AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
August 12, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule
13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT
OF 1934)
ESCALADE, INCORPORATED
(NAME OF ISSUER AND PERSON FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
296056 10 4
(CUSIP Number of Class of Securities)
JOHN R. WILSON
SECRETARY
ESCALADE, INCORPORATED
817 MAXWELL AVENUE
EVANSVILLE, INDIANA 47717
(812) 467-1265
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and
Communications on Behalf of the Person Filing the Statement)
COPY TO:
Richard G. Schmalzl, Esq.
Graydon, Head & Ritchey
1900 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
(513) 621-6464
August 12, 1996
(Date Tender Offer First Published, Sent Or Given To Security Holders)
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee
$10,000,000 $2,000
* Determined pursuant to Rule 0-11(b)(1). Assumes the purchase of 1,000,000
shares at $10.00 per share.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, of the Form or
Schedule and the date of its filing.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Escalade, Incorporated, an Indiana
corporation (the "Company"), and the address of its principal
executive offices is 817 Maxwell Avenue, Evansville, Indiana
47717.
(b) This Schedule relates to the offer by the Company to purchase
up to 1,000,000 shares (or such lesser number of shares as are
properly tendered) of its Common Stock, no par value (the
"Shares") at a price not less than $6.00 nor more than $10.00 per
Share, net to the seller in cash, all upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated
August 12, 1996 (the "Offer to Purchase"), and the related Letter
of Transmittal (which together constitute the "Offer"), copies of
which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. As of August 9, 1996, the Company had issued and
outstanding 4,111,889 Shares and had reserved for issuance upon
exercise of outstanding stock options and warrants 459,477
Shares. Directors and executive officers of the Company and any
of its affiliates may participate in the Offer on the same basis
as the Company's other stockholders, although the Company has
been advised that no executive officer of the Company intends to
tender Shares pursuant to the Offer. The information set forth
on the cover page and under "Introduction" and "The Offer -
Purpose of the Offer; Certain Effects of the Offer" in Section 9
of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth on the cover page, and under
"Introduction" and "The Offer - Price Range of Shares; Dividends"
in Section 8 of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth under "The Offer - Source and
Amount of Funds" in Section 11 and "The Offer - Certain
Information Concerning the Company" in Section 10 of the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth under "The Offer - Source and
Amount of Funds" in Section 11 of the Offer to Purchase is
incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF
THE ISSUER OR AFFILIATE.
(a) through (j) The information set forth under "The Offer -
Purpose of the Offer; Certain Effects of the Offer" in Section 9
of the Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth under "The Offer - Transactions and
Agreements Concerning Shares" in Section 12 of the Offer to
Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS,UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE ISSUER'S SECURITIES
The information set forth under "The Offer - Transactions and
Agreements Concerning Shares" in Section 12 of the Offer to
Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "Introduction" and "The Offer -
Fees and Expenses" in Section 15 of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) and (b) The information set forth under "The Offer-Certain
Information Concerning the Company-Summary Consolidated
Historical Financial Information" and "The Offer-Certain
Information Concerning the Company-Summary Unaudited Pro Forma
Consolidated Financial Information" in Section 10 of the Offer to
Purchase is incorporated herein by reference, the information set
forth on pages F-1 through F-19 of the Company's Annual Report on
Form 10-K for the year ended December 30, 1995, filed as Exhibit
(g) hereto, is incorporated herein by reference and the
information set forth on pages 3 through 6 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended July
13, 1996, filed as Exhibit (h) hereto, is incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) None
(b) None
(c) The information set forth under "The Offer - Purpose of the
Offer; Certain Effects of the Offer" in Section 9 of the Offer to
Purchase is incorporated herein by reference.
(d) None.
(e) The Information set forth in the Offer to Purchase and the
Letter of Transmittal is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase, dated August 12, 1996.
(a)(2) Form of Letter of Transmittal together with Guidelines
for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(3) Form of Letter to Stockholders of the Company from
Robert E. Griffin, Chairman and Chief Executive Officer
of the Company, dated August 12, 1996.
(a)(4) Form of Notice of Guaranteed Delivery.
(a)(5) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees, dated August 12,
1996.
(a)(6) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(7) Form of Press Release issued by the Company, dated
August 12, 1996.
(b) Commitment Letter dated as of July 24, 1996 between
Bank One, Indianapolis, N.A. and the Company
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g) Pages F-1 through F-19 of the Company's Annual Report
on Form 10-K for the year ended December 30, 1995.
(h) Pages 3 through 6 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 13, 1996.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
Escalade, Incorporated
By: /s/ Robert E. Griffin
---------------------
Name: Robert E. Griffin
Title: Chairman and Chief
Executive Officer
Dated: August 12, 1996
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
(a)(1) Form of Offer to Purchase, dated August 12, 1996.
(a)(2) Form of Letter of Transmittal together with Guidelines
for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(3) Form of Letter to Stockholders of the Company from
Robert E. Griffin, Chairman and Chief Executive Officer
of the Company, dated August 12, 1996.
(a)(4) Form of Notice of Guaranteed Delivery.
(a)(5) Form of Letter to Brokers, Dealers Commercial Banks,
Trust Companies and Other Nominees, dated August 12,
1996.
(a)(6) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(7) Form of Press Release issued by the Company, dated
August 12, 1996.
(b) Commitment Letter dated as of July 24, 1996 between
Bank One, Indianapolis, N.A. and the Company
(g) Pages F-1 to F-19 of the Company's Annual Report on
Form 10-K for the year ended December 30, 1995.
(h) Pages 3 to 6 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended July 13, 1996.
EXHIBIT (a)(1)
Offer to Purchase
-----------------
OFFER TO PURCHASE FOR CASH
BY
ESCALADE, INCORPORATED
Up to 1,000,000 Shares of its Common Stock at a Purchase Price
not less than $6.00 nor more than $10.00 per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00
P.M., EASTERN TIME, ON FRIDAY, SEPTEMBER 13, 1996, UNLESS THE
OFFER IS EXTENDED.
Escalade, Incorporated, an Indiana corporation (the
"Company"), invites its stockholders to tender shares of its
Common Stock, no par value (the "Shares") at prices not less than
$6.00 nor more than $10.00 per Share, net to the seller in cash,
specified by such stockholders, upon the terms and subject to the
conditions set forth herein and in the related Letter of
Transmittal (which together constitute the "Offer").
The Company will determine a single per Share price (not
less than $6.00 nor more than $10.00 per Share) (the "Purchase
Price") that it will pay for the Shares validly tendered pursuant
to the Offer and not withdrawn, taking into account the number of
Shares so tendered and the prices specified by the tendering
stockholders. The Company will select the Purchase Price that
will enable it to purchase 1,000,000 Shares (or such lesser
number of Shares as are validly tendered at prices not less than
$6.00 nor more than $10.00 per Share) pursuant to the Offer. The
Company will purchase all Shares validly tendered at prices at or
below the Purchase Price and not withdrawn, upon the terms and
subject to the conditions of the Offer, including the provisions
thereof relating to proration and conditional tenders described
herein. Shares tendered at prices in excess of the Purchase
Price and Shares not purchased because of proration and
conditional tenders will be returned. Stockholders must complete
the section of the Letter of Transmittal relating to the price at
which they are tendering Shares in order to validly tender
Shares.
____________
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES
BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 7.
__________
IMPORTANT
Any stockholder desiring to tender all or any portion of his
or her Shares should either (1) complete and sign the Letter of
Transmittal or a photocopy thereof in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and
any other required documents to Fifth Third Bank (the
"Depositary"), and either deliver the certificates for Shares to
the Depositary along with the Letter of Transmittal or deliver
such Shares pursuant to the procedure for book-entry transfer set
forth in Section 3 hereof or (2) request his or her broker,
dealer, commercial bank, trust company or nominee to effect the
transaction for him or her. A stockholder whose Shares are
registered in the name of a broker, dealer, commercial bank,
trust company or nominee must contact such broker, dealer,
commercial bank, trust company or nominee if he or she desires to
tender such Shares. Any stockholder who desires to tender Shares
and whose certificates for such Shares are not immediately
available, or who cannot comply in a timely manner with the
procedure for book-entry transfer, should tender such Shares by
following the procedures for guaranteed delivery set forth in
Section 3 hereof.
______________________
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE
OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO EXECUTIVE OFFICER OF THE COMPANY INTENDS TO
TENDER SHARES PURSUANT TO THE OFFER.
On August 9, 1996, the last full trading day prior to the
commencement of the Offer, the last reported sale price of the
Shares on the Nasdaq Stock Market's National Market (the "Nasdaq
National Market") was $ 6.25 per Share. Stockholders are urged
to obtain current market quotations for the Shares.
Questions or requests for assistance or for additional
copies of this Offer to Purchase, the Letter of Transmittal or
other tender offer materials may be directed to the Dealer
Manager at the address and telephone number set forth on the back
cover of this Offer to Purchase.
______________________
The Dealer Manager for the Offer is:
NatCity Investments, Inc.
August 12, 1996
TABLE OF CONTENTS
Section Page
SUMMARY
INTRODUCTION
THE OFFER
1. Number of Shares; Proration
2. Tenders by Holders of Fewer Than 100 Shares
3. Procedure for Tendering Shares
4. Withdrawal Rights
5. Acceptance for Payment of Shares and Payment
of Purchase Price
6. Conditional Tender of Shares
7. Certain Conditions of the Offer
8. Price Range of Shares; Dividends
9. Purpose of the Offer; Certain Effects of
the Offer
10. Certain Information Concerning the Company
11. Source and Amount of Funds
12. Transactions and Agreements Concerning Shares
13. Certain Federal Income Tax Consequences
14. Extension of Tender Period; Termination;
Amendments
15. Fees and Expenses
16. Miscellaneous
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER
OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY.
SUMMARY
This general summary is provided solely for the convenience
of holders of Shares and is qualified in its entirety by
reference to the full text of and the more specific details
contained in this Offer to Purchase and the related Letter of
Transmittal and any amendments hereto and thereto. Capitalized
terms used in this summary without definition shall have the
meaning ascribed to such terms in the Offer to Purchase.
The Company Escalade, Incorporated
The Shares Shares of the Company's Common Stock, no par value
Number of
Shares Sought 1,000,000 of the 4,111,889 Shares outstanding as
of August 9, 1996.
Purchase Price The Company will select a single Purchase Price
which will be not less than $6.00 nor more than
$10.00 per Share. All Shares purchased by the
Company will be purchased at the Purchase Price
even if tendered at or below the Purchase Price.
Each stockholder desiring to tender Shares must
specify in the Letter of Transmittal the minimum
price (not less than $6.00 nor more than $10.00
per Share) at which such stockholder is willing to
have his or her Shares purchased by the Company.
Stockholders wishing to maximize the possibility
that their Shares will be purchased at the
Purchase Price may check the box on the Letter of
Transmittal marked "Shares Tendered At Purchase
Price Determined By Dutch Auction." Checking this
box may result in a purchase of the Shares so
tendered at the minimum price of $6.00.
Expiration
Date of Offer Friday, September 13, 1996, at 5:00 p.m., Eastern
time, unless extended by the Company.
How to Tender
Shares See Section 3. For further information, call the
Dealer Manager or consult your broker for
assistance.
Odd Lot Owners There will be no proration of Shares tendered by
any stockholder beneficially owning less than 100
Shares as of the close of business on August 9,
1996, who tenders all such Shares and completes
the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of
Guaranteed Delivery.
Stockholders tendering Odd Lots will avoid the
payment of brokerage commissions and the
applicable odd lot discount payable in a sale of
Shares in a transaction effected on a securities
exchange.
Withdrawal
Rights Tendered Shares may be withdrawn at any time until
the Expiration Date of the Offer and, unless
previously purchased, after Tuesday, October 8,
1996. See Section 4.
Purpose of
Offer The Offer is designed to afford stockholders who
may be considering the sale of their shares an
opportunity to sell such shares to the Company for
a higher price than that which has been available
recently on the open market and without
transaction costs. The Company believes that the
Offer will have a positive long-term effect on the
Company's financial and capital ratios, earnings
per share and stock price. See Section 9.
Market Price
of Shares On August 9, 1996, the last reported sale price of
the Shares on the Nasdaq National Market was
$ 6.25 per Share. See Section 8.
Brokerage
Commissions Not payable by stockholders.
Stock
Transfer Tax None, except as provided in Instruction 7 of the
Letter of Transmittal.
Payment Date As Promptly as practicable after the Expiration
Date of the Offer.
Further
Information Any questions, requests for assistance or requests
for additional copies of this Offer to Purchase,
the Letter of Transmittal or other tender offer
materials may be directed to the Dealer Manager at
the address and phone number set forth on the back
cover page of this Offer to Purchase.
To the Holders of Common Stock of
Escalade, Incorporated:
INTRODUCTION
Escalade, Incorporated, an Indiana corporation (the
"Company"), invites its stockholders to tender shares of its
Common Stock, no par value (the "Shares") at prices not less than
$6.00 nor more than $10.00 per Share, net to the seller in cash,
specified by such stockholders, upon the terms and subject to the
conditions set forth herein and in the related Letter of
Transmittal (which together constitute the "Offer").
The Company will determine a single per Share price (not
less than $6.00 nor more than $10.00 per Share) (the "Purchase
Price") that it will pay for the Shares validly tendered pursuant
to the Offer and not withdrawn, taking into account the number of
Shares so tendered and the prices specified by tendering
stockholders. The Company will select the Purchase Price that
will enable it to purchase 1,000,000 Shares (or such lesser
number of Shares as is validly tendered at prices not less than
$6.00 nor more than $10.00 per Share) pursuant to the Offer. The
Company will purchase all Shares validly tendered at prices at or
below the Purchase Price and not withdrawn on or prior to the
Expiration Date (as defined in Section 1), upon the terms and
subject to the conditions of the Offer, including the provisions
relating to proration and conditional tenders described below.
The Purchase Price will be paid in cash, net to the seller, with
respect to all Shares purchased. Shares tendered at prices in
excess of the Purchase Price and Shares not purchased because of
proration or conditional tenders will be returned.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN
OTHER CONDITIONS. SEE SECTION 7.
Tendering stockholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to
Instruction 7 of the Letter of Transmittal, stock transfer taxes
on the purchase of Shares by the Company. The Company will pay
all charges and expenses of Fifth Third Bank (the "Depositary")
incurred in connection with the Offer. See Section 15. HOWEVER,
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE
AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER
OF TRANSMITTAL MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX
BACKUP WITHHOLDING OF 31% OF THE GROSS PAYMENTS PAYABLE TO SUCH
STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTIONS 3
AND 13.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE
OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NONE OF MESSRS. GRIFFIN, REED OR WILSON (THE
COMPANY'S CHAIRMAN, PRESIDENT AND CHIEF FINANCIAL OFFICER,
RESPECTIVELY), CONSTITUTING THE EXECUTIVE OFFICERS OF THE
COMPANY, INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
As of August 9, 1996, the Company had issued and outstanding
4,111,889 Shares and had reserved for issuance upon exercise of
outstanding stock options and warrants 459,477 Shares. As of
August 9, 1996, there were approximately 441 holders of record of
Shares. The 1,000,000 Shares that the Company is offering to
purchase represent approximately 24.3% of the Shares then
outstanding, or approximately 21.9% on a fully diluted basis
(assuming the exercise of all outstanding stock options and
warrants).
Stockholders are urged to obtain current market quotations
for the Shares.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
---------------------------
Number of Shares. Upon the terms and subject to the
conditions described herein and in the Letter of Transmittal, the
Company will purchase up to 1,000,000 Shares that are validly
tendered on or prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) at a price (determined in
the manner set forth below) not less than $6.00 nor more than
$10.00 per Share. The later of 5:00 p.m., Eastern time, on
Friday, September 13, 1996, or the latest time and date to which
the Offer is extended, is referred to herein as the "Expiration
Date." If the Offer is oversubscribed as described below, only
Shares tendered at or below the Purchase Price on or prior to the
Expiration Date will be eligible for proration.
The Company will determine the Purchase Price taking into
account the number of Shares so tendered and the prices specified
by tendering stockholders. The Company will select the Purchase
Price that will enable it to purchase 1,000,000 Shares (or such
lesser number of Shares as is validly tendered and not withdrawn
at prices not less than $6.00 nor more than $10.00 per Share)
pursuant to the Offer. The Company reserves the right to
purchase more than 1,000,000 Shares pursuant to the Offer, as may
be permitted by applicable laws, rules and regulations and/or in
accordance with the procedures for amending the Offer as
described in Section 14 hereof. The Offer is not conditioned on
any minimum number of Shares being tendered.
In accordance with Instruction 5 of the Letter of
Transmittal, each stockholder who wishes to tender Shares must
specify the price (not less than $6.00 nor more than $10.00 per
Share) at which such stockholder is willing to have the Company
purchase such Shares. As promptly as practicable following the
Expiration Date, the Company will determine the Purchase Price
(not less than $6.00 nor more than $10.00 per Share) that it will
pay for Shares validly tendered pursuant to the Offer, taking
into account the number of Shares so tendered and the prices
specified by tendering stockholders. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices
greater than the Purchase Price and Shares not purchased because
of proration or conditional tenders, will be returned to the
tendering stockholders at the Company's expense as promptly as
practicable following the Expiration Date.
Proration. Upon the terms and subject to the conditions of
the Offer, if 1,000,000 or fewer Shares have been validly
tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date, the Company will purchase all such
Shares. Upon the terms and subject to the conditions of the
Offer, if more than 1,000,000 Shares have been validly tendered
at or below the Purchase Price and not withdrawn on or prior to
the Expiration Date, the Company will purchase Shares in the
following order of priority:
(a) all Shares validly tendered at or below the
Purchase Price and not withdrawn on or prior to
the Expiration Date by any stockholder (an "Odd
Lot Owner") who owned beneficially an aggregate of
fewer than 100 Shares as of the close of business
on August 9, 1996, and who validly tenders all of
such Shares (partial and conditional tenders will
not qualify for this preference) and completes the
box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of
Guaranteed Delivery;
(b) after purchase of all of the foregoing Shares, all
Shares conditionally and validly tendered in
accordance with Section 6, for which the condition
was satisfied, and all other Shares
unconditionally and validly tendered at or below
the Purchase Price and not withdrawn on or prior
to the Expiration Date on a pro rata basis, if
necessary (with appropriate adjustments to avoid
purchases of fractional Shares); and
(c) if necessary, Shares conditionally tendered, for
which the condition was not satisfied, at or below
the Purchase Price and not withdrawn on or prior
to the Expiration Date, selected by random lot in
accordance with Section 6.
If proration of tendered Shares is required, because of the
difficulty in determining the number of Shares validly tendered
(including Shares tendered by the guaranteed delivery procedure
described in Section 3) and as a result of the "odd lot"
procedure described in Section 2 (the "Odd Lot Procedure") and
the conditional tender procedure described in Section 6, the
Company does not expect that it would be able to announce the
final proration factor or to commence payment for any Shares
purchased pursuant to the Offer until approximately seven trading
days after the Expiration Date. Proration of Shares, other than
Shares tendered pursuant to the Odd Lot Procedure, will be based
on the ratio of the number of Shares to be purchased by the
Company pursuant to the Offer, other than Shares purchased
pursuant to the Odd Lot Procedure, to the total number of Shares
tendered by all stockholders, other than Shares tendered pursuant
to the Odd Lot Procedure, at or below the Purchase Price. This
ratio will be applied to all Shares tendered by each stockholder,
other than Shares tendered pursuant to the Odd Lot Procedure, to
determine the number of Shares that will be purchased from each
stockholder pursuant to the Offer.
Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date.
Holders of Shares may obtain such preliminary information from
the Dealer Manager and may also be able to obtain such
information from their brokers. For a discussion of certain
federal income tax consequences, see Section 13.
THE COMPANY EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO PURCHASE ADDITIONAL SHARES PURSUANT TO THE OFFER
OR TO DECREASE THE NUMBER OF SHARES BEING SOUGHT PURSUANT TO THE
OFFER.
If (i) the Company increases or decreases the price to be
paid for Shares, increases the number of Shares being sought and
such increase in the number of Shares being sought exceeds 2% of
the outstanding Shares or decreases the number of Shares being
sought and (ii) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such
increase or decrease is first published, sent or given in the
manner described in Section 14, the Offer will be extended until
the expiration of ten business days from the date of publication
of such notice.
The Company also expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the
period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary. See Section
14. There can be no assurance, however, that the Company will
exercise its right to extend the Offer.
For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, Eastern
time.
Copies of this Offer to Purchase and the Letter of
Transmittal are being mailed to record holders of Shares and will
be furnished to brokers, banks and similar persons whose names,
or the names of whose nominees, appear on the Company's
stockholder 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.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES.
-------------------------------------------
All Shares validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date by or on
behalf of persons who each owned beneficially an aggregate of
fewer than 100 Shares as of the close of business on August 9,
1996, will be accepted before proration, if any, of the purchase
of other tendered Shares. See Section 1. Partial or conditional
tenders will not qualify for this preference, and it is not
available to beneficial holders of 100 or more Shares, even if
such holders have separate stock certificates for fewer than 100
Shares. By accepting the Offer, an Odd Lot Owner will avoid the
payment of brokerage commissions and the applicable odd lot
discount payable in a sale of such Shares in a transaction
effected on a securities exchange.
