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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Name of Subject Company)
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Name of Person Filing Statement)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
389893207
(CUSIP Number of Class of Securities)
Rod F. Dammeyer
President and Chief Executive Officer
Two North Riverside Plaza
Chicago, Illinois 60606
(312) 648-5656
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on Behalf of the Subject Company)
With a copy to:
Gus J. Athas C. Stephen Bigler
Senior Vice President and General Counsel Richards, Layton & Finger
Two North Riverside Plaza One Rodney Square
Chicago, Illinois 60606 Wilmington, Delaware 19899
(312) 648-5656 (302) 658-6541
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company to which this Schedule 14D-9
Solicitation/Recommendation Statement (the "Statement") relates is Great
American Management and Investment, Inc., a Delaware corporation (the
"Company"), and the address of its principal executive offices is Two North
Riverside Plaza, Chicago, Illinois 60606. The title of the class of equity
security to which the Statement relates is shares of common stock, par value
$.01 per share (the "Shares") of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer by GAMI Merger Co., a
Delaware corporation (the "Purchaser"), wholly owned by Equity Holdings
Limited, an Illinois Limited Partnership ("Equity Holdings'), to purchase any
and all Shares of the Company. The address of the principal executive offices
of the Purchaser is Two North Riverside Plaza, Chicago, Illinois 60606. The
offer is being made at a price of $50.00 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase of the Purchaser dated March 29, 1996 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with the
Offer to Purchase, constitute the "Offer"), copies of which are filed as
Exhibits 2 and 3 hereto, respectively.
The Purchaser and Equity Holdings filed a Rule 13e-3 Transaction
Statement (the "Rule 13e-3 Statement") and a Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1") with the Securities and Exchange Commission on
March 29, 1996 and amended the Rule 13e-3 Statement and the Schedule 14D-1 on
April 5, 1996. According to the Offer to Purchase, the Purchaser is making the
Offer for the purpose of acquiring more than 90 percent of the outstanding
Shares and then consummating a "short-form merger" under Section 253 of the
General Corporation Law of the State of Delaware (the "DGCL"), pursuant to
which the Purchaser will be merged into the Company (the "Merger" and, together
with the Offer, the "Transaction"). The Purchaser has approved the
consummation of the Merger for the same price per Share as paid in the Offer,
subject to certain conditions, including ownership of 90 percent of the
outstanding Shares. Once the Purchaser acquires at least 90 percent of Shares,
the Purchaser will have a sufficient number of Shares to effect the Merger
without (i) any action whatsoever by the Board of Directors of the Company or
(ii) the affirmative vote of any other stockholder as permitted by Section 253
of the DGCL. Assuming the Purchaser acquires at least 90 percent of the
Shares, the Purchaser has stated an intention to consummate the Merger
immediately after consummation of the Offer.
As a result of the Merger, the Purchaser will cease to exist and the
Company will continue as the surviving corporation (the "Surviving
Corporation"), with Equity Holdings as its sole stockholder. In the Merger,
each Share outstanding immediately prior to the effective time of the Merger
(the "Effective Time") (other than Shares held in the Company's treasury, by
any subsidiary of the Company or by the Purchaser and other than Shares held by
stockholders who have properly exercised appraisal rights with respect thereto
(the "Dissenting Shares") in accordance with Section 262 of the DGCL) shall, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, be cancelled and converted into the right to receive
$50.00 in cash, or any higher price per Share paid in the Offer (the "Merger
Price"), payable to the holder thereof, without interest thereon, upon the
surrender of the certificate or certificates formerly representing such Shares.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the
person filing this Statement, is set forth in Item 1 above.
(b)(1)-(2) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS--Interests of Certain Persons in the
Transaction," "SPECIAL FACTORS--Past Contacts and Transactions
<PAGE> 3
Between Equity Holdings and the Company," "SPECIAL FACTORS--Contracts,
Transactions and Arrangements Concerning the Shares," "SPECIAL FACTORS--
Certain Shares Expected to be Tendered," "SPECIAL FACTORS--The Merger,"
"SPECIAL FACTORS--Certain Effects of the Transaction," "SPECIAL FACTORS--Plans
for the Company After the Transaction," "THE OFFER--Section 8. Certain
Information Concerning Equity Holdings and the Purchaser" and in Schedule I to
the Offer to Purchase is incorporated herein by reference.
Additional information concerning certain contracts, agreements and
arrangements between the Company or its affiliates and certain of its executive
officers, directors, or affiliates are described under the headings "Summary
Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values," "Compensation
of Directors," "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," "Compensation Committee Interlocks and Insider
Participation," "Compensation Committee Report on Executive Compensation" and
"Certain Relationships and Related Transactions" contained at various places on
pages 6 through 14 of the Company's Notice of Annual Meeting and Proxy
Statement for the Annual Meeting of Stockholders dated April 28, 1995 (the
"Proxy Statement"). Copies of such pages are filed as Exhibit 4 hereto and are
incorporated herein by reference.
On April 19, 1995, the Company entered into a Stock Purchase Agreement
between the Company and Equality Acquisition Corp. whereby the Company sold its
stock in ES Holding Company, the owner of all shares of Equality Specialties,
Inc., to Equality Acquisition Corp. for approximately $19.4 million in cash and
a note and shares of the acquiring entity. Mr. F. Philip Handy, a director of
the Company, is a member of the investment group that owns Equality Acquisition
Corp.
On March 21, 1996, Winter Park Capital Company, executed a letter of
intent to acquire The Parts House, Inc. from Eagle Industries, Inc., a wholly
owned subsidiary of the Company, for approximately $19.0 million in cash and
notes, as well as warrants and other consideration. Mr. Handy is the President
of Winter Park Capital Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)-(b) The Board of Directors of the Company decided, by a unanimous
vote of the directors with all directors present, that the Company would remain
neutral with respect to the Offer and would advise each stockholder of the
Company to make his or her own decision as to whether or not to tender Shares
in the Offer, and if so, the number of Shares to tender.
In determining that the Company will remain neutral with respect to
the Offer, the Board of Directors noted that it appears extremely likely that
the Offer and the Merger will be consummated because Equity Holdings already
owns approximately 87.9% of the outstanding Shares and will be able to
unilaterally effect the Merger under Delaware law, without any action required
by the Board, if only 2.1% of the outstanding Shares are tendered in the Offer.
The Offer to Purchase stated that owners of 495,700 Shares, or approximately
5.4% of Shares outstanding, are expected to tender such Shares pursuant to the
Offer.
The Board of Directors also noted that the Offer represents an
economic opportunity not otherwise available to stockholders to sell their
Shares at a historically attractive price. Although the Board has not engaged
an outside financial advisor with respect to the Offer, the Board of Directors
considered, among other factors, the Offer Price in comparison to the
historical trading price of the Shares, the effective price per Share of $39.27
paid by the Company to acquire 2,000,000 Shares from affiliates of Hellman &
Friedman in August 1995, the limited trading liquidity of the Shares, and the
underlying Company business fundamentals. In addition, the Board noted that
Equity Holdings had structured the Offer and Merger in a manner that provides
for equal treatment of all stockholders.
<PAGE> 4
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has not retained any person or class of persons to make
solicitations or recommendations to security holders.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a)-(b) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS--Certain Shares Expected to be Tendered,"
"SPECIAL FACTORS--Contracts, Transactions and Arrangements Concerning the
Shares" and "SPECIAL FACTORS--Interests of Certain Persons in the Transaction"
is incorporated herein by reference.
Mr. David Gardner, a director of the Company, has informed the Company
that he intends to transfer 10,000 Shares that he presently owns to Princeton
University as a gift, with the understanding that Princeton University will
tender such Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a)(1)-(4) The Company is not presently engaged in any negotiation in
response to the Offer which relates to or would result in:
(i) an extraordinary transaction such as a merger or
reorganization involving the Company or any
subsidiary of the Company;
(ii) a purchase, sale or transfer of a material amount of
assets by the Company or any subsidiary of the
Company;
(iii) a tender offer for or other acquisition of securities
by or of the Company; or
(iv) any material change in the present capitalization or
dividend policy of the Company.
(b) There are no transactions, board resolutions, agreements in
principle or signed contracts in response to the Offer which relate to or would
result in one or more of the matters referred to in paragraphs (a)(1)-(4) of
this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
On April 1, 1996, a purported stockholder class action suit was filed
in the Court of Chancery in the State of Delaware (Lewis v. Great American
Management and Investment, Inc. et al., C.A. No. 14915). The Lewis action
names as defendants the Company, the Purchaser, Equity Holdings and each
individual member of the Company's Board of Directors. In general, the action
alleges that defendants breached their fiduciary duties to stockholders because
the Offer Price is "grossly inadequate" and "fails to fully value [the
Company's] excellent future anticipated results." According to the Lewis
complaint, the Offer Price "represents only a slight premium over the Company's
trading price prior to announcement of the [O]ffer," which trading price has
been allegedly depressed as a result of the Company's announcement of its
operating results for the fourth quarter of 1995. The Lewis action further
alleges that the Offer is not the result of arms-length negotiations, that due
to control exercised by Equity Holdings, no third party will bid for the
Company, and that the Offer constitutes a "fraudulent plan to take [the
Company] private" by defendants and is "inherently unfair" to minority
stockholders because defendants have allegedly "circumvent[ed] protections
customarily afforded minority stockholders" and due to an alleged conflict of
interest by the defendants.
<PAGE> 5
The Lewis action seeks certification of a class on behalf of the
Company's stockholders, an order requiring the defendants to "carry out their
fiduciary duties to plaintiff," preliminary and permanent injunctive relief
against consummation of the Offer, an order requiring the defendants to
structure the Offer such that consummation of the Offer is conditioned on a
majority of outstanding Shares being tendered and an order requiring defendants
to supplement the Offer to "include all information necessary to shareholders
to make an informed decision on whether to tender." The action further seeks
rescissionary damages, in the event that the Offer is consummated, and other
damages, including court costs, attorneys' and expert fees and various other
forms of relief.
The Company and its Directors believe that the Lewis action is utterly
without merit and intend to oppose it vigorously.
On April 8, 1996, the Company issued a press release which described
the foregoing and is being filed as Exhibit 1 hereto.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Press Release, dated April 8, 1996.
(b) Not applicable
(c) Offer to Purchase of GAMI Merger Co., dated March 29,
1996.
Letter of Transmittal to Tender Shares, dated March 29,
1996.
Pages 6 through 14 of the Notice of Annual Meeting and
Proxy Statement dated April 28, 1995.
Stock Purchase Agreement between Great American
Management and Investment, Inc. and Equality Acquisition
Corp. dated April 19, 1995.
Letter of Intent executed by Winter Park Capital Company
dated March 21, 1996.
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SIGNATURE
After reasonable 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.
Dated: April 11, 1996 GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By /S/ ROD F. DAMMEYER
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Name: Rod F. Dammeyer
Title: President and Chief
Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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(1) Press Release, dated April 8, 1996.
(2) Offer to Purchase of GAMI Merger Co., dated March 29, 1996.
(3) Letter of Transmittal to Tender Shares, dated March 29, 1996
(4) Pages 6 through 14 of the Notice of Annual Meeting and Proxy Statement dated April 28, 1995.
(5) Stock Purchase Agreement between Great American Management and Investment, Inc. and Equality
Acquisition Corp. dated April 19, 1995.
(6) Letter of Intent executed by Winter Park Capital Company dated March 21, 1996.
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EXHIBIT 1
NEWS
RELEASE
________________________________________________________________________________
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
Two North Riverside Plaza, Chicago, Illinois 60606 312-648-5656
Contact: Gus J. Athas FOR IMMEDIATE RELEASE
Senior Vice President
(312) 906-6860
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
ANNOUNCES RESPONSE TO TENDER OFFER
AND STOCKHOLDER SUIT
Chicago, April 8, 1996 -- Great American Management and Investment, Inc. ("the
Company") (NASDAQ: GAMI) announced today that its Board of Directors met on
April 3, 1996 to consider the tender offer for any and all of its shares at $50
per share (the "Offer") that was commenced on March 29, 1996 by GAMI Merger Co.
and Equity Holdings Limited, an Illinois Limited Partnership ("Equity
Holdings"), which would be followed by a second-step merger at $50 per share
immediately after consummation of the Offer. As a result of the merger, Equity
Holdings would become the sole stockholder of the Company.
The Board of Directors decided, by a unanimous vote of the directors
with all directors present, that the Company would remain neutral with respect
to the Offer and would advise each stockholder of the Company to make his or
her own decision as to whether or not to tender shares of the Company in the
Offer, and if so, the number of shares to tender.
In determining that the Company will remain neutral with respect to
the Offer, the Board of Directors noted that it appears extremely likely that
the Offer and the second-step merger will be consummated because Equity
Holdings already owns approximately 87.9% of the outstanding shares and will be
able to unilaterally effect the merger under Delaware law, without any action
required by the Board, if only 2.1% of the outstanding shares of the Company
are tendered. The Offer to Purchase of GAMI Merger Co., dated March 29, 1996,
stated that owners of 495,700 shares, or approximately 5.4% of the shares
outstanding, are expected to tender such shares pursuant to the Offer.
The Board of Directors also noted that the Offer represents an
economic opportunity not otherwise available to stockholders to sell their
shares at a historically attractive price. Although the Board has not engaged
an outside financial advisor with respect to the Offer,
<PAGE> 2
the Board of Directors considered, among other factors, the Offer price in
comparison to the historical trading price of the shares, the effective price
per share of $39.27 paid by the Company to acquire 2,000,000 shares from
affiliates of Hellman and Friedman in August 1995, the limited trading
liquidity of the shares, and the underlying Company business fundamentals. In
addition, the Board noted that Equity Holdings had structured the Offer and
merger in a manner that provides for equal treatment of all stockholders.
On April 1, 1996, a purported stockholder class action suit was filed
in the Court of Chancery in the State of Delaware (Lewis v. Great American
Management and Investment, Inc. et al., C.A. No. 14915). The Lewis action
names as defendants the Company, GAMI Merger Co., Equity Holdings and each
individual member of the Company's Board of Directors. In general, the action
alleges that the defendants breached their fiduciary duties to stockholders
because the Offer Price is "grossly inadequate" and "fails to fully value [the
Company's] excellent future anticipated results." According to the Lewis
complaint, the Offer Price "represents only a slight premium over the Company's
trading price prior to announcement of the [O]ffer," which trading price has
been allegedly depressed as a result of the Company's announcement of its
operating results for the fourth quarter of 1995. The Lewis action further
alleges that the Offer is not the result of arms-length negotiations, that due
to control exercised by Equity Holdings, no third party will bid for the
Company, and that the Offer constitutes a "fraudulent plan to take [the
Company] private" by defendants and is "inherently unfair" to minority
stockholders because defendants have allegedly "circumvent[ed] protections
customarily afforded minority stockholders" and due to an alleged conflict of
interest by the defendants.
The Lewis action seeks certification of a class on behalf of the
Company's stockholders, an order requiring the defendants to "carry out their
fiduciary duties to plaintiff," preliminary and permanent injunctive relief
against consummation of the Offer, an order requiring the defendants to
structure the Offer such that consummation of the Offer is conditioned on a
majority of outstanding Shares being tendered and an order requiring defendants
to supplement the Offer to "include all information necessary to shareholders
to make an informed decision on whether to tender." The action further seeks
rescissionary damages, in the event that the Offer is consummated, and other
damages, including court costs, attorneys' and expert fees and various other
forms of relief.
The Company and its Directors believe that the Lewis action is utterly
without merit and intend to oppose it vigorously.
The Company has three major investments consisting of: 70% ownership
of Falcon Building Products (NYSE: FB); a 7% interest in IMC Global Inc. (NYSE:
IGL); and two operating businesses, Lapp Insulator Company and Denman Tire
Corporation.
* * * *
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ANY AND ALL SHARES OF COMMON STOCK
OF
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
AT
$50.00 NET PER SHARE
BY
GAMI MERGER CO.
AN ENTITY WHOLLY OWNED BY
EQUITY HOLDINGS LIMITED, AN ILLINOIS LIMITED PARTNERSHIP
THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, APRIL 25, 1996 (THE "EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY
TENDERED (AND NOT VALIDLY WITHDRAWN) PRIOR TO THE EXPIRATION DATE A NUMBER OF
SHARES (AS DEFINED HEREIN) SUCH THAT, UPON CONSUMMATION OF THE OFFER, GAMI
MERGER CO. (THE "PURCHASER") AND EQUITY HOLDINGS LIMITED, AN ILLINOIS LIMITED
PARTNERSHIP ("EQUITY HOLDINGS") TOGETHER WOULD OWN A NUMBER OF SHARES
REPRESENTING AT LEAST 90 PERCENT OF OUTSTANDING SHARES (THE "MINIMUM
CONDITION"). THE PURCHASER ESTIMATES THAT APPROXIMATELY 193,000 SHARES WILL
NEED TO BE VALIDLY TENDERED (AND NOT VALIDLY WITHDRAWN) TO SATISFY THE MINIMUM
CONDITION. SEE "THE OFFER--SECTION 11. CONDITIONS OF THE OFFER."
NEITHER EQUITY HOLDINGS NOR THE PURCHASER, NOR THE GENERAL PARTNERS, BOARD OF
DIRECTOR OR EXECUTIVE OFFICERS OF ANY OF THEM, MAKE ANY RECOMMENDATION AS TO
WHETHER ANY HOLDER OF SHARES SHOULD TENDER ANY OR ALL OF SUCH HOLDER'S SHARES
PURSUANT TO THE OFFER. HOLDERS OF SHARES MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER SHARES AND, IF SO, THE NUMBER OF SHARES TO TENDER.
----------------
IMPORTANT
ANY STOCKHOLDER (AS DEFINED HEREIN) DESIRING TO TENDER ALL OR ANY PORTION
OF SHARES PURSUANT TO THE OFFER (AS DEFINED HEREIN) SHOULD EITHER (1) COMPLETE
AND SIGN THE ENCLOSED LETTER OF TRANSMITTAL, OR A FACSIMILE COPY THEREOF, IN
ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL, HAVE THE
SIGNATURE THEREON GUARANTEED IF REQUIRED BY INSTRUCTION 1 OF THE LETTER OF
TRANSMITTAL AND MAIL OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO THE
DEPOSITARY AND EITHER DELIVER THE CERTIFICATES FOR SUCH SHARES TO THE
DEPOSITARY TOGETHER WITH THE LETTER OF TRANSMITTAL OR TENDER SHARES PURSUANT TO
THE PROCEDURE FOR BOOK-ENTRY TRANSFER DESCRIBED IN "THE OFFER--SECTION 3.
PROCEDURES FOR TENDERING SHARES," OR (2) REQUEST SUCH STOCKHOLDER'S BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
TRANSACTION FOR THE STOCKHOLDER. A STOCKHOLDER HAVING SHARES REGISTERED IN THE
NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST
CONTACT SUCH PERSON TO TENDER SUCH SHARES.
ANY STOCKHOLDER DESIRING TO ACCEPT THE OFFER WHOSE CERTIFICATES FOR SHARES
ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH THE PROCEDURES FOR
BOOK-ENTRY TRANSFER ON A TIMELY BASIS, SHOULD TENDER SUCH SHARES BY FOLLOWING
THE PROCEDURES FOR GUARANTEED DELIVERY DESCRIBED IN "THE OFFER--SECTION 3.
PROCEDURES FOR TENDERING SHARES."
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT AT THE ADDRESS AND TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THIS
OFFER TO PURCHASE. REQUESTS FOR ADDITIONAL COPIES OF THIS OFFER TO PURCHASE,
THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND OTHER RELATED
DOCUMENTS MAY BE DIRECTED TO THE INFORMATION AGENT OR BROKERS, DEALERS,
COMMERCIAL BANKS OR TRUST COMPANIES.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE 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 PURCHASER OR EQUITY
HOLDINGS. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (OR ANY STATE SECURITIES COMMISSION) NOR HAS
THE COMMISSION (OR ANY STATE SECURITIES COMMISSION) PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON
& COMPANY INC.
March 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purpose and Structure of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certain Shares Expected to be Tendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Fairness of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Effects of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Plans for the Company After the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interests of Certain Persons in the Transaction . . . . . . . . . . . . . . . . . . . . . . . . 6
Past Contacts and Transactions Between Equity Holdings and the Company . . . . . . . . . . . . 7
Contracts, Transactions and Arrangements Concerning the Shares . . . . . . . . . . . . . . . . . 9
Certain Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Treatment As A Sale Or Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Treatment of Certain Affiliated Holders . . . . . . . . . . . . . . . . . . . . . . . . 11
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1. Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2. Acceptance for Payment and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. Procedures for Tendering Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Valid Tender of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Book-Entry Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signature Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Guaranteed Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Back-up Federal Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Appointment as Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Determination of Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Price Range of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Effect of the Offer on the Market for Shares; Exchange Act Registration . . . . . . . . 18
7. Certain Information Concerning the Company . . . . . . . . . . . . . . . . . . . . . . . 18
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. Certain Information Concerning Equity Holdings and the Purchaser . . . . . . . . . . . . 20
9. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11. Conditions of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
State Anti-Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Federal Reserve Board Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Certain Fees and Expenses; Utilization of Company Employees . . . . . . . . . . . . . . 24
14. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
-i-
<PAGE> 3
Schedule I - Name, Address, Principal Occupation and Ownership of
Shares:
Equity Holdings
General Partners of Equity Holdings
Trustees of General Partners of Equity Holdings
GAMI Merger Co.
Directors and Executive Officers of GAMI Merger Co.
Directors and Executive Officers of Great American
Management and Investment, Inc.
Certain Affiliates of Great American Management and
Investment, Inc.
Schedule II - Section 262 of the Delaware General Corporation Law
AVAILABLE INFORMATION
Great American Management and Investment, Inc. (the "Company") is
currently subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports and other information filed by the Company with
the Commission may be inspected and copied at the public reference facilities
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Seven World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
the Company's Annual Report on Form 10-K for the year ended December 31, 1995
and Current Reports on Form 8-K dated January 2, 1996, January 24, 1996, and
February 28, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of the Offer to Purchase
and prior to the Expiration Date shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Offer to Purchase to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Offer to Purchase.
-ii-
<PAGE> 4
To the Holders of Common Stock
of Great American Management and Investment, Inc.:
INTRODUCTION
GAMI Merger Co., a Delaware corporation (the "Purchaser") wholly owned
by Equity Holdings Limited, an Illinois Limited Partnership ("Equity
Holdings"), hereby offers to purchase any and all shares of common stock, par
value $.01 per share (the "Shares"), of Great American Management and
Investment, Inc., a Delaware corporation (the "Company"), at $50.00 per Share,
net to the seller in cash without interest thereon (the "Offer Price"), upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which together constitute the "Offer").
Holders of Shares ("Stockholders") who tender Shares will not be obligated to
pay brokerage commissions or, except as set forth in Instruction 8 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. The Purchaser will pay all charges and
expenses of Chemical Mellon Shareholder Services, L.L.C. as the Depositary (the
"Depositary") and Georgeson & Company Inc. as the Information Agent (the
"Information Agent") in connection with the Offer. See "THE OFFER--Section 13.
Certain Fees and Expenses; Utilization of Company Employees." For more
information concerning Equity Holdings and the Purchaser, see "THE
OFFER--Section 8. Certain Information Concerning Equity Holdings and the
Purchaser."
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED (AND NOT VALIDLY WITHDRAWN) PRIOR TO THE EXPIRATION DATE A
NUMBER OF SHARES SUCH THAT, UPON CONSUMMATION OF THE OFFER, THE PURCHASER AND
EQUITY HOLDINGS TOGETHER WOULD OWN A NUMBER OF SHARES REPRESENTING AT LEAST 90
PERCENT OF OUTSTANDING SHARES (THE "MINIMUM CONDITION"). THE PURCHASER EXPECTS
THAT, CONCURRENTLY WITH THE MERGER (AS DEFINED HEREIN), ALL OPTIONS (AS DEFINED
HEREIN) WILL BE REDEEMED BY THE COMPANY AND NOT EXERCISED INTO SHARES. AS A
RESULT, THE PURCHASER ESTIMATES THAT APPROXIMATELY 193,000 SHARES WILL NEED TO
BE VALIDLY TENDERED (AND NOT VALIDLY WITHDRAWN) TO SATISFY THE MINIMUM
CONDITION. THE PURCHASER EXPRESSLY RESERVES THE RIGHT TO WAIVE THE MINIMUM
CONDITION AND TO PURCHASE ANY SHARES VALIDLY TENDERED (AND NOT VALIDLY
WITHDRAWN) PURSUANT TO THE OFFER. SEE "THE OFFER--SECTION 11. CONDITIONS OF
THE OFFER" AND "SPECIAL FACTORS--THE MERGER."
The Purchaser is making the Offer for the purpose of acquiring at
least 90 percent of the outstanding Shares and then consummating a "short-form
merger" under Section 253 of the General Corporation Law of the State of
Delaware (the "DGCL"), pursuant to which the Purchaser will be merged into the
Company (the "Merger" and, together with the Offer, the "Transaction"). As of
March 29, 1996, the Purchaser owned no Shares of record and Equity Holdings,
the sole stockholder of the Purchaser, owned 8,082,744 Shares, or approximately
87.9% of Shares outstanding. Equity Holdings intends to transfer all Shares it
owns to the Purchaser upon the completion of the Offer. The Director of the
Purchaser has approved the consummation of the Merger for the same price per
Share as paid in the Offer, subject to certain conditions, including ownership
of at least 90 percent of the outstanding Shares. Once the Purchaser acquires
at least 90 percent of Shares, the Purchaser will have a sufficient number of
Shares to effect the Merger without (i) any action whatsoever by the Board of
Directors of the Company or (ii) the affirmative vote of any other Stockholder
as permitted by Section 253 of the DGCL. See "SPECIAL FACTORS--The Merger."
Assuming that the Purchaser acquires at least 90 percent of the Shares, the
Purchaser intends to consummate the Merger immediately after consummation of
the Offer.
As a result of the Merger, the Purchaser will cease to exist and the
Company will continue as the surviving corporation (the "Surviving
Corporation"), with Equity Holdings as its sole Stockholder. In the Merger,
each Share outstanding immediately prior to the effective time of the Merger
(the "Effective Time") (other than Shares held in the Company's treasury, by
any subsidiary of the Company or by the Purchaser and other than Shares held by
Stockholders who have properly exercised appraisal rights with respect thereto
(the "Dissenting Shares") in accordance with Section 262 of the DGCL) shall, at
the Effective Time, by virtue of the Merger and without any
<PAGE> 5
action on the part of the holder thereof, be cancelled and converted into the
right to receive $50.00 in cash, or any higher price per Share paid in the
Offer (the "Merger Price"), payable to the holder thereof, without interest
thereon, upon the surrender of the certificate or certificates formerly
representing such Shares. See "SPECIAL FACTORS--The Merger" for a description
of the Merger.
According to the Company's Annual Report on Form 10-K, as of February
16, 1996, there were 9,194,251 Shares issued and outstanding, held of record by
approximately 800 Stockholders. According to information provided to the
Purchaser by the Company, as of March 29, 1996, 389,506 Shares were issuable
upon exercise of outstanding options ("Options"), held of record by 20 persons,
granted under the Company's 1991 Amended and Restated Stock Option Plan (the
"Stock Option Plan"). The Purchaser expects that no Options will be exercised
into Shares, because all such Options are expected to be redeemed in connection
with the Merger at a price per Option equal to the Offer Price less the
exercise price for such Option. See "SPECIAL FACTORS--Interests of Certain
Persons in the Transaction" for information concerning the redemption of
outstanding Options.
In addition to the transfer of Shares by Equity Holdings,
the Purchaser estimates that approximately 193,000 Shares would need to be
tendered and accepted for purchase pursuant to the Offer for the Purchaser to
own at least 90 percent of the Shares after the transfer of Shares to the
Purchaser by Equity Holdings. The Purchaser expects that owners of 495,700
Shares will tender such amount of Shares pursuant to the Offer. Assuming such
Shares are tendered and accepted for purchase, Equity Holdings will transfer
its Shares to the Purchaser and the Purchaser will effect the Merger. See
"SPECIAL FACTORS--Certain Shares Expected to be Tendered" and "SPECIAL
FACTORS--The Merger."
THE PURCHASER DOES NOT INTEND TO INCREASE THE OFFER PRICE. IF,
HOWEVER, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE OFFER
PRICE, SUCH INCREASE SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED
PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH
INCREASE. ANY HOLDER OF SHARES WHO TENDERED SUCH SHARES PRIOR TO SUCH AN
INCREASE IN THE OFFER PRICE WOULD BE ENTITLED TO RECEIVE SUCH AN INCREASE
WITHOUT FURTHER ACTION ON THE PART OF SUCH HOLDER.
-2-
<PAGE> 6
STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER OR NOT TO TENDER THEIR
SHARES.
SPECIAL FACTORS
PURPOSE AND STRUCTURE OF THE TRANSACTION
The Offer is being made pursuant to the intention of the Purchaser and
Equity Holdings to effectuate the Merger, with the ultimate purpose of Equity
Holdings acquiring the entire equity interest in the Company. Equity Holdings
seeks to have the Purchaser acquire the remaining equity interest in the
Company that Equity Holdings does not already own because it believes the
operations of the Company can be more effectively and efficiently managed as a
single integrated enterprise if the Company does not need to take into account
the separate interests of the public Stockholders. Because Equity Holdings
does not own the entire common equity interest in the Company, the Company is
required by law to be managed by the Company's Board of Directors in the best
interests of all the Company's Stockholders rather than just Equity Holdings
and its limited partners. In addition, after consummation of the Merger, the
Company will no longer need to incur the substantial costs associated with
complying with the reporting requirements under the Exchange Act.
