<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
NOVEMBER 3, 1997
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
November 3, 1997
(Date Tender Offer First Published, Sent Or Given To Security Holders)
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee
$14,000,000 $2,800
* Determined pursuant to Rule 0-11(b)(1). Assumes the purchase of 1,000,000
shares at $14.00 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.
<PAGE> 2
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
$11.00 nor more than $14.00 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
October 31, 1997 (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 November 3,
1997, the Company had issued and outstanding 3,130,613 Shares and had reserved
for issuance upon exercise of outstanding stock options and warrants 412,018
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. Robert E. Griffin and C.W. Reed, directors of the Company and its
Chairman and President, respectively, have advised the Company that they will
not tender any of their Shares in this Offer. Messrs. Griffin and Reed own
beneficially an aggregate of 653,069 Shares as of October 31, 1997.
Yale Blanc, Gerald Fox, Blaine Matthews, Robert Orr, Keith Williams and
A. Graves Williams, the Company's six non-management directors, and John Wilson,
the Company's Secretary and Treasurer, have each advised the Company that he has
not made a final decision as to whether he will tender Shares in this Offer.
However, each such person has advised the Company that, if he were to
participate in this Offer, he would tender only a portion of his Shares
beneficially owned and not all of such Shares. Each of Messrs. Matthews, Orr, A.
Graves Williams and Wilson have further indicated that he is giving serious
consideration to tendering a portion of his Shares in this Offer, but has not
determined at what price such Shares would be tendered. Each of Messrs. Blanc,
Fox and Keith Williams have indicated that he is not likely to tender any Shares
in this Offer, but has reserved the right to do so. These seven individuals
owned beneficially an aggregate of 507,197 Shares as of October 31, 1997. The
information set forth on the cover page and under "Introduction" and "The Offer
- - Background and 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 - Background and
Purpose of the Offer; Certain Effects of the Offer" in Section 9 of the Offer to
Purchase is incorporated herein by reference.
<PAGE> 3
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-18 of the Company's Annual Report on Form 10-K for the year ended
December 28, 1996, filed as Exhibit (g) hereto, is incorporated herein by
reference and the information set forth on pages 3 through 7 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended October 4, 1997,
filed as Exhibit (h) hereto, is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) None
(b) The information set forth under "The Offer - Background and 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 under "The Offer - Background and 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 November 3, 1997.
(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 November 3,
1997.
(a)(4) Form of Notice of Guaranteed Delivery.
2
<PAGE> 4
(a)(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees, dated November 3, 1997.
(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 November 3, 1997.
(b) Commitment Letter dated as of October 15, 1997 between Bank One,
Indianapolis, N.A. and the Company.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g) Pages F-1 through F-18 of the Company's Annual Report on Form 10-K for
the year ended December 28, 1996.
(h) Pages 3 through 7 of the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 4, 1997.
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: November 3, 1997
3
<PAGE> 5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
(a)(1) Form of Offer to Purchase, dated November 3, 1997.
(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 November 3,
1997.
(a)(4) Form of Notice of Guaranteed Delivery.
(a)(5) Form of Letter to Brokers, Dealers Commercial Banks, Trust Companies
and Other Nominees, dated November 3, 1997.
(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 November 3, 1997.
(b) Commitment Letter dated as of October 15, 1997 between Bank One,
Indianapolis, N.A. and the Company
(g) Pages F-1 through F-18 of the Company's Annual Report on Form 10-K for
the year ended December 28, 1996.
(h) Pages 3 through 7 of the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 4, 1997.
4
<PAGE> 1
EXHIBIT (a)(1)
Offer to Purchase
-----------------
<PAGE> 2
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 $11.00 NOR MORE THAN $14.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., EASTERN TIME, ON FRIDAY, DECEMBER 5, 1997,
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 $11.00 nor more than $14.00 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
$11.00 nor more than $14.00 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 $11.00 nor more than $14.00 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. SEE SECTION 9
FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER.
On October 31, 1997, 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 $11.63
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.
November 3, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
SUMMARY ..........................................................................................3
INTRODUCTION.......................................................................................5
THE OFFER..........................................................................................6
1. NUMBER OF SHARES; PRORATION......................................................6
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES......................................7
3. PROCEDURE FOR TENDERING SHARES...................................................8
4. WITHDRAWAL RIGHTS...............................................................10
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE..................10
6. CONDITIONAL TENDER OF SHARES....................................................11
7. CERTAIN CONDITIONS OF THE OFFER.................................................11
8. PRICE RANGE OF SHARES; DIVIDENDS................................................13
9. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN
EFFECTS OF THE OFFER............................................................14
10. CERTAIN INFORMATION CONCERNING THE COMPANY......................................17
11. SOURCE AND AMOUNT OF FUNDS......................................................21
12. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES...................................22
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.........................................22
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.............................25
15. FEES AND EXPENSES...............................................................26
16. MISCELLANEOUS...................................................................26
</TABLE>
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.
2
<PAGE> 4
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 3,130,613 Shares outstanding as of
October 31, 1997.
Purchase Price The Company will select a single Purchase Price which
will be not less than $11.00 nor more than $14.00 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
$11.00 nor more than $14.00 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 $11.00.
Expiration
Date of Offer Friday, December 5, 1997, 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 October 31, 1997, 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, December 30,
1997. See Section 4.
Purpose of
Offer The Offer is designed to afford stockholders who may
be considering the sale of their shares a liquidity
opportunity to sell such shares to the Company for a
higher price than the Company believes would be
available in the open market, and without the usual
transaction costs associated with market sales. See
Section 9.
3
<PAGE> 5
Market Price
of Shares On October 31, 1997, the last reported sale price of
the Shares on the Nasdaq National Market was $11.63
per Share. See Section 8.
Determination of
Purchase Price The Company's Board of Directors has subjectively
established the price range for Shares to be
purchased in this Offer based on market activity in
the Company's common stock in recent months. The
purchase price for Shares tendered in this Offer may
bear no relation to future market prices, and such
future market prices could be substantially higher
or lower than the purchase price for Shares tendered
in this Offer. See Section 9.
Directors and
Executive Officers Certain directors and executive officers of the
Company have advised the Company that they will not
tender any of their Shares in this Offer. The
remaining directors and executive officer have not
made a final decision as to whether they will
participate in this Offer. Such persons have advised
the Company that, if they were to participate in this
Offer, they would tender only a portion of their
Shares and not all of their Shares. See Section 9.
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.
4
<PAGE> 6
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 $11.00 nor more than $14.00 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
$11.00 nor more than $14.00 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 $11.00 nor more than $14.00 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. SEE
SECTION 9 FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND
EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER.
As of October 31, 1997, the Company had issued and outstanding
3,130,613 Shares and had reserved for issuance upon exercise of outstanding
stock options and warrants 412,018 Shares. As of October 31, 1997, there were
approximately 400 holders of record of Shares. The 1,000,000 Shares that the
Company is offering to purchase represent approximately 31.9% of the Shares then
outstanding, or approximately 28.2% 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.
5
<PAGE> 7
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 $11.00 nor more than $14.00 per
Share. The later of 5:00 p.m., Eastern time, on Friday, December 5, 1997, 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 $11.00 nor more than $14.00 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
$11.00 nor more than $14.00 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
$11.00 nor more than $14.00 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 October 31,
1997, 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.
6
<PAGE> 8
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 October 31, 1997, 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 October 31, 1997, there were approximately 400 holders of record
of Shares. Approximately 35% of these holders of record held individually fewer
than 100 Shares and held in the aggregate approximately 5,000 Shares. Because of
the large number of Shares held in the names of brokers and nominees, the
Company is unable to estimate
7
<PAGE> 9
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 $.0625) 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 $11.00.
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.
8
<PAGE> 10
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
9
<PAGE> 11
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, December 30, 1997, 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
10
<PAGE> 12
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 October 31, 1997 (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
reasonable judgment to have occurred) regardless of the circumstances giving
rise thereto (including any action or omission to act by the Company); provided,
however, that, except for conditions relating to the obtaining of any or
11
<PAGE> 13
all required state or federal government regulatory approvals, the Company shall
not terminate the Offer after the Expiration Date:
(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 reasonable 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) 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
12
<PAGE> 14
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 reasonable 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.
