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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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GRIST MILL CO.
(Name of Subject Company)
GRIST MILL CO.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(AND ASSOCIATED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
398629204
(CUSIP Number of Class of Securities)
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GLEN S. BOLANDER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
GRIST MILL CO.
21340 HAYES AVENUE
LAKEVILLE, MINNESOTA 55044-0430
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
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With a copy to:
CHARLES H. PERLMAN, ESQ.
BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG
333 WEST WACKER DRIVE, SUITE 2700
CHICAGO, ILLINOIS 60606
(312) 984-3100
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Grist Mill Co., a Delaware corporation
(the "Company"), and the address of the principal executive office of the
Company is 21340 Hayes Avenue, Lakeville, Minnesota 55044-0430. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 (this "Schedule 14D-9" or this "Statement") relates is common
stock, par value $.10 per share, of the Company (the "Common Stock"), including
the associated rights to purchase shares of Common Stock issued pursuant to the
Rights Agreement (the "Rights Agreement") dated May 22, 1996, between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent, as amended (the
"Rights", and together with the Common Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by IHF/GM Acquisition
Corporation, a Delaware corporation ("Purchaser"), a direct wholly owned
subsidiary of IHF/GM Holding Corporation, a Delaware corporation ("Parent"), and
an indirect wholly owned subsidiary of International Home Foods, Inc., a
Delaware corporation ("IHF"), disclosed in a Tender Offer Statement on Schedule
14D-1 dated March 17, 1998 (the "Schedule 14D-1"), to purchase all outstanding
Shares at a purchase price of $14.50 per Share (the "Offer Consideration"), net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated March 17, 1998 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements thereto, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of March 10, 1998, among IHF, Parent, Purchaser and the Company (the "Merger
Agreement" and together with the Stockholder Agreement and the Option Release
Agreements (each as hereinafter defined), the "Transaction Documents"). The
Merger Agreement provides, among other things, for the commencement of the Offer
by Purchaser and further provides that, following the consummation of the Offer
and subject to the satisfaction or waiver of certain conditions, Purchaser will
be merged with and into the Company (the "Merger"), and the Company will
continue as the surviving corporation as a direct wholly owned subsidiary of
Parent and an indirect wholly owned subsidiary of IHF (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"), among
other things, each share of Common Stock issued and outstanding immediately
prior to the Effective Time (excluding shares of Common Stock owned, directly or
indirectly, by the Company or any wholly owned subsidiary of the Company or
owned by IHF, Parent, Purchaser or any other wholly owned subsidiary of Parent
or IHF, which shares shall be canceled pursuant to the Merger Agreement, and
other than shares of Common Stock ("Dissenting Shares") held by stockholders who
shall have fully complied with the statutory procedures set forth in the General
Corporation Law of the State of Delaware (the "DGCL") for the assertion of
appraisal rights in respect of such shares) will be canceled and converted
automatically into the right to receive an amount equal to the Offer
Consideration, or such higher price, if any, as is paid in the Offer (the
"Merger Consideration"), payable to the holder thereof in cash, without any
interest thereon, less any required withholding taxes, upon surrender and
exchange of the certificate representing such share of Common Stock. In
connection with the Merger, each then outstanding option to purchase or acquire
shares of Common Stock under the Company's 1986 Non-Qualified Stock Option Plan
(the "Stock Option Plan"), whether or not then exercisable or vested
(collectively, the "Options"), will be, except under certain circumstances
relating to persons subject to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), canceled and will represent the right to
receive an amount (subject to any applicable withholding tax) in cash for each
share of Common Stock subject to such Option equal to the difference between the
per share Merger Consideration and the per share exercise price of such Option
to the extent such difference is a positive number.
Pursuant to the Merger Agreement, the Company has granted to Purchaser an
irrevocable option (exercisable only if (a) the Funding Date (as defined herein)
shall have occurred, (b) upon such exercise, Purchaser shall own at least 90% of
the then outstanding shares of Common Stock and (c) such exercise would not
violate applicable law) to purchase an indeterminate number of shares of Common
Stock equal to the Applicable Common Share Amount (as hereinafter defined). As
used in the Merger Agreement, the term
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"Funding Date" means the date that funds necessary to pay for the Shares
accepted for payment pursuant to the Offer have been tendered to the paying
agent as provided for in the Merger Agreement.
Concurrently with the execution of the Merger Agreement, Purchaser and
Parent entered into a Stockholder Agreement, dated March 10, 1998 (the
"Stockholder Agreement"), with the Company and Glen S. Bolander, the President
and Chief Executive Officer of the Company (the "Selling Stockholder"), who has
(i) agreed to tender into the Offer an aggregate of 403,899 Shares, (ii) granted
to Purchaser an option (exercisable under certain circumstances as provided in
the Stockholder Agreement) to purchase up to an aggregate of 245,000 shares of
Common Stock, consisting of certain shares of Common Stock beneficially owned by
the Selling Stockholder as a result of the exercise of certain Options, and
(iii) granted to Parent an irrevocable proxy to vote such shares of Common
Stock, in each event, prior to any termination of the Merger Agreement.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser are located at 1633 Littleton Road, Parsippany, New Jersey 07054.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Statement are to the
"Company" and its direct subsidiaries, viewed as a single entity.
(b) Except as described herein and in Annex A hereto, to the knowledge of
the Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings, or any actual or potential conflicts of interest
between the Company or its affiliates and (1) the Company, its executive
officers, directors or affiliates; or (2) IHF, the Parent or the Purchaser,
their respective officers, directors and affiliates.
In considering the recommendation of the Board of Directors set forth in
Item 4 below the Company's stockholders should be aware that certain members of
the Company's management and certain members of the Company's Board of Directors
have interests in the Offer and the Merger, which are described herein and in
Annex A hereto and which may present them with certain conflicts of interest.
The Board of Directors was aware of these potential conflicts and considered
them along with the other factors described in Item 4 below.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the
Commission (as hereinafter defined) as an exhibit to the Schedule 14D-1. The
Merger Agreement may be examined, and copies thereof may be obtained, as set
forth in Section 8 of the Schedule 14D-1.
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which Purchaser and Parent have expressly reserved the right
to amend or modify the terms of the Offer at any time prior to acceptance of
Shares for payment pursuant to the Offer; except that without the prior written
consent of the Company (which consent may be withheld in the Company's sole
discretion), Purchaser shall not (and Parent shall cause Purchaser not to) (i)
decrease the Offer Consideration, change the form of the Offer Consideration or
decrease the number of Shares sought pursuant to the Offer; (ii) amend or waive
the Minimum Condition (as hereinafter defined); (iii) extend the expiration date
of the Offer which shall initially be not less than 20 business days after the
date the Offer is commenced; provided, however, that, Purchaser may extend the
expiration date of the Offer in certain circumstances. The Offer is conditioned
upon, among other things, (i) there being validly tendered and not withdrawn
prior to the Expiration Date (as hereinafter defined) a number of Shares which
constitutes a majority of the Shares outstanding on a fully-diluted basis on the
date of purchase ("on a fully diluted basis" meaning, as of any date, the number
of Shares outstanding, together with the shares of Common Stock, if any, which
the Company may be required to issue, now or in the future, including, without
limitation, shares of Common Stock issuable pursuant to options (including,
without limitation, the Options), warrants or other rights (excluding the Rights
until the earlier of the occurrence, if at all, of a Flip-In-Event or a Stock
Acquisition Date (in each case as defined in the Rights Agreement) or
obligations outstanding at that date) (the "Minimum Condition"), (ii) the debt
financing
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necessary for the consummation of the Offer having been received by Parent and
(iii) the expiration or termination prior to the expiration of the Offer of all
waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). Assuming the prior satisfaction or waiver of
the conditions to the Offer, Purchaser shall accept for payment, and pay for, in
accordance with the terms of the Offer, all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the Expiration
Date. The Company will not, nor will it permit any of its subsidiaries to,
tender into the Offer any Shares beneficially owned by it. As used in the Offer,
the term "Expiration Date" shall mean 12:00 Midnight, New York City time, on
April 13, 1998, unless and until Purchaser, in accordance with the terms of the
Offer and the Merger Agreement, shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by Purchaser, shall
expire.
Board Representation. The Merger Agreement provides that upon the purchase
by Purchaser pursuant to the Offer of such number of Shares which represents a
majority of the outstanding shares of Common Stock (on a fully diluted basis),
and from time to time thereafter, the parties to the Merger Agreement agree to
cause to be elected to the Board of Directors of the Company such number of
directors designated by Purchaser, rounded up to the next whole number (but in
no event more than two less than the total number of directors on the Board of
Directors of the Company, as such number may be increased as provided herein),
as will give Purchaser, subject to compliance with Section 14(f) of the Exchange
Act, representation on the Board of Directors of the Company equal to the
product of (i) the number of directors on the Board of Directors of the Company
(giving effect to any increase in the number of directors pursuant to the Merger
Agreement) and (ii) the percentage ("Board Percentage") that such number of
Shares so purchased bears to the aggregate number of Shares outstanding. The
Company has agreed, upon request by Purchaser and subject to applicable law, to
promptly satisfy the Board Percentage by (A) increasing the size of the Board of
Directors of the Company or (B) using its reasonable efforts to secure the
resignations of such number of directors as is necessary to enable Purchaser's
designees to be elected to the Board of Directors of the Company and to cause
Purchaser's designees promptly to be so elected, provided that no such action
shall be taken which would result in there being, prior to the consummation of
the Merger, less than two directors of the Company who are Continuing Directors
(as hereinafter defined), except to the extent that all Continuing Directors
have resigned. The Company shall promptly amend or cause to be amended, its
bylaws, if necessary, to increase the size of the Board of Directors of the
Company if such increase is required to satisfy the Board Percentage pursuant to
the Merger Agreement. The Company has agreed to take, at Purchaser's expense and
at Purchaser's request, any lawful action necessary to effect any such election,
including, without limitation, mailing to the Company's stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder (provided that Purchaser has provided the information
described in the following sentence), which information is included as Annex A
hereto. Purchaser has agreed to supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
directors and affiliates required by Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The term "Continuing Director" means (1) each member of the
Board of Directors immediately prior to the acceptance for payment of Shares
tendered pursuant to the Offer or (2) any director elected or appointed to fill
any vacancy or newly created directorship after the date of the Merger Agreement
who is (x) recommended or elected, as the case may be, by a majority of the
Continuing Directors then on the Board of Directors of the Company and (y) not
affiliated with, and not a designee or nominee of, Parent or Purchaser.
Consideration to be Paid in the Merger. The Merger Agreement provides that
upon the terms and subject to the conditions set forth in the Merger Agreement,
and in accordance with the DGCL, Purchaser will be merged with and into the
Company, with the Company continuing as the Surviving Corporation and as a
direct wholly owned subsidiary of Parent or its successor. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of shares of Common Stock or any holder of shares of capital stock of Purchaser:
(i) each share of capital stock of Purchaser issued and outstanding immediately
prior to the Effective Time will be converted into and become a number of fully
paid and nonassessable shares of common stock, par value $0.10 per share, of the
Surviving Corporation equal to the quotient realized by dividing (A) the sum of
(1) the aggregate number of shares of Common Stock issued and outstanding
immediately prior to the Effective Time, (2) the aggregate number of shares of
Common Stock that are
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owned by and held in the treasury of the Company immediately prior to the
Effective Time and (3) the aggregate number of shares of Common Stock issuable,
immediately prior to the Effective Time, in respect of all then outstanding
Options, by (B) the aggregate number of shares of capital stock of Purchaser
issued and outstanding immediately prior to the Effective Time, (ii) each share
of Common Stock and all other shares of capital stock of the Company that are
owned, directly or indirectly, by the Company or any wholly owned subsidiary of
the Company, or by IHF, Parent or Purchaser or any other wholly owned subsidiary
of Parent or IHF will be canceled and retired and will cease to exist, and no
consideration will be delivered or deliverable in exchange therefor, and (iii)
each share of Common Stock issued and outstanding immediately prior to the
Effective Time (excluding shares of Common Stock owned, directly or indirectly,
by the Company or any wholly owned subsidiary of the Company, or by IHF, Parent
or Purchaser or any other wholly owned subsidiary of Parent or IHF, and
Dissenting Shares) will be converted into the right to receive an amount in cash
equal to the Offer Consideration, or such higher price, if any, as is paid in
the Offer, payable to the holder thereof in cash, without any interest thereon,
less any required withholding taxes, upon surrender and exchange of the
certificate or certificates which immediately prior to the Effective Time,
evidenced the outstanding shares of Common Stock, pursuant to the terms of the
Merger Agreement.
Stockholder Meeting. The Merger Agreement provides that as soon as
practicable following the acceptance for payment of and payment for Shares by
Purchaser in the Offer, the Company and Parent will prepare and file a proxy
statement or information statement (if required by applicable law) in
preliminary form relating to a meeting of the Company's stockholders to adopt
the Merger Agreement (as may be amended from time to time, the "Proxy
Statement") with the Securities and Exchange Commission (the "Commission").
Pursuant to the Merger Agreement, the Company will use all reasonable efforts to
respond to all Commission comments with respect to the Proxy Statement and to
cause the Proxy Statement to be mailed to the stockholders at the earliest
practicable date. The Merger Agreement also provides that the Company will, as
soon as practicable following the acceptance for payment of and payment for
Shares by Purchaser in the Offer, duly call, give notice of, convene and hold a
meeting (the "Special Meeting") of its stockholders for the purpose of adopting
the Merger Agreement or, in lieu of such meeting, Parent and Purchaser, as soon
as practicable following the Funding Date shall cause the Merger Agreement to be
adopted by written consent of stockholders. At the Special Meeting (or in
connection with any consent in lieu thereof), Parent shall cause all the shares
of Common Stock then owned by Parent or Purchaser to be voted in favor, or
consented to, the adoption of the Merger Agreement. Notwithstanding the
foregoing, in the event Parent and Purchaser acquire in the aggregate at least
90% of the outstanding shares of Common Stock in the Offer, the parties to the
Merger Agreement have agreed to take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable after the
expiration of the Offer, without a meeting of the Company's stockholders in
accordance with the "short form" merger provisions set forth in Section 253 of
the DGCL.
If the Minimum Condition is satisfied and Purchaser acquires less than 90%
of the outstanding shares of Common Stock pursuant to the Offer, Purchaser
intends to exercise one or both of the options, if then exercisable, granted by
the Company, pursuant to the Merger Agreement, and by the Selling Stockholder,
pursuant to the Stockholder Agreement, in order to acquire an aggregate number
of shares of Common Stock in excess of 90% of the outstanding shares of Common
Stock, thereby permitting Purchaser to effect the Merger pursuant to the
"short-form" merger provisions of Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to: corporate
organization and qualification, subsidiaries, capitalization, the authority of
the Company to enter into the Merger Agreement and the other Transaction
Documents and to consummate the transactions contemplated thereby,
noncontravention, consents and approvals, filings with the Commission,
compliance with law, litigation, taxes, employee benefit plans, absence of
certain changes or events, the receipt of the ABN AMRO Opinion (as defined in
Item 4 hereof), labor matters, intellectual property rights, environmental
matters, title to property and brokers.
The Merger Agreement also includes representations and warranties by IHF,
Parent and Purchaser regarding: corporate organization and qualification, the
authority of IHF, Parent and Purchaser to enter into the Merger Agreement and
the other Transaction Documents to which each is a party and to consummate the
transaction contemplated thereby, non-contravention, compliance with laws,
Commission filings and financing.
