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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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JOHNSTON INDUSTRIES, INC.
(Name of Subject Company)
JOHNSTON INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $.10 PAR VALUE PER SHARE
(Title or Class of Securities)
479368 10 2
(CUSIP Number of Class of Securities)
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MR. JAMES J. MURRAY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
JOHNSTON INDUSTRIES, INC.
EXECUTIVE OFFICES
105 THIRTEENTH STREET
COLUMBUS, GEORGIA 31901
(706) 641-3140
(Name, address and telephone number of person authorized
to receive notices and communications on behalf of the person(s) filing
statement)
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With Copies to:
ELIZABETH H. NOE, ESQ.
JAMES W. MAXSON, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
SUITE 2400
600 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308-2222
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Johnston Industries, Inc., a Georgia
Corporation ("Johnston"). The address and telephone number of the principal
executive offices of Johnston is 105 Thirteenth Street, Columbus, Georgia,
31901, (706) 641-3140. This Solicitation/Recommendation Statement on Schedule
14D-9 relates to shares of Johnston's common stock, $.10 par value per share
(the "Shares"). As of March 31, 2000, there were 10,712,872 Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The filing person of this Schedule 14D-9 is Johnston. Its address and
telephone number are stated in Item 1.
This Schedule 14D-9 relates to the tender offer being made by JI
Acquisition Corp., a Delaware corporation ("JI") and wholly-owned subsidiary of
CGW Southeast Partners IV, L.P. ("CGW"), to acquire up to all of the issued and
outstanding Shares of Johnston at a price of $3.00 per Share (such amount, or
any greater amount in cash as JI may pay pursuant to the offer, being
hereinafter referred to as the "Per Share Amount"), net to the seller thereof in
cash. The offer is being made on the terms and subject to the conditions set
forth in the Purchase Agreement, dated March 30, 2000 (the "Purchase Agreement")
by and among JI, CGW and Johnston and the related Letter of Transmittal (which
together constitute the "Offer"). Contemporaneous with the Offer, JI has agreed
to purchase and acquire, and Johnston shall issue and sell to JI, 8,750,000
shares of common stock and 250,000 shares of Series A preferred stock at an
aggregate purchase price of $27 million. The Offer is disclosed in the Tender
Offer Statement on Schedule TO, dated April 7, 2000 and filed with the
Securities and Exchange Commission (the "SEC") on April 7, 2000. The address of
the principal executive offices of JI, as set forth in the Schedule TO, is
Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as set forth below, there are no contracts, agreements,
arrangements and understandings between Johnston and its executive officers,
directors and affiliates (other than for services as employees, officers and
directors) and between Johnston and JI or its executive officers, directors or
affiliates:
Indemnification. The current Certificate of Incorporation of Johnston, as
amended to date, provides that no director shall be personally liable to
Johnston or any stockholder for monetary damages, for breach of fiduciary duty
as a director, except for any matter in respect of which such director shall be
liable under Section 174 of the Delaware General Corporation Law or shall be
liable by reason that such director (a) shall have breached his duty of loyalty
to Johnston or its stockholders, (b) shall not have acted in good faith, or in
failing to act, shall not have acted in good faith, (c) shall have acted in a
manner involving intentional misconduct or a knowing violation of law, or in
failing to act, shall have acted in a manner involving intentional misconduct or
a knowing violation of law, or (d) shall have derived an improper personal
benefit.
In addition, Johnston's Certificate of Incorporation and bylaws provide
that Johnston shall indemnify all of its officers and directors against any
liability on their part which may at any time be claimed to have resulted by
reason of any acts or omissions by them, in connection with the business or on
behalf of Johnston, to the fullest extent permitted by law.
Stock Options. Pursuant to agreements under Johnston's Amended and
Restated Stock Incentive Plan for Key Employees and Non-employee Directors, the
directors and executive officers of Johnston have been granted options to
purchase common stock. Of those options, the following directors and executive
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officers hold options to purchase the number of shares of common stock noted
below which are exercisable at an exercise price less than the Per Share Amount:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME COMMON STOCK PURCHASABLE EXERCISE PRICE
---- ------------------------ --------------
<S> <C> <C>
J. Reid Bingham................................... 5,000 $1.50
Allyn P. Chandler................................. 5,000 $1.50
John A. Friedman.................................. 5,000 $1.50
William J. Hart................................... 5,000 $1.50
Gaines R. Jeffcoat................................ 5,000 $1.50
Harold Harvey..................................... 50,000 $2.19
</TABLE>
In addition, the estate of David L. Chandler, a former director and
officer of Johnston, holds options to purchase 306,376 shares of common stock,
99,816 of which are exercisable at a price of $2.50 per share and the remainder
of which are exercisable at a price of $1.979 per share. Allyn Chandler is a
co-executor of the estate.
As permitted by the Purchase Agreement, the Board of Directors has
approved the cancellation of all outstanding options to purchase common stock
which are not exercisable at a price equal to or below the Per Share Amount,
totaling options to purchase 951,654 shares of common stock. The Board of
Directors has voted to allow all options that are exercisable at a price equal
to or below the Per Share Amount, including the options described above, to
remain outstanding and in full force and effect in accordance with their terms.
Employment Agreements. Johnston and D. Clark Ogle, President and Chief
Executive Officer, entered into an employment agreement for a three year term
commencing March 19, 1998. This agreement provides for a base salary of
$450,000, a one time signing bonus of $100,000, and a bonus of $225,000 payable
following the first year of employment and bonus or other additional
compensation as approved by the Compensation Committee of the Board of Directors
over the term of the agreement. In accordance with and upon execution of the
agreement, Johnston granted Mr. Ogle options to purchase 300,000 shares of
common stock which vest in equal amounts over a three year period. The agreement
contains a non-competition clause and a non-solicitation clause (each as defined
in the agreement) which are effective for a one-year period following the
termination of the employment agreement. Under the terms of the agreement, Mr.
Ogle would be entitled to continuation of salary and benefits but no bonus for a
period of one year in the event of termination by Johnston "without cause" (as
defined by the agreement). In the event Mr. Ogle should terminate the agreement
other than as a result of a material breach by Johnston not cured within thirty
days or in the event Johnston terminates the agreement "with cause" (as defined
in the agreement), Mr. Ogle would be entitled to all salary and benefits accrued
through the date of termination.
