
any United States or foreign court or governmental entity or authority by
any United States or foreign governmental entity or authority seeking any
order, decree or injunction having any effect set forth in (a) above;
(c) the representations and warranties of the Company contained in the
Merger Agreement (without giving effect to the materiality, material adverse
effect or knowledge limitations contained therein) shall not be true and
correct as of the Expiration Date (as the same may be extended from time to
time) as though made anew on and as of such date (except for representations
and warranties made as of a specified date, which shall not be true and
correct as of the specified date), except for any breach or breaches which,
in the aggregate, could not be reasonably expected to have a material
adverse effect on the business, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, or on the ability of
the Company to perform any of its obligations under the Merger Agreement;
(d) the Company shall not have performed or complied in all material
respects with its covenants under the Merger Agreement to which it is a
party and such failure continues until the later of (1) 15 calendar days
after actual receipt by it of written notice from CTS setting forth in
detail the nature of such failure or (2) the Expiration Date;
(e) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(f) the Merger Agreement shall have been terminated in accordance with
its terms;
(g) the Company Board shall have withdrawn or materially modified or
changed (including by amendment of Schedule 14D-9) in a manner adverse to
Purchaser or CTS its recommendation of the Offer, the Merger or any of the
transactions contemplated by the Merger Agreement;
(h) there shall have occurred (1) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (2) a decline
of at least 20% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 Index from the date of the Merger Agreement, or (3)
the declaration of a banking moratorium or any limitation or suspension of
payments in respect of the extension of credit by banks or other lending
institutions in the United States; or
(i) it shall have been publicly disclosed or CTS shall have otherwise
learned that (1) any person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than CTS or its affiliates or any group of which
any of them is a member or any affiliate controlled by it or which is
referred to in clause (2) below, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
more than 20% of the Shares, (2) any such person or group which has filed a
Schedule 13D prior to the date of the Merger Agreement disclosing beneficial
ownership of 20% or more of the Shares shall have acquired beneficial
ownership of 25% or more of the Shares, or (3) any person or group shall
have entered into a definitive agreement or agreement in principle with the
Company with respect to a merger, consolidation or other business
combination with the Company.
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser, or CTS on behalf of Purchaser,
regardless of the circumstances (including without limitation any action or
inaction by Purchaser or any of its affiliates other than a material breach by
Purchaser or CTS of the Merger Agreement) giving rise to any such condition or
may be waived by Purchaser, in whole or in part, from time to time in its sole
discretion, except as otherwise provided in the Merger Agreement. The failure by
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of
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any such right and each such right will be deemed an ongoing right and may be
asserted at any time and from time to time. Any good faith determination by
Purchaser concerning any of the events described herein will be final and
binding. Pursuant to the Merger Agreement, CTS may not cause Purchaser to waive
the Minimum Share Condition and the Tax Opinion Condition without the Company's
consent.
A public announcement will be made of a material change in, or waiver of,
such conditions to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, and the Offer will be extended in connection with any such change
or waiver to the extent required by such rules.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will purchase, by accepting for payment, and will pay for,
all Shares (up to 49.9% of the total number of Shares) which are validly
tendered prior to the Expiration Date (and not properly withdrawn in accordance
with the procedures set forth under "-- Withdrawal Rights") promptly after the
later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of
the conditions set forth in "-- Conditions of the Offer." Purchaser expressly
reserves the right, in its discretion, to delay acceptance for payment of, or,
subject to applicable rules of the Commission, payment for, Shares in order to
comply in whole or in part with any applicable law.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company or the Philadelphia Depository Trust Company (each a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in "-- Procedures for Tendering Shares,"
(ii) the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, or, in the case of a book-entry transfer, an Agent's Message, and
(iii) any other documents required by the Letter of Transmittal. See
" -- Procedures for Tendering Shares."
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. Payment for
Shares accepted pursuant to the Offer will be made by deposit of the Offer Price
with the Depositary, which will act as agent for tendering Shareholders for the
purpose of receiving payments from Purchaser and transmitting payments to such
tendering Shareholders. If, for any reason, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for
payment Shares tendered pursuant to the Offer, then, without prejudice to
Purchaser's rights under "-- Conditions of the Offer," the Depositary may,
nevertheless, on behalf of Purchaser, retain the tendered Shares, and such
Shares may not be withdrawn, except to the extent that the tendering
Shareholders are entitled to withdrawal rights as described in "-- Withdrawal
Rights" and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under
no circumstances will interest on the Offer Price paid by Purchaser, regardless
of any delay in making such payment. Purchaser will pay any stock transfer taxes
incident to the transfer to it of validly tendered Shares, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, as well as any charges
and expenses of the Depositary and the Information Agent.
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No fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing Shares
not purchased will be returned, without expense to the tendering Shareholder
(or, in the case of Shares tendered by book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility pursuant to the procedure set forth in
"-- Procedures for Tendering Shares," such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Subject to the terms of the Merger Agreement, Purchaser reserves the right
to transfer or assign, in whole at any time, or in part from time to time, to
CTS or one or more direct or indirect wholly owned subsidiaries of CTS, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, provided that any such transfer or assignment will not relieve Purchaser
of its obligations under the Offer and will in no way prejudice the rights of
tendering Shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
PROCEDURES FOR TENDERING SHARES
VALID TENDER OF SHARES. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (in the case of any book-entry transfer) and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer To Purchase prior to the Expiration Date and
either (i) the Share Certificates evidencing tendered Shares must be received by
the Depositary at one of such addresses or Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the tendering Shareholder must comply with the
guaranteed delivery procedures described below. No alternative, conditional or
contingent tenders will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE
OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer To Purchase, and any
financial institution that is a participant in either of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other required documents must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer To Purchase prior to the Expiration Date or the tendering Shareholder must
comply with the guaranteed delivery procedures described below. The confirmation
of a book-entry transfer of shares into the Depositary's account at a Book Entry
Transfer Facility as described above is referred to as a "Book-Entry
Confirmation." DELIVERY OF
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DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each, an "Eligible Institution"), unless the
Shares tendered thereby are tendered (i) by a registered holder of Shares who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a Shareholder desires to tender Shares pursuant to
the Offer and such Shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required
signature guarantee (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by such Letter of Transmittal, are
received by the Depositary within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
IN ALL CASES, SHARES SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE) IS RECEIVED BY THE DEPOSITARY.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), and (iii) any other documents required by the Letter of
Transmittal.
DISTRIBUTION OF RIGHTS. Holders of Shares will be required to tender one
Right for each Share tendered to effect a valid tender of such Share. Unless and
until the Distribution Date occurs (see "Certain Information Concerning the
Company -- The Rights"), the Rights are represented by and transferred with the
Shares. Accordingly, if the Distribution Date does not occur prior to the
Expiration Date of the Offer, a tender of Shares will constitute a tender of the
associated Rights. If a Distribution Date has occurred, Rights Certificates
representing a number of Rights equal to the number of Shares being tendered
must be
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delivered to the Depositary in order for such Shares to be validly tendered. If
a Distribution Date has occurred, a tender of Shares without Rights constitutes
an agreement by the tendering Shareholder to deliver Rights Certificates
representing a number of Rights equal to the number of Shares tendered pursuant
to the Offer to the Depositary within three NYSE trading days after the date
such Rights Certificates are distributed. Purchaser reserves the right to
require that it receive such Rights Certificates prior to accepting Shares for
payment. If a Distribution Date has occurred, unless the Rights are redeemed
prior to the Expiration Date, Shareholders who sell their Rights separately from
their Shares and do not otherwise acquire Rights may not be able to satisfy the
requirements of the Offer for the tender of Shares. Payment for Shares tendered
and purchased pursuant to the Offer will be made only after timely receipt by
the Depositary of, among other things, such Rights Certificates, if such Rights
Certificates have been distributed to holders of Shares. Purchaser will not pay
any additional consideration for the Rights tendered pursuant to the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Offer (subject to the terms of the Merger Agreement) or any defect or
irregularity in any tender with respect to Shares of any particular Shareholder,
whether or not similar defects or irregularities are waived in the case of other
Shareholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of CTS,
Purchaser, the Company, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in tenders or will incur any liability for failure to
give any such notification.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal as set forth
above, a tendering Shareholder irrevocably appoints designees of Purchaser as
such Shareholder's proxies, each with full power of substitution and
resubstitution, to the full extent of such Shareholder's rights with respect to
the Shares tendered by such Shareholder and accepted for payment by Purchaser
(and any and all noncash dividends, distributions, rights, other Shares or other
securities issued or issuable in respect of such Shares after the date that the
Shares are accepted for payment). All such proxies shall be considered coupled
with an interest in the tendered Shares. This appointment will be effective if,
when and only to the extent that, Purchaser accepts such Shares for payment
pursuant to the Offer. Upon such acceptance for payment, all prior proxies given
by such Shareholder with respect to such Shares and other securities will,
without further action, be revoked, and no subsequent proxies may be given. The
designees of Purchaser will, with respect to the Shares and other securities for
which the appointment is effective, be empowered to exercise all voting and
other rights of such Shareholder as they in their sole discretion may deem
proper at any annual, special, adjourned or postponed meeting of the
Shareholders by written consent or otherwise, and Purchaser reserves the right
to require that, in order for Shares or other securities to be deemed validly
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser must be able to exercise full voting rights with respect to such
Shares. In the event that WHX proceeds with the proxy solicitation relating to
the Company's Annual Meeting and proposals made by WHX for consideration thereof
described in "Background of the Combination," Purchaser presently intends to
vote any Shares over which it has voting power, including pursuant to any proxy
appointments described herein, against such proposals.
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CERTAIN TAX MATTERS. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH
RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE FOR SHARES
PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE
DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND
CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL.
IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS
REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. SEE "SPECIAL CONSIDERATIONS RELATING
TO THE COMBINATION -- CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
GENERAL. Purchaser's acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement between the tendering Shareholder
and Purchaser upon the terms and subject to the conditions of the Offer.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after July 14, 1997.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
Shareholders are entitled to withdrawal rights as described in this Section. Any
such delay will be by an extension of the Offer to the extent required by law.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Shares deposited by or on behalf of Shareholders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer To Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in "-- Procedures for Tendering Shares," any notice of withdrawal must
also specify the name and number of the account at a Book-Entry Transfer
Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. No withdrawal of Shares will be
deemed to have been made properly until all defects and irregularities have been
cured or waived. None of CTS, Purchaser, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered at any time prior to the Expiration Date by following the procedures
described in "-- Procedures for Tendering Shares."
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THE MERGER AND THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
MERGER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE AND A COPY OF WHICH HAS
BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE MERGER
AGREEMENT MAY BE EXAMINED, AND COPIES OBTAINED FROM THE OFFICES OF THE
COMMISSION, IN THE SAME MANNER AS SET FORTH IN "MISCELLANEOUS -- SCHEDULE
14D-1."