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Conduct of Business Pending the Merger. The Company has agreed as to the
Company and its subsidiaries that during the period from the date of the Merger
Agreement and continuing until the designees of Purchaser have been appointed to
the Board of Directors of the Company pursuant to certain provisions of the
Merger Agreement (as previously described), except as expressly contemplated or
permitted by the Transaction Documents or to the extent that Parent shall
otherwise consent in writing: (i) the Company will, and will cause each of its
subsidiaries to, carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as conducted prior to the date of the
Merger Agreement; and (ii) the Company will, and will cause each of its
subsidiaries to, use all reasonable efforts to (a) preserve intact its present
business organization and goodwill, maintain its rights and franchises, and
retain the services of its current officers and key employees and preserve its
relationships with customers, suppliers and others having business dealings with
it, (b) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain supplies
and inventories in quantities consistent with its customary business practice,
(c) keep in full force and effect insurance and bonds comparable in amount and
scope of coverage to that currently maintained, and (d) maintain in effect all
existing Company permits, and timely apply for and obtain any additional Company
permits that are or will be required for current or currently planned
operations. The Company has further agreed that during the period from the date
of the Merger Agreement and continuing until the designees of Purchaser have
been appointed to the Board of Directors of the Company pursuant to certain
provisions of the Merger Agreement (as previously described), except as
expressly contemplated by the Transaction Documents or to the extent that Parent
shall otherwise consent in writing, it shall not, and shall not permit any of
its subsidiaries to: (i) declare or pay any dividends on or make any other
distributions in respect of any of its capital stock (except for cash dividends
paid to the Company by its wholly-owned subsidiaries with regard to its capital
stock), or set aside funds therefor; (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution, for shares of its
capital stock; (iii) repurchase or otherwise acquire any shares of its capital
stock, except as required by the terms of its securities outstanding or any
employee benefit plan in effect on the date of the Merger Agreement, or set
aside funds therefor; (iv) other than in accordance with the Rights Agreement,
(a) grant any options, warrants or other rights to purchase shares of capital
stock; (b) amend the terms of or reprice any Option outstanding on the date of
the Merger Agreement or amend the terms of the Stock Option Plan; or (c) except
for Shares issuable pursuant to Options outstanding on the date of the Merger
Agreement and except for issuances of capital stock of the Company's
subsidiaries to the Company or to a wholly owned subsidiary, issue, deliver or
sell, or authorize or propose to issue, deliver or sell, any shares of its
capital stock, any bonds, debentures, notes or other instruments or evidence of
indebtedness of the Company ("Company Debt") or of any subsidiary of the Company
("Subsidiary Debt") or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Company Debt or Subsidiary Debt; (v)
amend or propose to amend its certificate of incorporation or bylaws; (vi) (a)
merge or consolidate with, or acquire any equity interest in, any corporation,
partnership, association or other business organization, or enter into an
agreement with respect thereto, (b) acquire or agree to acquire any material
assets, except for the purchase of inventory and supplies in the ordinary course
of business and except for capital expenditures otherwise permitted by the
Merger Agreement, or (c) make any loan or advance to, or otherwise make any
investment in, any person in excess of $25,000, other than loans or advances to,
or investments in, a wholly owned subsidiary of the Company existing on the date
of the Merger Agreement; (vii) sell, lease, encumber or otherwise dispose of, or
agree to sell, lease (whether such lease is an operating or capital lease),
encumber or otherwise dispose of, any of its material assets (including, without
limitation, any capital stock or other ownership interest of any subsidiary of
the Company), other than sales of inventory or sales or returns of obsolete or
surplus equipment in the ordinary course of business consistent with past
practice; (viii) authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation or dissolution; (ix) except as may be
required by law or pursuant to any of the Benefit Plans or Employee Arrangements
existing on the date of the Merger Agreement (each as defined in the Merger
Agreement), (a) grant any increases in the compensation of any of its directors,
officers, management employees or key employees, (b) pay or agree to pay any
pension, retirement allowance or other employee benefit to any director,
officer, management employee or key employee, whether past or present, (c) enter
into any new, or materially amend any existing, employment or severance or
termination agreement with any person, (d) except as may be required to comply
with applicable
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law, become obligated under any new Benefit Plan or Employee Arrangement, which
was not in existence on the date of the Merger Agreement, or amend any such plan
or arrangement in existence on the date of the Merger Agreement if such
amendment would have the effect of materially enhancing any benefits thereunder,
(e) grant any general increase in compensation (including without limitation,
salary, bonus and other benefits) to employees, except for increases occurring
in the ordinary course of business, consistent with past practice, or (f) extend
any loans or advances to any of its directors, officers, management employees or
key employees, except for ordinary course of business advances for business
related expenses; (x) (a) assume or incur any indebtedness for borrowed money
(except for drawdowns by the Company under its existing revolving credit
facility made in the ordinary course of business consistent with past practice),
(b) guarantee any such indebtedness, (c) issue or sell any debt securities or
warrants or rights to acquire any debt securities, (d) guarantee any debt
obligations of any other person except obligations of wholly owned subsidiaries
of the Company, (e) enter into any lease (whether such lease is an operating or
capital lease), (f) create any lien (other than permitted encumbrances) on the
property of the Company or any of its subsidiaries, or (g) enter into any "keep
well" or other agreement or arrangement to maintain the financial condition of
any other person except wholly owned subsidiaries of the Company; (xi) (a) enter
into any contacts involving aggregate annual payments in excess of $100,000, or
(b) modify, rescind, terminate, waive, release or otherwise amend in any
material respect any of the terms or provisions of any material contract; (xii)
other than as required by the Commission, by law or by generally accepted
accounting principles, make any changes with respect to accounting policies,
procedures and practices; (xiii) except as otherwise disclosed in the Merger
Agreement, incur capital expenditures in excess of (a) $45,000 individually and
(b) $400,000 in the aggregate; (xiv) engage in or permit any transaction or act
which, if it had been engaged in or permitted prior to the date of the Merger
Agreement, would have rendered untrue in any material respect any of the
representations and warranties of the Company contained in the Merger Agreement;
(xv) deposit or otherwise invest any cash on hand into accounts, securities or
other instruments having a maturity of more than 30 days or that will impose
payment or penalty upon liquidation within 30 days of such deposit or
investment; or (xvi) agree to or make any commitment to, whether orally or in
writing, take any actions prohibited by the Merger Agreement.
Other Agreements. The Company has agreed to (and to cause each of its
subsidiaries to) afford access, upon reasonable notice, to Parent and Purchaser
during the period prior to the Effective Time to all its properties, books,
contracts, commitments and records. During the period prior to the Effective
Time, the Company will (and will cause each of its subsidiaries to) furnish
Parent and Purchaser with: (i) a copy of each report, schedule, registration
statement and other document filed by it or received from the Commission during
such period, and (ii) all other information concerning its business, properties
and personnel as Parent and Purchaser may reasonably request.
Employee Benefit Plans. In the Merger Agreement, the parties have agreed
that on and after the Effective Time, officers and employees of the Company and
the officers and employees of its subsidiaries will be provided employee
benefits, plans and programs substantially similar in the aggregate to those
generally made available by the Company or its subsidiaries to its officers and
employees as of the date of the Merger Agreement. For purposes of eligibility to
participate and vesting in all benefits provided to the officers and employees
of the Company and the officers and employees of its subsidiaries will be
credited with their years of service with the Company and its subsidiaries and
prior employers to the extent service with the Company and its subsidiaries and
prior employers is taken into account under plans of the Company and its
subsidiaries. With respect to determining employee bonuses under the Company's
Annual Incentive Program for Fiscal Year June 1, 1997 -- May 31, 1998, the
revenues and financial results of the Company for its fiscal year 1998 shall be
calculated without regard to the effects of the Offer, the Merger, the Merger
Agreement and the other transactions contemplated thereby, including, without
limitation, the payment by the Company of investment banker, legal, accounting
and other professional fees related to the Merger Agreement and the transactions
contemplated thereby. At the Effective Time, the Surviving Corporation shall
adopt a severance plan in the form attached to the Merger Agreement and shall
keep such plan in effect for a period of not less than one year.
Indemnification and Insurance. The Merger Agreement provides that, until
six years from the Effective Time, unless otherwise required by applicable law,
the certificate of incorporation and bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to the elimination of
liability of directors and the indemnification of (and advancement of expenses
to) directors, officers, employees and agents that are
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set forth in the certificate of incorporation and bylaws of the Company, as in
effect as of the date of the Merger Agreement. The Merger Agreement provides
that IHF and Parent will cause to be maintained for a period of not less than
six years from the Effective Time, the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time ("D&O Insurance") for
all persons who are directors and officers of the Company on the date of the
Merger Agreement and for all former directors and of officers of the Company, so
long as the annual premium therefor would not be in excess of 150% of the last
annual premium therefor paid prior to the date of the Merger Agreement (the
"Maximum Premium"); provided, however, that Parent may, in lieu of maintaining
such existing D&O Insurance as provided above, cause coverage to be provided
under any policy maintained for the benefit of Parent or any of its affiliates,
so long as the terms thereof are no less advantageous to the intended
beneficiaries thereof than the existing D&O Insurance. The Merger Agreement
provides that if the existing D&O Insurance expires, is terminated or canceled
during such six-year period, IHF and Parent have agreed to use all reasonable
efforts to cause to be obtained as much D&O Insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the Maximum
Premium, on terms and conditions no less advantageous to the covered persons
than the existing D&O Insurance. The Company has represented to Parent that the
Maximum Premium is $35,000.
The Merger Agreement provides that, from and after the Effective Time, IHF
and the Surviving Corporation will, jointly and severally, indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
of the Merger Agreement or who becomes prior to the Effective Time, any officer,
director, employee or agent of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against all losses, reasonable
expenses (including reasonable attorneys' fees), claims, damages, liabilities or
amounts that are paid in settlement of, or otherwise in connection with, any
threatened or actual claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part on or arising in whole or in part out of the
fact that the Indemnified Party (or the person controlled by the Indemnified
Party) is or was a director, officer, employee or agent of the Company or any of
its subsidiaries and pertaining to any matter existing or arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, any Claim arising out of the Merger Agreement or any of the
transactions contemplated thereby), whether asserted or claimed prior to, at or
after the Effective Time, in each case to the fullest extent permitted under
Delaware law, and shall pay any expenses, as incurred, in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware law.
No Solicitation. The Company has agreed that: (A) from and after the date
of the Merger Agreement, until the termination of the Merger Agreement, the
Company will not, and will cause its Representatives (as defined below),
subsidiaries and the Representatives of its subsidiaries not to, directly or
indirectly, (i) initiate, solicit or knowingly encourage (including by way of
furnishing information or assistance), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal (as defined below), (ii) enter
into any agreement contemplating an Acquisition Proposal, (iii) maintain or
continue discussions or negotiations with any person or entity in furtherance of
such inquiries or for the purpose of obtaining an Acquisition Proposal, (iv)
agree to or endorse any Acquisition Proposal, (v) without the prior written
consent of Parent, amend the Rights Agreement, or (vi) release any third party
from any standstill or confidentiality agreement, or waive or amend any
provision thereof, to which it is a party; and (B) the Company will notify
Parent orally (within one business day) and in writing (as promptly as
practicable) of all the relevant details relating to, and all material respects
of (including the identity of the person or entity making such inquiry or
proposal), all inquiries and proposals which it or any of its subsidiaries or
any of their respective Representatives may receive relating to any of such
matters and, if such inquiry or proposal is in writing, the Company shall
deliver to Parent a copy of such inquiry or proposal as promptly as practicable.
Notwithstanding the foregoing, prior to the acceptance of Shares for payment
pursuant to the Offer, the Board of Directors of the Company may:
(i) following the receipt of an unsolicited written, bona fide
Acquisition Proposal, (A) furnish information to, or enter into discussions
or negotiations with, the person or entity that makes such Acquisition
Proposal; or (B) (1) withdraw, modify or not make a recommendation to the
Company's stockholders to accept the Offer and adopt the Merger Agreement
if such adoption is required by law, or
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<PAGE> 9
(2) terminate the Merger Agreement pursuant to the provisions of the Merger
Agreement and contemporaneously entering into an agreement relating to such
Acquisition Proposal (provided that, in the case of this subclause (B), the
Board of Directors of the Company has in good faith determined that the
person or entity making the Acquisition Proposal has, or is reasonably
likely to have, the necessary funds or has obtained, or is reasonably
likely to obtain, customary commitments to provide the funds to consummate
such Acquisition Proposal and such Acquisition Proposal is more favorable
to the Company and its stockholders than the transactions contemplated by
the Merger Agreement); if, and only to the extent that (x) in the case of
either clause (A) or (B) above, the Board of Directors of the Company,
after consultation with its legal counsel (who may be the Company's
regularly engaged legal counsel), determines in good faith that such action
is advisable for the Board of Directors of the Company to act in the best
interest of the Company and the Stockholders under applicable law and (y)
prior to taking such action, the Company (I) in the case of either clause
(A) or (B) above, provides reasonable prior notice to Parent to the effect
that it is taking such action, which notice shall (to the extent consistent
with the fiduciary duties of the Board of Directors to stockholders under
applicable law) include the identity of the person or entity engaging in
such discussions or negotiations, requesting such information or making
such Acquisition Proposal, and the material terms and conditions of any
Acquisition Proposal, (II) in the case of clause (A) above, receives from
such person or entity making such Acquisition Proposal an executed
confidentiality and standstill agreement having terms no more favorable to
such person or entity than those terms included in the Confidentiality
Agreement and the Standstill Agreement (each as hereinafter defined), and
(III) in the case of clause (A) above, the Company will, to the extent
consistent with the fiduciary duties of the Board of Directors of the
Company to stockholders under applicable law, promptly and continuously
advise Parent as to all of the relevant details relating to, and all
material aspects of, any such discussions or negotiations; or
(ii) take or disclose to the stockholders of the Company a position
contemplated by Rule 14e-2 of the Exchange Act if, after receipt of an
unsolicited written bona fide Acquisition Proposal, the Board of Directors
of the Company, after consultation with its legal counsel (who may be the
Company's regularly engaged counsel), determines in good faith that such
action is advisable for the Board of Directors of the Company to act in the
best interest of the Company and its Stockholders.
Except for the confidentiality and standstill agreement referred to above,
and the agreement relating to an Acquisition Proposal entered into
contemporaneous with terminating the Merger Agreement and subject to applicable
termination provisions of the Merger Agreement, nothing in the Merger Agreement
will permit the Company to enter into any agreement with respect to any
Acquisition Proposal during the term of the Merger Agreement. In the Merger
Agreement, the Company agreed to immediately cease and cause to be terminated
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted by the Company or any Representatives
with respect to any Acquisition Proposal existing on the date of the Merger
Agreement.
"Acquisition Proposal" is defined in the Merger Agreement to mean any
agreement or offer (other than the transactions among the Company, Parent and
Purchaser contemplated by the Merger Agreement) involving the Company or any of
its subsidiaries for: (i) any merger, consolidation, share exchange,
recapitalization, reorganization, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of a material portion of the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions; or (iii) any tender offer or exchange offer for all or any portion
of the outstanding shares of capital stock of the Company or any of its
subsidiaries or the filing of a registration statement under the Securities Act
in connection therewith.
"Representative" is defined in the Merger Agreement to mean that person's
employees, officers, directors, representatives (including without limitation,
any investment banker, attorney or accountant), agents or affiliates.
Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring
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<PAGE> 10
such expenses, except (i) as otherwise provided below, and (ii) with respect to
claims for damages incurred as a result of a material breach of the Merger
Agreement.
If the Merger Agreement is terminated: (i) by Parent prior to acceptance of
Shares for payment pursuant to the Offer if (A) the Board of Directors of the
Company (whether or not under circumstances permitted by the Merger Agreement)
shall have failed to make the recommendation contemplated by the Merger
Agreement in the Offer to Purchase and related documents and the Proxy Statement
or shall have withdrawn or modified, in any manner which is adverse to Parent,
its recommendation or approval of the Offer, the Merger or the Merger Agreement
and the transactions contemplated thereby, or shall have resolved to do so, it
being understood that a communication by the Board of Directors of the Company
to the stockholders of the Company pursuant to Rule 14d-9(e)(3) of the Exchange
Act (or any similar communication to the stockholders in connection with the
amendment of a tender or exchange offer) is not to be deemed to constitute such
a withdrawal or modification, (B) the Board of Directors of the Company shall
have recommended to the stockholders any Acquisition Proposal, or resolved to do
so, (C) a tender offer or exchange offer for 50% or more of the outstanding
shares of capital stock of the Company has been commenced (other than by
Purchaser or its affiliates) and the Board of Directors of the Company fails to
recommend, within the time period required by Rule 14e-2 of the Exchange Act,
against the stockholders tendering their shares into such tender offer or
exchange offer or (D) an Acquisition Proposal has been publicly announced by the
Company and the Company shall fail to publicly reaffirm its approval or
recommendation of the Offer, the Merger and the Merger Agreement on or before
the tenth business day following the date on which such Acquisition Proposal
shall have been announced; provided that Parent may condition the effectiveness
of such termination upon receipt by Parent or its designee of the amounts that
are payable to Parent or its designee under the Merger Agreement; or (ii) by the
Company prior to acceptance of Shares for payment pursuant to the Offer because
it shall have received an unsolicited written, bona fide Acquisition Proposal in
accordance with the provisions described above under "No Solicitation"; unless
and until (i) Parent receives at least five days' prior written notice (which
notice shall include the identity of the person or entity making the relevant
Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal and the material terms and conditions of any agreements or arrangements
to be entered into in connection with such Acquisition Proposal with any party
to the Stockholder Agreement with respect to his then existing agreements and
arrangements with the Company, to the extent known to the Company) from the
Company of its intention to effect such termination, and (ii) if during such
five-day period Parent shall have revised the terms and conditions of the Offer
or the Merger, the Board of Directors of the Company, after receiving advice
from the Company's financial and legal advisors, shall have determined in good
faith that the terms and conditions of the Acquisition Proposal giving rise to
such termination right are superior to those of the Offer and the Merger as so
revised then, in each case, the Company shall pay to Parent or Parent's
designee, contemporaneously with termination of the Merger Agreement, the
following amount in immediately available funds: a fee amount of $3,362,711, and
such amount, not to exceed $250,000, as may be required to reimburse IHF, Parent
and Purchaser for all reasonable out-of-pocket fees, costs and expenses incurred
by IHF, Parent or Purchaser in connection with their due diligence efforts or
the transactions contemplated in the Transaction Documents, including, without
limitation, (x) fees, costs and expenses of accountants, escrow agents, legal
counsel, financial advisors and other similar advisors, (y) fees paid to any
governmental entity and (z) fees, costs and expenses paid or payable to
financing sources.
Any amounts due under such provisions that are not paid when due shall bear
interest at the prime rate of interest as announced from time to time by The
Chase Manhattan Bank, plus 1% from the date due through and including the date
paid.
Appraisal Rights. The Company has agreed not to settle or compromise any
claim for appraisal rights in respect of the Merger without the prior consent of
Parent, which consent shall not be unreasonably withheld.