Johnston and James J. Murray, Executive Vice President and Chief Financial
Officer, entered into an employment agreement for a three year period commencing
September 22, 1997. The agreement contains a non-competition clause which is
effective during the term of the agreement and a non-solicitation clause (each
as defined in the agreement) which are effective for a one-year period following
the termination of the employment agreement. Under the agreement, Mr. Murray
would be entitled to continuation of salary and benefits but not bonus for the
remainder of the unexpired term in the event of termination by Johnston "without
cause" (as defined in the agreement). In the event that Mr. Murray should
voluntarily terminate the agreement prior to expiration of the term of the
agreement, he would forfeit all salary and benefits for the remainder of the
unexpired term.
Loan Guarantees. Under Johnston's Employee Stock Purchase Plan, several
years ago, certain directors and executive officers of Johnston borrowed money
from third party banks which indebtedness was guaranteed by Johnston. As a
condition to the consummation of the Offer, Johnston will cause the banks to
extend the terms of such notes, which have either matured or will mature
shortly, for all current directors and executive officers for a period of three
to five years and will cause the borrowers to pledge the common stock purchased
with such loans (or an equivalent number of shares) to the banks as security.
Each borrower may choose, in lieu of participating in such extensions and
pledge, to tender their Shares in the Offer and repay their outstanding loan.
Johnston's guarantee of the extended loans will also be extended. Separate
agreements
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will be negotiated for any directors or executive officers who wish to
participate but are unable to pledge shares to secure their loan, which
negotiations may result in the pledge of outstanding options to purchase common
stock referenced above.
The Purchase Agreement. The following is a summary of certain provisions
of the Purchase Agreement. The summary is qualified in its entirety by reference
to the Purchase Agreement which is incorporated herein by reference and a copy
of which has been filed with the SEC as an exhibit to this Schedule 14D-9.
The Offer. The Purchase Agreement provides that as promptly as reasonably
practicable JI will commence the Offer and that, upon the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, JI will
purchase all shares validly tendered pursuant to the Offer. The Purchase
Agreement provides that, without Johnston's consent, JI will not amend or waive
the minimum condition as described below, decrease the Per Share Amount, or
impose any further conditions to the Offer or amend any condition of the Offer
in a manner adverse to the holders of Shares. Notwithstanding the foregoing, the
Purchase Agreement provides that JI may, without Johnston's consent, extend the
Offer under the following circumstances:
- if at the scheduled expiration date any of the conditions to the Offer
have not been satisfied, including but not limited to any legal or
regulatory requirements under the Hart-Scott-Rodino Act;
- from time to time for a period of not more than ten business days beyond
the initial expiration date (which initial expiration date shall be
twenty business days following the commencement of the Offer), if at
that time less than 90% of the outstanding shares of Johnston common
stock have been tendered;
- for any period required by any rule, regulation, interpretation, or
position of the SEC or the staff of the SEC, applicable to the Offer;
and
- for a period of not more than ten business days beyond the latest
expiration date that would otherwise apply according to extensions under
the first three bullet points above.
The Purchase Agreement further provides, however, that in no event may the
Offer be extended beyond the date of termination of the Purchase Agreement, and
either party has the right to terminate the Purchase Agreement if the Offer is
not completed by June 30, 2000.
At the time that JI pays for the shares of Johnston common stock that were
validly tendered and accepted, JI has also agreed, subject to the terms and
conditions of the Purchase Agreement, to purchase 8,750,000 shares of Johnston
common stock and 250,000 shares of Johnston preferred stock, each for $3.00 per
share, for an aggregate purchase price of $27 million. The preferred stock is to
be designated as Series A preferred stock and will vote together with the common
stock on all matters brought before Johnston's stockholders. The Series A
preferred stock will also be convertible at any time, at the option of JI, into
shares of common stock as long as there are sufficient shares of authorized
common stock available for issuance.
The Mergers. Following the consummation of the Offer, the Purchase
Agreement provides that, subject to the terms and conditions thereof, at the
election of CGW and in accordance with Delaware law, in the event that CGW shall
acquire, directly or indirectly, at least 90% of the outstanding shares of
Johnston voting capital stock on a fully diluted basis, at the time CGW pays for
the Shares, a wholly owned subsidiary of JI shall be merged with and into
Johnston and, as a result of this short-form merger, Johnston, as the surviving
corporation, shall exist as a wholly owned subsidiary of JI.
At the effective time of the short-form merger each issued and outstanding
Share (other than Shares that are owned by Johnston as treasury stock, any
shares owned by CGW, JI, or their affiliates, or any Shares which are held by
stockholders exercising appraisal rights under Delaware law) will be converted
into the right to receive the Per Share Amount paid pursuant to the Offer. In
addition, each issued and outstanding share of the common stock of the wholly
owned subsidiary of JI will be converted into one share of common stock of
Johnston and, except for shares owned by CGW, JI or their affiliates, shall
constitute the only outstanding shares of capital stock of Johnston.
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The Purchase Agreement also provides that, subject to the terms and
conditions thereof, at the election of CGW and in accordance with Delaware law,
in the event that CGW shall acquire, directly or indirectly, less than 90% of
the outstanding shares of Johnston voting capital stock, at the time CGW pays
for the Shares, a wholly owned subsidiary of JI shall be merged with and into
Johnston, and, as a result of this merger Johnston will be the surviving
corporation and a subsidiary of JI. In contrast to the short-form merger
described above, in this instance the stockholders who did not tender their
shares will remain stockholders of Johnston.
Johnston's Board of Directors. The Purchase Agreement provides that
promptly after the purchase by JI of Shares pursuant to the Offer, JI shall be
entitled to designate such number of directors, rounded up to the next whole
number, on Johnston's board of directors as is equal to the product of the total
number of directors on Johnston's board of directors (giving effect to the
directors designated by JI) multiplied by the percentage that the number of
shares of capital stock beneficially owned by JI or CGW bears to the total
number of shares of capital stock then outstanding. Johnston will, upon request
of JI, promptly take all actions necessary to cause JI's designees to be elected
as directors of Johnston, including increasing the size of Johnston's board of
directors or securing the resignations of such number of its incumbent
directors, or both.