AGREEMENTS WITH RESPECT TO THE OFFER
The Merger Agreement contemplates the commencement of the Offer and
prescribes the conditions to the consummation of the Offer. See "The Offer --
Conditions of the Offer." Without the prior written consent of the Company,
Purchaser has agreed not to (and CTS has agreed to cause Purchaser not to) take
certain actions with respect to the Offer. See (The Offer -- Terms of the Offer;
Proration; Expiration Date).
THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the NYBCL, at the Effective Time the Company will merge with and
into Purchaser. Purchaser will be the surviving corporation in the Merger, and
will continue its corporate existence under New York law. Purchaser's charter
will be the Certificate of Incorporation of the Surviving Corporation, and
Purchaser's By-laws will be the By-Laws of the Surviving Corporation. After the
Effective Time, the Surviving Corporation will be a wholly owned subsidiary of
CTS.
As of the Effective Time, by virtue of the Merger and without any action on
the part of any holder of Shares, each issued and outstanding Share other than
Shares owned by the Company, CTS or any wholly owned subsidiary of the Company
or CTS (or Shares accepted for payment by Purchaser pursuant to the Offer), will
be converted into the right to receive 0.88 fully paid and nonassessable CTS
Shares (except that cash will be paid in lieu of fractional shares as described
under "-- Procedures for Exchange of Certificates; Fractional Shares"). As of
the Effective Time, all such Shares will no longer be outstanding, will
automatically be cancelled and retired and will cease to exist and each holder
of a certificate representing any Shares will cease to have any rights in
respect thereto except the right to receive the Merger Consideration and any
cash in lieu of fractional shares. See "-- Procedures for Exchange of
Certificates; Fractional Shares." Any Shares owned immediately prior to the
Effective Time by the Company, CTS or any of their wholly owned subsidiaries
will be cancelled. If the Stock Split is effective immediately after the
Effective Time, the Exchange Ratio will be adjusted to be 1.76, rather than
0.88.
PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
As soon as reasonably practicable after the Effective Time, a bank or trust
company designated by CTS, in its capacity as Exchange Agent (the "Exchange
Agent"), will send a transmittal letter to each Shareholder whose Shares were
converted into CTS Shares in the Merger. The transmittal letter will contain
instructions with respect to the surrender of certificates previously
representing the Shares converted in the Merger.
After the Effective Time, each certificate that previously represented
Shares will represent only the right to receive CTS Shares into which such
Shares were converted in the Merger and the right to receive cash in lieu of
fractional Shares as described below.
Holders of certificates previously representing Shares will not be paid
dividends or distributions on the CTS Shares into which such Shares have been
converted with a record date after the Effective Time, and will not be paid cash
in lieu of fractional CTS Shares, until such certificates are surrendered to the
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Exchange Agent for exchange. When such certificates are surrendered, any unpaid
dividends and any cash in lieu of fractional CTS Shares payable as described
below will be paid without interest.
In the event of a transfer of ownership of the Shares which is not
registered in the transfer records of the Company, a certificate representing
the proper number of CTS Shares may be issued to a person other than the person
in whose name the certificate so surrendered is registered if such certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such issuance shall pay any transfer or other taxes required
by reason of the issuance of CTS Shares to a person other than the registered
holder of such certificate or establish to the satisfaction of CTS that such tax
has been paid or is not applicable.
All CTS Shares issued upon conversion of the Shares (including any cash paid
in lieu of any fractional CTS Shares) will be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares.
No fractional CTS Shares will be issued to any Shareholder upon surrender of
certificates previously representing the Shares. For each fractional share that
would otherwise be issued, CTS will make available to such Shareholder an amount
in cash determined in the manner set out in the next two succeeding paragraphs.
As promptly as practicable following the Effective Time, the Exchange Agent
will determine the excess of (i) the number of whole CTS Shares delivered to the
Exchange Agent by CTS pursuant to the Merger Agreement over (ii) the aggregate
number of whole CTS Shares to be distributed to Shareholders pursuant to the
Merger (such excess being herein called the "Excess Shares"). The Exchange Agent
will sell the Excess Shares at then-prevailing prices on the NYSE and will hold
the proceeds of such sale or sales in trust for such Shareholders entitled
thereto (the "Common Share Trust"). Promptly following such sale or sales, the
Exchange Agent will determine the portion of the Common Share Trust to which
each Shareholder is entitled, if any, by multiplying the amount of the aggregate
net proceeds comprising the Common Share Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such Shareholder
is entitled (after taking into account all Shares held at the Effective Time by
such Shareholder) and the denominator of which is the aggregate amount of
fractional share interests to which all Shareholders are entitled.
Notwithstanding the preceding paragraph, CTS may elect at its option,
exercised prior to the Effective Time, in lieu of the issuance and sale of
Excess Shares and the making of the payments hereinabove contemplated, to pay
each Shareholder an amount in cash equal to the product obtained by multiplying
(i) the fractional share interest to which such Shareholder (after taking into
account all Shares held at the Effective Time by such Shareholder) would
otherwise be entitled by (ii) the average closing price for a CTS Share as
reported on the NYSE Composite Transaction Tape (as reported in the WALL STREET
JOURNAL, or, if not reported thereby, any other authoritative source) (the
"Average Closing Price") for the ten trading days prior to the closing date of
the Merger.
SHAREHOLDER APPROVAL OF THE MERGER
The Merger Agreement provides that the Company and CTS will, as soon as
practicable following the date of the Merger Agreement, duly call, give notice
of, convene and hold a meeting of their respective shareholders for the purpose
of adopting the Merger Agreement and the transactions contemplated thereby (in
the case of the Company) and for the purpose of approving the CTS Charter
Amendments described in "-- Amendments to CTS Charter and Bylaws" and the
issuance of CTS Shares in connection with the Merger (in the case of CTS). The
affirmative vote of the holders of two-thirds of the voting power of all the
voting shares at the Company's Shareholder meeting is required to adopt the
Merger Agreement (the "Company Shareholder Approval"). The affirmative vote of
the holders of a majority of the voting power of all outstanding CTS Shares
voting as a single class at the CTS Shareholder meeting is required to approve
the CTS Charter Amendments and the affirmative vote of a majority of votes cast
by CTS Shares present in person or represented by proxy and voting at the CTS
Shareholder meeting is required to approve the issuance of CTS Shares in
connection with the Merger (the "CTS Shareholder Approval").
27
<PAGE>
The Company currently owns 44.1% of the issued and outstanding CTS Shares,
24.5% of which has voting rights. The Company has agreed that, during the period
from May 9, 1997 until the Effective Time or the termination of the Merger
Agreement in accordance with its terms, (i) it will not sell, transfer or pledge
any Company-Owned CTS Shares or any other equity securities of CTS beneficially
owned by it ("CTS Securities") and (ii) it will vote the CTS Securities in favor
of the approval of the proposed CTS Charter Amendments and the approval of the
other transactions contemplated by the Merger Agreement or in furtherance
thereof and against any competing transaction and certain other material changes
in CTS' business and corporate governance. CTS has similarly agreed in respect
to the Company's equity securities owned by it or its Subsidiaries (including
Purchaser), including Shares purchased in the Offer. In addition, the Company
has agreed that, during the period from May 9, 1997 to the Offer Completion Date
(as defined under "-- No Shop Covenant") plus two calendar days (unless the
second calendar day is not a business day, in which case the period will include
the business day following the second calendar day) (the "Open Period"), it will
take all actions, including voting the CTS Securities in favor thereof, as are
requested by CTS to adjourn or postpone the CTS Annual Meeting to such date
within the Open Period as may be requested by CTS. CTS and the Company have
agreed that, in any event, the parties will take all actions that may be
required to adjourn the CTS Annual Meeting to June 24, 1997.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) organization, standing and corporate power;
(ii) subsidiaries; (iii) capital structures; (iv) authorization, execution,
delivery, performance and enforceability of, and required consents, approvals,
orders and authorizations of governmental authorities relating to, the Merger
Agreement; (v) the accuracy of information in documents filed with the
Commission and the absence of undisclosed liabilities; (vi) the accuracy of
information supplied in connection with this Offer To Purchase and the related
filings with the Commission; (vii) absence of material changes or events; (viii)
the absence of material litigation; (ix) required shareholder votes; (x) the
satisfaction of certain state takeover statutes; (xi) engagement and payment of
fees of brokers, investment bankers, finders and financial advisors; (xii)
receipt of fairness opinions; (xiii) ownership of the other parties' capital
stock; (xiv) the inapplicability of the Company Rights Agreement; (xv) certain
employment agreements between the Company, CTS and certain of the Company's and
CTS' employees; and (xvi) certain tax matters.
CONDUCT OF BUSINESS PENDING MERGER
Pursuant to the Merger Agreement, CTS and the Company have each agreed to
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as conducted prior to the execution of the
Merger Agreement and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, keep available
the services of their current officers and other key employees and preserve
their relationships with those persons and entities having business dealings
with them to the end that their goodwill and ongoing businesses will be
unimpaired at the Effective Time. In addition, CTS and the Company have each
agreed that during the period from May 9, 1997 to the Effective Time, among
other things and subject to certain exceptions, neither it nor any of its
subsidiaries may:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any capital stock, other than certain dividends
and distributions by a subsidiary and other than the regular quarterly or
semi-annual dividends, or 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
purchase, redeem or otherwise acquire any shares of its capital stock or its
significant subsidiaries' capital stock or any rights, warrants or options
to acquire any such securities; provided, however, CTS may (A) effect the
Stock Split and (B) under certain conditions, declare a dividend of rights
in connection with the adoption of a rights plan (the "CTS Rights");
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
capital stock, any other voting securities or any securities convertible
into or any rights, warrants or options to acquire any such
28
<PAGE>
shares, other than pursuant to existing employee stock options, the issuance
of CTS Rights and the Stock Split;
(iii) amend its certificate or articles, as applicable, of incorporation,
by-laws or other comparable organizational documents; or
(iv) make any material change to accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles.
The Company has further agreed, among other things and subject to certain
exceptions, that neither it nor any of its subsidiaries will:
(i) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
entity or other business organization;
(ii) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any properties or assets, other than (A) in
the ordinary course of business or (B) sales of assets that individually or
in the aggregate do not exceed $1 million;
(iii) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice;
(iv) make any loans, advances or capital contributions to, or
investments in, any other person, other than to subsidiaries or to officers
and to employees for travel, business or relocation expenses in the ordinary
course of business;
(v) make or agree to make any new capital expenditure other than as set
forth in existing operating budgets;
(vi) except as required by law or contemplated by the Merger Agreement,
enter into, adopt or amend in any material respect or terminate any employee
benefit plan or any other agreement, plan or policy involving the Company or
any of its subsidiaries and one or more of their directors, officers or
employees, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any Company pension plans, or
change the manner in which contributions to any Company pension plans are
made or the basis on which such contributions are determined;
(vii) increase the compensation of any director, executive officer or
other key employee of the Company or pay any benefit or amount not required
by a plan or arrangement as in effect on the date of this Agreement to any
such person;
(viii) enter into any contract or agreement, written or oral, with any
affiliate, associate or relative of CTS, or make any payment to or for the
benefit of, directly or indirectly, any of the foregoing; or
(ix) make any amendment to, or waive or enter into or give any binding
interpretation of, any term of a certain agreement with certain
Shareholders.