Grant of Common Share Option. The Company has agreed to grant to Purchaser
an irrevocable option (the "Common Share Option") to purchase for a per share
price equal to the per share Merger Consideration in cash a number of shares of
Common Stock (the "Optioned Common Shares") equal to the Applicable
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<PAGE> 11
Common Share Amount. The "Applicable Common Share Amount" shall be the lesser
of: (i) the number of shares of Common Stock which, when added to the number of
shares of Common Stock owned by Purchaser immediately prior to the exercise of
the Common Share Option, would result in Purchaser owning immediately after the
exercise of the Common Share Option 90% of the then outstanding shares of Common
Stock and (ii) the number of shares of Common Stock represented by (x) the total
authorized number of shares of Common Stock under the Company's certificate of
incorporation less (y) the sum of the number of shares of Common Stock
outstanding plus the number of shares of Common Stock reserved for issuance,
subscribed for or otherwise committed for issuance. Purchaser may exercise the
Common Share Option only if (a) the Funding Date shall have occurred, (b) upon
such exercise, it shall own at least 90% of the then outstanding shares of
Common Stock and (c) such exercise would not violate applicable law. The Common
Share Option shall expire if not exercised prior to the earlier of the Effective
Time and 12:00 Midnight, New York City time on the date 15 business days after
the Funding Date.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to the Merger Agreement to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Closing Date: (i) adoption of the Merger Agreement by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote thereon if such vote is required by applicable law; provided that the
Parent and Purchaser shall vote all shares of Common Stock purchased pursuant to
the Offer or the Stockholder Agreement in favor of adoption of the Merger
Agreement; (ii) termination or expiration of the waiting period (and any
extension thereof) applicable to the Merger under the HSR Act with no
restrictive order or other requirements having been placed on the Company,
Parent, Purchaser or the Surviving Corporation in connection therewith; (iii) no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger being in effect; (iv) no
statute, rule, order, decree or regulation having been enacted or promulgated by
any government or governmental agency or authority which prohibits consummation
of the Merger; and (v) Purchaser shall have accepted for payment and paid for
the Shares tendered in the Offer; provided that such condition shall be deemed
to have been satisfied if Purchaser in violation of the terms and conditions of
the Offer, fails to accept for payment and pay for Shares pursuant to the Offer
in violation of the terms and conditions of the Offer.
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after the
adoption of the Merger Agreement by the Company's stockholders or by Parent by
mutual written consent of Parent and the Company or under the following
circumstances:
Parent or the Company. The Merger Agreement provides that either
Parent or the Company may terminate the Merger Agreement and abandon the
Merger if any permanent injunction or other order of a court or other
competent authority preventing the acceptance of Shares for payment
pursuant to the Offer or the Merger shall have become final and
nonappealable.
Parent. The Merger Agreement provides that Parent may terminate the
Merger Agreement and abandon the Merger prior to the acceptance of Shares
for payment pursuant to the Offer: (i) so long as none of IHF, Parent or
Purchaser is in material breach of its obligations under the Merger
Agreement, if (a) there has been a breach of any representation or warranty
(when made on or at the time of termination as if made on such date of
termination, except to the extent it relates to a particular date) on the
part of the Company (provided that any representation or warranty of the
Company contained in the Merger Agreement that is subject to a
"materiality," "material adverse effect" or similar qualification shall not
be so qualified for purposes of determining the existence of any breach
thereof on the part of the Company) which breach has (1) not been cured
within five calendar days following receipt by the Company of notice of
such breach and (2) is existing at the time of termination of the Merger
Agreement, except for such breaches that would not, individually or in the
aggregate with any other breaches on the part of the Company, have a
material adverse effect on the Company or materially and adversely affect
the ability of the parties to the Merger Agreement to consummate the
transactions contemplated thereby, (b) there has been a breach of any
representation or warranty (when made on or at the time of termination as
if made on such date of termination, except to the extent it relates to a
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<PAGE> 12
particular date) contained in Section 4.1(b) of the Merger Agreement on the
part of the Company, or (c)(1) if the Company has breached its covenants
regarding the solicitation of Acquisition Proposals, or (2) the Company is
in material breach of any other covenant or agreement set forth in the
Merger Agreement (provided that any covenant or agreement of the Company
contained herein the performance of which is subject to a "materiality,"
"material adverse effect" or similar qualification shall not be so
qualified for purposes of determining the existence of any nonperformance
thereof on the part of the Company), which material breach has not been
cured within five calendar days following receipt by the Company of notice
of such breach which is existing at the time of termination by the Merger
Agreement; (ii) if the Board of Directors of the Company (whether or not
under circumstances permitted by the Merger Agreement) fails to make the
recommendation contemplated by the Merger Agreement in the Offer to
Purchase and related documents and the Proxy Statement or shall have
withdrawn or modified in any manner which is adverse to Parent, its
recommendation or approval of the Offer, the Merger or the Merger Agreement
and the transactions contemplated thereby, or resolves to do so, it being
understood that a communication by the Board of Directors of the Company to
the stockholders pursuant to Rule 14d-9(e)(3) of the Exchange Act (or any
similar communication to the stockholders in connection with the amendment
of a tender or exchange offer) shall not be deemed to constitute such a
withdrawal or modification, or recommends to the stockholders an
Acquisition Proposal, or if the Board of Directors of the Company resolves
to do any of the foregoing; (iii) if a tender offer or exchange offer for
50% or more of the outstanding shares of capital stock of the Company is
commenced (other than by the Purchaser or its affiliates) and the Board of
Directors of the Company fails to timely recommend, within the time period
required by Rule 14e-2 of the Exchange Act, against the stockholders
tendering their Shares into such tender offer or exchange offer; (iv) an
Acquisition Proposal has been publicly announced by the Company and the
Company shall fail to publicly reaffirm its approval or recommendation of
the Offer, the Merger, and the Merger Agreement on or before the tenth
business day following the date on which such Acquisition Proposal shall
have been announced; provided that Parent may condition the effectiveness
of such termination pursuant to the Merger Agreement upon receipt by Parent
or its designee of the amounts that are payable to Parent or its designee
under the Merger Agreement; or (v), if (a) any person has become an
Acquiring Person (as defined in the Rights Agreement), (b) a Stock
Acquisition Date (as defined in the Rights Agreement) has occurred, or (c)
a Flip-In Event (as defined in the Rights Agreement) has occurred. Parent
may also terminate the Merger Agreement if the Offer terminates, is
withdrawn, abandoned or expires by reason of the failure to satisfy any
condition to the Offer set forth in the Merger Agreement; provided,
however, that Parent may not so terminate if the termination, withdrawal,
abandonment or expiration of the Offer arises from a breach of the Merger
Agreement by IHF, Parent or Purchaser and provided further that if the
condition to the Offer relating to the receipt by Parent of the debt
financing necessary for the consummation of the Offer has not been
satisfied, IHF, Parent and Purchaser shall, jointly and severally, pay to
the Company contemporaneously with such termination a fee in the amount of
$3,362,711, plus such amount, not to exceed $250,000, necessary to
reimburse the Company for out-of-pocket fees, costs and expenses incurred
by the Company in connection with the transactions contemplated in the
Transaction Documents.
The Company. The Merger Agreement provides that the Company may
terminate the Merger Agreement and abandon the Merger prior to the
acceptance of Shares for payment pursuant to the Offer: (i) so long as the
Company is not in material breach of its obligations under the Merger
Agreement (A) if there has been a breach of any representation or warranty
(when made on or at the time of termination as if made on such date of
termination, except to the extent it relates to a particular date) on the
part of IHF, Parent or Purchaser (provided that any representation or
warranty of IHF, Parent or Purchaser contained in the Merger Agreement that
is subject to a "materiality," "material adverse effect" or similar
qualification shall not be so qualified for purposes of determining the
existence of any breach thereof on the part of IHF, Parent or Purchaser),
and which breach has not been cured within five calendar days following
receipt by IHF, Parent or Purchaser of notice of such breach and is
existing at the time of the termination of the Merger Agreement, except for
such breaches that, individually or in the aggregate with any other
breaches on the part of IHF, Parent or Purchaser, would not materially and
adversely affect the ability of the parties to the Merger Agreement to
consummate the transactions contemplated thereby and (B) if there has been
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a material breach of any covenant or agreement on the part of IHF, Parent
or Purchaser set forth in the Merger Agreement (provided that any covenant
or agreement of IHF, Parent or Purchaser contained in the Merger Agreement
the performance of which is subject to a "materiality," "material adverse
effect" or similar qualification shall not be so qualified for purposes of
determining the existence of any nonperformance thereof on the part of IHF,
Parent or Purchaser), and which breach has not been cured within five
calendar days following receipt by IHF, Parent or Purchaser of notice of
such breach and is existing at the time of the termination of the Merger
Agreement; or (ii) pursuant to the right of termination described above
under "No Solicitation," provided that (A) Parent receives at least five
days prior written notice (which notice shall include the identity of the
person or entity making the relevant Acquisition Proposal, the material
terms and conditions of such Acquisition Proposal and the material terms
and conditions of any agreements or arrangements to be entered into in
connection with such Acquisition Proposal with any party to the Stockholder
Agreement with respect to his then existing agreements and arrangements
with the Company, to the extent known to the Company) from the Company of
its intention to effect such termination and (B) if during such five-day
period Parent shall have revised the terms and conditions of the Offer or
the Merger, the Board of Directors of the Company, after receiving advice
from the Company's financial and legal advisors, shall have determined in
good faith that the terms and conditions of the Acquisition Proposal giving
rise to such termination right are superior to those of the Offer and the
Merger as so revised and (C) the Company may not effect termination
pursuant to such section unless the Company has contemporaneously with such
termination tendered payment to Parent or Parent's designee of the amounts
described above under "Fees and Expenses". The Merger Agreement also
provides that the Company may also terminate the Merger Agreement and
abandon the Merger at any time prior to the Effective Time, whether before
or after adoption of the Merger Agreement by the stockholders (i) if the
Offer shall have expired or shall have been withdrawn, abandoned or
terminated without any Shares being purchased by Purchaser thereunder or
(ii) if the Funding Date does not occur when required under the Exchange
Act (but which in no event shall be more than four business days following
the acceptance by Purchaser of Shares tendered pursuant to the Offer).
Limited Guarantee of IHF. IHF has guaranteed the full and complete
performance of each of the covenants and agreements made in the Merger Agreement
by either Parent or Purchaser and the respective obligations of Parent and
Purchaser arising under the Merger Agreement; provided, however, that such
guarantee by IHF is expressly limited in that in no event shall IHF's
liabilities or obligations under such guarantee exceed $3,612,711.
Amendment. Subject to the provisions of the Merger Agreement, the Merger
Agreement may be amended, modified or supplemented, before or after the adoption
of the Merger Agreement by the stockholders, only by written agreement of
Parent, Purchaser and the Company at any time prior to the Effective Time with
respect to any of the terms contained therein; provided however, that after the
Company Stockholder Approval (as defined in the Merger Agreement) no term or
condition of the Merger Agreement may be amended or modified in any manner that
by law requires further approval by the stockholders of the Company without so
obtaining such further stockholder approval.
Timing. The Merger Agreement provides that the closing of the Merger shall
occur as promptly as practical (but in no event later than the second business
day) after satisfaction and/or waiver of the conditions set forth in the Merger
Agreement unless another date, time or place is agreed to in writing by Parent,
Purchaser and the Company. The Merger shall become effective upon the filing of
a certificate of merger or a certificate of ownership and merger, as the case
may be, or at such time thereafter as may be provided in such certificate (as
the Company and Purchaser shall agree), with the Secretary of State of the State
of Delaware, as provided in the DGCL, which certificate shall be filed as soon
as practicable on or after the date of the closing of the Merger.
THE STOCKHOLDER AGREEMENT
Simultaneously with the execution of the Merger Agreement, Parent,
Purchaser, the Company and the Selling Stockholder, entered into the Stockholder
Agreement. The following is a summary of the material terms of the Stockholder
Agreement. This summary is not a complete description of the terms and
conditions
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thereof and is qualified in its entirety by reference to the full text thereof
which is incorporated herein by reference and a copy of which has been filed as
an exhibit to the Schedule 14D-1.
Agreement to Tender and Purchase Option. The Selling Stockholder has agreed
that he shall (i) tender all of his Shares into the Offer promptly, and in any
event no later than the third business day following the commencement of the
Offer, and (ii) not withdraw any Shares so tendered prior to the termination of
the Merger Agreement. In the event that: (i) the Minimum Condition is not
satisfied, (ii) Purchaser notifies the Selling Stockholder that Purchaser is
prepared to close the Offer but for the fact that the Minimum Condition is not
satisfied, and (iii) the tender by the Selling Stockholder of shares of Common
Stock issuable to the Selling Stockholder upon the exercise by the Selling
Stockholder of the Options beneficially owned by the Selling Stockholder (the
"Underlying Shares") would cause the Minimum Condition to be satisfied, then
Selling Stockholder has agreed that, at any time prior to the termination of the
Merger Agreement, immediately upon the request of Purchaser, he shall exercise
all of the Options beneficially owned by him and immediately tender the
Underlying Shares received upon such exercise into the Offer (and not withdraw
such Underlying Shares so tendered). Purchaser and Parent have agreed to advance
to the Selling Stockholder the funds necessary to exercise such Options. In the
event that (i) the Offer has been consummated, (ii) the Selling Stockholder has
not exercised his Options pursuant to the prior sentence, (iii) Purchaser has
acquired pursuant to the Offer a number of shares of Common Stock which
constitutes, on a fully diluted basis (as defined in the Merger Agreement), less
than 90% of the outstanding shares of Common Stock and (iv) the shares of Common
Stock acquired by Purchaser pursuant to the Offer, together with the Underlying
Shares, aggregate in excess of 90% of the outstanding shares of Common Stock,
then the Selling Stockholder has agreed that, immediately upon the request of
Purchaser, he shall (x) exercise all of the Options beneficially owned by him
and (y) immediately sell to Purchaser each Underlying Share received upon such
exercise, free and clear of all liens, in consideration of an amount equal to
the Offer Consideration as in effect on the date of the Stockholder Agreement
(subject to adjustment as provided below). Except as described in this
paragraph, the Selling Stockholder has agreed that he shall not exercise any
Option that he beneficially owns.
In the event that the Shares of the Selling Stockholder are sold,
transferred, exchanged, canceled or disposed of in connection with or as a
result of any Acquisition Proposal that is in existence on, or that has been
otherwise made prior to the first anniversary of, the date of termination of the
Merger Agreement (an "Alternative Disposition") then, within five business days
after the closing of such Alternative Disposition, the Selling Stockholder shall
tender and pay to, or shall cause to be tendered and paid to, Parent (or its
designee), in immediately available funds, the Profit realized from such
Alternative Disposition, less any withholdings. "Profit" shall mean an amount
equal to the excess, if any, of the Alternative Transaction Consideration over
the Current Transaction Consideration (each as defined below).
If, following the date of the Stockholder Agreement, the amount of the
Offer Consideration, the Merger Consideration or the consideration payable in
respect of the Options as currently provided for in the Merger Agreement should
be increased (a "Second Transaction"), then (i) if the Options beneficially
owned by the Selling Stockholder have not been exercised, at the option of
Purchaser in its sole discretion, (y) the Selling Stockholder shall tender and
pay, or cause to be tendered or paid, to Parent or its designee, in immediately
available funds, the Profit realized by the Selling Stockholder from the Second
Transaction or (z) the amount the Selling Stockholder shall receive in respect
of his Options as provided in the Merger Agreement shall be reduced by the
Profit realized by the Selling Stockholder from the Second Transaction or (ii)
if the Options beneficially owned by a Selling Stockholder have been exercised
as contemplated in the penultimate sentence of the first paragraph under
"Agreement to Tender and Purchase Option," the amount Selling Stockholder shall
receive in respect of his Underlying Shares as provided in the penultimate
sentence of the first paragraph under "Agreement to Tender and Purchase Option"
shall be reduced by the Profit realized by the Selling Stockholder from the
Second Transaction. "Profit" shall mean an amount equal to the excess, if any,
of the Second Transaction Consideration (as defined below) over the Current
Transaction Consideration.
"Acquisition Proposal", as used in the Stockholder Agreement, means any
agreement, letter of intent or offer (other than the transactions contemplated
in the Merger Agreement) involving the Company or any of its subsidiaries for:
(i) any merger, consolidation, share exchange, recapitalization, reorganization,
business combination, or other similar transaction, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Company and its subsidiaries, taken as a whole, in a single
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transaction or series of transactions, or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Company or any of its subsidiaries or the filing of a registration statement
under the Securities Act of 1933, as amended, in connection therewith, but shall
not include the Second Transaction.
"Alternative Transaction Consideration" means all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the Selling
Stockholder and his affiliates in connection with or as a result of an
Alternative Disposition or any agreements or arrangements (including, without
limitation, any employment agreement, consulting agreement, non-competition
agreement, confidentiality agreement, settlement agreement or release agreement)
entered into, directly or indirectly, by the Selling Stockholder or his
affiliates (excluding officers and directors of the Company) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
"Current Transaction Consideration" means the sum of all amounts to be
received, directly or indirectly, by the Selling Stockholder and his affiliates
pursuant to all of the Transaction Documents as in effect on the date hereof and
pursuant to the Employment and Noncompetition Agreement (as hereinafter
defined).
"Second Transaction Consideration" shall mean the sum of all amounts to be
received, directly or indirectly, by the Selling Stockholder and his affiliates
(excluding officers and directors of the Company) in connection with or as a
result of a Second Transaction or any agreements or arrangements entered into,
directly or indirectly, by the Selling Stockholder or his affiliates as a part
of or in connection with the Second Transaction.