To ensure equal treatment of Stockholders, the acquisition transaction
has been structured as a cash tender offer followed by a merger of the
Purchaser with and into the Company, in which the remaining equity interest in
the Company not acquired by the Purchaser pursuant to the Offer will be
subsequently acquired by Equity Holdings pursuant to the Merger at the Merger
Price. Equity Holdings believes that the Offer will result in the Purchaser
acquiring at least 90 percent of Shares thereby allowing the Purchaser to
effectuate the Merger. As a result of the Merger, the Company will become
wholly owned by Equity Holdings. See "SPECIAL FACTORS -- Certain Shares
Expected to be Tendered" and "SPECIAL FACTORS -- The Merger."
CERTAIN SHARES EXPECTED TO BE TENDERED
Prior to commencing the Offer, representatives of the Purchaser
initiated informal discussions with three Stockholders, Messrs. F. Philip
Handy, David A. Gardner, and Bradbury Dyer, III, who own or control the
disposition of 27,800 Shares, 76,000 Shares, and 317,000 Shares, respectively,
and 420,800 Shares collectively, to determine whether these Stockholders would
tender such Shares upon terms and conditions similar to those contained in the
Offer. Messrs. Handy, Gardner and Dyer are also directors of the Company. The
discussions were initiated on or about February 15, 1996, and continued through
mid-March. As a result of these discussions, the Purchaser expects that these
three Stockholders will tender all of their Shares pursuant to the Offer;
however, such persons are in no way obligated to tender any or all of such
Shares in the Offer. In addition, based on an inquiry made by representatives
of the Purchaser, all of the other persons listed in Schedule I intend to
tender all of their Shares that they own directly. As a result, an additional
74,900 Shares are expected to be tendered by such persons (which amount
excludes the Shares owned by Messrs. Handy, Gardner, and Dyer). Assuming the
tender of the 495,700 Shares held by all of these persons, the Purchaser and
Equity Holdings together will own approximately 93.3% of Shares outstanding and
will own a sufficient number of Shares to consummate the Merger even if no
other Shares are tendered. See "SPECIAL FACTORS--The Merger."
THE MERGER
The Purchaser expects that after the Offer and the transfer of Shares
to the Purchaser by Equity Holdings, the Purchaser will own at least 90 percent
of the outstanding Shares and will be able to effect the Merger as a short-form
merger under Section 253 of the DGCL without the approval of the Company's
Board of Directors or vote of any other Stockholder. As a result of the
Merger, any Shares not tendered will be converted into the right to receive the
Merger Price, without any action on the part of the holder thereof.
Dissatisfied holders of Shares may
-3-
<PAGE> 7
elect to exercise appraisal rights in accordance with Section 262 of the DGCL.
See "THE OFFER--Section 12. Certain Legal Matters -- Appraisal Rights" and
Schedule II to this Offer to Purchase.
The procedure for a short-form merger under Section 253 of the DGCL
requires only that the board of directors of the parent corporation adopt a
resolution providing for the merger. On March 28, the sole director of the
Purchaser adopted a resolution authorizing the Merger (conditioned on the
success of the Offer). Upon completion of the Offer, a "certificate of
ownership and merger" will be filed with the Secretary of State of Delaware
setting forth the fact that the Purchaser owns at least 90 percent of the
outstanding Shares of the Company with a copy of the March 28 resolutions of
the Purchaser's director authorizing the Merger attached thereto, as well as
any subsequent resolutions setting forth the specific terms of the Merger. If
a parent corporation will not be the surviving corporation, the merger also
must be approved by the stockholders of the parent. Because the Company will
be the Surviving Corporation, Equity Holdings must, which it intends to do,
approve the Merger as the sole stockholder of the Purchaser. No approval by
the Board of Directors of the Company is required.
The Merger of the Purchaser and the Company will become effective upon
the filing of the certificate of ownership and merger. No vote of any other
Stockholder is required. As a result of the Merger, the Purchaser will cease
to exist and the Company will continue as the Surviving Corporation, with
Equity Holdings as its sole Stockholder. In the Merger, each Share outstanding
immediately prior to the Effective Time (other than Shares held in the
Company's treasury, by any subsidiary of the Company or by the Purchaser and
other than Dissenting Shares) shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and converted into the right to receive the Merger Price, which will be an
amount in cash equal to the Offer Price, or any higher price per Share paid in
the Offer, payable to the holder thereof, without interest thereon, upon the
surrender of the certificate or certificates formerly representing such Shares.
FAIRNESS OF THE TRANSACTION
The Purchaser believes that the Transaction is fair to unaffiliated
holders of Shares. In making this determination, the Purchaser considered the
following factors: (a) the premium represented by the difference between the
Offer Price and recent and historical trading prices of the Shares such that the
Offer Price gives holders of Shares the opportunity to sell all of their Shares
at a 7.5% premium over the last reported sale price of $46.50 per Share on March
28, 1996, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations Systems ("NASDAQ") (the last trading day prior to the
announcement of the Offer); (b) that the Offer Price represents a premium of
approximately 27.3% from the effective price per Share of $39.27 paid to the
Hellman Group (as defined herein) on August 25, 1995, pursuant to the Purchase
Agreement (as defined herein); (c) that the Offer Price represents a premium of
approximately 12.8% over the adjusted net book value per Share of $44.32 as of
March 1, 1996 (after giving effect to unrecorded appreciation on the Company's
investment in Falcon Buildings Products, Inc. ("Falcon")); and (d) that the
Offer will provide holders who are considering a sale of all or a portion of
Shares the opportunity to sell those Shares for cash without the usual
transaction costs associated with open-market sales or the potential resulting
depressing effect on the market price of Shares due to the illiquid trading
market for the Company's Shares. The Purchaser did not find it practicable to,
and therefore did not, quantify or otherwise assign relative weights to these
factors.
The Purchaser has not received any report, opinion or appraisal from
any outside financial advisor or appraiser with respect to the Transaction,
including, but not limited to, any report, opinion or appraisal relating to the
consideration or the fairness of the consideration to be offered to the holders
of the Shares or the fairness of the transaction to the Company or to any
security holder of the Company. The Purchaser has not retained any financial
advisor to negotiate the terms of the Transaction or to prepare a report
concerning the fairness of the Transaction.
The Company will be obligated to file a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") with the Commission within
ten business days of the date of this Offer to Purchase.
-4-
<PAGE> 8
CERTAIN EFFECTS OF THE TRANSACTION
If the Purchaser owns at least 90 percent of the Shares after the
Offer, the Purchaser will own a sufficient number of Shares to effect the
Merger under Section 253 of the DGCL without the vote of the Board of Directors
of the Company or any vote of any other Stockholder. The Merger will have the
effect of eliminating the Shares of minority Stockholders by converting such
Shares into the right to receive cash equal to the Merger Price. Under
Delaware law, however, minority Stockholders are entitled to have the "fair
value" of such Stockholder's Shares appraised by the Delaware Court of Chancery
by exercising appraisal rights pursuant to Section 262 of the DGCL. Such
appraisal rights are only available with respect to the Merger and are not
available in connection with the Offer. See Schedule II to this Offer to
Purchase for the provisions of Section 262 of the DGCL.
As a result of the consummation of the Offer and the Merger,
Stockholders other than Equity Holdings will not have the opportunity to
participate in the future earnings, profits and growth of the Company and will
not have a right to vote on corporate matters. Equity Holdings, as the sole
Stockholder after the Merger, will own a 100% interest in the book value and
earnings of the Company and will benefit from any increase in the value of the
Company following the Offer and the Merger. Similarly, Equity Holdings will
bear the risk of any decrease in the value of the Company after the Merger and
Stockholders will not face the risk of a decline in the value of the Company
after the Merger. According to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, the Company's Stockholders' Equity was $133.9
million as of December 31, 1995, and the Company had a net loss of $38.5
million for the twelve months ended December 31, 1995. As of March 1, 1996, as
a result of the merger between IMC Global Inc. ("IMC Global") and The Vigoro
Corporation ("Vigoro"), the Company recognized an after tax gain of
approximately $143.0 million. The resulting Stockholders' Equity at such time
for the Company was $275.3 million, or approximately $29.94 per Share. See
"THE OFFER--Section 7. Certain Information Concerning the Company--Selected
Financial Data" for a discussion on the effect on Stockholders' Equity of
including unrecorded appreciation on the Company's investment in Falcon.
After the Merger, the Shares will cease to be registered under the
Exchange Act, transactions in Shares will not be reported on NASDAQ, and the
Shares will not be available for use as collateral for loans made by brokers.
See "THE OFFER--Effect of the Offer on the Market for Shares; Exchange Act
Registration" for a discussion on the possible effects of the Offer if the
Merger is not consummated.
PLANS FOR THE COMPANY AFTER THE TRANSACTION
It is expected that, following the Transaction, the business and
operations of the Company will be continued by the Company substantially as
they are currently being conducted. Except as disclosed in this Offer to
Purchase and the Company's Annual Report on Form 10-K, the Purchaser and
Equity Holdings have no present plans or proposals that would result in an
extraordinary material corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets, involving
the Company or any of its subsidiaries, or any material changes in the
Company's corporate structure or business or the composition of its management
or personnel, except Equity Holdings expects that the Company's Board of
Directors will be reduced from its present size of eight directors. Upon
consummation of the Transaction, Equity Holdings intends to conduct a review of
the Company and its assets, businesses, operations, properties, policies,
corporate structure, capitalization, financing needs, dividend and
distributions policy, and management and consider if any changes would be
desirable in light of the circumstances then existing.
-5-
<PAGE> 9
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Except as disclosed in this Offer to Purchase, neither the Company,
the Purchaser, any of the Purchaser's executive officers and its director
listed on Schedule I, Equity Holdings, the general partners of Equity Holdings
listed on Schedule I, the persons controlling the general partners of Equity
Holdings or the executive officers, directors or affiliates of the Company
listed in Schedule I has (i) engaged in any transactions involving the Shares
during the period of sixty business days prior to the date hereof or (ii) is a
party to any contract, arrangement or understanding with respect to any
securities of the Company. The aggregate amount and percentage of Shares owned
by the Purchaser and its executive officers and directors, Equity Holdings, the
general partners of Equity Holdings, the persons controlling the general
partners of Equity Holdings and the Company's executive officers, directors and
affiliates is disclosed in Schedule I.
Based on an inquiry made by representatives of the Purchaser, all of
the natural persons listed in Schedule I intend to tender, pursuant to the
Offer, all of the Shares that they own or control the disposition of. The fact
that such persons tender Shares does not, in any manner, constitute a
recommendation by such persons for other Stockholders to tender Shares. Holders
of Shares must make their own decisions whether to tender Shares and, if so,
the number of Shares to tender.
The Company awards incentive stock options, nonqualified stock options
or stock appreciation rights to certain officers, key employees, directors and
consultants pursuant to the Stock Option Plan. Under the Stock Option Plan,
Options are granted by the Compensation Committee of the Company's Board of
Directors, which has the discretion to fix the exercise price and term of such
Options. Generally, Options are granted for a five-year term, and no Options
have been granted at an exercise price less than the fair market value of the
Company's Shares on the date of the grant. In connection with the Stock Option
Plan, at the date of the first meeting of the Board of Directors following each
Annual Meeting of Stockholders, each director of the Company receives an Option
to purchase 5,000 Shares at the fair market value of Shares on the date of such
meeting.
As of March 15, 1996, 389,506 Shares were subject to Options and
250,335 Shares were subject to Options exercisable on or before the Expiration
Date (all of which were awarded with an exercise price less than the Offer
Price). See Schedule I for information concerning the number of Options held
by affiliates of Equity Holdings and officers and directors of the Company that
are exercisable prior to the Expiration Date. The Purchaser expects that,
concurrently with the Merger, the Company will, consistent with the provisions
of the Stock Option Plan, redeem all outstanding Options for cash or other
consideration at a price per Option equal to the Offer Price less the exercise
price for such Option. The Purchaser does not expect any of the 250,335
Options which are exercisable into Shares, either presently or prior to the
Expiration Date, to be exercised into Shares and acquired pursuant to the
Offer. If the Company redeems such Options as described, the Company will make
payments in cash or other consideration to the 20 holders of Options totalling
approximately $7.7 million, based on an Offer Price of $50.00 per Share.
-6-
<PAGE> 10
Based on information provided to the Purchaser by the Company, the
following persons listed in Schedule I will receive payments in cash or other
consideration for the redemption of outstanding Options equal in value to
the following:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT TO BE
NAME OPTIONS RECEIVED
---- --------- --------------
<S> <C> <C>
Samuel Zell 30,000 $ 628,125
Sheli Z. Rosenberg 38,334 690,016
Rod F. Dammeyer 95,000 1,668,125
Bradbury Dyer, III 30,000 628,125
David A. Gardner 30,000 628,125
William K. Hall 15,000 308,125
F. Philip Handy 30,000 628,125
Joseph P. Sullivan 30,000 628,125
Arthur A. Greenberg 10,334 190,933
</TABLE>
PAST CONTACTS AND TRANSACTIONS BETWEEN EQUITY HOLDINGS AND THE COMPANY
During the Company's previous three fiscal years, the Company and its
subsidiaries have engaged in certain transactions and entered various
agreements with Equity Holdings and/or affiliates of Equity Holdings, and
Equity Holdings and its affiliates, as the majority Stockholder of the Company,
have had numerous contacts with the Company and its subsidiaries. Certain
employees of the Company have assisted the Purchaser with respect to the
Transaction, primarily by providing information concerning the Company for the
preparation of this Offer to Purchase to comply with the requirements under the
Exchange Act. Principally, this information has included financial information
of the Company and stock ownership and stock transaction data with respect to
officers and directors of the Company. No employee of the Company has, or
will, receive any additional or separate compensation for such services.
Equity Holdings and the Purchaser independently determined the pricing and the
structure of the Offer and the Merger.
Mr. Zell, the trustee of one of the two general partners of Equity
Holdings, is the Chairman of the Board of Directors of the Company, and was its
Chief Executive Officer from June 1990 until February 1994. The Company paid
Mr. Zell a salary of $300,000, $400,000 and $400,000 in 1995, 1994 and 1993,
respectively. Mr. Zell also received from the Company other compensation of
$9,000, $6,000 and $4,497 in 1995, 1994 and 1993, respectively, and Options for
5,000 Shares and 5,000 Shares in 1995 and 1993, respectively.
Mrs. Rosenberg, a co-trustee of the other general partner of Equity
Holdings and a trustee of certain other trusts which are indirect partners of
Equity Holdings, is a director of the Company, and was a Vice President and
General Counsel of the Company from October 1985 until March 1995. Mrs.
Rosenberg received Options for 20,000 Shares and 5,000 Shares in 1995 and 1993,
respectively. Mrs. Rosenberg is indebted to Equity Holdings as a result of a
loan extended in 1992, prior to the liquidation of Mrs. Rosenberg's direct
interest in Equity Holdings. As of March 15, 1996, $61,729 was outstanding
under such loan, which includes $17,379 of accrued interest. Mrs. Rosenberg is
separately indebted to an affiliate of Equity Holdings for a loan to finance
the acquisition of Shares in 1993. As of March 15, 1996, $303,669 was
outstanding under such loan, which includes $48,669 of accrued interest.
-7-
<PAGE> 11
The Company paid Ann Lurie, a co-trustee of the other general partner
of Equity Holdings, $303,552 during 1993 as beneficiary of certain agreements
between the Company and Robert H. Lurie, Vice-Chairman and President of the
Company from 1986 until his death in June 1990. In addition, Messrs. Handy,
Gardner, and Dyer, who own interests in various partnerships that are
affiliated with Equity Holdings, each received director fees of $28,000 in
1995, 1994, and 1993. As of March 15, 1996, the capital contributions to date
to such partnerships affiliated with Equity Holdings for Messrs. Handy,
Gardner, and Dyer were approximately $.9 million, $1.8 million, and $3.0
million, respectively. The investment terms for such partnership interests
were based on prevailing market terms at the time. Messrs. Handy and Dyer
serve as directors to certain companies affiliated with Equity Holdings.
Mr. Arthur A. Greenberg is a trustee of certain trusts which are
indirect partners of Equity Holdings. Mr. Greenberg was the Company's Chief
Financial Officer from December 1986 until March 1995. The Company paid Mr.
Greenberg a salary of $200,000 and $300,000 in 1994 and 1993, respectively.
Mr. Greenberg also received from the Company other compensation of $6,000 and
$4,497 in 1994 and 1993, respectively, and Options for 2,000 Shares and 5,000
Shares in 1995 and 1993, respectively.
During 1993, the Company's loan portfolio included a $15.0 million
loan to a general partnership ("Equity Pool"), which in turn is owned by two
limited partnerships which are affiliated with Mr. Zell. Equity Pool made
principal payments to reduce the loan to $5.9 million as of January 1, 1994.
At such time, the loan was collateralized by partnership units ("Units") which
were convertible in January 1995 into approximately 550,000 shares of Equity
Residential Properties Trust, a publicly traded real estate investment trust
affiliated with Mr. Zell. During 1994, principal payments reduced the loan to
approximately $5.4 million. On January 3, 1995, all rights and title in the
principal amount of $5.4 million plus an additional $1.6 million, as
participation based on the market value of the Units on September 16, 1994, and
accrued interest were assigned to Equity Holdings, the Company's majority
Stockholder, as part of a dividend to the Company's Stockholders in January
1995.
During 1993, an affiliate of Mr. Zell repaid in full a $3.8 million
loan held by the Company. In addition, Equity Holdings paid the Company $1.0
million pursuant to an agreement made in connection with the transfer of
certain stock of a subsidiary to Equity Holdings in 1990. In June 1993, the
Company exercised its right to put a note to an entity affiliated with Mr.
Zell, which resulted in such entity making a payment of approximately $2.4
million to the Company.
The Company and its subsidiaries paid approximately $1.4 million, $1.7
million and $1.9 million to certain affiliates of Equity Holdings for services
rendered during 1995, 1994, 1993 respectively. These services included,
without limitation, administrative, human resource, consulting, accounting and
tax services, various real estate services, insurance services (including the
payment to third parties for insurance premiums) and other executive services.
The Company and its subsidiaries paid an affiliate of Equity Holdings
approximately $658,000, $785,000 and $408,000 for its office space during 1995,
1994 and 1993, respectively, and approximately $82,000, $463,000, and $279,000
for various leases of computer software and equipment and computer development
services during 1995, 1994 and 1993, respectively. The software leases range
from three to five years and are at rates comparable to market rates. Lease
payments also include amounts related to a facility sharing agreement between
the Company and such affiliate. Under the agreement, computer development,
operations and maintenance services were provided to the Company and certain of
its subsidiaries. These related entity transactions were approved by the Audit
Committee of the Company's Board of Directors (the "Audit Committee"), which is
comprised of three independent directors.
The Company performs certain services for various affiliates of Equity
Holdings. In 1995, 1994 and 1993, approximately $1.3 million, $1.5 million and
$0.9 million, respectively, was charged to such affiliates for the services
performed and office space provided by the Company.
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The Company and certain of its subsidiaries paid Rosenberg &
Liebentritt, P.C., a law firm affiliated with Mrs. Rosenberg, amounts totaling
$2.4 million, $1.7 million and $0.9 million for certain legal services rendered
in 1995, 1994 and 1993, respectively. Fees are based on not more than
comparable market rates for the services performed and rates are approved by
the Audit Committee.
The Company and certain of its subsidiaries paid Seyfarth Shaw
Fairweather & Geraldson, a law firm in which Mrs. Rosenberg's spouse is a
partner, amounts totaling approximately $447,000, $664,000 and $328,000 for
certain legal services rendered in 1995, 1994 and 1993, respectively. Fees are
based on comparable market rates for services performed.
CONTRACTS, TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
The Company acquired 2,000,000 Shares, pursuant to a Stock Purchase
Agreement dated as of August 25, 1995 (the "Purchase Agreement"), in
consideration of the delivery by the Company to Hellman & Friedman Capital
Partners ("Capital Partners"), Hellman & Friedman Capital Partners
International (BVI) ("Capital Partners International") and H&F Redwood
Partners, L.P. ("Redwood Partners," and together with Capital Partners and
Capital Partners International, the "Hellman Group") of 1,609,686, 92,501, and
57,813 shares of common stock of Vigoro, respectively, which shares were
previously held by the Company.
Capital Partners and Capital Partners International had acquired such
Shares from Equity Holdings pursuant to a Stock Purchase Agreement, dated July
17, 1990 (the "1990 Agreement"), and Redwood Partners subsequently acquired its
Shares from Capital Partners International on December 31, 1991. During the
period that the Hellman Group owned such Shares, the Company, Equity Holdings,
and the Hellman Group were parties to an agreement which provided that the
Hellman Group had the right to nominate, and the Company and Equity Holdings
would use their best efforts to elect, two of every nine directors to serve on
the Company's Board of Directors.
Based on its relationship with the Hellman Group and an understanding
of its investment objectives, the Company approached the Hellman Group in early
July 1995 to structure a mutually agreeable transaction that suited the
long-term interests of both parties. The Hellman Group sought an opportunity
to liquidate its investment in the Company and receive the more liquid shares
of Vigoro, which were traded on the New York Stock Exchange ("NYSE"). The
Company sought to acquire Shares at an attractive price in a non-cash
transaction that preserved the liquidity position of the Company and avoided
the incurrence of debt.
In connection with the Purchase Agreement, the Hellman Group sold all
of its Shares and entered into an agreement titled "Waiver and Termination of
Certain Agreements" (the "Termination Agreement"), which provides for the
termination of the 1990 Agreement and of other related agreements, including
the voting agreement among Equity Holdings, the Company and the Hellman Group.
Certain provisions relating to indemnification rights of the Company and the
Hellman Group survived the Termination Agreement.
Based on the August 25, 1995, closing share price of Vigoro common
stock on the NYSE of $44.625 per share, as reported by the Dow Jones News
Service, the 1,760,000 shares of Vigoro had a valuation of $78,540,000. As
such, the 2,000,000 Shares acquired by the Company pursuant to the Purchase
Agreement were sold to the Company at an effective price of $39.27 per share.
However, such an effective price is not necessarily comparable to prevailing
market ask prices of the Company's Shares due to the structure of the
transaction, which included the termination of certain rights held by the
Hellman Group, and the subsequent transaction costs necessary to liquidate such
a substantial block of Vigoro stock.
In the preceding three years, the Company has acquired Shares in two
market transactions. On February 1, 1996, the Company acquired 29,000 Shares
at $47.25 per Share, for a total cost of $1,370,250, and on December 1, 1995,
the Company acquired 13,000 Shares at $40.25 per Share, for a total cost of
$523,250.
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On December 12, 1995, Messrs. Gardner and Handy, each a director of
the Company, each exercised Options to acquire 10,000 Shares at an exercise
price of $26.50 per Share on December 12, 1995. Mr. Handy sold 15,000 Shares
on September 27, 1993, at $32.50 per Share.
The Company and Mr. Rod F. Dammeyer, President and Chief Executive
Officer of the Company, are parties to an agreement providing for Mr.
Dammeyer's employment at a base salary and annual incentive awards of 50% to
112.5% of salary, with a target of 75% of salary and such long-term incentives
as the Compensation Committee of the Company's Board of Directors in its good
judgment shall grant. Such long-term incentives have included Options to
acquire Shares.
Equity Holdings acquired 4,500 Shares on May 18, 1993, at $26.375 per
Share and 6,900 Shares on January 5, 1993, at $25.50 per Share. On March 8,
1993, Equity Holdings sold 10,000 Shares at $25.50 per Share to Mrs. Rosenberg
in a privately negotiated transaction.
Mrs. Rosenberg sold 3,333 Shares on December 22, 1993, at $33.00 per
Share and 13,333 Shares on December 16, 1993, at $33.00 per Share. Mrs.
Rosenberg exercised Options to acquire 3,333 Shares at an exercise price of
$26.25 per Share on December 22, 1993, and 13,333 Shares at an exercise price
of $26.50 per Share on December 16, 1993. Mrs. Rosenberg acquired 10,000
Shares on March 8, 1993, from Equity Holdings at $25.50 per Share. Mrs.
Rosenberg borrowed money from an affiliate of Equity Holdings to finance the
acquisition of such Shares. As of March 15, 1996, $303,669 was outstanding
under such loan, which includes accrued interest of $48,669.
Mr. Arthur A. Greenberg, an affiliate of the Purchaser as a result of
his relationship as a trustee of certain trusts which are indirect partners of
Equity Holdings, sold 2,667 Shares at $34.00 per Share on April 26, 1995, 666
Shares at $34.00 per Share on April 11, 1995, 2,834 Shares at $34.00 per Share
on April 11, 1995, 500 shares at $34.25 per Share on March 17, 1995 and 19,999
Shares at $33.00 per Share on December 22, 1993. Mr. Greenberg exercised
Options to acquire 2,667 Shares at an exercise price of $26.25 per Share on
April 26, 1995, 2,834 Shares at an exercise price of $26.50 per Share on April
11, 1995, 666 Shares at an exercise price of $26.25 on April 11, 1995, 500
Shares at an exercise price of $26.50 per Share on March 17, 1995, 16,666
Shares at an exercise price of $26.50 per Share on December 22, 1993, and 3,333
Shares at an exercise price of $26.25 per Share on December 22, 1993.
Equity Holdings has pledged 6,789,889 Shares to eight different
financial institutions as collateral for loans to Equity Holdings. Under the
various agreements, the institutions cannot vote or exercise any ownership
rights relating to the pledged shares unless there is an event of default under
the applicable agreement. All of the pledge agreements are subject to standard
default provisions.
CERTAIN TAX CONSEQUENCES
The following summary is a general discussion of certain of the United
States Federal income tax consequences of the Offer and the Merger. This
summary is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change. No rulings as to any of the matters
discussed in this summary have been requested or received from the Internal
Revenue Service ("IRS").
HOLDERS OF SHARES ARE URGED TO CONSULT AND RELY ON THEIR OWN TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES OF TENDERING SHARES PURSUANT TO THE OFFER AND
THE TAX CONSEQUENCES OF THE MERGER.
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1. GENERAL. Sales of Shares by holders thereof pursuant to the Offer
and the surrender of Shares by holders thereof pursuant to the Merger will be
taxable transactions for Federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. This
summary does not discuss any aspect of state, local or foreign tax laws. The
Federal income tax consequences to a holder of Shares may vary depending upon
the holder's particular facts and circumstances.
2. TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the
Internal Revenue Code of 1986, as amended (the "Code"), a sale of Shares
pursuant to the Offer and the surrender of Shares pursuant to the merger will,
as a general rule, be treated as a sale or exchange if the receipt of cash upon
the sale (i) results in a "complete termination" of the holder's interest in
the Company or (ii) is "not essentially equivalent to a dividend" with respect
to the holder. Since the Transaction will result in a complete termination of
each holder's interest in the Company (except for the limited exceptions
described in paragraph 4 below), holders will be treated as having sold their
Shares for income tax purposes.
Accordingly, a tendering holder of Shares or a holder transferring
Shares pursuant to the Merger will ordinarily recognize gain or loss equal to
the difference between the amount of cash received by the holder pursuant to
the Transaction and the holder's tax basis in the Shares sold pursuant to the
Transaction. If the Shares are held as capital assets, the gain or loss will
be a capital gain or loss, which will be a long-term capital gain or long-term
capital loss if the Shares have been held for more than one year. A holder of
Shares will not be permitted to recognize a loss on the sale of a Share
pursuant to the Transaction if the holder purchases a Share within a period
beginning 30 days prior to and ending 30 days after the completion of the
Transaction.
3. TAX RATES. Net capital gain (which is the excess of net long-term
capital gain over net short-term capital loss) of individuals, trusts and
estates is currently taxed at a maximum Federal income tax rate of 28%.
Dividends and short-term capital gains of individuals, trusts and estates are
taxed at ordinary income rates. Ordinary income is currently taxable to
individuals, trusts and estates at a maximum Federal income tax rate of 39.6%
(although it may be taxed at higher marginal rates due to the phase-out of
certain exemptions and deductions). Capital gains and ordinary income of
corporations are both taxed at the same Federal income tax rate, currently a
maximum of 35% (although they may be taxed at higher marginal rates due to the
phase-out of the 15%, 25% and 34% brackets).
HOLDERS OF SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
POSSIBLE IMPACT OF THE RECEIPT OF CASH FROM THE COMPANY PURSUANT TO THE OFFER
OR MERGER ON THEIR OBLIGATION TO MAKE ESTIMATED TAX PAYMENTS.
4. TREATMENT OF CERTAIN AFFILIATED HOLDERS. Any holder of Shares
which is affiliated with the Purchaser may receive tax consequences different
from those described above. These holders would include any such holders
who constructively own shares by attribution due to the Purchaser's ownership
of Shares by reason of Section 318 of the Code. Under Section 318, a holder
may constructively own Shares actually owned, and in some cases constructively
owned, by certain related individuals and certain related entities in which the
holder has an interest, as well as any Shares the holder has a right to acquire
by exercise of an option. In this case, this could occur where a holder of
Shares who transfers those shares pursuant to the Transaction also
constructively owns Shares actually owned by the Purchaser.
If by attribution, a holder would not satisfy the complete termination
test or not essentially equivalent to a dividend test, the receipt of cash
pursuant to the transaction could be treated as a distribution rather than a
sale or exchange under Section 302. If any such distribution were considered
to exist, it would result in a dividend for the holder to the extent the
Company has earnings and profits. To the extent the Company does not have
earnings and profits equal to the amount of any such distribution in excess of
any earnings and profits, the distribution will be treated first as a return of
capital up to the holder's basis and thereafter result in taxable gain to the
holder.
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THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING TAX LAW AS OF THE DATE OF
THIS OFFER TO PURCHASE. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH
STOCKHOLDER IS URGED TO CONSULT HIS OR HER TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO SUCH STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE
EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAW.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions
of the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment and thereby purchase any and all Shares validly tendered on or prior to
the Expiration Date (as hereinafter defined below) and not validly withdrawn in
accordance with the procedures set forth in "THE OFFER--Section 4. Withdrawal
Rights."