Options and Restricted Stock. Immediately after JI has accepted for
payment all Shares validly tendered and not withdrawn prior to the expiration
date, each outstanding option to purchase shares, other than certain designated
options with exercise prices below the Per Share Amount offered in this Offer,
granted under Johnston's Amended and Restated Stock Incentive Plan for Key
Employees and Non-Employee Directors, whether or not then exercisable or vested,
shall be canceled by Johnston. Each holder of a canceled option shall be
entitled to receive from JI at the same time as payment for Shares is made by JI
in connection with the Offer, in consideration for the cancellation of such
option, an amount, if any, in cash equal to the product of (a) the number of
shares previously subject to such option and (b) the excess, if any, of the
offer price over the exercise price per share previously subject to such option.
Interim Operations; Covenants. Pursuant to the Purchase Agreement,
Johnston covenants and agrees that, between the date of the Purchase Agreement
and the earlier of the termination of the Purchase Agreement or the time of the
election or appointment of JI's designees to Johnston's board of directors,
unless CGW will otherwise agree in writing, the following:
- the business of Johnston and its subsidiaries will be conducted only in,
and Johnston and subsidiaries will not take any action except in, the
usual, regular and ordinary course of business;
- Johnston will use all reasonable efforts to preserve intact its business
organization and material assets and maintain its material rights;
- Johnston will not, and will not permit any subsidiary to take any action
that would (a) materially adversely affect the ability of any party to
obtain any consents required for the Offer, (b) cause any of the
conditions to the Offer not to be satisfied, or (c) materially adversely
affect the ability of any party to perform its covenants and agreements
under the Purchase Agreement; and
- Johnston will not:
(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of Johnston or its subsidiaries, or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in the ordinary
course of the business consistent with past practices, or impose, or suffer
the imposition, on any material asset of Johnston or its subsidiaries of
any lien or permit any such lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of Johnston or its subsidiaries, or declare or pay any
dividend or make any other distribution in respect of Johnston's capital
stock; or
(d) except pursuant to the Purchase Agreement or upon the exercise of
stock options outstanding as of March 30, 2000, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to
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issue, sell, pledge, encumber, or authorize the issuance of, or otherwise
permit to become outstanding, any additional shares of Johnston common
stock or any other capital stock of Johnston or its subsidiaries, or any
stock appreciation rights, or any option, warrant, or other equity right;
or
(e) adjust, split, combine or reclassify any capital stock of Johnston
or its subsidiaries or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Johnston common
stock, or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (x) any shares of capital stock of any subsidiary of Johnston
(unless any such shares of stock are sold or otherwise transferred to
another subsidiary of Johnston) or (y) any asset having a book value in
excess of $25,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) purchase any securities or make any material investment, either by
purchase of stock of securities, contributions to capital, asset transfers,
or purchase of any assets, in any person other than a wholly owned
subsidiary of Johnston, or otherwise acquire direct or indirect control
over any person, other than in connection with (i) foreclosures in the
ordinary course of business, or (ii) the creation of new wholly owned
subsidiaries organized to conduct or continue activities otherwise
permitted by the Purchase Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of Johnston or its subsidiaries, except in accordance with past
practice or as required by law; pay any severance or termination pay or any
bonus other than pursuant to written policies or written contracts in
effect on March 30, 2000; and enter into or amend any severance agreements
with officers of Johnston or its subsidiaries; grant any material increase
in fees or other increases in compensation or other benefits to directors
of Johnston or its subsidiaries except in accordance with past practice; or
(h) enter into or amend any employment contract between Johnston or
its subsidiaries and any person (unless such amendment is required by law)
that does not contain the unconditional right on the part of Johnston or
its subsidiary to terminate without liability (other than liability for
services already rendered), at any time on or after the date JI pays for
the shares of Johnston common stock tendered in this Offer; or
(i) adopt any new employee benefit plan of Johnston or its
subsidiaries or terminate or withdraw from, or make any material change in
or to, any existing employee benefit plans of Johnston or its subsidiaries
other than any such change that is required by law or that, in the opinion
of counsel, is necessary or advisable to maintain the tax qualified status
of any such plan, or make any distributions from such employee benefit
plans, except as required by law, the terms of such plans or consistent
with past practice; or
(j) make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or regulatory accounting requirements or
GAAP; or
(k) commence any litigation other than in accordance with past
practice, or settle any litigation involving any liability of Johnston or
its subsidiaries for material money damages or restrictions upon the
operations of Johnston or its subsidiaries; or
(l) enter into, modify, amend or terminate any material contract or
waive, release, compromise or assign any material rights or claims; or
(m) authorize any of, or commit or agree to take any of, the foregoing
actions.
Pursuant to the Purchase Agreement, subject to a confidentiality
agreement, from the date of the Purchase Agreement to the purchase by JI of
Shares pursuant to the Offer, Johnston will provide CGW, during normal business
hours and upon reasonable notice, access to all financial, operating and other
data and information regarding the business of Johnston as CGW reasonably
requests.
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No Solicitation. Pursuant to the Purchase Agreement, Johnston has agreed
that neither Johnston nor any of its affiliates will, directly or indirectly,
initiate, solicit, encourage or knowingly facilitate (including by way of
furnishing information) any inquiries or the making of any acquisition proposal.
Johnston and its board of directors shall be permitted:
- to the extent applicable, to comply with Rule 14d-9 and Rule 14e-2 under
the Securities Exchange Act of 1934 with regard to an acquisition
proposal, and
- to engage in any discussions or negotiations with, or provide any
information to, any person in response to an unsolicited bona fide
written acquisition proposal by any such person, if and only to the
extent that:
(a) Johnston's board of directors concludes in good faith and
consistent with its fiduciary duties to Johnston's stockholders under
applicable law that such acquisition proposal could reasonably be expected
to result in a superior proposal,
(b) prior to providing any information or data to any person in
connection with an acquisition proposal by any such person, Johnston's
board of directors receives from such person an executed confidentiality
agreement containing confidentiality terms at least as stringent as those
contained in the confidentiality agreement between Johnston and CGW, and
(c) prior to providing any information or data to any person or
entering into discussions or negotiations with any person, Johnston's board
of directors notifies CGW and JI promptly of such inquiries, proposals or
offers received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or continued with, any
of its representatives indicating, in connection with such notice, the name
of such person and the material terms and conditions of any inquiries,
proposals or offers.
