SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934 (AMENDMENT NO.)
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
X Preliminary proxy statement
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Confidential, For Use of the Commission only (as permitted by Rule 14a-6(e)
(2))
KILLEARN PROPERTIES, INC.
(Name of Registrant as Specified in Its Charter)
KILLEARN PROPERTIES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
No fee required.
X Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.10 per share ("Common Stock"), of
Killearn Properties, Inc.
(2) Aggregate number of securities to which transaction applies:
661,279 shares of Common Stock:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which
the filing fee is calculated and state how it was determined):
$5.50 per share in cash-out merger.
(4) Proposed maximum aggregate value of transaction:
$3,637,034.50
(5) Total fee paid:
$724.41
__ Fee paid previously with preliminary materials:
__ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a) (2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date Filed:
KILLEARN PROPERTIES, INC.
385 Country Club Drive
Stockbridge, Georgia 30281
May __, 1999
Dear Shareholders:
You are cordially invited to attend a special meeting of shareholders of
Killearn Properties, Inc. to be held on June __, 1999 at the Corporate offices
located at 385 Country Club Drive, Stockbridge, Georgia, 10:00 a.m. local time
At this special meeting, you will be asked to consider and vote to approve
the Agreement and Plan of Merger among Killearn, Killearn Development, Inc., a
wholly-owned subsidiary of Killearn, Inc., and Killearn, Inc. (the
"Purchaser"). The Purchaser is owned and controlled by J.T. Williams, Jr. and
David K. Williams, who are both officers and directors of Killearn, and two
other sons of J.T. Williams, Jr. David K. Williams is the son of J.T.
Williams, Jr. Pursuant to the agreement and plan of merger, the Purchaser will
acquire all of the capital stock of Killearn in a merger. As a result of the
merger, Killearn's shareholders (other than the Purchaser, J.T. Williams, Jr.
and his sons) will be entitled to receive $5.50 in cash for each of their
shares of common stock.
The merger cannot be completed unless the agreement and plan of merger is
approved by shareholders holding a majority of the outstanding shares of
Killearn common stock. The Purchaser and the executive officers of Killearn,
who beneficially own, in the aggregate, approximately 26.7% of the outstanding
shares of Killearn common stock entitled to vote at the special meeting, have
agreed to vote their shares of Killearn common stock in favor of the agreement
and plan of merger in the same proportion as the other shareholders of
Killearn. Completion of the transactions is also subject to the satisfaction
of several other conditions. Accordingly, if shareholders approve the merger,
there can be no assurance the merger will be completed.
The agreement and plan of merger has been unanimously approved by
Killearn's Board of Directors, acting on the unanimous recommendation of an
independent special committee of the Board of Directors. In connection with
their evaluation of this agreement, the Board of Directors on behalf of the
special committee engaged American Express Tax & Business Services, Inc. to act
as financial advisor to the special committee. American Express Tax &
Business Services, Inc. has rendered a fairness opinion dated May 10, 1999 to
the special committee to the effect that, as of such date and based upon and
subject to the assumptions, limitations and qualifications set forth in such
opinion, the cash consideration of $5.50 per share to be received by
Killearn's shareholders (other than the Purchaser, J.T. Williams, Jr. and his
sons) in the merger is fair from a financial point of view to such
shareholders. American Express Tax & Business Services, Inc.'s opinion is
attached as Appendix B to the accompanying proxy statement. We recommend that
you read American Express Tax & Business Services, Inc.'s opinion in its
entirety.
The special committee and the Board of Directors believe that the terms of
the agreement and plan of merger are fair to and in the best interests of
Killearn's shareholders (other than the Purchaser, J.T. Williams, Jr. and his
sons) and unanimously recommend that the shareholders approve and adopt the
agreement and plan of merger.
The accompanying proxy statement explains the agreement and plan of merger
and the proposed merger and provides specific information about the parties
involved and their interests. Please read this document carefully.
Please give all this information your careful attention. Whether or not
you plan to attend, it is important that your shares are represented at the
special meeting. A failure to vote will count as a vote against the merger.
Accordingly, you are requested to promptly complete, sign and date the
enclosed proxy card and return it in the envelope provided, whether or not you
plan to attend the special meeting. This will not prevent you from voting
your shares in person if you subsequently choose to attend the special meeting.
Sincerely,
Mallory E. Horne
Chairman of the Board
KILLEARN PROPERTIES, INC.
385 Country Club Drive
Stockbridge, Georgia 30281
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON June __, 1999
_____________________
A special meeting of shareholders of Killearn Properties, Inc., a Florida
corporation, will be held on June __, 1999 at its corporate offices at 385
Country Club Drive, Stockbridge, GA, local time, at 10:00 a.m., for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger (the "Merger Agreement") dated May 10, 1999 among Killearn,
Killearn Development, Inc. ("Merger Sub"), a Georgia corporation formed by
Killearn, Inc., and Killearn, Inc. (the "Purchaser"). The Purchaser is owned
and controlled by J.T. Williams, Jr. and David K. Williams, who are both
officers and directors of Killearn, and two other sons of J.T. Williams, Jr.
David K. Williams is the son of J.T. Williams, Jr. Pursuant to the Merger
Agreement, Merger Sub will be merged with and into Killearn pursuant to which
the holders of Killearn common stock (other than the Purchaser, J.T. Williams,
Jr. and his sons) will be entitled to receive $5.50 in cash for each of their
shares of Killearn common stock outstanding at the time of the merger. A copy
of the Merger Agreement is attached as Annex A to and is described in the
accompanying proxy statement.
2. To consider and act upon such other matters as may properly come
before the special meeting or any adjournment or postponement thereof.
Shareholders of record of Killearn common stock at the close of business
on May __, 1999, will be entitled to notice of, and to vote at, the special
meeting or any adjournment or postponement thereof. A list of shareholders
will be available for inspection for ten days preceding the special meeting at
the office of the Secretary of Killearn, 385 Country Club Drive, Stockbridge,
Georgia 30281, and will be available for inspection at the meeting itself.
Approval of the Merger Agreement and the transactions contemplated thereby,
including the merger, will require the affirmative vote of the holders of a
majority of the shares of Killearn common stock outstanding on the record
date. A form of proxy and a proxy statement containing more detailed
information about the matters to be considered at the special meeting
accompany and form a part of this notice.
By order of the Board of Directors,
Becky Christian
Secretary
Stockbridge, Georgia
May __, 1999
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy card and return it promptly in the enclosed
envelope, which requires no postage if mailed in the United States. Please do
not send in any certificates for your shares at this time.
PRELIMINARY COPY, DATED MAY 12, 1999
KILLEARN PROPERTIES, INC.
385 Country Club Drive
Stockbridge, Georgia 30281
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE __, 1999
This proxy statement is furnished to shareholders of Killearn Properties,
Inc., a Florida corporation, in connection with the solicitation of proxies by
the Board of Directors of Killearn for use at the special meeting of
shareholders to be held on June __, 1999 at 10:00 a.m., local time, at its
corporate offices at 385 Country Club Drive, Stockbridge, Georgia, and at any
adjournment or postponement thereof. Proxies in the form enclosed will be
voted at the special meeting, if properly executed, returned to Killearn prior
to the meeting and not revoked. This proxy statement and the enclosed proxy
card are first being mailed to shareholders of Killearn on or about May __,
1999.
At the special meeting, holders of Killearn common stock will be asked
to consider and vote upon a proposal to approve the Agreement and Plan
of Merger (the "Merger Agreement") dated May 10, 1999 among Killearn,
Killearn Development, Inc. ("Merger Sub"), a Georgia corporation and
wholly-owned subsidiary of Killearn, Inc., and Killearn, Inc. (the
"Purchaser"). The Purchaser is owned and controlled by J.T. Williams,
Jr. and David K. Williams, who are both officers and directors of
Killearn, and two other sons of J.T. Williams, Jr. David K. Williams
is the son of J.T. Williams, Jr. Pursuant to the Merger Agreement,
Merger Sub will be merged with and into Killearn (the "Merger") and
the holders of Killearn common stock (other than the Purchaser, J.T.
Williams, Jr. and his sons) will be entitled to receive $5.50 in cash
for each of their shares of Killearn common stock outstanding at the
time of the Merger.
In this document, we refer to the Merger and the other transactions
contemplated by the Merger Agreement collectively as the "Transactions." A
copy of the Merger Agreement is attached as Appendix A to and is described in
this proxy statement.
The Transactions cannot be completed unless the Merger Agreement is
approved by the holders of a majority of the shares of Killearn common stock.
The Purchaser and the executive officers of Killearn, who beneficially own, in
the aggregate, approximately 26.7% of the outstanding shares of Killearn
common stock entitled to vote at the special meeting, have agreed to vote
their shares of Killearn common stock in favor of the Merger Agreement in the
same proportion as the other shareholders of Killearn. Completion of the
Transactions is also subject to the satisfaction of several other conditions.
Accordingly, even if shareholders approve and adopt the Merger Agreement,
there can be no assurance that the Transactions will be completed.
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) for adoption and approval of the Merger Agreement and
(ii) at the discretion of the proxy holders on any other matter that may
properly come before the meeting or any adjournment or postponement thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter or business is
properly brought before the special meeting, the proxy holders may vote the
proxies in their discretion. The Board of Directors does not know of any such
other matter or business.
No person has been authorized to give any information or make any
representation other than those contained in this proxy statement, and, if
given or made, such information or representation must not be relied upon as
having been authorized. This proxy statement does not constitute a
solicitation of a proxy in any jurisdiction from any person to whom it is
unlawful to make such proxy solicitation in such jurisdiction. The delivery
of this proxy statement shall not, under any circumstances, create any
implication that there has been no change in the affairs of Killearn since the
date hereof or that the information contained herein is correct as of any time
subsequent to its date.
The Transactions have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the fairness or
merits of such transactions nor upon the accuracy or adequacy of the
information contained in this document. Any representation to the contrary is
unlawful.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT i
Who Can Help Answer Your Questions iv
Cautionary Statement Concerning Forward-Looking Information v
Summary 1
The Companies 1
The Merger 2
The Special Meeting 2
Record Date; Voting Power; Quorum 2
Vote Required; Security Ownership of Management 3
Recommendations of the Board of Directors and Special Committee 3
Opinion of Financial Advisor 3
Conflicts of Interest 4
Federal Income Tax Consequences 4
Accounting Treatment 4
Dissenters' Appraisal Rights 5
Financing of the Merger 5
The Merger Agreement 5
Regulatory Approvals 7
Market Prices for Common Stock and Dividends 7
Summary Financial Information 8
Certain Projections of Future Operating Results 9
Special Factors 9
Background of the Merger 9
Recommendations of the Special Committee and Board of Directors 11
Purchaser's Purpose and Reasons for the Recapitalization and Merger 13
Opinion of Financial Advisor 13
Conflicts of Interest 16
The Special Meeting 17
Date, Time and Place 17
Record Date; Voting Power; Quorum 18
Vote Required; Security Ownership of Management 18
Proxies 18
Solicitation of Proxies 19
The Merger 19
Financing 20
Federal Income Tax Consequences 20
Accounting Treatment 22
Dissenters' Appraisal Rights 22
Delisting and Deregistration of Common Stock 22
Regulatory Approvals 22
The Merger Agreement 22
Overview 22
Exchange of Certificates Representing Common Stock 23
Representations and Warranties 24
Conduct of Business Pending the Merger 24
No Solicitation 25
Indemnification 25
Directors' and Officers' Liability Insurance 25
Conditions to the Merger 26
Termination of Merger Agreement 26
Fees and Expenses 27
Estimated Fees and Expenses of the Merger 27
Certain Information Concerning Merger Sub, the Purchaser and Other
Affiliates 28
Beneficial Ownership of Common Stock 29
Independent Public Accountants 30
Documents Incorporated By Reference 30
Available Information 31
APPENDIX A - Agreement and Plan of Merger
APPENDIX B - Opinion of American Express Tax & Business Services, Inc.
APPENDIX C - Transactions involving Killearn's Common Stock effected by
the Purchaser and other Affiliates since May 1, 1997.
QUESTIONS AND ANSWERS ABOUT
THE MERGER
Q: What will happen in the Merger:
A: Killearn will be merged with and into Merger Sub, with the Merger Sub
continuing as the surviving corporation and as a wholly-owned subsidiary of
Purchaser. As a result of the Merger, all of your shares of common stock will
be automatically converted into the right to receive a cash payment of $5.50
per share.
Q: Who will own Killearn after the Merger:
A: After the Merger, Killearn will become a privately held company owned by
the Purchaser. The Purchaser is owned by J.T. Williams, Jr. and David K.
Williams, two officers and directors of Killearn, and two other sons of J.T.
Williams, Jr.
Q: By voting in favor of the Merger Agreement, what am I approving?
A: If you vote in favor of the Merger Agreement, you will be directly
approving the Merger of Killearn with and into the Merger Sub.
Q: What will I receive in the Merger?
A: You will receive $5.50 in cash, without interest, for each share of your
Killearn common stock. This is the "Cash Merger Consideration." For example:
If you own 100 shares of Killearn common stock, upon completion of the Merger
you will receive $550 in cash.
Q: How many votes are required to approve and adopt the Merger Agreement?
A. Approval of the Merger Agreement requires the affirmative vote of a
majority of the shares of Killearn common stock outstanding as of the record
date. Therefore, a failure to vote or a vote to abstain will have the same
effect as a vote against the Merger Agreement.
Q: When and where is the special meeting?
A: The special meeting will take place on June __, 1999, at 10:00 a.m.
local time, at Killearn's offices at 385 Country Club Drive, Stockbridge,
Georgia.
Q: Why is the special committee and Board of Directors recommending that I
vote to approve and adopt the Merger Agreement?
A: In the opinion of the special committee and the Board of Directors, the
terms and provisions of the Merger Agreement and Transactions are fair to and
in the best interest of Killearn's shareholders (other than the Purchaser,
J.T. Williams, Jr. and his sons). To review the background and reasons for the
Merger in greater detail, see pages ___through ___.
Q: When do you expect the Merger to be completed?
A: We are working to complete the Merger by the end of June 1999.
Q: What are the tax consequences of the Merger to me?
A: There will be tax consequences of the Merger to you. The receipt of the
cash merger consideration by you for your Killearn common stock will be a
taxable transaction for federal income tax purposes. To review your potential
tax consequences in greater detail, see pages __ through __.
The tax consequences of the Merger will depend on your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the Merger to you.
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote, and sign and mail
it in the enclosed envelope as soon as possible, so that your shares will be
represented at the meeting. If you sign and send in your proxy card and do
not indicate how you want to vote, your proxy will be counted as a vote for
the Merger Agreement. If you fail to return your proxy card or to vote at the
special meeting, the effect will be a vote against the Merger Agreement.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: Your broker will vote your shares of Killearn common stock only if you
provide instructions on how to vote. You should instruct your broker how to
vote your shares, following the directions your broker provides to you. If
you do not provide instructions to your broker, your shares will not be voted
and they will not be counted as votes against the Merger Agreement. However,
the effect of not voting your shares will be a vote against the Merger
Agreement.
Q: Can I change my vote or revoke my proxy after I have mailed my signed
proxy card?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy card. If you choose either of these
methods, you must timely submit your notice of revocation or your new proxy
card to Killearn. Third, you can attend the special meeting and vote in
person. Simply attending the special meeting, however, will not revoke your
proxy. If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
Q: Should I send in my stock certificates now?