The term "Expiration Date" means 12:00 Midnight, New York City time,
on Thursday, April 25, 1996, unless and until the Purchaser, in its sole
discretion, shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date
at which the Offer, as so extended by the Purchaser, shall expire. All Shares
purchased pursuant to the Offer will be purchased at the Offer Price, net to
the seller in cash.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, to extend the period during which the Offer is
open for any reason, including the occurrence of any of the conditions
specified in "THE OFFER--Section 11. Conditions of the Offer," by giving oral
or written notice of such extension to the Depositary. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering Stockholder to withdraw such
Stockholder's Shares. See "THE OFFER--Section 4. Withdrawal Rights."
Subject to the applicable regulations of the Commission, the Purchaser
also expressly reserves the right, in its sole discretion, at any time or from
time to time to (i) delay acceptance for payment of or, regardless of whether
such Shares were theretofore accepted for payment, payment for any Shares
pending receipt of any regulatory or governmental approvals specified in "THE
OFFER--Section 12. Certain Legal Matters," (ii) terminate the Offer and not
accept for payment any Shares upon the occurrence of any of the conditions
specified in "THE OFFER--Section 11. Conditions of the Offer," and (iii)
waive any condition or otherwise amend the Offer in any respect, by giving oral
or written notice of such extension, delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof. The Purchaser
acknowledges (i) that Rule 14e-1(c) under the Exchange Act requires the
Purchaser to pay the consideration offered or return the Shares tendered
promptly after the termination or withdrawal of the Offer, and (ii) that the
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the preceding sentence), any Shares upon the
occurrence of any of the conditions specified in "THE OFFER--Section 11.
Conditions of the Offer" without extending the period of time during which
the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Purchaser may choose
to make any public announcement, subject to applicable law (including Rule
14d-4(c) under the Exchange Act, which requires that material changes be
promptly disseminated to holders of Shares), the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer, or
if it waives a material condition of the Offer, the Purchaser will extend the
Offer to the extent required by Rule 14e-1 under the Exchange Act. The
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<PAGE> 16
minimum period during which an offer must remain open following
material changes in the terms of the offer, other than a change in price or a
change in percentage of securities sought or a change in any dealer's
soliciting fee, will depend upon the facts and circumstances, including the
materiality of the changes. With respect to a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, a
minimum ten-business day period from the date of such change is generally
required to allow for adequate dissemination to Stockholders. Accordingly, if
prior to the Expiration Date, the Purchaser should decrease the number of
Shares being sought, or increase or decrease the consideration offered pursuant
to the Offer, and if the Offer is scheduled to expire at any time earlier than
the period ending on the tenth business day from and including the date that
notice of such increase or decrease is first published, sent or given to
holders of Shares, the Offer will be extended at least until the expiration of
such ten-business day period. 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, New York City time.
This Offer to Purchase and the related Letter of Transmittal and, if
required, other relevant materials will be mailed to record holders of Shares
and will be furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
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. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment) the Purchaser will
purchase, by accepting for payment, and will pay for, subject to the Minimum
Condition (which may be waived at the discretion of the Purchaser), any and all
Shares validly tendered and not properly withdrawn prior to the Expiration Date
promptly after the later to occur of (i) the Expiration Date, and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in "THE
OFFER--Section 11. Conditions of the Offer." In addition, subject to
applicable rules of the Commission, the Purchaser expressly reserves the right
to delay acceptance for payment of, or payment for, Shares pending receipt of
any regulatory or governmental approvals specified in "THE OFFER--Section 12.
Certain Legal Matters."
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares (individually a "Share Certificate" and
collectively the "Share Certificates") or timely confirmation (a "Book-Entry
Confirmation") of the book-entry transfer of such Shares into the Depositary's
account at the Depository Trust Company or the Philadelphia Depository Trust
Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the
procedures set forth in "THE OFFER--Section 3. Procedures for Tendering
Shares," (b) the Letter of Transmittal (or facsimiles thereof) properly
completed and duly executed, with any required signature guarantees, and (c)
any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of such Shares for payment pursuant to
the Offer. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering Stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to validly tendering Stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
PURCHASER BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
If any Shares tendered, and not withdrawn, are not purchased pursuant
to the Offer for any reason, or if Share Certificates are submitted
representing more Shares than are tendered, Share Certificates representing
unpurchased or untendered Shares will be returned, without expense to the
tendering Stockholder (or, in the case of Shares delivered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant
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<PAGE> 17
to the procedures set forth in "THE OFFER--Section 3. Procedures for
Tendering Shares," such Shares will be credited to an account maintained within
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration, termination or withdrawal of the Offer.
THE PURCHASER DOES NOT INTEND TO INCREASE THE OFFER PRICE. IF,
HOWEVER, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE OFFER
PRICE, SUCH INCREASE SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED
PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH
INCREASE. ANY HOLDER OF SHARES WHO TENDERED SUCH SHARES PRIOR TO SUCH AN
INCREASE IN THE OFFER PRICE WOULD BE ENTITLED TO RECEIVE SUCH AN INCREASE
WITHOUT FURTHER ACTION ON THE PART OF SUCH HOLDER.
The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to Equity Holdings or its affiliates the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer or
prejudice the rights of tendering Stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES
Except as set forth below, for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature guarantees
and any other documents required by the Letter of Transmittal (all as described
in the Letter of Transmittal), must be received by the Depositary at the
address set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date and either (i) Share Certificates representing tendered
Shares must be received by the Depositary or such Shares must be tendered
pursuant to the procedure for book-entry transfer set forth below, and a
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date, or (ii) the guaranteed delivery procedures set
forth below must be complied with.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Depositary will establish accounts with respect to the Shares at
each of the Book-Entry Transfer Facilities for purposes of the Offer within two
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and any other required documents must, in any case, be transmitted to and
received by, the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
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SIGNATURE GUARANTEES
Signatures on all Letters of Transmittal must be guaranteed by a firm
that is a bank, broker, credit union, savings association or other entity which
is a member in good standing of the Securities Transfer Agents Medallion
Program or by any other bank, broker, dealer, credit union, savings
association, or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing constituting an Eligible Institution"), unless the Shares tendered
thereby are tendered (i) by a registered owner of Shares who has not completed
either the box labeled "Special Payment Instructions" or the box labeled
"Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the
account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of the signer of
the Letter of Transmittal, no endorsements of Share Certificates or separate
stock powers are required. However, if the Share Certificates are registered
in the name of a person other than the signer of the Letter of Transmittal, or
if payment is to be made to, or Share Certificates for unpurchased Shares are
to be issued or returned to, a person other than the registered owner, then the
tendered certificates must be endorsed or accompanied by duly executed stock
powers, signed exactly as the name or names of the registered owner(s) appear
on the certificates, with the signatures on the certificates or stock powers
guaranteed by an Eligible Institution as provided in the Letter of Transmittal.
See Instructions 1 and 5 of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary,
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
GUARANTEED DELIVERY
If a Stockholder desires to tender pursuant to the Offer and such
Stockholder's Share Certificates are not immediately available or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible
Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form
provided by the Purchaser, is received by the
Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares in proper form for transfer
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees and any other documents required by the
Letter of Transmittal are received by the Depositary within
three NYSE trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mailed to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
Stockholders at the same time, and will
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<PAGE> 19
depend upon when Share Certificates or Book-Entry Confirmations of such
Shares are received into the Depositary's account at a Book-Entry Transfer
Facility.
BACK-UP FEDERAL TAX WITHHOLDING
UNDER THE FEDERAL INCOME TAX LAWS, THE DEPOSITARY WILL BE REQUIRED TO
WITHHOLD 31 PERCENT OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN STOCKHOLDERS
PURSUANT TO THE OFFER. TO PREVENT BACK-UP FEDERAL INCOME TAX WITHHOLDING ON
PAYMENTS MADE TO CERTAIN STOCKHOLDERS WITH RESPECT TO THE PURCHASE PRICE OF
SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE
DEPOSITARY WITH HIS CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT HE
IS NOT SUBJECT TO BACK-UP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 7
OF THE LETTER OF TRANSMITTAL.
APPOINTMENT AS PROXY
By executing the Letter of Transmittal, a tendering Stockholder
irrevocably appoints designees of the Purchaser, and each of them, as such
Stockholder's attorneys-in-fact and proxies, with full power of substitution,
in the manner set forth in the Letter of Transmittal, to the full extent of
such Stockholder's rights with respect to the Shares tendered by such
Stockholder and accepted for payment and paid for by the Purchaser and with
respect to any and all other Shares and other securities or rights issued or
issuable in respect of such Shares on or after the date of this Offer to
Purchase. All such proxies shall be considered coupled with an interest in the
tendered Shares, are irrevocable and are granted in consideration of, and are
effective upon, the acceptance for payment of such shares by the Purchaser in
accordance with the terms of the Offer. Upon such acceptance for payment, all
prior powers of attorney and proxies given by such Stockholder with respect to
such Shares and such other securities or rights will be revoked, without
further action, and no subsequent powers of attorneys and proxies may be given
by such Stockholder (and if given, will not be deemed effective). The
designees of the Purchaser will, with respect to the Shares for which such
appointment is effective, be empowered to exercise all voting and other rights
of such Stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Stockholders, or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
DETERMINATION OF VALIDITY
All questions as to the form of documents and validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding on all parties. The Purchaser
reserves the absolute right, to reject any or all tenders determined by it not
to be in proper form, or the acceptance of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender of Shares of any particular Stockholder whether or
not similar defects or irregularities are waived in the case of other
Stockholders.
The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding. No tender of Shares will be deemed to have been validly
made until all defects and irregularities have been cured or waived. None of
the Purchaser, Equity Holdings, any of their affiliates or assigns, if any, the
Depositary, the Information Agent or any other person will be under any duty to
give any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
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<PAGE> 20
The Purchaser's acceptance for payment of Shares tendered pursuant to
any one of the procedures described above will constitute a binding agreement
between the tendering Stockholder and the Purchaser upon the terms and subject
to the conditions of the Offer.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section
4, tenders of Shares made pursuant to the Offer are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided
herein, may also be withdrawn at any time sixty days after the date hereof.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares and such
Shares may not be withdrawn except to the extent that the tendering Stockholder
is entitled to and duly exercises withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal 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. Any such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the
Shares as set forth in the Share Certificates, if different from that of the
person who tendered such Shares. If Share Certificates have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the tendering Stockholder must submit the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of the
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in "THE OFFER--Section 3. Procedures for
Tendering Shares," the notice of withdrawal must specify the name and number of
the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any
Shares properly withdrawn will be deemed not validly tendered for purposes of
the Offer, but may be retendered at any subsequent time prior to the Expiration
Date by following any of the procedures described in "THE OFFER--Section 3.
Procedures for Tendering Shares."
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion whose determination shall be final and binding. None of the
Purchaser, Equity Holdings, any of their affiliates or assigns, if any, the
Depositary, the Information Agent or any other person will be under any duty to
give any notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
5. PRICE RANGE OF SHARES. The Shares principally trade in the
national over-the-counter securities market as reported by NASDAQ under the
trading symbol GAMI. The following table sets forth, for the periods
indicated, the high and low bid prices per Share as reported in the Company's
Annual Report to Stockholders on Form 10-K for the year ended December
31, 1995 or in published financial sources. The over-the-counter quotations
represent inter-dealer quotations without adjustment for retail markup,
markdown or commissions, and do not represent actual transactions.
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<PAGE> 21
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Year Ended December 31, 1994
First Quarter . . . . . . . . . . . . $31.00 $29.00
Second Quarter . . . . . . . . . . . . $32.00 $30.00
Third Quarter . . . . . . . . . . . . $33.00 $32.00
Fourth Quarter . . . . . . . . . . . . $34.25 $33.00
Year Ended December 31, 1995
First Quarter . . . . . . . . . . . . $34.50 $33.50
Second Quarter . . . . . . . . . . . . $33.50 $33.50
Third Quarter . . . . . . . . . . . . $36.50 $33.50
Fourth Quarter . . . . . . . . . . . . $45.00 $36.50
</TABLE>
On March 28, 1996, the last full trading day prior to the
commencement of the Offer, the last reported sale price per Share, as reported
by NASDAQ, was $46.50.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES.
6. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; EXCHANGE ACT
REGISTRATION. Any purchase of Shares pursuant to the Offer will reduce the
number of Shares that trade publicly and the number of Stockholders, which
would adversely affect the liquidity and market value of any remaining Shares
held by the public after the Offer (assuming that the Purchaser does not effect
the Merger). Notwithstanding the intention of the Purchaser to effectuate the
Merger and eliminate the Shares of minority Stockholders pursuant to Section
253 of the DGCL, if the Purchaser does not consummate the Merger, any purchase
of Shares pursuant to the Offer may reduce the number of Stockholders of the
Company below 300. In this event, the Company likely would terminate the
registration of Shares under the Exchange Act, Shares would be no longer
eligible for reporting by NASDAQ, and Shares would, as a result, no longer
constitute "margin securities" for purposes of the margin regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
and, therefore, could no longer be used as collateral for loans made by
brokers.
Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its Stockholders and would make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and
the requirement of furnishing a proxy statement in connection with
Stockholders' meetings pursuant to Section 14(a), no longer applicable to the
Company. Furthermore, if the Purchaser acquires a substantial number of
Shares, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant
to Rule 144 under the Securities Act of 1933 may be impaired or eliminated.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a
Delaware corporation with its principal executive offices located at Two North
Riverside Plaza, Chicago, Illinois 60606. Its telephone number at that address
is (312) 648-5656. According to the Form 10-K for the year ended December 31,
1995, the Company is a diversified holding company. The Company holds three
major investments, consisting of a 70 percent interest (14.0 million shares) in
Falcon a seven percent interest (approximately 6.5 million shares) in IMC
Global, and two operating businesses, Lapp Insulator Company ("Lapp") and Denman
Tire Corporation ("Denman"). During 1995, the Company divested a number of its
businesses. The Company reported that, in the future, its activities will
relate to managing the Lapp, Denman and Falcon operations, monitoring its
investment in IMC Global, completing certain divestitures, disposing of certain
non-operating assets and liabilities remaining from completed divestitures, and
considering new investments into operating companies and/or taking positions in
securities of other companies. A more detailed description of the Company,
including a description of the
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<PAGE> 22
Company's divestitures during 1995, is contained in the Company's Annual
Report on Form 10-K, which is incorporated herein by reference.
SELECTED FINANCIAL DATA
Set forth below is certain selected summary consolidated financial
information of the Company as of and for the fiscal years ended December 31,
1995 and 1994, which was excerpted and derived from the Company's Annual Report
on Form 10-K for the year ended December 31, 1995. More comprehensive
financial information is included in these reports and other documents filed by
the Company with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all of the
financial information and notes contained therein. These reports and other
documents may be examined and copies may be obtained in the manner set forth
above.
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIO DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1995 1994
---- ----
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $611.9 $592.7
Income from Continuing Operations . . . . . . . . . . . . . . . . 34.0 92.4
Income (Loss) From Discontinued Operations . . . . . . . . . . . (70.9) (28.3)
Extraordinary Item (Loss) . . . . . . . . . . . . . . . . . . . . -- (12.0)
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . (36.9) 52.1
Dividends on Subsidiary Preferred Stock . . . . . . . . . . . . . (1.6) (3.1)
Net Income (Loss) to Common Stockholders . . . . . . . . . . . . (38.5) 49.0
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . 3.6x 2.4x
Per Share Data:
Income From Continuing Operations . . . . . . . . . . . . . . . . $ 3.08 $ 7.98
Income (Loss) From Discontinued Operations . . . . . . . . . . . (6.75) (2.53)
Extraordinary Item (Loss) . . . . . . . . . . . . . . . . . . . . -- 1.07
Net Income (Loss) to Common Stockholders . . . . . . . . . . . . (3.67) 4.38
</TABLE>
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<PAGE> 23
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
---- ----
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . $118.9 $364.7
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 744.5 947.8
Total Assets less Goodwill . . . . . . . . . . . . . . . . . . . 705.1 882.0
Stockholders' Equity(1) . . . . . . . . . . . . . . . . . . . . . 133.9 249.1
Book Value Per Share(2) . . . . . . . . . . . . . . . . . . . . . . . $14.52 $22.28
-----------------------
</TABLE>
(1) Stockholders' Equity at December 31, 1995 does not reflect the
unrecorded appreciation on the Company's investment in IMC Global and
Falcon. See "Liquidity and Capital Resources" in the Company's Annual
Report on Form 10-K for a discussion of such amount. As of March 1,
1996, as a result of the merger between IMC Global and Vigoro, the
Company recognized an after tax gain of approximately $143.0 million.
The resulting Stockholders' Equity at March 1, 1996 was $275.3 million,
or approximately $29.94 per Share. At March 1, 1996, the price per
share of IMC Global, as reported on the NYSE Composite Tape, was
$41.875, and at March 28, 1996 (the last full trading day prior to the
commencement of the Offer), the price per share of IMC Global was
$36.375. The Stockholders' Equity at March 1, 1996, does not include
unrecorded appreciation on the Company's investment in Falcon. If the
Stockholders' Equity reflected such unrecorded appreciation in the
Company's investment in Falcon, Stockholders' Equity on March 1, 1996
would have been approximately $407.4 million, or $44.32 per Share. As
of March 1, 1996, the closing price per share of Falcon, as reported on
the NYSE Composite Tape, was $9.50, and on March 28, 1996, the closing
price per share was $9.125.
(2) Based on Shares outstanding at end of period.
Except as otherwise set forth herein, the information concerning the
Company contained herein has been taken from or is based upon documents on file
with the Commission or otherwise publicly available.
8. CERTAIN INFORMATION CONCERNING EQUITY HOLDINGS AND THE
PURCHASER. The Purchaser, a Delaware corporation wholly owned by Equity
Holdings, was organized recently for the purpose of commencing the Offer and
effecting the Merger and has not conducted any business since its incorporation
other than as disclosed herein. Equity Holdings is engaged in the business of
making investments in operating businesses and securities. The principal
executive offices of Equity Holdings and the Purchaser are located at Two North
Riverside Plaza, Chicago, Illinois 60606 and the telephone number at that
address is (312) 454-0100.
Equity Holdings's sole general partners are Samuel Zell, Trustee of
the Samuel Zell Revocable Trust under trust agreement dated January 17, 1990,
and Ann Lurie and Sheli Z. Rosenberg, Co-Trustees of the Robert H. and Ann
Lurie Trust. Mr. Zell is a Director and Chairman of the Board of the Company.
Mrs. Rosenberg is a Director of the Company. Additionally, Ms. Lurie and Mrs.
Rosenberg are trustees or co-trustees of certain trusts which are indirect
limited partners of Equity Holdings.
9. SOURCE AND AMOUNT OF FUNDS. If all outstanding Shares (other
than shares owned by Equity Holdings and Shares subject to Options) are
purchased pursuant to the Offer, the maximum amount required by the Purchaser
to purchase such Shares will be approximately $55,575,350. In addition, the
Purchaser and Equity Holdings expect to incur expenses of $177,000 in
connection with the Transaction. The Purchaser plans to obtain all funds
needed to purchase Shares pursuant to the Offer and to pay related fees and
expenses either through capital
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<PAGE> 24
contributions that will be made by Equity Holdings or with the working capital
of the Company (in the event the Merger is consummated prior to payment for
Shares), or a combination of the foregoing.
10. DIVIDENDS AND DISTRIBUTIONS. On January 3, 1995, the Company
paid a cash dividend of $.90 per Share to all Stockholders, except Equity
Holdings. For such dividend, Equity Holdings received a dividend equal to $.90
per Share, comprised of all rights and title to a loan made by the Company and
cash. See "SPECIAL FACTORS--Past Contacts and Transactions Between Equity
Holdings and the Company." Upon consummation of the Merger, the Company may
make dividends and distributions to its sole Stockholder based on a variety of
considerations, including general economic conditions that exist at the time a
dividend or distribution is contemplated.
11. CONDITIONS OF THE OFFER. The Offer is conditioned upon, among
other things, there having been validly tendered (and not validly withdrawn)
prior to the Expiration Date a number of Shares such that, upon consummation of
the Offer, the Purchaser and Equity Holdings together would own a number of
Shares representing at least 90 percent of outstanding Shares. The Purchaser
expects that, concurrently with the Merger, all Options will be redeemed by the
Company and not exercised into Shares. As a result, the Purchaser estimates
that approximately 193,000 Shares will need to be validly tendered (and not
validly withdrawn) to satisfy the Minimum Condition. The Purchaser expressly
reserves the right to waive the Minimum Condition and to purchase any Shares
validly tendered (and not validly withdrawn) pursuant to the Offer.
Notwithstanding any other provisions of the Offer and in addition to (and not
in limitation of) the Purchaser's rights to extend and amend the Offer at any
time in its sole discretion, the Purchaser shall not be required to accept for
payment, purchase or pay for, subject to Rule 14e- 1(c) under the Exchange Act,
any tendered Shares (whether or not any Shares have theretofore been accepted
for payment or paid for pursuant to the Offer), and may terminate the Offer as
to any Shares not then paid for, if at any time before the time of acceptance
for payment of any such Shares, any one or more of the following events shall
occur:
(a) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
mandatory), (iii) the commencement or escalation of a war, armed
hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed
by any governmental authority on, or any other event that might have
material adverse significance with respect to, the nature or extension
of credit or further extension of credit by banks or other lending
institutions in the United States, or (v) in the case of any of the
foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event or
development involving a prospective material adverse change) shall
have occurred or be likely to occur in the business, prospects,
financial condition, results of operations, properties, assets,
liabilities, capitalization, stockholders' equity, licenses,
franchises or businesses of the Company and its subsidiaries taken as
a whole; or
(c) there shall have been threatened, instituted or pending
any action, proceeding, application, claim or counterclaim by any
government or governmental authority or agency, domestic or foreign,
or by or before any court or governmental, regulatory or
administrative agency, authority or tribunal, domestic, foreign or
supranational, which (i) challenges the acquisition by the Purchaser
of the Shares, restrains, prohibits or delays or seeks to restrain,
prohibit or delay the performance of the transactions contemplated by
the Merger or seeks to obtain any material damages as a result
thereof, (ii) makes or seeks to make illegal, the acceptance for
payment, purchase or payment for any Shares or the consummation of the
Offer or the Merger, (iii) prohibits or limits or seeks to prohibit or
limit the ownership or operation by the Purchaser or any of its
affiliates of all or any substantial portion of the business or assets
of the Company or any of its subsidiaries or of the Purchaser or any
of its affiliates or compels or seeks to
-21-
<PAGE> 25
compel the Purchaser or any of its affiliates to dispose of or to hold
separate all or any substantial portion of the business or assets of
the Company or any of its subsidiaries or of the Purchaser or any of
its affiliates, or imposes or seeks to impose any material limitation
on the ability of the Purchaser to conduct such business or own such
assets, (iv) imposes or seeks to impose limitations on the ability of
the Purchaser or any affiliate of the Purchaser to acquire or hold or
to exercise full rights of ownership of the Shares, including, but not
limited to, the right to vote any Shares purchased by them on all
matters properly presented to the Stockholders or would otherwise
adversely affect the Company or its subsidiaries or their respective
businesses or assets, (v) may result in a material diminution in the
benefits expected to be derived by the Purchaser or any of its
affiliates as a result of the transactions contemplated by the Merger,
(vi) seeks to impose voting, procedural, price or other requirements
in addition to those under the DGCL and federal securities laws (each
as in effect on the date of commencement of the Offer) or any material
condition to the Offer that is unacceptable to the Purchaser or any of
its affiliates, or (vii) challenges or adversely affects the Offer or
the Merger; or
(d) there shall be any action taken, or any statute, rule,
regulation, order or injunction shall have been enacted, promulgated,
entered, enforced or deemed applicable to the Offer or the Merger, or
any other action shall have been taken, by any government,
governmental authority or court, domestic, foreign or supranational,
or in the reasonable good faith judgment of the Purchaser could be
expected to result, in any of the consequences referred to in clause
(i) through (vii) of paragraph (c) above; or
(e) the Company or any of its subsidiaries shall have
authorized, recommended, proposed or announced an agreement, or
intention to enter into an agreement, with respect to any merger,
consolidation, liquidation or business combination, any acquisition or
disposition of a material amount of assets or securities, or any
comparable event, not in the ordinary course of business consistent
with past practices; or
(f) either the Purchaser or Equity Holdings shall not have
received any necessary third-party consent or waiver to transfer
ownership of Shares to the Purchaser or to effect any other aspect of
the Offer or the Merger; or
(g) the Purchaser shall become aware that any material right
of the Company or any of its subsidiaries under any governmental
license, permit or authorization is reasonably likely to be impaired
or otherwise adversely affected as a result of, or in connection with,
the transactions contemplated by the Offer or the Merger.
The foregoing conditions are for the sole benefit of the Purchaser,
shall be subject to the sole interpretation of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to any
such condition and may be waived by the Purchaser, in whole or in part, at any
time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any other right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
12. CERTAIN LEGAL MATTERS. Based on information provided by the
Company, the Purchaser is not aware of any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or, except as set forth herein, of any
approval or other action by any governmental, administrative or regulatory
agency or authority that would be required prior to the acquisition of Shares
by the Purchaser pursuant to the Offer. Should any such approval or other
action be required, the Purchaser currently contemplates that such approval or
other action will be sought. While, except as described in this Offer to
Purchase, the Purchaser does not currently intend to delay the acceptance for
payment of Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other
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<PAGE> 26
action, if needed, would be obtained or would be obtained without substantial
conditions or that adverse consequences might not result to the Company's
business. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 12. See "THE OFFER--Section 11.
Conditions of the Offer."
APPRAISAL RIGHTS. Holders of Shares will not have appraisal rights as
a result of the Offer. If the Merger is consummated, however, persons who hold
Shares at that time would have the right to appraisal of their Shares in
accordance with Section 262 of the DGCL (which is reproduced in full in
Schedule II hereto). Such appraisal rights, if the statutory procedures are
complied with, would result in a judicial determination of the "fair value" of
the Shares owned by such holders. Any such judicial determination of the fair
value of the Shares could be based upon considerations other than or in
addition to the price paid in the Offer and the Merger and the market value of
the Shares, including asset values, the investment value of the Shares and any
other valuation considerations generally accepted in the investment community.
The value so determined for Shares could be more or less than the value of the
consideration per Share to be paid pursuant to the Offer or the Merger and
payment of such consideration would take place subsequent to payment pursuant
to the Offer.
Several recent decisions by the Delaware courts have held that a
substantial stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders which requires that the merger be fair to such
other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court indicated in
Weinberger v. UOP, Inc. and Rabkin v. Philip A. Hunt Chemical Corp. that
ordinarily the remedy available to stockholders in a merger that is found not
to be "fair" to minority stockholders is the right to appraisal described above
or a damages remedy based on essentially the same principles.
No provision has been made by the Company, the Purchaser or Equity
Holdings to allow access to the Company's files by unaffiliated Stockholders or
to obtain counsel or appraisal services at the expense of the Company, the
Purchaser or Equity Holdings.
STATE ANTI-TAKEOVER LAWS. A number of states have adopted
"anti-takeover" statutes which purport, to varying degrees, to be applicable to
attempts to acquire securities of corporations which are incorporated in such
states, or whose business operations have substantial economic effects in such
states, or which have substantial assets, security holders, principal executive
officers or principal places of business in such states. In that regard, it
should be noted that in 1982 in Edgar v. MITE Corporation, the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Act, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS Corp v. Dynamics Corp. of America, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
under certain conditions, in particular, that the corporation has a substantial
number of stockholders in the state and is incorporated there.
The Company is incorporated under the laws of the State of Delaware.
Section 203 of the DGCL, subject to certain exceptions, prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date, the board of directors of the
corporation approved either the business combination or the transaction in
which the interested stockholder became an interested stockholder. The Section
203 limitations are not applicable to the Company and will not apply to the
Merger.
-23-
<PAGE> 27
Should any government official or any other person seek to apply any
other state anti-takeover statute or regulation to the Transaction, the
Purchaser will take such action as then appears desirable, which may include
contesting the validity or applicability of any such statute in appropriate
legal proceedings. If it is asserted that one or more state anti-takeover
statutes are applicable to the Offer, and an appropriate court does not
determine that such statutes and regulations are inapplicable or invalid as
applied to the Offer, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities,
and the Purchaser might be unable to purchase or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer.
In such case, the Purchaser may not be obligated to accept for payment or pay
for any Shares tendered. See "THE OFFER--Section 11. Conditions of the
Offer."
FEDERAL RESERVE BOARD REGULATIONS. Federal Reserve Board Regulations
G, U and X (the "Margin Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, such as the Shares,
if the credit is secured directly or indirectly by margin stock. Such secured
credit may not be extended or maintained in an amount that exceeds the maximum
loan value of the collateral. The Purchaser and Equity Holdings believe that
any financing in connection with the Offer will not be in violation of the
Margin Regulations.
13. CERTAIN FEES AND EXPENSES; UTILIZATION OF COMPANY EMPLOYEES.
The Purchaser has retained Georgeson & Company Inc. to act as the
Information Agent and Chemical Mellon Shareholder Services, L.L.C. to act as
the Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and personal interview
and may request brokers, dealers, banks, trust companies and other nominee
stockholders to forward the Offer materials to beneficial owners. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for their services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws.
Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Purchaser for customary mailing expenses incurred by them in
forwarding by the Purchaser and Equity Holdings material to their customers.
It is estimated that the expenses incurred by the Purchaser and Equity
Holdings in connection with the Transaction will be approximately as set forth
below:
<TABLE>
<S> <C>
Information Agent Fees and Expenses . . . . . . . . . . . . . . . $ 10,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 100,000
Printing, Mailing, Solicitation,
Distribution and Depositary Expenses. . . . . . . . . . . . . . 40,000
Filing Fees and Related Expenses . . . . . . . . . . . . . . . . . 12,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
-----------
Total $ 177,000
===========
</TABLE>
Certain employees of the Company have assisted the Purchaser with
respect to the Transaction, primarily by providing information concerning the
Company for the preparation of this Offer to Purchase to comply with
requirements under the Exchange Act. Principally, this information has
included financial information of the Company and stock ownership and stock
transaction data with respect to officers and directors of the Company. No
employee of the Company has, or will, receive any additional or separate
compensation for such services.