<TABLE>
<CAPTION>
Fiscal Quarters HIGH LOW
--------------- ---- ---
<S> <C> <C>
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 $2.50
2nd Quarter $5.50 $4.75
3rd Quarter $9.13 $4.88
4th Quarter $9.25 $7.75
1997:
1st Quarter $12.63 $ 8.25
2nd Quarter $10.88 $ 9.38
3rd Quarter $12.25 $ 9.50
4th Quarter (through October 31, 1997) $12.00 $10.88
</TABLE>
13
<PAGE> 15
On October 31, 1997, 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 $11.63 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. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
------------------------------------------------------------------
The following discussion contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, the matters
discussed below as well as the factors described in the Company's 1996 Annual
Report and the Company's 1997 Quarterly Reports.
The Company's management and Board of Directors desire to enhance
stockholder value and have determined that a Share repurchase funded by bank
borrowings would advance such objectives and be in the best interests of the
Company and its stockholders. The Company expects that future cash flow from
operations and available borrowings, together with other sources of capital
believed to be available, 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 repurchase of Shares in this Offer.
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 the Company believes would
be available in the open market, and without the usual transaction costs
associated with market sales. Although the Company's Board of Directors
established the price range for Shares to be purchased in this Offer based on
market activity for the Company's common stock in recent months, such price
range has been subjectively determined by the Board. The market price for the
Company's common stock in the future may bear no relation to the price range of
this Offer, and future market prices could be substantially higher or lower than
such price range and/or recent market prices.
The Offer will also provide 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. In addition, the
Offer will also allow 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 will be a result of the
acquisition of shares by the Company pursuant to the Offer and the corresponding
reduction in the number of outstanding shares.
Of significant ongoing concern to the Board of Directors is the
continued relatively thin public trading market for the Shares. Trading volume
of the Shares has averaged less than approximately 3,600 shares per day over the
past 12 months as reported by Nasdaq. The Board of Directors also considered
that the Company's September, 1996 Dutch Auction tender offer was oversubscribed
and that holders of significant amounts of Shares have indicated a desire for
the Company to provide additional current liquidity. Accordingly, the Board of
Directors believes that the Company's repurchase of Shares will provide such a
liquidity opportunity for those stockholders wishing to dispose of their Shares,
and will allow such stockholders to sell Shares in quantities larger than the
existing market has indicated it has capacity to absorb without eroding per
Share price levels.
In light of the over subscribed nature of the Company's September, 1996
Dutch Auction tender offer, the Board of Directors thereafter renewed
discussions of various additional ways of enhancing stockholder value and
liquidity. As part of this process, the Board reviewed the businesses, prospects
and strategies of each operating unit of the Company and its subsidiaries.
Factors considered by the Board of Directors included (i) the emergence and
growth of strong competitors, particularly in the sporting goods business; (ii)
the substantial and increasing investment by such competitors
14
<PAGE> 16
in marketing and advertising; (iii) industry volatility and consolidation and
the resulting impact on the Company's base of current and prospective customers;
(iv) the Company's operation of divergent lines of business, thereby rendering
it difficult to achieve synergies in operations and to create a clear market
identity for the Company; and (v) the potential impact of these operational and
competitive factors on stockholder value.
The Board of Directors then identified several strategic alternatives
to address these considerations. As in prior years, a spin-off of the Martin
Yale subsidiary was seriously considered, which spinoff would create a new
publicly traded entity and may provide greater opportunity for both the
Company's sporting goods and office equipment businesses to independently pursue
their own respective strategies. However, this alternative was ultimately deemed
infeasible due to uncertain tax consequences to the Company and its stockholders
and possible resulting limitations on future business operations. The Board of
Directors also discussed whether they should consider a sale of the Company, in
whole or in part. Based largely on the Board of Directors' belief that the
Company's value has not been fully recognized due to the dichotomy of its
sporting goods and office equipment business lines, the Board decided that a
sale of the entire company would not likely provide full value to the Company's
stockholders. The Board of Directors also concluded that it had no interest in
considering the divestiture of the office equipment and graphic arts businesses
conducted through the Company's Martin Yale subsidiary because of its consistent
and relatively profitable operating results. However, because the Company's
sporting goods business has performed less consistently over recent years, the
Board of Directors has determined that further exploration of a possible sale of
the sporting goods operations, in whole or in part, should be undertaken.
The Company recently has engaged Oppenheimer & Co., Inc. to assist the
Company in exploring potential opportunities to enhance stockholder value
through transactions involving the Company's sporting goods operations,
including a possible sale. No offers have been solicited or received to date.
Due to the very preliminary stages of this investigation and analysis, there can
be no assurances as to (i) whether a satisfactory transaction will emerge; (ii)
the timing of any such transaction, if any; (iii) whether the Company's
stockholders would approve such a transaction, if stockholder approval is
required by applicable law; or (iv) how the Company would use the proceeds of
any sale (e.g. to repay debt, for acquisitions, for general corporate purposes
or distributions to stockholders). Furthermore, if the Company were to sell all
or substantially all of its sporting goods operations, the Company would be a
significantly smaller public company, consisting solely or primarily of the
Martin Yale operations, and the resulting impact on the value of the Company and
its stock is uncertain.
Based upon all these considerations and uncertainties, the Board of
Directors determined that conducting a second Dutch Auction tender offer would
best meet the needs and desires of the Company's stockholders who desire
additional liquidity on a current basis. The Board of Directors further
determined it is in the best interests of the Company and its stockholders to
proceed with this Offer at this time, and prior to reaching any definitive
conclusions as to whether the Company will divest all or substantially all of
its sporting goods business, because of the relative certainty of existing
conditions directly concerning the Company and the current financial ability of
the Company to successfully conduct the Offer.
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. The
Company currently has no intent to repurchase any Shares, except for Shares
purchased pursuant to this Offer.
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
15
<PAGE> 17
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 October 31, 1997, the Company had issued and outstanding
3,130,613 Shares and had reserved for issuance upon exercise of outstanding
stock options and warrants 412,018 Shares. The 1,000,000 Shares that the Company
is offering to purchase represent approximately 31.9% of the Shares then
outstanding. As of October, 1997, all executive officers of the Company as a
group owned beneficially an aggregate of 697,884 Shares (including an aggregate
of 52,950 Shares that may be acquired pursuant to the exercise of outstanding
stock options). 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 32.7% 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).
Robert E. Griffin and C.W. Reed, directors of the Company and its
Chairman and President, respectively, have advised the Company that they will
not tender any of their Shares in this Offer. Messrs. Griffin and Reed own
beneficially an aggregate of 653,069 Shares as of October 31, 1997.
Yale Blanc, Gerald Fox, Blaine Matthews, Robert Orr, Keith Williams and
A. Graves Williams, the Company's six non-management directors, and John Wilson,
the Company's Secretary and Treasurer, have each advised the Company that he has
not made a final decision as to whether he will tender Shares in this Offer.
However, each such person has advised the Company that, if he were to
participate in this Offer, he would tender only a portion of his Shares
beneficially owned and not all of such Shares. Each of Messrs. Matthews, Orr, A.
Graves Williams and Wilson have further indicated that he is giving serious
consideration to tendering a portion of his Shares in this Offer, but has not
determined at what price such Shares would be tendered. Each of Messrs. Blanc,
Fox and Keith Williams have indicated that he is not likely to tender any Shares
in this Offer, but has reserved the right to do so. These seven individuals
owned beneficially an aggregate of 507,197 Shares as of October 31, 1997.
Except as disclosed in Sections 9 and 10 hereof, the Company has no
plans or proposals which relate to or would result in: (a) the acquisition by
any person (including the Company) 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 securities 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 may reduce the number
of holders of Shares, depending upon whether the Offer is oversubscribed and
tenders are prorated. 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 market.
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.
16
<PAGE> 18
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 and the Company does not
intend to deregister its Shares as a result of this Offer.
In summary, this Offer is designed to give stockholders a current
liquidity opportunity. The Board of Directors believes that no assurances exist
that any of the potential corporate actions described herein will occur in the
future or that the price paid for Shares tendered in this Offer will bear any
relation to the future market price for Shares. 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. SEE THE
ABOVE DISCUSSION FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S
DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING 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, check signers, stamp affixers, paper shredders, paper punches,
catalog rack systems, 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, Los Angeles, California and
Tijuana, Mexico.