Johnston agrees that it will promptly keep CGW informed of the status and
terms of any such proposals or offers and the status and terms of any such
discussions or negotiations.
For purposes of this provision of the Purchase Agreement, a superior
proposal is defined to include any proposal:
- made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or
similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of
Johnston common stock then outstanding or all or substantially all the
assets of Johnston,
- which the board of directors of Johnston determines in its good faith
judgment that such proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory
aspects of the proposal and the person making the proposal, and
- which would, if consummated, result in a more favorable transaction to
the stockholders of Johnston than the offer, taking into account, to the
extent relevant, the long-term prospects and interests of Johnston and
its stockholders.
Indemnification and Insurance. Pursuant to the Purchase Agreement, CGW
and JI have agreed that:
- For a period of three years after the date on which JI purchases the
Shares tendered in the Offer, JI will, and will cause Johnston to,
indemnify, defend and hold harmless the present and former directors,
officers, employees and agents of Johnston and its subsidiaries against
all liabilities arising out of actions or omissions relating to the
service or services of those persons occurring at or prior to the date
on which JI purchases the Shares tendered in the Offer, to the fullest
extent permitted under Delaware law and by Johnston's Certificate of
Incorporation and Bylaws as in effect on March 30, 2000.
- JI will, or will cause Johnston to, use its reasonable efforts to
maintain in effect for a period of three years after the date on which
JI purchases the Shares tendered in the Offer, Johnston's existing
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directors' and officers' liability insurance policy with respect to
claims arising from facts or events which occurred prior to the date on
which JI purchases the Shares, and covering persons who are currently
covered by such insurance; provided, that neither JI nor Johnston is
obligated to make aggregate premium payments for such three-year period
which exceed 150% of the annual premium payments on Johnston's current
policy in effect as of March 30, 2000.
Representations and Warranties. Pursuant to the Purchase Agreement,
Johnston has made customary representations and warranties to CGW and JI with
respect to, among other things, its organization, capitalization, financial
statements, public filings, conduct of business, employee benefit plans,
intellectual property, labor matters, compliance with laws, tax matters,
litigation, environmental matters, tangible property, material contracts and
undisclosed liabilities.
Conditions of Offer. Notwithstanding any other provision of the Purchase
Agreement, JI shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if the
requirement that at least 9.7% of the currently outstanding common stock on a
fully diluted basis be validly tendered and not withdrawn (the "minimum
condition") shall not have been satisfied, any applicable waiting period under
the Hart-Scott-Rodino Act shall not have expired or been terminated prior to the
expiration of the Offer, or at any time on or after the date of the Purchase
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
- there shall have been instituted, threatened or pending any
litigation brought by any governmental entity or other person, or before
any court or governmental authority, in each case that has a reasonable
likelihood of success, (a) challenging the acquisition by CGW or JI of any
Shares, directly or indirectly seeking to restrain or prohibit or otherwise
make more costly the making or consummation of the Offer, or seeking to
obtain from Johnston, CGW or JI any damages that are material in relation
to Johnston and its subsidiaries, taken as a whole, (b) seeking to prohibit
or limit the ownership or operation by Johnston, CGW or any of their
respective subsidiaries of any material portion of the business or assets
of Johnston, CGW or any of their respective subsidiaries, or to compel
Johnston, CGW or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of Johnston, CGW or
any of their respective subsidiaries, as a result of the Offer, (c) seeking
to impose or to confirm limitations on the ability of CGW or any of its
subsidiaries effectively to acquire or hold or to exercise full rights of
ownership of the Shares tendered in the Offer, including without limitation
the right to vote any shares acquired or owned by CGW or any of its
subsidiaries on all matters properly presented to the stockholders of
Johnston, or the right to vote any shares of capital stock of any
subsidiary directly or indirectly owned by Johnston, (d) seeking to
prohibit CGW or any of its subsidiaries from effectively controlling in any
material respect the business or operations of Johnston or any of its
subsidiaries, or (e) which otherwise is reasonably likely to have a
material adverse effect on Johnston and its subsidiaries;
- there shall be any law threatened, proposed or enacted with respect
to, or deemed applicable to, or any consent withheld with respect to, (a)
CGW, Johnston or any of their respective subsidiaries or (b) the Offer, by
any governmental entity or before any court or governmental authority, that
is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (a) through (d) of the first bullet
above;
- there shall have occurred any development that is reasonably likely
to result in a material adverse effect on Johnston and its subsidiaries;
- there shall have occurred (a) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or
in the Nasdaq Stock Market for a period in excess of 24 hours, (b) a
decline of at least 25% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 index from March 30, 2000, or a
material disruption of or material adverse change in financial, banking or
capital market conditions that could materially adversely affect
syndication of loan facilities, (c) any material adverse change in United
States currency exchange rates or a suspension of, or limitation on, the
markets therefor, (d) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (e) any
limitation (whether or not mandatory) by any
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domestic government or governmental, administrative or regulatory authority
or agency on, or any other event that could reasonably be expected to
materially adversely affect the extension of credit by banks or other
lending institutions, (f) a commencement of a war or armed hostilities or
other national or international calamity that has a material adverse effect
on CGW, JI, Johnston or any of their subsidiaries or affecting or delaying
the consummation of the Offer, or (g) in the case of any of the foregoing
existing on the date of the Purchase Agreement, a material acceleration or
worsening thereof;
- (a) it shall have been publicly disclosed or JI shall have otherwise
learned that beneficial ownership of more than 20% of the outstanding
shares of Johnston's common stock has been acquired by any corporation
(including Johnston or any of its subsidiaries or affiliates), partnership,
person or other entity or group, other than JI or any of its affiliates, or
(b) (A) the board of directors of Johnston or any committee thereof shall
have approved or recommended any acquisition proposal or any other
acquisition of shares other than the Offer, or (B) Johnston shall have
entered into an agreement with respect to an acquisition proposal or (C)
the board of directors of Johnston or any committee thereof shall have
resolved to do any of the foregoing;
- any of the representations and warranties of Johnston set forth in
the Purchase Agreement that are qualified as to materiality shall not be
true and correct, or any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of
such determination;
- Johnston shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of Johnston to be performed or complied with by it under the
Purchase Agreement;
- the Purchase Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of
Johnston;
- all consents of and notices to or filings with governmental
authorities and third parties required in connection with the Offer shall
not have been obtained or made;
- JI shall not have received financing in an amount necessary to
consummate the Offer and the purchase of Johnston common and preferred
stock, including the payment of fees and expenses relating to the those
transactions, on terms and conditions reasonably satisfactory to JI and
CGW; or
- CGW and JI shall not have received confirmation from Johnston that
each of the financial institutions that have made loans to employees of
Johnston to purchase shares of Johnston common stock, which are guaranteed
by Johnston, shall have agreed to restructure the loans on terms reasonably
acceptable to CGW and JI, including the pledge by each borrower under the
loans of all shares of Johnston common stock held by such borrower and
purchased with the proceeds of the loan, to the lender to secure the loans;
provided, however, that any employee borrower who chooses to tender their
shares of Johnston common stock acquired with the loans, will not have
their loan restructured and instead it will remain due and payable in
accordance with its original terms.