A: No. After the Merger is completed, we will send you written instructions
for exchanging your common stock certificates for the cash merger
consideration.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like to
ask any additional questions about the Merger, you should contact Killearn's
Chief Financial Officer: William E. Daniels, Jr. at (770) 389-2020 or at
Killearn Properties, Inc., 385 Country Club Drive, Stockbridge, Georgia 30281.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT AND OTHER STATEMENTS MADE FROM TIME TO TIME BY KILLEARN
CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF, OR CURRENT EXPECTATIONS OF KILLEARN,
AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. SUCH FORWARD-
LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS
AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO THE MANAGEMENT OF KILLEARN THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT
LIMITED TO, THE RISKS DETAILED HEREIN AND: (I) COMPETITIVE PRESSURES IN THE
REAL ESTATE MARKETS IN WHICH KILLEARN OPERATES; (II) THE ABILITY OF KILLEARN
TO ACQUIRE, DEVELOP, AND MARKET NEW REAL ESTATE DEVELOPMENTS; (III) KILLEARN'S
BUSINESS AND GROWTH STRATEGIES; AND (IV) GENERAL ECONOMIC CONDITIONS. EXCEPT
FOR ITS ONGOING OBLIGATIONS TO DISCLOSE MATERIAL INFORMATION AS REQUIRED BY
THE FEDERAL SECURITIES LAWS, KILLEARN DOES NOT UNDERTAKE AN OBLIGATION TO
UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGES IN ASSUMPTIONS,
THE OCCURRENCE OF UNANTICIPATED EVENTS, OR CHANGES IN FUTURE OPERATING RESULTS
OVER TIME.
SUMMARY
This summary highlights selected information from the proxy statement but
may not contain all of the information that is important to you. To
understand the Merger Agreement and the Merger fully, you should read this
entire document carefully, as well as the additional documents to which we
refer you. See "Where You Can Find More Information" on page ___. The Merger
Agreement is attached as Appendix A to this proxy statement. We encourage you
to read the Merger Agreement as it is the legal document that governs the
Merger. We have included page references parenthetically to direct you to a
more complete description of the topics in this summary.
The Companies (Page ___)
Killearn Properties, Inc.
385 Country Club Drive
Stockbridge, Georgia 30281
(770) 389-2020
Killearn is engaged in the development of planned communities. Killearn is
currently developing a planned community named the Eagle's Landing. Eagle's
Landing comprises approximately 3,000 acres in Henry County, Georgia and is
approximately 23 miles south of downtown Atlanta and 15 miles south of the
Atlanta International Airport.
This "mixed use" development is presently zoned to allow development in
the categories of office, industrial, retail, multi-family residential, single-
family residential, lodging, schools, municipal services, religious
institutions, parks and recreation, golf course, open space and lakes. The
community is planned around Eagle's Landing golf course and country club,
which was originally developed by Killearn, but is now owned by the Purchaser.
At April 30, 1999, approximately 1767 residential lots and 1600 acres of
other property had been sold by Killearn in Henry County, Georgia. At that
date, approximately 625 platted residential lots remained to be sold and
approximately 400 acres of other property remained to be platted and sold.
In addition, Killearn had, as of April 30, 1999, approximately 40 acres, which
will be used for road right-of-way, utility easements and green areas.
Killearn, Inc. and Killearn Development, Inc.
1570 Rockquarry Road
Stockbridge, Georgia 30281
The Merger Sub is a wholly-owned subsidiary of the Purchaser. The
Purchaser will acquire Killearn in the Merger. The Purchaser is owned and
controlled by J.T. Williams, Jr. and David K. Williams, two officers and
directors of Killearn, and two other sons of J.T. Williams, Jr.
The ownership of the Purchaser is set forth in "Questions and Answers
about the Merger-Who will own Killearn after the Merger?" on page ___. For
further information about the Purchaser, see "Certain Information concerning
Merger Sub, the Purchaser and other Affiliates" beginning on page ____.
The Merger (Page__)
Mechanics of the Merger. In the Merger:
Killearn will be merged into Merger Sub with the Merger Sub continuing
as the surviving corporation (the "Surviving Corporation"); and
each share of Killearn's common stock (other than shares owned by the
Purchaser, J.T. Williams, Jr. and his sons) will be converted into the
right to receive $5.50 in cash, without interest; and
Consequences of the Merger. As a result of the Merger:
the entire equity interest in Killearn will be owned by the Purchaser;
the unaffiliated shareholders of Killearn will no longer have any
interest in, and will not be shareholders of Killearn, and therefore
will not participate in its future earnings and growth;
J. T. Williams, Jr. and David K. Williams, officers and directors of
Killearn, through their ownership of the Purchaser, will have the
opportunity to benefit from any earnings and growth of Killearn, and
will bear the risk of any decrease in Killearn's value; and
Killearn's common stock will no longer be traded on the American Stock
Exchange, price quotations will no longer be available and the
registration of Killearn's common stock under the Exchange Act, will be
terminated. After such registration is terminated, Killearn will no
longer be required to file periodic reports with the Commission.
The Special Meeting (Page __)
The special meeting will be held on June __, 1999, at 10:00 a.m., local
time, at Killearn's offices at 385 Country Club Drive, Stockbridge, Georgia.
At the special meeting, the shareholders of Killearn will be asked to consider
and vote upon a proposal to approve and adopt the Merger Agreement and the
Transactions.
Record Date; Voting Power; Quorum (Page ___)
Shareholders of record of Killearn common stock at the close of
on May __, 1999 are entitled to notice of and to vote at the special meeting.
As of the record date, there were 887,412 shares of Killearn common stock
issued and outstanding held by approximately 500 holders of record.
Holders of record of Killearn common stock on the record date are entitled
to one vote per share on any matter that may properly come before the special
meeting.
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Killearn common stock entitled to vote at the special
meeting is necessary to constitute a quorum for the transaction of business.
Vote Required; Security Ownership of Management (Page __)
Under Florida law, the affirmative vote of the holders of a majority of
the shares of Killearn common stock outstanding on the record date for the
special meeting is required to approve the Merger Agreement. For purposes of
determining whether the Merger Agreement has received a majority vote,
abstentions and broker non-votes (shares held in "street name" through a broker
or other nominee as to which voting instructions with regards to the Merger
Agreement have not been received from the beneficial owners and such broker or
other nominee is not permitted to exercise voting discretion with regards to
the Merger Agreement) will not be included in the vote total, although an
abstention and a broker non-vote will have the effect of a vote against the
Merger Agreement. Abstentions and broker non-votes will, however, be counted
for determining whether there is a quorum.
As of the record date for the special meeting, Killearn's executive
officers and directors owned, in the aggregate, 237,133 shares of Killearn
common stock or 26.7% of the shares of Killearn common stock then outstanding.
The Purchaser and each of the officers and directors of Killearn have agreed to
vote these shares in favor of the Merger Agreement in the same proportion as
the other shareholders of Killearn.
Recommendations of the Board of Directors and special committee (Page __)
Because of the potential conflicts of interests of two members of the
Board of Directors of Killearn who are owners of the Purchaser, the Board
established a special committee to act on behalf of the unaffiliated
shareholders of Killearn for the purpose of negotiating the price and other
terms of the transactions with the Purchaser and evaluating the fairness of
the Merger Agreement and the Transactions. The special committee is composed
of Mallory E. Horne and Melvin L. Pope, Jr., both of whom are independent
directors.
The special committee and the Board of Directors have each determined that
the terms of the Merger Agreement, which were established through arm's-length
negotiations with the Purchaser, and the Transactions, are fair to, and in the
best interests of, Killearn and its shareholders (other than the Purchaser,
J.T. Williams, Jr. and his sons). Accordingly, the special committee and the
Board of Directors have unanimously approved the Merger Agreement and
unanimously recommend that Killearn's shareholders vote for approval and
adoption of the Merger Agreement and the Transactions.
Opinion of Financial Advisor (Page __)
American Express Tax & Business Services, Inc. has delivered its written
opinion to the special committee to the effect that, as of May 10, 1999, the
cash merger consideration is fair, from a financial point of view, to
Killearn's shareholders (other than the Purchaser, J.T. Williams, Jr. and his
sons).
A copy of American Express Tax & Business Services, Inc.'s opinion,
setting forth the assumptions made, procedures followed, matters considered,
and limitations on and scope of the review by American Express Tax & Business
Services, Inc., is attached as Appendix B to this proxy statement. You are
encouraged to read such opinion in its entirety.
Conflicts of Interest (Page ___)
In considering the recommendations of the special committee and the Board of
Directors, shareholders should be aware that J.T. Williams, Jr. and David K.
Williams, who are both officers and directors of Killearn, have interests in
the Merger that are different from the interests of Killearn shareholders
generally and which may create potential conflicts of interest. The Purchaser
is owned entirely and controlled by J.T. Williams, Jr., David K. Williams and
two other sons of J.T. Williams, Jr. The Purchaser will own 100% of the
Surviving Corporation's outstanding common stock. The ownership of the
Purchaser by J.T. Williams, Jr., David K. Williams and two other sons of J.T.
Williams, Jr. may have presented J. T. Williams, Jr. and David K Williams with
actual or potential conflicts of interest in connection with the Merger.
Indemnification (Page ___)
The Merger Agreement provides for indemnification and liability insurance
arrangements for the current officers and directors of Killearn.
Federal Income Tax Consequences (Page ___)
There will be tax consequences of the Merger to the holders of Killearn
common stock. The receipt of cash by a shareholder in exchange for his or her
shares of Killearn common stock pursuant to the Merger will constitute a
taxable transaction to such shareholder for federal income tax purposes and
may also be a taxable transaction under applicable state, local and foreign
tax laws. In general, a shareholder will recognize gain or loss equal to the
difference between $5.50 per share and such shareholder's adjusted tax basis
in the shares exchanged.
All shareholders should read carefully the tax discussion in "The Merger-
Federal Income Tax Consequences" beginning on page ___. They are urged to
consult their own tax advisors as to the specific consequences to them of the
Merger under federal, state, local and any other applicable tax laws.
Accounting Treatment (Page ___)
Killearn expects that the Merger will be treated as a recapitalization for
accounting purposes because it will not constitute a change of control under
generally accepted accounting principles. As a result, the historical cost
basis of Killearn's assets and liabilities will not change.
Dissenters' Appraisal Rights (Page ___)
Killearn shareholders are not entitled under Florida law or Killearn's
articles of incorporation to exercise dissenters' appraisal rights in
connection with the Transactions.
Financing of the Merger (Page ___)
The total amount of funds necessary to fund the Merger and related
transactions is expected to be approximately $3.6 million. These funds are
expected to come from the following sources:
the 315,430 shares of Killearn common stock owned by Wimberly Investment
Funds, L.P. will be paid for by the cancellation of a portion of the
indebtedness owed by Wimberly to the Purchaser in the amount of
$1,734,865 (or $5.50 per share);
the 132,000 shares of Killearn common stock owned by Proactive
Technologies, Inc. will be paid for by the cancellation of a portion of
the indebtedness owed by PTI to the Purchaser in the amount of $726,000
(or $5.50 per share);
approximately $900,000 will be borrowed by the Purchaser from American
Century Bank pursuant to an existing line of credit; and
The balance will be cash of the Purchaser on hand at the effective time of
the Merger estimated to be approximately $250,000.
The Merger Agreement (Page ___)
Conditions of the Merger (Page ___)
Each party's obligation to effect the Merger is subject to the
satisfaction of a number of conditions, most of which may be waived. The most
significant condition to consummating the Merger includes the approval and
adoption of the Merger Agreement by the holders of a majority of the shares of
Killearn common stock.
No Solicitation (Page ___)
The Merger Agreement prohibits Killearn, its subsidiaries, and any of
Killearn's or its subsidiaries' directors, officers, employees, agents or
representatives from directly or indirectly:
initiating, soliciting, or encouraging any inquiries, discussions or
making any proposal with a third party with respect to any merger,
consolidation or other business combination involving Killearn or any
acquisition of any kind of a material portion of the assets or capital
stock of Killearn or its subsidiaries (a "Takeover Proposal"); or
negotiating, exploring or otherwise communicating in any way with any
third party with respect to any Takeover Proposal or entering into or
consummating any agreement arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger.
The Merger Agreement permits Killearn, prior to the special meeting, to
consider an unsolicited Takeover Proposal and to enter into an agreement with
respect to a Takeover Proposal if the following conditions are met: (a) the
special committee of the Killearn Board of Directors determines in good faith
by a majority vote based upon the advice of its outside counsel that the Board
is required to do so by its fiduciary obligations and (b) the Purchaser has
been notified of the Takeover Proposal by Killearn.
Termination (Page ___)
The Merger Agreement may be terminated and the Merger abandoned, at any
time prior to the effective time of the Merger, whether before or after
approval by Killearn's shareholders:
by the mutual written consent of Killearn and the Purchaser;
by either Killearn or the Purchaser if the Merger has not been
consummated by December 31, 1999, unless the failure by the terminating
party to fulfill any obligation under the Merger Agreement caused or
resulted in the failure of the Merger to be consummated by December 31,
1999;
by either the Purchaser or Killearn if Killearn's Board of Directors or
any committee thereof withdraws or modifies or refrains from giving its
approval or recommendation of the Merger Agreement or the Merger;
automatically, without action by any party thereto, if the Killearn
shareholders do not approve the Merger Agreement at the special meeting;
by either Killearn or the Purchaser if the other party breaches any of
its representations, warranties and agreements under the Merger
Agreement and such breach is not cured within 10 days of notice; or
by Killearn subsequent to a Takeover Proposal if its special committee
determines in good faith by a majority vote based upon the advice of its
outside counsel that the Board is required to do so by its fiduciary
obligations, and after it notifies the Purchaser of the Takeover
Proposal.
Fees and Expenses (Page __)
Killearn and the Purchaser will pay their own fees, costs and expenses
incurred in connection with the Merger Agreement (except that Killearn will
bear all expenses incurred in connection with this proxy statement).
Regulatory Approvals (Page __)
Killearn is not aware of any material governmental or regulatory approvals,
which are required for consummation of the Transactions.
Market Prices for Common Stock and Dividends
Killearn's common stock is traded on The American Stock Exchange, Inc.
under the symbol "KPI." The following table sets forth for the fiscal quarter
indicated the high and low closing bid prices per share of Killearn's common
stock as reported by the AMEX:
Fiscal Year ended April 30, 1998 High Low
_____ ____
First Quarter $5.63 $4.50
Second Quarter $10.83 $5.50
Third Quarter $9.83 $7.00
Fourth Quarter $9.00 $7.83
Fiscal Year ended April 30, 1999
First Quarter $9.75 $8.38
Second Quarter $10.50 $9.38
Third Quarter $9.63 $4.00
Fourth Quarter $5.38 $4.50
Fiscal Year ended April 30, 2000
First Quarter (through May 11, 1999) $5.12 $4.50
On April 20, 1999, the last trading day prior to the announcement of the
Board's preliminary approval of the Merger, the closing price per share of
Killearn's common stock as reported by AMEX was $4.50. On May 11, 1999, the
last trading day prior to the date of this proxy statement, the closing price
per share of Killearn's common stock as reported by AMEX was $5.12.
Killearn has never paid cash dividends on its common stock.
On the record date for the special meeting, there were approximately 500
holders of record of Killearn's common stock.
Shareholders should obtain current market price quotations for Killearn's
common stock in connection with voting their shares of common stock.