17
<PAGE> 19
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The summary historical consolidated financial information for fiscal
years 1995 and 1996 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 30, 1995 and December 28, 1996. 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 nine
month periods ended October 5, 1996 and October 4, 1997 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)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
October 4, 1997 October 5, 1996
UNAUDITED UNAUDITED
----------------------------------
<S> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting Goods $35,008 $43,385
Office & Graphic Arts Products 18,175 14,712
------- -------
Total Net Sales 53,183 58,097
Net Income $ 2,048 $ 2,437
Weighted Average Shares 3,104 4,077
PER SHARE DATA
Net Income Per Share $ .66 $ .60
Book Value Per Share 6.88 5.37
Ratio of Earnings to Fixed Charges(1) 4.66 4.72
BALANCE SHEET DATA
Working Capital $15,707 $19,264
Total Assets 60,275 58,569
Short-term Debt 8,375 11,225
Long-term Debt 12,200 14,400
Total Stockholders' Equity $21,533 $16,666
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
YEAR ENDED
December 28, 1996 December 30, 1995
AUDITED AUDITED
------------------------------------
<S> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting Goods $74,077 $73,858
Office & Graphic Arts Products 19,132 17,321
------- -------
Total Net Sales 93,209 91,179
Net Income $ 5,247 $ 448
Weighted Average Shares 3,850 4,134
PER SHARE DATA
Net Income Per Share $ 1.36 $ .11
Book Value Per Share 6.26 5.65
Ratio of Earnings to Fixed Charges(1) 6.38 1.34
BALANCE SHEET DATA
Working Capital $13,309 $17,069
Total Assets 54,430 57,767
Short-term Debt 13,675 16,732
Long-term Debt 5,500 6,266
Total Stockholders' Equity $19,305 $23,338
</TABLE>
(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.
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.
19
<PAGE> 21
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
October 4, 1997
ASSUMED ASSUMED
HISTORICAL $11.00 PER SHARE $14.00 PER SHARE
UNAUDITED PURCHASE PRICE PURCHASE PRICE
------------------------------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting Goods $35,008 $35,008 $35,008
Office & Graphic Arts Products 18,175 18,175 18,175
------- ------- -------
Total Net Sales 53,183 53,183 53,183
Net Income $ 2,048 $ 1,598 $ 1,478
Weighted Average Shares 3,104 2,104 2,104
PER SHARE DATA
Net Income Per Share $ .66 $ .76 $ .70
Book Value Per Share 6.88 5.01 3.58
Ratio of Earnings to Fixed Charges 4.66 2.80 2.44
BALANCE SHEET DATA
Working Capital $15,707 $14,493 $14,064
Total Assets 60,275 60,275 60,275
Short-term Debt 8,375 9,589 10,018
Long-term Debt 12,200 21,986 24,557
Total Stockholders' Equity $21,533 $10,533 $ 7,533
YEAR ENDED
December 28, 1996
ASSUMED ASSUMED
HISTORICAL $11.00 PER SHARE $14.00 PER SHARE
UNAUDITED PURCHASE PRICE PURCHASE PRICE
------------------------------------------------
INCOME STATEMENT DATA
Net Sales
Sporting Goods $74,077 $74,077 $74,077
Office & Graphic Arts Products 19,132 19,132 19,132
------- ------- -------
Total Net Sales 93,209 93,209 93,209
Net Income $ 5,247 $ 4,667 $ 4,517
Weighted Average Shares 3,850 2,850 2,850
PER SHARE DATA
Net Income Per Share $ 1.36 $ 1.64 $ 1.58
Book Value Per Share 6.26 2.91 1.86
Ratio of Earnings to Fixed Charges 6.38 4.14 3.78
BALANCE SHEET DATA
Working Capital $13,309 $12,095 $11,666
Total Assets 54,430 54,430 54,430
Short-term Debt 13,675 14,889 15,318
Long-term Debt 5,500 15,286 17,857
Total Stockholders' Equity $19,305 $ 8,305 $ 5,305
</TABLE>
See accompanying notes to Summary Unaudited Pro Forma Consolidated Financial
Information.
20
<PAGE> 22
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 $11.00 or $14.00, are consummated on the same day. The
purchase price of either $11,000,000 or $14,000,000 will be financed from
borrowings.
The operating data for the nine month period ended October 4, 1997 and
the year ended December 28, 1996 assumes that the repurchase of Shares and
related financing occurred as of December 29, 1996 and December 31, 1995,
respectively.
The balance sheet data as of October 4, 1997 and December 28, 1996
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
$450,000 and $570,000 for the nine month period ended October 4, 1997 at $11.00
and $14.00 respectively and $580,000 and $730,000 for the year ended December
28, 1996 at $11.00 and $14.00 respectively.
11. SOURCE AND AMOUNT OF FUNDS.
---------------------------
Assuming that the Company purchases 1,000,000 Shares pursuant to the
Offer at a price of $14.00 per Share, the total amount required by the Company
to purchase such Shares will be $14,000,000, 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 $26,500,000 term loan facility (the "Term Facility") pursuant to a
Commitment Letter dated October 15, 1997 (the "Commitment Letter") between Bank
One, Indianapolis, N.A. and the Company.
The Term Facility will have a term of 7 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
and/or the proceeds of potential future strategic transactions discussed in
Section 9.
21
<PAGE> 23
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 Robert Orr, a director of the Company. Mr. Orr sold 1,500 Shares
on September 23, 1997 on the open market at $11.00 per share. 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.
Long-term capital gains recognized by individuals are eligible for reduced rates
of taxation, with additional rate reductions applicable to gains from capital
assets held for more than eighteen months.
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
22
<PAGE> 24
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 sec. 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
23
<PAGE> 25
"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 during the 90 day period beginning at the date which
is 45 days before the date in which such share becomes ex dividend with respect
to such dividend. 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, the excess will be recognized as taxable gain from the sale of such
shares in the year in which shares are sold pursuant to the Offer. 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.
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
24
<PAGE> 26
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.
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.
25
<PAGE> 27
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 $.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. The Company files its reports,
proxy statements, and other information with the Commission electronically, and
the Commission maintains a Web site located at http://www.sec.gov containing
such information. 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 Company has its principal place of business and is incorporated
under the laws of the State of Indiana. As required by the Indiana Business
Take-Over Offers Act, the Company will be required to file a copy of the Offer
and related materials with the Indiana Division of Securities. This filing will
be necessary because the proposed share repurchases will result in the
acquisition of more than 10% of Company's outstanding common stock. Upon receipt
of this filing, the Indiana Division of Securities is required by law to hold an
administrative hearing to determine whether the Offer and related materials
provide full and fair disclosure of all material information concerning the
Offer and whether the Offer is made to all stockholders on substantially
equivalent terms. The Company believes that the Offer fully complies with all of
the requirements of Indiana law.
26
<PAGE> 28
The Offer is being made to all holders of Shares. Other than compliance
with the Indiana statute described in this Section 16, 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 or completion 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
November 3, 1997
27
<PAGE> 29
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:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza 77 Water Street
15th Floor 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
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
28
<PAGE> 1
EXHIBIT (a)(2)
Form of Letter of Transmittal
-----------------------------
<PAGE> 2
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
ESCALADE, INCORPORATED
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 3, 1997
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., EASTERN TIME, ON FRIDAY, DECEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
BY MAIL OR OVERNIGHT COURIER:
Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza
Mail Drop 1090F5
Cincinnati, Ohio 45263
BY HAND:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza 77 Water Street
15th Floor 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- ---------------------------------------------------------------------------------------------------------------------
Print Name(s) and Addresses of Registered Holder(s) Shares Tendered
(Please fill in exactly as name(s) appear(s) on (Attach signed additional list, if necessary)
Certificates(s)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Certificate Total Number of
Number(s)* Shares Represented Number of Shares
by Certificate(s)* Tendered**
------------ -------------------------------- ------------------
------------ -------------------------------- ------------------
------------ -------------------------------- ------------------
Total Shares:
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
<PAGE> 3
(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.:___________________________________________________________
-2-
<PAGE> 4
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 November 3, 1997 (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 November 3, 1997 (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 $11.00 nor more than $14.00 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 $11.00
nor more than $14.00 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
-3-
<PAGE> 5
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 $11.00 or as high as
$14.00.