The foregoing conditions are for the sole benefit of JI and CGW and may be
asserted by JI or CGW regardless of the circumstances giving rise to any such
condition or may be waived by JI or CGW in whole or in part at any time and from
time to time in their sole discretion. The failure by CGW or JI at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
-8-
<PAGE> 10
Termination; Fees. The Purchase Agreement and the Offer may be terminated
at any time prior to the effective date:
- by mutual written consent of CGW and Johnston;
- by either CGW or Johnston if JI has not accepted for payment all Shares
tendered pursuant to the Offer by June 30, 2000, if the Offer shall have
expired without any shares of Johnston common stock being purchased or
if any court or other governmental authority shall have issued an order,
decree or ruling or taken any other action, which permanently restrains,
enjoins or otherwise prohibits the acceptance for payment of, or payment
for, Shares tendered pursuant to the Offer and such order, decree,
ruling or other action shall have become final and non-appealable;
- by CGW if: (a) due to an occurrence not involving a breach by CGW or JI
of their obligations under the Purchase Agreement that results in a
failure to satisfy any condition of the Offer, JI shall have failed to
commence the Offer as soon as reasonably practical following the date of
the initial public announcement of the Offer, or (b) Johnston shall have
breached in any material respect any representation, warranty, covenant
or other agreement in the Purchase Agreement or the agreements governing
the investment by BancBoston or the refinancing of Johnston's debt by
Congress Financial Corporation which cannot be cured prior to the date
JI pays for the Shares tendered in the Offer; and
- by Johnston if (a) JI has failed to commence the Offer as soon as
reasonably practical following the initial date of the public
announcement of the Offer, (b) CGW or JI shall have breached in any
material respect any representation, warranty, covenant or other
agreement in the Purchase Agreement which cannot be cured prior to 30
days after Johnston gave JI and CGW notice of such breach, or (c) prior
to the purchase of Shares pursuant to the Offer, the board of directors
of Johnston approves or recommends a superior proposal and enters into a
definitive contract regarding such superior proposal.
Pursuant to the Purchase Agreement, Johnston shall pay CGW a fee equal to
$3,000,000, plus all of CGW's reasonable expenses (up to a maximum of $4,000,000
for such fee and all expenses), if:
- the Purchase Agreement is terminated pursuant the board of directors of
Johnston entering into a superior proposal; or
- the Offer shall have expired without any shares of Johnston common stock
being purchased or if JI shall have not accepted for payment all shares
of Johnston common stock tendered by June 30, 2000, and prior to that
time a superior proposal is announced.
CGW shall be entitled to receive its reasonable expenses in the event
that:
- the Purchase Agreement is terminated by CGW due to Johnston having
breached in any material respect any representation, warranty, covenant
or other agreement in the Purchase Agreement or the agreements governing
the investment by BancBoston or the refinancing of Johnston's debt by
Congress Financial Corporation which cannot be cured prior to the date
JI pays for the Shares tendered in the Offer.
Johnston shall be entitled to receive its reasonable expenses in the event
that:
- JI has failed to commence the Offer as soon as reasonably practical
following the initial date of the public announcement of the Offer; or
- CGW or JI shall have breached in any material respect any
representation, warranty, covenant or other agreement in the Purchase
Agreement which cannot be cured prior to 30 days after Johnston gave JI
and CGW notice of such breach.
Except as described above, all costs and expenses incurred in connection
with the Purchase Agreement and the Offer shall be paid by the party incurring
such expenses, whether or not the Offer is consummated.
-9-
<PAGE> 11
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Recommendation of the Board of Directors. The Board of Directors has
approved the Purchase Agreement and the transactions contemplated thereby,
including the Offer and related purchase of common and preferred stock by JI.
The Board of Directors expresses no opinion, however, as to whether stockholders
should accept the Offer and tender their Shares thereunder.
Background; Reasons for Neutral Position Regarding the Offer. As part of
an on-going strategic effort to improve the financial position of Johnston,
Johnston has considered a variety of alternatives for the past several months.
As a result of its considerations, Johnston engaged in negotiations with CGW
regarding its proposal to engage in an offer for an equity investment in
Johnston as described below.
In December 1998, Mr. Edwin A. Wahlen, Jr., a managing partner of CGW and
Mr. William A. Davies, a partner of CGW, made an initial visit to the offices of
Johnston to discuss a potential acquisition of Johnston by CGW.
On March 2, 1999, Messrs. Wahlen and Davies again travelled to the offices
of Johnston to further discuss a proposed transaction between Johnston and CGW.
At this meeting, CGW entered into a Confidentiality Agreement with Johnston,
pursuant to which, among other things, CGW agreed that any non-public
information made available to it would be held in strict confidence. CGW further
agreed to a three-year standstill with respect to initiating any purchase or
sale of any securities of Johnston, and with regard to influencing the voting of
any securities of Johnston, or otherwise seeking to control or influence
Johnston's management, unless Johnston provided its prior written consent.
On March 23, 1999, Mr. Davies met with representatives of Johnston at the
offices of Johnston to review Johnston's operational structure. Shortly
thereafter, CGW concluded that an acquisition of Johnston was not appropriate
for CGW at that time.
On July 20, 1999, Mr. James A. O'Donnell, a partner of CGW, and Mr. Roy R.