-24-
<PAGE> 28
14. MISCELLANEOUS. The Offer is being made to all Stockholders,
but is not being made in any jurisdiction where the making of such would be
illegal. The Purchaser is not aware of any state in which the making of the
Offer is prohibited by administrative or judicial action pursuant to a state
statute. If the Purchaser becomes aware of any state where the making of the
Offer is so prohibited, the Purchaser will make a good faith effort to comply
with any such statute or seek to have such statute declared inapplicable to the
Offer. If, after such good faith effort, the Purchaser cannot comply with any
applicable 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,
the securities laws or blue sky laws of which require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Purchaser by one or more registered brokers or dealers that are licensed
under the laws of, and represent the Stockholder residing in, such
jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser or Equity Holdings not contained
herein or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
Pursuant to Rules 13d-1 and 13e-3 and Regulation 14D-1 of the General
Rules and Regulations under the Exchange Act, the Purchaser and Equity Holdings
have filed a Rule 13e-3 Transaction Statement and a Tender Offer Statement on
Schedule 14D-1 (which includes Amendment No. 42 to Schedule 13D of Equity
Holdings and the Purchaser), together with exhibits in each case, furnishing
additional information with respect to the Offer and Merger. Such Statements
and any amendments thereto, including exhibits, may be inspected and copies may
be obtained at the same places and in the same manner as set forth with respect
to information concerning the Company in "AVAILABLE INFORMATION" (except that
they will not be available at the regional offices of the Commission).
GAMI Merger Co.
March 29, 1996
-25-
<PAGE> 29
Schedule I
The following table sets forth (i) the name, address, and current
principal occupation or employment of the directors and executive officers of
the Company and the Purchaser, (ii) the name and address of Equity Holdings,
its general partners and (iii) the name, address and current principal
occupation of certain persons affiliated with the Company, and such persons
controlling Equity Holdings's general partners and the number and percentage of
Shares beneficially owned by such persons as of the date hereof.
<TABLE>
<CAPTION>
Occupation Number of Shares
Name/Address or Employment Beneficially Owned(1)
------------ ------------- ---------------------
<S> <C> <C> <C>
Equity Holdings Limited, an 8,082,744 87.9%
Illinois Limited Partnership
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
General Partners of Equity Holdings(4)
--------------------------------------
Samuel Zell Revocable Trust Chairman of the Board of Directors. Mr. 8,082,744 87.9%
Samuel Zell (Trustee) Zell had been President from June 1990 8,106,077(2),(3) 87.9%
until February 1994, and Chief Executive
Officer from 1983 until February 1994 of
the Company. Mr. Zell is Chairman of the
Board of Equity Group Investments, Inc.
("Equity Group") and Equity Financial and
Management Company ("Equity Financial").
Mr. Zell was President and Chief Executive
Officer of Equity Group and Equity Financial
until November 1994.
Robert H. and Ann Lurie Trust Ms. Lurie has been a self-employed private 8,082,744(2) 87.9%
Ann Lurie (Co-Trustee) investor for the past five years. 8,082,744(2) 87.9%
Sheli Z. Rosenberg (Co-Trustee) Mrs. Rosenberg has been President and 8,144,111(2),(3) 88.4%
Chief Executive Officer since November
1994 of Equity Group and Equity Financial
and was Executive Vice President of Equity
Group since 1986, and of Equity Financial
since 1980. Both firms are privately
owned affiliated investment management
companies. Mrs. Rosenberg is a member of
the law firm of Rosenberg & Liebentritt,
P.C. Mrs. Rosenberg had been Vice
President and General Counsel of the
Company from October 1985 until March
1995.
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Occupation Number of Shares
Name/Address or Employment Beneficially Owned(1)
------------ ------------- ---------------------
<S> <C> <C> <C>
GAMI Merger Co. 0 *
Two North Riverside Plaza
Chicago, Illinois 60606
Executive Officers of
GAMI Merger Co.(4)
---------------
Samuel Zell See above 8,106,077(2),(3) 87.9%
Sheli Z. Rosenberg See above 8,144,111(2),(3) 88.4%
Director of GAMI Merger Co.
---------------------------
Samuel Zell See above 8,106,077(2),(3) 87.9%
Executive Officers of Great American
Management and Investment, Inc.(4)
-------------------------------
Rod F. Dammeyer President and 38,333(3)(5) *
Chief Executive Officer
Gus J. Athas Senior Vice President and General Counsel 0 *
Sam A. Cottone Senior Vice President and Chief Financial 0 *
Officer
Directors of Great American Management
and Investment, Inc.(4)
Rod F. Dammeyer President and Chief Executive Officer of 38,333(3) *
the Company since February 1994. Mr.
Dammeyer is also President, Chief
Executive Officer and a director of
Anixter International Inc. ("Anixter")
since 1993. Since 1985, Mr. Dammeyer had
served as President and a director of
Anixter.
Bradbury Dyer, III Mr. Dyer is the founder and sole general 340,333(3)(5) 3.7%
Paragon Associates partner of Paragon Associates and Paragon
500 Crescent Court, Suite 260 Associates II, private investment
Dallas, Texas 75201 partnerships.
David A. Gardner Mr. Gardner is President of Gardner 99,333(3) 1.1%
445 Park Avenue Capital Corporation, a privately owned
New York, New York 10022 real estate and venture capital investor.
William K. Hall Mr. Hall has been President, Chief 32,000(3) *
Executive Officer and a director of Eagle
Industries, Inc. ("Eagle") since 1990.
Mr. Hall has been President, Chief
Executive Officer and a director of Falcon
Building Products, Inc. ("Falcon") since
1994.
</TABLE>
-2-
<PAGE> 31
<TABLE>
<CAPTION>
Occupation Number of Shares
Name/Address or Employment Beneficially Owned(1)
------------ ------------- ---------------------
<S> <C> <C> <C>
F. Philip Handy Mr. Handy is President of Winter Park 51,133(3) *
Winter Park Capital Co. Capital Company, a private investment
200 East New England, Suite 301 firm. Mr. Handy was previously a director
Winter Park, Florida 32789 of the Company from 1980 to 1984.
Sheli Z. Rosenberg See above 8,144,111(3) 88.4%
Joseph P. Sullivan Mr. Sullivan is the Chairman of the 23,333(3) *
225 North Michigan Avenue Executive Committee of the Board of
Suite 2416 Directors of IMC Global, Inc. since March
Chicago, Illinois 60601 1996. Mr. Sullivan had been Chairman of
the Board of The Vigoro Corporation from
March 1991 until March 1996 and was Chief
Executive Officer of that company from March
1991 until September 1994 and President
from January 1986 until March 1991.
Samuel Zell See above 8,106,077(2),(3) 87.9%
Affiliates4
----------
Arthur A. Greenberg Mr. Greenberg has been a principal of the 8,105,411(2),(3) 88.1%
accounting firm of Greenberg & Pociask,
Ltd., since 1971. He has been a director
and Executive Vice President of Equity
Group and Equity Financial since 1986 and
1971, respectively. Mr. Greenberg was an
Executive Vice President and Chief
Financial Officer of the Company from 1986
until March 1995.
</TABLE>
- ---------------
*Indicates less than 1% of class.
Notes:
1 For purposes of this Schedule I, the number of shares owned is
calculated according to the definition of beneficial ownership under
Rule 13d-3 of the Exchange Act ("Rule 13d-3"). The percentage
ownership is based on 9,194,251 Shares outstanding, plus the amount of
Options held by such person which are exercisable within sixty days of
the date hereof.
2 Includes all Shares owned by Equity Holdings, pursuant to Rule 13d-3.
Messrs. Zell and Greenberg and Mrs. Rosenberg and Ms. Lurie disclaim
beneficial ownership of Shares owned by Equity Holdings.
3 Includes Options which are exercisable into Shares within sixty days
of the date hereof, one Option for one Share, as follows: 23,333
Options for Mr. Zell, 16,667 Options for Mrs. Rosenberg, 38,333
Options for Mr. Dammeyer, 23,333 Options for Mr. Dyer, 23,333 Options
for Mr. Gardner, 10,000 Options for Mr.
-3-
<PAGE> 32
Hall, 23,333 Options for Mr. Handy, 23,333 Options for Mr. Sullivan,
and 6,667 Options for Mr. Greenberg.
4 Unless otherwise designated, the business address for such persons is
Two North Riverside Plaza, Chicago, Illinois 60606.
5 317,000 Shares are held by Paragon Joint Venture, a joint venture
formed by Paragon Associates and Paragon Associates II, both Texas
Limited Partnerships. Under the terms of the joint venture agreement,
Paragon and Paragon II have beneficial ownership of the Shares in
proportion to their respective accounts in the joint venture. Mr. Dyer
does not have direct beneficial ownership in these Shares; however,
Mr. Dyer, as sole general partner of Paragon and Paragon II and agent
for Paragon Joint Venture, may be deemed to have indirect ownership of
these Shares. Mr. Dyer, in his role as general partner of Paragon and
Paragon II and as agent for Paragon Joint Venture, has sole voting and
dispositive powers in regard to these Shares.
-4-
<PAGE> 33
Schedule II
The following is reproduced from Section 262 of the Delaware General
Corporation Law.
SECTION 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation
of this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this title shall be entitled to
an appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to vote
at the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its approval
the vote of the holders of the surviving corporation as provided in subsection
(f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation pursuant
to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
-1-
<PAGE> 34
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder electing
to demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or within 10
days thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that appraisal
rights are available for any or all of the shares of the constituent
corporation, and shall include in such notice a copy of this section. The
notice shall be sent by certified or registered mail, return receipt requested,
addressed to the stockholder at his address at it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from the surviving
or resulting corporation the appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation of any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written
-2-
<PAGE> 35
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in such a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved as the Court deems advisable. The forms of
the notices by mail and by publication shall be approved by the Court, and the
costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have been become
entitled to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted his certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this State
or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
-3-
<PAGE> 36
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
-4-
<PAGE> 37
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON
& COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
1-800-223-2064
BANKS AND BROKERS CALL: (212) 440-9800
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
By Mail: By Hand/Overnight:
Chemical Mellon Shareholder Services, L.L.C. Chemical Mellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
PO Box 817 120 Broadway
Midtown Station 13th Floor
New York, New York 10018 New York, New York 10271
</TABLE>
By Facsimile Transmission:
(201) 296-4293
or
(201) 296-4291
Confirm by Telephone:
(212) 296-4209
<PAGE> 1
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Great American Management and Investment, Inc.
Pursuant to the Offer to Purchase dated March 29, 1996
by
GAMI Merger Co.
an entity wholly owned by
EQUITY HOLDINGS LIMITED, AN ILLINOIS LIMITED PARTNERSHIP
THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, APRIL 25, 1996 (THE "EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED.
The Depositary for the Offer is:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
By Mail: By Hand/Overnight:
Chemical Mellon Shareholder Services, L.L.C. Chemical Mellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
PO Box 817 120 Broadway
Midtown Station 13th Floor
New York, New York 10018 New York, New York 10271
</TABLE>
By Facsimile Transmission:
(201) 296-4293
or
(201) 296-4291
Confirm by Telephone:
(212) 296-4209
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER
OF TRANSMITTAL IS COMPLETED.
STOCKHOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE THE OFFER PRICE PURSUANT TO THE
OFFER MUST VALIDLY TENDER (AND NOT VALIDLY WITHDRAW) THEIR SHARES TO THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal ("Letter of Transmittal") is to be used by
Stockholders (as defined in the Offer to Purchase) if: (i) certificates
representing Shares (as defined herein) are to be physically delivered to the
Depositary herewith by such Stockholders; (ii) tender of Shares is to be made
by book-entry transfer to the Depositary's account at The
<PAGE> 2
Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company
("PDTC") (each, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in the
Offer to Purchase, dated March 29, 1996 (as the same may be amended from time
to time, the "Offer to Purchase"), of GAMI Merger Co., a Delaware corporation
(the "Purchaser"), under the caption "THE OFFER--Section 3. Procedures for
Tendering Shares--Book-Entry Transfer" by any financial institution that is a
participant in a Book-Entry Transfer Facility and whose name appears on a
security position listing as the owner of Shares; or (iii) tender of Shares is
to be made according to the guaranteed delivery procedures set forth in the
Offer to Purchase under the caption "THE OFFER--Section 3. Procedures for
Tendering Shares--Guaranteed Delivery." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
BENEFICIAL OWNERS WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF THEY DESIRE
TO TENDER THEIR SHARES. SEE "THE OFFER--SECTION 3. PROCEDURES FOR TENDERING
SHARES" IN THE OFFER TO PURCHASE.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and 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 and by making a public announcement of such extension.
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Offer.
All capitalized terms used herein and not defined herein shall have
the meaning ascribed to them in the Offer to Purchase.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance may be directed to the Information Agent,
whose address and telephone number appears on the back cover of this Letter of
Transmittal. Additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. See Instruction 12 below.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING:
<TABLE>
<S><C>
Name of Tendering Institution: .......................................................
Name of Book-Entry Transfer Facility:
DTC [ ] PDTC [ ]
(check one)
Account Number: ......................................................................
Transaction Code Number: .............................................................
</TABLE>
2
<PAGE> 3
If Stockholders desire to tender Shares pursuant to the Offer and (i)
certificates representing such Shares to be tendered for purchase and payment
are not lost but are not immediately available, (ii) time will not permit this
Letter of Transmittal, certificates representing such Shares or other required
documents to reach the Depositary prior to the Expiration Date or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Stockholders may effect a tender of such Shares in accordance with
the guaranteed delivery procedures set forth in the Offer to Purchase under the
caption "THE OFFER--Section 3. Procedures for Tendering Shares-- Guaranteed
Delivery." See Instruction 2 below.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO
THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name of Registered Owner(s):
.........................................................................
Window Ticket No. (if any): .............................................
Date of Execution of Notice of Guaranteed Delivery: .....................
Name of Eligible Institution that Guaranteed Delivery: ..................
If Delivered by Book-Entry Transfer:
Name of Book-Entry Transfer Facility
DTC [ ] PDTC [ ]
(check one)
Account Number: .........................................................
Transaction Code Number: ................................................
3
<PAGE> 4
List below the Shares to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers and number of
Shares on a separately executed schedule and affix the schedule to this Letter
of Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Number of Shares
Registered Owner(s) Certificate Represented by Number of Shares
(Please fill in, if blank) Number(s)* Certificate(s)* Tendered**
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Shares
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Stockholders tendering by book-entry transfer
(see below).
** Unless otherwise indicated in this column, it will be assumed that
all Shares represented by certificates delivered to the Depositary are
being tendered. See Instruction 4.
4
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Purchaser the number of Shares
indicated above pursuant to the Purchaser's offer to purchase any and all
shares of common stock, par value $.01 per share (the "Shares"), of Great
American Management and Investment, Inc., a Delaware corporation (the
"Company"), at $50.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated March 29,
1996 (the "Offer to Purchase") and this Letter of Transmittal (which, together,
constitute the "Offer"). Subject to, and effective upon, the Purchaser's
acceptance of the Shares tendered herewith in accordance with the terms 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 Purchaser all right, title and interest
in and to all the Shares being tendered hereby and any and all dividends,
distributions, other Shares, rights or other securities issued or issuable in
respect thereof on or after the date of the Offer (collectively,
"Distributions"), that are purchased pursuant to the Offer. The undersigned
hereby irrevocably constitutes and appoints the Depositary as the undersigned's
true and lawful agent and attorney-in-fact (with full knowledge that said
Depositary also acts as the agent of the Purchaser) with respect to the
tendered Shares (and any 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 representing such Shares or transfer
ownership of such Shares (and any Distributions) on the
account books maintained by the Book-Entry Transfer Facilities
and deliver, in any such case, all accompanying evidences of
transfer and authenticity to or upon the order of the
Purchaser upon receipt by the Depositary, as the undersigned's
agent, of the cash consideration to which the undersigned is
entitled upon the acceptance by the Purchaser of such Shares
under the Offer;
(b) present certificates for cancellation and transfer of such
Shares (and any Distributions) on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions),
all in accordance with the terms and subject to the conditions
of the Offer.
The undersigned hereby irrevocably appoints the Purchaser as the
attorney-in-fact and proxy of the undersigned, with full power of substitution,
to the full extent of the undersigned's rights with respect to all Shares
tendered hereby and accepted for payment by the Purchaser (and with respect to
any Distributions). All such proxies shall be considered coupled with an
interest in the Shares tendered herewith, are irrevocable and are granted in
consideration of, and are effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with the terms of the Offer. Upon such
acceptance for payment, all prior powers of attorney and proxies given by the
undersigned with respect to such Shares and Distributions will be revoked,
without further action, and no subsequent powers of attorneys and proxies may
be given (and, if given, will not be deemed effective). The designees of the
Purchaser will, with respect to the Shares for which such appointment is
effective, be empowered to exercise all voting and other rights of the
undersigned as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders, or any adjournment or
postponement thereof, by written consent in lieu of such meeting as permitted
by the Delaware General Corporation Law or otherwise. The undersigned
understands that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance of such Shares for payment, the
Purchaser or its designee must be able to exercise full voting rights with
respect to such Shares, and other securities, including voting at any meeting
of stockholders.
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 any Distributions) and that, when the same are accepted
for payment by the Purchaser, the Purchaser will acquire good and marketable
title to and unencumbered ownership of, the Shares tendered hereby (and any
Distributions) thereto, free and clear of all liens, restrictions, charges and
encumbrances, and that the Shares tendered hereby (and any Distributions) will
not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned
5
<PAGE> 6
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all other Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending such
remittance or appropriate assurance thereof, the Purchaser shall be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distributions, and may withhold the entire purchase price of Shares tendered
hereby, or deduct from such purchase price the amount or value thereof as
determined by the Purchaser in its sole discretion.
The undersigned understands that all Shares properly tendered and not
validly withdrawn will be purchased at $50.00 per Share (or such other price
that may be set forth in an amendment to the Offer), net to the seller in cash,
upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that tenders of Shares pursuant to any one
of the procedures described in the Offer to Purchase in, "THE OFFER--Section 3.
Procedures for Tendering Shares," and in the instructions hereto will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer.
The undersigned understands that the Purchaser may accept the
undersigned's tender by delivering oral or written notice of acceptance to the
Depositary.
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the undersigned's successors, assigns, heirs, executors, administrators,
trustees in bankruptcy and legal representatives and shall not be affected by,
and shall survive, the death or incapacity of the undersigned. This tender may
be withdrawn only in accordance with the procedures set forth in the
Instructions contained in this Letter of Transmittal.
Unless otherwise indicated in the box entitled "Special Delivery
Instructions" or the box entitled "Special Issuance Instructions" below, please
send the cash consideration for the tendered Shares (and, if applicable,
substitute certificates for any Shares not accepted) to the undersigned at the
address shown below the signature of the undersigned. The undersigned
understands that Stockholders who tender Shares by book-entry transfer
("Book-Entry Shareholders") may request that for any Shares not purchased, the
applicable account maintained by the Book-Entry Transfer Facility designated
below will be credited by making an appropriate entry in the box entitled
"Special Issuance Instructions". The undersigned recognizes that the Purchaser
has no obligation pursuant to "Special Issuance Instructions" to transfer any
Shares from the name of the registered holder thereof if the Purchaser does not
accept any of the Shares so tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF SHARES
TENDERED" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE SHARES AS SET FORTH IN SUCH BOX ABOVE.
The undersigned understands that, under certain circumstances and
subject to certain conditions of the Offer (each of which the Purchaser may
waive) set forth in the Offer to Purchase, the Purchaser may not be required to
accept for purchase any of the Shares tendered (including any Shares tendered
after the Expiration Date). Any Shares not accepted for purchase will be
returned promptly to the undersigned at the address set forth above in the
first column of "Description of Shares Tendered" unless otherwise indicated
herein under "Special Delivery Instructions" below.
The undersigned understands that the delivery and surrender of the
Shares is not effective, and the risk of loss of the Shares does not pass to
the Depositary, until receipt by the Depositary of this Letter of Transmittal,
or a facsimile hereof, properly completed and duly executed, together with all
accompanying evidences of authority and any other required documents in form
satisfactory to the Purchaser. All questions as to form of all documents and
the validity (including time of receipt) and acceptance of tenders and
withdrawals of Shares will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding.
6
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
REGARDLESS OF WHETHER SHARES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the registered owner(s)
exactly as their name(s) appear(s) on certificate(s) representing Shares
or, if tendered by a participant in one of the Book-Entry Transfer
Facilities, exactly as such participant's name appears on a security
position listing as the owner of Shares, or by person(s) authorized to
become registered owner(s) by endorsements and documents transmitted with
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in
a fiduciary or representative capacity, such person must set forth his or
her full title below under "Capacity" and submit evidence satisfactory
to the Purchaser of such person's authority to so act. See Instruction 5
below.
If the signature appearing below is not of the registered owner(s)
of the Shares, then the registered owner(s) must sign a valid proxy.
<TABLE>
<S><C>
X.........................................................................................................
X.........................................................................................................
SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY
Date:..............................................................................................., 1996
Names(s):.................................................................................................
..........................................................................................................
(PLEASE PRINT)
Capacity: ................................................................................................
Address:..................................................................................................
..........................................................................................................
(INCLUDING ZIP CODE)
Area Code and Telephone No.: .............................................................................
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 1 AND 5 BELOW)
(Certain Signatures Must Be Guaranteed by an Eligible Institution
which is a member of an Approved Signature Program)
..........................................................................................................
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
..........................................................................................................
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF ELIGIBLE INSTITUTION)
..........................................................................................................
(AUTHORIZED SIGNATURE)
..........................................................................................................
(PRINTED NAME)
..........................................................................................................
(TITLE)
Dated: ............................................................................................., 1996
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 5, 6, 7 AND 8)
To be completed ONLY if certificates for Shares To be completed ONLY if certificates for Shares
not tendered or not accepted for purchase are to be not tendered or not accepted for purchase or any
issued in the name of, or any check for the Offer check for the Offer Price are to be sent to someone
Price are to be issued to the order of, someone other other than the person or persons whose signature(s)
than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or to an
appear(s) within this Letter of Transmittal or issued address different from that shown in the box entitled
to an address different from that shown in the box "Description of Shares Tendered" within this Letter
entitled "Description of Shares Tendered" within this of Transmittal.
Letter of Transmittal, or if Shares tendered by book-
entry transfer that are not accepted for purchase are Deliver: [ ] Shares
to be credited to an account maintained at one of the [ ] Check
Book-Entry Transfer Facilities other than the one (check as applicable)
designated above.
Issue: [ ] Shares
[ ] Check Name:
(check as applicable) .................................................
(PLEASE PRINT)
Name:
................................................
(PLEASE PRINT)
Address: Address:
............................................. ..............................................
.....................................................
(ZIP CODE)
.......................................................
..................................................... (ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
Credit unpurchased Shares by book-entry to the Book-
Entry Transfer Facility account set forth below:
.....................................................
[ ] DTC [ ] PDTC
(check one) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
.....................................................
(DTC/PDTC ACCOUNT NUMBER)
Name of Account Party:
.....................................................
</TABLE>
8
<PAGE> 9
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 bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of the Securities Transfer Agents Medallion
Program or by any other bank, broker, dealer, credit union, savings association
or other entity which is an "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing
constituting 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 instruction
entitled "Special Payment Instructions" or "Special Delivery Instructions" on
this Letter of Transmittal or (b) if such Shares are tendered for the account
of an Eligible Institution. See Instruction 5.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR
SHARES OR BOOK-ENTRY CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES. This
Letter of Transmittal is to be used whether certificates are to be forwarded
herewith, whether tenders are to be made pursuant to the procedures for
book-entry transfer set forth in the Offer to Purchase in "THE OFFER--Section
3. Procedures for Tendering Shares--Book Entry Transfer," or whether tenders
were made pursuant to the procedure for guaranteed delivery set forth below and
in the Offer to Purchase in "THE OFFER--Section 3. Procedures for Tendering
Shares--Guaranteed Delivery." For Shares to be properly tendered pursuant to
the Offer, a properly completed and duly executed copy of this Letter of
Transmittal or facsimile copy thereof, together with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of the addresses set forth on the front
page of this Letter of Transmittal, before the Expiration Date. Either the
certificates for such Shares must be delivered to the Depositary along with
this properly completed and duly executed Letter of Transmittal, or facsimile
copy thereof, or such Shares must be tendered pursuant to the procedure for
book-entry tender set forth below, and confirmation of receipt of such tendered
Shares must be received by the Depositary, in each case prior to the Expiration
Date, or the tendering Stockholder must comply with the guaranteed delivery
procedure set forth below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
If a Stockholder desires to tender Shares pursuant to the Offer and
such Stockholder's certificates for such Shares are not immediately available
(or such Stockholder cannot follow the procedures for book-entry transfer on a
timely basis) or time will not permit such Stockholder to transmit this Letter
of Transmittal and all other required documents to reach the Depositary prior
to the Expiration Date, such Shares may nevertheless be tendered provided that
all of the following conditions are satisfied:
(a) such tender is made by or through a financial
institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion
Program or the Stock Exchanges Medallion Program (each such entity
being referred to herein as an "Eligible Institution");
(b) prior to the Expiration Date the Depositary must have
received from such Eligible Institution, at one of the addresses of
the Depositary set forth herein, a properly completed and duly
executed Notice of Guaranteed Delivery (by telegram, facsimile
transmission, mail or hand delivery) substantially in the form
provided by the Purchaser, setting forth the name(s) and address(es)
of the registered owner(s) and the number of Shares being tendered and
stating that the tender is being made thereby and guaranteeing that,
within three New York Stock Exchange ("NYSE") trading days after the
date of the Notice of Guaranteed Delivery, a properly completed and
duly executed Letter of Transmittal, or a facsimile hereof, together
with certificates representing the Shares (or confirmation of
book-entry transfer of such Shares into the Depositary's account with
a Book-Entry Transfer Facility as described above), and any other
documents required by the Letter of Transmittal and the instructions
hereto, will be deposited by such Eligible Institution with the
Depositary; and
9
<PAGE> 10
(c) this Letter of Transmittal or a facsimile hereof,
properly completed and duly executed, certificates for all physically
delivered Shares in proper form for transfer (or confirmation of
book-entry transfer of such Shares into the Depositary's account with
a Book-Entry Transfer Facility as described above) and all other
required documents must be received by the Depositary within three
NYSE trading days after the date of the Notice of Guaranteed Delivery.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment (and thereby purchased) the validly tendered Shares as,
if, and when the Purchaser gives oral or written notice thereof to the
Depositary of the Purchaser's acceptance of such Shares for payment. Payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price with the Depositary, which will act as agent for tendering
Stockholders for the purpose of receiving payment from the Purchaser and
transmitting payments to tendering Stockholders. Notwithstanding any other
provision hereof, payment for Shares tendered and purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a confirmation of book-entry transfer of such Shares into
the Depositary's account at a Book-Entry Transfer Facility), a properly
completed and duly executed Letter of Transmittal or a facsimile thereof and
any other documents required by this Letter of Transmittal. Under no
circumstances will interest be paid on the purchase price by the Company by
reason of any delay in making such payment.
If any tendered Shares are not purchased pursuant to the terms and
conditions of the Offer, certificates for such Shares not purchased or tendered
will be returned, without expense to the tendering Stockholder (or, in the case
of Shares tendered by book-entry transfer, such Shares will be credited to an
account maintained by the Book-Entry Transfer Facility designated above), as
promptly as practicable following the expiration of termination of the Offer.
All tendering holders of Shares, by executing this Letter of
Transmittal or facsimile hereof, waive any right to receive any notice of the
acceptance of such Stockholder's tender.
3. WITHDRAWAL OF TENDERS. Tenders of Shares made pursuant to the
Offer are irrevocable, except that Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date, and unless the Purchaser
has already accepted the Shares for payment pursuant to the Offer, may also be
withdrawn at any time thirty days after the Expiration Date. If the Purchaser
(i) extends the Offer, (ii) is delayed in its acceptance for purchase of or
payment for Shares, or (iii) is unable to accept for purchase or pay for Shares
for any reason, then, without prejudice to the Purchaser's rights under the
Offer to Purchase, tendered Shares may be retained by the Depositary on behalf
of the Purchaser and may not be withdrawn except to the extent that the
tendering Stockholder is entitled to and duly exercises withdrawal rights as
set forth in the Offer to Purchase, "THE OFFER--Section 4. Withdrawal Rights."
For a withdrawal to be effective, the Depositary must timely receive a
written or facsimile transmission of a notice of withdrawal at its address set
forth herein. Any notice of withdrawal must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered owner(s), if different from the name
of the person having tendered the Shares to be withdrawn. If the certificates
have been delivered or otherwise identified to the Depositary, the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn and a signed notice of withdrawal with such signature guaranteed by
an Eligible Institution (except in the case of Shares tendered by an Eligible
Institution) must be submitted prior to the release of the certificates or the
Shares to be withdrawn. If Shares have been delivered pursuant to the
procedure for book-entry transfer set forth in the Offer to Purchase, "THE
OFFER-- Section 3. Procedures for Tendering Shares -- Book-Entry Transfer," the
notice of withdrawal must specify the name and the number of the account of the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of the Book-Entry Transfer
Facility. Withdrawals of tendered Shares may not be rescinded. Any Shares
properly withdrawn will thereafter be deemed not to be validly tendered for
purposes of the Offer; provided, however, that withdrawn Shares may be
retendered by again following one of the procedures described herein so long as
the retender is made prior to the Expiration Date.
All questions as to the form of validity (including time and receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of the Purchaser, any of its affiliates or assigns, if any, the Depositary, the
Information Agent or any other person is or will be obligated to give any
notice of any defects or irregularities in any notice of withdrawal, and none
of them will incur any liability for failure to give any such notice.