As of August 9, 1996, there were approximately 441 holders
of record of Shares. Approximately 35.1% of these holders of
record held individually fewer than 100 Shares and held in the
aggregate approximately 12,187 Shares. Because of the large
number of Shares held in the names of brokers and nominees, the
Company is unable to estimate the number of beneficial owners of
fewer than 100 Shares or the aggregate number of Shares they own.
Any Odd Lot Owner wishing to tender all of his Shares free of
proration pursuant to this Section must complete the box
captioned "Odd Lots" on the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery.
The Company also reserves the right, but will not be
obligated to, purchase all Shares validly tendered by any
stockholder who tendered all Shares beneficially owned at or
below the Purchase Price and who, as a result of proration, would
then beneficially own an aggregate of fewer than 100 Shares. If
the Company exercises this right, it will increase the number of
Shares that it is offering to purchase in the Offer by the number
of Shares purchased through the exercise of such right.
3. PROCEDURE FOR TENDERING SHARES.
------------------------------
Proper Tender of Shares. To tender Shares validly pursuant
to the Offer, either (a) a properly completed and duly executed
Letter of Transmittal or photocopy thereof, together with any
required signature guarantees and any other documents required by
the Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) certificates for the Shares to be
tendered must be received by the Depositary at one of such
addresses or (ii) such Shares must be delivered pursuant to the
procedures for book-entry transfer described below (and a
confirmation of such delivery received by the Depositary), in
each case on or prior to the Expiration Date, or (b) the
tendering holder of Shares must comply with the guaranteed
delivery procedure described below.
IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF
TRANSMITTAL, IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, A
STOCKHOLDER MUST INDICATE IN THE SECTION CAPTIONED "PRICE (IN
DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON THE
LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $0.125) AT WHICH
SUCH SHARES ARE BEING TENDERED. Stockholders wishing to tender
Shares at more than one price must complete separate Letters of
Transmittal for each price at which such Shares are being
tendered. The same Shares cannot be tendered at more than one
price. FOR A TENDER OF SHARES TO BE VALID, A PRICE BOX, BUT ONLY
ONE PRICE BOX, ON EACH LETTER OF TRANSMITTAL MUST BE CHECKED.
Stockholders wishing to maximize the possibility that their
Shares will be purchased at the Purchase Price may check the box
on the Letter of Transmittal marked "Shares Tendered at Purchase
Price Determined by Dutch Auction." Checking this box may result
in a purchase of the Shares so tendered at the minimum price of
$6.00.
Book-Entry Transfer. The Depositary will establish an
account with respect to the Shares at The Depository Trust
Company and the Philadelphia Depository Trust Company
(collectively referred to as 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 the system of any Book-Entry
Transfer Facility may make delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the procedures of such
Book-Entry Transfer Facility. Although delivery of Shares may be
effected through book-entry transfer, a properly completed and
duly executed Letter of Transmittal or photocopy thereof,
together with any required signature guarantees and any other
required documents, must, in any case, be received by the
Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase on or prior to the Expiration Date, or the
tendering holder of Shares must comply with the guaranteed
delivery procedure described below. Delivery of the Letter of
Transmittal and any other required documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
Signature Guarantees. Except as otherwise provided below,
all signatures on a Letter of Transmittal must be guaranteed by a
firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc.,
or by a commercial bank, trust company or other financial institution
which is a participant in an approved Signature Guarantee Medallion
Program (each of the foregoing being referred to as an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed if
(a) the Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith and such holder has not
completed the box entitled "Special Payment Instructions" or the
box entitled "Special Delivery Instructions" in the Letter of
Transmittal or (b) such Shares are tendered for the account of an
Eligible Institution. See Instructions 1 and 6 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender
Shares pursuant to the Offer and cannot deliver certificates for
such Shares and all other required documents to the Depositary on
or prior to the Expiration Date or the procedure for book-entry
transfer cannot be complied with in a timely manner, such Shares
may nevertheless be tendered if all of the following conditions
are met:
(a) such tender is made by or through an Eligible
Institution;
(b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form
provided by the Company (with any required
signature guarantees) is received by the
Depositary as provided below on or prior to the
Expiration Date; and
(c) the certificates for such Shares (or a
confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities), together with a
properly completed and duly executed Letter of
Transmittal (or photocopy thereof) and any other
documents required by the Letter of Transmittal,
are received by the Depositary no later than 5:00
p.m., Eastern time, on the third trading day after
the date of execution of the Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand
or transmitted by facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible
Institution in the form set forth in such Notice.
The method of delivery of Shares and all other required
documents is at the option and risk of the tendering stockholder.
If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases
sufficient time should be allowed to assure timely delivery.
Federal Backup Withholding. To avoid federal income tax
backup withholding equal to 31% of the gross payments made
pursuant to the Offer, each stockholder must notify the
Depositary of such stockholder's correct taxpayer identification
number and provide certain other information by properly
completing the Substitute Form W-9 included in the Letter of
Transmittal. Foreign stockholders (as defined in Section 13) may
be required to submit a properly completed Form W-8, certifying
non-United States status, in order to avoid backup withholding.
In addition, foreign stockholders may be subject to 30% (or lower
treaty rate) withholding on gross payments received pursuant to
the Offer (as discussed in Section 13). For a discussion of
certain federal income tax consequences to tendering
stockholders, see Section 13. Each stockholder is urged to
consult with his or her own tax advisor.
Determination of Validity. All questions as to the Purchase
Price, the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole
discretion, and its determination shall be final and binding.
The Company reserves the absolute right to reject any or all
tenders of Shares that it determines are not in proper form or
the acceptance for payment of or payment for Shares that may, in
the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. None of the Company, the
Dealer Manager, the Depositary, or any other person will be under
any duty to give notice of any defect or irregularity in tenders,
nor shall any of them incur any liability for failure to give any
such notice.
Rule 14e-4. It is a violation of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for a person to tender Shares for his or her own
account unless, at the time of tender and at the end of the
proration period or period during which Shares are accepted by
lot (including any extensions thereof), the person so tendering
(i) has a net long position equal to or greater than the amount
of (x) Shares tendered or (y) other securities immediately
convertible into, exercisable, or exchangeable for the amount of
Shares tendered and will acquire such Shares for tender by
conversion, exercise or exchange of such other securities and
(ii) will cause such Shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on
behalf of another person. The tender of Shares pursuant to any
one of the procedures described above will constitute the
tendering stockholder's representation and warranty that (i) such
stockholder has a net long position in the Shares being tendered
within the meaning of Rule 14e-4 promulgated under the Exchange
Act, and (ii) the tender of such Shares complies with Rule 14e-4.
The Company's acceptance for payment of Shares tendered pursuant
to the Offer will constitute a binding agreement between the
tendering stockholder and the Company upon the terms and subject
to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
-----------------
Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter,
such tenders are irrevocable, except that they may be withdrawn
after Tuesday, October 8, 1996, unless theretofore accepted for
payment as provided in this Offer to Purchase. If the Company
extends the period of time during which the Offer is open, is
delayed in accepting for payment or paying for Shares or is
unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Company's
rights under the Offer, the Depositary may, on behalf of the
Company, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in this Section 4, subject
to Rule 13e-4(f)(5) under the Exchange Act, which provides that
the issuer making the tender offer shall either pay the
consideration offered, or return the tendered securities promptly
after the termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of
its addresses set forth on the back cover of this Offer to
Purchase and must specify the name of the person who tendered the
Shares to be withdrawn and the number of Shares to be withdrawn.
If the Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution) must be submitted
prior to the release of such Shares. In addition, such notice
must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different
from that of the tendering stockholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be
withdrawn or, in the case of Shares tendered by book-entry
transfer, the name and number of the account at one of the
Book-Entry Transfer Facilities to be credited with the withdrawn
Shares. Withdrawals may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of
the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 at any
time prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the
Company, in its sole discretion, which determination shall be
final and binding. None of the Company, the Dealer Manager, the
Depositary or any other person will be under any duty to give
notification of any defect or irregularity in any notice of
withdrawal or incur any liability for failure to give any such
notification.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE
---------------------------------------------------------
PRICE.
-----
Upon the terms and subject to the conditions of the Offer
and as promptly as practicable after the Expiration Date, the
Company will determine the Purchase Price, taking into account
the number of Shares tendered and the prices specified by
tendering stockholders, announce the Purchase Price, and will
(subject to the proration and conditional tender provisions of
the Offer) accept for payment and pay for Shares validly tendered
at or below the Purchase Price. Thereafter, payment for all
Shares validly tendered on or prior to the Expiration Date and
accepted for payment pursuant to the Offer will be made by the
Depositary by check as promptly as practicable. In all cases,
payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of
certificates for Shares (or of a confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities), a properly completed and
duly executed Letter of Transmittal or photocopy thereof, and any
other required documents.
For purposes of the Offer, the Company will be deemed to
have accepted for payment (and thereby purchased) Shares that are
validly tendered and not withdrawn as, if and when it gives oral
or written notice to the Depositary of its acceptance for payment
of such Shares. The Company will pay for Shares that it has
purchased pursuant to the Offer by depositing the Purchase Price
therefor with the Depositary. The Depositary will act as agent
for tendering stockholders for the purpose of receiving payment
from the Company and transmitting payment to tendering
stockholders. Under no circumstances will interest be paid on
amounts to be paid to tendering stockholders, regardless of any
delay in making such payment.
Certificates for all Shares not purchased will be returned
(or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to an account maintained with a
Book-Entry Transfer Facility) as promptly as practicable without
expense to the tendering stockholder.
Payment for Shares may be delayed in the event of difficulty
in determining the number of Shares properly tendered or if
proration is required. See Section 1. In addition, if certain
events occur, the Company may not be obligated to purchase Shares
pursuant to the Offer. See Section 7.
The Company will pay or cause to be paid any stock transfer
taxes with respect to the sale and transfer of any Shares to it
or its order pursuant to the Offer. If, however, payment of the
Purchase Price is to be made to, or Shares not tendered or not
purchased are to be registered in the name of, any person other
than the registered holder, or if tendered Shares are registered
in the name of any person other than the person signing the
Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder, such other person or
otherwise) payable on account of the transfer to such person will
be deducted from the Purchase Price unless satisfactory evidence
of the payment of such taxes, or exemption therefrom, is
submitted. See Instruction 7 of the Letter of Transmittal.
6. CONDITIONAL TENDER OF SHARES.
----------------------------
Under certain circumstances and subject to the exceptions
set forth in Section 1, the Company may prorate the number of
Shares purchased pursuant to the Offer. As discussed in Section
13, the number of Shares to be purchased from a particular
stockholder might affect the tax treatment of such purchase to
such stockholder and such stockholder's decision whether to
tender. Each stockholder is urged to consult with his or her own
tax advisor. Accordingly, a stockholder may tender Shares
subject to the condition that a specified minimum number of such
holder's Shares tendered pursuant to a Letter of Transmittal or
Notice of Guaranteed Delivery, must be purchased if any such
Shares so tendered are purchased, and any stockholder desiring to
make such a conditional tender must so indicate in the box
captioned "Conditional Tender" in such Letter of Transmittal and,
if applicable, the Notice of Guaranteed Delivery.
Any tendering stockholder wishing to make a conditional
tender must calculate and appropriately indicate such minimum
number of Shares. If the effect of accepting tenders on a pro
rata basis would be to reduce the number of Shares to be
purchased from any stockholder below the minimum number so
specified, such tender will automatically be regarded as
withdrawn (except as provided in the next paragraph). All Shares
tendered by such a stockholder pursuant to a Letter of
Transmittal or Notice of Guaranteed Delivery will be returned as
promptly as practicable thereafter.
If conditional tenders would otherwise be so regarded as
withdrawn and would cause the total number of Shares to be
purchased to fall below 1,000,000, then, to the extent feasible,
the Company will select enough of such conditional tenders that
would otherwise have been so withdrawn to permit the Company to
purchase 1,000,000 Shares. In selecting among such conditional
tenders, the Company will select by lot and will limit its
purchase in each case to the designated minimum number of Shares
to be purchased.
7. CERTAIN CONDITIONS OF THE OFFER.
-------------------------------
Notwithstanding any other provisions of the Offer, the
Company will not be required to accept for payment or pay for any
Shares tendered, and may terminate or amend the Offer or may
postpone (subject to the requirements of the Exchange Act for
prompt payment for or return of Shares) the acceptance for
payment of, or the purchase of and payment for, Shares tendered,
if at any time on or after August 9, 1996 (the "Determination
Date"), and before the time of payment for any such Shares
(whether any Shares have theretofore been accepted for payment,
purchased or paid for pursuant to the Offer) any of the following
events shall have occurred (or shall have been determined by the
Company in its sole judgment to have occurred) regardless of the
circumstances giving rise thereto (including any action or
omission to act by the Company):
(a) there shall have been threatened, instituted or
pending any action or proceeding by any government
or governmental, regulatory or administrative
agency or authority or tribunal or any other
person, domestic or foreign, or before any court,
authority, agency or tribunal that (i) challenges
the acquisition of Shares pursuant to the Offer or
otherwise in any manner relates to or affects the
Offer, or (ii) in the sole judgment of the
Company, could materially and adversely affect the
business, condition (financial or other), income,
operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated
future conduct of the business of the Company or
any of its subsidiaries or materially impair the
contemplated benefits of the Offer to the Company;
(b) there shall have been any action threatened,
pending or taken, or approval withheld, withdrawn
or abrogated or any statute, rule, regulation,
judgment, order or injunction threatened,
proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to
the Offer or to the Company or any of its
subsidiaries, by any legislative body, court,
authority, agency or tribunal which, in the
Company's reasonable judgment, would or might
directly or indirectly (i) make the acceptance for
payment of, or payment for, some or all of the
Shares illegal or otherwise restrict or prohibit
consummation of the Offer, or (ii) materially
affect the business, condition (financial or
other), income, operations or prospects of the
Company or any of its subsidiaries or otherwise
materially impair in any way the contemplated
future conduct of the business of the Company or
any of its subsidiaries;
(c) it shall have been publicly disclosed or the
Company shall have learned that (i) any person or
"group" (within the meaning of Section 13(d)(3) of
the Exchange Act) has acquired or proposes to
acquire beneficial ownership of more than 5% of
the outstanding Shares whether through the
acquisition of stock, the formation of a group,
the grant of any option or right, or otherwise
(other than as disclosed in a Schedule 13D or 13G
(or an amendment thereto) on file with the
Securities and Exchange Commission (the
"Commission") on the Determination Date), (ii) any
such person or group that on or prior to the
Determination Date, had filed such a Schedule with
the Commission thereafter shall have acquired or
shall propose to acquire whether through the
acquisition of stock, the formation of a group,
the grant of any option or right, or otherwise,
beneficial ownership of additional Shares
representing 2% or more of the outstanding Shares,
(iii) any new group shall have been formed which
beneficially owns more than 5% of the outstanding
Shares, or (iv) any person, entity or group shall
have filed a Notification and Report Form under
the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 or made a public announcement reflecting
an intent to acquire the Company or any or its
subsidiaries or any of their respective assets or
securities;
(d) there shall have occurred (i) any general
suspension of trading in, or limitation on prices
for, securities on any national securities
exchange or in the over-the-counter market, (ii)
any significant decline in the market price of the
Shares or in the general level of market prices of
equity securities in the United States or abroad,
(iii) any change in the general political, market,
economic or financial condition in the United
States or abroad that could have a material
adverse effect on the Company's business,
condition (financial or other), income,
operations, prospects or ability to obtain
financing generally or the trading in the Shares,
(iv) the declaration of a banking moratorium or
any suspension of payments in respect of banks in
the United States or any limitation on, or any
event which, in the Company's reasonable judgment,
might affect the extension of credit by lending
institutions in the United States, (v) the
commencement of a war, armed hostilities or other
international or national crisis directly or
indirectly involving the United States or (vi) in
the case of any of the foregoing existing at the
time of the commencement of the Offer, in the
Company's reasonable judgment, a material
acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or
all of the Shares (other than the Offer), or a
merger, acquisition or other business combination
proposal for the Company or any subsidiary, shall
have been proposed, announced or made by a person
other than the Company;
(f) there shall have occurred any event or events that
have resulted in, or may in the reasonable
judgment of the Company result in, an actual or
threatened change in the business, condition
(financial or other), income, operations, stock
ownership or prospects of the Company or any of
its subsidiaries, or materially impair the
contemplated benefits of the Offer to the Company;
or
(g) (i) Moody's Investors Service, Inc. or Standard &
Poor's Corporation shall have downgraded or
withdrawn the rating accorded any securities of
the Company, or (ii) Moody's Investors Service,
Inc. or Standard & Poor's Corporation shall have
publicly announced that it has under surveillance
or review, with possible negative implications,
its rating of any securities of the Company; and,
in the sole judgment of the Company, such event or
events make it undesirable or inadvisable to
proceed with the Offer or with such acceptance for
payment or payment.
Any of the foregoing conditions may be waived by the
Company, in whole or in part, at any time and from time to time
in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time. Any determination by the Company concerning the events
described above will be final and binding on all parties.
8. PRICE RANGE OF SHARES; DIVIDENDS.
--------------------------------
The following table sets forth the high and low closing
sales prices of the Shares on the Nasdaq National Market.
Fiscal Quarters HIGH LOW
1994:
1st Quarter $9.13 $7.00
2nd Quarter 8.25 7.00
3rd Quarter 7.50 5.50
4th Quarter 5.75 4.50
1995:
1st Quarter 5.25 4.25
2nd Quarter 4.50 4.00
3rd Quarter 5.25 4.00
4th Quarter 4.75 3.63
1996:
1st Quarter 5.13 2.64
2nd Quarter 5.50 4.75
3rd Quarter 6.75 4.87
(through August 9, 1996)
On August 9, 1996, the last trading day prior to the
commencement of the Offer, the last reported sale price of the
Shares on the Nasdaq National Market was $6.25 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES.
The Company has not paid cash dividends to its stockholders
and has no current intention to do so. Shares tendered and
purchased by the Company will not be entitled to any dividends in
respect of any dividends that may be declared in the future.
9. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
--------------------------------------------------
The Company's management and Board of Directors desire to
enhance stockholder value and have determined that Share
repurchases funded by bank borrowings would advance such
objectives and be in the best interests of the Company and its
stockholders. The Company expects future cash flow from
operations and available borrowings will be sufficient to enable
the Company to meet the anticipated future needs of the Company's
business and repay the borrowings related to the Company's
repurchases of Shares in this Offer. In addition, the Company
expects to have a higher percentage return on stockholders equity
over the long-term after the repurchases of Shares in this Offer.
The Company's operations have been negatively impacted by
restructuring charges for sporting goods in recent years.
However, the Company believes that future operations will be more
profitable than in the recent past and expects to experience more
stable cash flow.
The Offer is designed to afford stockholders considering the
sale of their shares an opportunity to sell a significant
portion, or perhaps all of their shares to the Company for a
higher price than has been recently available in the open market,
and, without the usual transaction costs associated with market
sales. In addition, the Offer will allow qualified odd lot
holders whose shares are purchased pursuant to the Offer an
avenue to avoid payment of brokerage commissions as well as any
applicable odd lot discounts chargeable on a sale of shares that
otherwise could apply to open market transactions.
The Offer also allows stockholders to sell a portion of
their shares while retaining a continuous equity interest in the
Company, if they so desire. Stockholders whose shares are not
tendered or purchased in the Offer will obtain a proportionate
increase in their ownership interest in the Company and thus in
the Company's future earnings and assets. This is a result of
the acquisition of shares by the Company pursuant to the Offer
and the corresponding reduction in the number of outstanding
shares.
If fewer than 1,000,000 Shares are purchased pursuant to the
Offer, the Company may repurchase the remainder of such Shares on
the open market, in privately negotiated transactions or
otherwise. In the future, the Company also may determine to
purchase additional Shares on the open market, in privately
negotiated transactions, through one or more tender offers or
otherwise. Any such purchases may be on the same terms or on
terms which are more or less favorable to stockholders than the
terms of the Offer. However, Rule 13e-4 under the Exchange Act
prohibits the Company and its affiliates from purchasing any
Shares, other than pursuant to the Offer, until at least ten
business days after the Expiration Date. Any future purchases of
Shares by the Company would depend on many factors, including the
market price of the Shares, the Company's business and financial
position, and general economic and market conditions.
Shares that the Company acquires pursuant to the Offer will
become authorized but unissued Shares and will be available for
issuance by the Company without further stockholder action
(except as may be required by applicable law or the rules of the
securities exchanges on which the Shares are listed). Such
Shares could be issued without stockholder approval for, among
other things, acquisitions, the raising of additional capital for
use in the Company's business, stock dividends or in connection
with employee stock, stock option and other plans, or a
combination thereof. The Company has no current plans for the
Shares it may acquire pursuant to the Offer or any other
authorized but unissued Shares.
As of August 9, 1996, the Company had issued and outstanding
4,111,889 Shares and had reserved for issuance upon exercise of
outstanding stock options and warrants 459,477 Shares. The
1,000,000 Shares that the Company is offering to purchase
represent approximately 24.3% of the Shares then outstanding. As
of August, 1996, all executive officers of the Company as a group
owned beneficially an aggregate of 682,884 Shares (including an
aggregate of 47,150 Shares that may be acquired pursuant to the
exercise of outstanding stock options. The Company has been
advised that no executive officer of the Company intends to
tender Shares pursuant to the Offer. If the Company purchases
1,000,000 Shares pursuant to the Offer and no executive officer
of the Company tenders Shares, the percentage of outstanding
Shares owned beneficially by the Company's executive officers as
a group would be approximately 19.1% of the Shares then
outstanding (including for this purpose, Shares that may be
acquired by such executive officers pursuant to the exercise of
outstanding stock options).