Voting. From and after the date of the Stockholder Agreement and ending as
of the first to occur of the Effective Time or the date of termination of the
Merger Agreement, at any meeting of the Company's stockholders, however called,
or in any other circumstance upon which the vote, consent or other approval of
the Company's stockholders is sought, the Selling Stockholder has agreed to vote
(or cause to be voted) his issued and outstanding shares of Common Stock (i)
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other material
obligation or agreement of the Company under the Merger Agreement or the
Stockholder Agreement; and (ii) against the following actions (other than the
Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Parent or any
affiliate thereof, and (B) to the extent that such (1) are intended to, or could
reasonably be expected to, impede, interfere with, delay, postpone, or
materially adversely affect the Offer, the Merger or the transactions
contemplated by the Merger Agreement or the Stockholder Agreement or (2) are
intended to, or could reasonably be expected to, implement or lead to any
Acquisition Proposal (other than an Acquisition Proposal with Parent or any
affiliate thereof): (x) any change in a majority of the persons who constitute
the Board of Directors of the Company; (y) any change in the present
capitalization of the Company or any amendment of the Company's certificate of
incorporation or bylaws (other than as expressly contemplated by the Merger
Agreement); or (z) any other material change in the Company's corporate
structure or business. The Selling Stockholder has granted to, and appointed,
Parent and any nominee thereof, his proxy and attorney-in-fact (with full power
of substitution), from and after the date of the Stockholder Agreement and
ending as of the first to occur of the Effective Time or the date of termination
of the Merger Agreement, to vote his Shares, or grant a consent or approval in
respect of his shares of Common Stock. Such proxy is intended to be irrevocable
and coupled with an interest. Notwithstanding the foregoing, nothing in the
Stockholder Agreement shall in any way restrict or limit the Selling Stockholder
from taking any action in his capacity as a director or officer of the Company
or otherwise fulfilling his fiduciary obligations as a director and officer of
the Company.
Representations, Warranties, Covenants and Other Agreements. In connection
with the Stockholder Agreement, the Selling Stockholder has made certain
customary representations, warranties and covenants, including with respect to
(i) his ownership of the shares of Common Stock and his rights and powers with
respect thereto, (ii) his authority to enter into and perform his obligations
under the Stockholder Agreement, (iii) noncontravention and enforceability, (iv)
absence of conflicts, (v) the absence of liens and encumbrances on and in
respect of his shares of Common Stock, (vi) restrictions on the transfer of his
shares of
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Common Stock and the granting of proxies with respect thereto and (vii) the
solicitation of Acquisition Proposals.
OPTION RELEASE AGREEMENT
The Company has agreed to use its reasonable efforts to obtain, within 15
days of the date of the Merger Agreement, from each beneficial and record holder
of an Option, an Option Surrender Agreement, Release and Waiver (an "Option
Release Agreement"), duly executed and delivered by such holder, pursuant to
which such holder will agree to surrender Options for cancellation as provided
for in the Merger Agreement. For each share of Common Stock subject to an
Option, these individuals will receive an amount (subject to applicable
withholding tax) in cash equal to the difference between the per share Merger
Consideration and the per share exercise price of the Option to be canceled, to
the extent such difference is a positive number (the "Option Consideration").
The aggregate amount of Option Consideration to be received by the directors and
executive officers of the Company who hold Options is approximately $2,883,000.
This amount excludes Option Consideration related to 76,667 Options with respect
to which Charles H. Perlman, a director of the Company, disclaims beneficial
ownership.
EMPLOYMENT AND NONCOMPETITION AGREEMENT
Contemporaneous with the execution and delivery of the Merger Agreement,
Mr. Bolander entered into an Employment and Noncompetition Agreement (the
"Employment and Noncompetition Agreement") with IHF. Pursuant to the Employment
and Noncompetition Agreement, as of the date that Purchaser accepts for payment
any Shares tendered pursuant to the Offer, IHF will employ Mr. Bolander and he
has agreed to be employed by IHF, in accordance with the terms and provisions of
the Employment and Noncompetition Agreement. The following is a summary of the
material terms of the Employment and Noncompetition Agreement. This summary is
not a complete description of the terms and conditions thereof and is qualified
in its entirety by reference to the full text thereof which is incorporated by
reference and a copy of which has been filed with the Commission as an exhibit
to the Schedule 14D-1. The Employment and Noncompetition may be examined, and
copies thereof may be obtained, as set forth in Section 8 of the Offer to
Purchase.
Terms of Employment. Mr. Bolander has agreed that, during the term of his
employment, he will (i) serve as a senior executive of IHF, perform such duties
as IHF assigns and report to the CEO of IHF or his designee, and (ii) devote
substantially all of his business time to the business and affairs of the
business and use his reasonable best efforts to perform faithfully, effectively
and efficiently responsibilities assigned to him pursuant to the Employment and
Noncompetition Agreement. During the term of his employment, Mr. Bolander will
receive an annual base salary of $225,000 and will be eligible for merit
increases after the first year of the Employment and Noncompetition Agreement.
It is contemplated that Mr. Bolander will be eligible for an annual bonus
payable only in accordance with the terms of IHF's plan, to be determined based
on targets established by IHF at the beginning of each calendar year, which will
be equal to, at maximum, $175,000. Notwithstanding anything to the contrary, Mr.
Bolander will be entitled to a bonus for the fiscal year ending May 31, 1998, in
accordance with the Company's prior history in paying bonuses to Mr. Bolander,
which will be equal to, at maximum $200,000. The bonus for which Mr. Bolander
will be eligible for the calendar year December 31, 1998, pursuant to IHF's
established bonus targets, will then be prorated to seven months.
Stock Options. Mr. Bolander will receive, on the first business day after
the date that Purchaser accepts for payment any Shares tendered pursuant to the
Offer, 50,000 non-qualified stock options in IHF, such options to have a strike
price equal to the fair market value of a share of IHF's Common Stock determined
as of the date that Purchaser accepts for payment any Shares tendered pursuant
to the Offer, in accordance with IHF's Stock Option Plan. Such options shall be
subject to the terms and conditions of IHF's Stock Option Plan and shall vest in
equal amounts over three years with the first one-third vesting on the first
anniversary of the date that Purchaser accepts for payment any Shares tendered
pursuant to the Offer, the second one-third on the second anniversary date and
the last one-third on the third anniversary date.
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Confidential Information. Mr. Bolander has agreed (i) that IHF and its
affiliates have, or may in the future obtain, trade, business and financial
secrets and other confidential and proprietary information (collectively, the
"Confidential Information"), except as otherwise described in the Employment and
Noncompetition Agreement, (ii) from and after the date that Purchaser accepts
for payment any Shares tendered pursuant to the Offer, to hold such Confidential
Information in confidence and not to release such information to any person
(other than IHF employees and other persons to whom IHF has authorized Mr.
Bolander to disclose such information and then only to the extent that such IHF
employees and other persons authorized by IHF have a need for such knowledge),
and (iii) from and after the date that Purchaser accepts for payment any Shares
tendered pursuant to the Offer, not to use any Confidential Information for the
benefit of any person or entity other than IHF.
Noncompetition. Mr. Bolander has agreed that (i) the term of noncompetition
shall be for a term beginning as of the date that Purchaser accepts for payment
any Shares tendered pursuant to the Offer and continuing until the later of one
year after the date of termination of his employment or three years from the
date of commencement of employment with IHF, (ii) he will not (other than for
the benefit of IHF pursuant to the Employment and Noncompetition Agreement)
directly or indirectly, individually or as an officer, director, employee,
shareholder, consultant, contractor, partner, joint venturer, agent, equity
owner or in any capacity whatsoever, (a) engage in the manufacturing,
distribution or marketing of food products anywhere in the United States that
are either (x) of the type of food category then being manufactured,
distributed, sourced or marketed by either IHF or any direct or indirect
subsidiary of IHF (collectively, the "IHF Companies"), or (y) food products
manufactured, sourced, distributed or marketed by the Company, at any time
within the most recent two year period prior to the date of the Employment and
Noncompetition Agreement, (b) hire or solicit with respect to hiring any
employee of any member of the IHF Companies, or (c) divert or take away any
customers or suppliers of any member of the IHF Companies within the United
States or elsewhere where the IHF Companies is then selling its products. Mr.
Bolander has acknowledged that (i) the geographic boundaries, scope of
prohibited activities, and time duration of the preceding provisions are
reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the good will of IHF's proprietary information, plans and
services and to protect the other legitimate business interest of IHF and (ii)
the payments provided him pursuant to the Employment and Noncompetition
Agreement are collectively consideration for the agreements contained in the
Employment and Noncompetition Agreement.
Termination of Employment Agreement. Effective as of the date that
Purchaser accepts for payment any Shares tendered pursuant to the Offer, that
certain Employment Agreement (the "Existing Agreement") dated January 10, 1990
(as amended) by and between the Company and Mr. Bolander shall be terminated in
full. From and after the date of termination of the Existing Agreement, Mr.
Bolander shall not be entitled to receive (i) any further wages or other
compensation provided for or anticipated by Article 4 of the Existing Agreement,
(ii) except for the payment of $850,000 at the date that Purchaser accepts for
payment any Shares tendered pursuant to the Offer to Mr. Bolander (which payment
IHF shall make to Mr. Bolander at the date that Purchaser accepts for payment
any Shares tendered pursuant to the Offer), any other payment following a change
in control or other compensation contemplated by Article 7 of the Existing
Agreement, or (iii) any other benefits or compensation arising under or pursuant
to the Existing Agreement or, except as may be otherwise provided in the
Employment and Noncompetition Agreement, Mr. Bolander's employment relationship
with the Company or any of its subsidiaries.
Release of Claims. Effective as of the date that Purchaser accepts for
payment any Shares tendered pursuant to the Offer, Mr. Bolander has agreed to
release and discharge the Released Parties (as defined herein) from all claims
and damages, except as otherwise described in the Employment and Noncompetition
Agreement, including those related to, arising from, or attributed to (i) Mr.
Bolander's employment with and membership on the Board of Directors for the
Company and its subsidiaries, (ii) the Existing Agreement and (iii) all other
acts or omissions at any time prior to and including the date of termination of
the Existing Agreement; except that such release shall not include Mr.
Bolander's (a) entitlement to continued group medical coverage in accordance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, (b) vested
account balances in the Company's employee benefit plans and rights under option
agreements
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outstanding as of the date of the Employment and Noncompetition Agreement, (c)
rights with respect to certain shares of capital stock of the Company, (d)
rights of Mr. Bolander arising under the Employment and Noncompetition
Agreement, (e) rights of Mr. Bolander arising under any of the Transaction
Documents, (f) rights of Mr. Bolander arising under the Company's organizational
documents, (g) accrued and unpaid salary and expenses incurred by Mr. Bolander
in respect of the period prior to the date that Purchaser accepts for payment
any Shares tendered pursuant to the Offer, and (h) any bonus payment owed to Mr.
Bolander pursuant to the Company's bonus plan. Mr. Bolander agreed that, unless
specifically excluded from such release, such release extends to all claims and
damages of every nature and kind, known or unknown, suspected or unsuspected,
past or present, whether or not such claims and damages were set forth in any
writing, and that all such claims and damages were expressly settled or waived.
Notwithstanding the foregoing, Mr. Bolander did not release or discharge the
Company and its subsidiaries from any claims or damages related to or arising
from Mr. Bolander's capacity as an officer or director of the Company or its
subsidiaries to which Mr. Bolander is entitled to be indemnified against or
reimbursed by the Company or its subsidiaries, whether by statute, contract or
otherwise. As used in the Employment and Noncompetition Agreement, "Released
Parties" means and includes the Company and its subsidiaries, and all of the
foregoing entities' past, present and future shareholders, directors, officers,
employees, agents, insurance carriers, employee benefit plans (and such plans'
fiduciaries, trustees, administrators and representatives), predecessors,
successors, assigns, executors, administrators, attorneys and representatives,
in both their corporate and individual capacities.
CONFIDENTIALITY AGREEMENTS
On February 2, 1998, IHF and the Company entered into a Confidentiality
Agreement (the "Confidentiality Agreement") pursuant to which the Company agreed
to supply certain information to IHF and IHF agreed to treat such information as
confidential and to use such information solely in connection with the
evaluation of a possible transaction with the Company. The Merger Agreement
provides that the Confidentiality Agreement shall terminate in full upon the
consummation of the Offer. In addition, on February 9, 1998, IHF and the Company
entered into a Confidentiality Agreement pursuant to which IHF agreed to supply
certain information to the Company and the Company agreed to treat such
information as confidential and to use such information solely in connection
with the evaluation of a possible transaction with the Company.
STANDSTILL AGREEMENT
Contemporaneous with the execution and delivery of the Merger Agreement,
IHF and the Company entered into a Standstill Agreement (the "Standstill
Agreement"). As an inducement and a condition to entering into the Merger
Agreement, the Company has required that IHF agree, and IHF has agreed, to enter
into the Standstill Agreement. The following is a summary of the material terms
of the Standstill Agreement. This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof which is incorporated by reference and a copy of which has
been filed with the Commission as an exhibit to the Schedule 14D-1. The
Standstill Agreement may be examined, and copies thereof may be obtained, as set
forth in Section 8 of the Offer to Purchase.
Term of Agreement: Except as otherwise expressly provided in the
Standstill Agreement, the respective covenants and agreements of IHF and
the Company contained in the Standstill Agreement will continue in full
force and effect until March 10, 1999 (the "Termination Date").
Representations, Warranties and Covenants of IHF: IHF has represented
to the Company that as of the date of the Standstill Agreement none of (i)
IHF, (ii) any corporation or other entity controlled by IHF, including
without limitation, Parent and Purchaser, (iii) any affiliate of IHF, (iv)
HMTF Operating, Inc., formerly known as Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse"), (v) any principal of Hicks Muse, (vi) any
corporation or other entity controlled by Hicks Muse, (vii) any affiliate
of Hicks Muse, or (viii) any principal of any of the foregoing
(collectively, the "IHF Group") owns any Shares. In addition, IHF has
represented to the Company that prior to the Termination Date or the
earlier termination of the Standstill Agreement and subject to the further
provisions thereof, except in
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accordance with the terms of the Transaction Documents or as otherwise
permitted by the Standstill Agreement: (i) no member of the IHF Group will,
directly or indirectly, acquire any Shares without the written consent of
the Company; (ii) no member of the IHF Group shall solicit proxies or
become a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act) in opposition to the recommendation
of the majority of the directors of the Company with respect to any matter;
(iii) no member of the IHF Group shall join a partnership, limited
partnership, syndicate or other group, or otherwise act in concert with any
other person, for the purpose of acquiring, holding, voting or disposing of
Shares, or otherwise become a "person" within the meaning of Section
13(d)(3) of the Exchange Act (in each case other than solely with members
of the IHF Group); (iv) IHF, on behalf of itself and the other members of
the IHF Group, will not (and will not assist or encourage others to)
directly or indirectly, (a) make any public announcement with respect to,
or submit any proposal for, a transaction between the Company or any of its
security holders and IHF (and/or any member of the IHF Group, whether or
not any other parties are also involved, directly or indirectly, in such
proposal or transaction) other than pursuant to the Transaction Documents,
unless such proposal is directed and disclosed solely to the management of
the Company or its designated representatives, and the Company shall have
consented in writing, in advance, to the submission of such proposal; nor
(b) by purchase or otherwise, acquire, offer to acquire, or agree to
acquire, ownership (including, but not limited to, beneficial ownership as
defined in Rule 13d-3 under the Exchange Act) of any assets (except in the
ordinary course of business) or businesses or securities or direct or
indirect rights (including convertible securities) or options to acquire
such ownership (or otherwise act in concert with any person which so
acquires, offers to acquire, or agrees to acquire), or otherwise seek to
influence or control, the management or policies of the Company or any of
its affiliates without such permission; and (v) no member of the IHF Group
shall make any public request to waive any provision of the Standstill
Agreement or to permit any member of the IHF Group to take any actions
specified therein.
Permitted Investment. Notwithstanding anything to the contrary
contained in the Standstill Agreement, the individuals referenced in
clauses (iii), (v), (vii) and (viii) of the first sentence under
"Representations, Warranties and Covenants of IHF" above shall be permitted
to acquire, hold and dispose of shares of Common Stock solely for their own
individual account (and not as a member of any group as contemplated by
clause (iii) of the last sentence under "Representations, Warranties and
Covenants of IHF" above) in the ordinary course of business; provided,
however, that, in all events, no such individual shall at any time (i)
beneficially own, or have the power to vote or invest, more than five
percent of the shares of Common Stock then outstanding or (ii) hold any
shares of Common Stock with the purpose or effect of changing or
influencing control of the Company, or as a participant in any transaction
having such purpose or effect.
As used in the Standstill Agreement, the term "affiliate" has the meaning
set forth in Rule 12b-2 under the Exchange Act and the term "person" means any
individual, partnership, corporation, trust or other entity.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Recommendation of the Board of Directors
The Board of Directors of the Company has unanimously determined that each
of the Transaction Documents and the transactions contemplated thereby,
including the Offer and the Merger, is fair to and in the best interests of the
Company and the holders of the shares of Common Stock and unanimously recommends
that the Company's stockholders tender their Shares pursuant to the Offer and,
if applicable, adopt the Merger Agreement.
The recommendation is based in part upon an opinion (the "ABN AMRO
Opinion") dated March 10, 1998, received by the Company from ABN AMRO
Incorporated ("ABN AMRO") that, as of such date, the proposed consideration to
be received by the stockholders of the Company pursuant to the Merger Agreement
is fair to such stockholders from a financial point of view. The full text of
the ABN AMRO Opinion is filed as Exhibit 3 to this Statement and is also
attached hereto as Annex B. The ABN AMRO Opinion states the assumptions made,
procedures followed, matters considered and review undertaken by ABN AMRO, and
stockholders are urged to read such opinion in its entirety.