10
<PAGE> 11
4. PARTIAL TENDERS (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS).
If fewer than all of the Shares represented by all Share Certificates delivered
to the Depositary herewith are to be tendered hereby, fill in the number of
Shares which are to be tendered in the box entitled "Number of Shares Tendered"
as appropriate. In such case, a new Share Certificate for the untendered
Shares will be sent, without expense, to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by certificate(s) delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES AND LETTER OF TRANSMITTAL, STOCK POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered owner(s) of the Shares tendered hereby, the signature(s) must
correspond with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in one of the Book-Entry Transfer
Facilities whose name is shown as the owner of the Shares tendered hereby, the
signature must correspond with the name shown on the security position listing
as the owner of the Shares.
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY WHO IS
NOT THE REGISTERED OWNER, THEN THE REGISTERED OWNER MUST SIGN A VALID PROXY,
WITH THE SIGNATURE OF SUCH REGISTERED OWNER GUARANTEED BY AN ELIGIBLE
INSTITUTION WHICH IS A MEMBER OF AN AUTHORIZED SIGNATURE PROGRAM (AS DEFINED
BELOW).
If any of the Shares tendered hereby are registered in the name of two
or more Stockholders, all such Stockholders must sign this Letter of
Transmittal. If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of the Letter of Transmittal and any necessary accompanying
documents as there are different names in which certificates are held.
If this Letter of Transmittal is signed by the registered owner(s) or
by a participant in one of the Book-Entry Transfer Facilities whose name is
shown as the owner of the Shares tendered hereby and the certificates for any
Shares not tendered or not accepted for purchase are to be issued (or if any
Shares that are not tendered or not accepted for purchase are to be reissued or
returned) to, or if tendered by book-entry transfer, credited to the account at
the Book-Entry Transfer Facility of, such person, and any check for payment of
the Offer Price to be made in connection with the Offer is to be issued to the
order of such person, then such person need not endorse any certificates for
tendered Shares, nor provide separate stock powers. In any other case
(including if this Letter of Transmittal is not signed by such person), such
person must either properly endorse the certificates for Shares tendered or
transmit a separate properly completed stock power with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
owner(s) appear(s) on such Shares, and, with respect to a participant(s) in a
Book-Entry Transfer Facility whose name(s) appear(s) on a security position
listing as the owner of Shares, exactly as the name(s) of the participant(s)
appear(s) on such security position listing), with the signature on the
endorsement or stock power guaranteed by an Eligible Institution which is a
member of an Approved Signature Program, unless such certificates or stock
powers are executed by an Eligible Institution.
If this Letter of Transmittal or any certificates for Shares or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Purchaser of their authority so to act must
be submitted with this Letter of Transmittal.
Endorsements on certificates for Shares, signatures on stock powers
and proxies provided in accordance with this Instruction 5 by Stockholders not
executing this Letter of Transmittal must be guaranteed by an Eligible
Institution which is a member of an Approved Signature Program.
No signature guarantee is required if (i) this Letter of Transmittal
is signed by the registered owner(s) of the Shares tendered herewith (or by a
participant in one of the Book-Entry Transfer Facilities whose name appears on
a security position listing as the owner of the Shares) and the payment of the
Offer Price is to be made, or any Shares not tendered or not accepted for
purchase are to be issued, directly to such registered owner(s) (or, if signed
by a participant in one of the Book-Entry Transfer Facilities, any Shares not
tendered or not accepted for purchase are to be credited to such participant's
account at such Book-Entry Transfer Facility) and neither the "Special Issuance
Instructions" box nor the "Special Delivery
11
<PAGE> 12
Instructions" box of this Letter of Transmittal has been completed or (ii) such
Shares are tendered for the account of an Eligible Institution. In all other
cases, all signatures on Letters of Transmittal accompanying Shares must be
guaranteed by an Eligible Institution which is a member or participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Program or the Stock Exchanges Medallion Program (an "Approved
Signature Program").
6. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS. The
person signing this Letter of Transmittal should indicate in the applicable box
or boxes the name and address to which Shares for principal amounts not
tendered or not accepted for purchase or any check for payment of the Offer
Price to be made in connection with the Offer is to be issued or sent, if
different from the name and address of such person. In the case of issuance in
a different name, the taxpayer identification or social security number of the
person named must also be indicated. If no instructions are given, Shares not
tendered or not accepted for purchase will be returned to the Stockholder of
the Shares tendered. Any Stockholder tendering by book-entry transfer may
request that Shares not tendered or not accepted for purchase be credited to
such account at any of the Book-Entry Transfer Facilities as such Stockholder
may designate under the caption "Special Issuance Instructions." If no such
instructions are given, any such Shares not tendered or not accepted for
purchase will be returned by crediting the account at the Book-Entry Transfer
Facility designated above.
7. TAXPAYER IDENTIFICATION NUMBER. Each tendering Stockholder is
required to provide the Depositary with the Stockholder's correct taxpayer
identification number ("TIN"), generally the Stockholder's social security or
federal employer identification number, on Substitute Form W-9, which is
provided under "Important Tax Information" below, or, alternatively, to
establish another basis for exemption from backup withholding. A Stockholder
must cross out item (2) in the Certification box on Substitute Form W-9 if such
Stockholder is subject to backup withholding. Failure to provide the
information on the form may subject the tendering Stockholder to 31% federal
income tax backup withholding on the payment made to the Stockholder or other
payee with respect to Shares purchased pursuant to the Offer. The box in Part
3 of the form should be checked if the tendering Stockholder has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the
near future. If the box in Part 3 is checked and the Depositary is not
provided with a TIN within 60 days, thereafter the Depositary will withhold 31%
on all such payments of the Offer Price until a TIN is provided to the
Depositary.
8. TRANSFER TAXES. The Company will pay all transfer taxes
applicable to the purchase and transfer of Shares pursuant to the Offer, except
in the case of deliveries of certificates for Shares not tendered or not
accepted for purchase that are registered or issued in the name of any person
other than the person signing this Letter of Transmittal and tendering Shares
hereby.
Except as provided in this Instruction 8, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
9. IRREGULARITIES. All questions as to the form of all documents
and the validity (including time of receipt) and acceptance of tenders and
withdrawals of Shares will be determined by the Purchaser in its sole
discretion, which determination shall be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of Shares or
deliveries of Shares that are not in proper form or the acceptance of which
would, in the Purchaser's opinion, be unlawful. The Purchaser also reserves
the right to waive any defects, irregularities or conditions of tender as to
particular Shares. The Purchaser's interpretations of the terms and conditions
of the Offer (including the instructions in this Letter of Transmittal) will be
final and binding. Any defect or irregularity in connection with tenders of
Shares must be cured within such time as the Purchaser determines, unless
waived by the Purchaser. Tenders of Shares shall not be deemed to have been
made until all defects or irregularities have been waived by the Purchaser or
cured. None of the Purchaser, any of its affiliates, if any, the Depositary,
the Information Agent, or any other person will be under any duty to give
notice of any defects or irregularities in tenders of Shares, or will incur any
liability to Stockholders for failure to give any such notice.
10. WAIVER OF CONDITIONS. The Purchaser expressly reserves the
absolute right, in its sole discretion, to amend or waive any of the conditions
to the Offer in the case of any Shares tendered, in whole or in part, at any
time and from time to time.
12
<PAGE> 13
11. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR SHARES.
Any Stockholder whose certificates for Shares have been mutilated, lost, stolen
or destroyed should immediately write to the Depositary at the address set
forth herein. The Letter of Transmittal and related documents cannot be
processed until the procedures for replacing such certificates have been
followed.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
relating to the procedure for tendering Shares and requests for assistance may
be directed to the Information Agent, whose address and telephone number
appears on the back cover page. Additional copies of the Offer to Purchase,
the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained
from the Information Agent.
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Stockholder whose tendered Shares are
accepted for purchase is required to provide the Depositary (as payer) with
such Stockholder's correct TIN on Substitute Form W-9 below or otherwise
establish a basis for exemption from backup withholding. If such Stockholder
is an individual, the TIN is his or her social security number. If the
Depositary is not provided with the correct TIN, a $50 penalty may be imposed
by the Internal Revenue Service, and payments made to such Stockholder with
respect to Shares purchased pursuant to the Offer may be subject to backup
withholding.
Certain Stockholders (including, among others, corporations and
certain foreign persons) are not subject to these backup withholding and
reporting requirements. Exempt Stockholders should indicate their exempt
status on Substitute Form W-9. A foreign person may qualify as an exempt
recipient by submitting to the Depositary a properly completed Internal Revenue
Service Form W-8, signed under penalties of perjury, attesting to that
Stockholder's exempt status. A Form W-8 can be obtained from the Depositary.
See the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Depositary is required to withhold
31% of any payments made to the Stockholder or other payee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payment made with respect to Shares
purchased pursuant to the Offer, the Stockholder is required to provide the
Depositary with: (i) the Stockholder's correct TIN by completing the form
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such Stockholder is awaiting a TIN) and that (A) such Stockholder is
exempt from backup withholding, (B) the Stockholder has not been notified by
the Internal Revenue Service that the Stockholder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the Internal Revenue Service has notified the Stockholder that the Stockholder
is no longer subject to backup withholding; and (ii) if applicable, an adequate
basis for exemption.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Stockholder is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the Stockholder.
If the Shares are held in more than one name or are held 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.
13
<PAGE> 14
<TABLE>
<S> <C>
PAYER'S NAME: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
Part 1-PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING AND _________________________
DATING BELOW Social Security Number
OR ___________________________________
Employer Identification Number
----------------------------------------------------------------------------------
SUBSTITUTE Part 2-Certification-Under penalties of perjury, I certify that: Part 3
(1) The number shown on this form is my correct Taxpayer
FORM W-9 Identification Number (or I am waiting for a number to be Awaiting
issued to me) and TIN [ ]
DEPARTMENT OF THE TREASURY (2) I am not subject to backup withholding because (i) I am
INTERNAL REVENUE SERVICE exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of failure to
report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup
withholding.
------------------------------------------------------------------------------------
Certificate instructions-You must cross out item (2) in part 2 above if you
have been notified by the IRS that you are subject to backup withholding because of
PAYER'S REQUEST FOR TAXPAYER underreporting interest or dividends on your tax return. However, if after being
IDENTIFICATION NUMBER notified by the IRS that you were subject to backup withholding you receive another
("TIN") notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE............................................... DATE..............., 1996
.......................................................
Name (Please Print)
</TABLE>
NOTE: FAILURE TO COMPLETE 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 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
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 (a) 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 (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a taxpayer identification number within 60
days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number.
................................................... ......................, 1996
SIGNATURE DATE
..................................................
NAME (PLEASE PRINT)
</TABLE>
<PAGE> 15
The Information Agent for the Offer is:
GEORGESON
& COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
1-800-223-2064
BANKS AND BROKERS CALL: (212) 440-9800
<PAGE> 1
EXHIBIT 4
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ALL OTHER
NAME AND SALARY BONUS OPTIONS/ COMPENSATION
PRINCIPAL POSITION (1) YEAR ($) ($) SARS (#) ($) (2)
---------------------- ---- ----------- -------- --------- --------------------
<S> <C> <C> <C> <C> <C>
Samuel Zell, 1994 400,000 0 0 6,000
Chairman of the Board 1993 400,000 0 5,000 4,497
1992 400,000 0 20,000 0
Rod F. Dammeyer, 1994 0 0 75,000 0
President and Chief Executive 1993 0 0 0 0
Officer 1992 0 0 0 0
Arthur A. Greenberg, 1994 200,000 0 0 6,000
Executive Vice President 1993 300,000 0 5,000 4,497
and Chief Financial Officer 1992 300,000 0 10,000 4,303
Norman M. Field, 1994 120,000 18,000 0 5,520
Vice President and Treasurer 1993 115,500 12,000 3,000 2,550
1992 110,000 6,000 5,000 2,257
Richard Trotter, 1994 110,000 16,500 0 5,060
Vice President - Internal Audit 1993 101,000 12,000 3,000 2,260
1992 96,075 6,000 4,000 1,985
</TABLE>
- ----------------------------
(1) Positions are as of December 31, 1994. Mr. Zell had been President and
Chief Executive Officer until February 1994. Mr. Dammeyer was elected to
such positions in February 1994. Messrs. Greenberg, Field and Trotter
resigned from their positions with the Company in 1995.
(2) Employer matching and/or profit sharing contributions to the Company's
Advantage Savings Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE OR ---------------------
GRANTED IN FISCAL BASE PRICE EXPIRATION
NAME (#) (1) YEAR ($/SH) DATE 5%($)(2) 10%($)(3)
----------------- ------------- ----------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Samuel Zell 0 0.00 -- -- 0 0
Rod F. Dammeyer 75,000 100.00 33.00 12/01/04 1,556,514 3,944,513
Arthur A. Greenberg 0 0.00 -- -- 0 0
Norman A. Field 0 0.00 -- -- 0 0
Richard Trotter 0 0.00 -- -- 0 0
</TABLE>
- ----------------------------
(1) Options granted during 1994 are exercisable in three equal cumulative
annual installations after the first of the option term.
(2) Assume a price of $53.75 at the end of ten years.
(3) Assumes a price of $85.59 at the end of ten years.
<PAGE> 2
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE FY-END (#) FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
------------------ --------------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Samuel Zell 0 0 14,998/10,002 162,482/92,519
Rod F. Dammeyer 0 0 8,333/81,668 85,823/429,178
Arthur A. Greenberg 0 0 8,333/6,668 85,001/54,178
Norman M. Field 4,000 26,000 8,333/3,667 89,663/28,587
Richard Trotter 2,667 20,336 1,000/3,334 4,500/24,675
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries receive
an annual fee of $28,000 for serving as directors. Additionally, on the date
of each Meeting all directors receive options to purchase 5,000 shares at the
fair market value of the Common Stock on the date of such Meeting. The options
are exercisable in three equal cumulative annual installments after the first
year and expire at the end of five years.
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company and Mr. Dammeyer have an agreement providing for Mr. Dammeyer's
employment at an annual salary of $280,000, beginning January 1, 1995, annual
incentive awards of 50% to 112.5% of salary, with a target of 75% of salary and
such long-term incentives as the Compensation Committee in its good judgment
shall grant. Since Mr. Dammeyer's activities under the agreement are not
full-time, he will not participate in any benefit plans.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Dyer (Chairman),
Pasquesi, Zell and Mrs. Rosenberg. Mr. Zell excused himself from discussions
and decisions concerning his compensation as Chairman of the Board, Chief
Executive Officer and President. Mr. Zell resigned as Chief Executive Officer
and President in February 1994.
The following relationships existed during 1994:
Messrs. Dammeyer, Zell and Mrs. Rosenberg were officers and directors of the
Company and Mr. Zell and Mrs. Rosenberg were members of the Compensation
Committee of the Company and Mr. Zell and Mrs. Rosenberg were officers and
directors of Capsure and Mr. Dammeyer is a director and member of the
Compensation Committee of Capsure.
Mr. Zell and Mrs. Rosenberg were officers, directors and members of the
Compensation Committee of the Company and Mr. Zell was an officer, trustee and
member of the Compensation Committee of Equity Residential and Mrs. Rosenberg
was a trustee and member of the Compensation Committee of Equity Residential.
Gerald A. Spector was an officer of the Company and was an officer and trustee
of Equity Residential and Mr Zell was an officer, trustee and member of the
Compensation Committee of Equity Residential.
-2-
<PAGE> 3
Messrs. Dammeyer, Zell and Mrs. Rosenberg were officers and directors of the
Company and Mr. Zell and Mrs. Rosenberg were members of the Compensation
Committee of the Company and Messrs. Dammeyer and Zell were officers and
directors of Itel and Mrs. Rosenberg was a director and member of the
Compensation Committee of Itel.
Messrs. Dammeyer, Zell and Mrs. Rosenberg were officers and directors of the
Company and Mr. Zell and Mrs. Rosenberg were members of the Compensation
Committee of the Company and Mr. Zell was an officer and director of Falcon and
Mr. Dammeyer and Mrs. Rosenberg were directors of Falcon.
Mr. Zell, Arthur A. Greenberg and Mrs. Rosenberg were officers of the
Company and directors of American Classic and Mr. Zell and Mrs. Rosenberg were
officers of American Classic and a member of the Compensation Committee of the
Company.
Mr. Spector was an officer of the Company and a director of MBC and Mr. Zell
was an officer and director of MBC and a member of the Compensation Committee
of the Company.
Messrs. Dammeyer and Greenberg were officers of the Company and members of
the Compensation Committee of Vigoro and Mr. Sullivan is an officer of Vigoro
and a director of the Company.
Messrs. Zell, Greenberg and Mrs. Rosenberg also served as members of the
board of directors of numerous non-public companies owned in whole or in part
by Mr. Zell or his affiliates, which did not have compensation committees, and
in many cases the executive officers of those companies included Mrs. Rosenberg
and/or Messrs. Zell and Greenberg.
On January 1, 1994, the Company's loan portfolio included a $5.9 million
loan to a general partnership ("Equity Pool") which in turn is owned by two
limited partnerships which are affiliated with Mr. Zell. The loan was
collateralized by partnership units ("Units") which were convertible in January
1995 into approximately 550,000 shares of Equity Residential, a publicly traded
real estate investment trust affiliated with Mr. Zell. During 1994, principal
payments reduced the loan to approximately $5.4 million. On January 3, 1995,
all rights and title in the principal amount of $5.4 million plus an additional
$1.6 million, as participation based on the market value of the Units on
September 16, 1994, and accrued interest were assigned to Equity Holdings, the
Company's majority stockholder, as part of a dividend to the Company's
stockholders.
The Company and certain of its subsidiaries paid or will pay $1,695,100 to
certain affiliates of Equity Holdings for services rendered during 1994. These
services included, but are not limited to, administrative, human resource,
consulting, accounting and tax services, various real estate services,
insurance services (including the payment to third parties for insurance
premiums) and other executive services. These related entity transactions are
for a term of one year and were approved by the independent members of the
Board.
The Company and certain of its subsidiaries paid or will pay an affiliate of
Equity Holdings $784,500 for its office space during 1994.
The Company and certain of its subsidiaries paid or will pay an affiliate of
Equity Holdings $463,100 for various leases of computer software and equipment
and computer development services during 1994. The leases range from three to
five years and are at rates comparable to the market place. Payment also
related to a facility sharing agreement between the Company and such affiliate.
Under the agreement, computer development, operations and maintenance services
were provided to the Company and certain of its subsidiaries.
The Company performed services for various affiliates of Equity Holdings.
For 1994, $1,536,900 was charged to such affiliates for the services performed
and office space provided by the Company.
The Company and Equity Holdings have each entered into an agreement with
Capital Partners and Capital Partners BVI (as hereinafter defined) (the
"Hellman Group") which provides that the Hellman Group shall have a right to
-3-
<PAGE> 4
nominate, and the Company and Equity Holdings shall each use its best efforts
to elect two (2) directors for every nine (9) directors of the Company.
Additionally the Hellman Group agreed to vote their shares of Common Stock in
favor of the directors nominated by the Company. This agreement shall continue
so long as Equity Holdings owns at least 50% of the Common Stock of the Company
and there has been no change of control of the Hellman Group, Messrs. Cohen and
Pasquesi and the Hellman Group nominees.
The Company and Vigoro have each entered into an agreement which provides
that the Hellman Group shall have a right to nominate, and the Company and
Vigoro shall each use its best efforts to elect one (1) director for every
twelve (12) directors of Vigoro. The agreement shall continue so long as long
as the Hellman Group retains certain minimum direct or indirect holdings of the
voting securities of either the Company or Vigoro. Mr. Pasquesi was the
Hellman Group nominee for election at Vigoro's Annual Meeting of Stockholders
held November 10, 1994.
The Company and certain of its subsidiaries paid or will pay Rosenberg &
Liebentritt, P.C., a law firm affiliated with Mrs. Rosenberg, amounts totaling
$1,697,300 for certain legal services rendered in 1994. Fees are based on
comparable market rates for the services performed. Rates are approved by the
independent members of the Board.
The Company and certain of its subsidiaries paid or will pay Seyfarth Shaw
Fairweather & Geraldson, a law firm in which Mrs. Rosenberg's spouse is a
partner, amounts totaling $153,200 for legal services rendered in 1994. Fees
are based on comparable market rates for services performed.
For a description of certain transactions with other Board members, see
"Certain Relationships and Related Transactions.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, or the Securities Exchange Act of
1934, as amended, that might incorporate future filings, including this Proxy
Statement, in whole or in part, the Compensation Committee Report presented
below and the Performance Graph following shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board determines the compensation of the
Company's executive officers, including those named in the Summary Compensation
Table. The Compensation Committee believes that the compensation of the
Company's Chief Executive Officer and all of the Company's executive officers
should be both competitive and based on individual and Company performance.
The Company's compensation policy takes into account a review of local and
national peer group salary surveys without limitation to the companies included
in the published industry index used in the Performance Graph. The salary
structure is designed to attract and retain highly qualified executives. This
is accomplished by providing competitive base salaries and meaningful
incentives intended to reward performance. Such performance is measured
against pre-established quantitative goals that are specific to the officer's
performance. The officer's responsibilities, performance evaluations and
expected future contributions are factored into annual increases.
The salary of Mr. Zell, who is Chairman of the Board and was Chief Executive
and President until February 1994, was determined by certain independent
members of the Board in January 1991 to be fair and competitive based on the
amount of time devoted to the business. His salary and his time commitment to
the Company had not changed since that date. He received no bonuses that
reward short-term performance.
Mr. Dammeyer is employed as President and Chief Executive Officer pursuant
to a contract entered into in 1995. See "Employment Contracts and Terminations
of Employment and Change-In-Control Arrangements" for terms of Mr. Dammeyer's
contract.
-4-
<PAGE> 5
The salary of Mr. Greenberg was determined in 1990 to be fair and
competitive based on local and national salary surveys and also on the amount
of time devoted to the Company. At the beginning of 1994, his time commitment
to the Company had decreased. Therefore, his salary was reduced to reflect
that decreased time commitment. He received no bonuses that reward short-term
performance. In 1995, Mr. Greenberg ceased to be an employee of the Company.
The salaries of all other executive officers are found to be competitive
with other top executives in other companies within the industry. Incentive
compensation in the form of bonuses is tied to performance measured against
qualitative and quantitative goals specific to each officer's performance and
is not directly related to the performance of the Company.
The Compensation Committee recognizes that while bonus programs provide
rewards for positive short-term individual and corporate performance, the
interests of stockholders are best served giving key employees the opportunity
to participate in the appreciation of the Company's Common Stock through the
granting of stock options. The Compensation Committee believes that over an
extended period of time, stock performance will, to a meaningful extent,
reflect executive performance, and that such arrangements further reinforce
management goals and incentives to achieve stockholder objectives. The only
stock options granted in 1994 were to Mr. Dammeyer in connection with his
appointment as the President and Chief Executive Officer of the Company. The
number of stock options was determined subjectively by the Compensation
Committee taking into consideration his responsibilities and his other
compensation.
It is the policy of the Company to structure its compensation in a manner
which will avoid the limitations imposed by the Omnibus Budget Reconciliation
Act of 1933 on the deductibility of executive compensation under Section 162(m)
of the Internal Revenue Code of 1986, as amended, to the extent it can
reasonably do so consistent with its goal of retaining and motivating its
executives in a cost effective manner.
The Compensation Committee believes that the compensation program properly
rewards its executive officers for achieving improvements in the Company's
performance and serving the interest of its stockholders.
Bradbury Dyer, III, Chairman
John M. Pasquesi
Sheli Z. Rosenberg
Samuel Zell
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During April 1995, the Company completed the sale of its subsidiary,
Equality Specialties, Inc., to a company affiliated with Mr. Handy, a director
of the Company. The sales price was $20 million which included a $4 million
note bearing interest at 3 1/2% over the prime rate and maturing on April 18,
2002. Additional consideration included a 15% equity interest in the acquiring
entity, subject to the ability of the buyer to reduce that equity interest to
7% by certain prepayments of the aforementioned note. The Board, Mr. Handy
abstaining, approved this transaction.
The Company has in the past entered into agreements or arrangements with
directors or officers of the Company or their affiliates relating to the
acquisition, disposition, financing or refinancing of properties and assets, or
similar types of ventures, and may enter into similar agreements or
arrangements from time to time in the future. Such arrangements may provide
for compensation to be paid to such officers, directors, or affiliates for
their services rendered in finding, structuring or negotiating each
transaction, which compensation could, among other things, take the form of a
cash fee or a direct or indirect equity interest in the transaction. The
fairness and reasonableness of any such arrangements have been and in the
future will be passed upon by a majority of the independent members of the
Board or by an independent firm selected by such Board members, or may be
submitted for approval by a majority of the unaffiliated stockholders of the
Company, if the transaction would otherwise call for stockholder approval.
-5-
<PAGE> 6
For a description of related transactions with members of the Compensation
Committee, see "Compensation Committee Interlocks and Insider Participation."
-6-
<PAGE> 1
STOCK PURCHASE AGREEMENT
BETWEEN
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
AND
EQUALITY ACQUISITION CORP.
DATED APRIL 19, 1995
RE: PURCHASE AND SALE OF STOCK OF
ES HOLDING COMPANY
===================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
ARTICLE I - PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 CALCULATION AND PAYMENT OF PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . . . 3
ARTICLE III - SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 DUE AUTHORIZATION AND EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 TITLE TO, AND TRANSFER OF, STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 DEBTS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 PATENTS, TRADEMARKS, TRADENAMES AND OTHER INTANGIBLE RIGHTS . . . . . . . . . . . . . . 10
3.14 REAL ESTATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.16 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.17 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 NO CONFLICT WITH OTHER INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS . . . . . . . . . . . . . . . . . . . . 13
3.20 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.21 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.22 PRODUCT LIABILITY/WARRANTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.23 ACCURACY AND COMPLETENESS OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 14
3.24 CUSTOMERS AND SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.25 OTHER BENEFITS AND PLANS AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.26 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV - PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 DUE AUTHORIZATION AND EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 GOVERNMENTAL CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 ACCURACY AND COMPLETENESS OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<TABLE>
<S> <C>
4.10 NO OTHER REPRESENTATIONS OR WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V - SELLER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 FULFILLMENT OF CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 ACCESS AND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 REPAYMENT OF CERTAIN OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.9 CERTAIN PRODUCT LIABILITY AND WORKERS COMPENSATION CLAIMS . . . . . . . . . . . . . . . 19
5.10 CERTAIN ENVIRONMENTAL CLEAN-UP OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI - PURCHASER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1. FULFILLMENT OF CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 PRESERVATION OF BUSINESS AND RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 GAMI LETTER OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 CERTAIN LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII - CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 BOARD AND SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 CERTIFICATES, ET AL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.8 COVENANT NOT TO COMPETE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.9 TRANSFER OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.10 NO ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.11 TITLE AND SURVEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.12 SHAREHOLDER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII - CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.6 CERTIFICATES, ET AL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.8 SHAREHOLDER AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.9 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.10 SELLER SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 TIME AND PLACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 DELIVERY OF CASH PAYMENT AND CLOSING DOCUMENTS . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
ARTICLE X - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 INDEMNIFICATION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 INDEMNIFICATION OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 TERMS OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.5 EXCLUSIVE REMEDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.1 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.2 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.3 EXCLUSIVE DEALINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.5 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.6 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.9 SUCCESSORS AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.10 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.12 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.13 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.14 INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.15 LIMITATIONS AND QUALIFICATIONS TO REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . 38
11.16 CROSS-DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.17 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.18 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
iii
<PAGE> 5
SCHEDULES
<TABLE>
<CAPTION>
DESIGNATION DESCRIPTION
- ----------- -----------
<S> <C>
Schedule 2.2(a) -- Estimated Net Worth
Schedule 2.3(a) -- Net Worth Schedule
Schedule 3.1 -- Good Standing and Foreign Qualifications
Schedule 3.3 -- Stock Title
Schedule 3.5(a) -- ESH 12/31/94 Financial Statements
Schedule 3.5(b) -- 12/31/93 Audited Consolidated Financial Statements of Equality Specialties, a Division of Seller
Schedule 3.5(c) -- [ESH] Unaudited Consolidating Statements
Schedule 3.5(e) -- Book Value of Assets and Liabilities of Seller Contributed to ESH as of July 29, 1990
Schedule 3.6 -- Absence of Certain Changes
Schedule 3.7 -- Taxes
Schedule 3.8 -- Debts and Liabilities
Schedule 3.9 -- Contracts
Schedule 3.10 -- Receivables
Schedule 3.12 -- Personal Property
Schedule 3.13 -- Patents, Trademarks, Tradenames and Other Intangible Rights
Schedule 3.14 -- Real Estate
Schedule 3.15 -- Licenses and Permits
Schedule 3.16(a)-(g) -- Employee Benefits
Schedule 3.17 -- Compliance with Laws
Schedule 3.18 -- Consents
Schedule 3.19 -- Interest in Customers, Suppliers and Competitors
Schedule 3.20 -- Litigation
Schedule 3.22 -- Product Liability/Warranty Claims
Schedule 3.24 -- Customers and Suppliers
Schedule 3.25 -- Other Benefits and Plans and Policies
Schedule 3.26 -- Environmental Matters
Schedule 5.1 -- Conduct of Business
Schedule 5.8(a) -- Repayment of Liabilities to Seller
Schedule 5.8(b) -- Intercompany Payables
Schedule 11.14 -- Allocation Schedule
</TABLE>
iv
<PAGE> 6
EXHIBITS
<TABLE>
<CAPTION>
DESIGNATION DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit A -- Note
Exhibit B -- Proposal Letter
Exhibit C -- Seller's Opinion of Counsel
Exhibit D -- Covenant Not to Compete Agreement
Exhibit E -- Purchaser's Opinion of Counsel
Exhibit F -- List of Shareholder Agreements
and Other Documents
</TABLE>
v
<PAGE> 7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as
of the 19TH day of April, 1995 by and between Great American Management and
Investment, Inc., a Delaware corporation ("Seller"), and Equality Acquisition
Corp., a Florida corporation ("Purchaser").
WHEREAS, Seller is the owner of all the issued and outstanding
shares of capital stock (the "ESH Stock") of ES Holding Company, a Delaware
corporation ("ESH").