OR
<TABLE>
<CAPTION>
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
<S> <C> <C> <C> <C> <C>
[ ] $11.0000 [ ] $11.5625 [ ] $12.1250 [ ] $12.6875 [ ] $13.2500 [ ] $13.7500
[ ] $11.0625 [ ] $11.6250 [ ] $12.1875 [ ] $12.7500 [ ] $13.3125 [ ] $13.8125
[ ] $11.1250 [ ] $11.6875 [ ] $12.2500 [ ] $12.8125 [ ] $13.3750 [ ] $13.8750
[ ] $11.1875 [ ] $11.7500 [ ] $12.3125 [ ] $12.8750 [ ] $13.4375 [ ] $13.9375
[ ] $11.2500 [ ] $11.8125 [ ] $12.3750 [ ] $12.9375 [ ] $13.5000 [ ] $14.0000
[ ] $11.3125 [ ] $11.8750 [ ] $12.4375 [ ] $13.0000 [ ] $13.5625
[ ] $11.3750 [ ] $11.9375 [ ] $12.5000 [ ] $13.0625 [ ] $13.6250
[ ] $11.4375 [ ] $12.0000 [ ] $12.5625 [ ] $13.1250 [ ] $13.6875
[ ] $11.5000 [ ] $12.0625 [ ] $12.6250 [ ] $11.1875
</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 October 31, 1997.
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 October 31, 1997, 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 October 31, 1997, and is tendering all of such Shares.
-4-
<PAGE> 6
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-5-
<PAGE> 7
- --------------------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W 9 BELOW)
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated: , 1997
-------------------------
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: , 1997
----------
- --------------------------------------------------------------------------------
-6-
<PAGE> 8
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.
-7-
<PAGE> 9
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 $11.00.
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
-8-
<PAGE> 10
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 October 31, 1997, 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.
-9-
<PAGE> 11
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).
-10-
<PAGE> 12
<TABLE>
<CAPTION>
PAYER: FIFTH THIRD BANK, as Depositary
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE | PART 1 - PLEASE PROVIDE TIN______________
FORM W-9 | YOUR TIN AND CERTIFY Social Security Number
| BY SIGNING AND DATING Or
Department of the Treasury | BELOW Employer Identification Number
Internal Revenue Service |
| ------------------------------
Payer's Request for Taxpayer | NAME (Please Print) PART 2 For Payees exempt
Identification Number (TIN) | from backup withholding, see
and Certification | the Important Tax Information
| ------------------------------ above and Guidelines for
| ADDRESS Certification of Taxpayer
| Identification Number on
| ------------------------------ Substitute Form W-9 enclosed
| CITY STATE ZIP CODE herewith and completed as
| instructed herein.
|
| Awaiting TIN [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 you
are currently subject to backup withholding because of under reporting 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 , 1997
----------------------------- ------------------------
- --------------------------------------------------------------------------------
-11-
<PAGE> 13
The Dealer Manager:
NATCITY INVESTMENTS, INC.
Corporate Finance Department
251 North Illinois Street
Indianapolis, IN 46204
(800) 382-1126
<PAGE> 14
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
<PAGE> 15
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.
-2-
<PAGE> 16
- 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.
-3-
<PAGE> 17
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
<TABLE>
<CAPTION>
For this type of account: Give name and SSN of:
- ------------------------- ---------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the (joint 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
<FN>
(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.)
</TABLE>
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.
-4-
<PAGE> 1
EXHIBIT (a)(3)
Form of Letter to Stockholders
------------------------------
<PAGE> 2
ESCALADE LETTERHEAD
November 3, 1997
Dear Stockholder:
Escalade, Incorporated is offering to purchase up to 1,000,000 shares of
its common stock (representing approximately 31.9 % of the currently outstanding
shares), at a price not less than $11.00 nor more than $14.00 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. Certain directors and
executive officers of the Company have advised the Company that they will not
tender any of their Shares in this Offer. The remaining directors and executive
officer have not made a final decision as to whether they will participate in
this Offer. Such persons have advised the Company that, if they were to
participate in this Offer, they would tender only a portion of their Shares and
not all of their Shares.
Sincerely,
/s/Robert E. Griffin
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT (a)(4)
Form of Notice of Guaranteed Delivery
-------------------------------------
<PAGE> 2
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:
Fifth Third Bank Fifth Third Bank
Corporate Trust Operations c/o Harris Trust
38 Fountain Square Plaza 77 Water Street
15th Floor 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.
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.
<PAGE> 3
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 November 3, 1997 (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
-2-
<PAGE> 4
- --------------------------------------------------------------------------------
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 $11.00 or as high as
$14.00.
OR
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] $11.0000 [ ] $11.5625 [ ] $12.1250 [ ] $12.6875 [ ] $13.2500 [ ] $13.7500
[ ] $11.0625 [ ] $11.6250 [ ] $12.1875 [ ] $12.7500 [ ] $13.3125 [ ] $13.8125
[ ] $11.1250 [ ] $11.6875 [ ] $12.2500 [ ] $12.8125 [ ] $13.3750 [ ] $13.8750
[ ] $11.1875 [ ] $11.7500 [ ] $12.3125 [ ] $12.8750 [ ] $13.4375 [ ] $13.9375
[ ] $11.2500 [ ] $11.8125 [ ] $12.3750 [ ] $12.9375 [ ] $13.5000 [ ] $14.0000
[ ] $11.3125 [ ] $11.8750 [ ] $12.4375 [ ] $13.0000 [ ] $13.5625
[ ] $11.3750 [ ] $11.9375 [ ] $12.5000 [ ] $13.0625 [ ] $13.6250
[ ] $11.4375 [ ] $12.0000 [ ] $12.5625 [ ] $13.1250 [ ] $13.6875
[ ] $11.5000 [ ] $12.0625 [ ] $12.6250 [ ] $11.1875
</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
- --------------------------------------------------------------------------------
-3-
<PAGE> 5
- --------------------------------------------------------------------------------
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 October 31, 1997.
The undersigned either (check one):
[ ] was the beneficial owner of an aggregate of fewer than 100 Shares as of the
close of business on October 31, 1997, 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 October 31,
1997, 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
-----------------------------------------------------------
Name Title
Name
--------------------------------------------------------------------
Address
--------------------------------------------------------------------
City, State, Zip Code
- --------------------------------------------------------------------------------
Area Code and Telephone Number
Dated: , 1997
-------------
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH
THE LETTER OF TRANSMITTAL.
-4-
<PAGE> 1
EXHIBIT (a)(5)
Form of Letter to Brokers, Dealers, etc.
----------------------------------------
<PAGE> 2
NATCITY INVESTMENTS, INC.
Corporate Finance Department
251 North Illinois Street
Indianapolis, IN 46204
(800) 382-1126
November 3, 1997
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
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, DECEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
In our capacity as Dealer Manager (the "Dealer Manager"), 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 $11.00 nor
more than $14.00 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 November 3, 1997 (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 $11.00 nor more than $14.00
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 $11.00
nor more than $14.00 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.
<PAGE> 3
Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees
Page 2
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase, dated November 3, 1997.
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, DECEMBER 5, 1997, 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 October 31, 1997, 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. SEE SECTION 9
FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE
OFFICERS WITH RESPECT TO TENDERING 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,
NATCITY INVESTMENTS, INC.
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.
<PAGE> 1
EXHIBIT (a)(6)
Form of Letter to Clients
-------------------------
<PAGE> 2
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, DECEMBER 5, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated November
3, 1997 (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 $11.00 nor more than $14.00 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 $11.00 nor more than $14.00 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 $11.00 nor more than
$14.00 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 $0.0625), not less
than $11.00 nor more than $14.00 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
31.9% of the total Shares outstanding as of October 31, 1997. 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, December 5, 1997, 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, December 30, 1997, if they have not been accepted for
payment.
<PAGE> 3
(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 October 31, 1997, 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 October 31, 1997,
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. SEE SECTION 9 OF
THE OFFER TO PURCHASE FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S
DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING 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
-2-
<PAGE> 4
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.
-3-
<PAGE> 5
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 November 3, 1997, 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 $11.00 nor less than $14.00 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 $11.00 or as high as
$14.00.
OR
SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] $11.0000 [ ] $11.5625 [ ] $12.1250 [ ] $12.6875 [ ] $13.2500 [ ] $13.7500
[ ] $11.0625 [ ] $11.6250 [ ] $12.1875 [ ] $12.7500 [ ] $13.3125 [ ] $13.8125
[ ] $11.1250 [ ] $11.6875 [ ] $12.2500 [ ] $12.8125 [ ] $13.3750 [ ] $13.8750
[ ] $11.1875 [ ] $11.7500 [ ] $12.3125 [ ] $12.8750 [ ] $13.4375 [ ] $13.9375
[ ] $11.2500 [ ] $11.8125 [ ] $12.3750 [ ] $12.9375 [ ] $13.5000 [ ] $14.0000
[ ] $11.3125 [ ] $11.8750 [ ] $12.4375 [ ] $13.0000 [ ] $13.5625
[ ] $11.3750 [ ] $11.9375 [ ] $12.5000 [ ] $13.0625 [ ] $13.6250
[ ] $11.4375 [ ] $12.0000 [ ] $12.5625 [ ] $13.1250 [ ] $13.6875
[ ] $11.5000 [ ] $12.0625 [ ] $12.6250 [ ] $11.1875
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 6
- --------------------------------------------------------------------------------
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 October 31, 1997.