Bowman, also a partner of CGW, visited the offices of Johnston to once again
discuss the possibilities of an investment by CGW in Johnston.
On August 4, 1999, Messrs. O'Donnell and Bowman visited the offices of
Johnston and also toured certain of the company's manufacturing facilities. At
this time further discussions of a potential investment or acquisition
transaction were held with the management of Johnston.
On August 9, 1999, Mr. D. Clark Ogle, president and chief executive
officer of Johnston, and Mr. James J. Murray, chief financial officer of
Johnston, visited CGW's offices in Atlanta, Georgia to meet with the partners of
CGW and discuss a potential investment in, or acquisition of, Johnston by CGW.
On August 23, 1999, CGW drafted and submitted to Johnston a letter of
interest. The letter of interest contained terms of the proposed investment in,
and acquisition of, Johnston.
In response to CGW's letter, the board of directors of Johnston held a
special meeting on August 30, 1999 to discuss the proposal. After discussing the
recent alternatives to an acquisition considered by management, none of which
had resulted in firm offers, the board determined to allow CGW to proceed with
due diligence. For purposes of additional negotiations with CGW, the board
appointed a special committee comprised of Messrs. John A. Friedman, J. Reid
Bingham, William J. Hart and Gaines R. Jeffcoat, authorizing this committee to
negotiate with CGW and evaluate any alternatives to the proposal.
Following this board meeting, Johnston announced that it had received an
unsolicited, tentative acquisition proposal involving a price of $3.00 per
share, indicating that the bidder would continue with due diligence.
Notwithstanding this release, Johnston did not receive any serious indications
of interest from other bidders.
In August, 1999, following the delivery of its letter of interest to
Johnston, CGW began its due diligence process and hired certain consultants and
advisors, including environmental consultants, legal advisors and accounting
advisors.
-10-
<PAGE> 12
On September 7, 1999, Messrs. O'Donnell and Bowman made a due diligence
visit to the offices of Johnston to review certain financial and operational
diligence materials.
On September 24, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's
offices for further due diligence review as well as to meet with Mr. Harold
Harvey, President of the Greige Fabrics and Finished Fabrics divisions of
Johnston. The discussions with Mr. Harvey concerned the operational aspects of
Johnston's business.
On September 27 and 28, 1999, Mr. Murray met with representatives of CGW
at the offices of CGW to further review the operational structure of Johnston.
Mr. Murray was joined by Mr. Ogle on September 29, 1999 for a continuation of
such discussions.
On October 4, 1999, CGW submitted a non-binding proposal to Johnston to
acquire a controlling interest in Johnston through a purchase of its common
stock.
On October 18, 21, and 25, 1999, the Johnston board held special meetings
to receive reports from the special committee concerning negotiations with CGW
and to discuss the October 4 proposal letter. Mr. Friedman reported that due
diligence had been completed. The proposal letter and a special committee
proposal for an alternative structure to the transaction were discussed. Recent
additional efforts by members of the board and management to determine if other
potential strategic buyers were interested in a transaction were also discussed.
The board then authorized the special committee to instruct Johnston's counsel
to meet with CGW and its counsel to discuss alternative transaction structures.
On October 18, 1999, CGW began arrangements for the financing of the
proposed transaction with Johnston, including initial contact with BancBoston
Capital, Inc., regarding an investment in JI, and Congress Financial
Corporation, regarding a new credit facility for Johnston.
On October 28, 1999, counsel to Johnston met with CGW and their counsel at
the offices of CGW to discuss various alternative structures for a transaction
with Johnston, including the possibility of a direct capital infusion in
Johnston by CGW.
On November 17, 1999, Messrs. O'Donnell and Bowman met at CGW's offices
with certain members of the special committee of the Board of Directors of
Johnston to discuss the non-binding proposal, certain issues relating thereto
and a timetable for consummation of the transaction.
On November 23, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's
offices to continue their financial and operational due diligence review of
Johnston.
On December 7, 1999, Messrs. O'Donnell and Bowman traveled to Opp, Alabama
to inspect Johnston's manufacturing operations at its Opp and Micolas, Alabama
mills.
On December 14, 1999, Messrs. O'Donnell and Bowman traveled to Johnston's
offices to meet with Mr. Bill Henry, Vice President of Johnston. Discussions
with Mr. Henry focused on overall operational matters.
On January 5, 2000, Messrs. O'Donnell and Bowman and representatives from
BancBoston traveled to Johnston's offices to meet with Mr. Ogle and Mr. Murray
to discuss the overall transaction, certain financial and operational due
diligence matters, and BancBoston's participation in the transaction. On January
25, 2000, Messrs. O'Donnell and Bowman traveled to Johnston's offices to
complete their operational and financial due diligence review of Johnston.
On February 21, 2000, Messrs. Bingham and Hart met with Messrs. Cravey,
O'Donnell and Bowman at the offices of CGW to discuss certain terms and
conditions of the proposed transaction.
During January, February, and March, counsels to Johnston and CGW prepared
and negotiated the Purchase Agreement and related documents setting forth the
structure of the proposed transaction, during which time various negotiations
were held by the special committee and CGW through counsel regarding various
terms of the transaction.
-11-
<PAGE> 13
In February 1999, Mr. Friedman, a member of the special committee of the
Johnston board of directors, became ill and, as a result, his participation in
the transaction ended.
On March 28, 1999, the special committee received an oral report from The
Robinson-Humphrey Company, LLC as to the opinion they were prepared to render to
the board of directors regarding the fairness of the consideration to be
received by the public stockholders. Thereafter, the special committee, certain
members of management and counsel met with CGW and its counsel at CGW's offices
to discuss final outstanding matters regarding the proposed transaction.
The Board of Directors, on March 29, 2000, approved the Purchase Agreement
and the transaction as contemplated thereby, including the Offer. The Board has
expressed no opinion, however, as to whether stockholders should accept the
Offer and tender their Shares thereunder. While the Board of Directors believes
that the Per Share Amount is fair to the stockholders of Johnston and has
received the opinion of The Robinson-Humphrey Company, LLC to that effect, the
Board believes that each stockholder is in a better position to determine if
tendering their shares as part of the Offer is in their best interest based on
the price they originally paid for their Shares, their personal financial
situation, and the tax impact of the tender on such stockholder. Further, as
noted below, if less than 90% of Johnston's voting stock is acquired by the JI
there is the potential for a continued public market in Johnston's common stock.