None of the Company's non-management directors have informed
the Company as to whether or not such director may tender shares
in this Offer, and one or more such director may tender all or
part of his shares in this Offer. Such persons owned
beneficially an aggregate of 505,936 Shares as of the date
hereof.
Except as disclosed in Section 10 hereof, the Company has no
plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Company
or the disposition of securities of the Company; (b) an
extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of
its subsidiaries; (c) a sale or transfer of a material amount of
assets of the Company or any of its subsidiaries; (d) any change
in the present Board of Directors or management of the Company;
(e) any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company; (f) any other
material change in the Company's corporate structure or business;
(g) any change in the Company's Articles of Incorporation or
Bylaws or any actions which may impede the acquisition of control
of the Company by any person; (h) a class of equity security of
the Company being delisted from a national securities exchange;
(i) a class of equity security of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of
the Exchange Act; or (j) the suspension of the Company's
obligation to file reports pursuant to Section 15(d) of the
Exchange Act.
The Company's purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly
and is likely to reduce the number of holders of Shares.
Nonetheless, the Company anticipates that there will still be a
sufficient number of Shares outstanding and publicly traded
following the Offer to ensure a continued trading market in the
Shares. Based on the published guidelines of the Nasdaq National
Market, the Company does not believe that its purchase of Shares
pursuant to the Offer will cause its remaining Shares to be
delisted from such exchange.
The Shares are currently "margin securities" under the rules
of the Federal Reserve Board. This has the effect, among other
things, of allowing brokers to extend credit on the collateral of
the Shares. The Company believes that, following the repurchase
of Shares pursuant to the Offer, the Shares will continue to be
"margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act, which
requires, among other things, that the Company furnish certain
information to its stockholders and the Commission and comply
with the Commission's proxy rules in connection with meetings of
the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the
Shares becoming eligible for deregistration under the Exchange
Act.
Stockholders who determine not to accept the Offer or whose
Shares are not purchased in the Offer will realize an increase in
their percentage ownership interest in the Company and thus, in
the Company's future earnings and assets. Because of the smaller
number of Shares outstanding after consummation of the Offer,
increases or decreases in net earnings will result in
proportionately greater increases or decreases in earnings per
Share. See Section 10.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE
OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO EXECUTIVE OFFICER OF THE COMPANY INTENDS TO
TENDER SHARES PURSUANT TO THE OFFER.
10. CERTAIN INFORMATION CONCERNING THE COMPANY.
------------------------------------------
The Company is an Indiana corporation with its principal
executive offices located at 817 Maxwell Avenue, P.O. Box 889,
Evansville, Indiana 47706-0889. The Company's telephone number
is (812) 467-1200.
Escalade is a diversified company engaged in the manufacture
and sale of sporting goods and office and graphic arts products.
Escalade and its predecessors have produced sporting goods for
over 65 years and have produced office machines for over 35
years.
Escalade's sporting goods business is conducted exclusively
through Escalade Sports. The Company manufactures and sells a
variety of sporting goods such as table tennis tables and
accessories, archery equipment, home pool tables and accessories,
combination bumper pool and card tables, game tables, basketball
backboards, goals and poles, darts, dart cabinets, home fitness
machines, weight benches, cast iron weight sets, and other home
fitness accessories. The Company currently manufactures sporting
goods in Evansville, Indiana, Compton, California and Tijuana,
Mexico. The Company's office and graphic arts products include
paper trimmers, paper folding machines, paper drills, collators,
decollators, bursting machines, letter openers, automated paper
joggers, checksigners, stamp affixers, paper shredders, bindery
carts, plate makers, sinks, light tables, cameras and related
accessories. Escalade's office and graphic arts products
business is conducted exclusively through Martin Yale. The
Company currently manufactures office and graphic arts products
in Wabash, Indiana.
Summary Historical Consolidated Financial Information
The summary historical consolidated financial information
for fiscal years 1994 and 1995 has been derived from the audited
consolidated financial statements of the Company contained in the
Company's Annual Reports on Form 10-K for the years ended
December 31, 1994 and December 30, 1995. This information should
be read in conjunction with and is qualified in its entirety by
reference to such audited statements and the related notes
thereto.
The summary historical consolidated financial information
for the six month periods ended July 15, 1995 and July 13, 1996
has not been audited but in the opinion of management contains
all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation. This information was derived
from the Company's Quarterly Reports on Form 10-Q for those
periods and should be read in conjunction with those statements
and the related notes contained therein.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
SIX MONTHS ENDED
JULY 13, 1996 JULY 15, 1995
UNAUDITED UNAUDITED
INCOME STATEMENT DATA
Net Sales
Sporting Goods $ 24,657 $ 28,394
Office & Graphic Arts Products 10,298 8,876
Total Net Sales 34,955 37,270
Net Income (loss) $ 920 $ (1,459)
Weighted Average Shares 4,122 4,133
PER SHARE DATA
Net Income (loss) Per Share $ .22 $ (.35)
Book Value Per Share 5.87 5.19
Ratio of Earnings to Fixed Charges(1) 3.33 ---
BALANCE SHEET DATA
Working Capital $ 15,598 $ 14,927
Total Assets 51,249 59,084
Short-term Debt 10,683 20,327
Long-term Debt 3,340 7,198
Total Stockholder's Equity $ 24,147 $ 21,430
YEAR ENDED
DECEMBER 30, 1995 DECEMBER 31, 1994
AUDITED AUDITED
INCOME STATEMENT DATA
Net Sales
Sporting Goods $ 73,858 $ 85,318
Office & Graphic Arts Products 17,321 17,276
Total Net Sales 91,179 102,594
Net Income (loss) $ 448 $ (2,403)
Weighted Average Shares 4,134 4,129
PER SHARE DATA
Net Income (loss) Per Share $ .11 $ (.58)
Book Value Per Share 5.65 5.54
Ratio of Earnings to Fixed Charges(1) 1.34 ---
BALANCE SHEET DATA
Working Capital $ 17,069 $ 16,837
Total Assets 57,767 75,883
Short-term Debt 16,732 31,215
Long-term Debt 6,266 9,148
Total Stockholder's Equity $ 23,338 $ 22,889
(1) For purposes of computing the ratio of earnings to fixed charges,
earnings are defined as the sum of pre-tax income plus fixed charges.
Fixed charges consist of all interest expense, one-third of rent expense
(which approximates the interest component of such expense) and
amortization of debt expense. There is no ratio for the year ended
December 31, 1994 or six months ended July 15, 1995 because there were
no earnings. The fixed charges for year ended December 31, 1994 were
$2,339,000 and for six months ended July 15, 1995 were $1,359,000.
Summary Unaudited Pro Forma Consolidated Financial Information
The summary unaudited pro forma consolidated financial
information gives effect to the purchase of shares pursuant to
the Offer as if such purchase had occurred at the dates indicated
based on certain assumptions. This information should be read in
conjunction with the summary historical consolidated financial
information, Form 10-K, Form 10-Q and related notes referred to
earlier. These estimated financial effects of the repurchase are
not necessarily indicative of either the Company's financial
position or the results of its operations, which would actually
have been obtained, had the purchase of shares pursuant to the
Offer and related debt assumption been completed at the date
indicated, or, be obtained in the future. The summary unaudited
pro forma consolidated financial information has been included
herein as required by the rules of the Commission and is for
comparative purposes only.
Certain statements made below relating to plans, conditions,
objectives and economic performance go beyond historical
information and may provide an indication of future results. To
that extent, they are forward-looking statements within the
meaning of Section 21E of the Exchange Act, and each is subject
to factors that could cause actual results to differ from those
in the forward-looking statement.
<TABLE>
<CAPTION>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
SIX MONTHS ENDED
JULY 13, 1996
ASSUMED ASSUMED
HISTORICAL $6 PER SHARE $10 PER SHARE
UNAUDITED PURCHASE PRICE PURCHASE PRICE
------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting Goods $24,657 $24,657 $24,657
Office & Graphic Arts Products 10,298 10,298 10,298
Total Net Sales 34,955 34,955 34,955
Net Income $ 920 $ 772 $ 672
Weighted Average Shares 4,122 3,122 3,122
PER SHARE DATA
Net Income Per Share $ .22 $ .25 $ .22
Book Value Per Share 5.87 5.83 4.55
Ratio of Earnings to Fixed Charges 3.33 2.73 2.47
BALANCE SHEET DATA
Working Capital $15,598 $13,598 $ 13,598
Total Assets 51,249 51,249 51,249
Short-term Debt 10,683 12,683 12,683
Long-term Debt 3,340 7,340 11,340
Total Stockholders' Equity $24,147 $18,147 $ 14,147
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, 1995
ASSUMED ASSUMED
HISTORICAL $6 PER SHARE $10 PER SHARE
AUDITED PURCHASE PRICE PURCHASE PRICE
----------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting Goods $73,858 $73,858 $73,858
Office & Graphic Arts Products 17,321 17,321 17,321
Total Net Sales 91,179 91,179 91,179
Net Income $ 448 $ 196 $ 10
Weighted Average Shares 4,134 3,134 3,134
PER SHARE DATA
Net Income Per Share $ .11 $ .06 $ -0-
Book Value Per Share 5.65 5.53 4.26
Ratio of Earnings to Fixed Charges 1.34 1.29 1.26
BALANCE SHEET DATA
Working Capital $17,069 $15,069 $15,069
Total Assets 57,767 57,767 57,767
Short-term Debt 16,732 18,732 18,732
Long-term Debt 6,266 10,266 14,266
Total Stockholders' Equity $23,338 $17,338 $13,338
See accompanying notes to Summary Unaudited Pro Forma Consolidated Financial Information.
</TABLE>
Notes to Summary Unaudited Pro Forma Consolidated Financial
Information
The summary unaudited pro forma consolidated financial
information assumes that the Offer and the borrowings connected
therewith to purchase 1,000,000 shares at $6.00 or $10.00, are
consummated on the same day. The purchase price of either
$6,000,000 or $10,000,000 will be financed from borrowings.
The operating data for the six month period ended July 13,
1996 and the year ended December 30, 1995 assumes that the
repurchase of shares and related financing occurred as of
December 31, 1995 and January 1, 1995, respectively.
The balance sheet data as of July 13, 1996 and December 30,
1995 assume that the repurchase of shares by the company pursuant
to the Offer and related financings had occurred as of the
respective balance sheet dates.
Pro forma adjustments were made for interest expense and
bank fees. The decrease in net income after tax effect of these
pro forma adjustments was $148,000 and $248,000 for the six month
period ended July 13, 1996 at $6.00 and $10.00 respectively and
$252,000 and $438,000 for the year ended December 30, 1995 at
$6.00 and $10.00 respectively.
11. SOURCE AND AMOUNT OF FUNDS.
--------------------------
Assuming that the Company purchases 1,000,000 Shares
pursuant to the Offer at a price of $10.00 per Share, the total
amount required by the Company to purchase such Shares will be
$10,000,000, exclusive of fees and other expenses. It is
anticipated that the Company will fund the purchase of Shares
pursuant to the Offer and the payment of related fees and
expenses by borrowings under a $13,900,000 term loan facility
(the "Term Facility") pursuant to a Commitment Letter dated July
24, 1996 (the "Commitment Letter") between Bank One,
Indianapolis, N.A. and the Company.
The Term Facility will have a term of five years. The Term
Facility will be secured by a pledge of all personal property of
the Company and its subsidiaries, including all accounts
receivable, inventories, machinery and equipment, general
intangibles and the stock of the subsidiaries.
The Company may elect that all or a portion of the
borrowings under the Term Facility bear interest at a rate per
annum equal to the rate of interest publicly announced by Bank
One as its prime rate, or (ii) the London Interbank Offered Rate;
plus (x) in the case of the prime rate, a spread of up to 25
basis points depending upon the Company's funded debt to EBITDA
ratio, or (y) in the case of the London Interbank Offered Rate, a
spread of between 125 to 225 basis points depending upon the
Company's funded debt to EBITDA ratio.
Each of the subsidiaries of the Company will guarantee the
Term Facility. The Commitment Letter provides that the
availability of the Term Facility will be subject to the
satisfaction of certain customary conditions, including but not
limited to the execution of definitive loan documentation, the
accuracy of representations and warranties and the absence of any
default. The Loan Agreement for the Term Facility is anticipated
to provide for representations, warranties and covenants of the
Company customary for credit facilities of this kind. The
covenants are expected to include (i) financial covenants, (ii)
restrictions on indebtedness, mergers, consolidations,
liquidations and dissolutions, sales of assets, dividends and
other payments in respect of capital stock, capital expenditures
and changes in lines of business and (iii) restrictions on liens
and pledging of assets. The Commitment Letter provides that
events of default, subject to grace periods and baskets where
applicable, will include, among other things, (i) failure to make
payments when due, (ii) violation of covenants, (iii) inaccuracy
of representations and warranties, (iv) cross default on material
debt, (v) material judgments and (vi) bankruptcy.
The Company currently anticipates that borrowings under the
Term Facility will be repaid out of cash generated from the
Company's operations.
The preceding summary of the Commitment Letter is qualified
in its entirety by reference to the text of the Commitment
Letter, which is filed as an exhibit to the Issuer Tender Offer
Statement on Schedule 13E-4 (the "Schedule 13E-4") of which this
Offer to Purchase forms a part. A copy of the Schedule 13E-4 may
be obtained from the Commission in the manner provided in Section
16.
12. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES.
---------------------------------------------
Based upon the Company's records and upon information
provided to the Company by its directors and executive officers,
neither the Company nor, to the Company's knowledge, any of its
associates, subsidiaries, directors, executive officers or any
associate of any such director or executive officer, or any
director or executive officer of its subsidiaries, has engaged in
any transactions involving the Shares during the 40 business days
preceding the date hereof. Except for outstanding options to
purchase Shares, neither the Company nor, to the Company's
knowledge, any of its directors or executive officers is a party
to any contract, arrangement, understanding or relationship
relating directly or indirectly to the Offer with any other
person with respect to the Shares.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
---------------------------------------
In General. The following summary is a general discussion
of certain United States federal income tax consequences relating
to the Offer. This summary does not discuss any aspects of
state, local, foreign or other tax laws. The summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), and
existing final, temporary and proposed Treasury Regulations,
Revenue Rulings and judicial decisions, all of which are subject
to prospective and retroactive changes. The summary deals only
with Shares held as capital assets within the meaning of Section
1221 of the Code and does not address tax consequences that may
be relevant to investors in special tax situations, such as
certain financial institutions, tax-exempt organizations,
insurance companies, dealers in securities or currencies,
stockholders who have acquired their Shares upon the exercise of
options or otherwise as compensation, or stockholders holding the
Shares as part of a conversion transaction, as part of a hedge or
hedging transaction, or as a position in a straddle for tax
purposes. The Company will not seek a ruling from the Internal
Revenue Service (the "IRS") with regard to the tax matters
discussed below. Accordingly, each stockholder should consult
its own tax advisor with regard to the Offer and the application
of United States federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdiction, to its
particular situation.
Characterization of the Sale. A sale of Shares by a
stockholder of the Company pursuant to the Offer will be a
taxable transaction for United States federal income tax purposes
and may also be a taxable transaction under applicable state,
local and foreign tax laws. The United States federal income tax
consequences to a stockholder may vary depending upon the
stockholder's particular facts and circumstances. Under Section
302 of the Code, a sale of Shares by a stockholder to the Company
pursuant to the Offer will be treated as a "sale or exchange" of
such Shares for United States federal income tax purposes (rather
than as a distribution by the Company with respect to the Shares
held by the tendering stockholder) if the receipt of cash upon
such sale (i) is "substantially disproportionate" with respect to
the stockholder, (ii) results in a "complete termination" of the
stockholder's interest in the Company, or (iii) is "not
essentially equivalent to a dividend" with respect to the
stockholder. These tests (the "Section 302 tests") are explained
more fully below.
If any of the Section 302 tests is satisfied, and the sale
of the Shares is therefore treated as a "sale or exchange" of
such Shares for United States federal income tax purposes, the
tendering stockholder will recognize capital gain or loss equal
to the difference between the amount of cash received by the
stockholder pursuant to the Offer and the stockholder's tax basis
in the Shares sold pursuant to the Offer. Any such gain or loss
will be long-term capital gain or loss if the Shares have been
held for more than one year.
If none of the Section 302 tests is satisfied and the
Company has sufficient current and accumulated earnings and
profits, the tendering stockholder will be treated as having
received a dividend includible in gross income in an amount equal
to the entire amount of cash received by the stockholder pursuant
to the Offer (without reduction for the tax basis of the Shares
sold pursuant to the Offer), no loss will be recognized, and
(subject to reduction as described below for corporate
stockholders eligible for the dividends-received deduction) the
tendering stockholder's basis in the Shares sold pursuant to the
Offer will be added to such stockholder's basis in its remaining
Shares, if any. No assurance can be given that any of the
Section 302 tests will be satisfied as to any particular
stockholder, and thus no assurance can be given that any
particular stockholder will not be treated as having received a
dividend taxable as ordinary income. If the sale of Shares is
not treated as a sale or exchange for federal income tax
purposes, any cash received for Shares pursuant to the Offer in
excess of the Company's earnings and profits will be treated,
first, as a nontaxable return of capital to the extent of the
stockholder's basis for such stockholder's Shares, and,
thereafter, as capital gain, to the extent it exceeds such basis.
Constructive Ownership of Stock. In determining whether any
of the Section 302 tests is satisfied, stockholders must take
into account not only the Shares which are actually owned by the
stockholder, but also Shares which are constructively owned by
the stockholder within the meaning of Section 318 of the Code.
Under Section 318 of the Code, a stockholder may constructively
own Shares actually owned, and in some cases constructively
owned, by certain related individuals or entities in which the
stockholder has an interest, or, in the case of stockholders that
are entities, by certain individuals or entities that have an
interest in the stockholder, and Shares which the stockholder has
the right to acquire by exercise of an option or by conversion.
Contemporaneous dispositions or acquisitions of Shares by a
stockholder or related individuals or entities may be deemed to
be part of a single integrated transaction which will be taken
into account in determining whether any of the Section 302 tests
has been satisfied. EACH STOCKHOLDER SHOULD BE AWARE THAT
BECAUSE PRORATION MAY OCCUR IN THE OFFER, EVEN IF ALL THE SHARES
ACTUALLY AND CONSTRUCTIVELY OWNED BY A STOCKHOLDER ARE TENDERED
PURSUANT TO THE OFFER, FEWER THAN ALL OF SUCH SHARES MAY BE
PURCHASED BY THE COMPANY. THUS, PRORATION MAY AFFECT WHETHER A
SALE BY A STOCKHOLDER PURSUANT TO THE OFFER WILL MEET ANY OF THE
SECTION 302 TESTS. See Section 6 for information regarding each
stockholder's option to make a conditional tender of a minimum
number of Shares. A stockholder should consult its own tax
advisor regarding whether to make a conditional tender of a
minimum number of Shares, and the appropriate calculation
thereof.
Section 302 Tests. One of the following tests must be
satisfied in order for the sale of Shares pursuant to the Offer
to be treated as a sale or exchange for federal income tax
purposes.
a. Substantially Disproportionate Test. The receipt of
cash by a stockholder will be "substantially disproportionate" if
the percentage of the outstanding Shares actually and
constructively owned by the stockholder immediately following the
sale of Shares pursuant to the Offer (treating as not outstanding
all Shares purchased pursuant to the Offer) is less than 80% of
the percentage of the outstanding Shares actually and
constructively owned by such stockholder immediately before the
sale of Shares pursuant to the Offer (treating as outstanding all
Shares purchased pursuant to the Offer), and the stockholder owns
actually or constructively less than 50% of the total combined
voting power of all classes of stock entitled to vote immediately
after the sale of Shares. The IRS also takes the position that
options, including warrants, to purchase shares under certain
circumstances are to be taken into account for purposes of
meeting the "substantially disproportionate" test on a
shareholder by shareholder basis pursuant to the attribution
rules under section 318 of the Code. Stockholders should consult their
tax advisors with respect to the application of the
"substantially disproportionate" test to their particular
situation.
b. Complete Termination Test. The receipt of cash by a
stockholder will be a "complete termination" of the stockholder's
interest if either (i) all of the Shares actually and
constructively owned by the stockholder are sold pursuant to the
Offer, or (ii) all of the Shares actually owned by the
stockholder are sold pursuant to the Offer and, with respect to
the Shares constructively owned by the stockholder which are not
sold pursuant to the Offer, the stockholder is eligible to waive
(and effectively waives) constructive ownership of all such
Shares under procedures described in Section 302(c) of the Code
and the regulations thereunder which require that certain formal
steps be followed to be effective. Stockholders considering
making such a waiver should do so in consultation with their tax
advisors.
c. Not Essentially Equivalent to a Dividend Test. Even if
the receipt of cash by a stockholder fails to satisfy the
"substantially disproportionate" test or the "complete
termination" test, a stockholder may nevertheless satisfy the
"not essentially equivalent to a dividend" test if the
stockholder's sale of Shares pursuant to the Offer results in a
"meaningful reduction" in the stockholder's proportionate
interest in the Company. Whether the receipt of cash by a
stockholder will be "not essentially equivalent to a dividend"
will depend upon the stockholder's particular facts and
circumstances. The IRS has indicated in published rulings that
even a small reduction in the proportionate interest of a small
minority stockholder in a publicly held corporation who exercises
no control over corporate affairs may constitute such a
"meaningful reduction." The IRS held in Rev. Rul. 76-385,
1976-2 C.B. 92, that a reduction in the percentage ownership
interest of a stockholder in a publicly held corporation from
.0001118% to .0001081% (a reduction to 96.7% of the stockholder's
prior percentage ownership interest) would constitute a
"meaningful reduction." Stockholders expecting to rely on the
"not essentially equivalent to a dividend" test should consult
their own tax advisors as to its application in their particular
situation.