[ ] 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 October 31, 1997, and is tendering all of such
Shares.
- --------------------------------------------------------------------------------
Number of Shares to be Tendered:
Shares*
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
SIGN HERE
Signature(s)
-------------------------
Name:
-------------------------
Address:
-------------------------
<PAGE> 1
EXHIBIT (a)(7)
Form of Press Release
---------------------
<PAGE> 2
ESCALADE ANNOUNCES TENDER OFFER FOR
SHARES OF ITS COMMON STOCK
Evansville, IN, November 3, 1997, -- 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 31.9%
of its issued and outstanding Common Stock. The tender offer begins Monday,
November 3rd and will expire, unless extended, at 5:00 p.m. (Eastern time) on
Friday, December 5, 1997.
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 less than $11.00 nor more than
$14.00 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. Bank One, Indianapolis, N.A. has agreed to finance the
repurchase of up to 1,000,000 shares under the tender offer, and additional open
market purchases, in an aggregate amount not to exceed $15,000,000.
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 October 31, 1997, the last full Nasdaq National Market trading day prior
to the announcement of the tender offer, the closing price of the Common stock
was $11.63 per share. As of October 31, 1997, the Company had issued and
outstanding 3,130,613 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. Throughout 1997, the Board of Directors has evaluated various strategic
transactions that would enhance stockholder value and liquidity, and believes
that a Dutch Auction tender offer is the best mechanism to further these
objectives at the current time. The Board is continuing to explore additional
opportunities, including a preliminary investigation of the potential
operational and value-enhancing impact of a divestiture of all or part of
Escalade's sporting goods operations. However, no definitive decisions have been
made in this regard nor have any offers been solicited or received to date."
<PAGE> 1
EXHIBIT (b)
Commitment Letter dated as of October 15, 1997
----------------------------------------------
Between Bank One, Indianapolis, N.A. and the Company
----------------------------------------------------
<PAGE> 2
[BANK ONE LETTERHEAD]
October 15, 1997
Mr. John R. Wilson
Chief Financial Officer and Secretary
Escalade, Incorporated
817 Maxwell Avenue
Evansville, Indiana 47706-0889
Dear John:
Bank One, Indiana, N.A. has approved an increase, extension and
restructuring of the Term Loan provided to Escalade, Incorporated (the
"Borrower"), on the terms and conditions of the Amended and Restated Credit
Agreement dated as of May 31, 1996, as amended from time to time (the "Credit
Agreement"), and subject to the terms and conditions set forth herein. All
capitalized terms used herein which are not otherwise defined are used as
defined in the Credit Agreement.
BORROWER: Escalade, Incorporated
- ---------
GUARANTORS: Indian Industries, Inc., Martin Yale Industries, Inc.,
- ----------- Escalade International, Ltd., Harvard Sports, Inc., and
Master Products Manufacturing Company, Inc.
AMOUNT: Twenty Six Million Five Hundred Thousand Dollars
($26,500,000.00)
- ------
PURPOSE: To finance the repurchase of stock by the Borrower in
- -------- a tender offer filed in compliance with regulations
of the Securities and Exchange Commission (Dutch
Auction) and to repurchase Escalade, Inc. warrants in
an aggregate amount not to exceed Fifteen Million
Dollars ($15,000,000) and to refinance the Borrower's
existing Term Loan in the amount of Eleven Million
Five Hundred Thousand Dollars ($11,500,000).
TERM: Seven years
- -----
INTEREST RATE: Interest will accrue at the Borrower's option,
- -------- at the Bank's Prime Rate plus the Applicable Spread
or at the London Interbank Offered Rate (LIBOR) plus
the Applicable Spread based upon the Borrower's
consolidated Funded Debt to EBITDA ratio as follows:
1
<PAGE> 3
<TABLE>
<CAPTION>
Funded Debt to
EBITDA Ratio LIBOR Spread Prime Spread
------------ ------------ ------------
<S> <C> <C>
greater than 3 to 1 225 b.p. 25 b.p.
2.50-2.99 to 1 200 b.p. 25 b.p.
2.00-2.49 to 1 175 b.p. 0 b.p.
1.50-1.99 to 1 150 b.p. 0 b.p.
less than 1.50 to 1 125 b.p. 0 b.p.
</TABLE>
The interest rate will initially be set at the 2.50-2.99
Funded Debt to EBITDA Ratio and will thereafter adjust
annually upon receipt of the Borrower's audited fiscal year
end financial statement beginning with receipt of the
Borrower's 1997 fiscal year-end statement, and shall be
effective for the first interest period following receipt of
such statement.
Pricing for the Borrower's Revolving Loan and for the Martin
Yale Industries, Inc. letter of credit will adjust to the
2.50-2.99 Funded Debt to EBITDA Ratio as of the date of
funding of the Term Loan.
LIBOR-based borrowings are for period of 30, 60, 90 or 180
days, with a minimum advance of One Million Dollars
($1,000,000) and certain prepayment penalties will apply to
prepayments of any LIBOR-based rate borrowing.
Interest shall be based on a 360 day year applied to the
actual number of days elapsed and shall be payable monthly.
COMMITMENT
FEE: One percent (1%) of the net increased amount of the Term Loan.
- --- The commitment fee shall be payable in installments, with the
first $30,000 due upon acceptance of this Commitment Letter,
which installment shall be deemed earned upon receipt and will
be non-refundable. At closing, 50% of the fee shall be
payable, less the $30,000 paid, upon acceptance of the
commitment. The remaining one-half of the commitment
fee shall be payable in two equal installments on June 1, 1998
and on December 1, 1998 provided, however, that any unpaid
commitment fee installments shall be waived if the sale of the
"Sporting Goods Division" occurs prior to any such installment
being due.
REPAYMENT: Principal shall be repaid in equal quarterly payments of
- ---------- $948,428 (adjusted proportionately should less than the
$26,500,000 be advanced at closing), commencing December 31,
1997 with the balance, if any, due September 30, 2004.
2
<PAGE> 4
An excess cash flow recapture payment equal to 50% of excess
cash flow, as is currently defined, shall be payable annually
upon receipt of the Borrower's audited fiscal year end
financial statements. Such payments shall be applied against
the latest maturing installments of principal.
COLLATERAL: No change in existing collateral
- -----------
GENERAL TERMS
- -------------
AND CONDITIONS: 1. There will have been no material adverse
- --------------- change in the financial condition of the
Borrower or its Subsidiaries from that
reflected in the Borrower's September 6,
1997 financial statement.
2. The Term Loan will be subject to the terms
and conditions of Borrower's Amended and
Restated Credit Agreement, as amended (the
"Credit Agreement"), and as further amended
to incorporate the following:
- The Minimum Debt Service Coverage
Ratio covenant will be amended to
1.10 to 1 at fiscal year end 1998
and at fiscal year end 1999,
increasing to 1.20 to 1 at fiscal
year end 2000 and thereafter.
- The Funded Debt to EBITDA ratio
covenant shall remain the same (3.0
to 1 through December 30, 1998
reducing to 2.5 to 1 on December 31,
1998 and at all times thereafter).
- Maintain a minimum Net Worth
covenant of not less than $500,000
below the Borrower's consolidated
Net Worth as of the date of funding
the tender offer through fiscal year
end 1998 and thereafter increasing
annually at each fiscal year end by
50% of net income, exclusive of
losses.
- Amend negative covenant to provide
for the purchase of shares of common
stock and warrants through the
tender offer in an aggregate amount
not to exceed $15,000,000.
3. The Bank will employ outside legal counsel
at Borrower's expense to prepare all bank
related documents, not to exceed $2,000 plus
all out of pocket costs and expenses of Bank
and its counsel.
4. The Bank is to be provided copies of all
Securities and Exchange Commission filings
relating to the tender offer.
5. The Borrower shall have engaged the services
of Oppenheimer & Co., Inc. in connection
with the possible sale of the "Sporting
3
<PAGE> 5
Goods Division," and the terms of that
engagement shall be satisfactory to the
Bank.