WHEREAS, ESH is the owner of all the issued and outstanding
shares of capital stock (the "Equality Stock") of Equality Specialties, Inc., a
Delaware corporation ("Equality").
WHEREAS, Equality is the owner of (a) the issued and
outstanding shares of ordinary stock (the "Stribbons Stock") of Stribbons
Limited, a corporation organized under the laws of the United Kingdom
("Stribbons"), and (b) (except as otherwise provided herein) all of the issued
and outstanding shares of capital stock (the "Majestic Stock") of Majestic
Industries Limited, a corporation organized under the laws of St. Lucia, West
Indies ("Majestic"). ESH, Equality, Stribbons and Majestic are collectively
referred to herein as the "Companies."
WHEREAS, Seller desires to sell to Purchaser and Purchaser
desires to purchase from Seller the ESH Stock, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties as hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I - PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions set forth in this Agreement, Seller shall sell, assign, transfer and
deliver to Purchaser at the Closing (as hereinafter defined), and Purchaser
shall purchase from Seller at the Closing the ESH Stock, for the purchase price
set forth in Article 2 hereof.
ARTICLE II - PURCHASE PRICE
2.1 PURCHASE PRICE. Subject to the terms and conditions
of this Agreement and in consideration for the sale and delivery of the ESH
Stock at the Closing, Purchaser will deliver to Seller at Closing the
following:
<PAGE> 8
(a) a Subordinated Note in the aggregate original
principal amount of Four Million Dollars ($4,000,000 U.S.)
(the "Note"), in the form attached hereto as Exhibit A; and
(b) Sixteen Million Dollars ($16,000,000) in
immediately available U.S. funds by wire transfer to an
account designated by Seller (the "Cash Payment"). The Note
and the Cash Payment are collectively referred to herein as
the "Purchase Price."
2.2 PURCHASE PRICE ADJUSTMENT.
(a) The Cash Payment shall be increased or
decreased by the amount that the Net Worth (as defined in
Section 2.2(c)) as set forth on the Net Worth Schedule (as
defined in Section 2.3(a)) is greater than or less than the
"Estimated Net Worth." The "Estimated Net Worth" shall mean
the estimated tangible assets of the Companies less the
estimated liabilities of the Companies on a consolidated basis
as of March 31, 1995 as set forth on Schedule 2.2(a) hereof,
as adjusted for certain items as agreed between Purchaser and
Seller and reflected on said Schedule 2.2(a).
(b) Notwithstanding the actual date of the
Closing or any other provision hereof (including provisions
relating to the allocation of income tax liability) which
allocates rights and obligations as of the Closing, the
"Closing Date Balance Sheet" shall mean the unaudited
consolidated balance sheet of ESH as of March 31, 1995,
prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied, and the principles
and methodology used in preparing the consolidated balance
sheet of ESH as of December 31, 1994, with inventory being
determined, for purposes of the Closing Date Balance Sheet,
based on a physical inventory taken as of March 31, 1995. To
facilitate any dispute resolution that may be required
pursuant to Section 2.3 below, a representative of the
accounting firm of Arthur Andersen & Co. shall be present to
observe such inventory. All costs relating to this physical
inventory shall be paid by Purchaser.
(c) "Net Worth" shall mean the tangible assets of
the Companies less the liabilities of the Companies on a
consolidated basis as set forth on the Closing Date Balance
Sheet, subject to adjustment pursuant to the principles and
procedures set forth on Schedule 2.3(a), which Closing Date
Balance sheet shall reflect no more than, and no less than,
$250,000 of cash (plus cash which
2
<PAGE> 9
Seller has elected to allow the Companies to retain to satisfy
certain tax obligations of Seller hereunder).
2.3 CALCULATION AND PAYMENT OF PURCHASE PRICE ADJUSTMENT.
Since the financial data required to determine the Closing Date Balance Sheet
will not be available at the Closing, the Cash Payment will be calculated,
adjusted and paid in accordance with the following provisions:
(a) As soon as practicable, Seller shall prepare
and deliver to Purchaser (i) the Closing Date Balance Sheet,
and (ii) a statement and explanation of items included in the
Closing Date Balance Sheet and utilized to calculate the Net
Worth in accordance with the principles and procedures set
forth on Schedule 2.3(a) (the "Net Worth Schedule"). If
Purchaser agrees with the proposed Net Worth Schedule prepared
by Seller, then the parties shall execute the Net Worth
Schedule and proceed to make any payment pursuant to Section
2.3(b) below, if applicable. If Purchaser disagrees with the
proposed Net Worth Schedule prepared by Seller, then within
ten (10) days after Purchaser receives the proposed Net Worth
Schedule, Purchaser may deliver written notice ("Notice") to
Seller objecting to the proposed Net Worth Schedule. Such
Notice shall (i) identify those items in the proposed Net
Worth Schedule to which Purchaser objects, and (ii) state in
reasonable detail the reasons for such objection. Any items
contained in the proposed Net Worth Schedule to which
Purchaser does not set forth an objection in such Notice shall
be deemed accepted by Purchaser. During the 30-day period
following delivery of the Notice, each party will (i) deliver
to the other party any supporting documentation reasonably
requested and necessary to calculate the Net Worth, and (ii)
cooperate fully and in good faith to resolve any disputes they
may have with respect to the proposed Net Worth Schedule. If
the parties cannot agree on the proposed Net Worth Schedule
within such 30-day period, any such dispute will be resolved
within thirty (30) days of submission by either party of a
request for binding arbitration by the accounting firm of
Arthur Andersen, LLP. Arthur Andersen, LLP will calculate
only those portions of the proposed Net Worth Schedule that
have not been agreed upon by the parties, and its calculation
will be based solely on the books, records and other
information relevant to the resolution of such disputes and
available as of March 31, 1995, which shall be submitted or
made available to Arthur Andersen, LLP by Seller or Purchaser.
Any fees or expenses payable to Arthur Andersen, LLP will be
shared equally by Seller and Purchaser.
3
<PAGE> 10
(b) Upon the final determination of the Net Worth
Schedule, whether such determination is made by agreement of
the parties or by Arthur Andersen, LLP in accordance with the
foregoing, the parties will proceed as follows:
(i) If such final determination results
in an increase in the Cash Payment in accordance with
Section 2.2(a) above, then within five (5) days after
such final determination, Purchaser will pay the
amount of such increase to Seller, in immediately
available U.S. funds by wire transfer or cashier's
check.
(ii) If such final determination results
in a decrease in the Cash Payment in accordance with
Section 2.2(a) above, then within five (5) days after
such final determination, Seller will pay to
Purchaser the amount of such decrease in immediately
available U.S. funds by wire transfer or cashier's
check.
ARTICLE III - SELLER'S REPRESENTATIONS AND WARRANTIES
Subject to the provisions of Section 11.15 below, Seller represents and
warrants to Purchaser on the date of this Agreement as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of Seller, ESH
and Equality is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Stribbons is a corporation
duly incorporated, validly existing and in good standing under the laws of the
United Kingdom. Except as set forth on Schedule 3.1, Majestic is a corporation
duly incorporated, validly existing and in good standing under the laws of St.
Lucia, West Indies. Each of the Companies has all requisite power to own,
operate and lease its assets, and to carry on its business as it is presently
conducted. Each of Seller and the Companies is duly authorized, qualified or
licensed to conduct its business and in good standing as a foreign corporation
in each state or jurisdiction in which such authorization, qualification or
licensing is required, as set forth in Schedule 3.1.
3.2 DUE AUTHORIZATION AND EXECUTION. Seller has the
necessary corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the transactions contemplated hereby have been duly
authorized and approved by all necessary corporate action on the part of
Seller. No other corporate proceedings or actions on the part of Seller are
necessary to authorize this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming due
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execution and delivery by Purchaser, constitutes a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms.
3.3 TITLE TO, AND TRANSFER OF, STOCK. Seller is the
owner of all right, title and interest in and to all of the ESH Stock, ESH is
the owner of all right, title and interest in and to all of the Equality Stock,
and except as set forth on Schedule 3.3, Equality is the owner of all right,
title and interest in and to all of the Majestic Stock and the Stribbons Stock,
each free and clear of all liens, claims and encumbrances of any kind or nature
whatsoever (other than restrictions arising under securities laws) and the
delivery to Purchaser of certificates for the ESH Stock pursuant to the
provisions of this Agreement will transfer to Purchaser good and valid title
thereto, free and clear of all such encumbrances. Except as specifically
contemplated by this Agreement, no person has any right, option, warrant,
subscription agreement, preference or privilege for the purchase of any of the
ESH Stock, the Equality Stock, the Majestic Stock or the Stribbons Stock. All
of such outstanding shares are duly and validly issued and outstanding, are
fully paid and nonassessable and were issued pursuant to an exemption from
registration under the Securities Act of 1933, as amended, under applicable
state securities and blue sky laws and under any and all similar securities
laws of the United Kingdom and St. Lucia, West Indies, as the case may be.
There are no outstanding warrants, options, rights, subscription agreements,
calls, convertible rights or other commitments of any kind or nature whatsoever
relating to such outstanding shares.
3.4 BROKERS. No broker, finder or other agent is
entitled to any brokerage or finders' fee or agents' commission as a result of
Seller's actions in connection with the negotiation, execution, consummation
and performance of the transactions contemplated by this Agreement, except a
fee payable to Winter Park Capital Company or its affiliates, which will be
paid by Purchaser.
3.5 FINANCIAL STATEMENTS.
(a) The audited consolidated financial statements
of ESH for the calendar year ended December 31, 1994 (the
"December 31, 1994 Financial Statements") are set forth in
Schedule 3.5(a).
(b) The audited consolidated financial statements
of Equality Specialties, a division of Seller, as of December
31, 1993 are set forth in Schedule 3.5(b).
(c) The unaudited consolidating statements which
were utilized in preparing the December 31, 1994 Financial
Statements are set forth in Schedule 3.5(c), and were prepared
by management consistent with past customs and practices.
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(d) The financial statements referred to in
Sections 3.5(a) and(b) present fairly in all material respects
the financial position of the person or persons referred to
therein as of the dates indicated and the results of
operations for the periods indicated and have been prepared in
accordance with GAAP consistently applied. The financial
statements referred to in Sections 3.5(a)-(c) may hereinafter
be referred to as the "Financial Statements."
(e) The book value of the assets and liabilities
of Seller which were contributed to ESH and Equality as of
July 29, 1994 is set forth on Schedule 3.5(e), and such
Schedule has been prepared in a manner consistent with past
practices employed by the Companies in their preparation of
interim internal balance sheets.
3.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 3.6 and as otherwise contemplated by this Agreement, with respect to
the Companies, since December 31, 1994 through the date of this Agreement:
(a) the Companies have operated only in the
ordinary, normal course of business consistent with prior
years;
(b) ESH has not paid or declared any dividends on
the ESH Stock or purchased or otherwise acquired or issued any
further shares of ESH Stock or granted any options or other
rights to purchase same;
(c) Equality has not paid or declared any
dividends on the Equality Stock or purchased or otherwise
acquired or issued any further shares of Equality Stock or
granted any options or other rights to purchase same;
(d) there have not been any material labor
disputes or other material labor problems including without
limitation material EEOC matters related to the Companies'
employees, pending or threatened in writing;
(e) there has not been any default or breach by
the Companies or amendment to any Material Agreement (as
hereinafter defined);
(f) there has not been any material theft, damage,
destruction or condemnation as to the Companies' properties;
(g) there has not been any sale of assets of the
Companies outside of the normal course of business of more
than $25,000;
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(h) there have not been any material agreements,
contracts, leases or commitments made by the Companies, except
in the ordinary course of business;
(i) there has not been any material change in
accounting principles or methods used by the Companies for
financial purposes, except as may be reflected in the December
31, 1994 Financial Statements; and
(j) Majestic and Stribbons have not declared any
dividends or purchased, issued, or otherwise acquired further
shares of Majestic Stock or Stribbons Stock or granted options
or other rights to purchase shares.
3.7 TAXES. Except as set forth on Schedule 3.7:
(i) each of the Companies has filed all federal, state, local, and foreign tax
returns required by applicable law to be filed with respect to its assets or
the operation of its business and paid all amounts set forth thereon;
(ii) there is no action, suit, proceeding, investigation, audit or claim now
pending against, or, with respect to the Companies and pertaining solely to the
business of the Companies, in respect of any tax or assessment asserted or
threatened in writing by any such authority; and (iii) all material tax
liabilities with respect to the business of the Companies or otherwise relating
to the Companies (including, without limitation, federal, state, local, foreign
and other income, franchise, capital stock, employee's income withholding,
foreign pension withholding, social security, unemployment, disability,
payroll, real property, personal property, sales, use, transfer, or other tax,
plus any interest, penalties or other charges in respect of the foregoing), for
all periods up to and including the Closing Date, have been paid when due by
Seller. Income taxes not then due shall be accrued on the Closing Date Balance
Sheet, and Seller shall elect to either (i) provide the Companies cash (in
excess of the cash specified in Schedule 2.2(a)) sufficient to satisfy such
accrued but unpaid income tax liabilities, (ii) pay such accrued but unpaid
income tax liabilities when due, or (iii) reimburse the Companies upon the
Companies' payment of such accrued but unpaid income tax liabilities. True and
correct copies of the income tax returns for the last five years, with respect
to Majestic, and since the date of inception, with respect to Stribbons, have
been delivered to Purchaser.
3.8 DEBTS AND LIABILITIES. Except as set forth on
Schedule 3.8, since December 31, 1994, neither Seller nor the Companies have
not assumed or incurred any material liabilities or obligations, except
liabilities or obligations assumed or incurred in the ordinary course of
business. Except as set forth on the Financial Statements, the Closing Date
Balance Sheet, Schedule 3.5(b), Schedule 3.8 or Schedule 5.8(b), or any other
applicable Schedule, the Companies have no liabilities or obligations of any
nature, whether accrued, absolute, contingent by guaranty, or
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otherwise, which, individually or in the aggregate are material to the business
of the Companies.
3.9 CONTRACTS. Schedule 3.9 contains an accurate listing
of all contracts, agreements or other legally binding commitments of the
Companies in existence on the date hereof, which respond to the following
categories (contracts with ESH, Equality, Majestic and Stribbons, respectively,
are identified as such):
(a) employment contracts, contracts requiring
payments exceeding $10,000 in any twelve-month future period
for services of independent contractors and other employee
benefit and/or employee remuneration plans, arrangements,
contracts or agreements, including without limitation pension,
stock option plans, and collective bargaining agreements;
(b) contracts including licenses relating to
patents, trademarks, trade names, copyrights, know-how, trade
secrets and similar matters;
(c) all notes payable, loan or credit contracts
and instruments or documents related to security for debt,
including but not limited to indentures, mortgages, pledges,
conditional sales and other title retention documents, and any
and all security documents filed with respect to any of the
Companies' assets;
(d) contracts and policies relating to insurance
whose coverage exceeds $10,000, including without limitation,
and all occurrence based policies regardless of when issued
but excluding title insurance;
(e) any contract or agreement between the
Companies, on the one hand, and Seller or any officer,
employee or director of any of the Companies or Seller, or any
affiliate or family member of the foregoing, on the other
hand;
(f) contracts with suppliers and customers
requiring payments in excess of $10,000 in any twelve-month
future period, other than customer contracts entered into in
the normal course of business which do not require payments in
excess of $100,000;
(g) all contracts or agreements between Seller or
Seller's affiliates, on the one hand, and third parties, on
the other hand, which provide and/or render goods and/or
services for the primary benefit of the Companies;
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(h) all other contracts not of the types covered
by Subsections 3.9(a) through 3.9(g) above, involving payment
by or to the Companies or an affiliate of any, in the
aggregate of more than $25,000, unless cancellable upon 30
days' or less notice;
(i) any material agreement related to capital
stock of any of the Companies; and
(j) any material leases related to personal
property of the Companies.
All items listed on Schedule 3.9 (collectively referred to as
"Material Agreements") are, except as set forth on Schedule 3.9, in full force
with no material default thereunder by the Companies or by any third party
thereto and no facts or conditions exist which, if continued, would result in a
material default thereunder. Except as set forth on Schedule 3.9, no item
listed on Schedule 3.9 shall be deemed in default as a result of a change in
control of the Companies.
3.10 RECEIVABLES. Except as set forth on Schedule 3.10,
all accounts and notes receivable reflected on the Closing Date Balance Sheet
shall have arisen in the ordinary course of business (the "Accounts"), and are,
in the aggregate, fully collectible, less the reserves for doubtful accounts
and sales returns and allowances, as stated therein, which reserves are
adequate under GAAP. All payments received by the Companies after the Closing
Date with respect to any customer or other third party whose debt or other
obligation is reflected in such Accounts shall be applied first to the Accounts
until paid in full. Any Accounts which are not collected, less the aforesaid
reserves, shall be assigned to Seller so that Seller may enforce collection
regarding same, but only if Seller has paid for such uncollected Accounts
pursuant to Section 10.2 below.
3.11 INVENTORY. The inventory reflected on the Closing
Date Balance Sheet shall be calculated in accordance with Section 2.2(b) above,
and shall include such reserves for obsolescence as are appropriate under GAAP.
3.12 PERSONAL PROPERTY. Schedule 3.12 sets forth the
items of personal property of the Companies which have a value greater than
$25,000. Schedule 3.12 lists and gives the location of, and provides an
indication of whether, such items of personal property (excluding inventories,
but including leasehold improvements on real property) are owned, leased or
used by the Companies in connection with the businesses of the Companies.
Except as set forth on Schedule 3.12, the Companies have good and indefeasible
title to all such items of personal property, free and clear of liens, claims
and encumbrances, and all such items of personal property are in good working
order, reasonable wear and
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tear excepted, and such personal property constitutes all of the material
personal property necessary to conduct the businesses of the Companies as such
businesses are currently conducted.
3.13 PATENTS, TRADEMARKS, TRADENAMES AND OTHER INTANGIBLE
RIGHTS. Schedule 3.13 contains an accurate listing of all material licenses,
trademarks, tradenames, copyrights, patents and other similar intangible rights
(e.g., inventions, know-how) and applications relating thereto, involving the
products or business of the Companies that are presently used by or held in the
name of the Companies. Such schedule includes an indication as to whether or
not the items listed thereon are evidenced by an appropriate copyright, patent,
or other form of registration. Except as set forth on Schedule 3.13, no
shareholder, employee or any other third party owns or claims any interest in
any rights to any material licenses, trademarks, tradenames, copyrights,
patents, inventions, know-how or other similar intangible rights used by the
Companies in their operations. Except as set forth on Schedule 3.13, the
Companies conduct their businesses without conflict or infringement with valid
patents, trademarks, tradenames, copyrights and other similar intangible rights
of others.
3.14 REAL ESTATE. Schedule 3.14 sets forth a complete
list of all parcels of real property owned by, leased to, or under contract to
sell by or to the Companies as of the date hereof identified by street address.
Seller has provided Purchaser with a copy of the lease agreements listed.
3.15 LICENSES AND PERMITS. Schedule 3.15 sets forth all
material licenses and permits required by each of the Companies to conduct its
business, and such licenses and permits shall remain in full force and effect
upon the Closing of the transaction contemplated by this Agreement or Seller
shall assist in their proper transfer, and except as set forth on Schedule
3.15, the Companies have not received written notification from any
governmental agency regarding revocation, cancellation, or any matter
materially affecting any of such licenses or permits.
3.16 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on Schedules 3.16(a), with
respect to all defined benefit plans, defined contribution
plans, welfare plans, compensation plans or other employee
benefit plans maintained or formerly maintained by the
Companies; provided, however, that the following
representations and warranties which relate to ERISA (as
defined below) and related regulations shall not be deemed
made with respect to Stribbons or Majestic:
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(i) the plans have complied with all
applicable reporting requirements of the Internal
Revenue Code of 1986 (the "Code") and the Employee
Retirement Income Security Act of 1974 ("ERISA");
(ii) all required contributions have been
made to such plans;
(iii) there exists no accumulated funding
deficiencies as that term is defined in Section 302
of ERISA or Section 412 of the Code;
(iv) there exists no Reportable Event as
that term is defined by ERISA;
(v) the plans have complied in all
material respects with ERISA; and
(vi) all plans capable of qualification
under the Code are, in fact, fully qualified under the
Code.
Seller shall retain responsibility for qualification under the
Code of the Equality Specialties Employee Savings and
Retirement Plan.
(b) The Companies have not incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC")
in connection with any employee benefit plan covering any of
its employees or ceased operations at any facility or
withdrawn from any such Plan in a manner which could subject
it to liability under ERISA; and there exists no facts which
might give rise to any liability of the Companies to the PBGC
under ERISA which could reasonably be anticipated to result in
any claims being made against Purchaser (if applicable) or the
Companies by the PBGC. The Companies have not established,
maintained, contributed to or participated in any employee
benefit plan which is a Multiemployer Plan (as defined in
Section 4001 of ERISA); and no event has occurred, and there
exists no condition or set of circumstances which presents a
material risk of the occurrence of any withdrawal from or the
partition, termination, reorganization or insolvency of any
Multiemployer Plan which could result in any liability to a
Multiemployer Plan.
(c) None of the Companies presently maintains any
employee benefit plans (including, but not limited to, dental
plans, medical plans, disability plans, life insurance plans,
specialized arrangements or plans relating to the foregoing
for executives, reimbursement
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plans, profit sharing or bonus arrangements, holidays,
vacations, stock purchase programs, day care programs,
cafeteria plans, legal service plans, education assistance
plans, and wage or salary continuation plans) or any other
foreign or domestic pension, welfare or retirement benefit
plans other than as listed on Schedule 3.16(c).
(d) None of the Companies' benefit plans provide
for medical benefits, life insurance or other similar benefits
to retirees or their families except as provided in Schedule
3.16(d).
(e) No persons other than employees of the
Companies or their dependents (as defined by each respective
plan) participate in any plan listed in Schedule 3.16(c).
(f) None of the plans listed in Schedule 3.16(c),
Schedule 3.16(d) or Schedule 3.16(e) is self-funded, except as
disclosed on Schedule 3.16(f).
(g) Other than claims for benefits arising in the
ordinary course of the administration and operations of the
plans set forth in Schedule 3.16(c), there are no claims
existing or threatened in writing which would materially and
adversely affect the financial position of the plans or the
Companies, except as set forth on Schedule 3.16(g) or as
reserved in the December 31, 1994 Financial Statements.
Seller will furnish to Purchaser all reports, returns and
other documents filed with either the Internal Revenue Service, United States
Department of Labor or the PBGC by the Companies during the last three (3)
years with respect to any of the above-mentioned plans.
3.17 COMPLIANCE WITH LAWS. Except as set forth on
Schedule 3.17, the Companies are each in compliance with all applicable
federal, state, foreign or local statutes, laws and regulations affecting the
properties or the operation of each of the Companies' businesses, including but
not limited to matters related to occupational safety, equal opportunity and
discrimination, and labor and benefit matters except where non-compliance with
the law would not have a material adverse effect on the Companies' businesses
or assets, in the aggregate. None of the Companies are in default with respect
to any order, writ, injunction or decree of any federal, state, local or
foreign court, department, agency or instrumentality.
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3.18 NO CONFLICT WITH OTHER INSTRUMENTS. Except as set
forth on Schedule 3.18, the execution and delivery of this Agreement has been
duly authorized and the consummation by the Seller of the transactions
contemplated hereby will not:
(a) require any consent, authorization or
approval of any person, entity or government authority that
has not been procured on or before the Closing Date, the
absence of which, on a consolidated basis, would have a
material adverse effect upon the ability of the Companies to
conduct their businesses substantially in accordance with
prior historical practices. It is understood that Seller is
making the representations contained in this Section 3.18(a)
in reliance upon the second sentence of Section 4.4 hereof.
(b) violate or constitute a default under the
Articles of Incorporation or Bylaws of the Companies or under
any note, indenture, mortgage, deed of trust or other material
contract, agreement or commitment of the Seller or the
Companies;
(c) result in the creation or imposition of any
lien, charge or encumbrance upon the property of the Companies
or cause the acceleration of any indebtedness that will be
retained by the Companies; or
(d) adversely affect any material license, permit
or agreement necessary for the conduct of the business of the
Companies.
3.19 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS.
Except as set forth on Schedule 3.19, neither the Companies nor affiliates,
officers, directors or employees of the Companies, nor any spouse, child or
affiliate of any of them, has any direct or indirect interest in any
competitor, lessor, supplier or customer of the Companies, or in any person
from whom or to whom the Companies lease any real or personal property or in
any other person with whom the Companies are doing business.
3.20 LITIGATION. Except as set forth on Schedule 3.20,
there are no suits, arbitrations, or legal, administrative or other proceedings
or governmental investigations pending or threatened in writing against or
affecting the businesses, assets or financial condition of the Companies that
would, if adversely determined, have a material adverse effect on the business
of the Companies determined on a consolidated basis.
3.21 INSURANCE. Schedule 3.9 sets forth all of the
material insurance policies covering the assets and the operations of the
Companies. Except as set forth on Schedule 3.9, all such insurance is in full
force and effect. Upon the Closing herein,
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Purchaser may continue insurance programs for the assets and business of the
Companies under Seller or its affiliates which are currently maintained (as set
forth and specifically designated in Schedule 3.9 hereto) if, upon departure
from Seller's insurance coverage after the consummation of the transaction
contemplated by this Agreement, Purchaser's insurance costs associated with the
assets and business of the Companies would be materially higher, provided that
Seller is under no obligation to pay for such insurance and such coverage shall
be permitted only for so long as the provider of insurance shall permit
Purchaser to maintain these programs.
3.22 PRODUCT LIABILITY/WARRANTY CLAIMS. Schedule 3.22 is
an accurate list showing all product liability experience of the Companies
since December 31, 1988 through the date hereof involving claims in excess of
$25,000. Such schedule identifies the date of each product liability claim,
the name of the product involved, the amount claimed as damages, the nature of
the injury or other loss and the current status of the claim. Such schedule
also includes a description of all insurance policies respecting liability
coverage against which claims for recovery have been made by the Companies
during the periods covered. Except as set forth on Schedule 3.22, during the
periods of time covered by such schedule there has been no claim, notice of
claim, demand, investigation or other indication in writing or otherwise
received by the Companies respecting death, personal injury, material damage to
property or other loss or dangerous condition that has or was claimed to be
related to or caused by the Companies. Seller shall cause the Companies to
make available to Purchaser all of the Companies' claims files which files
fairly represent all of the claims received by the Companies for the time
period indicated above. Except as set forth on Schedule 3.22, the Companies
have received no written claims alleging that the Companies have manufactured,
sold or supplied products or services which were in any material respect faulty
or defective or which did not comply in any material respect with any
warranties or representations expressly or impliedly made by the Companies or
with all applicable regulations, standards and requirements in respect thereof,
except to the extent reserved for on the Financial Statements, the Closing Date
Balance Sheet or the Net Worth Schedule.
3.23 ACCURACY AND COMPLETENESS OF INFORMATION. No
representation or warranty made (or deemed to be made) by Seller in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make such representation or warranty not
misleading in light of the circumstances in which the same was made.
3.24 CUSTOMERS AND SUPPLIERS. Schedule 3.24 sets forth
(i) the names of, and the gross sales of the Companies for the calendar year
ended December 31, 1994 to the ten largest customers of the Companies; (ii) the
names of the ten largest suppliers (by
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dollar volume) of products and services to the Companies during calendar-year
1994 indicating the products and services supplied and existing contractual
arrangements, if any, for continued supply from each such firm, and also
indicating whether any such firm is a sole-source supplier to the Companies.
Except as otherwise set forth on Schedule 3.24, the Companies do not know of
any termination, cancellation, or material limitation, modification or change
in the business relationships of the Companies with any supplier or customer
listed therein, or of any material dispute of any kind with any such supplier
or customer which is pending or threatened in writing.
3.25 OTHER BENEFITS AND PLANS AND POLICIES. Schedule 3.25
hereto (i) is a complete list of any material arrangements, plans, or
commitments of any kind, whether written or oral, with employees of the
Companies not previously listed in Section 3; (ii) lists all material company
policies, whether written or oral, on compensation, insurance, vacation pay,
retirement, expense reimbursement, bonuses, severance, or any other policies
related to employees of the Companies not previously listed in Section 3; and
(iii) provides a copy or summary of the Companies' company policy, if any,
related to all material employment matters (i.e., company employee manual).
3.26 ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 3.26, (a) the properties and businesses of the Companies have complied
with "Environmental Laws" (as defined below), (b) the Companies are not liable
for damages, fines, penalties or remediation costs pursuant to Environmental
Laws as a result of activities on or by the properties or businesses of the
Companies, (c) the Companies have complied with applicable Environmental Laws
in connection with the use, disposal and storage of "Hazardous Materials" (as
defined below) at offsite landfills and other facilities (including other
properties of the Companies), and (d) the Companies have received no written
notice or claims from any governmental entity or other third party with respect
to (a), (b) or (c) above. Except as set forth in this Section 3.26, Article 10
and Section 11.15(c), neither the Companies nor Seller makes any representation
or warranty regarding compliance by the Companies with Environmental Laws or
the environmental condition of any businesses or properties of the Companies
including the possible presence of contamination in the soil or groundwater on,
in, under or about the properties. Except as otherwise set forth in this
Section 3.26, Section 5.10 and Section 11.15(c), Purchaser waives any rights it
may have to seek contribution or indemnity from Seller relating to compliance
by the Companies with Environmental Laws or the environmental condition of any
businesses or properties of the Companies, whether pursuant to contract,
Environmental Laws or common law. For purposes of this Section 3.26, (a)
"Environmental Laws" shall mean any federal, foreign, state or local laws or
regulations relating to protection of health, safety or the environment; and
(b) "Hazardous Materials" shall mean any
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Hazardous Substances, as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, petroleum or petroleum
products, and any other hazardous or toxic material, substance or waste as
defined by any Environmental Laws.