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As set forth in the Offer, Purchaser will purchase all Shares properly
tendered prior to the close of the Offer if the Minimum Condition has been
satisfied by that time and if all other conditions to the Offer have been
satisfied (or waived). Stockholders considering not tendering their Shares in
order to wait for the Merger should note that if the Minimum Condition is not
satisfied or any of the other conditions to the Offer are not satisfied,
Purchaser is not obligated to purchase any Shares, and can terminate the Offer
and the Merger Agreement and not proceed with the Merger. Under the DGCL, the
approval of the Company's Board of Directors and the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock are required to
adopt the Merger Agreement. Accordingly, if the Minimum Condition is satisfied,
Purchaser will have sufficient voting power to cause the adoption of the Merger
Agreement without the affirmative vote of any other stockholder. The Company has
been advised by Parent and Purchaser that if Purchaser acquires pursuant to the
Offer, or otherwise, such number of shares of Common Stock that, when added to
the Optioned Common Shares constitutes at least 90% of the outstanding shares of
Common Stock, the Parent and Purchaser intend to cause the Merger to be
consummated without any action by or any further prior notice to the other
stockholders of the Company, pursuant to the short-form merger provisions of the
DGCL.
The Offer is scheduled to expire at 12:00 Midnight, Monday, April 13, 1998,
New York City time, unless the Offer is extended.
A copy of the press release issued jointly by the Company and IHF on March
11, 1998, announcing the Merger and the Offer, is filed as an exhibit to the
Schedule 14D-1 and is incorporated herein by reference in its entirety. A copy
of a letter to all stockholders of the Company communicating the recommendation
of the Board of Directors is filed as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference in its entirety.
Background of the Transaction
On or about January 15, 1998, Lou Pellicano, Senior Vice President of IHF,
telephoned Glen S. Bolander, the Company's Chief Executive Officer and President
and a Director, to discuss IHF's interest in acquiring the Company. Mr. Bolander
advised Mr. Pellicano that the Company was not for sale, but that the Company's
Board of Directors would be willing to listen to IHF's proposal.
On January 19, 1998, Mr. Pellicano met with Mr. Bolander at the Company's
offices to further discuss IHF's interest in the Company. At that time Mr.
Pellicano requested that the Company provide IHF with information that would
assist IHF in determining the value of the Company.
In response to Mr. Pellicano's request, and as an initial position for any
ensuing price discussions that might occur, Mr. Bolander and Daniel J. Kinsella,
Vice President and Chief Financial Officer of the Company, prepared an analysis
of the Company, and Mr. Bolander provided Mr. Pellicano with such information.
Following IHF's review of the analysis furnished by Mr. Bolander, Mr.
Pellicano orally informed Mr. Bolander that based upon IHF's evaluation of the
Company, IHF was prepared to explore a transaction with the Company at a price
range of $13.00 to $15.00 per share.
During the last week of January 1998, Mr. Bolander and Mr. Pellicano
continued to discuss the various possible economic terms of a transaction. Mr.
Bolander indicated that, based upon previous discussions with the Company's
Board of Directors relating to prior inquiries regarding the acquisition of the
Company, he would not present a potential transaction to the Company's Board of
Directors at a price less than $15.00 per share. Mr. Pellicano responded with a
price of $14.00 per share. After further discussion between Mr. Bolander and Mr.
Pellicano, Mr. Pellicano orally informed Mr. Bolander that, subject to due
diligence, IHF was prepared to offer between $14.50 and $15.00 per share with
the per share price being in part dependent upon the trading price of the
Company's shares.
At a special meeting of the Company's Board of Directors held on January
29, 1998, Mr. Bolander formally presented to the Board IHF's interest in
acquiring the Company. At that time, Mr. Bolander advised the Board that,
subject to its due diligence review of the Company, IHF was prepared to make an
all-cash offer for 100% of the outstanding shares of the Common Stock of the
Company at a price range of $14.50 to
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$15.00 per share with the per share price being in part dependent upon the
trading price of the Company's shares. The Board expressed interest in
continuing discussions with IHF regarding the potential acquisition of the
Company. After consultation with the Company's legal counsel, the Board decided
to establish an independent committee to represent the Company in its further
discussions with IHF. Roger L. Weston, a director of the Company, and Charles H.
Perlman, a director of the Company and partner with the Company's regular
outside counsel, were appointed as members of the independent committee. In
connection with Mr. Weston's appointment to the independent committee, the
Company's Board authorized the Company to pay Mr. Weston a fee of $75,000 for
his participation on the independent committee. The Board of Directors also
engaged special Delaware legal counsel to advise the Company's Board regarding
issues of Delaware law.
The independent committee decided to retain an investment banking firm to
assist the independent committee and to render a fairness opinion to the Board
of Directors should an agreement be reached with IHF. The independent committee
informed the Board that the receipt of a fairness opinion from a qualified
investment banking firm would be a condition to the independent committee's
recommendation of a transaction and should be a condition of the Board's
approval of a transaction. In addition, the independent committee authorized Mr.
Bolander to continue his discussions with Mr. Pellicano and instructed Mr.
Bolander to keep the independent committee informed as to the status and nature
of all such discussions.
During the January 29 meeting the Board discussed whether to seek other
potential buyers for the Company. The Board had received indications of interest
regarding the acquisition of the Company from two potential buyers over the past
20 months, in each case at prices significantly lower than the IHF price range.
Mr. Bolander advised the Board that it was clear to him from his discussions
with Mr. Pellicano that IHF would likely not be interested in continuing
negotiations with the Company if the Company sought other prospective buyers.
The Board expressed the view that, under those circumstances, actively seeking
other bidders for the Company would not be prudent or necessary because: (i)
IHF's offer was at a significant premium to the current market price of the
Company's shares, which premium could be lost if IHF refused to continue
negotiations after the Company sought other bidders; (ii) the Company would be
exposed to the market during the course of the pendency of any offer commenced
by, or any agreement entered into with, IHF; and (iii) the transaction could be
structured so that the Company would be permitted to accept any unsolicited
higher offer received prior to the closing of a transaction with IHF. Also, the
Board determined that any transaction would be preconditioned on the receipt of
a fairness opinion from a well respected investment banking firm.
On February 2, 1998, IHF and the Company entered into a confidentiality
agreement covering information furnished by the Company to IHF and its advisors
in connection with their evaluation of a possible transaction with the Company.
On February 9, 1998, IHF and the Company entered into a confidentiality
agreement covering information furnished by IHF to the Company and its advisors.
During the first week of February 1998, IHF conducted due diligence on the
Company. During such time period, Mr. Pellicano and Mr. Bolander continued to
negotiate the various terms of a possible transaction, with the independent
committee providing Mr. Bolander guidance with regard to various aspects of the
negotiations. As a result of such negotiations, Mr. Pellicano orally conveyed to
Mr. Bolander IHF's preliminary proposal to acquire 100% of the Company's shares
at a per share cash price of $14.75.
On February 13, 1998, the Company's Board of Directors held a telephonic
meeting to consider IHF's proposal. At that time the independent committee
recommended to the Board that the independent committee, with Mr. Bolander's
assistance, continue to pursue negotiations with IHF. The Board instructed Mr.
Bolander and the independent committee to continue to negotiate and pursue the
potential sale of the Company to IHF. Also on that date the independent
committee interviewed potential investment banking firms.
During the following week, Mr. Bolander conducted business due diligence
with respect to IHF.
On February 18, 1998, IHF submitted to the Company drafts of the Merger
Agreement and the Stockholder Agreement.
On February 19, 1998, Mr. Bolander met with C. Dean Metropoulos, the
Chairman of the Board of IHF.
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On February 26, 1998, counsel for the Company delivered comments on the
drafts of the Merger Agreement and the Stockholder Agreement to counsel for IHF
and raised several open issues regarding the proposed transaction.
On February 26, 1998, the independent committee and the Company's Board of
Directors met telephonically and approved the retention of ABN AMRO to provide
financial advisory and investment banking services in connection with the Offer
and the Merger. On February 26, 1998, the Company entered into an agreement with
ABN AMRO (dated as of February 23, 1998), paid ABN AMRO a retainer fee of
$50,000 and agreed to pay ABN AMRO an additional $200,000 upon the delivery by
ABN AMRO of an opinion regarding the fairness, from a financial point of view,
of any proposed transaction with IHF.
From February 27, 1998 through March 10, 1998, counsel for IHF and the
Company exchanged comments on successive drafts of the Merger Agreement and
Stockholder Agreement and counsel for IHF and the Company continued to engage in
extensive negotiations concerning various open issues. The Company also
requested IHF to enter into the Standstill Agreement.
On March 4, 1998, ABN AMRO delivered its presentation book regarding the
proposed transaction with IHF to the independent committee and the Company's
Board of Directors, and the Company's Board of Directors received copies of the
latest drafts of the Transaction Documents.
On March 5, 1998, the Company's Board and the independent committee
conducted a telephonic meeting. ABN AMRO made a presentation to the Company and
discussed with the independent committee and the Company's Board of Directors
its presentation book regarding IHF's then-proposed per share consideration of
$14.75. The Company's legal counsel reviewed with the Board the proposed terms
of the Transaction Documents and the Standstill Agreement in detail. Mr.
Bolander discussed in detail the terms of his proposed Employment and
Noncompetition Agreement with IHF. The Board also discussed various open issues
in the negotiations and instructed Mr. Perlman to negotiate further with IHF
regarding such issues. Following the meeting the negotiation of the open issues
continued.
On March 6, 1998, the Company's Board of Directors and the independent
committee met again telephonically to discuss the status of the proposed
transaction. Mr. Bolander reported that, based upon its further due diligence
and its concerns over certain business issues, IHF had lowered its proposal to
$14.50 per share. The Board of Directors determined that Mr. Bolander should
continue negotiations with IHF to determine whether a price higher than $14.50
per share could be obtained. The independent committee requested that ABN AMRO
conduct an analysis of IHF's proposal of $14.50 per share and prepare a
presentation for the Company's Board and the independent committee.
Following the March 6 Board meeting, negotiations between representatives
of IHF and the Company continued regarding price and other open issues.
On March 9, 1998, ABN AMRO provided the independent committee and the Board
with a revised presentation book analyzing the transaction at a price of $14.50
per share. The Company's Board of Directors reconvened telephonically and Mr.
Bolander reported on the negotiations that had taken place over the prior two
days. During such meeting ABN AMRO indicated that it was in a position to render
a fairness opinion to the Company's Board of Directors based on a price of
$14.50 per share. Mr. Bolander was authorized by the independent committee and
the Board to continue discussions with Mr. Pellicano regarding the open issues.
Following the March 9 Board meeting, in a telephone conversation held on
March 9, 1998 between Mr. Bolander and Mr. Pellicano, Mr. Pellicano indicated
that IHF's offer of $14.50 per share was firm and non-negotiable.
On March 10, 1998, the Company's Board of Directors reconvened
telephonically. Mr. Perlman advised the Board of Directors of the status of the
negotiations with IHF and the status of the Transaction Documents and the
Standstill Agreement. ABN AMRO reviewed with the Board its revised presentation
book based upon a transaction price of $14.50 per share. ABN AMRO provided
orally its opinion to the Board that the $14.50 per share consideration to be
received by the stockholders of the Company pursuant to the Merger Agreement is
fair to such stockholders from a financial point of view. Based upon this oral
opinion and the Board's
21
<PAGE> 23
discussion, the independent committee recommended the approval of the proposed
transactions with IHF at $14.50 per share. After further discussion, the Board
unanimously approved in the following order the following matters: (i) an
amendment to the Rights Agreement, permitting the Offer and Merger to proceed
without triggering the provisions of the Rights Agreement, (ii) the Merger
Agreement, the Stockholder Agreement, the Standstill Agreement and the
transactions contemplated thereby, including the Offer and the Merger each at
$14.50 per share, and (iii) certain amendments to the Company's bylaws required
to be effected pursuant to the terms of the Merger Agreement. In addition, the
Company's Board of Directors recommended that the Company's stockholders tender
their shares pursuant to the Offer and, if applicable, adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger.
On March 10, 1998, following the Board meeting, the Merger Agreement and
the other Transaction Documents were executed by all the parties thereto.
On March 11, 1998, ABN AMRO delivered its written fairness opinion to the
Company's Board of Directors, confirming its oral opinion of March 10.
In reaching the determination and recommendation described above, the Board
of Directors considered a number of factors, including, among other things, the
following:
(i) Information regarding the Company's business, its current financial
condition and results of operations and its future prospects.
(ii) The projected financial results, prospects and strategic objectives
of the Company, as well as the risks involved in achieving those
results, prospects and objectives.
(iii) The fact that the $14.50 per share price to be received by the
Company's stockholders in both the Offer and Merger represents a
substantial premium over the closing market price per share of Common
Stock on each of the last full trading day prior to the Board's
approval of the transaction, that date which was a seven days prior
to the Board's approval of the transaction and that date which was 30
days prior to the Board's approval of the transaction; and that such
price would be payable in cash, thus eliminating any uncertainties in
valuing the consideration to be received by the Company's
stockholders.
(iv) That while the Company is prohibited from soliciting or encouraging
Acquisition Proposals, following the receipt of an unsolicited written
bona fide Acquisition Proposal, the Company may provide information
concerning the Company to, or enter into discussions or negotiations
with, the person or entity that made such Acquisition Proposal if the
Board of Directors of the Company, after consultation with its legal
counsel, determines in good faith that such actions are advisable for
the Board to act in the best interest of the Company and its
stockholders.
(v) The favorable timing of a sales transaction in light of the equity
markets being at an all-time high.
(vi) The Board's view, after consultation with management and ABN AMRO,
regarding the likelihood of the existence of other buyers on terms as
favorable as those in the Offer and the Merger.
(vii) The presentation made to the Company's Board of Directors by a
representative of ABN AMRO and the opinion of ABN AMRO that the
$14.50 per share price to be received by the stockholders of the
Company pursuant to the Merger Agreement is fair to such stockholders
from a financial point of view.
(viii) The availability of appraisal rights under Section 262 of the DGCL
for Dissenting Shares.
(ix) The terms and conditions of the Merger Agreement and the course of the
negotiations resulting in the execution thereof.
(x) The likelihood that the proposed acquisition would be consummated,
including the likelihood of obtaining the regulatory approvals
required pursuant to the Merger Agreement, and satisfying the other
conditions to the Offer and the Merger contained in the Merger
Agreement, the experience,
22
<PAGE> 24
reputation and financial condition of IHF and the risks to the Company
if the acquisition were not consummated.
(xi) The Board's view as to the means by which the value of the
consideration received by stockholders of the Company in any
transaction would be maximized.
The members of the Board of Directors evaluated the factors listed above in
light of their knowledge of the business and operations of the Company and their
business judgment. In view of the wide variety of factors considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement dated February 23, 1998, the Company
retained ABN AMRO as the Company's exclusive financial advisor to provide
financial advisory and investment banking services in connection with analyzing
the fairness, from a financial point of view, of a possible transaction with
IHF. The Company paid ABN AMRO a non-refundable $50,000 retainer at the time the
letter agreement was signed and agreed to pay ABN AMRO an opinion fee of
$250,000 (against which the $50,000 retainer would be credited) at the time ABN
AMRO rendered its verbal or written fairness opinion. In addition, the Company
agreed to reimburse ABN AMRO for its expenses, including legal fees, and to
indemnify, ABN AMRO for liabilities and expenses arising out of the engagement
and the transactions in connection therewith.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to stockholders of the Company on its
behalf with respect to the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To be best knowledge of the Company, during the past sixty days, no
transactions in the Shares have been effected by the Company or, to the best of
the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries presently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company 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) Except as set forth in this Statement, there is no transaction, board
resolution, agreement in principle or signed contract in response to the Offer,
which relates to or would result in one or more of the matters referred to in
paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
23
<PAGE> 25
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer is subject to such
requirements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may be consummated following the expiration of a 15
calendar day waiting period following the filing by IHF of a Pre-Merger
Notification and Report Form with respect to the Offer, unless IHF receives a
request for additional information or documentary material, or the Antitrust
Division and the FTC terminate the waiting period prior thereto. IHF has filed a
Pre-Merger Notification and Report Form with respect to the Offer. If, within
the initial 15 day period, either the Antitrust Division or the FTC requests
additional information or material from IHF concerning the Offer, the waiting
period will be extended and would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by IHF with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of IHF. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties may engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Expiration or
termination of applicable waiting periods under the HSR Act is a condition to
Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
Shares pursuant to the Offer and shares of Common Stock pursuant to the Merger.
At any time before or after Purchaser's acquisition of Shares, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition of Shares pursuant to the Offer or the consummation of the Merger or
seeking divestiture of Shares acquired by Purchaser or divestiture of
substantial assets of IHF or its subsidiaries or the Company or its
subsidiaries. Private parties and state attorneys general may also bring action
under the antitrust laws under certain circumstances. There can be no assurance
that a challenge to the Offer or the Merger on antitrust grounds will not be
made or, if such a challenge is made, of the result thereof.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. Section 203 of the DGCL limits the ability of a Delaware
corporation to engage in business combinations with "interested stockholders"
(generally defined as any beneficial owner of 15% or more of the outstanding
voting stock of the corporation) unless, among other things, the corporation's
board of directors has given its prior approval to either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder. As indicated in Item 4, the Company, pursuant to a
resolution of the Board of Directors approving the Offer and the Merger, has
rendered Section 203 of the DGCL inapplicable to the Offer and the Merger. A
number of other states throughout the United States have enacted takeover
statutes that purport, in varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated or have assets,
stockholders, executive offices or places of business in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws, that made the
takeover of certain corporations more difficult, imposed a substantial burden on
interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics
Corp. of America, however, 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
only under certain conditions.