SUMMARY FINANCIAL INFORMATION
The following tables set forth selected financial information for Killearn
for each of the five fiscal years in the period ended April 30, 1998 and for
the nine months ended January 31, 1998 and January 31, 1999. Such information
should be read in conjunction with the historical financial statements of
Killearn and the notes thereto which are incorporated by reference into this
proxy statement. Selected financial information for Killearn as of and for the
nine months ended January 31, 1998 and January 31, 1999 has been derived from
the unaudited historical financial statements of Killearn and, in the opinion
of Killearn's management, includes all adjustments (consisting only of normal
recurring adjustments) that are considered necessary for a fair presentation
of the operating results for such interim periods. Results for the interim
periods are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
Unaudited
Year Ended Nine Months Ended
_____________________________________________________________ ______________________
April 30, April 30, April 30, April 30, April 30 January 31 January 31
1994 1995 1996 1997 1998 1998 1999
_________ _________ _________ _________ _________ _________ _________
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 17,821 $ 17,896 $ 16,044 $ 13,194 $ 13,852 $ 11,866 $ 14,475
Operating income 278 1,001 1,960 1,834 921 657 734
Net income 287 621 1,277 1,095 301 410 440
Earnings per common share:
Basic .20 .43 .84 1.23 .34 .46 .50
Diluted .20 .43 .84 1.23 .34 .46 .50
Number of shares used in per share computations:
Basic 1439 1439 1439 887 887 887 887
Diluted 1439 1439 1439 887 887 887 887
Balance Sheet Data (End of Year):
Cash, cash equivalents and investments 683 666 324 269 366 262 324
Working capital 56,279 49,100 46,855 28,213 24,154 29,427 23,015
Total assets 61,151 54,662 55,914 32,812 29,323 33,511 27,493
Total current liabilities 4,872 5,562 9,059 4,599 5,169 4,084 4,478
Long-term debt, net of current portion 38,920 31,121 27,632 25,085 20,776 25,890 19,146
Total stockholders' equity $ 17,358 $ 17,979 $ 19,223 $ 3,127 $ 3,428 $ 3,537 $ 3,869
Unaudited
Year Ended Nine Month Ended
______________________ __________________________
April 30 April 30, January 31 January 31,
1997 1998 1998 1999
_________ _________ __________ __________
Book value per common share $3.52 $3.86 $3.99 $4.36
Common shares outstanding 887,412 887,412 887,412 887,412
</TABLE>
No Projections of Future Operating Results
The Purchaser was not provided with any non-public business or financial
information relating to Killearn, including any projections of Killearn's
future operating performance.
SPECIAL FACTORS
Background of the Merger
J.T. Williams, Jr. and David K Williams, two officers and directors of
Killearn, own directly, or through the Purchaser, as of May 10, 1999, 237,133
shares of Killearn common stock, constituting approximately 26.7% of the
issued and outstanding shares of Killearn common stock. These shares were
acquired from time to time in market transactions commencing in January 1998.
In February 1999, J.T. Williams, Jr., the Chairman of the Board of the
Purchaser, was contacted by Proactive Technologies, Inc. ("PTI"). PTI offered
to sell to the Purchaser 132,000 shares of Killearn common stock at a price of
$6.50 per share. PTI indicated that the sale would be subject to the approval
of a group controlled by Mr. Mason Hawkins and creditors of PTI and who held
the Killearn common stock as collateral for certain loans. In March 1999, PTI
advised the Purchaser that PTI was unable to secure Mr. Hawkins's approval to
the proposed transaction and the agreement to sell the Killearn common stock
to the Purchaser was terminated.
In March 1999, Mr. Hawkins contacted the Purchaser and offered to sell the
Purchaser 132,000 shares of Killearn common stock. The Purchaser declined Mr.
Hawkin's offer, but offered instead to purchase the notes in the aggregate
principal amount of $1,400,000, which was secured by these shares, for
$1,150,000. The offer was accepted by Mr. Hawkins, subject to the consent of
PTI, which was required by the terms of the notes. PTI consented to the
transaction, and on March 24, 1999, the Purchaser acquired these notes from the
group controlled by Mr. Hawkins for an aggregate of $1,150,000.
On March 9, 1999, the Chairman of the Board of PTI met with the Purchaser
and discussed a transaction pursuant to which the Purchaser would purchase the
assets of Killearn, but would leave assets in Killearn equal to $5.50 per
share. The Chairman of the Board of PTI would then contribute certain real
estate assets to Killearn in exchange for shares of Killearn common stock
valued at $5.50 per share. The Purchaser agreed to consider the proposed
transaction.
On March 17, 1999, the Purchaser agreed to PTI's proposed offer and
presented it to Killearn. The Purchaser, PTI and Killearn executed a non-
binding letter of intent, which was specifically subject to approval by the
board of directors and shareholders of Killearn.
On March 19, 1999, Killearn's board of directors appointed a special
committee, consisting of Mallory E. Horne and Melvin L. Pope, Jr. to analyze
the terms of the proposed transaction among the Purchaser, PTI and Killearn,
including analyzing the income tax consequences of the proposed transaction to
the shareholders of Killearn.
On March 26, 1999, the special committee of Killearn advised the Board of
Directors of Killearn that they would not recommend the proposed transaction
involving PTI, the Purchaser and Killearn because of the tax consequences of
the transaction. The Purchaser then offered to purchase for $5.50 per share
in a merger transaction all of the shares of Killearn common stock not owned
by the Purchaser, J.T. Williams, Jr. or his sons. The Board of Directors
agreed to consider the proposed transaction with the Purchaser.
On April 19, 1999, the special committee of the Board met with
representatives of American Express to discuss the Purchaser's proposal.
American Express advised the special committee that its preliminary opinion
was that the proposed transactions were fair from a financial point of view to
the unaffiliated shareholders of Killearn. Immediately thereafter, the
special committee advised the board that subject to the receipt of a final
fairness option, the execution of definitive agreement and the receipt of
shareholder approval, that they would recommend the proposed transaction.
During the next several weeks, Greenberg Traurig, P.A., legal counsel to
Killearn, and Montello & Kenney, legal counsel to the Purchaser, negotiated
the terms and conditions of a definitive merger agreement and related
documents for the transaction.
On May 7, 1999, the special committee, together with representatives of
American Express and Greenberg Traurig, met to review the Purchaser's
proposal, including the negotiated merger agreement and related agreements.
Greenberg Traurig summarized the material terms of the agreements for the
special committee. American Express then presented the special committee with
an analysis that it had performed to produce a range of implied values for
Killearn's common stock. American Express concluded by delivering an oral
opinion to the special committee, which it later confirmed in writing, that
the cash merger consideration to be received by Killearn's shareholders (other
than the Purchaser, J.T. Williams, Jr. and his sons) was fair from a financial
point of view to such shareholders. Based on American Express' opinion and
valuation analysis presented at the meeting and other factors considered
during the meeting, the special committee unanimously determined that the
Merger Agreement and the Transactions are fair to, and in the best interest
of, Killearn and its unaffiliated shareholders, and recommended that the Board
of Directors approve the Merger Agreement and the Transactions.
Immediately after the special committee's meeting, the Board of Directors
of Killearn met to receive the report of the special committee. At this
meeting, the special committee unanimously recommended that the Board of
Directors adopt and approve the Merger Agreement and the Transactions. After
discussing the recommendation of the special committee and other factors, the
Board determined that the Merger Agreement and the Transactions are fair to,
and in the best interest of, Killearn and its unaffiliated shareholders, and
unanimously adopted and approved the Merger Agreement and the Transactions.
A more complete description of the factors considered by the special
committee and the Board of Directors is set forth under the caption
"Recommendations of the special committee and Board of Directors" on pages ___
through ___.
Recommendations of the special committee and Board of Directors
On May 7, 1999, the special committee unanimously determined that the Merger
Agreement and the Transactions, are fair to, and in the best interests of,
Killearn and its unaffiliated shareholders, and recommended that the Board of
Directors approve and adopt the Merger Agreement and that it be recommended to
the shareholders of Killearn.
On May 7, 1999, the Board, based on the unanimous recommendation of the
special committee, unanimously determined that the Merger Agreement and the
Transactions, are fair to, and in the best interests of, the shareholders of
Killearn, and recommended that the shareholders approve and adopt the Merger
Agreement.
During their deliberations, the special committee and Board of Directors
were assisted by their financial advisor, American Express Tax & Business
Services, Inc., and their legal counsel, Greenberg Traurig, P.A.
Special Committee Factors. In connection with its recommendation, the
special committee considered a number of factors, including, the following:
(1) the historical market prices and recent trading activity of
Killearn's common stock, in particular the fact that the cash merger
consideration would enable the shareholders to realize a premium over the
prices at which Killearn's common stock historically had traded; the cash
merger consideration of $5.50 per share represented an approximately 11.3%
premium over the average closing price of $4.94 during the 120 business days
prior to May 7, 1999, the date on which the special committee made its
unanimous recommendation to the Board;
(2) the presentation of American Express Tax & Business Services, Inc. to
the special committee at its April 19, 1999 and May 7, 1999 meetings, as to
various financial and other matters;
(3) the oral opinion of American Express Tax & Business Services, Inc.,
later confirmed in writing, addressed and delivered to the special committee
on May 10, 1999, as to the fairness from a financial point of view of the cash
merger consideration to be received by Killearn's shareholders (other than the
Purchaser, J.T. Williams, Jr. and his sons) pursuant to the Merger Agreement.
A copy of American Express Tax & Business Services, Inc.'s opinion, setting
forth the assumptions made, matters considered and limitations on the review
undertaken in connection with such opinion, is attached as Appendix B to this
proxy statement and should be read carefully in its entirety;
4) information with respect to the financial condition, results of
operations, business and prospects of Killearn, as well as the risks involved
in achieving such prospects, and the general economic and market conditions
affecting Killearn;
5) the likelihood of consummation of the Merger, the proposed structure
of the Merger and anticipated closing date, and the conclusion that the
Purchaser has the financial capability of completing the Merger and the
Transactions;
(6) the fact that consummation of the Merger would preclude the
shareholders from having the opportunity to participate in Killearn's future
earnings or prospects as well as actual or potential conflicts of interests of
J.T. Williams, Jr. and David K. Williams who will have the opportunity to
benefit from any increases in the value of Killearn following the Merger by
reason of their ownership of the Purchaser; and
(7) the terms and conditions of the Merger Agreement, including the
ability of Killearn, to the extent required by fiduciary obligations of the
special committee to Killearn's shareholders, to terminate the Merger
Agreement in order to approve a Takeover Proposal on terms more favorable to
Killearn's shareholders than those set forth in the Merger Agreement.
In view of the various factors considered by the special committee in
connection with its evaluation of the Merger Agreement and the cash merger
consideration, the special committee did not find it necessary to quantify or
otherwise attempt to assign relative importance to the specific factors
considered in making its determination, nor did it evaluate whether such
factors were of equal importance. However, based upon these factors, the
evaluation of all the relevant information provided to them by Killearn's
financial advisor and taking into account the existing trading ranges for
Killearn's common stock, the special committee determined that the Merger,
including the cash merger consideration, was fair, to Killearn's unaffiliated
shareholders. In considering the factors described above, individual members
of the special committee may have given different weights to different
factors. Except for above paragraph (6), the special committee considered the
foregoing factors to be positive factors supporting its determination that the
Merger is fair and in the best interest of Killearn's unaffiliated
shareholders.
The special committee believes that the Merger was considered in a manner
that was procedurally fair to Killearn's shareholders.
Board of Directors Factors. In connection with its recommendation, the
Board considered the following factors: (1) the determinations and
recommendations of the special committee; (2) the factors referred to above as
having been taken into account by the special committee; and (3) the fact that
the cash merger consideration and the terms and conditions of the Merger
Agreement were the result of arm's-length negotiations between the special
committee and Killearn, on the one hand, and the Purchaser, on the other hand.
The Board did not consider it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. The Board did not find it necessary to
quantify or otherwise attempt to assign relative importance to the specific
factors considered in making its determination, nor did it evaluate whether
such factors were of equal importance. Rather, the Board reached a general
consensus that the Merger was advisable and in the best interests of Killearn,
its unaffiliated shareholders and Killearn's other constituencies. In
considering the factors described above, individual members of the Board may
have given different weight to different factors. Except for paragraph (6) of
the special committee factors, the Board considered the foregoing factors to be
positive factors supporting its determination that the Merger is fair and in
the best interest of Killearn's unaffiliated shareholders.
The Board determined that the Merger was procedurally fair because, among
other things: (1) the special committee consisted entirely of non-management,
non-affiliated independent directors appointed to represent the interests of
the Killearn's unaffiliated shareholders; (2) the special committee and Board
were represented by Greenberg Traurig, Killearn's outside legal counsel,
whereas J.T. Williams, Jr. and David K. Williams and the Purchaser retained
and were represented by separate legal counsel; (3) the special committee
retained American Express Tax & Business Services, Inc. as its financial
advisor to assist it in evaluating a potential transaction and received advice
from American Express; (4) the special committee engaged in extensive
deliberations in evaluating the sales process; and (5) the $5.50 per
cash consideration and the other terms and conditions of the Merger Agreement
resulted from active arm's-length bargaining between the special committee and
its representatives, on the one hand, and the Purchaser, on the other hand.
The Board believed that such safeguards were sufficient to assure that the
Merger is fair to, and in the best interests of Killearn's unaffiliated
shareholders.
Fairness of the Merger. Based on the factors set forth above, Killearn
believes that the consideration to be received by its unaffiliated shareholders
pursuant to the Merger is fair from a financial point of view.
Purchaser's Purpose and Reasons for the Merger
The purpose of the Purchaser for engaging in the Transactions is to gain
100% ownership of Killearn. The Purchaser believes that Killearn's future
business prospects can be improved through the contemplated corporate
restructuring. This assessment is based upon publicly available information
regarding Killearn, the Purchaser's due diligence investigation of Killearn
and the Purchaser's experience. While the Purchaser believes that there will
be significant opportunities associated with their investment in Killearn,
there are also substantial risks that such opportunities may not be fully
realized.
The proposed acquisition of Killearn has been structured as a merger in
order to permit the redemption of all of Killearn's common stock. The
Purchaser did not consider other alternatives with respect to the structure of
the transaction, except as described under "Special Factors -- Background of
the Merger" on page ___.
Opinion of Financial Advisor
American Express Tax & Business Services, Inc. ("American Express") has
acted as the sole financial advisor to the Special Committee in connection
with the Merger and has assisted the Special Committee in its examination of
the fairness, from a financial point of view, to the public shareholders of
Killearn of the consideration to be received by them in the Merger. As used
herein and in the opinion of American Express, the term "public shareholders"
means all shareholders of Killearn other than the Purchaser, J.T. Williams,
Jr., David K. Williams, and two other sons of J.T. Williams, Jr.
American Express indicated to the Special Committee that it was prepared
to render its opinion as to the fairness of the Merger Consideration as
proposed by the Purchaser to Killearn's public shareholders from a financial
point of view on April 19, 1999, subject to American Express' review of drafts
of the Merger Agreement and this Proxy Statement. On May 7, 1999 American
Express delivered its oral opinion to the special committee and the Board of
Directors to the effect that, as of the date of such opinion, the $5.50 per
share cash consideration to be received in the Merger is fair to the public
shareholders of Killearn from a financial point of view. The full text of
American Express' written opinion, which sets forth the assumptions made,
procedures followed, matters considered and scope of review by American
Express in rendering its opinion, was delivered on May 10, 1999 and is
attached as Exhibit B to this Proxy Statement and is incorporated herein by
reference. Shareholders are urged to read the American Express opinion in its
entirety. In addition, a copy of the written report presented by American
Express to the Special Committee was filed as an exhibit to the Rule 13E-3
Transaction Statement on Schedule 13E-3 ("Schedule 13E-3") under the Exchange
Act filed by Killearn, with the Commission with respect to the transactions
described in this Proxy Statement. Copies of the Schedule 13E-3 are available
for inspection and copying at the principal executive offices of Killearn
during regular business hours by any interested shareholder of Killearn, or a
representative who has been so designated in writing, and may be inspected and
copied, or obtained by mail, in the manner specified in "Available
Information". The summary set forth below does not purport to be a complete
description of such materials or presentations by American Express.
In arriving at its opinion, American Express (i) considered financial
information with respect to the assets of Killearn through January 31, 1999;
(ii) reviewed certain financial analyses and forecasts of sales and
development activities; (iii) analyzed publicly available information; (iv)
held discussions with management of Killearn; (v) reviewed appraisals and
sales documents; (vi) reviewed historical stock market prices and trading
volumes of Killearn common stock; (vii) reviewed drafts of the Merger Agreement
and (viii) made such other studies and inquiries and considered such other
data as it deemed relevant. In addition, American Express relied, without
independent verification, on the accuracy and completeness of all financial
and other information that was publicly available or furnished to it by
Killearn. American Express further assumed that projections of sales and
related costs examined by American Express were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
Killearn's management as to the future performance of Killearn. In addition,
in accordance with the Special Committee's instructions regarding American
Express' review of the Merger, American Express did not advise the special
committee with respect to alternatives to the Merger. No other limitations
were imposed by the Special Committee or the Board upon American Express with
respect to the investigations made or procedures followed by American Express
in rendering its opinion.