NO-SHOP COVENANT
Pursuant to the Merger Agreement, the Company and CTS will not, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries or
the making of any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to, with respect to the Company, the Offer Completion Date or, with
respect to CTS, the Effective Time, the Company Board (with respect to the
Company) or the Unaffiliated CTS Directors (with respect to CTS) determine in
good faith, after consultation with advisors, that the failure to do so would
create a reasonable possibility of a breach of their fiduciary duties to its
shareholders under applicable law, such party may, in response to a Takeover
Proposal which was not solicited by it or which did not otherwise result from a
breach of the covenant described in this paragraph, furnish information with
respect to it and its subsidiaries to any
29
<PAGE>
person pursuant to a customary confidentiality agreement and participate in
negotiations regarding such Takeover Proposal.
Except as expressly permitted by the Merger Agreement, neither the Company
Board nor the CTS Board, nor any committee thereof, will (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to the other
party, the approval or recommendation by such board of directors or such
committee of the Merger or the Merger Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause
such party to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Takeover
Proposal (an "Acquisition Agreement"). Notwithstanding the foregoing, in the
event that prior to the earlier to occur of (a) the date on which Purchaser
purchases Shares pursuant to the Offer and (b) the Effective Time (the "Offer
Completion Date"), the Company Board (with respect to the Company) or a majority
of the members of the CTS Board who are Unaffiliated CTS Directors (with respect
to CTS) determines in good faith, (and with respect to the Company, after the
Company has received a Takeover Proposal and, with respect to CTS, after CTS has
received a Takeover Proposal) and after consultation with advisors, that the
failure to do so would create a reasonable possibility of a breach of their
fiduciary duties to its shareholders under applicable law, the Company Board
(with respect to the Company) or a majority of the members of the CTS Board who
are Unaffiliated CTS Directors (with respect to CTS) may withdraw or modify its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
approve or recommend a Takeover Proposal, or terminate the Merger Agreement
(such termination, a "Fiduciary Out"), but only if (A) the terminating party
pays its respective termination fee (see "-- Inducement Fee and Termination
Fees") and (B) with respect to the Company's Fiduciary Out, prior to any such
termination which is to be effective within two business days of the CTS Annual
Meeting or any postponement or adjournment thereof, the Company shall have given
CTS at least two business days notice of the effectiveness of such termination.
A "Takeover Proposal" is defined, with respect to either the Company or CTS,
to be any inquiry, proposal or offer from any person or entity relating to any
direct or indirect acquisition or purchase of 20% or more of such party's and
its subsidiaries' assets or 20% or more of any class of equity securities of
such party or any of its subsidiaries, any tender offer or exchange offer that
if consummated would result in any person owning 20% or more of any class of
equity securities of such party or any of its subsidiaries or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving such party or any of its subsidiaries other
than the transactions contemplated by the Merger Agreement.
INDUCEMENT FEE AND TERMINATION FEES
As an inducement to CTS and Purchaser to enter into the Merger Agreement and
perform their respective obligations thereunder, on May 9, 1997, the Company
paid $2.0 million to CTS (the "Inducement Fee"). The Inducement Fee is not
subject to refund or return for any reason whatever and may not be used as an
offset against or otherwise applied to any obligation of the Company, including
without limitation the obligation to pay a termination fee. In addition, the
Merger Agreement provides that the Company will pay CTS a $3.0 million fee in
the event that (i) a Takeover Proposal with respect to the Company (other than
WHX Corporation's $45.00 cash tender offer) is made known to the Company or any
of its subsidiaries or has been made directly to Shareholders generally or any
person or entity publicly announces an intention (whether or not conditional) to
make such a Takeover Proposal and thereafter the Merger Agreement is terminated
by the Company or CTS because either the Merger has not been consummated by
September 30, 1997 or the Company Shareholders have not approved the Merger at
the shareholders meeting called for such purpose, (ii) the Merger Agreement is
terminated (a) by the Company pursuant to its Fiduciary Out or (b) by CTS
because the Company Board or any committee thereof has (1) withdrawn or modified
in a manner adverse to CTS its approval or recommendation of the Offer, the
Merger or the Merger Agreement or failed to reconfirm its approval within the
prescribed time, (2) has approved or recommended, or proposed publicly to do so,
any Takeover Proposal with respect to the Company, (3) caused the Company to
enter into an Acquisition Agreement or, (4) resolved to take any of the
foregoing actions.
30
<PAGE>
The Merger Agreement provides that CTS will pay the Company a $5.0 million
fee in the event that (i) a Takeover Proposal with respect to CTS is made known
to CTS or any of its subsidiaries or has been made directly to shareholders
generally or any person or entity publicly announces an intention (whether or
not conditional) to make such a Takeover Proposal and thereafter the Merger
Agreement is terminated by CTS or the Company because either the Merger has not
been consummated by September 30, 1997 or CTS Shareholder Approval has not been
obtained at the CTS Shareholders meeting called for such purpose, (ii) the
Merger Agreement is terminated (a) by CTS pursuant to its Fiduciary Out or (b)
by the Company because the CTS Board or any committee thereof has (1) withdrawn
or modified in a manner adverse to the Company its approval or recommendation of
the Offer, the Merger or the Merger Agreement or failed to reconfirm its
approval within the prescribed time, (2) has approved or recommended, or
proposed publicly to do so, any Takeover Proposal with respect to CTS, (3)
caused CTS to enter into an Acquisition Agreement, or (4) resolved to take any
of the foregoing actions.
Except as described above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Merger
Agreement will be paid by the party incurring the cost or expense, except that
the Company and CTS will each pay one half of the cost of (i) filing, printing
and mailing the Joint Proxy Statement (including SEC filing fees) and (ii) the
HSR Act filing.
EMPLOYEE BENEFITS MATTERS
Pursuant to the Merger Agreement, with respect to each CTS "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including plans or policies providing severance
benefits and vacation entitlement ("CTS Plans"), if the Effective Time occurs,
service with the Company will be treated as service with CTS for purposes of
determining eligibility to participate, vesting and entitlement to benefits
(other than the accrual of benefits under any defined benefit pension plan)
unless, and to the extent that, the recognition of such service would result in
a duplication of benefits. Such service also will apply for purposes of
satisfying any waiting periods, evidence of insurability requirements or the
application of any preexisting condition limitations under any CTS Plan.
Employees of the Company will be given credit under any CTS Plan in which they
are eligible to participate for amounts paid under a corresponding Company
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the CTS Plans.
Following the Effective Time, CTS will cause the Surviving Corporation to
honor in accordance with their terms all employment, severance and other
compensation agreements and arrangements of the Company, including but not
limited to severance benefit plans, the existence or terms of which do not
involve any material breach of any representation, warranty or covenant of the
Company under the Merger Agreement.
For a description of certain employment agreements and other employee
benefits matters relating to the Merger, see "Special Considerations Relating to
the Combination -- Interest of Certain Persons in the Offer and the Merger."
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time existing in favor of the current or former directors or officers
of the Company or its subsidiaries as provided in their respective certificates
of incorporation or by-laws (or comparable organizational documents) will be
assumed by CTS and CTS will be directly responsible for such indemnification,
without further action, as of the Effective Time and will continue in full force
and effect in accordance with their respective terms. In addition, from and
after the Effective Time, directors and officers of the Company who become or
remain directors or officers of CTS
31
<PAGE>
or Purchaser will be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to other directors and officers of CTS.
For a period of six years after the Effective Time, CTS will, and will cause
the Surviving Corporation to, maintain policies of directors' and officers'
liability insurance equivalent in all material respects to those maintained by
or on behalf of the Company and its subsidiaries on the date of the Merger
Agreement (and having at least the same coverage and containing terms and
conditions which are no less advantageous to the persons currently covered by
such policies as insureds) with respect to matters existing or occurring at or
prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed 200% of the
per annum rate of premium currently paid by the Company and its subsidiaries for
such insurance on the date of the Merger Agreement, then CTS will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that shall then be available at an annual premium equal to 200%
of such rate.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the satisfaction
or waiver on or prior to the closing date of the Merger (the "Closing Date") of
various conditions which include, in addition to other customary closing
conditions, the following:
(i) each of the Company Shareholder Approval and the CTS Shareholder
Approval shall have been obtained;
(ii) no judgment, order, decree, statute, law, ordinance, rule,
regulation, temporary restraining order, injunction or other order enacted,
entered, promulgated, enforced or issued by any court or other governmental
entity or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect (each, a "Restraint"); and
(iii) the Joint Proxy Statement/Prospectus shall have become effective
and shall not be the subject of any stop order or proceeding seeking a stop
order.
CTS' obligation to effect the Merger is also subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(i) the Company shall have performed in all material respects all
obligations to be performed by it on or before the earlier of (i) such time
as CTS controls the Company Board pursuant to the Merger Agreement and (ii)
the Closing Date; and
(ii) Purchaser shall have accepted for payment and paid for Shares
pursuant to the Offer; provided, however, that CTS may not invoke this
condition if Purchaser fails to purchase Shares in violation of the terms of
the Merger Agreement.
The Company's obligation to effect the Merger is also subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(i) Purchaser and CTS having performed in all material respects all
obligations to be performed by them; and
(ii) Purchaser having accepted for payment and paid for at least 25% of
the Shares pursuant to the Offer.
If (i) the Minimum Share Condition is not satisfied on the Expiration Date
and (ii) the average closing price of CTS Shares for the ten trading days prior
to the Expiration Date multiplied by the Exchange Ratio is at least $55.00, CTS
and Purchaser may elect, by written notice from CTS to the Company not later
than the first business day after the Expiration Date, to proceed with the
Merger, in which case the Company, CTS and Purchaser will be obligated to effect
the Merger subject to all of the conditions specified in the preceding
paragraphs except for the conditions with respect to purchase of Shares in the
Offer. If CTS and
32
<PAGE>
Purchaser elect to proceed with the Merger in these circumstances, the parties'
obligations to effect the Merger will be subject to the additional condition
that either Jones Day or Skadden Arps deliver an opinion, dated as of the
Closing Date, to the same effect as the opinion to be delivered in satisfaction
of the Tax Opinion Condition. See "The Offer -- Conditions of the Offer."