The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither Purchaser, Parent nor IHF knows whether any or all
of these takeover laws and regulations will by their terms apply to the Offer,
and, except with respect to the DGCL, neither Purchaser, Parent nor IHF has
currently complied with any other state takeover statute or regulation.
Purchaser has reserved the right to challenge the applicability or validity
24
<PAGE> 26
of any state law purportedly applicable to the Offer. If it is asserted that any
state takeover statute is applicable to the Offer and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer, or may be
delayed in consummating the Offer. In such case, Purchaser may not be obligated
to accept for payment or pay for any Shares tendered pursuant to the Offer.
Litigation. On March 12, 1998, a complaint alleging a class action on
behalf of persons who own Common Stock was filed in the Delaware Court of
Chancery by attorneys for The Great Neck Capital Appreciation Investment
Partnership, L.P. ("Plaintiff"), against the individuals serving as directors of
the Company, the Company and IHF (the "Defendants"). In substance, the complaint
alleges that the Defendants possess material non-public information regarding
the fair value of the Company and that the Company's Directors breached their
fiduciary duties to the public stockholders of the Company by, among other
things, failing to take adequate steps to determine the fair value of the
Company, failing to investigate other potential transactions and failing to take
adequate steps to maximize stockholder value. The relief sought by the Plaintiff
includes an injunction against the acquisition of Shares by Purchaser; an
injunction requiring that certain steps be taken to evaluate the value of the
Company; an accounting for damages; and an award of costs of suit and attorneys'
and experts' fees in unspecified amounts.
25
<PAGE> 27
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
Exhibit 1 Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to the Tender Offer Statement on Schedule 14D-1 filed
with the Securities and Exchange Commission by IHF, Parent
and Purchaser dated March 17, 1998 (the "Schedule 14D-1")).
Exhibit 2 Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Schedule 14D-1).
Exhibit 3 Opinion of ABN AMRO dated March 10, 1998 (Attached to
Schedule 14D-9 mailed to stockholders as Annex B)
Exhibit 4 Joint Press Release, dated March 11, 1998 (incorporated by
reference to Exhibit (a)(8) to the Schedule 14D-1).
Exhibit 5 Letter dated March 18, 1998 from Glen S. Bolander to the
Stockholders of the Company (included with Schedule 14D-9
mailed to stockholders)
Exhibit 6 Agreement and Plan of Merger, dated March 10, 1998, by and
among IHF, Parent, Purchaser and the Company (incorporated
by reference to Exhibit (c)(1) to the Schedule 14D-1).
Exhibit 7 Stockholder Agreement dated March 10, 1998, among Purchaser,
Parent, the Company and the Selling Stockholder
(incorporated by reference to Exhibit (c)(2) to the Schedule
14D-1).
Exhibit 8 Form of Option Surrender Agreement, Release and Waiver dated
March 10, 1998, among the Company and holders of options to
acquire shares of the Company's Common Stock (incorporated
by reference to Exhibit (c)(3) to the Schedule 14D-1).
Exhibit 9 Employment and Noncompetition Agreement dated March 10,
1998, between IHF and the Selling Stockholder (incorporated
by reference to Exhibit (c)(4) to the Schedule 14D-1).
Exhibit 10 Confidentiality Agreement dated as of February 2, 1998,
between IHF and the Company (incorporated by reference to
Exhibit (c)(5) to the Schedule 14D-1).
Exhibit 11 Confidentiality Agreement dated as of February 9, 1998,
between IHF and the Company (incorporated by reference to
Exhibit (c)(6) to the Schedule 14D-1).
Exhibit 12 Standstill Agreement dated as of March 10, 1998, between IHF
and the Company (incorporated by reference to Exhibit (c)(7)
to the Schedule 14D-1).
Exhibit 13 Employment Agreement dated January 10, 1990, between the
Company and Glen S. Bolander (incorporated by reference to
Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1994).
Exhibit 14 Amendment No. 1 to Employment Agreement dated October 1993,
between the Company and Glen S. Bolander (incorporated by
reference to Exhibit 10(e) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994).
Exhibit 15 Employment Agreement effective June 4, 1994, between the
Company and Ronald K. Zuckerman (incorporated by reference
to Exhibit 10(g) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1994).
Exhibit 16 Amendment No. 1 to Employment Agreement dated June 3, 1997,
between the Company and Ronald K. Zuckerman (incorporated by
reference to Exhibit 10(i) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1997).
</TABLE>
26
<PAGE> 28
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.
GRIST MILL CO., a Delaware corporation
By: /s/ GLEN S. BOLANDER
------------------------------------
Name: Glen S. Bolander
Title: Chief Executive Officer and
President
Dated: March 18, 1998
<PAGE> 29
ANNEX A
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about March 18, 1998 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Grist Mill Co., a Delaware corporation (the "Company"), to
the holders of record of shares of common stock, par value $.10 per share, of
the Company (the "Common Stock" or the "Shares"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Purchaser (as defined below) to the Board of Directors of the
Company (the "Board").
On March 10, 1998, the Company, International Home Foods, Inc., a Delaware
corporation ("IHF"), IHF/GM Holding Corporation, a Delaware corporation, a
direct wholly owned subsidiary of IHF ("Parent"), and IHF/GM Acquisition
Corporation, a Delaware corporation, a direct wholly owned subsidiary of Parent
("Purchaser"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which (i) Purchaser will commence a tender offer (the
"Offer") for all of the outstanding Shares at the purchase price of $14.50 per
Share, net to the seller in cash, and (ii) Purchaser will be merged with and
into the Company (the "Merger"). As a result of the Offer and the Merger, Parent
will own all of the outstanding capital stock of the Company.
The Merger Agreement generally provides that, promptly upon the purchase by
Purchaser of a majority of the Shares pursuant to the Offer, Purchaser shall be
entitled to designate such number of directors (the "Purchaser Designees") to
the Board as will give Purchaser representation proportionate to its ownership
interest. The Merger Agreement requires the Company to take action to cause the
Purchaser Designees to be elected to the Board under the circumstances described
therein. This Information Statement is required by Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. See "Right to Designate Directors; The Purchaser
Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning IHF,
Parent and Purchaser has been furnished to the Company by IHF. The Company
assumes no responsibility for the accuracy or completeness of such information.
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of March 10, 1998, there were 6,860,692
Shares outstanding. The Board currently consists of four members with no
vacancies.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, upon the purchase by Purchaser pursuant
to the Offer of that number of Shares which represents a majority of the shares
of Common Stock then outstanding on a fully diluted basis, the parties to the
Merger Agreement will take all actions necessary to cause to be elected to the
Board such number of directors designated by Purchaser, rounded up to the next
whole number, as will give Purchaser representation on the Board equal to the
product of: (i) the total number of directors of the Company (giving effect to
any increase in the number of directors pursuant to such provision) multiplied
by (ii) the percentage that such number of Shares so purchased bears to the
aggregate number of shares of Common Stock then outstanding. The Merger
Agreement also provides that the Company will take whatever action is necessary,
including but not limited to amending the Company's bylaws, to increase the size
of its
A-1
<PAGE> 30
Board of Directors, or use reasonable efforts to secure the resignation of
directors, as is necessary to permit that number of Purchaser Designees to be
elected to the Company's Board of Directors; provided that, prior to the
effective time of the Merger, the Company's Board of Directors will always have
at least two members who are Continuing Directors (as defined in the Merger
Agreement), except to the extent that all Continuing Directors resign.
IHF has informed the Company that it currently intends to choose the
Purchaser Designees it has the right to designate to the Company's Board of
Directors pursuant to the Merger Agreement from the individuals set forth below:
<TABLE>
<CAPTION>
NAME AGE
---- --- PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
<S> <C> <C>
C. Dean Metropoulos............ 50 Chairman of the Board and Chief Executive Officer, IHF
(1996-present); Chairman of the Board and Chief Executive
Officer, Purchaser and Parent (1998-present); Chief
Executive Officer, C. Dean Metropoulos & Co. (1994-present);
Chairman and Chief Executive Officer, The Morningstar Group
(1994-1997); President and Chief Executive Officer, Stella
Foods, Inc. (1983-1993).
John H. Bess................... 45 President and Chief Operating Officer, IHF (1997-present);
President, Chief Operating Officer and Director, Purchaser
and Parent (1998-present); Vice President, Managing Director
of Worldwide Strategies Planning and numerous other
positions Procter & Gamble (1975-1997).
N. Michael Dion................ 40 Senior Vice President and Chief Financial Officer, IHF
(1996-present); Chief Financial Officer, Purchaser and
Parent (1998-present); Vice President of Finance, C. Dean
Metropoulos & Co. (1994-1996); Vice President of Finance,
Stella Foods, Inc. (1990-1994).
Jack D. Furst.................. 38 Managing Director and Principal, Executive Vice President,
The Fund, Inc. (1994-present); Executive Vice President,
HMTF Operating, Inc., formerly known as Hicks, Muse, Tate &
Furst Incorporated ("Hicks Muse") (1989-present).
Michael J. Levitt.............. 38 Director, IHF (1996-present); Managing Director and
Principal, Executive Vice President, The Fund, Inc.
(1995-present); Managing Director and Deputy Head --
Investment Banking, Smith Barney Inc. (1993-1995); Managing
Director, Morgan Stanley & Co. Incorporated (1986-1993).
Alan B. Menkes................. 38 Director, IHF (1996-present); Managing Director and
Principal, Executive Vice President, The Fund, Inc.
(1992-present); Vice President, Assistant Secretary and
Director, Purchaser and Parent (1998-present).
John R. Muse................... 46 Director, IHF (March 1998-present); Chief Operating Officer,
Hicks Muse (1989-present); Chief Operating Officer, The
Fund, Inc. (1994-present); Director, Suissa Foods (1997-to
present).
Lawrence D. Stuart, Jr. ....... 52 Managing Director and Principal, Executive Vice President,
The Fund, Inc. (1995-present); Managing Partner, Dallas
office of Weil, Gotshal & Manges (1989-1995); Director,
Chancellor Media Corporation (1997-present).
Charles W. Tate................ 52 Director, IHF (1996-present); President, The Fund, Inc.
(1991-present); Director, Berg Electronics Corp.
(1993-present).
</TABLE>
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding Shares,
pursuant to the Offer, which purchase cannot be earlier than April 13, 1998.
This step will be accomplished at a meeting or by written consent of the Board
providing that the size of the Board will be increased and/or sufficient numbers
of current directors resigning such that,
A-2
<PAGE> 31
immediately following such action, the number of vacancies to be filled by the
Purchaser Designees will be available. It is currently not known which of the
current directors of the Company will resign, if any.
None of the executive officers or directors of IHF, Parent or Purchaser
currently is a director of, or holds any position with, the Company. The Company
has been advised that, to the best knowledge of IHF, Parent or Purchaser, none
of IHF's, Parent's or Purchaser's directors or executive officers beneficially
owns any equity securities, or rights to acquire any equity securities, of the
Company, and none has been involved in any transactions with the Company or any
of its directors, executive officers, affiliates or associates which are
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission.
THE CURRENT MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY
The current directors of the Company, their ages as of March 10, 1998, and
their principal occupation and business experience are set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
---- --- --------------------------------------------
<S> <C> <C>
Ronald K. Zuckerman.................. 55 Chairman of the Board, also served as Chief Financial
Officer until 1992 and Chief Executive Officer from 1975
until October 1993. He has been a director and officer
of the Company since 1975. From 1973 to 1981, Mr.
Zuckerman also worked as an independent management
consultant.
Glen S. Bolander..................... 51 President and Chief Executive Officer, he has been a
director of the Company since 1986 and an officer of the
Company since 1982. Mr. Bolander joined the Company in
1982 as Vice President, Industrial Sales, and later
served as Executive Vice President. He is associated
with the National Institute of Food Technologies.
Charles H. Perlman................... 52 He has been a director of the Company since 1983. Mr.
Perlman has been a partner in the law firm of Barack
Ferrazzano Kirschbaum Perlman & Nagelberg specializing
in corporate and securities law since 1986.
Roger L. Weston...................... 55 He has been a director of the Company since 1984 and has
been Chairman of the Board, President and Chief
Executive Officer of GreatBanc, Inc., an Illinois
multi-bank holding company since 1986. Mr. Weston
invests in and is on the board of directors of numerous
public and private companies.
</TABLE>
THE CURRENT EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company, their ages as of March 10,
1998, and their positions with the Company and business experience are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION AND BUSINESS EXPERIENCE
---- --- --------------------------------
<S> <C> <C>
Glen S. Bolander..................... 51 President and Chief Executive Officer, he has been a
director of the Company since 1986 and an officer of the
Company since 1982. Mr. Bolander joined the Company in
1982 as Vice President, Industrial Sales, and later
served as Executive Vice President. He is associated
with the National Institute of Food Technologies.
</TABLE>
A-3
<PAGE> 32
<TABLE>
<CAPTION>
NAME AGE POSITION AND BUSINESS EXPERIENCE
---- --- --------------------------------
<S> <C> <C>
Michael J. Cannon.................... 40 Vice President, Sales since 1994. Mr. Cannon was the
Vice President, Core Products Group from 1993 to 1994
and the Vice President, Grocery from 1988 to 1993. Prior
to joining the Company in 1987, Mr. Cannon was the
Marketing and New Product Manager for The Pillsbury
Company.
Daniel J. Kinsella................... 39 Vice President, Chief Financial Officer and Treasurer
since 1992. Mr. Kinsella was the Company's Director of
Finance and Treasurer from 1990 to 1992. Prior to
joining the Company in 1989, he was the Director of
Financial Reporting for Inter-Regional Financial Group,
Inc.
Michael A. Parent.................... 40 Vice President, Operations since 1996. Mr. Parent has
been a member of the Company's operations management
since 1994 and was the Manufacturing Controller for the
Company from 1991 to 1994.
Thomas L. Traub...................... 39 Vice President, Human Resources since May 1997. Mr.
Traub was the Company's Human Resources Manager from
1995 to 1996. Prior to joining the Company, Mr. Traub
was the Human Resources Manager for General Mills Inc.
from 1990 to 1995.
</TABLE>
A-4
<PAGE> 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons were known to the Company, as of March 10, 1998, to
be the beneficial owners of more than 5% of the Company's outstanding Common
Stock (the only class of outstanding equity securities of the Company):
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) BENEFICIALLY OWNED
------------------- ------------------------ ------------------
<S> <C> <C>
Glen S. Bolander.......................... 673,544(3) 9.82%
21340 Hayes Avenue
Lakeville, MN 55044
Dimensional Fund Advisors Inc............. 419,950(4) 6.12%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Heartland Advisors, Inc................... 403,000(5) 5.87%
790 North Milwaukee Street
Milwaukee, WI 53202
</TABLE>
- -------------------------
(1) All shares are subject to the named person's sole voting and investment
power, except as set forth in the footnotes below.
(2) Includes all stock options held by the named persons provided such options
are currently vested or will vest within sixty (60) days.
(3) Includes 403,899 shares owned directly by Mr. Bolander, of which 45,000
shares are owned by Mr. Bolander as a tenant in common with his spouse with
whom Mr. Bolander shares voting and investment power. Includes 24,645 shares
owned by the Grist Mill Co. Employees Retirement Savings Plan and Trust for
the benefit of Mr. Bolander. Also includes non-qualified stock options to
purchase 70,000 shares at $6.00 per share, 50,000 shares at $6.563, 75,000
shares at $8.625 per share and 50,000 shares at $7.875 per share.
(4) The Company is relying on information provided by Dimensional Fund Advisors
Inc. in a Schedule 13G filed with the Securities and Exchange Commission
(the "SEC") on February 10, 1998. According to such Schedule 13G,
Dimensional Fund Advisors Inc. has the sole power to dispose of all 419,950
shares reported, but has the sole power to vote only 279,000 of such shares.
(5) The Company is relying on information provided by Heartland Advisors, Inc.,
in a Schedule 13G filed with the SEC on January 30, 1998.
A-5
<PAGE> 34
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the total number of shares of Common Stock (the
only class of outstanding equity securities of the Company) and the percentage
of the outstanding Common Stock beneficially owned, as of March 10, 1998 (except
as noted below), by the Chief Executive Officer, by each of the Company's four
most highly compensated executive officers other than the Chief Executive
Officer who were serving as executive officers at the end of fiscal year 1997
and by one individual who served as an executive officer of the Company for a
portion of fiscal year 1997 only (collectively, the "Named Executive Officers")
individually, by each director individually and by directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNERSHIP PERCENT OF SHARES
BENEFICIAL OWNER (1)(2)(3) BENEFICIALLY OWNED
---------------- -------------------- ------------------
<S> <C> <C>
Glen S. Bolander............................. 673,544(4) 9.82%
Eric H. Beringause........................... 7,758(5) *
Michael J. Cannon............................ 23,810(6) *
Daniel J. Kinsella........................... 24,009(7) *
Michael A. Parent............................ 6,456(8) *
Thomas J. Tatoian............................ 13,458(9) *
Ronald K. Zuckerman.......................... 153,938(10) 2.24%
Charles H. Perlman........................... 129,534(11) 1.89%
Roger L. Weston.............................. 125,444(12) 1.83%
All directors and executive officers as a
group
(10 persons)............................... 1,159,456(13) 16.90%
</TABLE>
- -------------------------
* Less than 1%.