American Express employed several analytical methodologies and no one
method of analysis should be regarded as critical to the overall conclusion it
has reached. Each analytical technique has inherent strengths and limitations,
and the nature of the available information may further affect the value of
particular techniques. Its conclusion is based on all the analyses and
factors it considered taken as a whole and also on application of its
experience. Such conclusions often involve significant elements of judgment
and qualitative as well as quantitative analysis. Hence, it expresses no
opinion as to the probative force standing alone, of any one or more parts of
the material that follows. Its only opinion is the formal written opinion
that it has expressed as to the fairness from a financial point of view of the
consideration being paid in the transaction. Its opinion, analyses and all
conclusions drawn from such analyses are necessarily based upon market,
economic and other conditions that exist and can be evaluated as of the date
thereof, and on information available to it as of the date thereof.
In delivering its opinion and making its presentations to the Special
Committee and the Board of Directors on May 7, 1999, American Express
considered and presented the financial and comparative analyses of various
indicators of value of Killearn set forth below. This financial and
comparative analyses, including the ranges of share values implied by such
analyses, were based in part upon projections prepared by Killearn.
American Express' financial analyses employed the following two types of
approaches: (i) a comparative company analysis, and (ii) a discounted cash
flow analysis. American Express considered, and to some degree utilized, all
of the analyses described below. American Express considered but rejected use
of break-up or liquidation value analysis.
Comparable Company Analysis. In the comparative company analysis,
American Express compared Killearn's financial performance against that of
publicly traded companies usable for comparative purposes, whose primary
operations involved land development. In comparing Killearn's financial
performance over the most recent three years and the most recent twelve month
period against that of the comparables, American Express observed that
Killearn was much smaller than the median of the comparatives in, among other
elements, revenues and earnings before interest, taxes, depreciation and
amortization and earnings before interest and taxes. American Express
concluded that Killearn's earnings did not support the values implied by this
analysis.
Discounted Cash Flow Analysis. American Express' discounted cash flow
analyses, discounting Killearn's projected cumulative cash flows to a present
value. This analysis assumed the continued viability of Killearn, that it
will develop and sell land for amounts approximating those in the forecasts,
and will have available to is sufficient capital to acquire and develop land
in the future.
The procedures surrounding land value consisted of developing forecasts of
development and sale of land parcels currently held by Killearn. The sales
prices were based upon management's estimates of value, comparison with
historical sales values and comparison of values to independent appraisals.
From these values, American Express deducted commissions, general and
administrative expenses, income taxes and other amounts incident to the sale
of the land or operation of Killearn to arrive at future estimated cash flows.
These cash flows were discounted to their present value using a 12% discount
rate. The parcel of land referred to as I75 and Octagon Road is subject to
wide valuation estimates. Split into two approximately equal parts, it
consists of 27.6 acres between the proposed Octagon Road and I75 and 29.7
acres between the proposed Octagon Road and the golf course. Management's
estimates of potential selling prices are significantly lower than the values
used by the independent appraisals on the land.
In addition to the base case, American Express performed a discounted cash
flow using both management's estimate of the selling price of the I75 and
Octagon Road properties and the value used in the appraisal and noted the
value of each share of stock of Killearn under these scenarios for sale of the
I75 and Octagon Road parcels is $6.27 per the independent appraisals and $2.92
per Killearn management's estimates.
Comparable Sales Analysis. American Express was unable to identify recent
sales of similar companies with which to complete this analysis.
Liquidation Analyses. American Express considered, but rejected, use of
liquidation value analyses which assumes the sale of land "as is", with no
further development cost; and a significant reduction of general and
administrative costs. The overall result of this analysis was that the
decrease in sales value of the land was significantly greater than the savings
from cessation of development activity. Also, because of the cessation of
development activity, the deferred tax liability, created out of timing
differences in the capitalization of real estate taxes and interest during
development, converts into a tax payable and further reduces the value of the
stock. The resulting value per share of a liquidation approaches zero.
Other. American Express is regularly engaged in the valuation of
businesses in connection with mergers and acquisitions, private placements and
valuations for estate, corporate and other purposes. The Special Committee
selected American Express to act as its financial advisor in connection with
the Merger on the basis of American Express' reputation and its experience in
transactions of this type.
In connection with its financial advisory services and the delivery of its
opinion, American Express received a fee of $25,000, which fee was not
contingent upon a favorable opinion. In addition, Killearn agreed to
reimburse American Express for its reasonable out-of-pocket expenses incurred
during its engagement and to indemnify American Express and hold them harmless
against certain liabilities, including certain liabilities under the federal
securities laws, relating to, or arising out of, its rendering of services
under its engagement.
Conflicts of Interest
In considering the recommendations of the special committee and Board of
Directors, Killearn's shareholders should be aware that J.T. Williams, Jr. and
David K. Williams, who are both members of the Board of Directors have
nterests in the Merger that are different from the interests of Killearn
shareholders generally and which may create potential conflicts of interest.
Ownership of Purchaser. Two directors of Killearn, J.T. Williams, Jr. and
David K. Williams, own, in the aggregate, approximately 76% of the outstanding
capital stock of the Purchaser. In addition, two other sons of J.T. Williams,
Jr. own the remainder of the outstanding capital stock of the Purchaser.
Director and Officer Indemnification and Insurance. The Merger Agreement
provides that the Surviving Corporation generally will indemnify all directors
and officers of Killearn to the fullest extent permitted by Florida law and in
the Articles of Incorporation and Bylaws of Killearn, as in effect as of the
date of the Merger Agreement, from and against all liabilities, costs,
expenses and claims arising out of actions taken prior to the Merger in
performance of their duties as directors and officers of Killearn. The Merger
Agreement further provides that, except as may be limited by applicable law,
for a period of six years after the Merger the indemnification obligations set
forth in Killearn's Articles of Incorporation and Bylaws shall survive the
Merger and shall not be amended or modified by either Killearn or the
Surviving Corporation in a manner adverse to the rights of former and current
officers and directors of Killearn with respect to matters occurring prior to
the Merger. In addition, the Merger Agreement provides that the Surviving
Corporation will maintain in effect, for three years or until expiration of
the applicable statute of limitations but in no event longer than four years,
after the Merger to maintain directors' and officers' liability insurance for
the benefit of its directors and officers who are currently covered under
Killearn's directors' and officers' liability insurance on terms not
materially less favorable than the existing insurance coverage; provided,
however, the Surviving Corporation is not required to pay an annual premium in
excess of 200% of the last annual premium paid by Killearn prior to the date
of the Merger Agreement.
Special Committee and Board Compensation. Compensation paid to the members
of the special committee and the Board for services rendered in their capacity
as members of the special committee or the Board for the period from December
1998 through May 1999, including, among other things, their analysis and
evaluation of the proposal of the Purchaser as well as their negotiation of
the terms of the Merger Agreement, amounted to $9,000 for Mr. Horne and $9,000
for Mr. Pope.
THE SPECIAL MEETING
Date, Time and Place
The special meeting will be held on June __, 1999, at 10:00 a.m., local
time, at Killearn's offices 385 Country Club Drive, Stockbridge, Georgia. At
the special meeting, Killearn shareholders will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement and the Transactions.
Record Date; Voting Power; Quorum
Shareholders of record of Killearn common stock at the close of business
on May __, 1999 are entitled to notice of and to vote at the special meeting.
As of the record date, there were 887,412 shares of Killearn common stock
issued and outstanding held by approximately 500 holders of record
Holders of record of Killearn common stock on the record date are entitled
to one vote per share on any matter that may properly come before the special
meeting.
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Killearn common stock entitled to vote at the special
meeting is necessary to constitute a quorum for the transaction of business.
Vote Required; Security Ownership of Management
Under Florida law, the affirmative vote of the holders of a majority of
the shares of Killearn common stock outstanding on the record date is required
to approve the Merger Agreement and the Transactions. For purposes of
determining whether the Merger Agreement and the Transactions have received a
majority vote, abstentions and broker non-votes (shares held in "street name"
through a broker or other nominee as to which voting instructions with regards
to the Merger Agreement and the Transactions have not been received from the
beneficial owners and such broker or other nominee is not permitted to
exercise voting discretion with regards to the Merger Agreement or the
Transactions) will not be included in the vote total, although an abstention
and a broker non-vote will have the effect of a vote against the Merger
Agreement and the Transactions. Abstentions and broker non-votes will,
however, be counted for determining whether there is a quorum.
As of the record date for the special meeting, Killearn's executive
officers and directors owned, in the aggregate, 237,133 shares of Killearn
common stock or 26.7 % of the votes represented by the shares of Killearn
common stock then outstanding. The Purchaser and each executive officer and
director of Killearn have agreed to vote these shares in favor of the Merger
Agreement and the Transactions in the same proportion as the other
shareholders of Killearn. See "Beneficial Ownership of Common Stock" on page
___.
Proxies
Shareholders are requested to complete, date and sign the accompanying
form of proxy and return it promptly in the enclosed postage-paid envelope.
Any shareholder giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted at the special meeting. A later dated
proxy or written notice of revocation given prior to the vote at the special
meeting to the Secretary of Killearn will serve to revoke such proxy. Also, a
shareholder who attends the special meeting in person may, if he or she
wishes, vote by ballot at the special meeting, thereby canceling any proxy
previously given. Mere presence at the special meeting will not serve to
revoke any proxy previously given.
Solicitation of Proxies
In addition to the use of mails, proxies may be solicited by persons
regularly employed by Killearn, by personal interview, telephone and
telegraph. Such persons will receive no additional compensation for such
services, but will be reimbursed for any out-of-pocket expenses incurred by
them in connection with such services. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of shares of
common stock held of record by such persons, and Killearn may reimburse such
persons for reasonable out-of-pocket expenses incurred by them in connection
therewith.
Killearn will bear the costs of the special meeting and of soliciting
proxies therefor. Killearn may engage a proxy solicitor to assist in the
solicitation of proxies.
THE MERGER
Mechanics of the Merger. In the Merger:
Killearn will be merged into Merger Sub, and Merger Sub will be the
Surviving Corporation; and
each share of Killearn's common stock (other than shares held by the
Purchaser, J.T. Williams, Jr. and his sons) will be converted into the
right to receive $5.50 in cash, without interest.
Consequences of the Merger. As a result of the Merger:
the entire equity interest in Killearn will be owned by the Purchaser;
the unaffiliated shareholders of Killearn will no longer have any
interest in, and will not be shareholders of Killearn, and therefore
will not participate in its future earnings or growth;
the Purchaser will have the opportunity to benefit from any earnings and
growth of Killearn, and will bear the risk of any decrease in Killearn's
value;
Killearn's common stock will no longer be traded on The American Stock
Exchange, Inc., price quotations will no longer be available and the
registration of Killearn's common stock under the Exchange Act will be
terminated. After such registration is terminated, Killearn will no
longer be required to file periodic reports with the Commission;
the present Board of Directors of Killearn will be replaced by the Board
of Directors of Merger Sub which is comprised of J.T. Williams, Jr.,
David K. Williams, John R. Williams and J.T. Williams, III;
the officers of Killearn will be the officers of the Surviving
Corporation after the effective time of the Merger. See "Certain
Information Concerning Merger Sub and the Purchaser" on page ____.
The Purchaser expects that, following consummation of the Merger, the
business and operations of Killearn will be continued substantially as they
are currently being conducted. The Board of Directors and management
Killearn will, however, continue to evaluate Killearn's business, operations,
corporate structure and organization and will make such changes as they deem
appropriate.
Financing
The total amount of funds necessary to fund the Merger and related
transactions is expected to be approximately $3.6 million. These funds are
expected to come from the following sources:
the 315,430 shares of Killearn common stock owned by Wimberly Investment
Funds, L.P. will be paid for by the cancellation of a portion of the
indebtedness owed by Wimberly to the Purchaser in the amount of
$1,734,865 (or $5.50 per share);
the 132,000 shares of Killearn common stock owned by Proactive
Technologies, Inc. will be paid for by the cancellation of a portion of
indebtedness owed by PTI to the Purchaser in the amount of $726,000 (or
$5.50 per share);
approximately $900,000 will be borrowed from American Century Bank as
described below; and
the balance will be cash of the Purchaser on hand at the effective time
of the Merger estimated to be approximately $250,000.
Debt Financing. The Purchaser has a revolving line of credit with American
Century Bank in the aggregate amount of $2.0 million having a final maturity
date occurring on or before March 22, 2000 (the "Line of Credit").
Approximately, $1.1 million has been previously borrowed under the Line of
Credit and the balance in the amount of $900,000 available under the Line of
Credit will be used to fund the Merger.
The Line of Credit is secured by 26.77 acres of real estate of the
Purchaser. The interest rate under the Line of Credit is the Prime Rate plus
1/2 percentage points The documents for the Line of Credit contain
affirmative, negative and financial covenants and events of default customary
for credit facilities of a size and type similar to the Line of Credit. Draws
under the Line of Credit are subject to the satisfaction of customary
conditions for similar financing.
Federal Income Tax Consequences
There will be federal income tax consequences of the Merger to the holders
of the Killearn common stock. The material tax consequences of the Merger are
summarized in the following discussion, which is based on the current
provisions of the Internal Revenue Code, existing and proposed Treasury
Regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any change, which may or may not be
retroactive, could alter the tax consequences to the holders of Killearn
common stock as described herein. The following discussion is addressed to a
shareholder that holds Killearn common stock as a capital asset and that, for
federal income tax purposes, is a U.S. citizen or resident or a domestic
corporation, partnership, trust or estate. This summary does not purport to
deal with all aspects of taxation that may be relevant to a particular
shareholder in light of his, her or its particular circumstances or to certain
types of taxpayers subject to special treatment under the federal income tax
law, including financial institutions, broker-dealers, foreign persons, persons
holding Killearn common stock as part of a straddle, "synthetic security" or
other integrated investment (including a "conversion transaction") or persons
who acquired their Killearn common stock through the exercise of an employee
stock option or otherwise as compensation.
A holder of Killearn common stock will recognize capital gain or loss for
federal income tax purposes on each share of Killearn common stock exchanged
for the cash merger consideration pursuant to the Merger. The amount of gain
or loss recognized on a share will be equal to the difference between $5.50
and the holder's basis in the share. The gain or loss will be long-term
capital gain or loss in the case of shares held for more than one year as of
the date of the Merger. In the case of individuals, trusts and estates, net
capital gain for a taxable year (that is, the excess of net long-term capital
gain for the taxable year over any net short-term capital loss for the year)
is subject to a maximum federal income tax rate of 20%. Receipt of the cash
merger consideration in exchange for Killearn common stock pursuant to the
Merger also may be a taxable transaction under applicable state, local and
foreign tax laws.
A holder of Killearn common stock may be subject to backup withholding at
the rate of 31% with respect to the cash merger consideration received
pursuant to the Merger, unless the holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates that fact or
(b) provides a correct taxpayer identification number ("TIN"), certifies as to
no loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholdings rules. To prevent the
possibility of backup withholding on payments made to certain holders with
respect to shares of Killearn common stock pursuant to the Merger, each holder
must provide the paying agent (the "Paying Agent") with his, her or its
correct TIN by completing a Form W-9 or Substitute Form W-9. A holder of
Killearn common stock that does not provide his, her or its correct TIN may be
subject to penalties imposed by the Internal Revenue Service (the "IRS"), as
well as to backup withholding. Any amount withheld under these rules will be
refundable or creditable against the holder's federal income tax liability,
provided the required information is furnished to the IRS. Killearn (or its
agent) will report to the holders of Killearn common stock and to the IRS the
amount of any "reportable payments," as defined in Section 3406 of the Code,
and the amount of tax, if any, withheld with respect thereto.
