<PAGE> 1
As filed with the Securities and Exchange Commission on February 1, 1999
Registration No. 333-68609
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
PRE-EFFECTIVE AMENDMENT NO.1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
NATCO INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6790 13-2721761
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------------
1800 Moler Road
Columbus, Ohio 43207
(614) 221-9200
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------------
Thomas R. Ketteler
Vice President and Treasurer
Natco Industries, Inc.
1800 Moler Road
Columbus, Ohio 43207
(614) 221-9200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies of Correspondence to:
Neil Bulman, Jr., Esq. Irwin A. Bain, Esq.
Porter, Wright, Morris & Arthur Schottenstein Stores Corporation
41 South High Street 1800 Moler Road
Columbus, Ohio 43215 Columbus, Ohio 43207
(614) 227-2219 (614) 221-9200
---------------------------
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after this Registration
Statement becomes effective and all other conditions to the proposed merger (the
"Merger") of Thorn Hill Acquisition Corp., a wholly owned subsidiary of the
Registrant, with and into American Eagle Outfitters, Inc. ("American Eagle")
pursuant to the Plan of Reorganization and Agreement and Plan of Merger, dated
as of November 30, 1998, attached as Appendix A to the enclosed Prospectus/Proxy
Statement have been satisfied or waived.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
<PAGE> 2
PROSPECTUS
----------------------------------------------------------
NATCO INDUSTRIES, INC.
1800 Moler Road
Columbus, Ohio 43207-1698
(614) 221-9200
-----------------------------------------------------------
16,279,300 SHARES OF COMMON STOCK
We are a private company and owner of 30.1% of American Eagle Outfitters,
Inc. We are providing this prospectus to you because your American Eagle shares
will be exchanged for our shares in a corporate reorganization. The
reorganization is to align the interests of our owners with your interests as
American Eagle stockholders and to implement a holding company structure.
All of your shares of American Eagle common stock will convert into the
same number of shares of our common stock.
Although technically, you will become a stockholder of our company, after
the reorganization, we will have the same characteristics as American Eagle,
including:
- - the same business operations and substantially identical assets and
liabilities;
- - the same directors, officers and employees;
- - the same number of shares outstanding held by the same beneficial owners;
and
- - the same certificate of incorporation and by-laws, except for an increase
in the number of authorized shares, a classified Board of Directors, and
the adoption of the provisions of Section 203 of the Delaware General
Corporation Law. The additional authorized shares will be available for
stock splits and other corporate purposes determined by the Board of
Directors of New American Eagle.
American Eagle common stock trades on the Nasdaq National Market under the
symbol "AEOS." We will change our name to American Eagle Outfitters, Inc. in the
reorganization. Our common stock will trade on the Nasdaq National Market under
the symbol "AEOS."
This prospectus also serves as a proxy statement to stockholders of
American Eagle for the special meeting of stockholders to be held on March 15,
1999. We are mailing this prospectus/proxy statement and the accompanying forms
of proxy to stockholders of American Eagle on or about February 11, 1999. A
stockholder who gives his proxy may revoke it at any time prior to its use at
the meeting.
ACQUISITION OF OUR COMMON STOCK IN THE REORGANIZATION INVOLVES RISKS. SEE
"RISK FACTORS" AT PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is February 11, 1999.
<PAGE> 3
TABLE OF CONTENTS
Page
TABLE OF CONTENTS ............................................................2
SUMMARY ......................................................................3
RISK FACTORS .................................................................5
AVAILABLE INFORMATION ........................................................5
INFORMATION INCORPORATED BY REFERENCE ........................................6
COMPARATIVE PER SHARE INFORMATION ............................................7
MARKET PRICE DATA; DIVIDEND POLICY ...........................................8
SELECTED FINANCIAL DATA ......................................................9
THE REORGANIZATION ..........................................................12
How It Will Work ........................................................12
Background of the Reorganization ........................................13
American Eagle's Reasons for the Merger; Recommendation of
American Eagle's Board of Directors ..................................14
Natco's Reasons for the Merger; Recommendation of
Natco's Board of Directors ...........................................15
The Merger Agreement ....................................................15
Indemnification Agreement ...............................................15
Exchange of Certificates ................................................16
Nasdaq Listing ..........................................................16
No Dissenters' Rights ...................................................16
Accounting Treatment ....................................................16
U.S. Federal Income Tax Consequences of the Merger ......................16
NATCO INDUSTRIES, INC. ......................................................17
General .................................................................17
Historical Background and Business ......................................17
Natco LLC Spinoff .......................................................17
Natco Directors and Executive Officers ..................................18
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................18
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
OF NEW AMERICAN EAGLE ...................................................19
Ownership of Common Stock ...............................................19
Ownership of Retail Ventures and Natco ..................................20
DESCRIPTION OF NATCO SECURITIES .............................................22
STOCKHOLDER RIGHTS AFTER THE REORGANIZATION .................................22
EXPERTS .....................................................................23
LEGAL MATTERS ...............................................................23
INDEX TO FINANCIAL STATEMENTS ..............................................F-1
APPENDIX A - Plan of Reorganization and Agreement and Plan of Merger
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
AMERICAN EAGLE THAT IS NOT INCLUDED OR DELIVERED WITH THIS DOCUMENT. THIS
INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY HOLDERS UPON A WRITTEN OR
ORAL REQUEST TO AMERICAN EAGLE OUTFITTERS, INC., 150 THORN HILL DRIVE,
WARRENDALE, PA 15086-7528, ATTENTION: WILLIAM P. TAIT, CORPORATE SECRETARY,
(724) 776-4857. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD
BE MADE BY MARCH 8, 1999, FIVE BUSINESS DAYS BEFORE SECURITY HOLDERS MUST MAKE
AN INVESTMENT DECISION.