6. The Martin Yale Industries, Inc.
manufacturing facility in Wabash, Indiana
will be appraised to determine its fair
market value in accordance with FIRREA
appraisal requirements. The cost of the
appraisal will be paid by the Bank.
7. The Borrower and the Guarantors will be
required to execute and deliver resolutions,
officers' certificates and other documents
and to provide for and deliver counsel
opinions, all as the Bank and its counsel
deem necessary or appropriate and in form
and substance acceptable to the Bank and its
counsel.
This commitment shall expire on October 31, 1997, unless extended in
writing by the Bank. Please evidence your acceptance of this commitment by
signing where indicated and returning the original of this letter to me,
together with your check in the amount of $30,000 in payment of the first
installment of the commitment fee.
Very truly yours,
/s/ D. Kelly Queisser
D. Kelly Queisser, Vice President and Senior
Relationship Manager
Accepted this 28th day of October, 1997
ESCALADE, INCORPORATED
By: /s/ John R. Wilson
----------------------------------------
John R. Wilson, Chief Financial Officer
cc: Robert E. Griffin, Chairman
W.C. (Bill) Reed
4
<PAGE> 1
EXHIBIT(g)
PAGES F-1 THROUGH F-18 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 28, 1996
------------------------------------
<PAGE> 2
[GEO. S. OLIVE & CO. LLC LETTERHEAD]
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 28, 1996 and December 30, 1995 and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 28, 1996.
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 28, 1996
and December 30, 1995 and the results of their operations and their cash
flows for each of the three years in the period ended December 28, 1996 in
conformity with generally accepted accounting principles.
/s/ GEO. S. OLIVE & CO. LLC
Evansville, Indiana
February 3, 1997
(F-1)
<PAGE> 3
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 1,319,319 $ 1,246,668
Receivables, less allowances of $681,606 and $726,352 27,296,584 25,285,014
Inventories 11,452,433 15,151,696
Prepaid expenses 221,850 266,770
Income tax refundable 275,000
Deferred income tax benefit 1,560,814 1,828,489
--------------------------------------------
Total current assets 41,851,000 44,053,637
Property, plant and equipment 10,208,548 11,223,763
Other assets 1,851,511 1,827,628
Deferred income tax benefit 518,653 662,326
--------------------------------------------
$54,429,712 $57,767,354
============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable--bank $ 3,875,000 $14,350,000
Current portion of long-term debt 9,800,000 2,382,500
Trade accounts payable 2,393,980 2,369,637
Accrued liabilities 11,374,159 7,553,307
Federal income tax payable 1,099,072 329,072
--------------------------------------------
Total current liabilities 28,542,211 26,984,516
--------------------------------------------
Other liabilities
Long-term debt 5,500,000 6,265,500
Deferred compensation 1,082,790 1,178,863
--------------------------------------------
6,582,790 7,444,363
--------------------------------------------
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--3,084,449 and 4,133,954
shares for 1996 and 1995 8,291,516 17,572,397
Retained earnings 11,013,195 5,766,078
--------------------------------------------
19,304,711 23,338,475
--------------------------------------------
$54,429,712 $57,767,354
============================================
</TABLE>
See notes to consolidated financial statements.
(F-2)
<PAGE> 4
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 28, DECEMBER 30
AND DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $93,209,331 $91,178,757 $102,594,116
-----------------------------------------------------------
Costs, Expenses and Other Income
Cost of products sold 66,703,061 73,443,333 83,432,921
Selling, administrative and general expenses 16,628,415 13,867,421 16,297,865
Restructuring charge 1,040,000 4,340,053
Write off of goodwill 399,000
Interest 1,408,070 2,267,620 2,120,104
Other income (290,666) (274,483) (308,423)
-----------------------------------------------------------
84,448,880 90,343,891 106,281,520
-----------------------------------------------------------
Income (Loss) Before Income Taxes 8,760,451 834,866 (3,687,404)
Provision (Benefit) for Income Taxes 3,513,334 387,133 (1,283,983)
-----------------------------------------------------------
NET INCOME (LOSS) $ 5,247,117 $ 447,733 $(2,403,421)
===========================================================
Per Share Data
NET INCOME (LOSS) PER SHARE $1.36 $.11 $(.58)
Weighted average shares outstanding 3,849,783 4,133,566 4,128,865
See notes to consolidated financial statements.
</TABLE>
(F-3)
<PAGE> 5
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------- RETAINED
SHARES AMOUNT EARNINGS
---------------------------------------------------------
<S> <C> <C> <C>
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
Exercise of stock options 11,786 38,766
Net income 5,247,117
Purchase of stock (1,061,291) (9,319,647)
---------------------------------------------------------
BALANCES AT DECEMBER 28, 1996 3,084,449 $ 8,291,516 $11,013,195
=========================================================
</TABLE>
See notes to consolidated financial statements.
(F-4)
<PAGE> 6
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 28, DECEMBER 30
AND DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 5,247,117 $ 447,733 $(2,403,421)
Items not affecting net cash provided (used) by operating activities
Depreciation and amortization 3,018,039 3,618,194 4,436,609
Provision for losses on accounts receivable 427,650 175,559 181,732
Provision for deferred income tax 411,348 (140,855) (1,251,833)
Provision for deferred compensation 101,955 98,101 93,133
Provision for restructuring charges 1,040,000 4,340,053
Gain on disposals of equipment (60,146) (23,293) (699)
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) (47,734) (39,407) (31,298)
Changes in
Accounts receivable (2,439,220) 6,411,341 (2,717,424)
Income tax refundable 275,000 123,909 (142,631)
Inventories 3,699,263 8,244,785 (7,636,716)
Prepaids 44,920 (8,308) (57,434)
Other assets 81,149 9,289 83,509
Income tax payable 770,000 329,072
Accounts payable and accrued expenses 3,728,311 (1,628,264) (998,164)
-----------------------------------------------------
Net cash provided (used) by operating activities 15,266,154 18,666,358 (5,697,082)
-----------------------------------------------------
INVESTING ACTIVITIES
Premiums paid for life insurance (65,800) (131,600) (35,000)
Purchase of property and equipment (1,902,127) (1,144,922) (4,262,437)
Proceeds from sale of property and equipment 76,333 34,425 10,000
Purchase of long-term investments (99,256) (917,407)
Purchase of certain Data-Link Corporation assets (900,000)
Proceeds from sale of long-term investments 290,217 9,500
-----------------------------------------------------
Net cash used by investing activities (1,891,594) (1,051,136) (6,095,344)
-----------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in notes payable--bank (10,475,000) (14,887,500) 14,675,000
Proceeds from exercise of stock options 38,766 1,945 131,057
Cash paid for fractional shares (2,161)
Proceeds from loan against life insurance 15,000
Reduction of long-term debt (7,248,000) (2,477,500) (2,514,500)
Purchase of stock (9,319,647)
Proceeds from long-term debt 13,900,000
Deferred compensation paid (198,028)
-----------------------------------------------------
Net cash provided (used) by financing activities (13,301,909) (17,363,055) 12,304,396
-----------------------------------------------------
INCREASE IN CASH 72,651 252,167 511,970
CASH, BEGINNING OF YEAR 1,246,668 994,501 482,531
-----------------------------------------------------
CASH, END OF YEAR $ 1,319,319 $ 1,246,668 $ 994,501
=====================================================
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 1,379,847 $ 2,332,038 $ 1,864,327
Income taxes paid (refunded), net 2,286,986 (413,773) 891,607
Fixed assets in accounts payable 126,884 10,000 11,799
</TABLE>
See notes to consolidated financial statements.
(F-5)
<PAGE> 7
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Escalade, Incorporated (Company) 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 revenues 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 Standards (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:
<TABLE>
<CAPTION>
YEARS
- ---------------------------------------------------------------------------
<S> <C>
Buildings 20-30
Leasehold improvements 4-8
Machinery and equipment 5-15
Tooling, dies and molds 2-4
</TABLE>
Maintenance and repairs are expensed and major renewals and improvements are
capitalized. The costs 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.
(F-6)
<PAGE> 8
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The carrying values of all of the Company's financial instruments approximate
their fair values.
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.
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.
Research and development costs are charged to income as incurred. The research
and development costs incurred during 1996, 1995 and 1994 were approximately
$2,300,000, $1,700,000 and $2,300,000.
Revenue from the sale of the Company's products is recognized as products are
shipped to customers.
The Company has elected to act as a self-insurer for certain costs related to
employee health and accident benefit programs. Costs resulting from non-insured
losses are charged to income when incurred. The Company has purchased insurance
which limits its exposure for individual claims and which limits its aggregate
exposure to $1,100,000.
INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished products $ 5,082,134 $ 5,323,465
Work in process 2,709,752 3,135,909
Raw materials and supplies 3,660,547 6,692,322
--------------------------------------------
$11,452,433 $15,151,696
============================================
</TABLE>
(F-7)
<PAGE> 9
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 345,210 $ 340,210
Buildings and leasehold improvements 9,562,524 9,672,666
Machinery and equipment 21,909,966 23,051,491
--------------------------------------------
31,817,700 33,064,367
Accumulated depreciation and amortization (21,609,152) (21,840,604)
--------------------------------------------
$10,208,548 $11,223,763
============================================
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage payable, paid off in 1996 $ 648,000
Mortgage payable, due in annual installments varying from $300,000 in 1997 to
$500,000 in 2005, interest varies from 7.65% to 7.95%, due 2005, secured by
plant facility, machinery and equipment, and letter of credit $ 3,300,000 3,500,000
Term loan, due in quarterly installments of $500,000, interest
varies from prime plus .25% or London Interbank Offered Rate (LIBOR) plus
2.25%, secured by equipment, inventory, accounts
receivable, general intangibles and securities 12,000,000 4,500,000
--------------------------------------------
15,300,000 8,648,000
Portion classified as current (9,800,000) (2,382,500)
--------------------------------------------
$ 5,500,000 $6,265,500
============================================
</TABLE>
Maturities of long-term indebtedness for the ensuing five years are: 1997,
$9,800,000; 1998, $2,300,000; 1999, $800,000; 2000, $300,000; 2001, $400,000 and
thereafter, $1,700,000.
The Company expects to pay $8,000,000 of the $12,000,000 term loan from cash
flow in the first quarter of 1997. This payment is in excess of the scheduled
payback and therefore has been classified as current on the balance sheet.
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
28, 1996, the Company was in violation of a current ratio covenant dating back
to June 4, 1990 on the mortgage payable credit agreement; however, the lender
waived compliance with this covenant and agreed to delete that and other
sections of the agreement.
(F-8)
<PAGE> 10
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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 307,684 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>
1996 1995 1994
-------------------------------------------------------------------------------------------
OPTION Option Option
SHARES PRICE Shares Price Shares Price
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year $3.26 TO $3.26 to $3.26 to
196,581 7.25 204,211 7.25 162,358 6.93
Issued during year $5.50 to
71,374 7.25
Canceled or expired (16,485) (7,037) (8,021)
$3.26 to
Exercised during year (11,785) $3.26 (593) $3.26 (21,500) 6.30
---------------------------------------------------------------------------------------
$3.26 TO $3.26 to $3.26 to
Outstanding at end of year 168,311 7.25 196,581 7.25 204,211 7.25
================ ================ ================
Exercisable at end of year 120,699 92,925 45,928
================ ================ ================
</TABLE>
The options granted in 1994 are exercisable at the rate of 25% over each of the
four years beginning in 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 28, 1996.
STOCKHOLDERS' EQUITY TRANSACTIONS
During 1996, the Company conducted a "Dutch Auction" whereby it repurchased
approximately 1,000,000 shares of its common stock at a price of $8.875 per
share.
(F-9)
<PAGE> 11
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO 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.
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.
OPERATING LEASES
The Company leases manufacturing, warehousing and office space at 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.
The Company also leases warehousing space next to its Evansville facility for
$17,317 per month for two years expiring on October 31, 1998. The Company has
four two-year renewal options followed by two five-year renewal options.
At December 28, 1996, the minimum rental payments under noncancelable leases
with terms of more than one year are as follows:
<TABLE>
<CAPTION>
YEARS ENDING AMOUNT
- --------------------------------------------------------------------------
<S> <C>
1997 $588,532
1998 262,761
------------------
$851,293
==================
</TABLE>
The following schedule shows the composition of total rental expense for
operating leases except those with terms of a month or less:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
Rentals $656,082 $638,670 $656,670
=====================================================
</TABLE>
(F-10)
<PAGE> 12
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 28, DECEMBER 30
AND DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $2,670,000 $329,072 $ 132,240
State 431,986 198,916 (164,390)
-----------------------------------------------------
3,101,986 527,988 (32,150)
-----------------------------------------------------
Deferred
Federal 401,443 (85,548) (1,070,217)
State 9,905 (55,307) (181,616)
-----------------------------------------------------
411,348 (140,855) (1,251,833)
-----------------------------------------------------
$3,513,334 $387,133 $(1,283,983)
=====================================================
</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 28, DECEMBER 30
AND DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rate $2,978,553 $283,854 $(1,253,717)
Increase (decrease) in income tax resulting from
Recurring permanent differences (goodwill
amortization, dividend exclusion, and non-
deductible officers' life insurance expense) (24,279) (5,522) 10,196
State tax expense (benefit)--net of federal effect 291,648 94,782 (228,364)
Benefit of foreign subsidiary loss not recognized 166,402 138,846 76,373
Other 101,010 (124,827) 111,529
-----------------------------------------------------
Provision (benefit) for income taxes recorded $3,513,334 $387,133 $(1,283,983)
=====================================================
</TABLE>
The $8,760,451 income before income taxes for the year ended December 28, 1996
was comprised of $489,417 foreign losses and $9,249,868 domestic income.
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.
At December 28, 1996 and December 31, 1995, a cumulative deferred tax asset of
$2,079,467 and $2,490,815 is included in current and other assets.
(F-11)
<PAGE> 13
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ (12,934) $ 78,654
Deferred compensation 341,825 447,662
Valuation reserves 1,014,582 851,968
Alternative minimum tax credit carryover 362,713
Differences in accounting for royalties 88,390 88,390
Differences in accounting for goodwill 125,382 135,846
Differences in accounting for employee benefits 406,205 234,877
Differences in accounting for lease expense 116,017 182,672
Differences in accounting for professional fees 108,033
------------------------------------
$2,079,467 $2,490,815
====================================
</TABLE>
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 $311,701, $60,940 and $111,808 for 1996, 1995 and 1994.
VOLUNTARY EMPLOYEE BENEFITS ASSOCIATION TRUST (VEBA)
The Company established a VEBA as a tax-exempt organization to provide life,
medical, disability and other similar welfare benefits permitted pursuant to
Internal Revenue Code Section 501(c)(9) for its employees.
(F-12)
<PAGE> 14
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEGMENT INFORMATION AND CONCENTRATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 28, DECEMBER 30
AND DECEMBER 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Sales to unaffiliated customers
Sporting goods $74,077 $73,858 $ 85,318
Office and graphic arts products 19,132 17,321 17,276
-----------------------------------------------------
Total consolidated $93,209 $91,179 $102,594
=====================================================
Operating profit (loss)
Sporting goods $ 6,156 $ (262) $ (4,303)
Office and graphic arts products 4,103 3,363 2,872
Corporate (381) (273) (445)
-----------------------------------------------------
Total consolidated 9,878 2,828 (1,876)
Consolidated other income 290 274 309
-----------------------------------------------------
10,168 3,102 (1,567)
Consolidated interest expense 1,408 2,267 2,120
=====================================================
Consolidated income (loss) from operations before
income taxes $ 8,760 $ 835 $ (3,687)
=====================================================
Identifiable assets
Sporting goods $40,543 $43,122 $ 61,475
Office and graphic arts products 10,199 10,317 10,039
Corporate 3,688 4,328 4,369
-----------------------------------------------------
Total assets $54,430 $57,767 $ 75,883
=====================================================
Depreciation and amortization charged to operations
Sporting goods $ 2,123 $ 2,438 $ 3,827
Office and graphic arts products 895 714 610
-----------------------------------------------------
Total consolidated $ 3,018 $ 3,152 $ 4,437
=====================================================
Capital expenditures
Sporting goods $ 1,262 $ 617 $ 3,750
Office and graphic arts products 757 526 452
-----------------------------------------------------
$ 2,019 $ 1,143 $ 4,202
=====================================================
</TABLE>
(F-13)
<PAGE> 15
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO 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, junior sporting goods including Mini Ping Pong, Mini Pool(TM), Mini
Court(R) 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, 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 1996, approximately 31% of the sporting goods were sold to Sears, Roebuck &
Co. (24% of consolidated sales). In 1995 and 1994, the percentages were 29% (23%
consolidated) and 32% (27% consolidated). At December 28, 1996 and December 30,
1995, accounts receivable included $10,613,368 and $10,439,845 due from Sears,
Roebuck & Co.