The federal income tax consequences set forth in this proxy statement are
for general information only. The tax consequences for a particular
shareholder will depend upon the facts and circumstances applicable to that
shareholder. Accordingly, each shareholder is urged to consult his, her or
its own tax adviser to determine the tax consequences of the Merger to the
shareholder in light of his, her or its particular circumstances, including
the applicability and effect of state, local, foreign and other tax laws and
any possible changes in those laws. The foregoing discussion may not apply to
shares received pursuant to the exercise of employee stock options or
otherwise as compensation.
Accounting Treatment
Killearn expects that the Merger will be accounted for as a
recapitalization for accounting purposes because it will not constitute a
change of control under generally accepted accounting principles. As a
result, the historical cost basis of Killearn's assets and liabilities will
not change. The aggregate cost of repurchasing the common stock will be
accounted for as a charge to shareholders' equity.
Dissenters' Appraisal Rights
Killearn's shareholders are not entitled under the Florida law or
Killearn's articles of incorporation to exercise dissenters' appraisal rights
in connection with the Transactions. Therefore, if a shareholder votes
against, or abstains from voting for, the Transactions and a majority of
shareholders approve the Transactions, then the dissenting or abstaining
shareholder will receive the Merger Consideration in exchange for their shares.
Delisting and Deregistration of Common Stock
Following the Merger, Killearn's common stock will be no longer traded on
The American Stock Exchange, Inc., price quotations will no longer be
available and the registration of Killearn's common stock under the Exchange
Act will be terminated. After such registration is terminated, Killearn will
no longer be required to file periodic reports with the Commission.
Regulatory Approvals
Killearn is not aware of any material governmental or regulatory approvals
which are required for consummation of the Transactions.
THE MERGER AGREEMENT
Overview
The terms and conditions of the Merger are set forth in the Merger
Agreement, the complete text of which is attached as Appendix A to this proxy
statement and is incorporated herein by reference. The summary of the Merger
Agreement contained in this proxy statement does not purport to be complete
and is subject to and qualified in its entirety by reference to the complete
text of such document.
In the Merger:
Killearn will be merged into Merger Sub, and the Merger Sub will be the
Surviving Corporation upon completion of the Merger; and
each share of Killearn's common stock (other than shares held by the
Purchaser, J.T. Williams, Jr. and his sons) will be converted into the
right to receive $5.50 in cash, without interest.
Exchange of Certificates Representing Common Stock
Instructions with regard to the surrender of Killearn's stock certificates,
together with a letter of transmittal to be used for this purpose, will be
mailed to Killearn's shareholders as promptly as practicable after the
completion of the Merger. In order to receive the cash merger consideration,
shareholders will be required to surrender their stock certificates, together
with a duly completed and executed letter of transmittal, to a Paying Agent
designated by Merger Sub and approved by Killearn. Promptly after completion of
the Merger, the cash merger consideration will be deposited in trust with the
Paying Agent. Upon receipt of such stock certificates and letter of
transmittal, the Paying Agent will deliver the cash merger consideration to
the registered holder or his transferee of the shares of Killearn's common
stock. No interest will be paid or accrued on the amounts payable upon the
surrender of stock certificates.
Shareholders should not submit their stock certificates for exchange until
the instructions and letter of transmittal are received.
After the effective time of the Merger, there will be no further transfers
on the stock transfer books of Killearn of the shares of Killearn's common
stock that were outstanding immediately prior to the Merger. If a certificate
representing such shares is presented for transfer, subject to compliance with
the requisite transmittal procedures, it will be canceled and exchanged for
the cash merger consideration.
Each certificate representing shares of Killearn's common stock
immediately prior to the effective time of the Merger will, at such time, be
deemed for all purposes to represent only the right to receive the cash merger
consideration into which the shares of Killearn's common stock represented by
such certificate were converted in the Merger.
Any cash merger consideration delivered or made available to the Paying
Agent and not exchanged for stock certificates within 180 days after the
Merger will be returned by the Paying Agent to the Surviving Corporation,
which will thereafter act as Paying Agent. If any certificates representing
shares of Killearn common stock are not surrendered within five years after
the Merger then the unclaimed cash merger consideration payable in exchange
for such certificates shall, to the extent permitted under applicable
abandoned property, escheat or similar law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any person
previously entitled thereto. None of the Merger Sub, the Purchaser, Killearn
nor the Paying Agent will be liable to a holder of shares of Killearn's common
stock for any of the cash merger consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Representations and Warranties
Killearn has made representations and warranties in the Merger Agreement
regarding, among other things its organization and good standing, authority to
enter into the transactions, its capitalization, the content and submission of
forms and reports required to be filed by Killearn with the Commission,
requisite governmental and other consents and approvals, and compliance with
all applicable laws.
Each of Merger Sub and Purchaser have made representations and warranties
in the Merger Agreement regarding, among other things, its organization and
good standing, authority to enter into the transactions, the requisite
governmental and other consents and approvals, financing, and the accuracy of
information supplied by it for submission on forms and reports required to be
filed by Killearn with the Commission.
Conduct of Business Pending the Merger
Killearn has agreed that during the period from the date of the Merger
Agreement to the effective time of the Merger, except as otherwise provided in
the Merger Agreement, unless consented to by Purchaser, it shall, and shall
cause its subsidiaries, to, among other things, conduct its business in the
ordinary course and to use its commercially reasonable efforts to preserve
intact its current business organizations, keep available the services of its
current officers, employees and consultants, preserve its relationships with
customers, suppliers, contractors and other persons with which it or its
subsidiaries has significant business relations and maintain all insurance
necessary to the conduct of its business as currently conducted. Killearn
has further agreed that it shall not, and shall cause its subsidiaries not to,
without the prior written consent of Purchaser:
dispose of or encumber any of its properties and assets, other than
sales in the ordinary course of business and collections of receivables
in the ordinary course of business;
issue, sell, or acquire any shares of the capital stock of the Killearn
or securities convertible into, or rights, warrants or options
(including employee stock options) to acquire, any such shares or other
convertible securities;
split, combine or reclassify any shares of its common stock or declare
any dividends on or make other distributions; and
incur, assume or prepay any long-term debt or, except in the ordinary
course of business, incur or assume any short-term debt; assume,
guarantee, endorse or otherwise become liable or responsible for the
obligations of any other person; or make any loans, advances or capital
contributions to, or investments in, any other person.
No Solicitation
The Merger Agreement prohibits Killearn, its subsidiaries, and any of
Killearn's or its subsidiaries' directors, officers, employees, agents or
representatives from directly or indirectly: (i) initiating, soliciting, or
encouraging any inquiries, discussions or making any proposal with respect to
any merger, consolidation or other business combination involving Killearn or
any acquisition of any kind of a material portion of the assets or capital
stock of Killearn or its subsidiaries (a "Takeover Proposal"); or (ii)
negotiating, exploring or otherwise communicating in any way with any third
party with respect to any Takeover Proposal or entering into or consummating
any agreement arrangement or understanding requiring it to abandon, terminate
or fail to consummate the Merger.
However, prior to the special meeting (or any postponement thereof),
Killearn may, if Killearn's Board of Directors determines in good faith by a
majority vote, based upon the advice of its outside counsel, that failing to
take such action would constitute a breach of the fiduciary duties of the
Board of Directors under applicable law, in response to a Takeover Proposal
from any person that was not solicited by Killearn and that did not otherwise
result from the breach of Killearn's obligations to refrain from soliciting
any Takeover Proposal, and upon notifying Merger Sub of the particulars of
such Takeover Proposal and otherwise complying with these obligations,
Killearn may participate in discussion or negotiations with such person
regarding any Takeover Proposal.
Indemnification
The Merger Agreement provides that the Surviving Corporation generally
will indemnify all directors and officers of Killearn to the fullest extent
permitted by Florida law and in the Articles of Incorporation and Bylaws of
Killearn, as in effect as of the date of the Merger Agreement, from and
against all liabilities, costs expenses and claims arising out of actions
taken prior to the effective time of the Merger in performance of their duties
as directors and officers of Killearn in connection with the Merger Agreement.
The Merger Agreement further provides that, except as may be limited by
applicable law, for a period of six years from and after the effective time of
the Merger the indemnification obligations set forth in Killearn's Articles of
Incorporation and Bylaws shall survive the Merger and shall not be amended or
modified by either Killearn or the Surviving Corporation in a manner adverse
to the rights of former and current officers and directors of Killearn with
respect to matters occurring prior to the effective time of the Merger.
Directors' and Officers' Liability Insurance
The Merger Agreement provides that the Surviving Corporation shall
maintain in effect, for three years or until the applicable statute of
limitations expires but in no event longer than four years after the Merger,
directors' and officers' liability insurance policies covering the persons who
are currently covered in their capacities as such directors and officers (the
"Covered Parties") by Killearn's current directors' and officers' policies
and on terms not materially less favorable than the existing insurance
coverage with respect to matters occurring prior to the Merger; provided,
however, in the event the annual premium for such coverage exceeds an amount
equal to 200% of the last annual premium paid immediately prior to the date
hereof by Killearn for such coverage, the Surviving Corporation shall notify
the Covered Parties who shall then elect as a group either (i) to allow the
Surviving Corporation to obtain as much comparable insurance as possible for
an annual premium equal to 200% of the last annual premium paid immediately
prior to the date hereof by Killearn, or (ii) to seek coverage from another
carrier, in which event the Surviving Corporation shall reimburse the Covered
Parties the cost of such alternative coverage up to an amount equal to 200% of
the last annual premium paid immediately prior to the date hereof by the
Killearn for such coverage.
Conditions to the Merger
Each party's respective obligations to effect the Merger is subject to
satisfaction of the following conditions:
the approval and adoption of the Merger Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of
Killearn's common stock in accordance with Florida Law and Killearn's
Articles of Incorporation;
no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which
prohibits or materially and adversely restricts the consummation of the
Merger; and
The obligations of Merger Sub and the Purchaser, on the one hand, and
Killearn, on the other hand, to consummate the Merger are subject to the
satisfaction or waiver of further conditions including:
Killearn, Merger Sub and the Purchaser, as the case may be, shall have
performed all of its obligations under the Merger Agreement required to
be performed by it at or prior to the effective time of the Merger;
each of the representations and warranties of Killearn, Merger Sub and
the Purchaser, as the case may be, contained in the Merger Agreement
shall be true and correct, in each case as of the Closing Date as if
made at and as of such time; and
Termination of Merger Agreement
The Merger Agreement may be terminated and the Merger abandoned, at
time prior to the effective time of the Merger, whether before or
approval by Killearn's shareholders:
by the mutual written consent of Killearn and the Purchaser;
by either the Purchaser or Killearn if the Merger has not been
consummated by December 31, 1999, unless the failure by the terminating
party to fulfill any obligation under the Merger Agreement caused or
resulted in the failure of the Merger to be consummated by December 31,
1999;
by either the Purchaser or Killearn, if Killearn's Board of Directors
(or any committee thereof), withdraws or modifies or refrains from giving
its approval or recommendation of the Merger Agreement or the Merger;
automatically, without action by any party thereto, if the shareholders
of Killearn do not approve the Merger Agreement at the special meeting;
by either Killearn or the Purchaser if the other party breaches any of
its representations, warranties and agreements under the Merger
Agreement and such breach is not cured within 10 days of notice; and
by Killearn subsequent to a Takeover Proposal if its special committee
determines in good faith by a majority vote based upon the advice of its
outside counsel that the Board is required to do so by its fiduciary
obligations, and after it notifies the Purchaser of the Takeover
Proposal.
Fees and Expenses
Killearn and Merger Sub will pay their own fees, costs, and expenses
incurred in connection with the Merger Agreement (except that Killearn will
bear all expenses incurred in connection with this proxy statement).
Estimated Fees and Expenses of the Merger
Estimated fees and expenses incurred or to be incurred by the Surviving
Corporation and Killearn, Inc. (the parent Company) in connection with the
Merger are approximately as follows:
Description Amount
(in thousands)
___________ ______________
Advisory fees and expenses(1) $25,000
Debt financing fees and expenses(2) 15,135
Legal fees and expenses(3) 60,000
Paying Agent fees and expenses 2,500
Transaction fees and expenses 1,500
Accounting fees and expenses 5,000
Securities and Exchange Commission filing fee 500
Printing and mailing costs 1,500
Miscellaneous expenses 3,000
_______
Total.................................................... $114,135
=======
(1) Includes the fees and expenses of American Express Tax & Business
Services, Inc.
(2) Includes the fees and expenses of $15,135.00 to American Century Banking
Corp.
(3) Includes the estimated fees and expenses of counsel for Killearn, and the
Purchaser, which are expected to be reimbursed by the Surviving Corporation
following the Merger.
CERTAIN INFORMATION CONCERNING
MERGER SUB, THE PURCHASER AND OTHER AFFILIATES
Merger Sub. Merger Sub is a Georgia corporation incorporated in May 1999
at the direction of the Purchaser for the purpose of consummating the Merger.
It is anticipated that Merger Sub will not have any significant assets or
liabilities prior to the effective date of the Merger nor engage in any
activities other than those involving the Transactions.
Purchaser. The Purchaser is a Georgia corporation. Approximately 77% of
the outstanding capital stock of the Purchaser is owned by J.T. Williams, Jr.
and David K. Williams, two directors of Killearn, and all of the remaining
capital stock of the Purchaser is owned by two other sons of J.T. Williams, Jr.
Each owner of the Purchaser is a citizen of the United States and the business
address of the Purchaser and each such owner is at 1570 Rockquarry Road,
Stockbridge, Georgia 30281. Information relating to transactions involving
Killearn's common stock effected by or on behalf of each owner of the Purchaser
and his respective affiliates since May 1, 1997 through the date of this proxy
statement is set forth on Appendix C to this proxy statement. For further
information concerning the Purchaser, see "Special Factors-Conflicts of
Interest."
Subsequent to the consummation of the Merger, it is anticipated that the
directors and executive officers of the Surviving Corporation will be as
follows:
Name Position
____ ________
J.T. Williams, Jr. Chairman of the Board
David K. Williams President and Chief
Executive Officer, Director
John R. Williams Vice President, Director
J.T. Williams, III Secretary, Director
William E. Daniels, Jr. Chief Financial Officer
Set forth below is a brief description of the business experience for each
of the directors of the Surviving Corporation:
Name Position
____ ________
J.T. Williams, Jr. Chairman of the Board and
President of Killearn
Properties, Inc. from 1970
until October 1996.
President of Killearn,
Inc., a privately owned
company which owned and
managed the Eagle's Landing
Golf and Country Club until
May 1998, and owns the Inn
at Eagle's Landing since
October 1996.
David K. Williams President of Killearn
Properties, Inc. since
August 1997 and Chief
Executive Officer of the
Company since January 1998.
Executive Vice President of
the Company from May 1994
to August 1997. President
of the Company's Florida
operations from June 1989
to May 1994.
John R. Williams Vice President of Killearn,
Inc. since July 1997.
President of Eagles Landing
Sales Center from January
1988 until July 1997.
J.T. Williams, III Development Coordinator of
Killearn Properties, Inc.
since January 1989.
William E. Daniels, Jr. Chief Financial Officer of
Killearn Properties, Inc.
since July 1998. Chief
Financial Officer of
Proactive Technologies,
Inc. from July 1997 until
February 1998. Controller
for KWC Management
Corporation from 1993 to
1995.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Killearn's common stock as of April 30, 1999 for (1) each person
who is known by Killearn to own beneficially more than 5% of the outstanding
shares of common stock, (2) the Chief Executive Officer and the four other
most highly compensated executive officers of Killearn, (3) each director of
Killearn, and (4) all of the directors and executive officers of Killearn as a
group. Except pursuant to applicable community property laws and except as
otherwise indicated, each shareholder identified in the table possesses sole
voting and investment power with respect to its or his shares.