Corporate Stockholder Dividend Treatment. Under current
law, generally, if a sale of Shares by a corporate stockholder is
treated as a dividend, the corporate stockholder may be entitled
to claim a deduction equal to 70% of the dividend under Section
243 of the Code, subject to applicable limitations. Corporate
stockholders should consider the effect of Section 246(c) of the
Code, which disallows the 70% dividends-received deduction with
respect to stock that is held for 45 days or less. For this
purpose, the length of time a taxpayer is deemed to have held
stock may be reduced by periods during which the taxpayer's risk
of loss with respect to the stock is diminished by reason of the
existence of certain options or other transactions. Moreover,
under Section 246A of the Code, if a corporate stockholder has
incurred indebtedness directly attributable to an investment in
Shares, the 70% dividends-received deduction may be reduced by a
percentage generally computed based on the amount of such
indebtedness and the total adjusted tax basis in the Shares. In
addition, because it is expected that the redemption of Shares
will not be pro rata with respect to all stockholders, any amount
received by a corporate stockholder pursuant to the Offer that is
treated as a dividend will likely constitute an "extraordinary
dividend" under Section 1059 of the Code (except as may otherwise
be provided in regulations yet to be promulgated by the Treasury
Department). Accordingly, a corporate stockholder would be
required under Section 1059(a) of the Code to reduce its basis
(but not below zero) in its Shares by the non-taxed portion of
the extraordinary dividend (i.e., the portion of the dividend for
which a deduction is allowed), and, if such portion exceeds the
stockholder's tax basis for its Shares, to treat the excess as
gain from the sale of such Shares in the year in which a sale or
disposition of such Shares occurs. The basis reduction rules of
Section 1059 also generally apply to dividends which exceed a
threshold percentage of a stockholder's basis in its stock,
unless the stockholder has held its stock for more than two years
before the announcement date of such dividend. For purposes of
applying Section 1059, all dividends received by a stockholder
and having their ex-dividend dates within an 85-day period
(expanded to a 365-day period, in the case of dividends received
in such period that in the aggregate exceed 20% of the
stockholder's adjusted tax basis in the Shares) are aggregated.
Corporate stockholders should consult their own tax advisors as
to the application of Section 1059 of the Code to the Offer, and
to any dividends which may be paid with respect to the Shares, as
well as the effect of pending legislation discussed below.
Foreign Stockholders. The Company will withhold United
States federal income tax at a rate of 30% from the gross
proceeds paid pursuant to the Offer to a foreign stockholder or
his agent, unless the Company determines that a reduced rate of
withholding is applicable pursuant to a tax treaty or that an
exemption from withholding is applicable because such gross
proceeds are effectively connected with the conduct of a trade or
business by the foreign stockholder within the United States.
For this purpose, a foreign stockholder is any stockholder that
is not (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in
or under the laws of the United States or any political
subdivision thereof, or (iii) any estate or trust the income of
which is subject to United States federal income taxation
regardless of its source.
Generally, the determination of whether a reduced rate of
withholding is applicable is made by reference to a foreign
stockholder's address or to a properly completed Form 1001
furnished by the stockholder, and the determination of whether an
exemption from withholding is available on the grounds that gross
proceeds paid to a foreign stockholder are effectively connected
with a United States trade or business is made on the basis of a
properly completed Form 4224 furnished by the stockholder. The
Company will determine a foreign stockholder's eligibility for a
reduced rate of, or exemption from, withholding by reference to
the stockholder's address and any Forms 1001 or 4224 submitted to
the Company by a foreign stockholder unless facts and
circumstances indicate that such reliance is not warranted or
unless applicable law requires some other method for determining
whether a reduced rate of withholding is applicable. These forms
can be obtained from the Company.
A foreign stockholder with respect to whom tax has been
withheld may be eligible to obtain a refund of all or a portion
of the withheld tax if the stockholder satisfied one of the
Section 302 tests for capital gain treatment or is otherwise able
to establish that no tax or a reduced amount of tax was due.
Foreign stockholders are urged to consult their own tax advisors
regarding the application of United States federal income tax
withholding, including eligibility for a withholding tax
reduction or exemption and the refund procedure.
Backup Withholding. See Section 3 with respect to the
application of United States federal income tax backup
withholding.
Legislative Proposals With Potential Direct Effects.
(a) Capital Gains: The Revenue Reconciliation Act of 1995,
as passed by Congress and vetoed by the President, includes a
reduction in the tax on net long-term capital gains for both
individuals and corporations. Under the bill, individual
taxpayers would be permitted a deduction for 50% of net capital
gains (i.e., the excess of net long-term capital gains over net
short-term capital losses). In addition, the deduction for net
long-term capital losses could not exceed 50% of the excess of
net long-term capital losses over net short-term capital gains.
Corporations would be subject to a maximum tax rate of 28% on
their net capital gains. These reductions in the effective
capital gains tax rates generally would be effective for
transactions occurring after 1994. It is uncertain whether
capital gains relief ultimately will be adopted and, if adopted,
what form such relief will take or what the effective date will
be.
(b) Corporate dividends-received deduction: The Revenue
Reconciliation Act of 1995, as passed by Congress and vetoed by
the President, and the President's budget proposal would amend
Section 1059 of the Code to require corporate stockholders to
recognize gain immediately whenever the non-taxed portion of an
extraordinary dividend exceeds the basis of stock with respect to
which the dividend is received. Such legislation would also
cause any amount characterized as a dividend due to the Section
318 option attribution rules to be treated as an extraordinary
dividend under Section 1059 (with the legislation's gain
recognition rule applied by taking into account only the basis of
the stock redeemed). The legislation generally is proposed to be
effective for redemptions after May 3, 1995. It is uncertain
whether such proposals will be adopted and, if adopted, what form
such legislation will take.
In addition, the President's budget proposal (but not the
Revenue Reconciliation Act of 1995 as passed by Congress) would
generally reduce the dividends-received deduction under Section
243 of the Code from 70% to 50% and would require the 46-day
holding period of Section 246(c) of the Code to be satisfied over
a period immediately before and/or after the taxpayer becomes
entitled to receive the dividend. Both of these provisions would
apply to dividends paid after January 31, 1996.
The impact of pending and future budget and tax legislation
on the United States federal tax system, including possible
effects on taxation of the Offer, is uncertain. Stockholders are
advised to consult their own tax advisors as to these matters.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE
OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR
CIRCUMSTANCES OF THE TENDERING STOCKHOLDER. NO INFORMATION IS
PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE OFFER, THE
EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED ABOVE
AND THE EFFECT OF TAX LEGISLATIVE PROPOSALS.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
---------------------------------------------------
The Company expressly reserves the right, in its sole
discretion and at any time or from time to time, to extend the
period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary. There can be
no assurance, however, that the Company will exercise its right
to extend the Offer. During any such extension, all Shares
previously tendered will remain subject to the Offer, except to
the extent that such Shares may be withdrawn as set forth in
Section 4. The Company also expressly reserves the right, in its
sole discretion, (i) to terminate the Offer and not accept for
payment any Shares not theretofore accepted for payment or,
subject to Rule 13e-4(f)(5) under the Exchange Act, which
requires the Company either to pay the consideration offered or
to return the Shares tendered promptly after the termination or
withdrawal of the Offer, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 7 hereof
by giving oral or written notice of such termination to the
Depositary and making a public announcement thereof and (ii) at
any time or from time to time, to amend the Offer in any respect.
Amendments to the Offer may be effected by public announcement.
Without limiting the manner in which the Company may choose to
make public announcement of any termination or amendment, the
Company shall have no obligation (except as otherwise required by
applicable law) to publish, advertise or otherwise communicate
any such public announcement, other than by making a release to
the Dow Jones News Service, except in the case of an announcement
of an extension of the Offer, in which case the Company shall
have no obligation to publish, advertise or otherwise communicate
such announcement other than by issuing a notice of such
extension by press release or other public announcement, which
notice shall be issued no later than 9:00 a.m., Eastern time, on
the next business day after the previously scheduled Expiration
Date. Material changes to information previously provided to
holders of the Shares in this Offer or in documents furnished
subsequent thereto will be disseminated to holders of Shares in
compliance with Rule 13e-4(e)(2) promulgated under the Exchange
Act.
If the Company materially changes the terms of the Offer or
the information concerning the Offer, or if it waives a material
condition of the Offer, the Company will extend the Offer to the
extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the
Exchange Act. Those rules require that the minimum period during
which an offer must remain open following material changes in the
terms of the offer or information concerning the offer (other
than a change in price, change in dealer's soliciting fee or
change in percentage of securities sought) will depend on the
facts and circumstances, including the relative materiality of
such terms or information. In a published release, the
Commission has stated that in its view, an offer should remain
open for a minimum of five business days from the date that
notice of such a material change is first published, sent or
given. The Offer will continue or be extended for at least ten
business days from the time the Company publishes, sends or gives
to holders of Shares a notice that it will (a) increase or
decrease the price it will pay for Shares or the amount of the
dealer's soliciting fee or (b) increase (except for an increase
not exceeding 2% of the outstanding Shares) or decrease the
number of Shares it seeks.
15. FEES AND EXPENSES.
-----------------
The Company has retained Fifth Third Bank as Depositary and
NatCity Investments, Inc. will serve as Dealer Manager in
connection with the Offer. The Dealer Manager may request
brokers, dealers and other nominee stockholders to forward
materials relating to the Offer to beneficial owners. The Dealer
Manager will receive a fee for its services of $0.025 for each
Share tendered and accepted in this Offer. The Depositary will
receive reasonable and customary compensation for its services
and will also be reimbursed for certain out-of-pocket expenses.
The Company has agreed to indemnify the Dealer Manager and
Depositary against certain liabilities, including certain
liabilities under the federal securities laws, in connection with
the Offer. Neither the Dealer Manager nor the Depositary has
been retained to make solicitations or recommendations in
connection with the Offer.
Although the Company does not contemplate doing so, certain
directors or executive officers of the Company may, from time to
time, contact stockholders to provide them with information
regarding the Offer. Such directors and executive officers will
not make any recommendation to any stockholder as to whether to
tender all or any Shares and will not solicit the tender of any
Shares. The Company will not compensate any director or
executive officer for this service.
Other than as described above, the Company will not pay any
solicitation fees to any broker, dealer, bank, trust company or
other person for any Shares purchased in connection with the
Offer. The Company will reimburse such persons for customary
handling and mailing expenses incurred in connection with the
Offer.
The Company will pay all stock transfer taxes, if any,
payable on account of the acquisition of the Shares by the
Company pursuant to the Offer, except in certain circumstances
where special payment or delivery procedures are utilized
pursuant to Instruction 7 of the Letter of Transmittal.
16. MISCELLANEOUS.
-------------
The Company is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports, proxy
statements and other information with the Commission relating to
its business, financial condition and other matters. Certain
information as of particular dates concerning the Company's
directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the
Company is filed with the Commission. The Company has also filed
an Issuer Tender Offer Statement on Schedule 13E-4 with the
Commission, which includes certain additional information
relating to the Offer. Such reports, as well as such other
material, may be inspected and copies may be obtained at the
Commission's public reference facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York
10048, and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material
may be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's Public Reference Section at
450 Fifth Street, N.W., Washington, D.C. 20549. Such reports,
proxy statements and other information also should be available
for inspection at the office of the Nasdaq Stock Market at 7735 K
Street, N.W., Washington, D.C. 20006-1506. The Company's
Schedule 13E-4 may not be available at the Commission's regional
offices.
The Offer is being made to all holders of Shares. The
Company is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to a
valid state statute. If the Company becomes aware of any valid
state statute prohibiting the making of the Offer, the Company
will make a good faith effort to comply with such statute. If,
after such good faith effort, the Company cannot comply with such
statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, holders of Shares in such state.
In those jurisdictions whose securities, blue sky or other laws
require the Offer to be made on behalf of the Company by the
Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdictions.
ESCALADE, INCORPORATED
August 12, 1996
Facsimile copies of the Letter of Transmittal will be
accepted from Eligible Institutions. The Letter of Transmittal
and certificates for Shares should be sent or delivered by each
stockholder of the Company or his or her broker, dealer, bank or
trust company to the Depositary at one of its addresses set forth
below.
The Depositary:
FIFTH THIRD BANK
TO: Fifth Third Bank, Depositary
By Mail or Overnight Courier:
Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza, Mail Drop #1090F5
Cincinnati, Ohio 45263
By Hand: By Hand:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza, 15th Floor 77 Water Street, 4th Floor
Cincinnati, Ohio 45263 New York, New York 10005
By Facsimile Transmission:
(For Eligible Institutions Only)
(513) 744-8909
To Confirm Receipt of Facsimile:
(513) 579-5320
(800) 837-2755
Any questions or requests for assistance may be directed to
the Dealer Manager at the telephone number and address listed
below. Requests for additional copies of this Offer to Purchase,
the Letter of Transmittal or other tender offer materials may be
directed to the Dealer Manager and such copies will be furnished
promptly at the Company's expense. Stockholders may also contact
their local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
The Dealer Manager:
NATCITY INVESTMENTS, INC.
Corporate Finance Department
251 North Illinois Street
Indianapolis, IN 46204
(800) 382-1126
EXHIBIT (a)(2)
Form of Letter of Transmittal
-----------------------------
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
ESCALADE, INCORPORATED
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 12, 1996
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., EASTERN TIME, ON FRIDAY, SEPTEMBER 13, 1996,
UNLESS THE OFFER IS EXTENDED.
TO: Fifth Third Bank, Depositary
By Mail or Overnight Courier:
Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza, Mail Drop #1090F5
Cincinnati, OH 45263
By Hand: By Hand:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza, 15th Floor 77 Water Street, 4th Floor
Cincinnati, Ohio 45263 New York, NY 10005
By Facsimile Transmission:
(for eligible institutions only)
(513) 744-8909
To Confirm Receipt of Facsimile:
(513) 579-5320
(800) 837-2755
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS
COMPLETED.
This Letter of Transmittal is to be used if certificates are
to be forwarded herewith or if delivery of Shares (as defined
below) is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PDTC") (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below) or if Shares are conditionally
tendered pursuant to the procedures set forth in Section 6 of the
Offer to Purchase.
Stockholders who cannot deliver their Shares and all other
documents required hereby to the Depositary by the Expiration
Date (as defined in the Offer to Purchase) must tender their
Shares pursuant to the guaranteed delivery procedure set forth in
Section 6 of the Offer to Purchase. See Instruction 2. Delivery
of documents to the Company or to a Book-Entry Transfer Facility
does not constitute a valid delivery.
DESCRIPTION OF SHARES TENDERED
SHARES TENDERED
(ATTACH ADDITIONAL
LIST, IF NECESSARY)
TOTAL NUMBER OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
TOTAL SHARES:
(TABLE CONTINUED)
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
CERTIFICATE (PLEASE FILL IN EXACTLY AS NAME(S)
NUMBER(S)* APPEAR(S) ON CERTIFICATE(S))
TOTAL SHARES:
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificate delivered to the Depositary are being tendered. See
Instruction 4.
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK
ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK
ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Applicable Box: [ ] DTC
[ ] PDTC
Account No.
Transaction Code No.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY
AND COMPLETE THE FOLLOWING:
Name(s) of Tendering Stockholder(s)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution that Guaranteed Delivery
Check Box of Applicable Book Entry Transfer Facility and Give
Account Number if Delivery is by Book Entry Transfer:
[ ] DTC
[ ] PDTC
Account No.:
Transaction Code No.:
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Escalade, Incorporated, an
Indiana corporation (the "Company"), the above described shares
of its Common Stock, no par value (the "Shares") pursuant to the
Company's offer to purchase up to 1,000,000 Shares at a price per
Share hereinafter set forth, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to
Purchase dated August 12, 1996 (the "Offer to Purchase"), receipt
of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of
and payment for the Shares tendered herewith in accordance with
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), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being
tendered hereby (and any and all other Shares or other securities
issued or issuable in respect thereof on or after August 12, 1996
(collectively, "Distributions")) and constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Distributions,
with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to
(a) deliver certificates for such Shares and all Distributions,
or transfer ownership of such Shares and all Distributions on the
account books maintained by any of the Book-Entry Transfer
Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of
the Company, (b) present such Shares and all Distributions for
registration and transfer on the books of the Company and (c)
receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, sell, assign
and transfer the Shares tendered hereby and all Distributions and
that, when and to the extent the same are accepted for payment by
the Company, the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements
or other obligations relating to the sale or transfer thereof,
and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or the Company to
be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Distributions.
All authority herein conferred or agreed to be conferred
shall not be affected by, and shall survive the death or
incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant
to any one of the procedures described in Section 3 of the Offer
to Purchase and in the instructions hereto will constitute the
undersigned's acceptance of the terms and conditions of the
Offer, including the undersigned's representation and warranty
that (i) the undersigned has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 promulgated under
the Securities Exchange Act of 1934, as amended, and (ii) the
tender of such Shares complies with Rule 14e-4. The Company's
acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the undersigned and
the Company upon the terms and subject to the conditions of the
Offer.
The undersigned understands that the Company will determine
a single per Share price (not less than $6.00 nor more than
$10.00 per Share) (the "Purchase Price") that it will pay for
Shares validly tendered and not withdrawn pursuant to the Offer
taking into account the number of Shares so tendered and the
prices specified that will enable it to purchase 1,000,000 Shares
(or such lesser number of Shares as are validly tendered at
prices not less than $6.00 nor more than $10.00 per Share)
pursuant to the Offer. The undersigned understands that tenders
of Shares pursuant to any one of the procedures described in
Section 3 of the Offer to Purchase and in the instructions hereto
will constitute an agreement between the undersigned and the
Company upon the terms and subject to the conditions of the
Offer.
Unless otherwise indicated under "Special Payment
Instructions," please issue the check for the Purchase Price of
any Shares purchased, and/or return any Shares not tendered or
not purchased, in the name(s) of the undersigned (and, in the
case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above).
Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not
tendered or not purchased (and accompanying documents, as
appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the Purchase Price of any
Shares purchased and/or return any Shares not tendered or not
purchased in the name(s) of, and mail said check and/or any
certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the
"Special Payment Instructions," to transfer any Shares from the
name of the registered holder(s) thereof if the Company does not
accept for payment any of the Shares so tendered.
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR
IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION
[ ] The undersigned wants to maximize the chance of having the
Company purchase all the Shares the undersigned is tendering
(subject to the possibility of proration). Accordingly, by
checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW,
the undersigned hereby tenders Shares and is willing to accept
the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share
as low as $6.00 or as high as $10.00.
OR
<TABLE>
<CAPTION>
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
<S> <C> <C> <C> <C> <C> <C> <C>
[ ]$6.000 [ ]$6.500 [ ]$7.000 [ ]$7.500 [ ]$8.000 [ ]$8.500 [ ]$9.000 [ ]$9.500
[ ]$6.125 [ ]$6.625 [ ]$7.125 [ ]$7.625 [ ]$8.125 [ ]$8.625 [ ]$9.125 [ ]$9.625
[ ]$6.250 [ ]$6.750 [ ]$7.250 [ ]$7.750 [ ]$8.250 [ ]$8.750 [ ]$9.250 [ ]$9.750
[ ]$6.375 [ ]$6.875 [ ]$7.375 [ ]$7.895 [ ]$8.375 [ ]$8.895 [ ]$9.375 [ ]$9.875
[ ]$10.000
</TABLE>
ODD LOTS
(SEE INSTRUCTION 9)
This section is to be completed ONLY if shares are being
tendered by or on behalf of a person owning beneficially an
aggregate of fewer than 100 Shares as of the close of business on
August 9, 1996.
The undersigned either (check one box):
[ ] was the beneficial owner of an aggregate of fewer than 100
Shares as of the close of business on August 9, 1996, all of
which are being tendered, or
[ ] is a broker, dealer, commercial bank, trust company or other
nominee that (i) is tendering, for the beneficial owners thereof,
Shares with respect to which it is the record owner, and (ii)
believes, based upon representations made to it by each such
beneficial owner, that such beneficial owner owned beneficially
an aggregate of fewer than 100 Shares as of the close of business
on August 9, 1996, and is tendering all of such Shares.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 6, 7 AND 8)
To be completed ONLY if the check for the Purchase Price of
Shares purchased and/or certificates for Shares not tendered or
not purchased are to be issued in the name of someone other than
the undersigned.
Issue check [ ] and/or certificate(s) [ ] to:
Name
(Please Print)
Address
(Include Zip Code)
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 6, 7 AND 8)
To be completed ONLY if the check for the Purchase Price of
Shares purchased and/or the certificates for Shares not tendered
or not purchased are to be mailed to someone other than the
undersigned or to the undersigned at an address other than that
shown below the undersigned's signature(s).
Mail check [ ] and/or certificate(s) [ ] to:
Name
(Please Print)
Address
(Include Zip Code)
CONDITIONAL TENDER
A tendering stockholder may condition his or her tender of
Shares upon the purchase by the Company of a specified minimum
number of the Shares tendered hereby, all as described in the
Offer to Purchase, particularly in Section 6 thereof. Unless at
least such minimum number of Shares is purchased by the Company
pursuant to the terms of the Offer, none of the Shares tendered
hereby will be purchased. It is the tendering stockholder's
responsibility to calculate such minimum number of Shares, and
each stockholder is urged to consult his or her own tax advisor.