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after Company Shareholder Approval and the CTS
Shareholder Approval:
(i) by mutual written consent of CTS and the Company (including without
limitation in connection with the entry into any other agreement between the
Company and CTS);
(ii) by CTS, if the Offer shall have expired or been withdrawn or
terminated in accordance with the terms thereof without any Shares being
purchased by CTS thereunder by reason of the failure of any condition set
forth in "The Offer -- Conditions of the Offer";
(iii) by either CTS or the Company: (a) if the Merger has not been
consummated by September 30, 1997; provided, however, that the right to
terminate the Merger Agreement pursuant to this clause will not be available
to any party whose failure to perform any of its obligations under the
Merger Agreement results in the failure of the Merger to be consummated by
such time, (b) if Company Shareholder Approval shall not have been obtained,
(c) if CTS Shareholder Approval shall not have been obtained, or (d) if any
governmental entity shall have issued a Restraint or taken any other action
permanently enjoining, restraining or otherwise prohibiting the consummation
of the Offer, the Merger or any of the other transactions contemplated by
the Merger Agreement and such Restraint or other action shall have become
final and nonappealable;
(iv) by CTS, if the Company Board or any committee thereof shall have
(a) withdrawn or modified in a manner adverse to CTS its approval or
recommendation of the Offer, the Merger or the Merger Agreement or failed to
reconfirm its approval or recommendation within five business days after a
written request to do so, (b) approved or recommended, or proposed publicly
to approve or recommend, any Takeover Proposal with respect to the Company,
(c) caused the Company to enter into an Acquisition Agreement, or (d)
resolved to take any of the foregoing actions;
(v) by CTS, upon exercise of its Fiduciary Out at any time prior to the
Offer Completion Date;
(vi) by the Company, if the CTS Board or any committee thereof shall
have (a) withdrawn or modified in a manner adverse to the Company its
approval or recommendation of the Offer, the Merger or the Merger Agreement
or failed to reconfirm its approval or recommendation within five business
days after a written request to do so, (b) approved or recommended, or
proposed publicly to approve or recommend, any Takeover Proposal with
respect to CTS, (c) caused CTS to enter into a Acquisition Agreement, or (d)
resolved to take any of the foregoing actions;
(vii) by the Company at or prior to the Offer Completion Date, if CTS or
Purchaser shall have breached or failed to perform in any material respect
any of its representations, warranties or covenants required to be performed
by them under the Merger Agreement at or prior to the Offer Completion Date,
which breach or failure to perform cannot be or has not been cured within 30
days after the giving of written notice to CTS and Purchaser of such breach
(provided that the Company is not then in material breach of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement that cannot or has not been cured within 30 days after
giving notice to the Company of such breach); and
(viii) by the Company, upon exercise of its Fiduciary Out at any time
prior to the Offer Completion Date.
33
<PAGE>
AMENDMENTS TO CTS CHARTER AND BYLAWS
In connection with the Merger, effective as of the Effective Time, CTS'
Articles of Incorporation will be amended (the "CTS Charter Amendments"), among
other things, to (i) increase the authorized capital of CTS from 8,000,000
shares of Common Stock to 75,000,000 shares of Common Stock and 25,000,000
shares of Preferred Stock (the terms of which will be fixed by the CTS Board),
(ii) increase the maximum and minimum size of the CTS Board to 15 and three,
respectively, with the exact size to be determined by the CTS Board, and (iii)
expand the required indemnification to the extent allowable by law and to
provide procedures for the resolution of disputes over compliance with the
applicable standard of care. The CTS Charter Amendments will require the
affirmative vote of a majority of the CTS Shares outstanding, but will not
become effective unless the issuance of CTS Shares in the Merger is also
approved by CTS Shareholders.
Also, effective as of the Effective Time and subject to the occurrence
thereof, CTS' Bylaws will be amended to, among other things, provide that a
majority of the CTS Board (rather than two-thirds) may amend or take
substantially all other actions under CTS' Bylaws.
DISSENTER'S RIGHTS
Under the NYBCL, Shareholders are not entitled to dissenter's rights by
reason of the Offer. However, if the Merger is consummated, Shareholders will be
entitled to appraisal rights under the NYBCL. Shareholders who follow the
procedures in Section 623 of the NYBCL will be entitled to have their Shares
appraised by a New York court and to receive payment of the "fair value" of such
Shares as determined by such court. The procedures therefor will be described in
full in the Joint Proxy Statement/ Prospectus.
CERTAIN INFORMATION CONCERNING THE COMPANY
GENERAL
The Company is a New York corporation whose principal executive offices are
located at 475 Steamboat Road, Greenwich, Connecticut 06830-7197. The Company is
a diversified manufacturer of commercial and industrial products founded in
1924. The Company's eight plants are located in California, Connecticut, Ohio
and Pennsylvania. Its six separate business units manufacture electronic
components, mobile vans and transportable shelters for specialized electronic
and medical diagnostic equipment, portable electric housewares and commercial
appliances, air distribution equipment, specialized air-conditioning equipment
and generator sets.
SELECTED FINANCIAL INFORMATION
Set forth below is a summary of certain consolidated financial information
with respect to the Company and its subsidiaries for its quarter ended March 31,
1997 and its fiscal years ended December 31, 1996, 1995 and 1994, excerpted from
financial statements presented in the Company's Quarterly Report on Form 10-Q
for the first quarter of 1997 (the "Company 10-Q"), the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the "Company 10-K") and other
documents filed by the Company with the Commission. More comprehensive financial
information is included in such reports (including management's discussion and
analysis of results of operations and financial position) and other documents
filed by the Company with the Commission, and the financial information summary
set forth below is qualified in its entirety by reference to such reports and
other documents, and all the financial information and related notes contained
therein. The Company 10-Q, the Company 10-K and such other documents may be
examined and copies may be obtained from the offices of the Commission or the
NYSE in the manner set forth below.
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<PAGE>
DYNAMICS CORPORATION OF AMERICA
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 31, MARCH 31,
1997 1996 1996 1995 1994
---------- ----------- ---------- ---------- ----------
INCOME STATEMENT INFORMATION:
Net Sales............................................ $ 30,402 $ 27,864 $ 129,206 $ 114,164 $ 107,700
Income (loss) from continuing operations before
equity investment in CTS........................... 1,171 (834) 76 1,364 5,106
Income from equity investment in CTS................. 2,637 4,060 10,280 4,411 3,618
Income from continuing operations.................... 3,808 3,226 10,356 5,775 8,724
PER SHARE INFORMATION:
Income from continuing operations.................... 1.00 .84 2.71 1.50 2.25
Reclassification of provision for Fermont
disposition........................................ -- .07 .07 .25 --
Net income........................................... 1.00 .91 2.78 1.75 2.25
Dividends per common share........................... .10 .10 .20 .20 .20
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, ----------------------
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total current assets................................. $ 53,386 $ 49,350 $ 50,793
Equity investment in CTS............................. 86,478 84,046 77,180
Total assets......................................... 148,226 140,736 134,301
Total liabilities.................................... 29,858 25,698 28,827
Total shareholders' equity........................... 118,368 115,038 105,474
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Shareholders and filed with the Commission.
These reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located in
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should
be available for inspection and copying at prescribed rates at the following
regional offices of the Commission: Seven World Trade Center, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of this material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains an Internet web site
at http:// www.sec.gov that contains reports, proxy statements and other
information. The Shares are listed on the NYSE, and reports, proxy statements
and other information concerning the Company should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
CERTAIN PROJECTIONS
In the course of discussions giving rise to the Merger Agreement (see
"Background of the Combination"), representatives of the Company furnished
representatives of CTS certain business and financial
35
<PAGE>
information that was not publicly available, including certain financial
projections for 1997 and 1998 (the "Company Projections"). The Company
Projections included certain projections for the years 1997 and 1998 prepared
solely for the Company's internal purposes. None of such projected financial
information provided by the Company to CTS was prepared for publication or with
a view to complying with the published guidelines of the Commission regarding
projections or with the AICPA Guide for Prospective Financial Statements, and
such information is being included in the Offer To Purchase solely because it
was furnished to CTS in connection with the discussions giving rise to the
Merger Agreement. The independent accountants of the Company, Ernst & Young LLP,
have neither examined nor compiled the prospective financial information set
forth below and, accordingly, do not express an opinion or any other form of
assurance with respect thereto. The reports of Ernst & Young LLP incorporated by
reference in this Offer To Purchase relate to the historical financial
information of the Company, do not extend to the prospective financial
information and should not be read to do so.
THE PROJECTED FINANCIAL INFORMATION SET FORTH BELOW NECESSARILY REFLECTS
NUMEROUS ASSUMPTIONS WITH RESPECT TO GENERAL BUSINESS AND ECONOMIC CONDITIONS
AND OTHER MATTERS, MANY OF WHICH ARE INHERENTLY UNCERTAIN OR BEYOND THE
COMPANY'S OR CTS' CONTROL, AND DOES NOT TAKE INTO ACCOUNT ANY CHANGES IN THE
COMPANY'S OPERATIONS OR CAPITAL STRUCTURE WHICH MAY RESULT FROM THE OFFER AND
THE MERGER. SEE "SPECIAL CONSIDERATIONS RELATING TO THE COMBINATION -- PLANS FOR
THE COMPANY AND CTS." IT IS NOT POSSIBLE TO PREDICT WHETHER THE ASSUMPTIONS MADE
IN PREPARING THE PROJECTED FINANCIAL INFORMATION WILL BE VALID AND ACTUAL
RESULTS MAY PROVE TO BE MATERIALLY HIGHER OR LOWER THAN THOSE CONTAINED IN THE
PROJECTIONS. NO SPECIFIC ASSUMPTIONS RELATING TO SUCH PROJECTIONS WERE FURNISHED
BY THE COMPANY TO CTS, ALTHOUGH CERTAIN INFORMATION GENERALLY PERTINENT TO THE
COMPANY PROJECTIONS WAS FURNISHED BY THE COMPANY TO CTS IN THEIR DUE DILIGENCE
REVIEW. THE INCLUSION OF THIS INFORMATION SHOULD NOT BE REGARDED AS AN
INDICATION THAT THE COMPANY, CTS OR ANYONE ELSE WHO RECEIVED THIS INFORMATION
CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE EVENTS, AND THIS INFORMATION SHOULD
NOT BE RELIED ON AS SUCH. NONE OF CTS, PURCHASER, THE COMPANY OR ANY OF THEIR
RESPECTIVE REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY,
REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTED FINANCIAL INFORMATION,
AND THE COMPANY HAS MADE NO REPRESENTATIONS TO CTS REGARDING SUCH INFORMATION.
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
(AMOUNTS IN
MILLIONS)
Net Sales............................................................................ $ 148.6 $ 170.9
Cost of goods sold................................................................... 115.4 132.7
Earnings before interest and taxes, before equity earnings from CTS.................. 6.0 6.9
Net earnings, before equity earnings from CTS........................................ $ 4.3 $ 5.0
</TABLE>
THE RIGHTS
The Company Rights Agreement is described in the Company's Form 8-A, dated
January 30, 1986, the Company 8-K, dated as of December 27, 1995, the Company
8-K, dated May 9, 1997, and the Company 8-K, dated May 12, 1997 filed with the
Commission, each of which is incorporated herein by this reference. The Rights
will be represented by the Share Certificates and will not be exercisable, or
transferable apart from the Shares, until (i) 10 days after the public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, the beneficial ownership of 20
percent or more of the Shares in a transaction not approved by the Board prior
to such transaction (an "Acquiring Person"), or (ii) such date as the Company
Board shall determine following the first public announcement of the
commencement of, or the intent of any individual, firm, corporation or other
entity (other than the Company) to commence, a tender or exchange offer for 25%
or more of the outstanding Shares. As soon as practicable after such date (the
"Distribution Date"), separate certificates evidencing the Rights will be mailed
to holders of record of Shares as of the close of business on the Distribution
Date and such separate certificates alone will evidence the Rights. For a
description of the amendments to the Company Rights Agreement effected in
connection with the Merger, see "Introduction."