(1) All shares are subject to the named person's sole voting and investment
power, except as set forth in the footnotes below.
(2) Includes all stock options held by the named persons provided such options
are currently vested or will vest within sixty (60) days.
(3) Does not include any shares beneficially owned by the adult children of
such persons. Includes shares held in joint tenancy with certain family
members who share voting and investment power.
(4) See footnote (3) to the table entitled "Security Ownership of Certain
Beneficial Owners" for additional information regarding beneficial
ownership by Mr. Bolander.
(5) Reflects stock ownership as of May 21, 1997, the effective date of the
termination of Mr. Beringause's employment with the Company. Includes 1,000
shares owned directly by Mr. Beringause and 2,638 shares owned by the Grist
Mill Co. Employees Retirement Savings Plan and Trust for the benefit of Mr.
Beringause. Includes non-qualified stock options to purchase 120 shares at
$9.00 per share and 4,000 shares at $9.625 per share.
(6) Includes 13,770 shares owned directly by Mr. Cannon. Also includes
non-qualified stock options to purchase 880 shares at $7.00 per share, 900
shares at $6.25 per share, 6,000 shares at $9.75 per share, 680 shares at
$9.00 per share, 1,200 shares at $5.50 per share and 380 shares at $5.00
per share.
(7) Includes 9,352 shares owned directly by Mr. Kinsella and 1,497 shares owned
by the Grist Mill Co. Employees Retirement Savings Plan and Trust for the
benefit of Mr. Kinsella. Also includes non-qualified stock options to
purchase 2,400 shares at $7.00 per share, 2,160 shares at $6.25 per share,
6,000 shares at $9.75 per share, 920 shares at $9.00 per share, 1,200
shares at $5.50 per share and 480 shares at $5.00 per share.
(8) Includes 2,583 shares owned by the Grist Mill Co. Employees Retirement
Savings Plan and Trust for the benefit of Mr. Parent. Also includes
non-qualified stock options to purchase 1,200 shares at $7.00 per share,
1,200 shares at $6.25 per share, 640 shares at $9.00 per share, 400 shares
at $5.00 per share and 3,800 shares at $6.87 per share.
A-6
<PAGE> 35
(9) Reflects stock ownership as of May 31, 1997, the effective date of the
termination of Mr. Tatoian's employment with the Company. Includes 7,370
shares owned directly by Mr. Tatoian and 6,088 shares owned by the Grist
Mill Co. Employee Retirement Savings Plan and Trust for the benefit of Mr.
Tatoian.
(10) Includes 148,938 shares held directly by Mr. Zuckerman. Also includes 5,000
shares owned by Mr. Zuckerman's spouse. Mr. Zuckerman disclaims beneficial
ownership of the securities owned by his spouse.
(11) Includes 2,262 shares held directly by Mr. Perlman. Also includes 36,320
shares owned beneficially by Mr. Perlman's spouse, 5,000 shares in trust
for Mr. Perlman's children and 5,000 shares in an individual retirement
account. Mr. Perlman disclaims beneficial ownership with respect to 41,320
of such shares. Includes non-qualified stock options to purchase 10,436
shares at $7.125 per share, 10,516 shares at $6.25 per share, 15,000 shares
at $9.375 per share, 15,000 shares at $6.25 per share, 15,000 shares at
$6.50 per share and 15,000 shares at $9.0625 per share. Such options are
held by Mr. Perlman for the benefit of Mr. Perlman and his partners in the
law firm of Barack Ferrazzano Kirschbaum Perlman & Nagelberg. Accordingly,
Mr. Perlman disclaims beneficial ownership of all but 4,285 of the shares
represented by such options.
(12) Includes 65,444 shares held directly by Mr. Weston. Also includes
non-qualified stock options to purchase 15,000 shares at $9.375 per share,
15,000 shares at $6.25 per share, 15,000 shares at $6.50 per share and
15,000 shares at $9.0625 per share.
(13) Includes non-qualified stock options to purchase 421,312 shares at prices
ranging from $5.00 per share to $9.75 per share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers. Officers, directors and "greater than ten
percent" stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms so filed.
Based solely on review of the copies of such forms furnished to the Company
for the period beginning on June 1, 1996 and ending on May 31, 1997 and written
representations from certain reporting persons that no Forms 5 were required to
be filed, all Section 16(a) filing requirements applicable to the Company's
officers, directors and "greater than ten percent" stockholders were met for the
fiscal year ended May 31, 1997.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND MERGER
In considering the recommendation of the Board of Directors, stockholders
of the Company should be aware that certain officers and directors of the
Company have certain interests in the Offer and the Merger, including those
referred to below, that present actual or potential conflicts of interest in
connection with the Offer and the Merger. The Board of Directors was aware of
these potential or actual conflicts of interest and considered them along with
other matters described under Item 4 of the Schedule 14D-9 to which this
Information Statement is attached.
INTERESTS OF BOARD MEMBERS WITH RESPECT TO COMPENSATION AND SHARES
AGREEMENT WITH ROGER L. WESTON
At a special meeting of the Board of Directors held on January 29, 1998,
the Board of Directors of the Company, after consultation with the Company's
legal counsel, decided to establish an independent committee to represent the
Company in its discussions with IHF in connection with the proposed acquisition
of the Company. Roger L. Weston and Charles H. Perlman were appointed as members
of the independent
A-7
<PAGE> 36
committee. In connection with Mr. Weston's appointment to the independent
committee, the Company's Board authorized the Company to pay Mr. Weston a fee of
$75,000 to serve as Chairman of the independent committee and to continue to
serve as a director of the Company prior to the effective time of the Merger.
OPTIONS
All employees, officers, directors or consultants of the Company and its
subsidiaries are eligible to participate in the Grist Mill 1986 Non-Qualified
Stock Option Plan (the "Stock Option Plan"). In general pursuant to the Stock
Option Plan, option grants vest according to the following schedule: one-fifth
at the one-year anniversary of the grant date, an additional one-fifth at the
three-year anniversary, an additional one-fifth at the four-year anniversary and
the remainder at the four-year, eleven-month anniversary of the grant. With
respect to options granted to Mr. Bolander, however, options vest immediately.
All options granted under the Stock Option Plan have an exercise price equal to
the last bid price per share of the Company's Common Stock on the date of grant
as reported on the National Association of Securities Dealers, Inc. Automated
Quotation System.
In connection with the Merger, each then outstanding option to purchase
shares of Common Stock under the Stock Option Plan, whether or not then
exercisable or vested, will be, except under certain circumstances relating to
persons subject to Section 16(a) of the Exchange Act, canceled and will
represent the right to receive an amount (subject to any applicable withholding
tax) in cash for each share of Common Stock subject to such option equal to the
difference between the per share Merger Consideration and the per share exercise
price of such option to the extent such difference is a positive number. During
or on behalf of the fiscal year 1997, Mr. Perlman and Mr. Weston each received
options to purchase 15,000 shares of Common Stock at an exercise price of
$9.0625 per share.
INTERESTS OF EXECUTIVE OFFICERS OF THE COMPANY WITH RESPECT TO SHARES
EMPLOYMENT CONTRACTS
Glen S. Bolander.
Existing Agreement. The Company entered into an employment agreement
with Mr. Bolander on January 10, 1990 (the "Existing Agreement"), which
provides that Mr. Bolander will not compete with the Company or its
subsidiaries during his employment with the Company and for an additional
12 month period thereafter. The Existing Agreement also provides that, upon
Mr. Bolander's death or disability, he or his estate will receive an amount
equal to his then last annual salary. If Mr. Bolander desires to terminate
his employment with the Company, pursuant to the terms of the Existing
Agreement, he must give the Company three months' prior notice and will
receive no severance; however, if he desires to terminate his employment
within one year after a change of control of the Company, Mr. Bolander will
receive an amount equal to one and one-half times his then last annual
salary and bonus as severance. Additionally, if Mr. Bolander is terminated
within one year after a change of control of the Company, with or without
cause, he would be entitled to receive pursuant to the terms of the
Existing Agreement an amount equal to three times his then last annual
salary and bonus as severance. If Mr. Bolander is terminated within two
years after a change of control of the Company, with or without cause, he
would be entitled to receive pursuant to the terms of the Existing
Agreement an amount equal to two times his then last annual salary and
bonus as severance. If Mr. Bolander is terminated within three years after
a change of control of the Company, with or without cause, he would be
entitled to receive pursuant to the terms of the Existing Agreement an
amount equal to his then last annual salary and bonus as severance. The
Existing Agreement was amended in October 1993 to provide that upon any
termination of Mr. Bolander's employment, the Company shall continue to be
obligated to make the payments required by the Split Dollar Life Insurance
Agreement described below.
Effective as of the date that Purchaser accepts for payment any Shares
tendered pursuant to the Offer, the Existing Agreement will be terminated
in full. From and after the date of such termination, Mr. Bolander shall
not be entitled to receive (i) any further wages or other compensation
provided for or
A-8
<PAGE> 37
anticipated by the Existing Agreement, (ii) except for the payment of
$850,000 at the date that Purchaser accepts for payment any Shares tendered
pursuant to the Offer to Mr. Bolander (which payment IHF shall make to Mr.
Bolander at the date that Purchaser accepts for payment any Shares tendered
pursuant to the Offer), any other payment following a change in control or
other compensation contemplated by the Existing Agreement, or (iii) any
other benefits or compensation arising under or pursuant to the Existing
Agreement or, except as may be otherwise provided in the Employment and
Noncompetition Agreement (as hereinafter defined), Mr. Bolander's
employment relationship with the Company or any of its subsidiaries.
Employment and Noncompetition Agreement. On March 10, 1998, Mr.
Bolander entered into an Employment and Noncompetition Agreement (the
"Employment and Noncompetition Agreement") with IHF. Pursuant to the
Employment and Noncompetition Agreement, as of the date that Purchaser
accepts for payment any Shares tendered pursuant to the Offer, IHF will
employ Mr. Bolander and he has agreed to be employed by IHF, in accordance
with the terms and provisions of the Employment and Noncompetition
Agreement. The terms of the Employment and Noncompetition Agreement are
summarized in Item 4 of the Schedule 14D-9 to which this Information
Statement is attached.
Split Dollar Life Insurance Agreement. The Company entered into a
Split Dollar Life Insurance Agreement with Mr. Bolander on November 2, 1993
whereby the Company agreed to pay on behalf of a trust established for the
benefit of Mr. Bolander eight annual premiums of $36,000 each on a life
insurance policy on the life of Mr. Bolander in the face amount of
$1,000,000. The Company has a claim to the cash surrender value (or the
proceeds of the policy upon the death of Mr. Bolander) for the amount of
its full contribution.
Ronald K. Zuckerman. The Company entered into an employment agreement with
Mr. Zuckerman effective June 1, 1994 and amended June 3, 1997, for a term ending
May 31, 2001. The agreement, as amended, provides for an annual salary of
$144,000 through May 31, 1998, and an annual salary of $75,000 from June 1, 1998
through the end of the term. In addition, Mr. Zuckerman is entitled to such
bonus and other benefits as may be determined by the Company's Board of
Directors. The agreement provides that, upon the death or disability of Mr.
Zuckerman, he or his estate will receive an aggregate amount equal to his annual
salary at such time, payable in 12 equal monthly installments. The agreement
provides that Mr. Zuckerman will not compete with the Company or its
subsidiaries during his employment with the Company and for an additional 12
months thereafter.
OPTIONS
The Company's executive officers have options outstanding to purchase
shares under the Stock Option Plan. As described above, each such option to
acquire a share of Common Stock will be canceled and will represent the right to
receive an amount in cash equal to the excess, if any, of the per share Merger
Consideration and the per share exercise price of such option. During or on
behalf of fiscal year 1997, the Company's executive officers received options to
purchase in the aggregate 103,800 shares of Common Stock at exercise prices
ranging from $6.00 to $6.875 per share, including options to purchase 70,000
shares granted to Mr. Bolander at an exercise price of $6.00 per share.
A-9
<PAGE> 38
The directors and executive officers of the Company will be entitled to
receive, as contemplated by the Merger Agreement, cash payments in the manner
set forth in the table below (see Item 3 of the Schedule 14D-9 to which this
Information Statement is attached):
SHARES AND OPTION AMOUNTS WITH RESPECT
TO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
DOLLAR AMOUNT TOTAL
NAME OWNED SHARES AT OFFER PRICE OPTIONS CASH PAYMENT CONSIDERATION
---- ------------ -------------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Glen S. Bolander................... 403,899 $5,856,536 245,000 $1,763,725 $7,620,261
Michael J. Cannon.................. 13,770 199,665 31,300 218,913 418,578
Daniel J. Kinsella................. 10,849 157,311 36,800 261,588 418,899
Michael A. Parent.................. 2,583 37,454 15,800 121,888 159,342
Thomas L. Traub.................... 705 10,223 10,500 86,563 96,786
Ronald K. Zuckerman................ 148,938(1) 2,159,601 0 0 2,478,601
Charles H. Perlman................. 7,262(2) 105,299 4,285(3) 28,689 133,988
Roger L. Weston.................... 65,444 948,938 60,000 402,188 1,351,126
</TABLE>
- -------------------------
(1) Does not include 5,000 shares owned by Mr. Zuckerman's spouse. Mr. Zuckerman
disclaims beneficial ownership of those shares.
(2) Does not include 36,320 shares owned beneficially by Mr. Perlman's spouse
and 5,000 shares in trust for Mr. Perlman's children. Mr. Perlman disclaims
beneficial ownership of those shares.
(3) Does not include options to purchase 76,667 shares held by Mr. Perlman for
the benefit of his partners in the law firm of Barack Ferrazzano Kirschbaum
Perlman & Nagelberg. Mr. Perlman disclaims beneficial ownership of such
options.
A-10
<PAGE> 39
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended May 31, 1997, 1996 and 1995, of those persons who were, at May 31, 1997,
the Chief Executive Officer and the Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#)(2) ($)(3)
--------------------------- ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Glen S. Bolander,................. 1997 $399,000 $150,000 $ 500 70,000 $37,376(4)
Chief Executive Officer and 1996 385,900 125,000 1,500 50,000 37,653(4)
President 1995 387,500 130,000 750 75,000 38,185(4)
Eric H. Beringause................ 1997 $155,000 $ 20,168 $ 0 0 $54,500(7)
Vice President, Marketing(5) 1996 151,200 17,100 37,000(6) 5,900 1,066
1995 34,600 30,100 0 10,600 190
Michael J. Cannon,................ 1997 $129,100 $ 24,618 $ 500 9,100 $ 1,395
Vice President, Sales 1996 116,600 13,400 500 7,900 1,746
1995 105,800 39,700 0 11,700 1,708
Daniel J. Kinsella,............... 1997 $133,400 $ 25,722 $ 0 9,500 $ 2,557
Vice President, Chief Financial 1996 119,000 12,900 0 8,400 2,709
Officer, Treasurer and Secretary 1995 109,000 39,900 0 12,300 2,490
Michael A. Parent,................ 1997 $ 91,200 $ 17,942 $ 0 8,700 $ 1,744
Vice President, Operations 1996 78,800 4,900 0 2,000 0
1995 70,900 16,700 0 1,600 0
Thomas J. Tatoian,................ 1997 $119,067 $ 0 $ 500 0 $ 3,299
Vice President, Manufacturing(8) 1996 120,777 4,873 550 0 2,841
1995 110,900 31,800 550 7,000 2,550
</TABLE>
- -------------------------
(1) Represents amounts reimbursed during the fiscal year for the payment of
income tax preparation.
(2) Awarded during the fiscal year shown or in July or August of the following
fiscal year based on performance in the fiscal year shown. All such options
have an exercise price equal to the last bid price per share of the
Company's Common Stock on the date of grant as reported on the National
Association of Securities Dealers, Inc. Automated Quotation System.
(3) Represents amounts contributed by the Company to the Grist Mill Employees
Retirement Savings Plan and Trust and amounts paid by the Company in
premiums for life insurance coverage except with respect to Mr. Beringause.
(4) Includes a premium of $36,000 paid for a life insurance policy under a
split-dollar arrangement whereby the Company will recoup the premium and Mr.
Bolander will accrue earnings from the policy.
(5) Mr. Beringause joined the Company in February 1995. His employment with the
Company terminated effective as of May 21, 1997.
(6) Includes $30,600 reimbursed to Mr. Beringause for moving expenses. Also
includes $6,400 representing a gross up for income tax purposes.
(7) Represents amounts paid to Mr. Beringause with respect to the termination of
his employment with the Company.
(8) Mr. Tatoian's employment with the Company terminated effective as of May 31,
1997.
A-11
<PAGE> 40
Shown below is further information on grants of stock options pursuant to
the Stock Option Plan during or pertaining to the fiscal year ended May 31,
1997, to the Chief Executive Officer and the Named Executive Officers who are
set forth in the Summary Compensation Table above. No stock appreciation rights
have ever been granted.