Unless this box has been completed and a minimum specified, the
tender will be deemed unconditional.
Minimum number of Shares that must be purchased, if any are
purchased:
Shares
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W 9 BELOW)
Signature(s) of Owner(s)
Dated: , 1996
Name(s)
(Please Print)
Capacity (full title)
Address
(Include Zip Code)
Area Code and Telephone No.
Must be signed by registered holder(s) exactly as name(s)
appear(s) on stock certificate(s) or on a security position
listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature
is by a trustee, executor, administrator, guardian, attorney in
fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title
and see Instruction 6.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm
Authorized Signature
Dated: , 1996
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided
below, all signatures on this Letter of Transmittal must be
guaranteed by a firm that is a member of a registered national
securities exchange or the National Association of Securities
Dealers, Inc., or by a commercial bank, trust company or other financial
institution which is a participant in an approved Signature Guarantee
Medallion Program (an "Eligible Institution"). Signatures on this Letter of
Transmittal need not be guaranteed (a) if this Letter of
Transmittal is signed by the registered holder(s) of the Shares
(which term, for purposes of this document, shall include any
participant in one of the Book Entry Transfer Facilities whose
name appears on a security position listing as the owner of
Shares) tendered herewith and such holder(s) have not completed
the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of
Transmittal or (b) if such Shares are tendered for the account of
an Eligible Institution. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This
Letter of Transmittal is to be used either if certificates are to
be forwarded herewith or if delivery of Shares is to be made by
book entry transfer pursuant to the procedures set forth in
Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book entry
transfer into the Depositary's account at one of the Book Entry
Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of
Transmittal (or photocopy thereof) and any other documents
required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of
this Letter of Transmittal on or prior to the Expiration Date (as
defined in the Offer to Purchase). Stockholders who cannot
deliver their Shares and all other required documents to the
Depositary on or prior to the Expiration Date must tender their
Shares pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure:
(a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the
Company (with any required signature guarantees) must be received
by the Depositary on or prior to the Expiration Date and (c) the
certificates for all physically delivered Shares, or a
confirmation of a book entry transfer into the Depositary's
account at one of the Book Entry Transfer Facilities of all
Shares delivered electronically, as well as a properly completed
and duly executed Letter of Transmittal (or photocopy thereof)
and any other documents required by this Letter of Transmittal
must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in Section 3 of
the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER.
IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Except as specifically permitted by Section 6 of the
Offer to Purchase, no alternative or contingent tenders will be
accepted. Fractional Shares, if any, will be purchased, unless
proration of tendered Shares is required. See Section 1 of the
Offer to Purchase. By executing this Letter of Transmittal (or a
photocopy thereof), the tendering stockholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the certificate numbers and/or the number of Shares
should be listed on a separate schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO
TENDER BY BOOK ENTRY TRANSFER). If fewer than all the Shares
represented by any certificate delivered to the Depositary are to
be tendered, fill in the number of Shares that are to be tendered
in the box entitled "Number of Shares Tendered." In such case, a
new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the "Special
Payment Instructions" or "Special Delivery Instructions" boxes on
this Letter of Transmittal, as promptly as practicable following
the expiration or termination of the Offer. All Shares
represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED.
For Shares to be validly tendered, the stockholder must check the
box indicating the price per Share at which he or she is
tendering Shares under "Price (In Dollars) Per Share at Which
Shares Are Being Tendered" on this Letter of Transmittal. Only
one box may be checked. If more than one box is checked or if no
box is checked, there is no valid tender of Shares. A
stockholder wishing to tender portions of his or her Share
holdings at different prices must complete a separate Letter of
Transmittal for each price at which he or she wishes to tender
each such portion of his or her Shares. The same Shares cannot
be tendered (unless previously validly withdrawn as provided in
Section 4 of the Offer to Purchase) at more than one price.
Stockholders wishing to maximize the possibility that their
Shares will be purchased at the relevant Purchase Price may check
the box on the Letter of Transmittal marked "Shares Tendered at
Purchase Price Determined by Dutch Auction." Checking this box
may result in a purchase price of the Shares so tendered at the
minimum price of $6.00.
6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the
registered holder(s) of the Shares hereby, the signature(s) must
correspond with the name(s) as written on the face of the
certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares hereby are held of record by two
or more persons, all such persons must sign this Letter of
Transmittal.
If any of the Shares tendered hereby are registered in
different names on different certificates, it will be necessary
to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the
registered holder(s) of the Shares tendered hereby, no
endorsements of certificates or separate stock powers are
required unless payment of the Purchase Price is to be made to,
or Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder(s).
Signatures on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person
other than the registered holder(s) of the Shares tendered
hereby, certificates must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the
name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal or any certificate or
stock power is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such
person should so indicate when signing, and proper evidence
satisfactory to the Company of the authority of such person so to
act must be submitted.
7. STOCK TRANSFER TAXES. The Company will pay or cause to
be paid any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the
name of, any person other than the registered holder(s), or if
tendered Shares are registered in the name of any person other
than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of
the transfer to such person will be deducted from the Purchase
Price unless satisfactory evidence of the payment of such taxes,
or exemption therefrom, is submitted. See Section 5 of the Offer
to Purchase.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check
for the Purchase Price of any Shares purchased is to be issued in
the name of, and/or any Shares not tendered or not purchased are
to be returned to, a person other than the person(s) signing this
Letter of Transmittal or if the check and/or any certificates for
Shares not tendered or not purchased are to be mailed to someone
other than the person(s) signing this Letter of Transmittal or to
an address other than that shown below the signature of the
person(s) signing this Letter of Transmittal, then the boxes
captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer will have
any Shares not accepted for payment returned by crediting the
account maintained by such stockholder at the Book-Entry Transfer
Facility from which such transfer was made.
9. ODD LOTS. As described in the Offer to Purchase, if
more than 1,000,000 Shares have been validly tendered at or below
the Purchase Price and not withdrawn on or prior to the
Expiration Date, the Company will purchase first all Shares
validly tendered at or below the Purchase Price and not withdrawn
on or prior to the Expiration Date by any stockholder (an "Odd
Lot Owner") who owned beneficially an aggregate of fewer than 100
Shares as of the close of business on August 9, 1996, and who
validly tenders all of such Shares (partial and conditional
tenders will not qualify for this preference) and completes the
box captioned "Odd Lots" on the Letter of Transmittal and, if
applicable, the Notice of Guaranteed Delivery.
10. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering
stockholder is required to provide the Depositary with either a
correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9, which is provided under "Important Tax Information" below,
or in the case of certain foreign stockholders, a properly
completed Form W-8. Failure to provide the information on either
Substitute Form W-9 or Form W-8 may subject the tendering
stockholder to 31% federal income tax backup withholding on the
payment of the Purchase Price. The box in Part 2 of Substitute
Form W-9 may be checked if the tendering stockholder has not been
issued a TIN and has applied for a number or intends to apply for
a number in the near future. If the box in Part 2 is checked and
the Depositary is not provided with a TIN by the time of payment,
the Depositary will withhold 31% on all payments of the Purchase
Price thereafter until a TIN is provided to the Depositary.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any
questions or requests for assistance may be directed to the
Dealer Manager at the telephone number and address listed below.
Requests for additional copies of the Offer to Purchase, this
Letter of Transmittal or other tender offer materials may be
directed to the Dealer Manager and such copies will be furnished
promptly at the Company's expense. Stockholders may also contact
their local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
12. IRREGULARITIES. All questions as to the Purchase
Price, the form of documents and the validity, eligibility
(including time of receipt) and acceptance of any tender of
Shares will be determined by the Company, in its sole discretion,
and its determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the
acceptance for payment of or payment for Shares that may, in the
opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any of the conditions to the
Offer or any defect or irregularity in any tender of Shares and
the Company's interpretation of the terms and conditions of the
Offer (including these instructions) shall be final and binding.
Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the Company shall
determine. None of the Company, the Dealer Manager, the
Depositary or any other person shall be under any duty to give
notice of any defect or irregularity in tenders, nor shall any of
them incur any liability for failure to give any such notice.
Tenders will not be deemed to have been made until all defects
and irregularities have been cured or waived.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered
Shares are accepted for payment is required to provide the
Depositary (as payer) with either such stockholder's correct TIN
on Substitute Form W-9 below or in the case of certain foreign
stockholders, a properly completed Form W-8. If such stockholder
is an individual, the TIN is his or her social security number.
For businesses and other entities, the number is the employer
identification number. If the Depositary is not provided with
the correct TIN or properly completed Form W-8, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder
with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding. The Form W-8 can be obtained from
the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If federal income tax backup withholding applies, the
Depositary is required to withhold 31% of any payments made to
the stockholder. Backup withholding is not an additional tax.
Rather, the federal income tax liability of persons subject to
federal income tax backup withholding will be reduced by the
amount of the tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a
stockholder with respect to Shares purchased pursuant to the
Offer, the stockholder is required to notify the Depositary of
his or her correct TIN by completing the Substitute Form W-9
attached hereto certifying that the TIN provided on Substitute
Form W-9 is correct and that (1) the stockholder has not been
notified by the Internal Revenue Service that he or she is
subject to federal income tax backup withholding as a result of
failure to report all interest or dividends or (2) the Internal
Revenue Service has notified the stockholder that he or she is no
longer subject to federal income tax backup withholding. Foreign
stockholders must submit a properly completed Form W-8 in order
to avoid the applicable backup withholding; provided, however,
that backup withholding will not apply to foreign stockholders
subject to 30% (or lower treaty rate) withholding on gross
payments received pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the
social security number or employer identification number of the
registered owner of the Shares. If the Shares are in more than
one name or are not in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which
number to report.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A PHOTOCOPY
THEREOF) TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED
IN THE OFFER TO PURCHASE).
PAYER'S NAME: ____________________________________________
SUBSTITUTE
FORM W-9
Department of the Treasury
Internal Revenue Service
Payer's Request for Taxpayer
Identification Number (TIN) and
Certification
- -----------------------------------------------------------------
Part 1 PLEASE PROVIDE YOUR TIN AND CERTIFY BY SIGNING AND DATING BELOW.
NAME
(Please Print)
ADDRESS
CITY STATE
ZIP CODE
TIN ______________________________
Social Security Number or Employer Identification Number
- -----------------------------------------------------------------
Part 2
AWAITING TIN [ ]
- -----------------------------------------------------------------
Part 3 CERTIFICATION UNDER THE PENALTIES OF PERJURY.
I CERTIFY THAT (1) the number shown on this form is my
correct taxpayer identification number (or a TIN has not been
issued to me but I have mailed or delivered an application to
receive a TIN or intend to do so in the near future), (2) I am
not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of a failure to report
all interest or dividends or the IRS has notified me that I am no
longer subject to backup withholding and (3) all other
information provided on this form is true, correct and complete.
SIGNATURE _____________________________ DATE _______________
You must cross out item (2) above if you have been notified
by the IRS that your are currently subject to backup withholding
because of underreporting interest or dividends on your tax
return.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO
THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W 9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING
CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE
FORM W 9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me and either (1) I
have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office or (2) I intend
to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification
number by the time of payment, 31% of all payments of the
Purchase Price made to me thereafter will be withheld until I
provide a number.
SIGNATURE _____________________________ DATE _______________
The Dealer Manager:
NatCity Investments, Inc.
Corporate Finance Department
251 North Illinois Street
Indianapolis, IN 46204
(800) 382-1126
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form. --A person who is required to file an
information return with the IRS must obtain your correct Taxpayer
Identification Number ("TIN") to report income paid to you, real
estate transactions, mortgage interest you paid, the acquisition
or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the
requester (the person asking you to furnish your TIN) and, when
applicable, (1) to certify that the TIN you are furnishing is
correct (or that you are waiting for a number to be issued), (2)
to certify that you are not subject to backup withholding, and
(3) to claim exemption from backup withholding if you are an
exempt payee. Furnishing your correct TIN and making the
appropriate certifications will prevent certain payments from
being subject to backup withholding.
Note: If a requester gives you a form other than a W-9 to
request your TIN, you must use the requester's form.
How to Obtain TIN. --If you do not have a TIN, apply for
one immediately. To apply, get Form SS-5, Application for a
Social Security Card (for individuals), from your local office of
the Social Security Administration, or Form SS-4, Application for
Employer Identification Number (for businesses and all other
entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write
"Applied for" in the space for the TIN in Part I (or check box 2
of Substitute Form W-9), sign and date the form, and give it to
the requester. Generally, you must obtain a TIN and furnish it
to the requester by the time of payment. If the requester does
not receive your TIN by the time of payment, backup withholding,
if applicable, will begin and continue until you furnish your TIN
to the requester.
Note: Writing "Applied for" (or checking box 2 of the
Substitute Form W-9) on the form means that you have already
applied for a TIN OR that you intend to apply for one in the near
future.
As soon as you receive your TIN, complete another Form W-9,
include your TIN, sign and date the form, and give it to the
requester.
What is Backup Withholding? --Persons making certain
payments to you are required to withhold and pay to the IRS 31%
of such payments under certain conditions. This is called
"backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee
compensation, and certain payments from fishing boat operators,
but do not include real estate transactions.
If you give the requester your correct TIN, make the
appropriate certifications, and report all your taxable interest
and dividends on your tax return, your payments will not be
subject to backup withholding. Payments you receive will be
subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an
incorrect TIN, or
3. You are notified by the IRS that you are subject to
backup withholding because you failed to report all your interest
and dividends on your tax return (for reportable interest and
dividends only), or
4. You do not certify to the requester that you are not
subject to backup withholding under 3 above (for reportable
interest and dividend accounts opened after 1983 only), or
5. You do not certify your TIN. This applies only to
reportable interest, dividend, broker, or barter exchange
accounts opened after 1983, or broker accounts considered
inactive in 1983.
Certain payees and payments are exempt from backup
withholding and information reporting. See Payees and Payments
Exempt From Backup Withholding, below, if you are an exempt
payee.
Payees and Payments Exempt from Backup Withholding. --The
following is a list of payees exempt from backup withholding and
for which no information reporting is required. For interest and
dividends, all listed payees are exempt except item (9). For
broker transactions, payees listed in (1) through (13) and a
person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from
backup withholding only if made to payees described in items (1)
through (7), except a corporation that provides medical and
health care services or bills and collects payments for such
services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions,
patronage dividends, and payments by certain fishing boat
operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or
an IRA, or a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or
instrumentalities.
(4) A state, the District of Columbia, a possession of the
United States, or any of their political subdivisions or
instrumentalities.
(5) A foreign government or any of its political
subdivisions, agencies, or instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to
register in the United States or a possession of the United
States.
(9) A futures commission merchant registered with the
Commodity Futures Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year
under the Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section
584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a
nominee or listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described
in section 4947.
Payments of dividends and patronage dividends generally not
subject to backup withholding include the following:
- Payments to nonresident aliens subject to withholding
under section 1441.
- Payments to partnerships not engaged in a trade or
business in the United States and that have at least one
nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup
withholding include the following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the payer's
trade or business and you have not provided your correct TIN to
the payer.
- Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- Payments described in section 6049(b)(5) to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are
also not subject to backup withholding. For details, see
sections 6041, 6041(A)(a), 6042, 6044, 6045, 6049, 6050A, and
6050N, and their regulations.
PENALTIES
Failure to Furnish TIN. --If you fail to furnish your
correct TIN to a requester, you are subject to a penalty of $50
for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
Civil Penalty for False Information With Respect to
Withholding. --If you make a false statement with no reasonable
basis that results in no backup withholding, you are subject to a
$500 penalty.
Criminal Penalty for Falsifying Information. --Willfully
falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment.
Misuse of TINs. --If the requester discloses or uses TINs
in violation of Federal law, the requester may be subject to
civil and criminal penalties.
SPECIFIC INSTRUCTIONS
Name. --If you are an individual, you must generally
provide the name shown on your social security card. However, if
you have changed your last name, for instance, due to marriage,
without informing the Social Security Administration of the name
change, please enter your first name, the last name shown on your
social security card, and your new last name. If you are a sole
proprietor, you must furnish your individual name and either your
Social Security Number ("SSN") or Employer Identification Number
("EIN").
SIGNING THE CERTIFICATION.
1. Interest, Dividend, and Barter Exchange Accounts Opened
Before 1984 and Broker Accounts Considered Active During 1983.
You are required to furnish your correct TIN, but you are not
required to sign the certification.
2. Interest, Dividend, Broker and Barter Exchange Accounts
Opened After 1983 and Broker Accounts Considered Inactive During
1983. You must sign the certification or backup withholding will
apply. If you are subject to backup withholding and you are
merely providing your correct TIN to the requester, you must
cross out item 2 in the certification before signing the form.
3. Real Estate Transactions. You must sign the
certification. You may cross out item 2 of the certification.
4. Other Payments. You are required to furnish your
correct TIN, but you are not required to sign the certification
unless you have been notified of an incorrect TIN. Other
payments include payments made in the course of the requester's
trade or business for rents, royalties, goods (other than bills
for merchandise), medical and health care services, payments to a
nonemployee for services (including attorney and accounting
fees), and payments to certain fishing boat crew members.
5. Mortgage Interest Paid by You, Acquisition or
Abandonment of Secured Property, or IRA Contributions. You are
required to furnish your correct TIN, but you are not required to
sign the certification.
6. Exempt Payees and Payments. If you are exempt from
backup withholding, you should complete this form to avoid
possible erroneous backup withholding. Enter your correct TIN in
Part I, write "EXEMPT" on the form and sign and date the form.
If you are a nonresident alien or foreign entity not subject to
backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
7. TIN "Applied for." Follow the instructions under How To
Obtain a TIN, on page 1, and sign and date the form.
Signature. --For a joint account, only the person whose TIN
is shown in Part I should sign.
Privacy Act Notice. --Section 6109 requires you to furnish
your correct TIN to persons who must file information returns
with the IRS to report interest, dividends, and certain other
income paid to you, mortgage interest you paid, the acquisition
or abandonment of secured property, or contributions you made to
an IRA. The IRS uses the numbers for identification purposes and
to help verify the accuracy of your tax return. You must provide
your TIN whether or not you are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a TIN
to a payer. Certain penalties may also apply.
What Name and Number to Give the Requester
--------------------------------------------
For this type of account: Give name and SSN of:
- ------------------------ --------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined,
the first individual on
the account (1)
3. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
4a. The usual revocable savings The grantor-trustee (1)
trust (grantor is also trustee)
b. So-called trust account The actual owner (1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner (3)
6. Sole proprietorship The owner (3)
7. A valid trust, estate, or The legal entity (4)
pension trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or
other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a state
or local government, school
district or prison) that receives
agricultural program payments
(1) List first and circle the name of the person whose number
you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate,
or pension trust. (Do not furnish the TIN of the personal
representative or trustee unless the legal entity itself is
not designated in the account title.)
Note: If no name is circled when there is more than one name, the
number will be considered to be that of the first name listed.
EXHIBIT (a)(3)
Form of Letter to Stockholders
------------------------------
ESCALADE LETTERHEAD
August 12, 1996
Dear Stockholder:
Escalade, Incorporated is offering to purchase up to
1,000,000 shares of its common stock (representing approximately
24.3% of the currently outstanding shares), at a price not less
than $6.00 nor more than $10.00 per share. The Company is
conducting the offer through a procedure commonly referred to as
a "dutch auction." This procedure allows you to select the price
within that range at which you are willing to sell all or a
portion of your shares to the Company.
Based upon the number of shares tendered and the prices
specified by the tendering stockholders, the Company will
determine the single per share price within that range that will
allow it to buy 1,000,000 shares (or such lesser number of shares
that are properly tendered). All of the shares that are properly
tendered at prices at or below that purchase price (and are not
withdrawn) will subject to possible proration, conditional tender
and provisions relating to the tender of "odd lots" be purchased
for cash at that purchase price, net to the selling stockholder.
All other shares that have been tendered and not purchased will
be returned to the stockholder.
If you do not wish to participate in the offer, you do not
need to take any action.
The offer is explained in detail in the enclosed Offer to
Purchase and Letter of Transmittal. If you want to tender your
shares, the instructions on how to do so are also explained in
detail in the enclosed materials. I encourage you to read these
materials carefully before making any decision with respect to
the offer.
Neither the Company nor its Board of Directors makes any
recommendation to any stockholder whether to tender all or any
shares. Neither I nor any other executive officer intends to
tender shares pursuant to the offer.
Sincerely,
/s/Robert E. Griffin
-----------------
Robert E. Griffin
Chairman and Chief Executive Officer
EXHIBIT (a)(4)
Form of Notice of Guaranteed Delivery
-------------------------------------
ESCALADE, INCORPORATED
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
This form, or a form substantially equivalent to this form,
must be used to accept the Offer (as defined below) if: (a)
certificates for the shares of Common Stock of Escalade,
Incorporated are not immediately available, (b) the procedure
for book entry transfer cannot be completed on a timely basis, or
(c) time will not permit all other documents required by the
Letter of Transmittal to be delivered to the Depositary on or
prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase defined below).