36
<PAGE>
Shareholders are required to tender one associated Right for each Share
tendered in order to effect a valid tender of such Share. If the Distribution
Date (as defined) does not occur prior to the Expiration Date, a tender of
Shares will automatically constitute a tender of the associated Rights. See "The
Offer -- Procedures for Tendering Shares."
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION
Article XV of the Company's Certificate of Incorporation provides, among
other things, that the affirmative vote of not less than 80% of the outstanding
stock of the Company entitled to vote thereon (the "80% Vote") is required to
approve any of the following transactions with an individual, corporation or
other entity (collectively, a "Combination Partner") who is a beneficial owner
(as such term is defined in the Company Certificate of Incorporation) of 5% or
more of the outstanding capital stock of the Company entitled to vote in the
election of directors: (i) any agreement for merger or consolidation of the
Company or any subsidiary with or into a Combination Partner, or the merger of
any other Combination Partner into the Company or any subsidiary, (ii) any sale,
lease, exchange, mortgage or pledge to any other Combination Partner of all or
substantially all of the property and assets of the Company or any subsidiary,
or any part of such assets having a fair market value greater than 50% of the
fair market value of the total assets of the Company or such subsidiary, or
(iii) the issuance or transfer by the Company or any subsidiary of any voting
securities of the Company or any subsidiary having a fair market value of more
than $1,000,000 in exchange or payment for the securities or property and assets
(including cash) of any Combination Partner. Notwithstanding the preceding
sentence, the 80% Vote is not required if the Company owns a majority of the
Combination Partner's voting stock or if the Company Board approves the
transaction before such Combination Partner becomes a 5% or more beneficial
owner of such capital stock. At the time that the Company Board approved the
Merger Agreement, Purchaser or CTS did not own 5% of the Shares. Therefore, the
80% Vote is inapplicable to the Merger Agreement or the Merger, and the
affirmative vote of the holders of two-thirds of the Shares is the only vote
required to approve the Merger Agreement and the Merger.
CERTAIN INFORMATION CONCERNING PURCHASER AND CTS
PURCHASER
Purchaser is a New York corporation which was recently organized in
connection with the Offer. The principal offices of Purchaser are located at 905
West Boulevard North, Elkhart, Indiana 46514. Purchaser is a wholly owned
subsidiary of CTS. Until immediately prior to the time that Purchaser will
purchase Shares pursuant to the Offer, it is not expected that Purchaser will
have any significant assets or liabilities or engage in activities other than
those activities incident to the Offer and the Merger and the other transactions
contemplated by the Merger Agreement.
CTS
CTS is an Indiana corporation with its principal executive offices located
at 905 West Boulevard North, Elkhart, Indiana 46514. CTS designs, manufactures
and sells a broad line of electronic components principally serving original
equipment manufacturers in the automotive, computer, communications, instrument
and controls, defense and aerospace industries. CTS products are engineered and
manufactured at 16 facilities worldwide and include automotive control devices,
interconnect products, frequency control devices, resistor networks and hybrid
microcircuits.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of CTS and Purchaser are set forth in Schedule I hereto. Except as
disclosed in this Offer To Purchase (including Schedule I hereto), neither CTS
nor Purchaser, nor, to the knowledge of CTS or Purchaser, any of the persons
listed in Schedule I hereto, any associate or subsidiary of such persons or any
of the respective directors, executive officers or subsidiaries of the foregoing
(i) beneficially owns any equity security of the Company, (ii) has effected any
transaction in any equity security of the Company during the past 60 days, (iii)
has any contract,
37
<PAGE>
arrangement, understanding or relationship with any other person with respect to
any securities of the Company, including, without limitation, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any securities of the Company, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, or (iv) except as set forth in this Offer To Purchase,
has had any transactions with the Company, or any of its executive officers,
directors or affiliates that would require reporting under the rules of the
Commission. Except as set forth in this Offer To Purchase (see "Background of
the Combination"), there have been no contacts, negotiations or transactions
between CTS or Purchaser, or their respective subsidiaries, or, to the knowledge
of CTS or Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or its executive officers, directors or affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors, or a sale or other
transfer of a material amount of assets.
SELECTED FINANCIAL INFORMATION
Set forth below is a summary of certain consolidated financial information
with respect to CTS and its subsidiaries for the quarter ended March 30, 1997
and for its fiscal years ended December 31, 1996, 1995 and 1994, excerpted from
financial statements presented in CTS' Quarterly Report on Form 10-Q for the
quarter ended March 30, 1997 (the "CTS 10-Q"), CTS' Annual Report on Form 10-K
for the year ended December 31, 1996 (the "CTS 10-K") and other documents filed
by CTS with the Commission. More comprehensive financial information is included
in such reports (including management's discussion and analysis of results of
operations and financial position) and other documents filed by CTS with the
Commission, and the financial information summary set forth below is qualified
in its entirety by reference to such reports and other documents, and all the
financial information and related notes contained therein. The CTS 10-Q, the CTS
10-K and such other documents may be examined and copies may be obtained from
the offices of the Commission or the NYSE in the manner set forth below.
CTS CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 30, MARCH 31,
1997 1996 1996 1995 1994
----------- ----------- ---------- ---------- ----------
INCOME STATEMENT INFORMATION:
Net sales............................................ $ 91,269 $ 80,186 $ 321,297 $ 300,157 $ 268,707
Earnings before taxes................................ 11,038 7,006 33,602 27,684 21,487
Net earnings......................................... 6,954 4,414 21,170 17,164 13,967
PER CTS SHARE INFORMATION:
Net earnings applicable to CTS Shares................ $ 1.32 $ 0.83 $ 4.03 $ 3.30 $ 2.70
Dividends declared................................... .18 .15 .69 .60 .45
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 30, ----------------------
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Total current assets................................ $ 150,619 $ 138,201 $ 126,113
Net property, plant and equipment................... 56,919 56,103 50,696
Total assets........................................ 263,982 249,372 227,127
Total liabilities................................... 92,845 83,140 80,874
Total shareholders' equity.......................... 171,137 166,232 146,253
</TABLE>
CTS is subject to the information and reporting requirements of the Exchange
Act and is required to file reports and other information with the Commission
relating to its business, financial condition and
38
<PAGE>
other matters. Information, as of particular dates, concerning CTS' directors
and officers, their remuneration, stock options granted to them, the principal
holders of CTS' securities, any material interests of such persons in
transactions with CTS and other matters is required to be disclosed in proxy
statements distributed to CTS Shareholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located in
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should
be available for inspection and copying at prescribed rates at the following
regional offices of the Commission: Seven World Trade Center, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of this material may also be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains an Internet web site
at http://www.sec.gov that contains reports, proxy statements and other
information. The CTS Shares are listed on the NYSE, and reports, proxy
statements and other information concerning CTS should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
CERTAIN PROJECTIONS
In the course of discussions giving rise to the Merger Agreement (see
"Background of the Combination"), representatives of CTS furnished
representatives of the Company certain business and financial information that
was not publicly available, including CTS' current business plan (the "CTS
Business Plan"). The CTS Business Plan included certain projections for the
years 1997 through 2000 prepared solely for CTS' internal purposes. None of such
projected financial information provided by CTS to the Company was prepared for
publication or with a view to complying with the published guidelines of the
Commission regarding projections or with the AICPA Guide for Prospective
Financial Statements, and such information is being included in this Offer To
Purchase solely because it was furnished to the Company in connection with the
discussions giving rise to the Merger Agreement. The independent accountants of
CTS, Price Waterhouse LLP, have neither examined nor compiled the prospective
financial information set forth below and, accordingly, do not express an
opinion or any other form of assurance with respect thereto. The reports of
Price Waterhouse LLP incorporated by reference in this Offer To Purchase relate
to the historical financial information of CTS and do not extend to the
prospective financial information and should not be read to do so.
THE PROJECTED FINANCIAL INFORMATION SET FORTH BELOW NECESSARILY REFLECTS
NUMEROUS ASSUMPTIONS WITH RESPECT TO GENERAL BUSINESS AND ECONOMIC CONDITIONS
AND OTHER MATTERS, MANY OF WHICH ARE INHERENTLY UNCERTAIN OR BEYOND CTS'
CONTROL, AND DOES NOT TAKE INTO ACCOUNT ANY CHANGES IN THE CTS' OPERATIONS OR
CAPITAL STRUCTURE WHICH WILL RESULT FROM THE OFFER AND THE MERGER. SEE "SPECIAL
CONSIDERATIONS RELATING TO THE COMBINATION -- PLANS FOR THE COMPANY AND CTS" AND
"MISCELLANEOUS -- SOURCE AND AMOUNT OF FUNDS." IT IS NOT POSSIBLE TO PREDICT
WHETHER THE ASSUMPTIONS MADE IN PREPARING THE PROJECTED FINANCIAL INFORMATION
WILL BE VALID AND ACTUAL RESULTS MAY PROVE TO BE MATERIALLY HIGHER OR LOWER THAN
THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THIS INFORMATION SHOULD NOT
BE REGARDED AS AN INDICATION THAT THE COMPANY, CTS OR ANYONE ELSE WHO RECEIVED
THIS INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE EVENTS, AND THIS
INFORMATION SHOULD NOT BE RELIED ON AS
39
<PAGE>
SUCH. NEITHER CTS, PURCHASER, THE COMPANY NOR ANY OF THEIR RESPECTIVE
REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS,
ACCURACY OR COMPLETENESS OF THE PROJECTED FINANCIAL INFORMATION, AND CTS HAS
MADE NO REPRESENTATION TO THE COMPANY REGARDING SUCH INFORMATION.
<TABLE>
<CAPTION>
ESTIMATES FOR THE YEAR ENDING DECEMBER 31,
------------------------------------------
<S> <C> <C> <C> <C>
1997 1998 1999 2000
--------- --------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales............................................................ $ 351.2 $ 402.0 $ 452.1 $ 527.4
Cost of goods sold................................................... 262.1 298.0 335.3 389.4
Earnings before interest and taxes................................... 37.7 52.9 62.5 80.5
Net earnings......................................................... $ 22.9 $ 32.4 $ 38.5 $ 50.3
</TABLE>
The principal assumptions underlying the foregoing projections are as
follows:
(i) Sales are projected to increase at a compounded annual rate of
approximately 15% over the period 1997 to 2000, based primarily on assumed
increased sales of existing and new automotive, interconnect and
microelectronic products.