ARTICLE IV - PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to Seller as follows:
4.1 ORGANIZATION AND QUALIFICATION. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Florida, and has all requisite power to own, operate and
lease all of its assets and to carry on its business as it is presently
conducted. Purchaser, at Closing, shall be duly authorized, qualified or
licensed to conduct its business and in good standing as a foreign corporation
in each state or jurisdiction in which such authorization, qualification or
licensing is required.
4.2 DUE AUTHORIZATION AND EXECUTION. Purchaser has the
necessary corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the transactions contemplated hereby have been duly
authorized and approved by all necessary corporate action on the part of
Purchaser. No other corporate proceedings or actions on the part of Purchaser
are necessary to authorize this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivery by Purchaser and, assuming due execution and delivery by
Seller, constitutes a valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms.
4.3 NO VIOLATION. Neither the execution nor the delivery
of this Agreement nor the consummation of the transactions contemplated hereby,
will conflict with or result in the breach of any term or provision of, or
constitute a default under any charter provision, bylaw or material agreement,
permit, license, statute, rule, regulation, judgement, order, writ, injunction
or decree to which Purchaser is a party or by which Purchaser or any of its
assets is bound or obligated.
4.4 GOVERNMENTAL CONSENTS. No consent, approval, permit,
license or authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority is required on the part
of Purchaser in connection with the transactions contemplated by this
Agreement. Purchaser represents that the entity which will acquire the ESH
Stock on the Closing Date will be a newly organized, non-controlled entity with
total assets of less than $10,000,000 as calculated under the provisions of
Section 801.11(e) of the rules promulgated under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
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4.5 BROKERS. No broker, finder or other agent is
entitled to any brokerage or finders' fee or agents' commission as a result of
such party's actions in connection with the negotiation, execution,
consummation and performance of the transactions contemplated by this
Agreement, except a fee payable to Winter Park Capital Company or affiliates,
which will be paid by Purchaser.
4.6 COMPLIANCE WITH LAWS. Purchaser is in material
compliance with all applicable federal, state or local statutes, laws and
regulations affecting the properties or the operation of its business,
including but not limited to matters related to taxes, environmental
protection, occupational safety, equal opportunity and discrimination, and
labor and benefit matters except where non-compliance with the law would not
have a material adverse effect on Purchaser's business or assets. Purchaser is
not in default with respect to any order, writ, injunction or decree of any
federal, state, local or foreign court, department, agency or instrumentality.
4.7 LITIGATION. There are no suits, arbitrations, or
legal, administrative or other proceedings or governmental investigation
pending or threatened in writing against or affecting the businesses, assets or
financial condition of Purchaser that would have a material adverse effect on
the business of Purchaser.
4.8 ACCURACY AND COMPLETENESS OF INFORMATION. No
representation or warranty made (or deemed to be made) by Purchaser in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make such representation or warranty not
misleading in light of the circumstances in which the same was made.
4.9 FINANCING. Attached hereto as Exhibit B is a signed
proposal letter which is in full force and effect (the "Proposal Letter") for
senior debt financing in the amount of at least Nineteen Million Dollars
($19,000,000.00) to be made available to Purchaser for purposes of the
transaction contemplated hereunder.
4.10 NO OTHER REPRESENTATIONS OR WARRANTIES. Except as
specifically provided in this Agreement, (i) Purchaser acknowledges that,
Seller has not made, and (ii) Purchaser is not relying on, any representation
or warranty with respect to the transactions contemplated hereby. Purchaser
acknowledges and agrees that, except as specifically set forth in this
Agreement, Seller has not made, does not make and specifically disclaims any
representations, warranties, promises, covenants, agreements or guaranties of
any kind or character whatsoever, whether express or implied, oral or written,
past, present or future, of, as to, concerning or with respect to: (a) the
nature, quality or condition of the assets owned or leased by the Companies,
(b) the current or projected value, financial condition, income or results of
operations of the
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Companies including, without limitation, as may be reflected in any financial
projections with respect to such matters which have previously been reviewed by
Purchaser or its affiliates, (c) the compliance of or by the Companies or their
respective operations with any laws, rules, ordinances or regulations of any
applicable governmental authority or body, or (d) any other matter with respect
to the Companies.
ARTICLE V - SELLER'S COVENANTS
Seller covenants and agrees with Purchaser as follows:
5.1 CONDUCT OF BUSINESS. Subject to the provisions of
Section 5.8 below and except as set forth on Schedule 3.6 or 5.1, from and
after the date hereof and until the Closing Date, Seller shall cause the
Companies to: (i) operate in the ordinary course of their businesses and in
accordance with their current methods of transacting business; (ii) maintain,
in a manner consistent with their past practice, their books and records, the
operating condition and repair of their assets, reasonable wear and tear
excepted, and their rights under the Material Agreements, permits, intellectual
property and insurance policies; (iii) not pay any management, advisory or
other fees or make any payments of any nature to any shareholder, officer,
director or employee of the Companies, except compensation payments made in the
ordinary course of business and consistent with amounts in prior years; (iv)
not assume, incur or pay any material liabilities or obligations other than in
the ordinary course of their businesses; (v) except in the ordinary course of
business, not increase or decrease the compensation and bonuses of any officer,
director or employee or enter into or amend in any material respect any
compensation, separation or consultation or collective bargaining agreement
with any such person; (vi) not make or agree to make capital expenditures
exceeding $100,000 without the prior written consent of Purchaser, which will
not be unreasonably withheld; (vii) except in the ordinary course of business,
not enter into any material agreement, contract, lease or commitment that
obligates the Companies to pay or expend an amount exceeding $10,000 per year,
without the prior written consent of Purchaser, which will not be unreasonably
withheld; (viii) not sell, mortgage, or alienate any property exceeding $25,000
(book value) outside of the ordinary course of business; and (ix) not incur any
long term indebtedness or guaranty any indebtedness except as contemplated in
this Agreement.
5.2 FULFILLMENT OF CONDITIONS. Seller shall cause each
of the Companies to use reasonable commercial efforts to cause the conditions
to the obligations of Purchaser under this Agreement to be satisfied prior to
or at the Closing.
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5.3 ACCESS AND INFORMATION. Seller shall cause the
Companies to permit the authorized representatives of Purchaser to have
reasonable access during normal business hours to the relevant books, records
and documents of the Companies upon reasonable prior notice and as Purchaser
may reasonably request.
5.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Seller
shall cause each of the Companies to use reasonable commercial efforts to
preserve their business organizations intact, and to preserve their present
relationships with suppliers, customers and others with which they maintain
business relationships.
5.5. MAINTENANCE OF INSURANCE. Seller shall cause each of
the Companies to use reasonable commercial efforts to continue to carry their
existing insurance policies, subject to variations and amounts required by the
ordinary operations of their businesses and further subject to the provisions
of Section 3.21.
5.6 LOANS. Seller shall cause the Companies to collect
in full all loans made by the Companies and all other amounts owing to the
Companies from any shareholder or any officer, director or employee of the
Companies or any affiliate of any such shareholder, officer, director or
employee, prior to Closing, except as contemplated by this Agreement.
5.7 NOTIFICATION. Between the date hereof and the
Closing Date, Seller shall promptly notify Purchaser in writing of any
information or the occurrence of any event that will result or has reasonable
prospect of resulting in making any warranty, covenant or representation by
Seller materially false or which is reasonably likely to result in the failure
to satisfy any condition to the obligations of Purchaser under this Agreement
prior to or at the Closing.
5.8 REPAYMENT OF CERTAIN OBLIGATIONS. At or prior to the
Closing Date, all liabilities of the Companies owed to Seller shall be repaid,
such repayment and the amounts thereof to be reflected on Schedule 5.8(a). Any
liabilities in excess of the amounts reflected in Schedule 5.8(a) shall be
cancelled and forgiven without the payment of any money in connection
therewith, and any such cancellation and forgiveness of intercompany
liabilities shall be treated as a contribution to equity. Notwithstanding the
foregoing, intercompany payables owed by the Companies to Seller's affiliates
for goods or services rendered in the ordinary course of business as set forth
on Schedule 5.8(b) shall not be cancelled at the Closing unless payment is made
therefor.
5.9 CERTAIN PRODUCT LIABILITY AND WORKERS COMPENSATION
CLAIMS. Seller agrees that it shall pay and hold Purchaser harmless from and
against any loss, cost, expense or liability incurred after the Closing arising
from (i) the worker's
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compensation claims set forth as item 5 in Schedule 3.20 (the "WC Claims") and
(ii) the product liability claims set forth as Items 1 and 2 on Schedule 3.22
(the "PC Claims"), to the extent such loss, cost, expense or liability incurred
after the Closing with respect to either such PC Claim exceeds $75,000 (the "WC
Claims" and the "PC Claims" are hereinafter collectively referred to as the
"Claims").
Seller (or its insurer) shall have sole right to assume and
conduct the defense of the Claims. Seller shall not be obligated to Purchaser
for any legal or other expenses incurred after the date hereof with respect to
the defense of the Claims. Purchaser shall cause the Companies to cooperate in
the defense of the Claims and to provide records and other information necessary
or appropriate to such defense, as requested by Seller or its insurer, and
neither Purchaser nor Seller shall take any action, or omit to take any action,
which may affect the availability of insurance coverage with respect to the
Claims. Seller shall not consent to the settlement of any PC Claim with respect
to which Purchaser shall have any liability or obligation under this Section 5.9
without the prior written consent of Seller, which consent shall not be
unreasonably withheld.
5.10 CERTAIN ENVIRONMENTAL CLEAN-UP OBLIGATIONS. Seller
shall pay to Purchaser (or shall credit Purchaser against the Cash Payment
required at Closing) the amount of $8,500 representing payment towards the
clean-up of the environmental condition at the Fall River Massachusetts
facility described in the last sentence of Paragraph 1 of Schedule 3.26.
Purchaser shall be solely responsible for the performance of such work and for
any excess amounts required to complete same.
ARTICLE VI - PURCHASER'S COVENANTS
Purchaser covenants and agrees with Seller as follows:
6.1. FULFILLMENT OF CONDITIONS. Purchaser shall use
reasonable commercial efforts to cause the conditions to the obligations of
Seller under this Agreement to be satisfied prior to or at the Closing.
6.2 PRESERVATION OF BUSINESS AND RELATIONSHIPS.
Purchaser shall use reasonable commercial efforts to preserve its business
organization intact, and to preserve its present relationships with suppliers,
customers and others with which it maintains a business relationship.
6.3 NOTIFICATION. Between the date hereof and the
Closing Date, Purchaser shall promptly notify Seller in writing of any
information or the occurrence of any event that will result or has reasonable
prospect of resulting in making any warranty, covenant or representation by
Purchaser materially false or which
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is reasonably likely to result in the failure to satisfy any condition to the
obligations of Seller under this Agreement prior to or at the Closing.
6.4 FINANCING. Purchaser shall use its reasonable best
efforts to fulfill the conditions to the proposed senior debt financing and
cause such senior debt financing to be available to Purchaser at Closing.
6.5 GAMI LETTER OF CREDIT. At the Closing or within five
(5) business days thereafter, Purchaser shall cause that certain Letter of
Credit No. 60008064 dated July 25, 1994, as amended, in the amount of $35,000
issued in the name of Seller by American National Bank, Chicago and Barclays
Bank International, Ltd. to be returned to Seller or cancelled without any
draws thereunder. Purchaser shall indemnify Seller for any liability or
expense to Seller resulting from draws under such Letter of Credit prior to
such return or cancellation.
6.6 CERTAIN LEASE OBLIGATIONS.
(a) The parties acknowledge that Seller may have
continuing obligations under the terms of that certain lease
dated November 19, 1991 between 41 Madison Company, as
landlord and Seller as successor-in-interest to Equality
Specialties, Inc., as tenant (the "Madison Lease") and under
that certain lease dated May 23, 1994 by and between West L.
A. Properties, as landlord and Seller, as lessee (the
"Placentia Lease"), each of which has been assigned by Seller
to ESI. Purchaser agrees to indemnify and hold harmless
Seller from any loss, cost, expense or liability of any nature
(including attorneys' fees and costs) arising from any breach,
or alleged breach, by ESI after the Closing Date of its
obligations under the Madison Lease, or the Placentia Lease.
(b) Purchaser further covenants and agrees that
Purchaser will not, and will not permit ESI to, take any
action with respect to the Madison Lease, or the Placentia
Lease, which could have the effect of increasing the potential
liability of Seller with respect thereto, including, without
limitation, agreeing to any amendment, renewal, extension or
other modification thereof, or waiving any rights thereunder
unless Purchaser shall have first obtained either (i) the
prior written consent of Seller or (ii) a complete release and
discharge of Seller of all liabilities and obligations under
the Madison Lease, or the Placentia Lease, as applicable,
executed by the landlord, on terms and conditions acceptable
to Seller, (including in the case of the Placentia Lease the
return of any letters of
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credit issued in the name of Seller to secure ESI's
obligations thereunder).
ARTICLE VII - CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are subject to the
satisfaction in all material respects at or prior to the Closing of the
following conditions, but compliance with any of such conditions may be waived
by Purchaser in writing:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Seller contained in Article 3 of this
Agreement will be materially true and correct at and as of the Closing with the
same effect as though such representations and warranties were made at and as
of the Closing. Seller will have caused to be performed and complied with in
all material respects the covenants and agreements required by this Agreement
to be performed or complied with by it at or prior to the Closing, and
Purchaser will have received a certificate to the foregoing effect from Seller.
7.2 LITIGATION. There will be no litigation pending or
threatened in writing in any court or any proceeding before or by any
administrative or governmental authority to restrain or prohibit or obtain
substantial damages or other material relief with respect to this Agreement or
the consummation of the transactions contemplated hereby or as a result of
which Purchaser could be deprived of any of the material benefits of the
transactions contemplated hereby.
7.3 FINANCING. Senior debt financing for the
transactions contemplated hereby will have been made available to Purchaser on
terms reasonably satisfactory to Purchaser.
7.4 LEGAL OPINION. Purchaser will receive a legal
opinion from Seller's counsel substantially in the form of Exhibit C.
7.5 BOARD AND SHAREHOLDER APPROVAL. Seller will have
delivered to Purchaser a certified copy of the board of director consents
authorizing the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
7.6 CERTIFICATES, ET AL. The form and substance of all
certificates, instruments, opinions and other documents delivered or
deliverable to Purchaser under this Agreement shall be satisfactory in all
reasonable respects to Purchaser and its counsel.
7.7 CONSENTS. Seller shall have caused the Companies to
have obtained any and all third party consents necessary under any contracts,
leases or agreements to effect the transactions
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contemplated hereby, provided that no such consents will be required for any
contracts, leases or agreements if the failure to obtain such consents would
not, on a consolidated basis, have a material adverse effect upon the ability
of the Companies to conduct their businesses substantially in accordance with
prior historical practices.
7.8 COVENANT NOT TO COMPETE AGREEMENT. Seller shall have
executed and delivered a Covenant Not to Compete Agreement in the form of
Exhibit D pursuant to which Seller will agree not to compete with Purchaser in
business activities similar to those currently conducted by the Companies for a
period of three (3) years following the Closing.
7.9 TRANSFER OF BUSINESS. Seller shall have caused to be
executed and delivered to Purchaser each of the documents and instruments
described below, which will be reasonably satisfactory to Purchaser in form and
substance, and Seller will have taken such additional actions as may be
reasonably necessary to transfer the ESH Stock to Purchaser and to place
Purchaser in possession and operating control of the Companies.
(a) Share certificates representing all of the
ESH Stock, duly endorsed for transfer to Purchaser or with
separate stock transfer powers duly endorsed by Seller for
transfer of the Stock to Purchaser.
(b) Certificates of the Secretary of State of
Delaware evidencing the corporate good standing of Seller, ESH
and Equality. Seller shall deliver equivalent evidence with
respect to Majestic and Stribbons, to the extent available.
(c) The minute book, stock records and corporate
seal for each of the Companies (other than Stribbons, which
are maintained in the United Kingdom).
(d) Resignations of all members of the Board of
Directors of the Companies to be effective as of the Closing.
7.10 NO ADVERSE CHANGE. Except to the extent reflected or
reserved against or otherwise disclosed in the Financial Statements, there has
not been any event or condition of any character that has or is likely to have
a material and adverse effect on the financial condition, business or assets of
the Companies, determined on a consolidated basis.
7.11 TITLE AND SURVEY. Seller has provided Purchaser with
a current commitment for an ALTA Mortgagee's Title Insurance Policy for each of
the properties located in the United States of America which are owned by the
Companies. As soon as practicable after the
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Closing Date, Seller shall provide Purchaser with a true and accurate survey of
each of the properties located in the United States of America which are owned
by Seller, all of which shall be satisfactory to Purchaser and Purchaser's
senior debt lender. Seller and Purchaser shall share equally the costs
associated with such surveys, title insurance, and all other transfer costs, if
any, resulting from this transaction.
7.12 SHAREHOLDER AGREEMENTS. Seller will have executed
and delivered to Purchaser, Seller's counterpart of a Shareholder's Agreement
by and among the proposed shareholders of Purchaser and that certain
Registration Rights Agreement with Purchaser (collectively, the "Shareholder
Agreements") each in form and substance acceptable to Purchaser.
ARTICLE VIII - CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement are subject to the
satisfaction in all material respects at or prior to the Closing of the
following conditions, but compliance with any of such conditions may be waived
by Seller in writing:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Purchaser contained in Article 4 of this
Agreement will be materially true and correct at and as of the Closing with the
same effect as though such representations and warranties were made at and as
of the Closing. Purchaser will have performed and complied in all material
respects with the covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing and Seller will
have received a certificate to the foregoing effect from Purchaser.
8.2 LITIGATION. There will be no litigation pending or
threatened in writing in any court or any proceeding before or by any
administrative or governmental authority to restrain or prohibit or obtain
substantial damages or other material relief with respect to this Agreement or
the consummation of the transactions contemplated hereby or as a result of
which Seller could be deprived of any of the material benefits of the
transactions contemplated hereby.
8.3 CONSIDERATION. Purchaser will have (i) paid to
Seller the Cash Payment, and (ii) executed and delivered to Seller the Note.
8.4 COVENANT NOT TO COMPETE. Purchaser will have
executed and delivered to Seller, Purchaser's counterpart of the Covenant Not
to Compete Agreement.
8.5 LEGAL OPINION. Seller will receive a legal opinion
from Purchaser's counsel substantially in the form of Exhibit E.
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8.6 CERTIFICATES, ET AL. The form and substance of all
certificates, instruments, opinions and other documents delivered or
deliverable to Seller under this Agreement shall be satisfactory in all
reasonable respects to Seller and its counsel. In addition, Seller shall have
received certificates from certain officers of Seller and of Michael Friedman
and Charles Vaughn with respect to the accuracy of the representations and
warranties made by Seller hereunder, which certificates shall be in form and
substance acceptable to Seller.
8.7 AUTHORIZATION. Seller will receive a copy of a
resolution of Purchaser's board of directors certified by Purchaser's secretary
as having been duly adopted and being in full force and effect, authorizing
Purchaser's execution and performance of this Agreement.
8.8 SHAREHOLDER AND OTHER AGREEMENTS. Purchaser will
have executed and delivered to Seller, Purchaser's counterpart of each of the
Shareholder Agreements, which Shareholder Agreements shall each be in form and
substance acceptable to Seller, and the various agreements and other
instruments listed in Exhibit F hereto shall have been executed and delivered
by the signatories thereto and shall each be in form and substance acceptable
to Seller.
8.9 FINANCING. Purchaser shall have completed its
financing with its senior debt lender on terms reasonably acceptable to Seller,
and Seller and Heller Financial, Inc. shall have entered into a Subordination
and Intercreditor Agreement on terms acceptable to Seller.
8.10 SELLER SHARES. Purchaser shall have issued to Seller
150,000 shares of common stock of Purchaser, par value ($.01) per share.
ARTICLE IX - CLOSING
9.1 TIME AND PLACE. The closing of the transactions
contemplated by this Agreement (the "Closing" or the "Closing Date") will take
place at such time and place as the parties may agree and is expected to be on
April 19, 1995, at the office of Rosenberg & Liebentritt, P.C., or such other
location as shall be mutually agreed.
9.2 DELIVERY OF CASH PAYMENT AND CLOSING DOCUMENTS. At
the Closing, Seller will cause to be executed and delivered to Purchaser the
documents and instruments referred to in Section 7 above, or in any other
provision of this Agreement which requires execution or delivery of documents
prior to or at the Closing. Concurrently therewith, Purchaser will cause to be
executed and delivered to Seller (a) a bank wire transfer in the amount
required by Section 2.1(b) above, (b) the Note, and (c) the documents and
instruments referred to in Section 8 above.
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ARTICLE X - INDEMNIFICATION
10.1 SURVIVAL. The representations and warranties
contained in Sections 3 and 4 of this Agreement shall survive the Closing and
shall continue in effect notwithstanding any investigation by or on behalf of
either party hereto until the second year anniversary of the Closing Date or
such other period of survival as is specified in clauses (i) - (iii) of this
Section 10.1 (the "Cutoff Date"), provided that any representation or warranty
which would otherwise terminate after the Cutoff Date shall survive until the
final adjudication or settlement of any such matter if notice of any inaccuracy
or breach thereof, including a reasonably detailed description of such alleged
inaccuracy or breach, shall have been given in writing to Purchaser or Seller,
as the case may be, on or prior to the Cutoff Date, and further provided that
(i) the representations and warranties set forth in Section 3.26 shall continue
until the fifth year anniversary of the Closing Date, (ii) the representations
and warranties set forth in Section 3.7 shall continue until the expiration of
all applicable statutes of limitation, provided, however, that Purchaser and/or
the Companies shall not extend such statutes of limitation without the prior
written consent of Seller, and (iii) the representations and warranties set
forth in Sections 3.2, 3.3, the last sentence of Section 3.12 and Section 4.2
shall continue without limit to time.
10.2 INDEMNIFICATION OF PURCHASER. Except as otherwise
provided in this Article 10, Seller shall indemnify and hold harmless
Purchaser, its officers, directors, employees, stockholders, agents and
affiliates from and against, and shall reimburse such parties for, any actual
claim, loss, liability, damage or expense (including, without limitation,
reasonable attorneys' fees) arising, in each case, prior to Closing and
resulting from circumstances arising prior to Closing from (i) any breach of
any representation, warranty, agreement or covenant on the part of Seller under
or pursuant to this Agreement, (ii) Seller's failure to obtain a required
consent pursuant to Section 7.7 above, or (iii) all net income taxes, penalties
and interest with respect thereto which Purchaser may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any liability of
any of the Companies for the unpaid income taxes of any entity including,
without limitation, under Regulations (as defined herein) Section 1.1502-6 (or
any similar provision of state, local or foreign law) or as a transferee or
successor, by contract or otherwise, and all expenses of defense or collection
thereof, (iv) federal and foreign withholding taxes on the repatriation of cash
from Majestic and Stribbons prior to the Closing Date, (v) federal, state,
foreign, and local income taxes of whatever nature up and through the Closing
Date, relating to the Section 338 election referred to in Section 11.14(d)
below), and (vi) the Companies or their businesses, assets or properties being
a former division or affiliate of, or member of a control group
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with Seller, provided such claim, loss, liability, damage or expense was not
otherwise attributable to, and did not result from, the ownership or operation
of the businesses, assets or properties of any of the Companies or their
predecessors. Seller shall be responsible for all losses, liabilities, damages
or expenses claimed for any breach of any representation or warranty herein, or
indemnification with respect thereto, only to the extent that the aggregate
amount of such losses, liabilities, damages and expenses claimed for all of such
breaches, calculated after taking into account the net amount of any recovery or
benefit described in Section 10.4(b) below ("Purchaser's Net Claim"), exceeds
$100,000, except as to reimbursement for (y) the payment of taxes pursuant to
Section 11.14 below, or (z) representations or warranties relating to Majestic
Stock, as provided in Section 3.3, for which Seller shall reimburse Purchaser
from the first dollar owed. Notwithstanding anything contained in this
Agreement to the contrary, (A) Purchaser shall not be entitled to
indemnification from Seller with respect to any loss, cost, expense, liability
or obligation to the extent is reflected or reserved against in the Net Worth
Schedule, (B) only when Purchaser's Net Claim exceeds $100,000 shall Purchaser
be entitled to indemnification from Seller for the entire amount of Purchaser's
Net Claim, and (C) under no circumstances shall the aggregate amount of payments
made by Seller under this Article 10 exceed $3,000,000, and of said $3,000,000,
with respect to indemnification for matters arising other than as a result of a
breach of the representations and warranties contained in Section 3.26 above,
the aggregate amount of payment for which Purchaser shall be entitled to
indemnification from Seller shall not exceed $2,000,000. Furthermore, Purchaser
shall not be entitled to indemnification for any losses, liabilities, damages or
expenses claimed for any breach of any representation or warranty herein which
are asserted after the time of survival of the applicable representation and
warranty, as provided in Section 10.1 above. The indemnification obligation of
Purchaser set forth in clause (vi) above shall not be subject to the limitations
of clauses (B) or (C) above and such obligation shall survive indefinitely.
10.3 INDEMNIFICATION OF SELLER. Except as otherwise
provided in this Article 10, Purchaser shall indemnify and hold harmless Seller,
its officers, directors, employees, stockholders, agents and affiliates from and
against, and shall reimburse such parties for any actual claim, loss, liability,
damage or expense (including, without limitation, reasonable attorneys' fees)
resulting from any breach of any representation, warranty, agreement or covenant
on the part of Purchaser under or pursuant to this Agreement. Purchaser shall
be responsible for all losses, liabilities, damages or expenses claimed for any
breach of any representation or warranty herein, or indemnification with respect
thereto, only to the extent that the aggregate amount of such losses,
liabilities, damages and expenses claimed for all of such breaches, calculated
after taking into account the net amount of
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any recovery or benefit described in Section 10.4(b) below ("Seller's Net
Claim"), exceeds $100,000. Notwithstanding anything contained in this Agreement
to the contrary, (A) only when Seller's Net Claim exceeds $100,000 shall Seller
be entitled to indemnification from Purchaser for the entire amount of Seller's
Net Claim, and (B) under no circumstances shall the aggregate amount of
payments made by Purchaser under this Article 10 exceed $2,000,000.
10.4 TERMS OF INDEMNIFICATION. The foregoing
indemnification obligations are subject to the following:
(a) Notification of Claim. Promptly after the
assertion of any claim by a third party or occurrence of any
event which may give rise to a claim for indemnification from
a party obligated to indemnify another party (the
"Indemnitor") under this Article 10, the party seeking
indemnity hereunder (an "Indemnitee") shall notify the
Indemnitor in writing of such claim, with reasonable
particularity, and, with respect to claims by third parties,
advise the Indemnitor whether the Indemnitee intends to
contest same; provided that the failure to give any such
notice shall not relieve the Indemnitor of its obligations
hereunder except to the extent that such failure to give
notice actually and materially prejudices the Indemnitor.
(b) Recoveries. The Indemnitee shall be deemed
to have suffered a loss for which the Indemnitor shall be
liable for indemnification only to the extent that the
Indemnitee has not received any recovery or benefit with
respect thereto from any third party, person or entity
(including without limitation insurance benefits, recoveries
under any counterclaims or set-off, or the benefit of any
federal or state income or franchise tax benefit obtained as a
result of such loss); and if the Indemnitee received such a
recovery or benefit after receipt of payment of a loss, then
the amount of such recovery or benefit (but not exceeding the
amount of such payment), net of reasonable expenses incurred
in obtaining the recovery or benefit, shall be paid to the
Indemnitor. Without limiting the foregoing, in the event that
a claim or benefit is created in connection with the
occurrence of a loss which has not been collected or otherwise
enjoyed by the Indemnitee at the time payment with respect to
the loss is made, the Indemnitee shall assign such benefit or
claim to the Indemnitor as a condition to the payment of such
loss, or, if such claim or benefit is not assignable under
applicable laws, the Indemnitee shall attempt in good faith to
collect such claim or benefit.
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(c) Defense. With respect to any third party
claim or action that could give rise to indemnity under this
Agreement, the Indemnitor shall be entitled to assume the
defense thereof, and after notice from the Indemnitor to the
Indemnitee of its election so to assume the defense thereof,
the Indemnitor shall not be liable to the Indemnitee under the
foregoing indemnity agreement for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the
defense thereof. Any party which receives notice of a claim
for indemnification may agree to assume the defense thereof
conditional upon the final determination of its
indemnification obligation, and any such assumption of defense
shall not prejudice its right to contest its indemnification
obligation. Regardless of which party is controlling the
defense of any claim that could give rise to indemnity under
this Agreement, (i) both the Indemnitor and Indemnitee shall
act in good faith and (ii) no settlement of such claim may be
agreed to without the written consent of the Indemnitor, which
consent shall not be unreasonably withheld, or, in the case
the settlement requires actions, forbearance or payments by
Indemnitee, without the consent of such Indemnitee (as to such
matters) which consent shall not be unreasonably withheld.
The controlling party shall deliver, or cause to be delivered,
to the other party copies of all correspondence, pleadings,
motions, briefs, appeals or other written statements relating
to or submitted in connection with the defense of any such
claim, and timely notices of any hearing or other court
proceeding relating to such claim.
(d) Set Off. Purchaser shall have the right to
set off all amounts owed by Purchaser to Seller under this
Article 10 first against interest and then principal due under
the Note; provided, however, that (i) Purchaser has first
obtained a final adjudication, not subject to appeal, from a
court having competent jurisdiction over the subject matter
entitling Purchaser to indemnification pursuant to this
Article 10, and (ii) such indemnification has not been paid
within thirty (30) days after the entry of such final
adjudication.