During 1994, the Company announced that it intended to pursue distribution,
subject to various preconditions occurring, 100% of the stock of its office and
graphic arts products wholly owned subsidiary, Martin Yale Industries, Inc., to
its stockholders. The Company's Board of Directors is continuing discussion of
this potential distribution.
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.
(F-14)
<PAGE> 16
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO 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
<TABLE>
<CAPTION>
DECEMBER 28 AND DECEMBER 30 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued Liabilities
Employees' compensation $ 2,972,848 $1,031,435
Payroll taxes and taxes withheld from employees'
compensation 257,251 167,499
Taxes other than taxes on income 412,505 460,066
Accrued interest 156,408 182,362
Customer volume discounts payable 3,204,500 1,522,000
Other accrued items 4,370,647 4,189,945
--------------------------------------------
$11,374,159 $7,553,307
============================================
Long-Term Marketable Equity Securities--
(included in other assets) $ 576,883 $ 517,493
============================================
</TABLE>
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 28, 1996, the line of credit for
short-term borrowings aggregated $18,000,000, of which $3,875,000 was borrowed.
The interest rate on the line of credit is at the Bank One Indianapolis, N.A.
prime rate plus .25%. 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.
(F-15)
<PAGE> 17
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO 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 28, 1996, standby letters of credit aggregated $4,000,000, of which
the Company was obligated in the amount of $990,480 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 28, 1996, the balance of the letter of credit was
$3,441,877. 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.
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.
(F-16)
<PAGE> 18
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF QUARTERLY RESULTS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
MARCH 25 JULY 15 OCTOBER 7 DECEMBER 30
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Net sales $15,381 $19,574 $23,142 $35,112
Gross profit 4,253 5,758 7,251 9,244
Net income 232 688 1,517 2,810
Earnings per share .06 .16 .38 .91
1995
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>
A reduction in outstanding shares of approximately 1,000,000 shares as a result
of the completion of the Dutch Auction in September caused the fourth quarter
earnings per share to be greater than the first three quarters proportionately.
Consequently, if the four quarters earnings per share are added together, they
are greater than the actual earnings per weighted average share for the year.
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 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 September
30, 1996. 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.
(F-17)
<PAGE> 19
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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.
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:
<TABLE>
<S> <C>
Inventories $150,000
Equipment 351,000
Goodwill 399,000
---------------------
$900,000
=====================
</TABLE>
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 of 1994. 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.
(F-18)
<PAGE> 1
EXHIBIT(h)
PAGES 3 THROUGH 7 OF THE COMPANY'S QUARTERLY REPORTS ON FORM 10-Q
-----------------------------------------------------------------
FOR THE QUARTER ENDED OCTOBER 4, 1997
-------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 4, October 5, December 28,
1997 1996 1996
ASSETS -----------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 76 $ 352 $ 1,319
Receivables, less allowances of
$1,002, $583 and $682 16,687 20,036 27,297
Inventories 22,693 23,484 11,452
Prepaid expense 402 246 222
Deferred income tax benefit 1,311 1,558 1,561
------- ------- -------
TOTAL CURRENT ASSETS 41,169 45,676 41,851
Property, plant, and equipment 37,839 34,469 31,818
Accum. depr. and amortization (26,939) (24,084) (21,609)
------- ------- -------
10,900 10,385 10,209
Goodwill 5,869 --- ---
Other assets 1,818 1,876 1,851
Deferred income tax benefit 519 632 519
------- ------- -------
$60,275 $58,569 $54,430
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 6,075 $ 8,925 $ 3,875
Current portion of long-term debt 2,300 2,300 9,800
Trade accounts payable 5,291 5,086 2,394
Accrued liabilities 10,867 9,528 11,374
Federal income tax payable 929 573 1,099
------- ------- -------
TOTAL CURRENT LIABILITIES 25,462 26,412 28,542
Other Liabilities:
Long-term debt 12,200 14,400 5,500
Deferred compensation 1,080 1,091 1,083
------- ------- -------
13,280 15,491 6,583
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 - 3,130,613,
3,102,827, and 3,084,449 at
10-04-97, 10-05-96, and 12-28-96 8,472 8,463 8,292
Retained earnings 13,061 8,203 11,013
------- ------- -------
21,533 16,666 19,305
------- ------- -------
$60,275 $58,569 $54,430
======= ======= =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 3
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Oct. 4, Oct. 5, Oct. 4, Oct. 5,
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $22,716 $23,142 $53,183 $58,097
Costs, expenses and other income:
Cost of products sold 14,845 15,891 36,694 40,835
Selling, administrative and
general expenses 4,345 4,222 11,934 12,089
Interest 378 355 849 959
Amortization of Goodwill 92 --- 125 ---
Other income (126) (47) (242) (163)
-------- -------- -------- --------
19,534 20,421 49,360 53,720
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 3,182 2,721 3,823 4,377
Provision for income taxes 1,389 1,204 1,775 1,940
-------- -------- -------- --------
NET INCOME $ 1,793 $ 1,517 $ 2,048 $ 2,437
======== ======= ======== ========
Per share data:
NET INCOME $ .57 $ .38 $ .66 $ .60
======== ======= ======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 4
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Oct. 4, 1997 Oct. 5, 1996
Operating Activities: --------------------------------------
<S> <C> <C>
Net Income $ 2,048 $ 2,437
Depreciation and amortization 2,020 2,244
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 3,686 2,311
-------- --------
Net cash provided by
operating activities 7,754 6,992
-------- --------
Investing Activities:
Purchase of 100% of the stock of
Master Product Manufacturing, Inc. (9,118) ---
Purchase of property and equipment (1,459) (1,405)
-------- --------
Net cash (used) by investing activities (10,577) (1,405)
-------- --------
Financing Activities:
Net inc.(dec.) in notes pay.- bank 2,200 (5,425)
Net inc.(dec.) in long-term debt (800) 8,052
Proceeds from exercise of stock options 188 28
Purchase of Common Stock - Dutch Auction
& Open Market (8) (9,137)
-------- --------
Net cash provided (used) by
financing activities 1,580 (6,482)
-------- --------
(Decrease) in cash (1,243) ( 895)
Cash, beginning of period 1,319 1,247
-------- --------
Cash, end of period $ 76 $ 352
======== =========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 5
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 October 4, 1997, October 5, 1996, and December 28, 1996 and
the results of operations and changes in financial position for the nine months
ended October 4, 1997 and October 5, 1996. The balance sheet at December 28,
1996 was derived from the audited balance sheet included in the 1996 annual
report to shareholders.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the nine month periods ended October 4,
1997 and October 5, 1996 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
<TABLE>
<CAPTION>
10-4-97 10-5-96 12-28-96
------- ------- --------
<S> <C> <C> <C>
Raw Materials $ 5,854 $ 6,777 $ 3,660
Work In Process 4,030 3,491 2,710
Finished Goods 12,809 13,216 5,082
------- ------- -------
$22,693 $23,484 $11,452
======= ======= =======
</TABLE>
Note D - Earnings Per Share
- ---------------------------
Earnings per common and common equivalent shares are based on average
shares outstanding. Dilutive effects of stock options on net income are not
material. The number of shares used to calculate earnings per share for the nine
months ended October 4, 1997 and October 5, 1996 was 3,103,777 and 4,076,670.
Note E - Income Taxes
- ---------------------
The provision for income taxes was computed based on financial
statement income.
Note F - Acquisition
- ---------------------
On June 17, 1997, the Company's wholly-owned subsidiary, Martin Yale
Industries, Inc. acquired 100% of the stock of Master Products Manufacturing
Company, Inc., a California corporation, ("Master") for cash in the amount of
$9,118,000. Master manufactures paper punches and catalog rack systems.
The acquisition was accounted for as a purchase and the excess of cost
over the fair value of net assets acquired was $5,994,000, which is being
amortized over fifteen years on a straight-line method. The Company's
consolidated results of operations include the operations of Master from June
17, 1997.
<PAGE> 6
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The following unaudited pro forma information shows the results of the
Company's operations as though the purchase of Master had been made at January
1, 1996 (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended
Oct. 4, 1997 Oct. 5, 1996
---------------------------------------
<S> <C> <C>
Net Sales $57,612 $65,617
Net Income 2,251 2,977
Earnings Per Share .73 .73
</TABLE>
The pro forma results of operations are not necessarily indicative of
the actual results of operations that would have occurred had the purchase
actually been made at January 1, 1996, or the results which may occur in the
future.