This form may be delivered by hand or transmitted by mail,
or (for Eligible Institutions only) by facsimile transmission, to
the Depositary. See Section 3 of the Offer to Purchase. THE
ELIGIBLE INSTITUTION, WHICH COMPLETES THIS FORM, MUST COMMUNICATE
THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF
TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN
THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A
FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
To: Fifth Third Bank, Depositary
By Mail or Overnight Courier:
Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza, Mail Drop #1090F5
Cincinnati, Ohio 45263
By Hand: By Hand:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza, 15th Floor 77 Water Street, 4th Floor
Cincinnati, Ohio 45263 New York, New York 10005
By Facsimile Transmission:
(For Eligible Institutions Only)
(513) 744-8909
To Confirm Receipt of Facsimile:
(513) 579-5320
(800) 837-2755
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A
SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED
BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED
IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Escalade, Incorporated, an
Indiana corporation (the "Company"), at the price per Share
indicated below, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase,
dated August 12, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged, the number of shares of
Common Stock, no par value (the "Shares"), of the Company listed
below, pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase.
Number of Shares:
______________________________ ______________________________
Certificate Nos.: (if available) Signature(s)
_________________________________________________________________
Names(s) (Please Print)
If Shares will be tendered by
book entry transfer:
Name of Tendering Institution:
Address:
Account No. at (check one)Area Code and Telephone Number
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO
BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
STOCKHOLDERS WHO DESIRE TO TENDER SHARES AT MORE THAN ONE PRICE
MUST COMPLETE A SEPARATE ELECTION FORM FOR EACH PRICE AT WHICH
SHARES ARE TENDERED.
SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION
[ ] The undersigned wants to maximize the chance of having the
Company purchase all the Shares the undersigned is tendering
(subject to the possibility of proration). Accordingly, by
checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW,
the undersigned hereby tenders Shares and is willing to accept
the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share
as low as $6.00 or as high as $10.00.
<TABLE>
<cpation>
OR
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
<S> <C> <C> <C> <C> <C> <C> <C>
[ ]$6.000 [ ]$6.500 [ ]$7.000 [ ]$7.500 [ ]$8.000 [ ]$8.500 [ ]$9.000 [ ]$9.500
[ ]$6.125 [ ]$6.625 [ ]$7.125 [ ]$7.625 [ ]$8.125 [ ]$8.625 [ ]$9.125 [ ]$9.625
[ ]$6.250 [ ]$6.750 [ ]$7.250 [ ]$7.750 [ ]$8.250 [ ]$8.750 [ ]$9.250 [ ]$9.750
[ ]$6.375 [ ]$6.875 [ ]$7.375 [ ]$7.895 [ ]$8.375 [ ]$8.895 [ ]$9.375 [ ]$9.875
[ ]$10.000
</TABLE>
CONDITIONAL TENDER
UNLESS THIS BOX HAS BEEN COMPLETED AND A MINIMUM SPECIFIED, THE
TENDER WILL BE DEEMED UNCONDITIONAL (see Sections 6 and 13 of the
Offer to Purchase).
Minimum number of Shares that must be purchased, if any are
purchased:
_____ Shares
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf
of persons owning beneficially an aggregate of fewer than 100
Shares as of the close of business on August 9, 1996.
The undersigned either (check one):
[ ] was the beneficial owner of an aggregate of fewer than 100
Shares as of the close of business on August 9, 1996, all of
which are tendered, or
[ ] is a broker, dealer, commercial bank, trust company or other
nominee that (i) is tendering, for the beneficial owners thereof,
Shares with respect to which it is the record owner, and (ii)
believes, based upon representations made to it by each such
beneficial owner, that such beneficial owner owned an aggregate
of fewer than 100 Shares as of the close of business on August 9,
1996, and is tendering all of such Shares.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered
national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States,
guarantees (a) that the above-named person(s) has a net long
position in the Shares (and associated Rights) being tendered
within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, (b) that such tender of Shares
complies with Rule 14e-4 and (c) delivery to the Depositary at
one of its addresses set forth above certificate(s) for the
Shares tendered hereby, in proper form for transfer, or a
confirmation of the book-entry transfer of the Shares tendered
hereby into the Depositary's account at The Depository Trust
Company or the Philadelphia Depository Trust Company, in each
case together with a properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), with any
required signature guarantee(s) and any other required documents,
all within three business days after the date hereof.
Name of Firm Authorized Signature
Address Name
City, State, Zip Code Title
Area Code and Telephone Number
Dated: , 1996
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
EXHIBIT (a)(5)
Form of Letter to Brokers, Dealers, etc.
----------------------------------------
ESCALADE, INCORPORATED
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., EASTERN TIME, ON FRIDAY, SEPTEMBER 13, 1996, UNLESS
THE OFFER IS EXTENDED.
August 12, 1996
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
We are enclosing the material listed below relating to the offer of
Escalade, Incorporated, an Indiana corporation (the "Company"),
to purchase up to 1,000,000 shares of its Common Stock, no par
value (the "Shares"), at prices not less than $6.00 nor more than
$10.00 per Share, net to the seller in cash, specified by
tendering stockholders, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 12,
1996 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"). The Company
will determine a single price (not less than $6.00 nor more than
$10.00 per Share) that it will pay for Shares validly tendered
pursuant to the Offer (the "Purchase Price"), taking into account
the number of Shares so tendered and the prices specified by
tendering stockholders. The Company will select the Purchase
Price that will enable it to purchase up to 1,000,000 Shares (or
such lesser number of Shares as are validly tendered at prices
not less than $6.00 nor more than $10.00 per Share) pursuant to
the Offer. The Company will purchase all Shares validly tendered
at prices at or below the Purchase Price and not withdrawn, upon
the terms and subject to the conditions of the Offer, including
the provisions relating to proration and conditional tenders
described in the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller,
with respect to all Shares purchased. Shares tendered at prices
in excess of the Purchase Price and Shares not purchased because
of proration and conditional tenders will be returned.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. The Offer is, however, subject to other
conditions. See Section 7 of the Offer to Purchase.
We are asking you to contact your clients for whom you hold
Shares registered in your name (or in the name of your nominee)
or who hold Shares registered in their own names. Please bring
the Offer to their attention as promptly as possible.
For your information and for forwarding to your clients, we
are enclosing the following documents:
1. The Offer to Purchase, dated August 12, 1996.
2. The Letter of Transmittal for your use and for the
information of your clients, including Guidelines of the
Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax
withholding.
3. A letter to stockholders of the Company from the Chairman
and Chief Executive Officer of the Company.
4. The Notice of Guaranteed Delivery to be used to accept the
Offer if the Shares and all other required documents cannot
be delivered to the Depositary by the Expiration Date (as
defined in the Offer to Purchase).
5. A letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the
name of your nominee, with space for obtaining such a client's
instructions with regard to the Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL
RIGHTS EXPIRE AT 5:00 P.M., EASTERN TIME, ON FRIDAY, SEPTEMBER
13, 1996, UNLESS THE OFFER IS EXTENDED.
As described in the Offer to Purchase, if more than
1,000,000 Shares have been validly tendered at or below the
Purchase Price and not withdrawn on or prior to the Expiration
Date, as defined in Section 1 of the Offer to Purchase, the
Company will purchase Shares in the following order of priority:
(a) all Shares validly tendered at or below the Purchase Price
and not withdrawn on or prior to the Expiration Date by any
stockholder (an "Odd Lot Owner") who owned beneficially an
aggregate of fewer than 100 Shares as of the close of business on
August 9, 1996, and who validly tenders all of such Shares
(partial and conditional tenders will not qualify for this
preference) and completes the box captioned "Odd Lots" on the
Letter of Transmittal and, if applicable, the Notice of
Guaranteed Delivery or; (b) after purchase of all the foregoing
Shares, subject to the conditional tender provisions described in
Section 6 of the Offer to Purchase, all other Shares validly
tendered at or below the Purchase Price and not withdrawn on or
prior to the Expiration Date on a pro rata basis, if necessary
(with appropriate adjustments to avoid purchases of fractional
Shares); and (c) if necessary, Shares conditionally tendered, for
which the condition was not satisfied, at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date,
selected by random lot in accordance with Section 6.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE
OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO EXECUTIVE OFFICER OF THE COMPANY INTENDS TO
TENDER SHARES PURSUANT TO THE OFFER.
Any questions, requests for assistance or requests for
additional copies of the enclosed materials may be directed to
the Dealer Manager at the address and telephone number set forth
on the back cover of the enclosed Offer to Purchase.
Very truly yours,
____________________________________
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL
CONSTITUTE YOU THE AGENT OF THE COMPANY, THE DEALER MANAGER OR
THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
EXHIBIT (a)(6)
Form of Letter to Clients
-------------------------
ESCALADE, INCORPORATED
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., EASTERN TIME, ON FRIDAY, SEPTEMBER 13, 1996, UNLESS
THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase,
dated August 12, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer")
setting forth an offer by Escalade, Incorporated, an Indiana
corporation (the "Company"), to purchase up to 1,000,000 shares
of its Common Stock, no par value (the "Shares"), at prices not
less than $6.00 nor more than $10.00 per Share, net to the seller
in cash, specified by tendering stockholders, upon the terms and
subject to the conditions of the Offer. The Company will
determine a single per Share price (not less than $6.00 nor more
than $10.00 per Share) (the "Purchase Price") that it will pay
for the Shares validly tendered pursuant to the Offer and not
withdrawn, taking into account the number of Shares so tendered
and the prices specified by tendering stockholders. The Company
will select the Purchase Price that will enable it to purchase up
to 1,000,000 Shares (or such lesser number of Shares as are
validly tendered at prices not less than $6.00 nor more than
$10.00 per Share) pursuant to the Offer. The Company will
purchase all Shares validly tendered at prices at or below the
Purchase Price and not withdrawn, upon the terms and subject to
the conditions of the Offer, including the provisions thereof
relating to proration and conditional tenders.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish us to tender
any or all of the Shares held by us for your account, upon the
terms and subject to the conditions set forth in the Offer to
Purchase and the Letter of Transmittal.
Your attention is invited to the following:
(1) You may tender Shares at prices (in multiples of
$0.125), not less than $6.00 nor more than $10.00 per Share, as
indicated in the attached instruction form, net to you in cash.
(2) The Offer is for up to 1,000,000 Shares, constituting
approximately 24.3% of the total Shares outstanding as of August
9, 1996. The Offer is not conditioned upon any minimum number of
Shares being tendered.
(3) The Offer, proration period and withdrawal rights will
expire at 5:00 p.m., Eastern time, on Friday, September 13, 1996,
unless the Offer is extended. Your instructions to us should be
forwarded to us in ample time to permit us to submit a tender on
your behalf. If you would like to withdraw your Shares that we
have tendered, you can withdraw them so long as the Offer remains
open or at any time after Tuesday, October 8, 1996, if they have
not been accepted for payment.
(4) As described in the Offer to Purchase, if more than
1,000,000 Shares have been validly tendered at or below the
Purchase Price and not withdrawn on or prior to the Expiration
Date, as defined in Section 1 of the Offer to Purchase, the
Company will purchase Shares in the following order of priority:
(a) all Shares validly tendered at or below the
Purchase Price and not withdrawn on or prior to the Expiration
Date by any stockholder (an "Odd Lot Owner") who owns
beneficially an aggregate of fewer than 100 Shares (including
fractional Shares) as of the close of business on August 9, 1996,
and who validly tenders all of such Shares (partial and
conditional tenders will not qualify for this preference) and
completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery
;
(b) after purchase of all of the foregoing Shares, all
Shares conditionally and validly tendered in accordance with
Section 6, for which the condition was satisfied, and all other
Shares unconditionally and validly tendered at or below the
Purchase Price and not withdrawn on or prior to the Expiration
Date on a pro rata basis, if necessary (with appropriate
adjustments to avoid purchases of fractional Shares); and
(c) if necessary, Shares conditionally tendered, for
which the condition was not satisfied, at or below the Purchase
Price and not withdrawn on or prior to the Expiration Date,
selected by random lot in accordance with Section 6 of the Offer
to Purchase.
(5) Any stock transfer taxes applicable to the sale of
Shares to the Company pursuant to the Offer will be paid by the
Company, except as otherwise provided in Instruction 7 of the
Letter of Transmittal.
(6) If you owned beneficially an aggregate of fewer than 100
Shares (including fractional Shares) as of the close of business
on August 9, 1996, and you instruct us to tender at or below the
Purchase Price on your behalf all such Shares on or prior to the
Expiration Date and check the box captioned "Odd Lots" in the
instruction form, all such Shares will be accepted for purchase
before proration, if any, of the purchase of other tendered
Shares.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE
OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO
WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS
BEEN ADVISED THAT NO EXECUTIVE OFFICER OF THE COMPANY INTENDS TO
TENDER SHARES PURSUANT TO THE OFFER.
If you wish to have us tender any or all of your Shares held
by us for your account upon the terms and subject to the
conditions set forth in the Offer, please so instruct us by
completing, executing and returning to us the enclosed instruction form.
If you authorize tender of your Shares, all such Shares will be tendered
unless otherwise specified on the enclosed instruction form. Your
instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf by the expiration of the Offer.
A tendering stockholder may condition the tender of Shares
upon the purchase by the Company of a specified minimum number of
Shares tendered, all as described in Section 6 of the Offer to
Purchase. Unless such specified minimum is purchased by the
Company pursuant to the terms of the Offer to Purchase and the
related Letter of Transmittal, none of the Shares tendered by the
stockholder will be purchased. If you wish us to condition your
tender upon the purchase of a specified minimum number of Shares,
please complete the box entitled "Conditional Tender" on the
instruction form. It is the tendering stockholder's
responsibility to calculate such minimum number of Shares, and
you are urged to consult your own tax advisor.
The Offer is being made to all holders of Shares. The
Company is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to a
valid state statute. If the Company becomes aware of any valid
state statute prohibiting the making of the Offer, the Company
will make a good faith effort to comply with such statute. If,
after such good faith effort, the Company cannot comply with such
statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, holders of Shares in such state.
In any jurisdiction whose securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to have been made on the Company's behalf by
the Dealer Manager or by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF ITS COMMON STOCK
OF
ESCALADE, INCORPORATED
The undersigned acknowledge(s) receipt of your letter and
the enclosed Offer to Purchase, dated August 12, 1996, and the
related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by Escalade, Incorporated,
an Indiana corporation (the "Company"), to purchase up to
1,000,000 shares of its Common Stock, no par value (the
"Shares"), at prices not greater than $10.00 nor less than $6.00
per Share, net to the undersigned in cash, upon the terms and
subject to the conditions of the Offer.
This will instruct you to tender to the Company the number
of Shares indicated below (or, if no number is indicated below,
all Shares) which are held by you for the account of the
undersigned, at the price per Share indicated below, upon the
terms and subject to the conditions of the Offer.
PRICE (IN DOLLARS) PER SHARE
AT WHICH SHARES ARE BEING TENDERED
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR
IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.
SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION
[ ] The undersigned wants to maximize the chance of having the
Company purchase all the Shares the undersigned is tendering
(subject to the possibility of proration). Accordingly, by
checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW,
the undersigned hereby tenders Shares and is willing to accept
the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share
as low as $6.00 or as high as $10.00.
<TABLE>
<CAPTION>
OR
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
<S> <C> <C> <C> <C> <C> <C> <C>
[ ]$6.000 [ ]$6.500 [ ]$7.000 [ ]$7.500 [ ]$8.000 [ ]$8.500 [ ]$9.000 [ ]$9.500
[ ]$6.125 [ ]$6.625 [ ]$7.125 [ ]$7.625 [ ]$8.125 [ ]$8.625 [ ]$9.125 [ ]$9.625
[ ]$6.250 [ ]$6.750 [ ]$7.250 [ ]$7.750 [ ]$8.250 [ ]$8.750 [ ]$9.250 [ ]$9.750
[ ]$6.375 [ ]$6.875 [ ]$7.375 [ ]$7.895 [ ]$8.375 [ ]$8.895 [ ]$9.375 [ ]$9.875
[ ]$10.000
</TABLE>
CONDITIONAL TENDER
By completing this box, the undersigned conditions the
tender authorized hereby on the following minimum number of
Shares being purchased if any are purchased:
Shares
Unless this box is completed, the tender authorized hereby
will be made unconditionally.
ODD LOTS
[ ] Check this box ONLY if shares are being tendered by or on
behalf of a person owning beneficially an aggregate of fewer than
100 Shares (including fractional Shares) as of the close of
business on August 9, 1996.
[ ] By checking this box, the undersigned represents that the
undersigned owned beneficially an aggregate of fewer than 100
Shares (including fractional Shares) as of the close of business
on August 9, 1996, and is tendering all of such Shares.
- -----------------------------------------------------------------
Number of Shares to be Tendered: SIGN HERE
Shares*
Signature(s)
Date: , 1996
Name:
Address:
* Unless otherwise indicated, it will be assumed that all Shares
held by us for your account are to be tendered.
EXHIBIT (a)(7)
Form of Press Release
ESCALADE ANNOUNCES TENDER OFFER FOR
-----------------------------------
SHARES OF ITS COMMON STOCK
--------------------------
Evansville, IN, August 12, 1996, -- Escalade, Incorporated,
a diversified company engaged in the manufacture and sale of
sporting goods and office and graphic arts products, announced
today that it will commence a Dutch Auction tender offer to
purchase for cash up to 1,000,000 shares, or approximately 24.3%
of its issued and outstanding Common Stock. The tender offer
begins Monday, August 12, and will expire, unless extended, at
5:00 p.m. (Eastern time) on Friday, September 13, 1996.
Terms of the Dutch Auction tender offer, which are described
more fully in the Offer to Purchase and Letter of Transmittal,
pursuant to which the offer is being made, include a purchase
price not greater than $10 nor less than $6 per share, net to the
seller in cash, without interest thereon. The Company has
retained NatCity Investments, Inc. to act as its dealer manager
for the tender offer.
In a Dutch Auction, the Company sets a price range, and
holders have an opportunity to specify prices within that range
at which they are willing to sell shares. After the expiration
of the tender offer, the Company will determine a single per
share price to be paid for each share purchased, taking into
consideration the number of shares tendered and the prices
specified by tendering stockholders. If the tender offer is
oversubscribed, only shares validly tendered at or below the
purchase price determined by the Company will be eligible for
proration. The Company reserves the right to purchase more than
1,000,000 shares pursuant to the tender offer, but does not
currently plan to do so. The tender offer is not conditioned on
any minimum number of shares being tendered.
On August 9, 1996, the last full Nasdaq National Market
trading day prior to the announcement of the tender offer, the
closing price of the Common stock was $ 6.25 per share. As of
August 9, 1996, the Company had issued and outstanding 4,111,889
shares of Common stock. The Offer to Purchase, Letter of
Transmittal and related documents will be mailed to stockholders
of record of its Common stock and will also be made available for
distribution to beneficial owners of Common stock.
Chairman of the Board Robert E. Griffin commented on the
offer saying, "We believe this is a good investment for the
Company that will enhance stockholder value. Recent years
profitability has been negatively impacted by restructuring
charges for sporting goods operations, however future
profitability should be less erratic. Bank One, Indianapolis,
N.A. has agreed to finance the re-purchase of up to 1,000,000
shares under the tender offer, and additional open market
purchases, in an aggregate amount not to exceed $10,000,000. It
is our belief that the purchase of these shares should result in
a higher percentage return on stockholders equity over the long
term," Mr. Griffin concluded.
July 24, 1996
VIA FACSIMILE AND U.S. MAIL
Mr. Robert E. Griffin
Chairman
Escalade, Inc.
P.O. Box 889
817 Maxwell Avenue
Evansville, Indiana 47706
Fax: (812) 467-1300
Dear Bob:
I am pleased to inform you that Bank One, Indianapolis, N.A. (the
"Bank") has approved the restructuring of and an increase in the amount of the
Term Loan provided to Escalade, Inc. (the "Borrower") pursuant to an Amended
and Restated Credit Agreement dated May 31, 1996 (the "Credit Agreement")
subject to the following terms and conditions:
Borrower: Escalade, Inc.
Guarantors: Indian Industries, Inc., Martin Yale Industries, Inc.,
Escalade International, Inc. and Harvard Sports, Inc.
Amount: Thirteen Million Nine Hundred Thousand Dollars
($13,900,000).
Purpose: To finance the repurchase of stock by the Borrower from
existing shareholders in a tender offer filed with and in
compliance with regulations of the Securities and Exchange
Commission or through open-market purchases in an aggregate
amount not to exceed Ten Million Dollars ($10,000,000), to
refinance an Industrial Revenue Bond held by the Citizens
Bank, Evansville in the approximate amount of Six Hundred
Forty Eight Thousand Dollars ($648,000) and to refinance the
existing Term Loan in the amount of Three Million Two
Hundred Fifty Thousand Dollars ($3,250,000).
The Term Loan may be funded in two separate disbursements.
Interest Rate: Interest will accrue and be payable, at the Borrower's
option, at the Bank's Prime Rate plus the applicable
spread set forth below, or the London Interbank
Offered Rate (LIBOR) plus the applicable spread set
forth below, based upon the Borrower's consolidated
Funded Debt to EBITDA Ratio as follows:
Funded Debt LIBOR Prime
to EBITDA Ratio Spread Spread
>3.00 to 1.00 225 bp 25 bp
2.50-2.99 to 1.00 200 bp 25 bp
2.00-2.49 to 1.00 175 bp 0 bp
1.50-1.99 to 1.00 150 bp 0 bp
<1.50 - 1.00 125 bp 0 bp
The initial interest rate will be set at the highest spread
set forth above and will thereafter adjust annually,
effective as of January 1 of each year, upon receipt of the
Borrower's audited fiscal year end financial statement and
calculation of the Borrower's Funded Debt to EBITDA Ratio.