Name Shares
Beneficially Owned Percent Owned
____ __________________ _____________
Wimberly Investment Fund, L.P. 315,430(1) 35.6
J.T. Williams, Jr. 216,146(2) 24.4
David K. Williams 167,387(2) 18.9
Killearn, Inc. 157,400 17.7
Proactive Technologies, Inc. 132,000 14.9
Melvin L. Pope, Jr. 300(3) *
William E. Daniels, Jr. 150 *
Mallory E. Horne 0 *
All directors and executive officers
as a group (5 persons) 226,583(2) (3) 25.5
______________________
Less than 1% of the outstanding shares.
(1) Based solely on reports of beneficial ownership filed by the named
person with the Commission.
(2) Includes 157,400 shares of Common Stock held by Killearn, Inc., a
corporation controlled by J.T. Williams, Jr. and David K. Williams.
(3) Includes 25 shares of Common Stock held by Mr. Pope's wife and 275
shares of Common Stock held by Mr. Pope as custodian for his children.
INDEPENDENT PUBLIC ACCOUNTANTS
Killearn's consolidated balance sheet as of April 30, 1998, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year ended April 30, 1998, incorporated by reference in this
proxy statement, have been audited by PricewaterhouseCoopers LLP, independent
public accountants. A representative of PricewaterhouseCoopers LLP will not be
at the special meeting.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission by Killearn
(File No. 1-6762) are incorporated by reference in this proxy statement:
Annual Report on Form 10-KSB for the year ended April 30, 1998; and
Quarterly Reports on Form 10-QSB for the quarterly periods ended July 31,
1998, October 31, 1998 and January 31, 1999.
All documents filed by Killearn with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the date of the special meeting shall be deemed to be incorporated by
reference herein and shall be a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein or contained in this proxy statement shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded.
This proxy statement incorporates documents by reference which are not
presented herein or delivered herewith. Such documents (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference)
are available, without charge, to any person, including any beneficial owner,
to whom this proxy statement is delivered, on written or oral request to
Killearn at 385 Country Club Drive, Stockbridge, Georgia 30281 Attn: Chief
Financial Officer (telephone number 770-389-2020). Such documents will be
provided to such person by first class mail or other equally prompt means
within one business day of receipt of such request. In order to ensure
delivery of the documents prior to the special meeting, requests should be
received by _____________, 1999.
AVAILABLE INFORMATION
Killearn, the Merger Sub and the Purchaser have filed with the Commission
a Rule 13e-3 Transaction Statement on Schedule 13E-3 (including any amendments
thereto, the "Schedule 13E-3") under the Exchange Act with respect to the
Merger. This proxy statement does not contain all of the information set
forth in the Schedule 13E-3 and the exhibits thereto, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Killearn is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports, proxy statements and other information
with the Commission.
Schedule 13E-3 and the exhibits thereto, as well as such reports, proxy
statements and other information filed by Killearn, can be inspected and copied
at the Commission's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms.
Killearn's SEC filings are also available to the public from commercial
document retrieval services and at the Internet web site maintained by the
Commission at http://www.sec.gov.
KILLEARN PROPERTIES, INC.
385 Country Club Drive
Stockbridge, Georgia 30281
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mallory E. Horne and William E. Daniels,
Jr., and either of them, proxies (each with full power of substitution) to
vote, as indicated below and in their discretion upon such other matters as
may properly come before the meeting, all shares which the undersigned would
be entitled to vote at the special meeting of shareholders of Killearn to be
held on June __, 1999, at 10:00 a.m., local time, at its offices at 385
Country Club Drive, Stockbridge, Georgia, and at any adjournment or
postponement thereof, as indicated on the reverse side.
1. A proposal to approve and adopt the Merger Agreement and the Transactions
described in the accompanying proxy statement.
___FOR ___AGAINST ___ABSTAIN
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
ALSO DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS
WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF AND MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING DATED MAY __, 1999 AND THE ACCOMPANYING PROXY STATEMENT.
PLEASE SIGN AND DATE THIS PROXY BELOW
Date: , 1999
__________________________________________
__________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
ON LEFT. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, GUARDIAN OR
CORPORATE OFFICIAL, PLEASE GIVE FULL
TITLE.
AGREEMENT AND PLAN OF MERGER
AMONG
KILLEARN, INC.,
KILLEARN DEVELOPMENT, INC.
AND
KILLEARN PROPERTIES, INC.
DATED AS OF MAY 10, 1999
Execution Copy
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 10, 1999,
among Killearn, Inc., a Georgia corporation ("Parent"), Killearn Development,
Inc., a Georgia corporation ("Sub"), and Killearn Properties, Inc., a Florida
corporation (the "Company").
PRELIMINARY STATEMENTS
A. Parent has proposed to the Company's Board of Directors that the
Company merge with and into Sub (the "Merger"), with the holders of all of
the outstanding shares of Common Stock, par value $0.10 per share, of the
Company (the "Common Stock") not currently owned by Parent or shareholders of
Parent receiving a cash payment of $5.50 in exchange for each of their shares
of Common Stock.
B. A Special Committee of the Company's Board of Directors (the "Special
Committee") has determined that the Merger is fair to, and in the best
interests of, the Public Shareholders (as defined in Section 2.1), and has
recommended the approval and adoption of this Agreement to the Company's Board
of Directors.
C. The Boards of Directors of Parent, Sub and the Company have approved
and adopted this Agreement and approved the Merger upon the terms and subject
to the conditions set forth herein.
D. The Company's Board of Directors believes it is in the best interests
of the Company and its shareholders to consummate the Merger upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, and intending to
be legally bound hereby, Parent, Sub and the Company agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the General Corporation Act of the
State of Florida (the "Florida Business Corporation Act") and Georgia Business
Corporation Code of the State of Georgia (the "Georgia Business Corporation
Code"), at the Effective Time (as defined in Section 1.2), the Company shall
be merged with and into Sub and the separate existence of the Company shall
thereupon cease, with Sub being the surviving corporation in the Merger (the
"Surviving Corporation").
1.2. Effective Time of the Merger. Subject to the terms of this
Agreement, the Merger shall become effective when the Department of State of
the State of Florida (the "Florida Department of State") files the articles of
merger or other appropriate documents in accordance with the Florida Business
Corporation Act, and the Georgia Secretary of State files the articles of
merger or other appropriate documents in accordance with the Georgia Business
Corporation Code, or such other date as shall be specified in the articles of
merger, which articles of merger shall be delivered by Sub and the Company to
the Florida Department of State and the Georgia Secretary of State as soon as
practicable after the closing of the Merger contemplated by this Agreement in
accordance with Section 7.1. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which such articles are so filed.
1.3. Effects of the Merger. The Merger shall have the effects set forth
in the Florida Business Corporation Act and the Georgia Business Corporation
Code.
1.4. Articles of Incorporation. The Articles of Incorporation of Sub,
as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation.
1.5. Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation.
1.6. Directors. The directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, who shall serve
until their respective successors are duly elected and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
1.7. Officers. The officers of the Surviving Corporation shall initially
consist of the officers of Sub immediately prior to the Effective Time, until
their successors are duly elected and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
ARTICLE 2
CONVERSION OF SHARES
2.1. Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) All shares of Common Stock (the "Shares") that are held by any
wholly owned subsidiary of the Company and any Shares held by Parent, Sub, any
other subsidiary of Parent or any shareholder of Parent, shall be canceled and
retired and shall cease to exist and no payment shall be made with respect
thereto.
(b) Each remaining outstanding Share shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
the right to receive $5.50 in cash, without any interest thereon, upon
surrender of the certificate representing such Share (such cash amount is
referred to herein as the "Merger Consideration; the Shares for which the
Merger Consideration is to be paid are referred to herein as the "Public
Shares" and the holders thereof are referred to herein as the "Public
Shareholders"). At the Effective Time, all such Public Shares shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and the Public Shareholders shall cease to have any rights as
shareholders of the Company except the right to receive the Merger
Consideration.
2.2. Exchange of Certificates. (a) As soon as reasonably practicable
after the Effective Time, Sub shall deposit in trust with a bank or trust
company designated by Parent ("Paying Agent"), cash in an aggregate amount
equal to the product of (x) the number of Public Shares issued and outstanding
immediately prior to the Effective Time, and (y) the Merger Consideration
(such amount being hereinafter referred to as the "Exchange Fund"). Paying
Agent shall, pursuant to irrevocable instructions, make the payments provided
for in Section 2.1(b) out of the Exchange Fund. Paying Agent shall invest the
Exchange Fund, as Parent directs, in direct obligations of the United States
of America, obligations for which the full faith and credit of the United
States of America is pledged to provide for the payment of all principal and
interest or commercial paper obligations receiving the highest rating from
either Moody's Investors Services, Inc. or Standard & Poor's, a division of
The McGraw Hill Companies, or a combination thereof, provided that, in any
such case, no instrument shall have a maturity exceeding 3 months. Any net
profit resulting from, or interest or income produced by, such investments
shall be payable to Parent. Parent shall replace any monies lost through any
investment made pursuant to this Section 2.2. The Exchange Fund shall not be
used for any other purpose except as provided in this Agreement.
(b) Promptly after the Effective Time, Parent shall cause Paying
Agent to mail to each record holder of certificates that immediately prior to
the Effective Time represented Public Shares (the "Certificates), a form
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to Paying Agent) and instructions for use in
surrendering Certificates and receiving payment therefor. Upon surrender to
Paying Agent of a Certificate, together with a properly completed and executed
letter of transmittal, the holder of such Certificate shall be entitled to
receive in exchange therefor cash in an amount equal to the product of the
number of Public Shares represented by such Certificate and the Merger
Consideration, less any applicable withholding tax, and such Certificate shall
forthwith be canceled. In the event any Certificate shall have been lost or
destroyed, Paying Agent, subject to such other reasonable conditions as Parent
may impose (including the posting of an indemnity bond or other surety in
favor of Sub with respect to the Certificates alleged to be lost or
destroyed), shall be authorized to accept an affidavit from the record holder
of such Certificate in a form reasonably satisfactory to Parent. No interest
shall be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other tax required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Paying Agent and Parent that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.2(b), each Certificate shall represent for all
purposes only the right to receive the Merger Consideration into which the
Shares evidenced by the Certificates shall have been converted pursuant to
Section 2.1(b), without any interest thereon.
2.3. Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Shares shall
thereafter be made. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation or Paying Agent, they shall
be canceled and exchanged for cash as provided herein.
2.4. Dissenting Shares. In accordance with the Florida Business
Corporation Act, no shareholder shall have dissenter or appraisal rights with
respect to the Common Stock.
2.5. Withholding Rights. Sub and Paying Agent shall be entitled to
deduct and withhold from the amounts payable (including the Merger
Consideration) pursuant to this Agreement to any Public Shareholder such
amounts as Parent, Sub or Paying Agent is required to deduct and withhold with
respect to the making of such payment under applicable tax law. To the extent
that amounts are so deducted and withheld by Parent, Sub or Paying Agent, such
amounts shall be treated for all purposes of this Agreement as having been
paid to the relevant Public Shareholder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except as
previously disclosed to Parent in writing:
3.1. (a) Corporate Organization. Each of the Company and the Company
Subsidiaries (as defined in Section 3.5 hereof) (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of
jurisdiction of its incorporation; (ii) has all requisite corporate power and
authority to own, operate and lease the properties and assets it now owns,
operates and leases and to carry on its business as now being conducted; and
(iii) is qualified or licensed to do business and in good standing in every
jurisdiction in which the ownership, operation or lease of property by it or
the conduct of its business requires such qualification or licensing, except
for such failures, if any, to be so qualified and in good standing, that, when
taken together with all such other failures, would not in the aggregate have a
material adverse effect on the business, condition (financial or otherwise),
operations, prospects, properties, assets or liabilities (the "Business") of
the Company and the Company Subsidiaries taken as a whole.
3.2. Authorization; Recommendation of Merger. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and,
subject to approval by the Company's shareholders, to consummate the
transactions contemplated hereby. The Company's Board of Directors has duly
approved this Agreement and has duly authorized the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and has resolved to recommend that its shareholders approve this Agreement and
the Merger. This Agreement has been duly executed and delivered by the
Company and, subject to approval by the Company's shareholders, constitutes
(assuming due authorization, execution and delivery of this Agreement by the
other parties hereto), the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(b) The Special Committee has received the opinion of American
Express Incorporated dated May 10, 1999, that, as of the date of such opinion,
the Merger Consideration to be received by the Public Shareholders pursuant to
this Agreement is fair, from a financial point of view, to the Public
Shareholders.
(c) The Special Committee (at a meeting duly called and held at
which a quorum was present) has determined that the Merger is fair to, and in
the best interests of, the Public Shareholders, and has recommended the
adoption of this Agreement to the Company's Board of Directors, subject to the
right of the Special Committee to withdraw, modify or amend such
recommendation if the Special Committee determines, in good faith after
consultation with legal counsel, that failure to take such action would be
reasonably likely to result in a breach of its fiduciary duties to the
Company's shareholders under applicable law.
(d) The Company's Board of Directors (at a meeting duly called and
held at which a quorum was present) has determined that the Merger is fair to,
and in the best interests of, the Company's shareholders, has adopted this
Agreement and has recommended the adoption of this Agreement by the Company's
shareholders, subject to the right of the Company's Board of Directors to
withdraw, modify or amend such recommendation to the extent the Company's
Board of Directors determines, in good faith after consultation with legal
counsel, that failure to take such action would be reasonably likely to result
in a breach of its fiduciary duties to the Company's shareholders under
applicable law.
3.3. Consents and Approvals; No Violations. Except for (a) the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") relating to the Proxy Statement (as defined in Section 3.6 hereof; (b)
the Transaction Statement on Schedule 13E-3 to be filed pursuant to Rule 13e-3
promulgated under the Exchange Act (the "Schedule 13E-3"); and (c) the filing
of the articles of merger and other appropriate merger documents, if any, as
required by the laws of the States of Florida and Georgia, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not: (i) violate any provision of the Articles of
Incorporation or Bylaws (or comparable governing documents) of the Company or
any Company Subsidiary; (ii) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any public, governmental or regulatory body,
agency or authority applicable to the Company or any Company Subsidiary or by
which any of their respective properties or assets may be bound; (iii) require
any filing with, or permit, consent or approval of, or giving of any notice to,
any public, governmental or regulatory body, agency or authority; or (iv)
result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement or other instrument or obligation to which the Company or any
Company Subsidiary is a party, or by which any of them or any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (ii), (iii) and (iv) violations, breaches and defaults that, and
filings, notices, permits, consents and approvals the absence of which, in the
aggregate, would not have a material adverse effect on the business of the
Company and the Company Subsidiaries taken as a whole and would not prevent or
delay the consummation of the transactions contemplated hereby.
3.4. Capitalization. The authorized capital stock of the Company
consists of 6,000,000 Shares. As of the date hereof, no Shares are held by
the Company in its treasury. As of May 10, 1999, 887,412 Shares are issued
and outstanding and no Shares are reserved for issuance for any reason. All
Shares that are outstanding as of the date hereof are duly authorized, validly
issued, fully paid and nonassessable, and are not subject to, nor were they
issued in violation of, any preemptive rights. Except as set forth above,
there are no shares of capital stock of the Company authorized or outstanding.
There are not any, and at the Effective Time there will not be any,
subscriptions, options, conversion or exchange rights, warrants or other
agreements, claims or commitments of any nature whatsoever obligating the
Company or any Company Subsidiary to issue, transfer, deliver or sell, or
cause to be issued, transferred, delivered or sold, additional shares of the
capital stock of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to grant, extend or enter into any such
agreement or commitment.
3.5. Subsidiaries. All the outstanding shares of capital stock of each
corporation of which the Company owns, directly or indirectly, 50 percent or
more of the outstanding capital stock (a "Company Subsidiary") have been
validly issued and are fully paid, nonassessable and are not subject to, nor
were they issued in violation of, any preemptive rights. All outstanding
shares of capital stock of the Company Subsidiaries are owned, directly or
indirectly, by the Company, free and clear of all liens, charges,
encumbrances, security interests, equities, options, restrictions on voting
rights or rights of disposition, and claims or third party rights of whatever
nature. Except for the Company Subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
business and neither the Company nor any Company Subsidiary is subject to any
obligation or requirement to provide funds for or to make any investment (in
the form of a loan, capital contribution or otherwise) in any entity.