OPTION GRANTS WITH RESPECT TO FISCAL YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------ AT ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(3)
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (#)(1) FISCAL YEAR(2) ($/SH) DATE 5% 10%
---- ------- --------------- ----------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Glen S. Bolander.............. 70,000 46.67% $ 6.00 10/28/03 $128,923 $297,421
Eric H. Beringause............ 0 0 0 -- 0 0
Michael J. Cannon............. 9,100 6.07 6.875 01/31/03 19,204 44,303
Daniel J. Kinsella............ 9,500 6.33 6.875 01/31/03 20,048 46,251
Michael A. Parent............. 8,700 5.80 6.875 01/31/03 18,360 42,356
Thomas J. Tatoian............. 0 0 0 -- 0 0
</TABLE>
- -------------------------
(1) All of these options were granted in July 1997 (with the exception of Mr.
Bolander's options which were granted in April 1997) based upon the
performance of the Named Executive Officers for the fiscal year ended May
31, 1997. With respect to Mr. Bolander, the options vest immediately. With
respect to the other Named Executive Officers, the option grants vest
according to the following schedule: one-fifth at the one-year anniversary
of the grant date, an additional one-fifth at the two-year anniversary, an
additional one-fifth at the three-year anniversary, an additional one-fifth
at the four year anniversary and the remainder at the four-year eleven-month
anniversary of the grant date.
(2) With respect to performance in fiscal year 1997, as of July 1997, a total of
150,000 options were granted to employees of the Company, including the
Named Executive Officers. In addition, 30,000 options were granted to the
non-employee directors of the Company.
(3) The "potential realizable value" shown represents the potential gains based
on annual compound stock price appreciation of 5% and 10% from the date of
grant through the full five- and 1/2-year option term. The amounts given
represent assumed rates of appreciation only. Actual gains, if any, on
option exercises will depend on future performance of the Company's Common
Stock and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
Set forth below is information with respect to the unexercised options to
purchase the Company's Common Stock granted in fiscal year 1997 and prior years
under the Stock Option Plan to the Named Executive Officers and held by them at
May 31, 1997. A total of 10,930 options were exercised by the Named Executive
Officers during fiscal year 1996-97.
AGGREGATE OPTION EXERCISES DURING FISCAL YEAR ENDED
MAY 31, 1997 AND VALUE OF OPTIONS HELD AT MAY 31, 1997
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT MAY 31, 1997 (#) MAY 31, 1997 ($)(1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ --------------------------- -------------------------
<S> <C> <C> <C> <C>
Glen S. Bolander......... 0 $ 0 325,000/0 $123,125/$0
Eric H. Beringause....... 0 0 4,120/12,260 0/ 7,588
Michael J. Cannon........ 4,080 4,080 10,290/14,160 4,649/ 8,095
Daniel J. Kinsella....... 2,770 3,000 16,310/14,140 6,221/ 15,281
Michael A. Parent........ 0 0 5,090/3,660 2,819/ 2,900
Thomas J. Tatoian........ 4,080 3,695 7,680/7,320 3,475/ 1,150
</TABLE>
- -------------------------
(1) "Value" has been determined based upon the difference between the per share
option exercise price and the last bid price per share of the Company's
Common Stock reported on the National Association of Securities Dealers,
Inc. Automated Quotation system at the date of exercise or May 31, 1997, as
applicable.
A-12
<PAGE> 41
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of independent outside directors, Messrs. Perlman and Weston. The
Committee is responsible for administering the policies which govern annual
executive compensation. Following review and approval by the Committee, all
issues pertaining to executive compensation are submitted to the full Board of
Directors for approval.
Objectives of Executive Compensation. The Company maintains the philosophy
that compensation of its executive officers and others shall be directly and
materially linked to operating performance. To achieve this linkage, a
significant portion of executive compensation includes bonuses and stock options
that are granted on the basis of the Company's performance. Thus, while annual
salary increases are determined in light of the Company's general performance,
as well as the personal performance of the executive officers, annual bonuses
are more closely tied to the Company's actual economic performance during the
particular fiscal year in question.
Stock options are granted to the executive officers under the provisions of
the Stock Option Plan. Stock options are granted to provide additional incentive
to improve stockholder value over the long-term and to encourage and facilitate
executive stock ownership. Stock options are granted at the market price of the
Common Stock at the date of grant to ensure that executives can only be rewarded
for appreciation in the price of the Common Stock when the Company's
stockholders are similarly benefited. The Committee determines, on an annual
basis, those executives who will receive stock option grants and size of such
grants awarded.
Compensation Committee Procedures. The Committee annually evaluates the
personal performance of the Chief Executive Officer of the Company as well as
the Company's performance. The Committee also compares the compensation of the
Chief Executive Officer over the preceding four fiscal years to the executive
compensation of other Midwest public companies. Finally, the Committee analyzes
the compensation history of the Chief Executive Officer over the preceding four
fiscal years. Personal performance can include such qualitative factors as
organizational and management development exhibited from year to year. The
compensation of the remaining executive officers of the Company, including the
other Named Executive Officers, is recommended by Mr. Bolander. Increases in
base salary are determined primarily by performance -- both that of the Company
and that of each executive officer. The achievement of corporate and business
unit financial and strategic goals are considered as well as individual
performance, including managerial effectiveness, teamwork, leadership and
innovation.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility on the Company's tax return of compensation
over $1 million to the Chief Executive Officer and any of the Named Executive
Officers of the Company unless, in general, the compensation is paid pursuant to
a plan which is performance-related, non-discretionary and has been approved by
the Company's stockholders. The Committee's policy with respect to Section
162(m) is to make reasonable efforts to ensure that compensation is deductible
to the extent permitted while simultaneously providing Company executives with
appropriate rewards for their performance.
Compensation of the Chief Executive Officer. The annual base salary for the
Company's Chief Executive Officer, Glen S. Bolander was $399,000 for fiscal year
1997, which represented an increase of approximately 3% (or $13,100) from the
prior fiscal year. Mr. Bolander's annual base salary and the increase thereto
was based on the Company's performance during fiscal year 1996, and Mr.
Bolander's performance in relation to the Company's operations and executive
compensation for past years. Mr. Bolander was awarded a cash bonus of $150,000
with respect to fiscal year 1997, and he was granted options to purchase 70,000
shares of Common Stock at the market price at the time of grant ($6.00 per
share). The Committee determined the number of options granted to Mr. Bolander
and his cash bonus in light of his contributions to the Company and performance
for fiscal year 1997.
A-13
<PAGE> 42
Submitted by the Compensation Committee:
Charles H. Perlman Roger L. Weston
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bolander made recommendations to the Company's Board of Directors
regarding the compensation of the executive officers of the Company, other than
compensation decisions with respect to himself. Mr. Bolander is an officer of
the Company and its wholly-owned subsidiary, Grist Mill Confections, Inc. Mr.
Zuckerman serves as a director and on the compensation committee of GreatBanc,
Inc., of which Mr. Weston is the Chairman of the Board, Chief Executive Officer
and President. Mr. Perlman serves as a director and on the compensation
committee of the Company as well as on the compensation committee of GreatBanc,
Inc. Mr. Weston serves as a director and on the compensation committee of the
Company and on the compensation committee of GreatBanc, Inc.
EMPLOYEE BENEFIT PLANS
To provide stockholders with additional information regarding the plans
under which the Chief Executive Officer and the Named Executive Officers have
received compensation, the following is a summary of the Grist Mill Employees
Retirement Savings Plan and Trust (the "Retirement Plan") and the Stock Option
Plan.
Retirement Plan. The Retirement Plan, in effect since 1986, was formally
approved by the stockholders at the 1991 annual meeting of the Company's
stockholders. Employees are eligible to participate in the Retirement Plan when
they are 21 years of age and have completed one full year of service. Employees
may make annual pre-tax contributions to the Retirement Plan of up to 15% of
their annual salaries or wages. The Company makes a matching contribution of 30%
on up to the first 7% of each employee's annual salary and wages. All matching
contributions are automatically 100% vested when contributed. Each year the
Board of Directors, at its discretion, determines what amount, if any, the
Company will make as a profit sharing contribution to the Retirement Plan.
Although to date the Company has made no profit sharing contributions, a profit
sharing contribution, if made, would be allocated to the accounts of individual
employees meeting certain minimum service criteria for the fiscal year, based on
a formula which takes into account total years of service and total
compensation. Profit sharing contributions would continue to vest fully upon the
completion of five years of service. The sum of annual salary deferrals,
matching contributions and profit sharing allocations per individual may not
exceed the lesser of $30,000 or 25% of the individual's annual wages or salary.
The Retirement Plan is a defined contribution plan intended to qualify
under Section 401(a) of the Code and contains a deferred feature intended to
qualify under Section 401(K) of the Code. Benefits may be paid out in the event
of the retirement, disability, death or termination of employment of an
employee.
Stock Option Plan. In November 1986 the Company adopted the Stock Option
Plan to provide incentives for certain key employees or other persons to exert
maximum efforts towards the success of the Company, and also to help attract and
retain personnel of the highest quality. All employees, officers, directors or
consultants of the Company, its parent and subsidiaries are eligible to
participate in the Stock Option Plan. The term of the Stock Option Plan expires
on November 1, 2001. The Company has reserved 2,500,000 shares of Common Stock
for issuance under the Stock Option Plan.
Effective June 5, 1997, the Board of Directors assumed the administration
of the Stock Option Plan from the Committee. The Board of Directors (previously
the Committee) is responsible for determining which of the eligible persons
shall be granted options, the manner and time of exercise of such options and
the exercise price of the options. Mr. Bolander then recommends the number of
options to be granted to each individual. Members of the Committee are now
eligible for discretionary grants under the Stock Option Plan.
Options must be exercised in accordance with the Stock Option Plan and
terms set by the Board. Each option terminates if not exercised by the exercise
date set by the Board. Unless otherwise specified when the option is granted,
options granted to an employee who ceases to become an employee terminates in
the
A-14
<PAGE> 43
following manner. If the cessation is due to death, the options must be
exercised by the decedent's beneficiary within one year from date of death. If
the cessation of employment is due to permanent disability, the option must be
exercised within one year. If the cessation of employment is due to any other
reason, the option terminates at the end of three months.
Unless otherwise specified when the option is granted, options are not
transferable except by will or by the laws of descent and distribution, and
options may be exercised only by the person granted the option during that
person's lifetime.
The Stock Option Plan is not covered by the Employees Retirement Income
Security Act (ERISA). The Stock Option Plan is not qualified under Section 401
of the Code. Generally, there will be no federal tax consequences to the Company
or the recipient of the options at the time the options are granted. When
options are exercised, the Company incurs a "business expense" federal income
tax deduction equal to the difference, if any, between the fair market value of
each option on the exercise date and the option exercise price. On exercise, the
recipient of the options will have reportable ordinary income equal to the
difference, if any, between the fair market value of the options on the exercise
date and the option exercise price.
A-15
<PAGE> 44
PERFORMANCE GRAPH
The graph set forth below depicts total cumulative shareholder return and
assumes $100 invested on May 31, 1992 in the Company's Common Stock, the
Standard & Poor's ("S&P") Foods Index and the NASDAQ Stock Market -- U.S. Index
for the period of the Company's last five fiscal years (May 31, 1992=100). The
S&P Foods Index is composed of 13 of the largest publicly traded food companies
in the United States. The graph assumes all dividends are reinvested.
<TABLE>
<CAPTION>
NASDAQ
STOCK
Measurement Period GRIST MARKET S&P FOODS
(Fiscal Year Covered) MILL CO. (U.S.) INDEX
<S> <C> <C> <C>
5/92 100 100 100
5/93 164 120 105
5/94 98 127 104
5/95 173 151 131
5/96 122 219 155
5/97 124 246 204
</TABLE>
A-16
<PAGE> 45
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The law firm of Barack Ferrazzano Kirschbaum Perlman & Nagelberg, of which
Charles H. Perlman is a partner, is engaged from time to time to represent the
Company in legal matters. For general legal services, the firm has been paid
legal fees and expenses of approximately $400,775 from June 1, 1996, the
beginning of the Company's last completed fiscal year, through March 10, 1998.
The firm has been engaged to represent the Company in connection with the Offer
and the Merger.
DIRECTORS MEETINGS
During the fiscal year ended May 31, 1997, the Board of Directors held six
meetings, each of which was attended by all directors. The Board of Directors
also conducted business by unanimous written consent on 17 occasions. The
Company has a standing audit committee and a standing compensation committee.
The audit committee, consisting of Messrs. Perlman and Weston, reviews and
monitors the accounting policies and control procedures of the Company,
recommends the engagement of the independent accountants and reviews the scope
of the audit. The audit committee met five times during the last fiscal year,
with both Messrs. Perlman and Weston present at each such meeting. The
compensation committee, consisting of Messrs. Perlman and Weston, met once in
the 1997 fiscal year, with both Messrs. Perlman and Weston in attendance.
A-17
<PAGE> 1
ANNEX B
ABN AMRO OPINION
March 10, 1998
The Board of Directors
Grist Mill Co.
21340 Hayes Avenue
Lakeville, MN 55044-0430
Gentlemen:
We understand that Grist Mill Co. (the "Company"), International Home
Foods, Inc., IHF/GM Holding Corporation (the "Acquiror") and IHF/GM Acquisition
Corporation, a wholly owned subsidiary of the Acquiror (the "Merger Sub"),
propose to enter into an Agreement and Plan of Merger dated March 10, 1998 (the
"Agreement") pursuant to which the Acquiror will acquire the Company by means of
a cash tender offer (the "Offer") and subsequent merger of Merger Sub with and
into the Company in a transaction (the "Merger") in which each issued and
outstanding share of common stock of the Company, par value $0.10 per share,
(the "Company Common Stock"), will be converted into the right to receive a cash
amount equal to $14.50 per share (the "Offer Consideration"), or such higher
price, if any, as is paid in the Offer (the "Merger Consideration").
Collectively the Offer Consideration and the Merger Consideration are referred
to herein as the "Consideration".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of Company Common Stock is fair to such stockholders from a
financial point of view.
In connection with this opinion, we have reviewed the Agreement and certain
related documents and held discussions with certain senior officers and other
representatives and advisors of the Company concerning the business, operations
and prospects of the Company. We have examined certain publicly available
business and financial information relating to the Company as well as certain
financial data and other data for the Company which were provided to or
otherwise discussed with us by the management of the Company. We reviewed the
financial terms of the Merger as set forth in the Agreement in relation to: (i)
current and historical market prices and trading volumes of the Company Common
Stock; (ii) the Company's financial and other operating data; and (iii) the
capitalization and financial condition of the Company. We also considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of the Company.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us and we have
not made or obtained or assumed any responsibility for independent verification
of such information. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries. With respect to the financial data, we have assumed that it has
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management and the Company as to the future
financial performance of the Company. We have assumed that the Merger will be
consummated in accordance with the terms of the Agreement.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
ABN AMRO Incorporated ("AAI"), as part of its investment banking business,
is continually engaged in the valuation of businesses in connection with mergers
and acquisitions, as well as public offerings and secondary market transactions
of securities and valuations for other purposes. We have acted as financial
advisor to the Board of Directors of the Company in connection with this
transaction and will receive a fee for rendering this opinion, which is not
contingent upon the consummation of the Merger. In the ordinary course of our
business, AAI and its affiliates may actively trade securities of the Company
for their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
B-1
<PAGE> 2
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Merger and may not be
used for any other purpose or reproduced, disseminated, quoted or referred to at
any time, in any manner or for any purpose without our prior consent, except
that this letter may be used as part of any proxy statement relating to the
Merger. This letter does not address the Company's underlying business decision
to enter into the Merger or constitute a recommendation to any stockholder as to
whether such stockholder should tender their shares or how such stockholder
should vote with respect to the proposed Merger. In addition, we express no
opinion relative to terms on which certain stockholders have entered into
specific stockholders' agreements. Finally, our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof, and we assume no
responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration is fair from a financial point of view to the
stockholders of the Company.
Very truly yours,
ABN AMRO Incorporated
B-2
<PAGE> 1
GRIST MILL LOGO
21340 Hayes Avenue
Lakeville, Minnesota 55044
March 18, 1998
Dear Stockholders:
By now you are probably aware that on March 10, 1998, Grist Mill Co. (the
"Company") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with International Home Foods, Inc., IHF/GM Holding Corporation and IHF/GM
Acquisition Corporation that provides for the acquisition of the common stock of
the Company at a price of $14.50 per share. Under the terms of the proposed
transaction, IHF/GM Acquisition Corporation, a wholly owned direct subsidiary of
IHF/GM Holding Corporation and a wholly owned indirect subsidiary of
International Home Foods, Inc. has commenced a tender offer for all outstanding
shares of the Company's common stock at $14.50 per share, in cash net to seller.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER BY IHF/GM ACQUISITION CORPORATION AND THE SUBSEQUENT MERGER OF THE COMPANY
WITH IHF/GM ACQUISITION CORPORATION, AND HAS DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO THE COMPANY'S STOCKHOLDERS. ACCORDINGLY, THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
Following the successful completion of the tender offer, upon adoption of
the Merger Agreement by stockholders of the Company, if required, IHF/GM
Acquisition Corporation will be merged with the Company, and all shares not
purchased in the tender offer will be converted into the right to receive $14.50
per share in cash in the merger without interest.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion of ABN
AMRO Incorporated that, as of March 10, 1998, the consideration to be received
by the Company's stockholders in the transaction is fair, from a financial point
of view, to the Company's stockholders.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14d-9. Also enclosed is the
Offer to Purchase and related materials, including a Letter of Transmittal, of
IHF/GM Acquisition Corporation, for use in tendering shares. I urge you to read
the enclosed materials carefully.
Very truly yours,
GLEN S. BOLANDER
Glen S. Bolander
Chief Executive Officer and President