(ii) Gross margin percentage is assumed to improve in 1998 and remain
constant through 1999 and 2000, as CTS implements continued cost control
efficiency and productivity improvements. Sales per employee are assumed to
grow from $91,000 in 1997 to $122,000 in 2000.
(iii) Earnings before interest and taxes are assumed to grow from 10.7%
in 1997 to 15.3% in 2000, primarily based upon the above-referenced sales
increases and cost and expense controls. Operating expenses are assumed to
be 15% of net sales in 1997 and are assumed to fall to 11% in the year 2000.
(iv) Interest expense is assumed to be essentially constant and to drop
significantly in 2000, due to a balloon payment on a term loan due at the
end of 1999.
(v) The tax rate is assumed to be CTS' current effective rate of 37%.
As indicated above, the foregoing projections were prepared for CTS'
internal purposes, do not reflect or give effect to the Offer or the Merger and
transactions related thereto (including the financing for the Offer) and,
accordingly, are not necessarily indicative of the results of operations of CTS
following the Offer or the Merger.
CERTAIN EMPLOYEE MATTERS
Mr. Walker's salary under the CEO Employment Contract is $500,000 per year,
subject to review by the CTS Board for increases, but not decreases, each year.
During the term of the CEO Employment Contract, if Mr. Walker's employment is
terminated as a result of his death or disability, for good reason (as defined)
or by CTS without cause (as defined), Mr. Walker will receive severance benefits
equal to his base salary for the remainder of the term, plus an annual bonus for
each year remaining in the term equal to the largest cash and stock bonus that
he received during the five fiscal years preceding the date of termination. In
addition, if Mr. Walker's employment is terminated by Mr. Walker for good reason
or by CTS without cause, Mr. Walker may instead receive a lump sum equal to
3-1/3 times his base salary and the largest cash and stock bonus that he
received during the five fiscal years preceding the date of the employment
agreement. Any payments to Mr. Walker upon a change in control are increased to
compensate Mr. Walker for any excise tax payable by him pursuant to Section 280G
of the Code. The payments and benefits to Mr. Walker under his employment
agreement are reduced automatically by any corresponding payments or benefits
under his severance agreement (described below).
40
<PAGE>
CTS entered into severance agreements, dated April 11, 1997, with each of
its nine executive officers and seven other key employees of CTS. The agreements
have a rolling three-year term which is automatically extended each January 1
thereafter unless notice is given otherwise. The severance agreements become
operative only upon a change in control of CTS (as defined). Severance benefits
are provided if, upon a change in control, CTS terminates a covered executive's
employment without cause or the executive terminates his employment for good
reason (each as defined). Severance compensation under the agreements includes a
multiple (two or three, depending upon level of job responsibility) of base
salary, a multiple (two or three, depending upon level of job responsibility) of
the average annual incentive compensation awarded to the executive during the
three fiscal years preceding the fiscal year in which the change in control
occurred, the continued participation for a number of months following
termination in welfare benefits plans and other similar benefit programs, a lump
sum payment equal to the increase in actuarial value of the benefits under CTS'
qualified and supplemental retirement plans that the executive would have
received had he or she remained employed, outplacement services, and, in lieu of
perquisites provided immediately prior to the change in control, the payment of
the lesser of $50,000 or 10% of the total base salary and incentive
compensation. In addition, if any payments made to the executive are subject to
the excise tax under Section 280G of the Code, CTS will make an additional
payment in an amount to put the executive in the same after-tax position as if
no excise tax had been imposed; provided that, if certain thresholds are not
met, payments will be reduced so that no excise tax applies.
PRO FORMA FINANCIAL DATA
The following Unaudited Condensed Consolidated Pro Forma Statements of
Operations of CTS for the three months ended March 30, 1997 and the year ended
December 31, 1996 present unaudited pro forma operating results for CTS as if
the Combination, including the reacquisition of the Company-Owned CTS Shares
effected thereby, had occurred as of the beginning of each such period. The
following Unaudited Condensed Consolidated Pro Forma Balance Sheet of CTS
presents the unaudited pro forma financial condition of CTS as if the
Combination had occurred as of March 30, 1997.
For purposes of the following pro forma financial data, the total purchase
price paid by CTS in the Combination is estimated to be $220.0 million,
consisting of the sum of (i) $105.3 million in cash for the purchase of
1,915,500 Shares pursuant to the Offer, (ii) $105.8 million in CTS Shares
(valued for this purpose at $62.50, being the quotient of the $55.00 per Share
cash price in the Offer divided by the Exchange Ratio), and (iii) $8.9 million
of transaction costs. Such purchase price has been allocated in the following
pro forma financial data to the estimated fair value of the net tangible
operating assets and inventory of the Company ("Net Company Operating Assets")
and the Company-Owned CTS Shares as follows: (i) Net Company Operating Assets:
$33.9 million and (ii) Company-Owned CTS Shares: $186.1 million. (See Note (1)
below.)
Following the Effective Time, CTS will be required to allocate finally the
purchase price to the fair value of the Company's assets and liabilities; such
allocation will vary from the allocations in the following pro forma financial
data based on various factors, including appraisals of the operating assets and
liabilities of the Company and the identification and valuation of intangible
assets (which CTS presently believes are not material). In addition, following
the Effective Time, CTS will finally determine the purchase price for purposes
of accounting for the Combination. The purchase price as finally defined will
vary from the amounts assumed in the following pro forma financial data based on
the actual transaction costs. In addition, in the event that the actual value of
the Company-Owned CTS Shares reacquired as a result of the Merger, which will be
determined primarily by reference to the post-Combination value of the CTS
Shares, is materially lower than the $80.80 per Company-Owned CTS Share value
assumed in the following pro forma financial data, CTS may be required to charge
the difference to net earnings currently to reflect the amount of such
difference, net of changes in the other components of the purchase price
allocation described above. CTS estimates that, assuming no other change in such
components, the amount of any such charge will equal $2.3 million for each $1 of
difference between the $80.80 per Company-Owned CTS
41
<PAGE>
Share assumed in the following pro forma financial data and the actual
post-Combination value for CTS Shares. Any such charge will, however, be a
non-cash item which CTS does not believe will have any material adverse effect
on its prospective financial position or results of operations.
CTS has received a financing commitment for Credit Facilities providing for
up to $125.0 million of borrowings to fund the purchase of Shares pursuant to
the Offer and the payment of transaction costs and expenses, and for general
corporate purposes. See "Miscellaneous -- Source and Amount of Funds." While CTS
expects annual after-tax cost savings of not less than $2.0 million resulting
from the Combination, such estimated savings have not been reflected in the pro
forma financial data because their realization is not assured.
The following pro forma financial data is presented for informational
purposes only and is not necessarily indicative of CTS' operating results or
financial position that would have occurred had the Combination and other
transactions described herein been consummated at the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of
CTS following the Combination. The unaudited pro forma condensed consolidated
financial data should be read in conjunction with the consolidated financial
statements of each of CTS and the Company and the related notes thereto
contained in the CTS Form 10-K, the CTS 10-Q, the Company 10-K and the Company
10-Q, all of which are incorporated herein by reference.
42
<PAGE>
CTS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
MARCH 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
CTS ----------------------
CORPORATION THE COMPANY DEBITS CREDITS PRO FORMA
----------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Total Current Assets................ $ 150,619 $ 53,386 $ 2,000(1) $ 25,000(1) $ 181,005
Property, plant & equipment--net.......... 56,919 6,126 63,045
Goodwill.................................. 3,861 -- 3,861
Prepaid pension expense................... 51,826 -- 51,826
Equity investment in CTS.................. -- 86,478 86,478(1) --
Other assets.............................. 757 2,236 2,993
----------- ------------- ---------- ---------- -----------
Total Assets............................ $ 263,982 $ 148,226 $ 2,000 $ 111,478 $ 302,730
----------- ------------- ---------- ---------- -----------
----------- ------------- ---------- ---------- -----------
Liabilities and Shareholders' Equity
Current Liabilities
Current maturities of long-term
obligations........................... $ 2,416 $ 49 $ 2,465
Accounts payable........................ 22,965 7,380 30,345
Accrued liabilities..................... 35,793 17,859 $ 8,869(1) 62,521
----------- ------------- ---------- -----------
Total Current Liabilities............... 61,174 25,288 -- 8,869 95,331
Long-term obligations..................... 11,210 2,862 80,353(1) 94,425
Deferred income taxes..................... 16,146 394 16,540
Other liabilities......................... 4,315 1,314 5,629
----------- ------------- ---------- ---------- -----------
Total Liabilities....................... 92,845 29,858 -- 89,222 211,925
Shareholders' Equity
Common stock............................ 33,401 382 $ 382(1) 105,778(1) 139,179
Additional paid-in capital.............. -- 11,777 11,777(1) --
Retained earnings....................... 150,125 106,740 106,740(1) 150,125
Other................................... 349 (531) 531(1) 349
----------- ------------- ---------- ---------- -----------
183,875 118,368 118,899 106,309 289,653
Less cost of common stock held in
treasury.......................... 12,738 -- 186,110(1) 198,848
-- --
----------- ------------- ---------- ---------- -----------
Total shareholders' equity.............. 171,137 118,368 305,009 106,309 90,805
----------- ------------- ---------- ---------- -----------
Total Liabilities and Shareholders'
Equity................................ $ 263,982 $ 148,226 $ 305,009 $ 195,531 $ 302,730
----------- ------------- ---------- ---------- -----------
----------- ------------- ---------- ---------- -----------
</TABLE>
See accompanying Notes to Pro Forma Financial Data.
43
<PAGE>
CTS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------
<S> <C> <C> <C> <C> <C>
CTS THE COMPANY DEBITS CREDITS PRO FORMA
--------- ------------- --------- ----------- -----------
Net sales......................................... $ 91,269 $ 30,402 $ 121,671
Cost of goods sold................................ 65,978 22,211 88,189
Selling, general and administrative expenses...... 11,824 5,948 17,772
Research and development expenses................. 2,974 244 3,218
--------- ------------- --------- ----- -----------
Operating income.............................. 10,493 1,999 -- -- 12,492
Other income (expense)--net....................... 545 (140) $ 1,500(2) (1,408)
313(3)
--------- ------------- --------- ----- -----------
Earnings before income tax.................... 11,038 1,859 1,813 -- 11,084
Income taxes...................................... 4,084 688 $ 725(4) 4,047
Income from equity investment in CTS (net of
income tax charge).............................. -- 2,637 2,637(5) --
--------- ------------- --------- ----- -----------
Net income.................................... $ 6,954 $ 3,808 $ 4,450 $ 725 $ 7,037
--------- ------------- --------- ----- -----------
--------- ------------- --------- ----- -----------
Net earnings per share........................ $ 1.32 $ 1.00 $ 1.51
--------- ------------- -----------
--------- ------------- -----------
Average common and common equivalent shares
outstanding (thousands)..................... 5,267 3,820 4,657
--------- ------------- -----------
--------- ------------- -----------
Net earnings per share assuming the Stock
Split....................................... $ 0.75
-----------
-----------
</TABLE>
See accompanying Notes to Pro Forma Financial Data.