The Board believes that each stockholder is in a better position than the Board
of Directors to determine whether it is in their best interest to tender or
continue to participate in the ownership of Johnston.
In approving the Purchase Agreement and the transactions contemplated
thereby, and deciding to take this neutral position, the Board of Directors
considered the following material factors:
(1) the terms of the Purchase Agreement and related documents,
which were the product of arms-length negotiations among the parties;
(2) Johnston's need for additional operating capital and the
benefits that will be provided to Johnston from the immediate infusion of
$27 million in connection with the purchase by JI from Johnston of common
and preferred stock;
(3) the opportunity represented by the Offer to provide both
public and employee stockholders with an opportunity to obtain liquidity
for their equity holdings in Johnston in light of relatively low volume of
trading in Johnston's stock over the last few months;
(4) the Per Share Amount is significantly more than the current
market value of the stock ($1.9375 as of March 28, 2000, the last trading
day before the Board approved the Purchase Agreement and the transactions
contemplated thereby);
(5) the fact that, if less than 90% of the voting stock of
Johnston is acquired by JI, JI will attempt to keep Johnston public for
three years, allowing the stockholders continued participation in any
future growth of Johnston while providing some opportunity for liquidity
in the future;
(6) The opinion of The Robinson-Humphrey Company, LLC delivered
to the Board at the March 29, 2000 meeting, which is more thoroughly
described below;
(7) The fact that many stockholders of Johnston who purchased
their shares more than a year ago purchased at prices greatly exceeding
the Per Share Amount, which would mean that such stockholders could
sustain a capital loss if they tender into the Offer; and
(8) In the event that JI acquires more than 90% of the
outstanding voting stock of Johnston, JI has the right to engage in a
merger cashing out the remaining stockholders at the Per Share Amount.
Therefore, if Johnston is not maintained as a public company, it is
probable that the remaining stockholders will have the opportunity to
participate in the Per Share Amount offered in the Offer. Thus a decision
not to tender will not necessarily result in a stockholder being left in a
position of illiquidity in a private company.
-12-
<PAGE> 14
The Board of Directors did not assign relative weights to the above
factors or determine that any factor was of particular importance. Rather, the
Board of Directors viewed its neutral position as being based on the totality of
the information presented to it and considered by it.
Opinion of Financial Advisor. The Board of Directors of the Company
retained The Robinson-Humphrey Company, LLC to act as its financial advisor to
render an opinion for the Board of Directors as to the fairness, from a
financial point of view, of the consideration to be received by the stockholders
of Johnston in the Offer. On March 28, 2000, The Robinson-Humphrey Company, LLC
delivered its oral opinion to the special committee of the Board of Directors of
Johnston and on March 29, 2000, Robinson-Humphrey delivered its oral and written
opinion to the Board of Directors of Johnston to the effect that, as of such
date, the Per Share Amount to be received by Johnston's stockholders in the
Offer was fair, from a financial point of view, to the stockholders of Johnston
(the "Robinson-Humphrey Opinion"). No restrictions were imposed by Johnston's
Board of Directors upon Robinson-Humphrey with respect to investigations made or
procedures followed in rendering its opinion. The full text of the
Robinson-Humphrey Opinion is attached hereto and has been filed as Exhibit 3 to
this Schedule 14D-9. Johnston's stockholders are urged to, and should, read the
Robinson-Humphrey Opinion carefully in its entirety for assumptions made,
matters considered and limits of the review by Robinson-Humphrey. The
Robinson-Humphrey Opinion is addressed to the Board of Directors of Johnston and
does not constitute a recommendation to any holder of Shares as to how such
holder should respond to the Offer.
To the best of Johnston's knowledge, none of Johnston's directors or
executive officers will tender Shares pursuant to the Offer. Certain of
Johnston's executives and directors and executive officers are parties to bank
loans which have been guaranteed by Johnston. As a condition to the Closing of
the Offer, these bank loans will be extended and the borrower (officer or
director) will pledge the shares of Johnston's Common Stock held by them to the
bank as additional security for such loan. See Item 3.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
For its services in connection with the Offer, Johnston is obligated to
pay Robinson-Humphrey a total transaction fee of $300,000. This fee became
payable upon delivery of the Robinson-Humphrey Opinion in writing. Johnston also
has agreed to reimburse Robinson-Humphrey for its out-of-pocket expenses,
including reasonable fees and expenses of its legal counsel, and to indemnify
Robinson-Humphrey and certain related persons or entities against liabilities
arising out of its engagement. No other person has been employed or retained and
no other person will be compensated to make solicitations or recommendations in
connection with the Offer.
ITEM 6. INTEREST AND SECURITIES OF THE SUBJECT COMPANY.
To the best of Johnston's knowledge, no transactions in Shares have been
effected within the past 60 days by Johnston or any executive officer, director,
affiliate or subsidiary of Johnston.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth below, Johnston is not engaged in any negotiation in
response to the Offer which relate to or would result in (i) any extraordinary
transaction, such as a merger, reorganization or liquidation, involving Johnston
or any subsidiary of Johnston; (ii) any purchase, sale or transfer or a material
amount of assets by Johnston or any subsidiary of Johnston; (iii) a tender offer
for or other acquisition of securities by or of Johnston; or (iv) any material
change in the present dividend rate or policy or indebtedness or capitalization
of Johnston.
In connection with the execution of the Purchase Agreement, Johnston and
CGW received a commitment letter dated March 30, 2000 from Congress Financial
Corporation pursuant to which Congress has committed, subject to the terms and
conditions of the commitment letter, to provide Johnston with a credit facility
in an initial aggregate principal amount of up to approximately $105.7 million,
to be available for the repayment of outstanding amounts under Johnston's
current credit facility and for general corporate
-13-
<PAGE> 15
purposes. Johnston will participate with CGW and JI in negotiations with
Congress over the definitive loan documentation, which transaction will close
contemporaneously with the Offer.
Except as set forth herein, there are no transactions, Board of Directors'
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
above.
ITEM 8. ADDITIONAL INFORMATION.