Interest shall be based on a 360-day year applied to the
actual number of days elapsed and shall be payable monthly
on the last Banking Day of each month and at maturity.
LIBOR based borrowings are for periods of 30, 60, 90, or 180
days, are for a minimum of One Million Dollars ($1,000,000)
and certain prepayment penalties will apply to prepayments
of any LIBOR-based rate borrowing.
Commitment Fee:A commitment fee of $70,000 shall be payable upon execution
of this commitment letter by the Borrower, which commitment
fee will be deemed earned upon receipt by the Bank and will
be nonrefundable.
Repayment: Principal shall be repaid in equal quarterly payments of
Five Hundred Thousand Dollars ($500,000) commencing
September 30, 1996 with the balance, if any, due on
September 30, 2001.
An excess cash flow recapture payment equal to 50% of the
sum of the Borrower's consolidated fiscal year net income
before taxes plus interest expense plus depreciation and
amortization expense plus any non-recurring or extraordinary
charges minus the sum of scheduled Term Loan principal
payments plus interest expense plus cash income taxes plus
capital expenditures not financed with term debt, will be
payable within 10 days of the Bank's receipt of the
Borrower's audited fiscal year end statement. Such payments
shall be applied against the latest maturing installment of
principal.
Collateral: To be secured by the pledge of all personal property of the
Borrower and Guarantors including all accounts receivable,
inventories, machinery and equipment, general intangibles
and by the common stock of Indian Industries, Inc., Martin
Yale Industries, Inc., Escalade International, Inc. and
Harvard Sports, Inc. (collectively the "Collateral"). In
addition, all other indebtedness of the Borrower to the
Bank, including but not limited to the Revolving Loan, shall
be secured by the Collateral.
TERMS AND CONDITIONS:
1. There has been no material adverse change in the financial condition of
the Company or its subsidiaries from that reflected in the Borrower's
June 15, 1996 financial statement.
2. The Applicable Rate of the Borrower's existing Revolving Loan, Martin
Yale Industries, Inc.'s Direct Pay Letter of Credit and the Letters of
Credit commitment will be restructured concurrent with the initial
funding of the Term Loan according to the Borrower's consolidated Funded
Debt to EBITDA Ratio as follows:
<TABLE>
<CAPTION>
Revolving Loan Letters of Credit
-------------- -----------------
Funded Debt Libor Prime Unused Documentary Standby
to EBITDA Ratio Spread Spread Fee Fee Fee
- --------------- ------ ------ ------ ----------------------------
<S> <C> <C> <C> <C> <C>
>3.00 to 1.00 200 bp 25 bp 3/8% 1/2% flat 1-1/2% p.a.
2.50-2.99 to 1.00 175 bp 0 bp 3/8% 7/16% flat 1-3/8% p.a.
2.00-2.49 to 1.00 150 bp 0 bp 1/4% 3/8% flat 1-1/4% p.a.
1.50-1.99 to 1.00 125 bp 0 bp 1/4% 5/16% flat 1-1/8% p.a.
<1.50 - 1.00 100 bp 0 bp 1/4% 1/4% flat 1% p.a.
</TABLE>
An additional 3/8% fee on Martin Yale Industries, Inc.'s Direct Pay
Letter of Credit will be due at closing of the Term Loan for the period
from the date of closing through May 1, 1997. The Direct Pay Letter of
Credit fee will thereafter, adjust on its May 1 annual commission due
date.
The initial Applicable Rate for the Revolving Loan and the Unused Fee
will be set at the highest rate set forth above and will thereafter
adjust annually, effective January 1 of each year, upon receipt of the
Borrower's audited fiscal year end financial statement and calculation
of the Borrower's Funded Debt to EBITDA ratio. The Documentary and
Standby Fees will initially be set at the highest fee set forth above,
and will thereafter adjust annually upon receipt of the Borrower's
audited fiscal year end financial statement and calculation of the
Borrower's Funded Debt to EBITDA ratio and will not be adjusted
retroactively.
3. The Borrower's Credit Agreement and Martin Yale Industries, Inc.'s
Credit Agreement dated June 4, 1990, as amended, will be amended to
incorporate the terms and conditions of this commitment. The principal
changes to the Credit Agreement will include but may not be limited to:
a. Provide for the repurchase of shares of the Borrower's common
stock from existing shareholders through a tender offer or open-market
purchases in an aggregate amount not to exceed $10,000,000.
Repurchases of common stock thereafter will be prohibited.
b. Limit consolidated annual capital expenditures to the amount of
the Borrower's prior year consolidated depreciation expense.
c. Maintain a minimum consolidated Debt Service Coverage ratio of:
Period Ratio
at closing through fiscal year end 1998 1.10 to 1
at fiscal year end 1998 through fiscal year end 1999 1.15 to 1
at fiscal year end 1999 and thereafter 1.20 to 1
The Debt Service Coverage ratio will be defined as the sum of
Borrower's consolidated net income before taxes plus interest
expense plus depreciation and amortization expense plus non-recurring
and extraordinary charges divided by the sum of
scheduled Term Loan and term debt payments (excluding excess cash
flow recapture payments) plus interest expense plus cash income
taxes plus capital expenditures not financed with term debt. The
Debt Service Coverage ratio shall be calculated on a rolling four
quarter basis.
d. Not exceed a Funded Debt to EBITDA ratio of:
Period Ratio
at closing through fiscal year end 1997 3.50 to 1
at fiscal year end 1997 through fiscal year end 1998 3.25 to 1
at fiscal year end 1998 through fiscal year end 1999 3.00 to 1
at fiscal year end 1999 through fiscal year end 2000 2.75 to 1
at fiscal year end 2000 and thereafter 2.50 to 1
e. Maintain a minimum Tangible Net Worth of not less than $500,000
below the Borrower's consolidated Tangible Net Worth as of the
date of funding of the tender offer (after giving effect to the
tender offer and its related transaction expenses) through
December 28, 1996 and thereafter increasing annually at each
fiscal year end by 50% of net income, exclusive of losses.
4. The Bank is to be provided copies of all Securities and Exchange
Commission filings relating to the tender offer.
5. The Bank will employ outside legal counsel, at the Borrower's expense,
not to exceed $7,500.00, to prepare all Bank related documents,
including but not limited to Amendments to the Credit Agreement,
Security Agreements, Amendments to Guaranties and Pledge Agreements.
The Borrower will be responsible for all out of pocket expenses of the
Bank or its counsel incurred to perfect its security interests in the
Collateral including all UCC filing and search fees. Additional legal
fees and expenses may be incurred for the perfection of security
interests in personal property of the Borrower or Guarantors held
outside the United States and, if incurred, will be the Borrower's
responsibility.
6. The Borrower and the Guarantors will be required to execute and deliver
resolutions, counsel opinions, officers' certificates and such other
documents as the Bank and its counsel deem necessary or desirable.
This commitment shall expire July 31, 1996, unless extended by the Bank in
writing. Please evidence your acceptance of this commitment by signing below
where indicated and return the original of this letter to my attention
together with your check in the amount of $70,000 in payment of the commitment
fee.
Very truly yours,
D. Kelly Queisser, Vice President and
Senior Relationship Manager
Accepted this _________________ day of July, 1996.
ESCALADE, INC.
By
Robert E. Griffin, Chairman
cc: John R. Wilson
W.C. (Bill) Reed
SS-79479-1
Independent Auditor's Report
To the Stockholders and Board of Directors
Escalade, Incorporated
Evansville, Indiana
We have audited the consolidated balance sheet of Escalade,
Incorporated and subsidiaries as of December 30, 1995 and December
31, 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in
the period ended December 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Escalade, Incorporated and subsidiaries at
December 30, 1995 and December 31, 1994 and the results of their
operations and their cash flows for each of the three years in the
period ended December 30, 1995 in conformity with generally
accepted accounting principles.
As discussed in the notes to consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993.
GEO. S. OLIVE & CO.LLC
Evansville, Indiana
February 9, 1996
<TABLE>
Escalade, Incorporated and Subsidiaries
Consolidated Balance Sheet
<CAPTION>
December 30 and December 31 1995 1994
<S> <C> <C>
Assets
Current assets
Cash $ 1,246,668 $ 994,501
Receivables, less
allowances of $726,352 and
$777,195 25,285,014 31,871,914
Inventories 15,151,696 24,436,481
Prepaid expenses 266,770 258,462
Income tax refundable 275,000 398,909
Deferred income tax benefit 1,828,489 1,644,261
----------- ------------
Total current assets 44,053,637 59,604,528
Property, plant and equipment 11,223,763 13,709,966
Other assets 1,827,628 1,862,373
Deferred income tax benefit 662,326 705,699
----------- ------------
$57,767,354 $75,882,566
=========== ============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable--bank $14,350,000 $29,237,500
Current portion of long-term debt 2,382,500 1,977,500
Trade accounts payable 2,369,637 3,585,944
Accrued liabilities 7,553,307 7,967,063
Federal income tax payable 329,072
----------- -----------
Total current liabilities 26,984,516 42,768,007
----------- -----------
Other liabilities
Long-term debt 6,265,500 9,148,000
Deferred compensation 1,178,863 1,077,762
----------- ----------
7,444,363 10,225,762
----------- ----------
Stockholders' equity
Preferred stock
Authorized 1,000,000 shares;
no par value, none issued
Common stock
Authorized 10,000,000 shares;
no par value Issued and
outstanding 4,133,954
and 4,133,361 shares for
1995 and 1994 17,572,397 17,570,452
Retained earnings 5,766,078 5,318,345
----------- ----------
23,338,475 22,888,797
----------- ----------
$57,767,354 $75,882,566
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Escalade, Incorporated and Subsidiaries
Consolidated Statement of Income
<CAPTION>
Years Ended December 30, December 31,
and December 25 1995 1994 1993
<S> <C> <C> <C>
Net Sales $91,178,757 $102,594,116 $94,734,870
----------- ------------ -----------
Costs, Expenses and Other Income
Cost of products sold 73,443,333 83,432,921 72,269,412
Selling, administrative and
general expenses 13,867,421 16,297,865 15,995,677
Restructuring charge 1,040,000 4,340,053
Write-off of goodwill 399,000
Interest 2,267,620 2,120,104 1,588,721
Other income (274,483) (308,423) (233,949)
----------- ------------ -----------
90,343,891 106,281,520 89,619,861
----------- ------------ -----------
Income (Loss) Before Income Taxes
and Cumulative Effect of a Change
in Accounting Method 834,866 (3,687,404) 5,115,009
Provision (Benefit) for Income Taxes 387,133 (1,283,983) 1,991,766
----------- ------------ -----------
Income (Loss) Before Cumulative
Effect of a Change in Accounting
Method 447,733 (2,403,421) 3,123,243
Cumulative Effect of Change in
Accounting for Income Taxes 3,089,893
----------- ------------ -----------
Net Income (Loss) $ 447,733 $ (2,403,421) $ 6,213,136
----------- ------------ -----------
Per Share Data
Income (loss) before cumulative
effect of a change in accounting
method $.11 $(.58) $.76
Cumulative effect of change in
accounting for income taxes ----------- ------------ ----------- .75
Net income (loss) per share $.11 $(.58) $1.51
=========== ============ ===========
Weighted average shares outstanding 4,133,566 4,128,865 4,110,611
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Escalade, Incorporated And Subsidiaries
Consolidated Statement of Stockholders' Equity
<CAPTION>
Common Stock Retained
Shares Amount Earnings
-------------------------------------------
<S> <C> <C> <C>
Balances at December 26, 1992 4,109,734 $11,796,628 $7,142,245
Exercise of stock options 2,127 11,313
Net income 6,213,136
Common stock dividend 5,631,454 (5,631,454)
---------- ----------- ----------
Balances at December 25, 1993 4,111,861 17,439,395 7,723,927
Exercise of stock options 21,500 131,057
Net loss (2,403,421)
Cash paid for fractional shares (2,161)
---------- ----------- ----------
Balances at December 31, 1994 4,133,361 17,570,452 5,318,345
Exercise of stock options 593 1,945
Net income 447,733
---------- ------------ ----------
Balances at December 30, 1995 4,133,954 $17,572,397 $5,766,078
========== ============= ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Escalade, Incorporated And Subsidiaries
Consolidated Statement of Cash Flows
<CAPTION>
Years Ended December 30, December 31
and December 25 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ 447,733 $(2,403,421) $6,213,136
Items not affecting net cash
provided (used) by
operating activities
Depreciation and amortization 3,618,194 4,436,609 3,204,703
Provision for losses on accounts
receivable 175,559 181,732 354,403
Provision for deferred income
tax (140,855) (1,251,833) (1,098,127)
Provision for deferred
compensation 98,101 93,133 79,256
Provision for restructuring
charges 1,040,000 4,340,053
Gain on disposals of equipment (23,293) (699) (2,730)
Amortization of prepaid loan
fees 8,502 8,502 8,502
Write-off of goodwill 399,000
Change in cash surrender value
(net of loans and premiums) (39,407) (31,298) (8,075)
Changes in
Accounts receivable 6,411,341 (2,717,424) (3,991,108)
Income tax refundable 123,909 (142,631) 2,558,165
Inventories 8,244,785 (7,636,716) (1,263,100)
Prepaids (8,308) (57,434) (52,334)
Other assets 9,289 83,509 (51,305)
Income tax payable 329,072
Accounts payable and accrued
expenses (1,628,264) (998,164) (1,553,909)
---------- ---------- ----------
Net cash provided (used) by
operating activities 18,666,358 (5,697,082) 4,397,477
---------- ---------- ----------
Investing Activities
Premiums paid for life insurance (131,600) (35,000) (85,800)
Proceeds from non-trade notes
receivable 21,630
Purchase of property and equipment (1,144,922) (4,262,437) (5,674,406)
Proceeds from sale of property and
equipment 34,425 10,000 13,700
Purchase of long-term investments (99,256) (917,407) (73,065)
Purchase of certain Data-Link
Corporation assets (900,000)
Proceeds from sale of long-term
investments 290,217 9,500 5,521
---------- ---------- ----------
Net cash used by investing
activities (1,051,136) (6,095,344) (5,792,420)
---------- ---------- ----------
Financing Activities
Net increase (decrease) in notes
payable--bank $(14,887,500) $14,675,000 $2,462,500
Proceeds from exercise of stock
options 1,945 131,057 11,313
Cash paid for fractional shares (2,161)
Proceeds from loan against life
insurance 15,000 20,000
Reduction of long-term debt (2,477,500) (2,514,500) (1,615,000)
------------ ------------ -----------
Net cash provided (used) by
financing activities (17,363,055) 12,304,396 878,813
------------ ------------ -----------
Increase (Decrease) in Cash 252,167 511,970 (516,130)
Cash, Beginning of Year 994,501 482,531 998,661
------------ ------------ ------------
Cash, End of Year $ 1,246,668 $ 994,501 $ 482,531
============ ============ ============
Supplemental Cash Flows Information
Interest paid $ 2,332,038 $ 1,864,327 $ 1,503,958
Income taxes paid (refunded), net (413,773) 891,607 (2,558,165)
Fixed assets in accounts payable 10,000 11,799 72,137
<FN>
See notes to consolidated financial statements.
</TABLE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Escalade is primarily engaged in the manufacture and sale of
sporting goods and office and graphic arts products. The Company
is located in Evansville, Indiana and has four manufacturing
facilities, one in Evansville, Indiana, Compton, California,
Tijuana, Mexico, and Wabash, Indiana. The Company sells products
to customers throughout the United States and provides foreign
shipments of sporting goods through a foreign sales corporation.
The consolidated financial statements include the accounts of all
significant subsidiaries. Intercompany transactions have been
eliminated.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Inventories are stated at the lower of cost or market. Cost is
based on the first-in, first-out method.
The Company has long-term marketable equity securities, which are
included in other assets on the consolidated balance sheet and are
recorded at fair value. The effects of Statement of Financial
Accounting Standard (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities, is not material to the
financial statements.
Land, buildings and equipment are recorded at cost. Contracts
under which certain facilities are leased have been treated as
purchases. Provisions for depreciation and amortization are
computed by the straight-line and double declining balance methods.
The estimated useful lives used in computing depreciation are as
follows:
Years
Buildings 20 to 30
Leasehold improvements 4 to 8
Machinery and equipment 5 to 15
Tooling, dies and molds 2 to 4
Maintenance and repairs are expensed and major renewals and
improvements are capitalized. The cost of assets sold or otherwise
disposed of, and the related allowances for depreciation, are
eliminated from the accounts in the year of disposal and the
resulting gains or losses are included in operations.
Earnings per common share information is based on average shares
outstanding adjusted for stock dividends. Dilutive effects of
stock options and warrants were not material in any year.
The Company's fiscal year ends on the Saturday nearest December 31,
within the calendar year.<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
The Company has an employee profit sharing salary reduction plan,
pursuant to the provisions of Section 401(k) of the Internal
Revenue Code, for non-union employees. It is the Company's policy
to fund costs accrued on a current basis.
Deferred federal income taxes applicable to the difference between
financial statement income and taxable income and the bases of
assets and liabilities for financial statement and tax purposes are
provided in the financial statements.
The Company paid no cash dividends during the last three fiscal
years. The Company's existing bank indebtedness restricts the
payment of cash dividends which would exceed 25% of consolidated
net income for any fiscal year.
On February 19, 1994, the Board of Directors of the Company
declared a 15% stock dividend to stockholders of record on March
11, 1994. The dividend was paid March 31, 1994. All share and per
share data was adjusted to reflect the stock dividend.
The Company expenses advertising costs as incurred. Advertising
costs were $3,874,981, $5,411,800 and $4,491,089 for 1995, 1994 and
1993.
Research and development costs are charged to income as incurred.
The research and development costs incurred during 1995, 1994 and
1993 were $1,700,000, $2,300,000 and $1,500,000, respectively.
From time to time during the year, the Company's cash accounts
exceeded federally insured limits.
INVENTORIES
December 30 and December 31 1995 1994
Finished products $ 5,323,465 $13,117,361
Work in process 3,135,909 3,723,052
Raw materials and supplies 6,692,322 7,596,068
----------- -----------
$15,151,696 $24,436,481
=========== ===========
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
PROPERTY, PLANT AND EQUIPMENT
December 30 and December 31 1995 1994
Land $ 340,210 $ 340,210
Buildings and leasehold improvements 9,672,666 9,862,687
Machinery and equipment 23,051,491 27,321,979
------------ ----------
33,064,367 37,524,876
Accumulated depreciation and amortization (21,840,604) (23,814,910)
------------ ----------
$ 11,223,763 $13,709,966
============ ===========
LONG-TERM DEBT
December 30 and December 31 1995 1994
Mortgage payable, due in annual installments
varying from $307,500 in 1996 to $340,500
in 1997, 88% of prime (current prime 8 1/4%),
due 1997, secured by real estate $ 648,000 $ 925,500
Mortgage payable, due in annual installments
varying from $200,000 in 1996 to $500,000
in 2005, interest varies from 7.55% to 7.95%,
due 2005, secured by plant facility,
machinery and equipment, and letter of credit 3,500,000 3,700,000
Term loan, due in quarterly installments
varying from $625,000 in 1996 to $1,000,000
in 1997, interest varies from prime plus .75%
or London Interbank Offered Rate (LIBOR)
plus 2.50%, unsecured 4,500,000 6,500,000
----------- -----------
8,648,000 11,125,500
Portion classified as current (2,382,500) (1,977,500)
------------ ------------
$ 6,265,500 $ 9,148,000
============ ============
Maturities of long-term indebtedness for the ensuing five years
are: 1996, $2,382,500; 1997, $3,265,500; 1998, $300,000; 1999,
$300,000; 2000, $300,000 and thereafter, $2,100,000.
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
The mortgages payable and term loan agreements contain certain
restrictive covenants, of which the more significant include
maintenance of specified net worth and working capital,
restrictions on capital expenditures and dividends, and maintenance
of specified ranges of current and leverage ratios. At December 30,
1995, the Company was in violation of the net worth covenant;
however, the lender waived compliance with this covenant.
STOCK OPTIONS AND WARRANTS
A total of 227,700 common shares were initially reserved for
issuance of stock options under the 1984 Stock Option Plan. At the
Company's 1991 annual meeting, the stockholders approved an
amendment to the Incentive Stock Option Plan increasing the total
number of common shares reserved for issuance of stock options to
345,000. Total options granted under this plan are 331,205 and the
date for granting options expired on October 26, 1994.
Stock option transactions (adjusted for the 1994 15% stock
dividend) are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------------------------------------
Option Option Option
Shares Price Shares Price Shares Price
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning
of year 204,211 $3.26 to 162,358 $3.26 to 139,415 $3.26 to
6.93 8.59
Issued during year 71,374 $5.50 to
7.25 81,650 6.30 to
6.93
Canceled or expired 7,037 (8,021) (56,580)
Exercised during year 593 $3.26 (21,500) $3.26 to $3.26 to
6.30 (2,127) $6.72
---------------------------------------------------------------
Outstanding at end of
year $3.26 to $3.26 to $3.26 to
196,581 7.25 204,211 $7.25 162,358 6.93
======= ======= =======
Exercisable at end
of year 92,925 45,928 33,672
======= ======= =======
</TABLE>
The options granted in 1993 and 1994 are exercisable at the rate of
25% over each of the four years beginning in 1994 and 1995.