44
<PAGE>
CTS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
--------------------
<S> <C> <C> <C> <C> <C>
CTS THE COMPANY DEBITS CREDITS PRO FORMA
---------- ------------- --------- --------- -----------
Net sales......................................... $ 321,297 $ 129,206 $ 450,503
Cost of goods sold................................ 233,801 104,245 338,046
Selling, general and administrative expenses...... 43,333 23,294 66,627
Research and development expenses................. 10,743 1,435 12,178
---------- ------------- --------- --------- -----------
Operating income.............................. 33,420 232 -- -- 33,652
Other income (expense)--net....................... 182 154 $ 6,000(2) (6,914)
1,250(3)
---------- ------------- --------- --------- -----------
Earnings before income tax.................... 33,602 386 7,250 -- 26,738
Income taxes...................................... 12,432 59 $ 2,900(4) 9,591
Income from equity investment in CTS (net of
income tax benefit)............................. -- 10,280 10,280(5) --
---------- ------------- --------- --------- -----------
Net income.................................... $ 21,170 $ 10,607 $ 17,530 $ 2,900 $ 17,147
---------- ------------- --------- --------- -----------
---------- ------------- --------- --------- -----------
Net earnings per share........................ $ 4.03 $ 2.78 $ 3.68
---------- ------------- -----------
---------- ------------- -----------
Average common and common equivalent shares
outstanding (thousands)..................... 5,259 3,820 4,657
---------- ------------- -----------
---------- ------------- -----------
Net earnings per share assuming the Stock
Split....................................... $ 1.84
-----------
-----------
</TABLE>
See accompanying Notes to Pro Forma Financial Data.
45
<PAGE>
NOTES TO PRO FORMA FINANCIAL DATA
(IN THOUSANDS)
(1) Adjustments record the effects of the Combination and reacquisition of
Company-Owned CTS Shares held by the Company and the elimination of the
historical shareholders equity of the Company and its 44.1% equity
investment in CTS.
<TABLE>
<S> <C> <C>
- Acquisition cost of all the outstanding Shares at
$55.00 per Share:
Cash......................................................... $ 25,000
Debt......................................................... 80,353
CTS Shares issued (1,692,453 CTS Shares x $62.50
per CTS Share)............................................... 105,778
---------
$ 211,131
---------
- Transaction costs............................................ $ 8,869
---------
Total pro forma purchase price............................... $ 220,000
---------
---------
- Allocated to:
Inventory.................................................... $ 2,000
Net Company Operating Assets................................. 31,890
Company-Owned CTS Shares..................................... 186,110
---------
$ 220,000
---------
---------
</TABLE>
(2) Adjustment records the additional interest expense associated with the
$80,353 of borrowings assumed to be incurred in connection with the
Combination at an assumed 7.5% effective annual interest rate.
(3) Adjustment records the assumed reduction in interest income earned (at a 5%
per annum rate) on the $25,000 of CTS cash used to finance a portion of the
purchase of Shares in the Offer.
(4) Adjustment records the tax effect of aggregating the asssumed rate of 40% to
the adjustments described in Notes (2) and (3).
(5) Adjustment records the elimination of the Company's equity earnings from its
44.1% equity ownership in CTS.
46
<PAGE>
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
GENERAL
Except as set forth below, based upon an examination of publicly available
filings made by the Company with the Commission and other publicly available
information concerning the Company and the representations and warranties of the
Company in the Merger Agreement, neither Purchaser nor CTS is aware of any
licenses or other regulatory permits that appear to be material to the business
of the Company and its subsidiaries, taken as a whole, that might be adversely
affected by Purchaser's acquisition of Shares (and the indirect acquisition of
the stock of the Company's subsidiaries) as contemplated herein, or of any
filings, approvals or other actions by or with any domestic governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of Shares (or the indirect acquisition of the stock of the
Company's subsidiaries) by Purchaser pursuant to the Offer as contemplated
herein. Should any such approval or other action be required, it is Purchaser's
present intention to seek such approval or action. However, Purchaser does not
presently intend to delay the purchase of Shares tendered pursuant to the Offer
pending the receipt of any such approval or the taking of any such action
(subject to Purchaser's right to delay or decline to purchase Shares if any of
the conditions in "The Offer -- Conditions of the Offer" shall not be
satisfied). There can be no assurance that any such approval or other action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the business of the Company, CTS or Purchaser
or that certain parts of the businesses of the Company, CTS or Purchaser might
not have to be disposed of or held separate or other substantial conditions
complied with in order to obtain such approval or other action or in the event
that such approval was not obtained or such other action was not taken, any of
which could cause Purchaser to elect to terminate the Offer without the purchase
of the Shares thereunder. Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions, including
conditions relating to the legal matters discussed in this Section. See "The
Offer -- Conditions of the Offer."
NEW YORK BUSINESS COMBINATION STATUTE
Section 912 of the NYBCL prohibits any person who is the "beneficial owner"
of 20% or more of the outstanding voting stock of a corporation and therefore is
an "interested shareholder" from engaging in certain business combinations
(including a merger) with such corporation for a period of five years following
the date on which such person first became an interested shareholder, unless the
transaction by which such person became an interested shareholder or the
business combination is approved by the board of directors of the corporation
prior to the date on which such person became an interested shareholder. The
Company has represented in the Merger Agreement that the Company Board has
approved the Merger Agreement and the consummation of the Merger and the other
transactions contemplated thereby and that such approval constitutes approval of
the Company Board of the Merger and the other transactions contemplated by the
Merger Agreement under Section 912 of the NYBCL and Article XV of the Company's
Certificate of Incorporation. See "Certain Information Concerning the Company --
Certain Provisions of the Company's Certificate of Incorporation."
If an assertion is made that CTS or Purchaser has not complied with the
provisions of any state takeover statute, CTS and Purchaser reserve the right to
challenge the validity or applicability of any state law allegedly applicable to
the Merger and nothing in this Offer To Purchase nor any action taken in
connection herewith is intended as a waiver of that right.
ANTITRUST
Under the HSR Act and the rules that have been promulgated thereunder,
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division and the FTC and certain
waiting period requirements have been satisfied. The acquisition of
47
<PAGE>
Shares pursuant to the Offer and the Merger is subject to such requirements. See
"The Offer -- Conditions of the Offer."
CTS filed with the FTC and the Antitrust Division a Premerger Notification
and Report Form in connection with the purchase of Shares pursuant to the Offer
on Monday, May 12, 1997. Under the provisions of the HSR Act applicable to the
Offer, the purchase of Shares pursuant to the Offer may not be consummated until
the expiration of a 15-calendar day waiting period following the filing by CTS
and notification to the Company of such filing. Accordingly, it is expected that
the waiting period under the HSR Act applicable to the Offer will expire at
11:59 p.m., New York City time, on Tuesday, May 27, 1997, unless, prior to the
expiration or termination of the waiting period, the FTC or the Antitrust
Division extends the waiting period by requesting additional information or
documentary material from CTS. If either the FTC or the Antitrust Division were
to request additional information or documentary material from CTS, the waiting
period would expire at 11:59 p.m., New York City time, on the tenth calendar day
after the date of substantial compliance by CTS with such request. Thereafter,
the waiting period could be extended by court order or by consent of CTS.
CTS and the Company filed with the FTC and the Antitrust Division a
Premerger Notification and Report Form in connection with the Merger on Monday,
May 12, 1997. Under the provisions of the HSR Act applicable to the Merger, the
Merger may not be consummated until the expiration of a 30-calendar day waiting
period following the filing by CTS and the Company. Accordingly, it is expected
that the waiting period under the HSR Act applicable to the Merger will expire
at 11:59 p.m., New York City time, on Wednesday, June 11, 1997, unless, prior to
the expiration or termination of the waiting period, the FTC or the Antitrust
Division extends the waiting period by requesting additional information or
documentary material from CTS or the Company. If either the FTC or the Antitrust
Division were to request additional information or documentary material from CTS
or the Company, the waiting period would expire at 11:59 p.m., New York City
time, on the twentieth calendar day after the date of substantial compliance by
CTS and the Company with such request. Thereafter, the waiting period could be
extended by court order or by consent of CTS and the Company.
The waiting periods under the HSR Act may be terminated by the FTC and the
Antitrust Division prior to their expiration. If the acquisition of Shares is
delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer may be extended (subject to the terms of the Merger Agreement) and in any
event the purchase of and payment for Shares will be deferred until ten days
after the request is substantially complied with, unless the waiting period is
sooner terminated by the FTC and the Antitrust Division. See "The Offer -- Terms
of the Offer; Proration; Expiration Date." Only one extension of such waiting
period pursuant to a request for additional information is authorized by the HSR
Act and the rules promulgated thereunder, except by court order or by consent of
CTS. Any such extension of the waiting period will not give rise to any
withdrawal rights not otherwise provided for by applicable law. See "The Offer
- -- Withdrawal Rights." Although the Company is required to file certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request from the Antitrust Division or the FTC for additional information
or documentary material made to the Company will extend the waiting period.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase by
Purchaser of Shares pursuant to the Offer, either of the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares, pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares purchased by Purchaser or the divestiture of substantial
assets of CTS, its subsidiaries or the Company. Private parties and state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, Purchaser believes that the
acquisition of Shares pursuant to the Offer and the
48
<PAGE>
Merger would not violate antitrust laws. Purchaser believes that retention of
all of the operations of the Company and Purchaser should be permitted under the
antitrust laws. Nevertheless, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or, if such challenge is made, what
the result will be.
OTHER
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such state statute. If, after such
good faith effort, Purchaser cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer
Manager or one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
MISCELLANEOUS
SOURCE AND AMOUNT OF FUNDS
Purchaser estimates that the total amount of funds required to purchase
Shares pursuant to the Offer and to pay related costs and expenses will be
approximately $114.2 million.
CTS has received a financing commitment for credit facilities (the "Credit
Facilities") of up to $125.0 million from NBD Bank, N.A., as agent bank and
arranger (the "Agent") for a group of lenders. The Credit Facilities will
consist of an unsecured six-year amortizing term loan of up to $50.0 million and
an unsecured six-year revolving credit facility of up to $75.0 million. The
availability of the Credit Facilities is subject to the following conditions:
(i) satisfaction of the conditions to the Offer; (ii) the Merger Agreement not
having been amended, waived or modified in any material respect without the
approval of the Agent (such approval not to be unreasonably withheld); (iii) the
absence of any material breach under the Merger Agreement; and (iv) certain
other conditions customary for credit facilities of this type. The Credit
Facilities will replace CTS' existing revolving credit facility from NBD Bank,
N.A. CTS expects that the Credit Facilities will provide sufficient availability
to finance the Offer and related costs and expenses and to provide for CTS' and
its subsidiaries' ongoing working capital needs.