At its meeting on March 29, 2000, in connection with its approval of the
Purchase Agreement and Offer, the Johnston Board of Directors approved an
amendment to the Stockholder Protection Agreement entered into between Johnston
and The Bank of New York, as rights agent, in May 1999, to prevent the Offer and
resulting acquisition of Shares by JI from constituting a triggering event under
such agreement. As a result, the rights previously issued to holders of Shares
will not become exercisable in connection with the Offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
1. -- Letter to Stockholders of Johnston Industries, Inc.
2. -- Purchase Agreement among CGW Southeast Partners IV, L.P., JI
Acquisition Corp. and Johnston Industries, Inc. dated March
30, 2000 (incorporated by reference to the exhibits to
Johnston's Annual Report on Form 10-K for the year ended
January 1, 2000)
3. -- Opinion of The Robinson-Humphrey Company, LLC
4. -- Employment Agreement with D. Clark Ogle dated March 20, 1998
(incorporated by reference to the exhibits to Johnston's
Annual Report on Form 10-K for the year ended January 3,
1998)
5. -- Employment Agreement with James J. Murray dated September
15, 1997 (incorporated by reference to the exhibits to
Johnston's Quarterly Report on Form 10-Q for the quarter
ended September 27, 1997)
</TABLE>
-14-
<PAGE> 16
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.
Johnston Industries, Inc.
April 7, 2000 By: /s/ JAMES J. MURRAY
------------------------------------
Name: James J. Murray
Title: Executive Vice President
and
Chief Financial Officer
-15-
<PAGE> 1
JOHNSTON INDUSTRIES, INC.
105 THIRTEENTH STREET
COLUMBUS, GEORGIA 31901
April 7, 2000
To our Stockholders:
On behalf of the Board of Directors of Johnston Industries, Inc. we are
pleased to inform you that, on March 30, 2000, the Company entered into a
Purchase Agreement with CGW Southeast Partners IV, L.P. and JI Acquisition
Corp., pursuant to which CGW through JI Acquisition has today commenced a cash
tender offer to purchase up to all of the shares of the Company's Common Stock
at $3.00 per share.
Your Board of Directors has approved the Purchase Agreement and related
transactions, including the offer. The Board of Directors of the Company
expresses no opinion, however, as to whether you should accept the offer and
tender your shares thereunder.
In arriving at its decision to approve the Purchase Agreement, the Board
of Directors gave careful consideration to a number of factors described in the
attached Schedule 14D-9 that is being filed today with the Securities and
Exchange Commission, including, among other things, the terms and conditions of
the Stock Purchase Agreement and the opinion of The Robinson-Humphrey Company,
LLC, the Company's financial advisor, to the effect that, as of the date of such
opinion and based upon the assumptions and other matters set forth therein, the
offer and the transactions contemplated by the Purchase Agreement are fair to
the Company's stockholders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the offer, also
enclosed is the Offer to Purchase, dated April 7, 2000, of CGW and JI
Acquisition, together with related materials, including a Letter of Transmittal,
to be used for tendering your shares, if you decide to do so. These documents
set forth the terms and conditions of the offer and provide instructions as to
how to tender your shares. We urge you to read the enclosed material carefully
in making your decision with respect to tendering your shares pursuant to the
offer.
On behalf of the Board of Directors,
D. CLARK OGLE
<PAGE> 1
EXHIBIT 3
THE ROBINSON-HUMPHREY COMPANY, LLC
<TABLE>
<S> <C> <C> <C>
Corporate Finance Investment Bankers
Department Since 1894
</TABLE>
March 29, 2000
Board of Directors
Johnston Industries, Inc.
105 Thirteenth Street
Columbus, Georgia 31901
Ladies and Gentlemen:
We understand that Johnston Industries, Inc. (the "Company") proposes to
enter into a Purchase Agreement dated March 29, 2000 (the "Purchase Agreement")
by and among Tiger Corporation and Tiger Holding Corporation (collectively
"Tiger") and the Company. Pursuant to the terms of the Purchase Agreement, (1)
Tiger will commence a tender offer, at a price of $3.00 per share net to the
seller in cash, for up to all of the outstanding shares of common stock of the
Company (the "Tender Offer") and (2) upon completion of the Tender Offer, Tiger
will purchase shares of the Company's common stock and Series A Preferred Stock
having an aggregate value of $27 million at a price of $3.00 per share (the
"Stock Purchase") (collectively, the "Purchase Consideration"). The Tender Offer
is subject to the "Minimum Tender Condition" whereby Tiger will not be required
to complete the Tender Offer if the number of tendered shares and the number of
shares to be acquired in the Stock Purchase do not aggregate at least 50.1% of
the fully diluted outstanding shares of common stock of the Company. The terms
and conditions of the proposed transaction are set forth in more detail in the
Purchase Agreement.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our opinion with respect to the fairness, from a
financial point of view, to the Company's stockholders of the Purchase
Consideration.
In arriving at our opinion, we reviewed and analyzed: (1) a draft of the
Purchase Agreement dated March 24, 2000, (2) publicly available information
concerning the Company which we believe to be relevant to our inquiry, (3)
financial and operating information with respect to the business, operations and
prospects of the Company furnished to us by the Company, (4) a trading history
of the Company's common stock from March 24, 1997 to the present and a
comparison of that trading history with those of other companies which we deemed
relevant, (5) a comparison of the historical financial results and present
financial condition of the Company with those of other companies which we deemed
relevant, (6) a comparison of the financial terms of the proposed transaction
with the financial terms of certain other recent transactions which we deemed
relevant, and (7) certain historical data relating to acquisitions of publicly
traded companies, including percentage premiums paid in such acquisitions. We
have also had discussions with the management of the Company concerning its
business, operations, assets, present condition and future prospects and
undertook such other studies, analyses and investigations as we deemed
appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections provided by
the Company, we have assumed that such projections have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made any evaluations or
appraisals of the assets or liabilities of the Company. In addition, you have
not authorized us to solicit, and we have not solicited, any indications of
interest from any third party with respect to the purchase of all or a part of
the Company's business. Our opinion is necessarily based upon market, economic
and other conditions as they exist on, and can be evaluated as of, the date of
this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Purchase Consideration to
be received in the proposed transaction is fair to the stockholders of the
Company.
Very Truly yours
/s/ THE ROBINSON-HUMPHREY COMPANY
THE ROBINSON-HUMPHREY COMPANY, LLC