3.6. Proxy Statement and Schedule 13E-3. The proxy statement and related
materials to be furnished to the Company's shareholders in connection with the
Merger pursuant to Section 5.2 (each proxy statement, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Company's shareholders, being the "Proxy Statement") and the
Schedule 13E-3 will comply in all material respects with the Exchange Act and
the rules and regulations thereunder. The information supplied by the
Company for inclusion in the Proxy Statement or the Schedule 13E-3 shall not,
at the time the Proxy Statement is mailed, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or, at the time of
the meeting of the Company's shareholders, as the Proxy Statement is then
amended or supplemented, omit to state any material fact necessary to correct
any statement originally supplied by the Company for inclusion in the Proxy
Statement or the Schedule 13E-3 that has become false or misleading. If at
any time prior to the Effective Time any event occurs relating to the Company
or any Company Subsidiary, or relating to their respective officers, directors
or shareholders, that should be described in a supplement or amendment to the
Proxy Statement or the Schedule 13E-3 or any supplement or amendment thereto,
the Company will promptly so inform Parent, will furnish all necessary
information to Parent relating to such event, and will file with the Securities
and Exchange Commission (the "Commission"), and mail to its shareholders with
respect to the Proxy Statement, any required supplement or amendment to the
Proxy Statement and Schedule 13E-3 in accordance with the Exchange Act and the
rules and regulations thereunder. Notwithstanding the foregoing, no
representation or warranty is made with respect to any information with
respect to Parent or Sub or their respective officers, directors or affiliates
(i) provided to the Company by Parent or Sub in writing for inclusion in the
Proxy Statement or the supplements or amendments thereto; or (ii) included in
the Schedule 13E-3.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company
that:
4.1. Corporate Organization. Each of Parent and Sub (i) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; (ii) has all requisite corporate power and
authority to own, operate and lease the properties and assets it now owns,
operates and leases and to carry on its business as now being conducted; and
(iii) is qualified or licensed to do business as a foreign corporation and in
good standing in every jurisdiction in which the ownership, operation or lease
of property by it or the conduct of its business requires such qualification
or licensing, except for such failures to be so qualified and in good standing,
if any, that when taken together with all such other failures, would not in
the aggregate have a material adverse effect on the business, condition
(financial or otherwise), operations, properties, assets or liabilities of
Parent and its subsidiaries taken as a whole.
4.2. Authorization. Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of each of Parent
and Sub, and Parent as the sole shareholder of Sub, have duly approved this
Agreement and have duly authorized the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Sub and
constitutes (assuming due authorization, execution and delivery of this
Agreement by the Company), the valid and binding agreement of Parent and Sub,
enforceable against each of them in accordance with its terms.
4.3. Consents and Approvals; No Violations. Except for (a) the
requirements of the Exchange Act relating to the Proxy Statement, the Schedule
13E-3 and the Merger; and (b) the filing of articles of merger and other
appropriate merger documents, if any, as required by the laws of the States of
Florida and Georgia, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not: (i) violate
any provision of the Articles of Incorporation or Bylaws (or other comparable
governing documents) of Parent or Sub; (ii) violate any statute, ordinance,
rule, regulation, order or decree of any court or of any public, governmental
or regulatory body, agency or authority applicable to Parent or Sub or by
which any of their respective properties or assets may be bound; (iii) require
any filing with or permit, consent or approval of, or the giving of any notice
to, any public, governmental or regulatory body or authority; or (iv) result
in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions or any note, bond, mortgage, indenture, license, franchise, permit,
agreement or other instrument or obligation to which Parent or Sub is a party,
or by which either of them or any of their respective properties or assets may
be bound, excluding from the foregoing clauses (ii), (iii) and (iv)
violations, breaches and defaults that, and filings, notices, permits,
consents and approvals the absence of which, in the aggregate, would not have
a material adverse effect on the business, condition (financial or otherwise),
operations, properties, assets or liabilities of Parent and its subsidiaries
taken as a whole and would not prevent or delay the consummation of the
transactions contemplated hereby.
4.4. Schedule 13E-3 and Proxy Statement. The information supplied by
Parent and Sub for inclusion in the Proxy Statement or the Schedule 13E-3
shall not, at the time the Proxy Statement is mailed, and the Schedule 13E-3
is filed with the Commission, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading or, at the time of the meeting of the
Company's shareholders, as the Proxy Statement and Schedule 13E-3 is then
amended or supplemented, omit to state any material fact necessary to correct
any statement originally supplied by Parent and Sub for inclusion in the Proxy
Statement or the Schedule 13E-3 that has become false or misleading. If at
any time prior to the Effective Time any event occurs relating to Parent or
Sub, or relating to their respective officers, directors or shareholders, that
should be described in a supplement or amendment to the Proxy Statement or the
Schedule 13E-3 or any supplement or amendment thereto, Parent and Sub will
promptly so inform the Company, will furnish all necessary information to the
Company relating to such event and will file with the Commission any required
supplement or amendment to the Schedule 13E-3 in accordance with the Exchange
Act and the rules and regulations thereunder. Notwithstanding the foregoing,
no representation or warranty is made with respect to any information with
respect to the Company or its officers, directors or affiliates included in
the Proxy Statement or Schedule 13E-3.
4.5. Financial Ability to Consummate Transaction. Parent has sufficient
funds to enable Sub to acquire all Shares owned by the Public Shareholders
pursuant to the Merger and to pay all fees and expenses payable by Parent and
Sub related to the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS
5.1. Conduct of the Company's Business. During the period commencing on
the date hereof and continuing until the Effective Time, the Company agrees
(except as expressly contemplated by this Agreement or to the extent that
Parent shall otherwise consent in writing; such consent, not to be
unreasonably withheld) that:
(a) The Company and each Company Subsidiary will carry on its
business in, and only in, the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use its commercially reasonable efforts to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, consultants, suppliers and others having business dealings with it
to the end that its goodwill and ongoing business shall not be impaired at the
Effective Time.
(b) The Company will not, and will not permit any Company Subsidiary
to, dispose of or encumber any of its properties and assets, other than sales
in the ordinary course of business and collections of receivables in the
ordinary course of business.
(c) The Company will not split, combine or reclassify any Shares or
declare any dividends on or make other distributions in respect of the Shares.
Neither the Company nor any Company Subsidiary will amend its Articles of
Incorporation or Bylaws or similar governing documents.
(d) Neither the Company nor any Company Subsidiary will issue, sell,
authorize or propose the sale or issuance of, or purchase or acquisition of,
any shares of the capital stock of the Company or any Company Subsidiary or
securities convertible into, or rights, warrants or options (including
employee stock options) to acquire, any such shares or other convertible
securities.
(e) Neither the Company, nor any Company Subsidiary, or officer,
director or employee of (or any investment banker, attorney, accountant or
other representative retained by) the Company or any Company Subsidiary
shall, directly or indirectly, solicit, initiate or encourage (including by
way of furnishing information) any inquiries or proposals by, or engage in any
discussions or negotiations with, any corporation, partnership, person or
other entity or group that it is reasonably expected may lead to, or that
relates to, any takeover proposal; provided that if the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's shareholders under applicable law, the Company may in response
to a takeover proposal from any person that was not solicited by the Company
and did not otherwise breach this subsection (i) furnish information with
respect to the Company to such person and (ii) participate in discussions or
negotiations with such person regarding any takeover proposal. The Company
will promptly advise Parent orally and in writing of the receipt and content
of any such inquiries or proposals. As used in this subsection (e), "takeover
proposal" shall mean any proposal for a merger or other business combination
involving the Company or for the acquisition of a 50% or greater interest in
the capital stock of the Company or all or substantially all of the assets of
the Company other than the one contemplated by this Agreement.
(f) Neither the Company nor any of the Company Subsidiaries will
(i) incur, assume or prepay any long-term debt or, except in the ordinary
course of business, incur or assume any short-term debt; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except wholly owned subsidiaries of the Company in the ordinary course of
business and consistent with past practices; or (iii) make any loans, advances
or capital contributions to, or investments in, any other person (other than
customary loans or advances to employees).
(g) The Company will not take, agree to take, or knowingly permit to
be taken any action or do or knowingly permit to be done anything in the
conduct of the Business of the Company and the Company Subsidiaries, or
otherwise, that would be contrary to or in breach of any of the terms or
provisions of this Agreement, or that would cause any of the representations
and warranties of the Company contained herein to be or become untrue in any
material respect.
5.2. Proxy Statement. As soon as practicable, the Company will prepare
and file with the Commission the Proxy Statement. The Company, Parent and Sub
will together prepare and file with the Commission the Schedule 13E-3. Each
of the Company, Parent and Sub will furnish all information required to be
included about such person in the Proxy Statement and the Schedule 13E-3 and,
after consultation with each other, shall respond promptly to any comments
made by the Commission with respect to the Proxy Statement and any preliminary
version thereof and the Schedule 13E-3. At the earliest practicable time, the
Company will cause the Proxy Statement to be mailed to its shareholders and,
if necessary, after the Proxy Statement shall have been so mailed, promptly
circulate amended, supplemental or supplemented proxy material and, if
required in connection therewith, resolicit proxies. The Proxy Statement
shall include the recommendation of the Company's Board of Directors to the
Company's shareholders (and reflect that the Special Committee has made a
similar recommendation to the Company's Board of Directors), subject to the
fiduciary duties under applicable law of such directors (including the
directors constituting the Special Committee), as determined by such directors
in good faith after consultation with counsel, in favor of the adoption of
this Agreement.
5.3. Shareholder Approval. As promptly as possible, the Company shall
call a meeting of its shareholders for the purpose of voting upon this
Agreement and the Merger and the Company agrees that this Agreement and the
Merger shall be submitted at a meeting of the shareholders of the Company and
the Company shall take all steps necessary to duly call, give notice of,
convene and hold such meeting. The Company shall use its commercially
reasonable efforts to obtain the necessary adoption of the Agreement by its
shareholders. Notwithstanding anything to the contrary in this Agreement, if
the Company's Board of Directors or the Special Committee determines, in good
faith after consultation with counsel, that in the exercise of its respective
fiduciary duties, under applicable law it is required to withdraw, modify or
amend its recommendation in favor of the Merger, such withdrawal, modification
or amendment shall not constitute a breach of this Agreement. Parent will
cause all Shares owned by Parent to be voted in favor of the Merger in the
same proportion as the other shareholders of the Company .
5.4. Reasonable Efforts. Subject to the terms and conditions herein
provided and the fiduciary duties under applicable law of the Company's
directors, including directors constituting the Special Committee, as
determined by such directors in good faith after consultation with counsel,
each of the parties hereto agrees to use its commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including obtaining any consents, authorizations, exemptions
and approvals from, and making all filing with, any governmental, regulatory
or public body or authority that are necessary or, in the judgment of Parent
or the Company, desirable in connection with the transactions contemplated by
this Agreement. Parent and the Company shall each have the right to review
and approve in advance all characterizations of the information relating to
Parent or the Company, as the case may be, and any of their respective
subsidiaries, which appear in any filings made in connection with the
transactions contemplated by this Agreement with any governmental body.
5.5. Material Events. At all times prior to the Effective Time, each
party shall promptly notify the other in writing of the occurrence of any
event that will or may result in the failure to satisfy any of the conditions
specified in Article 6 hereof.
5.6. Public Announcements. At all times until the Effective Time, each
party shall promptly advise and cooperate with the other prior to issuing, or
permitting any of its subsidiaries, directors, officers, employees or agents
to issue, any press release or other information to the press or any third
party with respect to this Agreement or the transactions contemplated hereby.
5.7. Indemnification and Insurance.
(a) The Surviving Corporation and the Company agree that, except as may
be limited by applicable laws, for six years from and after the Effective
Time, the indemnification obligations set forth in the Company's Articles of
Incorporation and the Company's Bylaws, in each case as of the date of this
Agreement, shall survive the Merger and shall not be amended, repealed or
otherwise modified after the Effective Time in any manner that would adversely
affect the rights thereunder of the individuals who on or at any time prior to
the Effective Time were entitled to indemnification thereunder with respect to
matters occurring prior to the Effective Time.
(b) The Company shall maintain in effect, for three years or until the
applicable statute of limitations expires but in no event longer than four
years, from and after the Effective Time, directors' and officers' liability
insurance policies covering the persons who are currently covered in their
capacities as such directors and officers (the "Covered Parties") by the
Company's current directors' and officers' policies and on terms not
materially less favorable than the existing insurance coverage with respect
to matters occurring prior to the Effective Time; provided, however, in the
event the annual premium for such coverage exceeds an amount equal to 200% of
the last annual premium paid immediately prior to the date hereof by the
Company for such coverage, the Surviving Corporation shall notify the Covered
Parties who shall then elect as a group either (i) to allow the Surviving
Corporation to obtain as much comparable insurance as possible for an annual
premium equal to 200% of the last annual premium paid immediately prior to the
date hereof by the Company, or (ii) to seek coverage from another carrier, in
which event the Surviving Corporation shall reimburse the Covered Parties the
cost of such alternative coverage up to an amount equal to 200% of the last
annual premium paid immediately prior to the date hereof by the Company for
such coverage.
(c) In addition to, and not in lieu of the foregoing, the Surviving
Corporation shall indemnify, defend and hold harmless all officers and
directors of the Company (the "Indemnified Parties") to the fullest extent
permitted by Florida law and in the Articles of Incorporation and Bylaws of
the Company, as in effect as of the date hereof, from and against all
liabilities, costs, expenses and claims (including without limitation
reasonable legal fees and disbursements, which shall be paid, reimbursed or
advanced by the Surviving Corporation in a manner consistent with applicable
provisions of the Surviving Corporation's Bylaws) arising out of the actions
taken prior to the Effective Time in performance of their duties as directors
or officers of the Company, in connection with the Merger and other
transactions contemplated hereby, which may be asserted against the
Indemnified Parties from and after the date of this Agreement; provided,
however, that Surviving Corporation's obligations to the Indemnified Parties
under this Section 5.7(c) shall not be effective until consummation of the
Merger; provided, further, that the Surviving Corporation shall not have any
obligation hereunder to any Indemnified Party if the indemnification of such
Indemnified Party in the manner contemplated hereby is determined pursuant to
a final non-appealable judgment rendered by a court of competent jurisdiction
to be prohibited by applicable law or if the indemnification of the
Indemnified Party is not within the power of the Surviving Corporation under
Florida law.
d) In the event that any action, suit, proceeding or investigation
relating thereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Effective Time, the parties hereto
agree to cooperate and use their respective reasonable efforts to vigorously
defend against and respond thereto.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) This Agreement shall have been approved and adopted by the
affirmative vote of the Company's shareholders by the requisite vote in
accordance with applicable law;
(b) No statute, rule, regulation, executive order, decree, order
or injunction shall have been enacted, entered, promulgated or enforced by
any court or governmental authority that prohibits or materially and
adversely restricts the consummation of the Merger;
6.2. Conditions to the Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and Sub contained
in this Agreement shall be true and correct at and as of the Effective Time as
if made at and as of such time, except as affected by the transactions
contemplated hereby;
(b) Each of Parent and Sub shall have performed its obligations
under this Agreement required to be performed by it at or prior to the
Effective Time pursuant to the terms hereof; and
(c) No statute, rule, regulation or temporary, preliminary or
permanent order or injunction shall have been proposed, promulgated, enacted,
entered, enforced or deemed applicable by any state, Federal or other
government authority, court or government agency of competent jurisdiction
that prohibits the consummation of the Merger or the transactions contemplated
hereby or thereby.
Parent and Sub will furnish the Company with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 6.2 as the Company may reasonably request.