Pricing under the Credit Facilities will initially be set at LIBOR plus
0.50% per annum through March 31, 1998, with adjustments thereafter based on the
ratio of CTS' consolidated total indebtedness to consolidated EBITDA. A
commitment fee of 0.175% per annum will accrue on the undrawn portion of the
revolving credit facility. As of May 14, 1997, based on the prevailing
three-month LIBOR rate of 5.8%, the effective annual interest rate (including
assumed debt issuance costs) is estimated to be not more than 7.5%.
The term loan will amortize on a quarterly basis in aggregate installments
of $0 in 1997, $3.0 million in 1998, $5.0 million in 1999, $10.0 million in
2000, $10.0 million in 2001, $10.0 million in 2002 and $12.0 million in 2003.
CTS will also be required to prepay the term loan with the net proceeds of asset
sales in excess of $10.0 million per annum, the net proceeds of certain debt
financings, 50% of the net proceeds of equity financings involving the sale of
CTS treasury stock in excess of $30.0 million and 50% of the net proceeds of all
other equity financings in excess of $5.0 million.
The Credit Facilities will include certain representations and warranties
and covenants customary for facilities of this type, including: (i) financial
maintenance tests consisting of a fixed charge coverage ratio, a leverage ratio
and a minimum tangible net worth test; (ii) preservation of corporate existence,
compliance with laws, maintenance of properties and insurance and reporting
requirements; and (iii) limitations (subject to certain baskets and exceptions)
on indebtedness, liens, mergers and acquisitions, sales of assets and other
fundamental changes, investments, guarantees, transactions with affiliates,
leases, cash dividends and stock repurchases and redemptions during the
continuance of any default under the Credit Facilities,
49
<PAGE>
and certain hedging obligations. The Credit Facilities will also include
customary events of default, including payment defaults, breaches of
representations and warranties, covenant defaults, cross defaults to other
indebtedness, bankruptcy events, defaults in satisfaction of money judgments,
certain events under ERISA and a change of control of CTS (defined as (i) any
person together with its affiliates becoming the beneficial owner of 40% or more
of the combined voting power of CTS' common stock or (ii) during any period of
12 months persons constituting a majority of the CTS Board at the beginning of
such period (and persons whose election to the CTS Board was approved by such
persons) ceasing to constitute such a majority).
Purchaser's obligation to purchase Shares tendered pursuant to the Offer is
not subject to financing. Following the Effective Time, CTS expects to consider
possible transactions that may alter its capital structure, including the
possible refinancing of a portion of the indebtedness under the Credit
Facilities and possible stock repurchases. However, CTS has made no decision and
as of the date hereof has no plans in respect of any of the foregoing and,
accordingly, there can be no assurances as to the nature, timing or terms of any
such transaction.
FEES AND EXPENSES
Purchaser has retained MacKenzie Partners, Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact
Shareholders by mail, telephone, facsimile, telegraph and personal interviews
and may request brokers, dealers and other nominee Shareholders to forward
materials relating to the Offer to beneficial owners of Shares. The Information
Agent will receive reasonable and customary compensation for its services, will
be reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
The First National Bank of Boston has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in its
role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable out-of-
pocket expenses and will be indemnified against certain liabilities and expenses
in connection therewith, including certain liabilities under the federal
securities laws.
CTS has retained J.P. Morgan to act as its financial advisor and as the
Dealer Manager. Pursuant to a letter agreement dated April 9, 1997, CTS agreed
to pay J.P. Morgan for its services, including its services as Dealer Manager,
(i) $100,000 upon the execution of such letter agreement, (ii) $400,000 upon
delivery to CTS of a fairness opinion, and (iii) $400,000 upon the consummation
of the Merger (or, in certain circumstances, upon the Expiration Date) for its
services as financial advisor to CTS. CTS also agreed to reimburse J.P. Morgan
for all reasonable expenses, including the reasonable fees and disbursements of
legal counsel, and to indemnify J.P. Morgan against liabilities and expenses in
connection therewith, including liabilities under federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions to
any broker or dealer or any other person for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
will, upon request only, be reimbursed by Purchaser for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
SCHEDULE 14D-1
Purchaser and CTS have filed with the Commission a Tender Offer Statement on
Schedule 14D-1 under the Exchange Act. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
principal offices of the Commission in the manner set forth in "Certain
Information Concerning Purchaser and CTS -- Selected Financial Data" (except
that they will not be available at the regional offices of the Commission).
CTS FIRST ACQUISITION CORP.
May 16, 1997
50
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF CTS AND PURCHASER
DIRECTORS AND EXECUTIVE OFFICERS OF CTS. The following table sets forth the
name, age, business address, present principal occupation and employment and
material occupations, positions, offices or employments for the past five years
of certain directors, officers and employees of CTS. Unless otherwise indicated,
the principal business address of each director and executive officer is 905
West Boulevard North, Elkhart, Indiana 46514, and each occupation set forth
opposite an individual's name refers to employment with CTS. Each person listed
below is a citizen of the United States. Directors are identified with a single
asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT AND FIVE-YEAR BENEFICIALLY
NAME AND AGE EMPLOYMENT HISTORY OWNED
- --------------------------------------------- --------------------------------------------- -----------------
<S> <C> <C>
Joseph P. Walker*............................ Chairman of the Board, President and Chief 853(1)
Age: 58 Executive Officer and Chairman of the
Executive Committee of CTS. During the past
five years, Mr. Walker has served in his
present capacities at CTS. Mr. Walker is a
director of NBD Bank, N.A.
Gerald H. Frieling, Jr*...................... Vice Chairman of the Board of Tokheim 0
Age: 66 Corporation (a manufacturer of petroleum
dispensing equipment, systems and control
devices); President of Frieling and
Associates (a consulting firm); Chairman of
the Audit Committee and Member of the
Executive and Compensation Committees of CTS.
During the past five years, Mr. Frieling
served as Chairman of the Board and Chief
Executive Officer of Tokheim Corporation, and
in his present capacity at Frieling and
Associates.
Andrew Lozyniak*............................. Chairman of the Board and President of the 181,428(2)
Age: 65 Company; Chairman of the Compensation
Committee and Member of the Executive and
Audit Committees of CTS. During the past five
years, Mr. Lozyniak has served in his present
capacities at the Company, Mr. Lozyniak
serves as a director of the Company and
Physicians Health Services, Inc.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT AND FIVE-YEAR BENEFICIALLY
NAME AND AGE EMPLOYMENT HISTORY OWNED
- --------------------------------------------- --------------------------------------------- -----------------
Lawrence J. Ciancia*......................... Vice President, Growth and Development, of 0
Age: 54 Uponor U.S., Inc. (a supplier of PVC pipe
products, specialty chemicals and PVC
compounds); Member of the Audit and
Compensation Committees of CTS. During the
past five years, Mr. Ciancia has served as
President, Chief Executive Officer and Chief
Operating Officer of Uponor ETI Company,
formerly Concorde Industries, Inc.
<S> <C> <C>
Patrick J. Dorme*............................ Vice President and Chief Financial Officer of 34,945(3)
Age: 61 the Company; Member of the Audit and
Compensation Committees of CTS. During the
past five years, Mr. Dorme has served in his
present capacities at the Company. Mr. Dorme
serves as a director of the Company.
Philip T. Christ............................. Group Vice President of CTS. During the past 0
Age: 66 five years, Mr. Christ has served in his
present capacity at CTS.
Stanley J. Aris.............................. Vice President Finance and Chief Financial 0
Age: 57 Officer of CTS. During the past five years,
Mr. Aris has served in his present capacity
at CTS and prior to that, as a business
consultant.
Jeannine M. Davis............................ Vice President, General Counsel and Secretary 0
Age: 48 of CTS. During the past five years, Ms. Davis
has served in her present capacity at CTS.
James L. Cummins............................. Vice President Human Resources of CTS. During 0
Age: 42 the past five years, Mr. Cummins has served
in his present capacity at CTS and prior to
that, as Director, Human Resources, of CTS.
James N. Hufford............................. Vice President Research, Development and 0
Age: 57 Engineering of CTS. During the past five
years, Mr. Hufford has served in his present
capacity at CTS and prior to that, as
Director of Corporate Research, Development
and Engineering of CTS.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION SHARES
OR EMPLOYMENT AND FIVE-YEAR BENEFICIALLY
NAME AND AGE EMPLOYMENT HISTORY OWNED
- --------------------------------------------- --------------------------------------------- -----------------
Donald R. Schroeder.......................... Vice President Sales and Marketing of CTS. 0
Age: 49 During the past five years, Mr. Schroeder has
served in his present capacity at CTS and
prior to that as Business Development Manager
for the CTS Microelectronics business unit.
<S> <C> <C>
George T. Newhart............................ Corporate Controller of CTS. During the past 0
Age: 54 five years, Mr. Newhart has served in his
present capacity at CTS.
Gary N. Hoipkemier........................... Treasurer of CTS. During the past five years, 0
Age: 42 Mr. Hoipkemier has served in his present
capacity at CTS.
</TABLE>
- ------------------------
(1) Mrs. Walker owns these 853 shares. Mr. Walker disclaims beneficial ownership
of such Shares.
(2) In addition, Mrs. Lozyniak owns 15,100 Shares. Mr. Lozyniak disclaims
beneficial ownership of such Shares.
(3) In addition, Mrs. Dorme owns 18,000 Shares. Mr. Dorme disclaims beneficial
ownership of such Shares.
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The directors of Purchaser
are: Joseph P. Walker, Stanley J. Aris, Jeannine M. Davis, James L. Cummins and
Donald R. Schroeder. The executive officers of Purchaser are: Joseph P. Walker,
President; Jeannine M. Davis, Vice President and Secretary; and Stanley J. Aris,
Treasurer. Each of the directors or executive officers of Purchaser are officers
and/or directors of CTS. Information concerning the name, business address,
present principal occupation, and employment and material occupations,
positions, offices or employments for the past five years is found in the table
above. The principal address of Purchaser and the current business address of
each individual enumerated above is 905 West Boulevard North, Elkhart, Indiana
46514. Each such person is a citizen of the United States.
53
<PAGE>
Manually executed facsimile copies of the Letter of Transmittal, properly
completed and duly signed, will be accepted. The Letter of Transmittal,
certificates for the Shares and any other required documents should be sent by
each Shareholder or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
THE FIRST NATIONAL BANK OF BOSTON
<TABLE>
<S> <C> <C>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
Securities Transfer and Bank of Boston Bank of Boston
Reporting Services, Inc. Corporate Agency and Corporate Agency and
One Exchange Plaza Reorganization Reorganization
55 Broadway, 3rd Floor Mail Stop 45-02-53 Mail Stop 45-02-53
New York, New York 10006 150 Royall Street P.O. Box 1889
Canton, Massachusetts 02021 Boston, Massachusetts
02105-1889
BY FACSIMILE TRANSMISSION:
(for Eligible Institutions
Only)
(617) 575-2233
CONFIRM FACSIMILE BY
TELEPHONE:
(617) 575-3120
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
To Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
60 Wall Street
Mail Stop 2860
New York, New York 10260
(212) 648-3251 (call collect)
or
Call Toll Free (800) 600-3799