In connection with the Company's 1987 public offering of its common
stock, the Company sold to Oppenheimer & Co., Inc., the
representative of the underwriters for such offering, warrants to
purchase 75,900 shares of common stock for $.85 per warrant, or an
aggregate of $65,000. Each warrant gives the holder the right to
buy one share of the Company's common stock at a price equal to
$12.33. Each warrant became exercisable on September 2, 1988 and
the initial termination date of September 1, 1992 was extended by
three years to September 1, 1995. These warrants expired during
1995.
To acquire all of the common stock of Marcy Fitness Products, Inc.,
the Company exchanged 272,113 Escalade warrants with an exercise
price of $9.13 per share. The warrants are exercisable until
August 19, 1999. These warrants are outstanding at December 30,
1995.<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
OPERATING LEASES
The Company leases manufacturing, warehousing and office space at
three locations. The Company's Evansville facilities are held
subject to a mortgage. The Company leases its Compton facilities
for $29,600 per month from October 1, 1990 through March 31, 1998.
The Company has a five-year option to extend the lease. On April
1, 1993, the Company leased a new warehouse facility adjacent to
its Compton facilities for $21,000 per month through March 31,
1998. The Company has a five year option to extend this lease.
The Company intends to vacate this warehouse facility in 1996 and
will negotiate a lease cancellation.
At December 30, 1995, the minimum rental payments under
noncancelable leases with terms of more than one year are as
follows:
Years Ending Amount
- --------------------------------------------------------------------
1996 $ 636,192
1997 632,723
1998 152,587
----------
$1,421,502
==========
The following schedule shows the composition of total rental
expense for operating leases except those with terms of a month or
less:
1995 1994 1993
--------------------------------------
Rentals $638,670 $656,670 $663,544
======================================
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 30, December 31,
and December 25 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $329,072 $ 132,240
State 198,916 (164,390)
---------------------------
527,988 (32,150)
---------------------------
Deferred
Federal (85,548) (1,070,217) $1,591,255
State (55,307) (181,616) 400,511
------------------------------------------
(140,855) (1,251,833) 1,991,766
------------------------------------------
$387,133 $(1,283,983) $1,991,766
==========================================
</TABLE>
The provision for income taxes was computed based on financial
statement income. A reconciliation of the provision for income
taxes to the amount computed using the statutory rate follows:
<TABLE>
<CAPTION>
Years Ended December 30, December 31,
and December 25 1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rate $283,854 $(1,253,717) $1,739,103
Increase (decrease) in income tax
resulting from
Recurring permanent differences
(goodwill amortization, dividend
exclusion, and non-deductible
officers' life insurance expense) (5,522) 10,196 7,595
State tax expense (benefit)--
net of federal effect 94,782 (228,364) 264,337
Benefit of foreign subsidiary
loss not recognized 138,846 76,373 19,886
Other (124,827) 111,529 (39,155)
-------------------------------------------
Provision (benefit) for income
taxes recorded $387,133 $(1,283,983) $1,991,766
===========================================
</TABLE>
The Company had alternative minimum tax credit carryforwards in the
amount of $362,713 at December 30, 1995. Such credits do not have
expiration dates.
The $834,866 income before income taxes for the year ended December
30, 1995 was comprised of $408,370 foreign losses and $1,243,236
domestic income. The $3,687,404 loss before income taxes for the
year ended December 31, 1994 was comprised of $224,626 foreign
losses and $3,462,778 domestic losses.
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
In 1993, the Company adopted SFAS No. 109. The change required by
SFAS No. 109 resulted in the recording of a deferred tax asset of
$3,089,893 in the first quarter of 1993.
At December 30, 1995 and December 31, 1994, a cumulative deferred
tax asset of $2,490,815 and $2,349,960 is included in current and
other assets.
The components of the net deferred tax asset were as follows:
December 30 and December 31 1995 1994
- -----------------------------------------------------------------------
Depreciation $ 78,654 $ 32,534
Deferred compensation 447,662 473,676
Valuation reserves 851,968 774,001
Net operating loss carryover 272,823
Alternative minimum tax
credit carryover 362,713 220,594
Differences in accounting
for royalties 88,390 144,000
Differences in accounting
for goodwill 135,846 148,960
Differences in accounting
for employee benefits 234,877 283,372
Differences in accounting
for lease expense 182,672
Differences in accounting
for professional fees 108,033
------------------------------------
$ 2,490,815 $2,349,960
====================================
EMPLOYEE BENEFIT PLANS
The Company has an employee profit sharing salary reduction plan,
pursuant to the provisions of Section 401(k) of the Internal
Revenue Code, for non-union employees. The Company's contribution
is a matching percentage of the employee contribution as determined
by the Board of Directors annually. The Company's expense for the
plan was $60,940, $111,808 and $343,563 for 1995, 1994 and 1993.
<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
SEGMENT INFORMATION AND CONCENTRATIONS
<TABLE>
<CAPTION>
Years Ended December 30, December 31,
and December 25 1995 1994 1993
(In Thousands)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers
Sporting goods $73,858 $ 85,318 $80,397
Office and graphic arts products 17,321 17,276 14,338
----------------------------------------------
Total consolidated $91,179 $102,594 $94,735
==============================================
Operating profit (loss)
Sporting goods $ (262) $ (4,303) $ 4,623
Office and graphic arts products 3,363 2,872 2,105
Corporate (273) (445) (258)
-----------------------------------------------
Total consolidated 2,828 (1,876) 6,470
Consolidated other income 274 309 234
-----------------------------------------------
3,102 (1,567) 6,704
Consolidated interest expense 2,267 2,120 1,589
-----------------------------------------------
Consolidated income (loss) from
operations before income taxes $ 835 $ (3,687) $ 5,115
===============================================
Identifiable assets
Sporting goods $43,122 $61,475 $55,108
Office and graphic
arts products 10,317 10,039 9,072
Corporate 4,328 4,369 1,962
-----------------------------------------------
Total assets $57,767 $75,883 $66,142
===============================================
Depreciation and
amortization
charged to operations
Sporting goods $ 2,886 $ 3,827 $ 2,625
Office and graphic
arts products 732 610 580
-----------------------------------------------
Total consolidated $ 3,618 $ 4,437 $ 3,205
===============================================
Capital expenditures
Sporting goods $ 617 $ 3,750 $ 5,324
Office and graphic
arts products 526 452 361
-----------------------------------------------
$ 1,143 $ 4,202 $ 5,685
===============================================
</TABLE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
The Company operates principally in two industries, sporting goods
and office and graphic arts products. The Company sells its
products primarily to retailers located throughout the United
States. Operations in the sporting goods industry consist of
production and sale of table tennis tables and accessories, archery
equipment, home pool tables and accessories, combination bumper
pool and card tables, game tables, basketball backboards, goals and
poles, darts, dart cabinets, volleyball and badminton equipment,
junior sporting goods including Mini Ping Pong, Mini Pool , Mini
Court basketball and Shot Clock basketball and home fitness
machines, weight benches, cast iron weight sets, and other home
fitness accessories. The Company has a licensing agreement with
Spalding to manufacture and distribute basketball backboards, goals
and poles; volleyball and badminton sets, croquet, horseshoe,
tether ball, bocce ball, flying discs, indoor darts, table tennis
sets and pool accessories under the Spalding brand name.
Operations in the office and graphic arts products industry consist
of production and sale of paper trimmers, paper folding machines,
paper drills, collators, decollators, bursting machines, letter
openers, automated paper joggers, electric staplers, checksigners,
stamp affixers, paper shredders, bindery carts, platemakers, sinks,
light tables, cameras and related accessories.
Operating profit is total revenue less operating expenses. In
computing operating profit neither interest expense nor income
taxes have been deducted.
Identifiable assets are principally those assets used in each
industry. Corporate assets are principally deferred taxes,
marketable equity securities and the cash surrender value of life
insurance.
In 1995, approximately 42% of the sporting goods were sold to
Sears, Roebuck & Co. (34% of consolidated sales). In 1994 and
1993, the percentages were 32% (27% consolidated) and 23% (20%
consolidated). At December 30, 1995, accounts receivable included
$10,439,845 due from Sears, Roebuck & Co.
During 1994, the Company announced that it intended to distribute
100% of the stock of its wholly owned subsidiary, Martin Yale
Industries, Inc., to its stockholders. The Company's Board of
Directors will discuss this distribution and other ways of
increasing stockholder value in future meetings.
Approximately 44% of the Company's labor force is covered by
collective bargaining agreements. Management acknowledges that
there usually will be differences between Company offers and union
demands during negotiations. However, management has no reason to
expect such differences to result in protracted conflict. The
current contracts all expire in 1997.
<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
CERTAIN SIGNIFICANT ESTIMATES
Management's estimates that influence the financial statements are
normally based on knowledge and experience about past and current
events and assumptions about future events. The following
estimates affecting the financial statements are particularly
sensitive because of their significance, and it is at least
reasonably possible that a change in these estimates will occur in
the near term:
Product warranty reserves based on an analysis of customers'
product return histories, current status, sales volume and
management's expectations from new products introduced into the
market.
Customer allowance reserves based on agreements for customer
purchase rebates and shared advertising, and prior year's
shipments.
Inventory valuation reserves based on estimates of costs of
inventory amounts overstocked or obsolete in excess of realizable
value.
ADDITIONAL INFORMATION
December 30 and December 31 1995 1994
- ----------------------------------------------------------------------
Accrued Liabilities
Employees' compensation $1,031,435 $1,569,859
Payroll taxes and taxes withheld
from employees' compensation 167,499 280,238
Taxes other than taxes on income 460,066 229,915
Accrued interest 182,362 291,933
Customer volume discounts payable 1,522,000 2,131,852
Other accrued items 4,189,945 3,463,266
---------------------------
$7,553,307 $7,967,063
===========================
Long-Term Marketable Equity Securities
(included in other assets) $ 517,493 $ 445,497
===========================
<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
LINE OF CREDIT
The Company has available an unsecured line of credit for short-term
borrowings. The line-of-credit arrangement is based upon a
written agreement and can be withdrawn at the banks' option. At
December 30, 1995, the line of credit for short-term borrowings
aggregated $28,000,000, of which $14,350,000 was borrowed. The
interest rate on the line of credit is at the Bank One
Indianapolis, N.A. prime rate plus .50%. A LIBOR option is also
available to use for the interest rate. This line of credit is
subject to the same restrictive covenants that are as discussed in
the long-term debt footnote to the consolidated financial
statements.
DEFERRED COMPENSATION PLAN
In October, 1985, the Board of Directors approved the adoption of a
Contributory Deferred Compensation Plan pursuant to which some
recipients of incentive compensation could elect to defer receipt
thereof. For each dollar of deferred compensation, the Company
provided a 75% matching amount. Amounts deferred earn interest at
the rate of 9%. Such amounts are not intended to be recognized for
tax purposes until receipt. All deferrals allowed under this plan
have been made. Participants have no vested rights in deferred
amounts credited to their accounts and are general creditors of the
Company until such amounts are actually paid.
COMMITMENTS AND CONTINGENCIES
At December 30, 1995, standby letters of credit aggregated
$4,000,000, of which the Company was obligated in the amount of
$769,076 relating to the purchase of certain raw materials and
finished goods from suppliers.
Additionally, the Company has obtained a letter of credit for the
benefit of the mortgage holders. At December 30, 1995, the balance
of the letter of credit was $3,649,479. It is to be used in the
event of a default in either interest or principal payments.
The Company is involved in litigation arising in the normal course
of its business. The Company does not believe that the disposition
or ultimate resolution of existing claims or lawsuits will have a
material adverse effect on the business or financial condition of
the Company.
<PAGE>
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
RESTRUCTURING CHARGE
During the fourth quarter of 1994, a restructuring charge of
$4,340,053 before taxes was recorded in connection with various
restructuring actions taken by the Company to strengthen its
sporting goods segment. Product lines and products within those
lines were reviewed for sales viability and profitability. This
charge included writedowns associated with discontinued products of
$2,807,414 for inventory; $802,100 for tooling; $360,000 for
royalty minimums; and $370,539 for severance arrangements.
The exit plan for this restructuring charge was completed in the
fourth quarter of 1995. In the second quarter of 1995, an
additional $1,040,000 restructuring charge was taken as a part of
the 1994 restructuring charge. This additional amount, related to
the discontinued product writedown, was the result of larger than
anticipated markdowns to sell this inventory. There were no other
material differences in the actual vs. estimated costs of the exit
plan. The exit plan was completed in the fourth quarter of 1995
with the sale of the marked down discontinued product.
SUMMARY OF QUARTERLY RESULTS
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data)
(Unaudited)
1995 March 25 July 15 October 7 December 30
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $18,110 $19,160 $22,857 $31,052
Gross profit 3,993 3,459 4,805 5,479
Net income (loss) (41) (1,418) 589 1,318
Earnings (loss) per
share (.01) (.34) .14 .32
</TABLE>
<TABLE>
<CAPTION>
1994 March 19 July 9 October 1 December 31
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $14,200 $19,340 $25,395 $43,659
Gross profit 2,612 3,606 5,530 7,413
Net income (loss) (677) (1,030) 657 (1,353)
Earnings (loss) per
share (.16) (.25) .16 (.33)
</TABLE>
ACQUISITIONS
ACQUISITION OF SWEDEN TABLE TENNIS AB
On February 2, 1994, the Company, along with the Bandstigen Family
and AB Traction, purchased Sweden Table Tennis AB. The Bandstigen
Family of Sweden has been actively involved with table tennis
internationally since the late 1960's. AB Traction is a major
Swedish venture-capital company. Sweden Table Tennis AB
manufactures and distributes products under the Stiga and Banda
brand names. These products are sold in 75 countries throughout
the world. Sweden Table Tennis AB has offices and warehousing in
Eskilstuna, Sweden and a manufacturing plant in Tranas, Sweden.
Escalade is the North American distributor of Stiga brand products
and is the world's only licensed manufacturer of Stiga table tennis
tables.
Escalade, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
Escalade owns 37.5%, the Bandstigen Family owns 37.5% and AB
Traction owns 25% of Sweden Table Tennis AB. The Company made an
equity investment of 675,000 SEK and a loan of 3,000,000 SEK
($85,357 and $379,363 in U. S. dollars). The loan has an interest
rate of 12.75%. Interest on the loan was paid through October 31,
1995. The investment in Sweden Table Tennis AB by all the
principals was switched to Valhalla and Sweden Table Tennis is now
owned by Valhalla, which is owned by the same principals in the
same percentages.
ACQUISITION OF CREATUM AB (NOW VALHALLA FASTIGHETS AB)
On June 20, 1994, the Company, along with the Bandstigen Family,
each purchased 37.5% of Creatum AB from AB Traction. Creatum AB
owns the real estate in Eskilstuna, Sweden where Sweden Table
Tennis AB has its offices and warehousing. Creatum AB leases these
facilities to Sweden Table Tennis AB. The Company made an equity
investment of 91,500 SEK and a loan of 2,062,000 SEK ($11,693 and
$262,908 in U. S. dollars). The loan had an interest rate of
12.50% and was paid in 1995. The name was changed in 1995 to
Valhalla Fastighets AB.
ACQUISITION OF PACIFIC WORLD TRADE, INC.
On June 7, 1994, the Company acquired a 10% ownership interest in
Pacific World Trade, Inc. (PWT). PWT is an Indiana based company
and will provide Escalade with two primary services, including the
management of the purchasing and supply and sales and distribution
functions in Asia. The 10% equity investment totalled $142,500.
Acquisition of Certain Data-Link Corporation Assets
In July, 1994, Martin Yale Industries, Inc., a wholly-owned
subsidiary of the Company, acquired certain assets of Data-Link
Corporation (Data-Link), which was a manufacturer of certain stamp
affixing products. The purchase price was $900,000, and is
allocated as follows:
Inventories $150,000
Equipment 351,000
Goodwill 399,000
---------
$900,000
=========
The combination was accounted for by using the purchase method.
The consolidated statement of income includes the results of
operations from the acquired division from the date acquired.
Historical results of operations prior to acquisition for the
assets acquired are not available and, therefore, no historical
data has been presented.
The remaining goodwill set up as a part of the Data-Link
acquisition was written off in the fourth quarter. This amounted
to $399,000. The main reason for this write off was due to lower
sales than projected in 1994 and anticipated lower sales in 1995
than originally projected. These reduced sales levels are the
result of the emergence of a competing product copied after the
Stamp E-Z affixer. This product was not on the market at the time
of purchase. While the Data-Link product will still be marketed
and sold, management determined that the goodwill has no future
value. Sales are only one-half of original expectations.
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands) July 13, July 15, December 30,
1996 1995 1995
ASSETS ------------------------------------
Current assets:
Cash $ 387 $ 351 $ 1,247
Receivables, less allowances of
$849, $690 and $726 12,800 13,501 25,285
Inventories 23,250 27,141 15,152
Prepaid expense 208 310 267
Income tax refundable --- 199 275
Deferred income tax benefit 1,648 2,750 1,828
------- ------- -------
TOTAL CURRENT ASSETS 38,293 44,252 44,054
Property, plant, and equipment 33,909 38,185 33,064
Accum. depr. and amortization (23,411) (25,906) (21,840)
------- ------- -------
10,498 12,279 11,224
Deferred income tax benefit 642 706 662
Other assets 1,816 1,847 1,827
------- ------- -------
$51,249 $59,084 $57,767
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 6,825 $17,600 $14,350
Current portion of long-term debt 3,858 2,727 2,383
Trade accounts payable 4,687 2,670 2,370
Accrued liabilities 7,241 6,328 7,553
Federal income tax payable 84 --- 329
------- ------- -------
TOTAL CURRENT LIABILITIES 22,695 29,325 26,985
Other Liabilities:
Long-term debt 3,340 7,198 6,265
Deferred compensation 1,067 1,131 1,179
------- ------- -------
4,407 8,329 7,444
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares;
no par value, none issued
Common stock:
Authorized 10,000,000 shares;
no par value,Issued and
outstanding - 4,111,889
4,133,361, and 4,133,954 at
7-13-96, 7-15-95, and 12-30-95
17,461 17,571 17,572
Retained earnings 6,686 3,859 5,766
------- ------- -------
24,147 21,430 23,338
------- ------- -------
$ 51,249 $59,084 $57,767
======= ======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
Three Months Ended Six Months Ended
July 13, July 15, July 13, July 15,
1996 1995 1996 1995
-------------------------------------------
Net sales $ 19,574 $19,160 $ 34,955 $37,270
Costs, expenses and other income:
Cost of products sold 13,816 15,701 24,944 29,818
Selling, administrative and
general expenses 4,315 4,100 7,867 7,621
Restructuring charge --- 1,040 --- 1,040
Interest 295 679 604 1,250
Other income ( 61) (42) (116) (95)
------- ------- ------- -------
18,365 21,478 33,299 39,634
INCOME (LOSS) BEFORE INCOME TAXES 1,209 (2,318) 1,656 (2,364)
Provision (benefit) 521 (900) 736 (905)
for income taxes ------- ------- ------- -------
NET INCOME (LOSS) $ 688 $(1,418) $ 920 $(1,459)
======= ======= ======= =======
Per share data:
NET INCOME (LOSS) $ .16 $ (.34) .22 $ (.35)
======= ======= ======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Six Months Ended
July 13,1996 July 15,1995
Operating Activities: -------------------------------
Net Income (Loss) $ 920 $(1,459)
Depreciation and amortization 1,571 2,091
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 6,580 12,222
------- -------
Net cash provided by operating
activities 9,071 12,854
------- -------
Investing Activities:
Purchase of property and equipment (845) (660)
------- -------
Net cash used by investing activities (845) (660)
------- -------
Financing Activities:
Net decrease in notes pay.- bank (7,525) (11,637)
Reduction of long-term debt (1,450) (1,201)
Proceeds from exercise of stock options 3 ---
Purchase of Common Stock (114) ---
------- -------
Net cash used by financing activities (9,086) (12,838)
------- -------
Decrease in cash ( 860) (644)
Cash, beginning of period 1,247 995
------- -------
Cash, end of period $ 387 $ 351
======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
- ------------------------------
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position of
the company as of July 13, 1996, July 15, 1995, and December 30, 1995 and the
results of operations and changes in financial position for the six months ended
July 13,1996 and July 13, 1995. The balance sheet at December 30, 1995 was
derived from the audited balance sheet included in the 1995 annual report to
shareholders.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the six month periods ended July 13, 1996
and July 15, 1995 are not necessarily indicative of the results to be expected
for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
7-13-96 7-15-95 12-30-95
------- ------- --------
Raw Materials $ 8,156 $10,433 $ 6,692
Work In Process 3,281 3,540 3,136
Finished Goods 11,813 13,168 5,324
------- ------- -------
$23,250 $27,141 $15,152
======= ======= =======
Note D - Earnings Per Share
- ---------------------------
Earnings (loss) per common and common equivalent shares are based on
average shares outstanding. Dilutive effects of stock options on net income
(loss) are not material. The number of shares used to calculate earnings (loss)
per share for the six months ended July 13, 1996 and July 15, 1995 was
4,122,359 and 4,133,361.
Note E - Income Taxes
- ---------------------
The provision (benefit) for income taxes was computed based on financial
statement income (loss).
Note F - Restructuring Charge
- -----------------------------
In the second quarter of 1995, an additional $1,040,000 restructuring
charge was taken as a part of the 1994 restructuring charge. This additional
amount, related to the discontinued product writedown, was the result of larger
than anticipated markdowns to sell this inventory. There were no other material
differences in the actual vs. estimated costs of the exit plan. The exit plan
was completed in the fourth quarter of 1995 with the sale of the marked down
discontinued product.