6.3. Conditions to Obligation of Parent and Sub to Effect the Merger.
The obligations of Parent and Sub to effect the Merger are further subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct at and as of the Effective Time as if
made at and as of such time, except as affected by the transactions
contemplated hereby;
(b) The Company shall have performed each of its obligations under
this Agreement required to be performed by it at or prior to the Effective
Time pursuant to the terms hereof;
(c) No statute, rule, regulation or temporary, preliminary or
permanent order or injunction shall have been proposed, promulgated, enacted,
entered, enforced or deemed applicable by any state, Federal or other
government authority, court or government agency of competent jurisdiction
that prohibits the consummation of the Merger or the transactions contemplated
hereby or thereby; and
The Company will furnish Parent and Sub with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 6.3 as Parent or Sub may reasonably request.
ARTICLE 7
CLOSING
7.1. Time and Place. Subject to the provisions of Articles 6 and 8
hereof, the closing of the Merger contemplated hereby (the "Closing") shall
take place at the Company's offices at 385 Country Club Road, Stockbridge,
Georgia 30281, at 10:00 a.m., local time, on a date (the "Closing Date") that
is no later than the third business day after the satisfaction or waiver of
the conditions set forth in Article 6 hereof or such other place, at other
time, or on such other date as Parent, Sub and the Company may mutually agree
upon for the Closing to take place.
7.2. Deliveries at the Closing. At the Closing:
(a) There shall be delivered to Parent, Sub and the Company the
certificates and other documents and instruments, if any, provided to be
delivered under Article 6 hereof.
(b) Sub and the Company shall cause the articles of merger to be
filed in accordance with the provisions of the Florida Business Corporation
Act and the Georgia Business Corporation Code and shall take any and all other
lawful actions and do any and all other lawful things necessary to effect the
Merger and to enable the Merger to become effective.
ARTICLE 8
TERMINATION AND ABANDONMENT
8.1. Termination. Notwithstanding approval and adoption of this
Agreement by the Company's shareholders, this Agreement may be terminated,
and the Merger abandoned, at any time prior to the Effective Time of the
Merger:
(a) by the mutual consent of Parent, Sub and the Company; or
(b) automatically, without action by any party hereto, if at the
Shareholders' Meeting, the Company's shareholders shall have not voted to
adopt this Agreement in accordance with the requirements set forth in Section
6.1(a); or
(c) by either Parent or the Company if, without fault of the
terminating party, the Merger shall not have been consummated on or before
December 31, 1999; or
(d) by either Parent or the Company's Board of Directors if the
Special Committee shall have withdrawn or modified in a manner adverse to
Parent or Sub its approval or recommendation of the Merger, this Agreement
or the transactions contemplated hereby; or
(e) by either Parent or the Company if any of the events set
forth in Sections 6.1(b) shall have occurred and shall not have been, on or
before the date of such termination, permanently waived by Parent or the
Company, as the case may be; or
(f) by either Parent or the Company, if any court of competent
jurisdiction or other governmental body in the United States shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final and nonappealable; or
(g) by the Company if , prior to the receipt of its shareholder
approval of the Merger, the Board of Directors of the Company or the Special
Committee determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the shareholders of the Company under applicable law; or
(h) by the Company if (i) any of the conditions set forth in
Sections 6.2(a) or (b) that are required to be satisfied at or prior to the
Closing shall not have been satisfied prior to the Closing or shall have
become incapable of being satisfied; or (ii) if any of the events set forth
in Sections 6.2(c) shall have occurred prior to the Closing and, in the case
of (i) or (ii), shall not have been, on or before the date of such
termination, permanently waived by the Company; provided, however, that in
the case of Sections 6.2(a) and (b), Parent and Sub shall not have cured such
breach, in all material respects, within 10 business days following the
receipt of written notice from the Company of such breach; or
(i) by Parent if (i) any of the conditions set forth in Sections
6.3(a) or (b) that are required to be satisfied at or prior to the Closing
shall not have been satisfied prior to the Closing or shall have become
incapable of being satisfied; or (ii) if any of the events set forth in
Sections 6.3(c) shall have occurred prior to the Closing and, in the case of
(i) or (ii), shall not have been, on or before the date of such termination,
permanently waived by Parent; provided, however, that in the case of Sections
6.3(a) and (b), the Company shall not have cured such breach, in all material
respects, within 10 business days following the receipt of written notice from
Parent of such breach.
8.2. Effect of Termination. In the event of the termination of this
Agreement and the Merger pursuant to Section 8.1, this Agreement shall
terminate and the Merger shall be abandoned without any further action by any
of the parties hereto. If this Agreement is terminated as provided herein, no
party hereto shall have any liability or further obligation hereunder to any
other party to this Agreement, provided, however, that (i) any termination by
the Company arising out of a breach by Parent or Sub of any representation,
warranty, covenant or agreement contained in this Agreement shall be without
prejudice to the rights of the Company to seek damages with respect thereto;
and (ii) any termination by Parent arising out of a breach by the Company of
any representation, warranty, covenant or agreement contained in this
Agreement shall be without prejudice to the rights of Parent or Sub to seek
damages with respect thereto; provided further, however, that the obligations
set forth in this Section 8.2 and in Section 9.1 hereof shall survive any
such termination and continue in effect thereafter.
ARTICLE 9
MISCELLANEOUS
9.1. Expenses. All costs and expenses incurred in connection with this
Agreement, and the transactions contemplated hereby and thereby, shall be
paid by the party incurring such costs and expenses.
9.2. No Survival of Representations and Warranties. The respective
representations and warranties of the Company, Parent and Sub contained
herein or in any certificate or letter delivered pursuant hereto shall expire
with, and be terminated and extinguished by, the effectiveness of the Merger
or the termination of this Agreement (whichever is earlier) and shall not
survive the Effective Time or such termination.
9.3. Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.4. Notices. All notices, demands, requests, or other communications
that may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telegram, telecopy or telex, addressed as follows:
If to Parent or Sub, to: Killearn, Inc.
1570 Rock Quarry Road, Suite B
Stockbridge, Georgia 30281
Attention: J.T. Williams, President
With a copy (which
shall not constitute
notice) to: Montello & Kenney, P.A.
777 Brickell Avenue, Suite 1070
Miami, Florida 33131
Attention: Louis R. Montello, Esquire
If to the Company, to: Killearn Properties, Inc.
385 Country Club Road
Stockbridge, Georgia 30281
Attention: Mallory E. Horne, Chairman of the
Board
With a copy (which
shall not constitute
notice) to: Greenberg, Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Phillip J. Kushner, Esquire
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication that shall be hand
delivered, sent, mailed, telecopied or telexed in the manner described above,
or that shall be delivered to a telegraph company, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at
such time as it is delivered to the addressee (with the return receipt, the
delivery receipt, or (with respect to a telecopy or telex) the answer back
being deemed conclusive, but not exclusive, evidence of such delivery) or at
such time as delivery is refused by the addressee upon presentation.
9.5. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties
except that Sub may assign all of its rights, interests and obligations
hereunder to Parent or another wholly owned subsidiary of Parent, provided
that such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein.
9.6. Complete Agreement. This Agreement including the documents and
instruments referred to herein or delivered pursuant hereto together
constitute the entire understanding of the parties with respect to the Merger
and the related transactions and supersede all prior agreements and
understandings, both written and oral, among the parties, with respect thereto.
9.7. Modifications, Amendments and Waivers. At any time prior to the
Effective Time of the Merger (notwithstanding any shareholder approval), if
authorized by Parent, Sub and the Company and to the extent permitted by
law, (i) the parties hereto may, by written agreement, modify, amend or
supplement any term or provision of this Agreement; and (ii) any term or
provision of this Agreement may be waived by the party that is entitled to the
benefits thereof, provided that after such shareholder approval, no amendment
shall be made that decreases the consideration to be paid in the Merger
without shareholder approval. Any written instrument or agreement referred
to in this paragraph shall be validly and sufficiently authorized for the
purposes of this Agreement if signed on behalf of Parent, the Company and Sub
by a person authorized to sign this Agreement.
9.8. Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.9. Governing Law. This Agreement shall be governed by the laws of the
State of Florida (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, interpretation, construction, effect, performance
and remedies.
9.10. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
9.11. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect to the maximum extent
permitted by law and shall in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
KILLEARN, INC.
By: /s/ J.T. Williams, Jr.
J.T. WILLIAMS, Jr.
President
KILLEARN DEVELOPMENT, INC.
By: /s/ David K. Williams
DAVID K. WILLIAMS,
President
KILLEARN PROPERTIES, INC.
By: /s/ Mallory E. Horne
MALLORY E. HORNE,
Chairman of the Board
Special Committee of the
Board of Directors
Killearn Properties, Inc.
We have been engaged to assist you in determining the fairness of a proposed
tender offer on the stock of Killearn Properties, Inc. ("KPI") made by
Killearn, Inc. ("KI") at $5.50 per share. Specifically, we have been asked
to ascribe values to the assets and liabilities of KPI and the resulting
value per share of KPI stock and to compare that value to the $5.50 per share
offer for the purpose of determining if the proposed offer is fair from a
financial point of view to the shareholders of KPI other than Killearn, Inc.
J. T. Williams, David K. Williams, both of whom are officers and directors of
KPI, and two other sons of J. T. Williams.
Our procedures are summarized below.
Among other things, we (i) considered financial information of the assets of
KPI furnished to us by management of KPI through January 31, 1999; (ii)
reviewed certain internal financial analyses and forecasts of sales and
development activities; (iii) analyzed publicly available information; (iv)
held discussions with management of KPI; (v) reviewed appraisals and sales
documents;(vi) historical stock market prices and trading volumes of KPI
stock; (vii) drafts of the merger agreement; and (viii) made such other
studies and inquiries and considered other data as deemed relevant.
Sales of Comparable Companies
A search for sales comparable companies produced no data on sales of
companies similar to KPI.
Comparable Company Analysis
A comparable company analysis was performed by us. We analyzed publicly
available information of the following:
Current enterprise value as a multiple of the last three years' earnings
before interest, taxes, depreciation and amortization (EBITDA); and current
EBITA. This analysis resulted in an implied value per share for KPI of
between $16.68 and $44.17.
Current enterprise value as a multiple of earnings for the last three years.
This multiple (the price - earnings ratio) resulted in implied values of
between $10.03 and $78.21 per share.
Current market value as a multiple of sales for the current year and the last
three years. This analysis resulted in an implied values ranging from $11.95
to $58.13 per share.
These implied values were not considered germane to the assignation of value
to KPI stock because they result in values that are not reasonable given
KPI's earnings history and potential without significant changes in KPI's
holdings and operations.
We also used comparable company information to derive current market value as
a multiple of book value for the current year and the last three years. This
analysis resulted in a range of values for the stock of KPI from $3.13 per
share to $9.55 per share.
Discounted Future Cash Flows
The fair value of the stock of KPI based upon the January 31, 1999 10-QSB and
our analysis, as discussed below, is as follows:
000's
Land held for development and sale $22,340
Other assets 1,414
Total assets 23,754
Debt 14,965
Other liabilities 4,686
Total liabilities 19,651
Net equity $4,103
There are numerous assumptions upon which this value is based. While most
are discussed elsewhere in this report, the more significant assumptions are
as follows:
KPI is a going concern; the values ascribed to land herein assume continued
viability of KPI.
KPI will develop and sell land for amounts approximating the amounts used
herein.
The company will have available to it sufficient capital to acquire and
develop land for sale in the future.
Our procedures surrounding land value consisted of developing forecasts of
development and sale of land parcels currently held by KPI. The sales prices
were based upon management's estimates of value, comparison with historical
sales values and comparison of values to appraisals. From these values, we
deducted commissions, general and administrative expenses, income taxes and
other amounts incident to the sale of the land or operation of KPI to arrive
at future estimated cash flows. These cash flows were discounted to their
present value using a 12% discount rate.
The parcel of land referred to as I75 and Octagon Road is subject to wide
valuation estimates. Split into two approximately equal parts, it consists
of 27.6 acres between the proposed Octagon Road and I75 and 29.7 acres
between the proposed Octagon Road and the golf
course.
The sales values of these parcels are summarized below:
000's
27.6 Acres 29.7 Acres
Independent Appraisal $7,867 $8,970
KPI Management $6,900 $2,970
Amount used in this report $7,590 $5,940
After reducing these amounts for commissions, taxes, general and
administrative expenses, and future development costs and discounting the
proceeds to January 31, 1999, the value of each share of stock of KPI using
the various amounts for sale of the I75 and Octagon Road parcels is as
follows:
Appraisal $6.27
KPI Management $2.92
In forecasts of future cash flows, events and circumstances frequently do not
occur as expected and there will usually be differences between the
forecasted and actual results. These differences may be material. We have
no responsibility to update this report for events and circumstances
occurring after the date of this report.
Liquidation Analysis
We analyzed a potential liquidation of KPI to determine if a liquidation
would result in a greater value per share than the proposed sale of stock to
KI. This analysis assumed the following:
Sale of land "as is", with no further development cost; and
Significant reduction of general and administrative costs.
The overall result of this analysis was that the decrease in sales value of
the land was significantly greater than the savings from cessation of
development activity. Also, because of the cessation of development
activity, the deferred tax liability, created out of timing differences in the
capitalization of real estate taxes and interest during development,
converts into a tax payable and further reduces the value of the stock.
The resulting value per share of a liquidation approaches zero. It clearly
is not in the best interest of the shareholders.
Summary
Based on the analysis set forth above, the transaction , as of the date
hereof, is, fair, from a financial point of view to the shareholders of KPI
other than Killearn, Inc., J. T. Williams, David K. Williams, and two other
sons of J. T. Williams.
/s/ American Express Tax and Business Services, Inc.
AMERICAN EXPRESS TAX AND BUSINESS SERVICES, INC.
May 10, 1999
APENDIX C
TRANSACTIONS INVOLVING KILLEARN'S COMMON STOCK EFFECTED BY PURCHASER AND OTHER
AFFILIATES SINCE MAY 1, 1997 THROUGH THE EFFECTIVE DATE OF THIS PROXY STATEMENT
DATE SHARES AMOUNT PURCHASER
____ ______ ______ _________
11-10-98 20,000 $6.00 Killearn, Inc.
11-11-98 20,000 $5.75 Killearn, Inc.
11-19-98 20,000 $4.00 Killearn, Inc.
11-19-98 20,000 $4.00 Killearn, Inc.
12-24-98 20,000 $4.75 Killearn, Inc.
12-28-98 11,100 $4.75 Killearn, Inc.
12-29-98 1,700 $4.75 Killearn, Inc.
01-05-99 3,200 $4.75 Killearn, Inc.
01-08-99 200 $4.75 Killearn, Inc.
01-19-99 1,000 $5.00 Killearn, Inc.
01-22-99 8,200 $5.00 Killearn, Inc.
_____________________________________________________________
Subtotal 125,400
12-14-98 58,746 $5.51 J.T. Williams Jr.
08-01-97 7,000 $5.13 J.T. Williams Jr.
08-08-97 10,000 $5.50 J.T. Williams Jr.
08-08-97 15,000 $5.50 J.T. Williams Jr.
________________________________________________________________
Subtotal 90,746
11-11-98 1,000 $5.50 David K. Williams
11-12-98 2,000 $5.00 David K. Williams
11-12-98 2,000 $5.00 David K. Williams
11-12-98 2,000 $5.50 David K. Williams
11-20-98 2,465 $4.6875 David K. Williams
11-20-98 522 $4.625 David K. Williams
________________________________________________________________
Subtotal 9,987
12-04-98 1,000 $4.875 John R. Williams
12-04-98 2,000 $4.9375 John R. Williams
12-04-98 2,000 $5.00 John R. Williams
12-07-98 1,000 $5.00 John R. Williams
12-07-98 1,000 $5.0625 John R. Williams
12-08-98 1,000 $5.00 John R. Williams
12-15-98 500 $4.75 John R. Williams
12-15-98 500 $4.875 John R. Williams
01-13-99 1,000 $4.9375 John R. Williams
01-13-99 1,000 $4.9375 John R. Williams
_______________________________________________________________
Subtotal 11,000
Total 237,133
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