10.5 EXCLUSIVE REMEDY. The indemnification provided in
this Article 10 shall constitute the sole and exclusive remedy of the parties
with respect to the breach of any representation, warranty, or covenant of any
party under this Agreement, except as may be otherwise expressly provided in
this Agreement
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ARTICLE XI - MISCELLANEOUS
11.1 NOTICES. All notices that are required or may be
given under this Agreement will be in writing and will be deemed to be
delivered if sent by personal delivery, by telecopy with appropriate
confirmation or by a recognized courier or overnight delivery service to the
parties at the following addresses (or to such other address as either party
may provide to the other party by like notice):
IF TO PURCHASER:
Equality Acquisition Corp.
c/o Winter Park Capital Company
200 East New England Avenue, Suite 301
P.O. Box 3090
Winter Park, Florida 32790-3090
Telephone: (407)644-9700
Fax: (407)628-2307
Attn: F. Philip Handy
WITH COPIES TO:
Robert P. Saltsman, P.A.
Attorney at Law
200 East New England Avenue, Suite 301
P.O. Box 2146
Winter Park, Florida 32790
Telephone: (407)647-2899
Fax: (407)628-2307
IF TO SELLER:
Great American Management and Investment, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Telephone: (312)906-8700
Fax: (312)906-8402
Attn: Gus Athas
WITH COPIES TO:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Telephone: (312)466-3196
Fax: (312)454-0335
Attn: Alisa M. Singer
11.2 FURTHER ASSURANCES. Purchaser and Seller agree to
execute any and all documents and instruments and to perform such other acts as
may be reasonably necessary or expedient to further
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the purposes of this Agreement and the transactions contemplated hereby. Any
consent or approval required from either or both parties hereto under the terms
of this Agreement will not be unreasonably withheld or delayed by such party or
parties.
11.3 EXCLUSIVE DEALINGS. From the date hereof until
termination or Closing of the transaction contemplated herein and so long as
Purchaser is not in default under this Agreement, Seller and its officers and
directors will not, directly or indirectly (through agents or otherwise),
encourage or solicit any inquiries or accept any proposals by, or engage in any
discussions or negotiations with or furnish any information to, any person other
than Purchaser concerning a proposed transaction involving an acquisition of the
assets or business or stock of the Companies or a merger or consolidation of the
Companies or a refinancing of the Companies' outstanding indebtedness, except in
connection with this Agreement and the transactions contemplated hereby.
11.4 PUBLICITY. Seller and Purchaser will cooperate with
each other in the development and distribution of all news releases and other
public disclosures relating to the transactions contemplated hereby.
Notwithstanding the foregoing, Seller may issue such news releases and other
public disclosures as Seller's legal counsel deems required by the Securities
Exchange Act of 1934, other state and federal securities laws or by the rules
of any exchange upon which Seller's securities may be listed.
11.5 CONFIDENTIALITY. Seller and Purchaser acknowledge
that all customer, supplier and distributor lists, trade secrets, plans,
manufacturing techniques, sales, marketing and expansion strategies, technology
and processes of the Companies relating to the businesses of the Companies, and
all related information concerning the products, services, production,
development, technology and all related technical information, procurement and
sales activities and procedures, promotion and pricing techniques and credit and
financial data relating to the businesses of the Companies are valuable, special
and unique assets (collectively, the "Confidential Information"); provided that
the Confidential Information does not include any such information that is
publicly available or is published through no fault of Purchaser or is required
by law or court order to be disclosed (other than as a result of a breach of
this Agreement). Purchaser agrees that, at all times prior to the Closing,
Purchaser will not disclose any Confidential Information to any person or entity
or make use of any Confidential Information for its own purposes or for the
benefit of any person or entity, except that Purchaser may disclose Confidential
Information to its lenders, investors, accountants and attorneys or other
representatives to the extent reasonably necessary to obtain financing for the
acquisition and to complete its due diligence review of the Companies' business,
provided that Purchaser notifies such lenders, investors, accountants and
attorneys to comply with the terms of this Section 11.5. If this
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Agreement is terminated pursuant to Section 11.13 below, or for any other
reason, Purchaser will return all Confidential Information and all copies
thereof to Seller and will not make use of any Confidential Information for its
own purposes or for the benefit of any person or entity. Seller acknowledges
and agrees that, after the Closing, all Confidential Information will be the
exclusive property of Purchaser and shall be maintained by Seller as
confidential. Seller agrees that it shall not use, disclose or disseminate the
Confidential Information, except as necessary to administer its continuing
interest as shareholder and creditor of Purchaser.
11.6 EXPENSES. Except as otherwise stated herein, Seller
and Purchaser will, whether or not the transactions contemplated hereby are
consummated, each bear its own attorneys', accountants', auditors' or other
fees, costs and expenses incurred in connection with the negotiation, execution,
consummation and performance of this Agreement or any of the transactions
contemplated hereunder.
11.7 COUNTERPARTS. This Agreement may be executed in one
or more counterparts for the convenience of Purchaser and Seller, both of which
together will constitute one and the same instrument.
11.8 SEVERABILITY. The unenforceability or invalidity of
any provision of this Agreement shall not affect the enforceability or validity
of any other provision.
11.9 SUCCESSORS AND ASSIGNMENT. This Agreement and all of
the provisions hereof will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, provided
proper notice and consent is given with respect to any assignment hereof and
such successor or assignor remains liable, and further provided that Purchaser
must be an affiliate of Winter Park Capital Company; provided, however that
Purchaser may collaterally assign this Agreement to its senior lender. This
Agreement is not intended for the benefit of any other party and no third
party, including any officer, director, shareholder or lender of either
Purchaser or Seller, shall have the right to enforce the provisions of this
Agreement.
11.10 ENTIRE AGREEMENT. This Agreement and the related
documents contained as Schedules or Exhibits hereto or expressly contemplated
hereby contain the entire understanding of the parties relating to the subject
matter hereof and supersede all prior written and oral and all contemporaneous
oral agreements and understandings relating to the subject matter hereof. This
Agreement cannot be modified or amended except in writing signed by both
parties.
11.11 GOVERNING LAW. This Agreement will be governed by
and construed and interpreted in accordance with the substantive laws of the
State of Delaware, without giving effect to any
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conflict of law, rule or principle that might require the application of
another jurisdiction.
11.12 ARBITRATION.
(a) All controversies between Purchaser and
Seller pertaining to the computation of the amount of the
Purchase Price (as adjusted) shall be submitted to Arthur
Andersen, LLP.
(b) All other controversies between the parties
of any kind relating to this Agreement, or any agreement
contemplated herein, at the option of either party hereto,
shall be settled by arbitration in Miami, Florida, in
accordance with the then applicable rules of the American
Arbitration Association. The parties hereto shall be bound by
the decision in any such arbitration. The judgment of any
such arbitration may be entered in any court in the United
States of America. In any such arbitration, the arbitrators
shall: (i) apply the provisions of this Agreement without
varying therefrom in any respect and the arbitrators shall not
have the power to add to, modify or change any of the
provisions of this Agreement; (ii) make specific written
findings of fact and law; and (iii) apply the law of the State
of Delaware to all substantive issues of law.
11.13 TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated and abandoned (a) at any time prior to the
Closing by mutual written consent of Purchaser and Seller or (b) by either
party, by written notice to the other party, if the Closing has not occurred by
April 30, 1995, provided that a party will not be entitled to exercise a right
of termination under this Section 11.13 if the event giving rise to such right
of termination results from the willful failure of such party to perform or
observe in any material respect any of the covenants or agreements set forth
herein to be performed or observed by such party. If this Agreement is
terminated as permitted under this Section 11.13 as a result of a breach or a
default by a party hereto, the non-breaching party shall be entitled to exercise
any and all rights and remedies available at law or in equity. Notwithstanding
the foregoing, the provisions of Section 11.5 above (Confidentiality) will
survive any termination of this Agreement.
11.14 INCOME TAXES.
(a) Federal Income Taxes. Seller warrants that
(i) it has filed consolidated federal income tax returns for
all years prior to and including July 31, 1993, (ii) it will
file a consolidated federal income tax return for the fiscal
year ended July 31, 1994 and, (iii) it is the
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common parent of the filing group pursuant to the
regulations (the "Regulations") promulgated under the Internal
Revenue Code of 1986, as amended (the "Code"), and Seller also
covenants that it will file a consolidated federal income tax
return for its fiscal year commencing August 1, 1994 and
ending July 31, 1995. Seller further covenants that it will
include income of ESH and Equality for the period commencing
August 1, 1994 and ending on and including the Closing Date
(including any deferred income triggered into income by
Regulations Sections 1.1502-13 and 1.1502-14) in its
consolidated federal income tax return for the fiscal year
ending July 31, 1995. Seller agrees to pay all federal income
taxes attributable to such income. The Companies will furnish
tax information to Seller for inclusion in Seller's federal
consolidated income tax returns for the taxable period which
includes the Closing Date, in accordance with ESH's past
custom and practice. The income of ESH and Equality for the
fiscal period which commenced August 1, 1994 will be allocated
to the period up to and including the Closing Date and to the
period after the Closing Date by closing the books of ESH and
Equality as of the end of the Closing Date.
(b) State and Local Income Taxes.
(i) With respect to state and local income
and franchise tax returns of ESH and Equality for the
taxable period commencing August 1, 1994 and ending
on and including the Closing Date, Seller shall cause
such returns to be prepared and Purchaser shall have
the opportunity to review and comment upon such
returns (including any amended returns). Seller will
take no position on such returns that would have a
material adverse effect on ESH and Equality. Taxes
shown to be due on such returns will be the
obligation of the entity to which the return relates.
Purchaser shall sign and file such returns by the
extended due date of each respective return. Seller
will submit to Purchaser such returns no less than
thirty (30) days prior to the extended due date and
will include with the submission of such returns
amounts equal to the liability on each return less
any estimated tax payments, if any, made towards such
tax liability. Seller will also reimburse Purchaser
in full within five (5) business days after demand
therefor for any deficiencies and interest and
penalties thereon resulting from amendments or
adjustments to such returns.
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(ii) With respect to state and local income
and franchise tax returns of ESH and Equality for any
jurisdiction in which the taxable year of the
taxpayer does not end on the Closing Date, Purchaser
shall be responsible for preparing a tax return for
the tax fiscal period commencing August 1, 1994 and
ending after the Closing Date. Seller shall have the
opportunity to review and comment upon such returns
(including any amended returns). Purchaser will take
no position on such returns that would have a
material adverse effect on the potential tax
liability of Seller. Purchaser will prepare
pro-forma tax returns for the period commencing
August 1, 1994 and ending on the Closing Date on the
basis that the books of ESH and Equality were closed
as of the end of the Closing Date and that the
taxable year of the entity terminated on such date.
Seller shall have the opportunity to review and
comment upon such pro-forma returns. Purchaser will
take no position on such returns that would have a
material adverse effect on the potential tax
liability of Seller. Seller shall within five (5)
business days after demand pay to Purchaser the
amount of any tax shown to be due on such pro-forma
returns. All estimated tax payments made prior to
the Closing Date by Seller will be credited against
the tax liability shown on such pro-forma returns.
Seller shall reimburse Purchaser within five (5)
business days after demand for any deficiencies and
interest and penalties thereon resulting from
subsequent adjustments to such returns to the extent
they relate to matters prior to the Closing Date.
(iii) Taxes - U.S. and Foreign Taxes
Relating to Stribbons and Majestic. With respect to
foreign taxes for any jurisdiction in which the
taxable year of the taxpayer does not end on the
Closing Date, Purchaser shall be responsible for
preparing tax returns for the tax fiscal period
commencing August 1, 1994 and ending after the
Closing Date. Purchaser will prepare pro-forma tax
returns for the period commencing August 1, 1994 and
ending on the Closing Date on the basis that the
books of Stribbons and Majestic were closed on the
Closing Date and the fiscal year of the entity
terminated on such date. Seller shall have the
opportunity to review and comment on such pro-forma
returns. Purchaser will take no position on such
returns that would have a material adverse effect on
the potential liability of Seller. Except to the
extent reserved for on the Closing Date Balance
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Sheet, Seller shall within five (5) business days
after demand pay to Purchaser the amount of any tax
shown to be due on the pro-forma return. Within five
(5) business days after demand Seller shall reimburse
Purchaser for any deficiencies and interest and
penalties thereon resulting from subsequent
adjustments to such returns to the extent they relate
to matters prior to and including the Closing Date.
(iv) To the extent that Purchaser or any of
the Companies is subject to any federal, state or
local income or franchise tax as a result of having
to include in federal taxable income any amount of
income for the fiscal year commencing August 1, 1994
and ending after the Closing Date by virtue of the
provisions of Code Section 951, Seller will reimburse
Purchaser for the full amount of such federal, state
and local taxes plus interest and penalties within
five (5) business days after demand.
(c) Audits.
(i) Seller will allow Purchaser and its
representatives to participate in any audits of ESH
and Equality's state and local income tax returns for
the period ending on or before the Closing Date to
the extent that such returns relate to the Companies.
Seller will not settle any such audit in a manner
which would have a material adverse effect on the
Companies after the Closing Date without the prior
written consent of the Purchaser, which consent shall
not be unreasonably withheld.
(ii) After the Closing, Seller shall assume
responsibility for the pending tax audit in St.
Lucia, provided, however, that Seller shall not agree
to a final settlement with the St. Lucian taxing
authority (the "Authority") without Purchaser's
consent. If Purchaser refuses to consent to the
settlement proposed by Seller to the Authority (the
"Proposed Settlement"), Purchaser shall be obligated
to assume the responsibility for the pending tax
audit at its sole expense, and the limit of Seller's
tax indemnification liability therefor shall be the
lower of (A) the amount of the Proposed Settlement,
and (B) the final settlement of the pending tax audit
as negotiated by Purchaser and the Authority.
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(iii) After the Closing, Seller and
Purchaser agree to cooperate with each other in
connection with any official tax inquiry, tax
determination or tax-related legal proceeding
affecting a tax liability of the Companies in
connection with a determination of any tax liability
or treatment and to make available to each other
party a reasonable amount of time, at no cost to such
party, of its employees and officers, together with
documents, correspondence, reports and other
materials bearing on such tax inquiry, examination,
proceeding or determination of tax liability or
treatment, provided that Seller and Purchaser shall
be reimbursed by the other for any out-of-pocket
expenses they incur in assisting the other party
hereunder. No party shall request a tax audit of the
Companies and Purchaser and the Companies shall not,
without the prior written consent of Seller (i)
extend any statute of limitation with respect to
taxes, or (ii) enter into a settlement or agreement
or take any other action regarding any tax liability
of any of the Companies arising prior to the Closing
Date, except as expressly permitted by this
Agreement.
(d) Section 338(h)(10) Election. Seller will
join with the Purchaser in making an election under Code
Section 338(h)(10) and any corresponding elections under
state, local or foreign tax law (collectively a "Section
338(h)(10) Election") with respect to the purchase and sale of
the stock in ESH and the deemed purchase and sale of Equality
and, if requested by Purchaser within ninety (90) days after
the Closing Date, the deemed purchase and sale of either or
both of Majestic and Stribbons. Purchaser shall cause to be
prepared Forms 8023 and 8023-A no later than 180 days after
the Closing Date which election forms shall be duly executed
on behalf of Purchaser and Seller. Purchaser and Seller each
covenant to duly cause such election forms to be timely filed
in accordance with Code Section 338(h)(10) and the Regulations
promulgated pursuant thereto. Seller shall pay all taxes
(including interest and penalties) attributable to the making
of the Section 338(h)(10) Election and equivalent elections
under state and local law.
(e) Allocation of Purchase Price. Purchaser and
Seller agree that the Purchase Price as specified in Article
2.1 and the liabilities of ESH and Equality and other relevant
items will be allocated to the assets of ESH and Equality
pursuant to and in accordance with an allocation schedule as
set forth in Schedule 11.14.
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Seller and Purchaser agree that such allocation shall be
binding for all purposes, including tax and financial
accounting purposes, and Seller and Purchaser agree that
Seller, Purchaser and the Companies will file all tax returns
(including any amended returns) and information reports in a
manner consistent with such allocation.
(f) Tax Sharing Agreements. Any tax sharing
agreement between Seller and any of the Companies shall
terminate as of the Closing Date and will have no further
effect for any taxable year including, without limitation, the
current taxable year or any past taxable years.
(g) Representations. Seller represents and
warrants that none of the Companies has (i) filed a consent
under Code Section 341(f), or (ii) been a U.S. real property
holding corporation within the meaning of Code Section
897(c)(2).
11.15 LIMITATIONS AND QUALIFICATIONS TO REPRESENTATIONS,
WARRANTIES AND COVENANTS.
(a) Except with respect to the representations and
warranties made by Seller in Sections 3.1, 3.2, 3.3, 3.5(d),
3.7 and 11.14, the representations and warranties made by
Seller under this Agreement shall be deemed qualified by the
phrase "to the Seller's best knowledge" ("Seller's Best
Knowledge"). Seller's Best Knowledge shall mean the actual
knowledge of current executive officers or employees of Seller
with significant involvement in the affairs of Seller, Michael
Friedman and Charles Vaughn, after reasonable inquiry. Seller
shall make reasonable inquiry of such executive officers or
employees of Seller, Michael Friedman and Charles Vaughn as to
its representations, warranties and covenants to ensure their
accuracy.
(b) The terms "material," "materially" and
"materiality" or other variations thereof as applied in this
Agreement with respect to the Companies and their businesses,
contemplate an amount in excess of $75,000.00, except that
with respect to any matter pertaining to income or franchise
tax liability, such amount shall be deemed to be $1,000.00.
Notwithstanding the foregoing, in the event any item or matter
is set forth in a schedule which requires disclosure of
certain "material" matters, the inclusion of such item and
matter in such schedule shall not cause such item or matter to
be deemed "material" unless such item or matter otherwise
satisfies the conditions of the foregoing definition.
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(c) The representations, warranties and covenants
made by Seller in Sections 3.5, 3.6, 3.7, 3.8, 3.13, 3.15,
3.16, 3.17, 3.20, 3.22, 3.24 and 3.26 above are hereby also
made by Seller with respect to Equality Specialties, a division
of Seller, and its predecessor, Equality Specialties, Inc.
11.16 CROSS-DEFAULT. A material breach by a party of its
obligations under any of (i) this Agreement, (ii) the Note, (iii) the
Shareholder Agreements, or (iv) the Covenant Not to Compete shall be considered
a material breach by such party of all of the above documents and consequently
the non-breaching party shall be entitled to exercise any and all rights and
remedies available at law or in equity.
11.17 ACCESS. Purchaser shall cause the Companies to
retain their books and records as they physically exist on the Closing Date for
a period of five (5) years (or such longer time period as typically maintained
by similar companies) from the Closing Date. Seller shall have access to such
books and records, as well as Purchaser's key accounting personnel, on
reasonable notice during normal business hours for any reasonable and necessary
purpose. If Seller desires copies of any such books and records after such
retention period, it shall notify Purchaser and will be permitted to have
copies or make copies of such books and records, provided that Seller bears the
costs and expenses of such copying.
11.18 CAPTIONS. Section and subsection headings are
included herein, or in any Exhibit or Schedule hereto for convenience or
reference only and shall not constitute a part of this Agreement for any other
purposes or be given substantive effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EQUALITY ACQUISITION CORP.,
a Florida corporation
By: /s/ F. Philip Handy
------------------------------------
Name: F. Phillip Handy
----------------------------------
Title: V.P.
---------------------------------
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.,
a Delaware corporation
By:/s/ Gus J. Athas
------------------------------------
Name: Gus J. Athas
----------------------------------
Title: Senior Vice-President
---------------------------------
39
<PAGE> 1
EXHIBIT 6
[WINTER PARK CAPITAL COMPANY LETTERHEAD]
March 21, 1996
Mr. William K. Hall
President and Chief Executive Officer
Eagle Industries, Inc.
Two North Riverside Plaza
Chicago, Ilinois 60606
Dear Bill:
After extensive discussions with our partners and potential lenders, we
are submitting what we hope is our final offer. We believe it represents a
full and fair offer, and we are eager to proceed with the acquisition.
On behalf of an entity to be formed (the "Purchaser"), this letter is
intended to outline the general terms and conditions of a proposed transaction
where Winter Park Capital Company, or its designee, Matthew Ott, David Honig,
and members of the Company's management would acquire all of the stock of The
Parts House, Inc. (the "Company"), owned ultimately by Eagle Industries, Inc.
("Eagle"), subject to the assumption of certain specified liabilities of the
Company (the "Transaction").
1. PURCHASE OF STOCK. Eagle, the ultimate stockholder of the
Company, proposes to sell and Purchaser proposes to acquire all of the stock
(the "Stock") of the Company. If applicable, Eagle and Purchaser shall make a
joint tax election under Section 338(h)(10) to allow Purchaser to step up the
tax basis of the Company's assets. To the extent that the election generates a
cost to the Seller, the Purchaser will pay one-half of that agreed-upon cost.
Purchaser will assume only certain specified obligations and liabilities of the
Company, all as specifically provided for in the Purchase Agreement, but it is
expected that Purchaser will assume the trade payables and accrued business
liabilities, excluding any intercompany liabilities (except to the extent that
items included in the intercompany account represent third party liabilities),
at Closing consistent with those listed on the Company's November 30, 1995,
adjusted balance sheet. Purchaser agrees that the inventory E&O reserve and
the bad debt reserve at Closing shall be the same as those utilized in
determining the attached November 30, 1996, adjusted balance sheet.
2. PURCHASE PRICE. The Purchaser will purchase all the Stock of
The Parts House, Inc., but will grant a warrant (the "Warrant") to Eagle at a
nominal cost for fifteen percent (15%) of the Stock acquired by the Purchaser,
for nineteen million dollars ($19,000,000).
Fourteen million dollars ($14,000,000) of the Purchase Price
will be paid in cash, and the balance of the Purchase Price will be paid with a
subordinated promissory note held by Eagle
<PAGE> 2
Mr. William K. Hall
March 21, 1996
Page 2
(the "Note"). The Note will be in the amount of five million dollars
($5,000,000). Eagle shall negotiate in good faith with the Purchaser's Senior
Lender to determine the terms and conditions of the subordination of the Note.
Such terms and conditions shall be mutually acceptable to Purchaser, Eagle, and
Senior Lender. The Purchaser may prepay the Note at any time without penalty.
3. TERMS OF THE NOTE. The Note will be for a term of seven (7) years
and will bear interest at the rate charged by the Senior Lender plus one percent
(1%). The interest will not be paid but will be accrued for the first two (2)
years, and said accrued interest will be computed semiannually and added to the
principal amount of the Note.
To the extent that the Note is repaid in full within three (3) years of
the Closing, then the Company can retire up to one half (1/2) of the
outstanding Warrant.
4. THE WARRANT. Eagle's Warrant represents fifteen percent (15%) fully
diluted common stock ownership in the Purchaser and is exercisable five (5)
years from the Closing Date at a nominal consideration, or alternatively,
Purchaser may issue Eagle the common stock for the Warrant at Closing. In
either event, the Purchaser may redeem or cancel up to seven and one-half
percent (7 1/2%) prior to the expiration of three (3) years by prepayment of the
Note. For each prepayment of one million dollars ($1,000,000) of principal
during the first thirty-six (36) months, one and one-half percent (1 1/2%) of
the common stock ownership shall be canceled or redeemed.
5. CONTINGENT PAYMENT. The Purchaser also will provide a contingent
payment, which will be determined by the Company's 1996 and 1997 EBITA
performance. To the extent that the Company exceeds nine million eight hundred
thousand dollars ($9,800,000) in EBITA, it will issue additional Notes ("Second
Notes"). The calculation would be that for every dollar over nine million
eight hundred thousand dollars ($9,800,00) in EBITA, the Company would issue an
additional dollar in Second Notes, up to two million dollars ($2,000,000) which
would have the same terms and conditions as the Note and would be added to the
Note as of January 1, 1998. The calculation would be completed by a big six
accounting firm in connection with the Company's 1996 and 1997 year-end audit.
The EBITA calculation would be done exclusive of any purchase accounting
adjustments.
6. CONDITIONS PRECEDENT TO CLOSING.
a. Purchaser or its designee shall complete a satisfactory business,
legal, environmental, and financial due diligence investigation of the
Company.
b. The parties shall negotiate and execute a Definitive Stock
Purchase Agreement (the "Purchase Agreement"), satisfactory in
all respects to the Company, Eagle, and the Purchaser and their respective
counsel, containing usual and customary terms and provisions including
representation, warranties and covenants
<PAGE> 3
Mr. William K. Hall
March 21, 1996
Page 3
on the part of the Company (including but not limited to reasonable
environmental, legal, employment, contract, and financial matters), and
indemnifications in favor of the Purchaser made by the Company and
Eagle for any breach by the Company and Eagle of the representations,
warranties and covenants contained in the Purchase Agreement.
c. All necessary consents and approvals related to the
Transaction shall be received by Purchaser and the Company, including
those necessary from AAAD.
d. Purchaser shall have obtained firm commitments, on
terms acceptable to it, for all financing required to fund the Purchase
Price and to provide sufficient working capital by May 1, 1996.
e. From the date of the Letter of the Closing Date, the
Company shall not have:
(1) increased compensation or other payments to any
employee except increases in the ordinary course of business;
(2) disposed of any capital assets with book value
which exceeds $25,000;
(3) made capital expenditures of more than $100,000;
(4) made any dividends, distributions, or payment
to Eagle (excluding repayment on existing obligations
outstanding to Eagle) or any of its affiliates, or any
payments to consultants, employees, officers, directors, or
other persons of Eagle, the Company, or any of their affiliates
outside the normal course of business. It is expressly
understood that Eagle will be permitted to book activities and
transactions through the intercompany account to the date of
Closing consistent with its prior practices.
f. The Company and Purchaser shall be responsible for
their respective filing and paying their expenses, if any, except those
associated with any Hart-Scott-Rodino filings necessary to the
Transaction which shall be borne by Buyer.
g. Approval by the disinterested majority of Eagle's board
of directors shall be obtained.
7. INSURANCE MATTERS. Eagle has agreed to allow Purchaser to
maintain Purchaser's insurance programs for the Company and operations
associated thereto (the "Business") under Eagle
<PAGE> 4
Mr. William K. Hall
March 21, 1996
Page 4
if upon departure from Eagle's insurance coverage from this Transaction,
Purchaser's insurance costs associated with the Business are materially
higher, provided that and only for so long as the provider of insurance shall
permit Purchaser to maintain these programs.
8. BALANCE SHEET AT CLOSING. The balance sheet of the Company will
be audited at December 31, 1995, and again as of the Closing. The balance
sheet of the Company at the Closing shall have a Minimum Net Investment Amount
of $25,603,000 of which $150,000 is cash. The Minimum Net Investment shall be
calculated as presented on the November 30, 1995, financial statement which is
attached. The Purchase Price shall be decreased for the amount that the actual
Minimum Net Investment Amount at Closing is less than $25,603,000 of which
$150,000 is cash, and increased for any amount greater than $25,603,000 of
which $150,000 is cash. The Company at Closing shall have assets and
liabilities consistent of a type and nature as those on the November 30, 1995,
financial statement. Purchaser shall, subject to the prior approval of Eagle,
work with management of the Company after the date of the Letter of Intent to
protect the Minimum Net Investment of the Company until Closing.
9. TIME FRAME. Purchaser, Eagle, and the Company shall use their best
efforts to conclude negotiations and execute and deliver the Purchase
Agreement by April 19, 1996 (the "Negotiation Period"), and, upon execution of
the Purchase Agreement, shall close the Transaction on or before May 31, 1996
(the "Closing" or the "Closing Date").
10. NO SOLICITATION. During the Negotiation Period, neither the
Company nor Eagle, directly or indirectly, shall solicit or encourage any third
party offer to acquire the assets or stock or disclosure directly or
indirectly to any third party any information not customarily disclosed to a
purchaser concerning the business and properties of the Company or afford to
any third party preparing to make or who has made such an offer access to the
properties, books or records of the Company or otherwise negotiate with,
facilitate, encourage, or assist any third party providing for any transaction
involving a business combination, equity investment, or sale of a significant
amount of the assets.
11. CONFIDENTIALITY. The Company, Eagle, and Purchaser agree that
material disclosed to other parties hereunder to evaluate various aspects of
the Transaction may contain proprietary confidential information and trade
secrets, and that the disclosure and unauthorized use of such information could
cause irreparable injury. The parties agree that all such information and
materials will be used and disclosed only to the limited extent necessary for
the parties hereto (and their professional advisors) to evaluate the
acquisition of the Company by Purchaser as described herein. All extracts,
digests, and copies of such information shall be maintained under strict
control by the recipients. Upon termination of the negotiation by the parties,
no party (or adviser to such party) shall make any further use of such
information and materials, and all materials previously obtained (together
with all copies, abstracts, digest and analysis thereof) shall be returned to
the party providing such information.
<PAGE> 5
Mr. William K. Hall
March 21, 1996
Page 5
12. EXPENSES. Each party hereto shall be responsible for the
payment of its own expenses (including without limitation, the fees of its
counsel, accountants, and financial advisers), except as otherwise set forth
herein.
13. BROKERS. Eagle agrees that Bowles Hollowell Conner & Company
("Bowles Hollowell") has assisted in the Transaction, and Eagle shall pay any
fees to Bowles Hollowell, and accordingly, they indemnify Purchaser against any
and all brokerage fees incurred by them in this Transaction, and Purchaser
agrees that it will pay a brokerage fee to Winter Park Capital Company for the
Transaction and shall indemnify Eagle from any brokerage fees incurred by them.
14. This Letter of intent supersedes and is in lieu of the letter
of intent between the parties dated January 15, 1996, and shall be null and
void if the parties do not enter into a Purchase Agreement by April 19,
1996. If the foregoing correctly states the general understanding that has been
reached among us, please so indicate by signing in the space provided and
returning one of the enclosed letters to Purchaser. This letter of intent does
not represent a binding agreement, except for Paragraphs 11, 12, and 13 hereof,
and is subject to execution of the Purchase Agreement for the subject matter in
this letter.
Very truly yours,
WINTER PARK CAPITAL COMPANY
By: F. PHILIP HANDY
--------------------------------
F. Philip Handy, President
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Matthew Ott
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David Honig
ACCEPTED AND AGREED:
EAGLE INDUSTRIES, INC.
By: Gus J. Athas - Senior Vice-President
-------------------------------------
Date: March 22, 1996
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