2
<PAGE> 4
NATCO INDUSTRIES, INC.
AND
AMERICAN EAGLE OUTFITTERS, INC.
-----------------------------
PROSPECTUS/PROXY STATEMENT
-----------------------------------------
SUMMARY
AMERICAN EAGLE OUTFITTERS, INC.
American Eagle is a specialty retailer of all-American casual apparel,
accessories, and footwear for men and women between the ages of 16 and 34.
American Eagle designs, markets, and sells its own brand of versatile, relaxed,
and timeless classics like AE dungarees, khakis, and T-shirts, providing high
quality merchandise at affordable prices. At January 30, 1999, American Eagle
operated 386 mall-based stores in 41 states principally in the Midwest,
Northeast and Southeast. American Eagle's principal offices are located at 150
Thorn Hill Drive, Warrendale, Pennsylvania 15086-7528 and its telephone number
is (724) 776-4857.
Because information regarding American Eagle is readily available to
investors, the law permits this document to be abbreviated by incorporating
information regarding American Eagle by reference to reports and other documents
filed with the SEC. Other than as described herein, there have been no material
changes in the affairs of American Eagle since the filing of its Quarterly
Report on Form 10-Q for the quarter ended October 31, 1998 through the date of
this prospectus/proxy statement.
THE REORGANIZATION
Our subsidiary will merge with and into American Eagle. American Eagle
will be the surviving corporation and will become our wholly owned operating
subsidiary. We will serve as a holding company. All of your shares of American
Eagle common stock will be converted into the same number of shares of New
American Eagle common stock.
You are entitled to exchange your stock certificates, and we will send you
a letter of transmittal to do so after the reorganization. The total number of
our outstanding shares will be the same as American Eagle's prior to the
reorganization.
Immediately following the reorganization, American Eagle will change its
name to AE Stores Company. We will change our name to American Eagle Outfitters,
Inc. The term "New American Eagle" is used in this document to refer to us after
the reorganization.
REASONS FOR THE REORGANIZATION
The American Eagle Board of Directors has determined that the
reorganization is in your best interests as a stockholder of American Eagle. The
American Eagle Board of Directors believes you should vote in favor of the
reorganization in order to achieve the following benefits:
- - the opportunity to limit the potential for stockholder conflicts that may
arise with respect to operating and other plans of American Eagle
- - the creation of a holding company ownership structure to facilitate any
future plans to restructure the operations of American Eagle
- - the reduction in the concentration of ownership of American Eagle, which
may enhance its long term ability to raise debt or equity capital
- - to provide administrative efficiencies.
EXPENSES
Principally all of the transaction expenses of the reorganization are
being borne by our stockholders. Even though New American Eagle will not bear
any cash expense related to transaction fees paid by us, for financial statement
reporting purposes, New American Eagle will be required to record the expenses
on its income statement in the financial quarter in which the services are
provided. These expenses total approximately $0.04 per share, on a diluted
earnings per share basis, and will be recognized in the quarter ending January
30, 1999.
3
<PAGE> 5
ACCOUNTING TREATMENT
American Eagle's assets and liabilities will be recorded at their
historical amounts in the financial statements of New American Eagle, because
the reorganization will be accounted for as an acquisition of minority interest
without a substantial change in net assets, operations, or ownership.
TAX TREATMENT
We and American Eagle each have received private letter rulings from the
Internal Revenue Service holding, among other things, that the merger will be a
reorganization under Section 368(a) of the Internal Revenue Code. Based on the
tax rulings, for U.S. federal income tax purposes, no gain or loss will be
recognized by you as a holder of American Eagle common stock on your exchange of
American Eagle common stock solely for New American Eagle common stock in the
merger.
THE SPECIAL MEETING
The special meeting will be held at 10:00 a.m., local time, on Monday,
March 15, 1999, at 150 Thorn Hill Drive, Warrendale, Pennsylvania 15086-7528.
The close of business on February 1, 1999 is the record date for determining the
stockholders of record of American Eagle entitled to notice of and to vote at
the special meeting. At that date, American Eagle had 23,053,966 shares of
American Eagle common stock outstanding and entitled to vote on all matters
requiring a vote of the stockholders. At the special meeting, you will be asked
to approve the reorganization, in which you will become a stockholder of New
American Eagle. We are first sending this prospectus/proxy statement to the
stockholders of American Eagle on or about February 11, 1999.
The American Eagle Board of Directors is soliciting proxies for the
special meeting. The shares represented by the accompanying proxy will be voted
as directed if the proxy is properly signed, dated and received prior to the
special meeting. The proxy grants discretionary authority to vote on other
matters which may arise at the special meeting. Management is presently unaware
of any such matters.
The persons designated to vote the shares will cast votes according to
their best judgment if any other matters properly come before the special
meeting. However, if you execute a proxy to vote against the merger, that proxy
cannot be used to vote to adjourn the special meeting so that we can continue to
solicit proxies to approve the reorganization.
If you sign, date and return the enclosed proxy, you still have the power
to revoke it at any time prior to the special meeting by filing with the
Secretary of American Eagle a written notice of revocation or a subsequent proxy
relating to the same shares, or by attending the special meeting and voting in
person.
A majority of the outstanding shares of American Eagle common stock
entitled to vote, represented in person or by proxy, will constitute a quorum at
the special meeting. Abstentions and broker non-votes will be counted to
determine the presence of a quorum at the special meeting. Under Delaware law,
approval of the reorganization requires the affirmative vote of the holders of a
majority of the voting power of American Eagle. Therefore, an abstention or
broker non-vote will have the same effect as a vote against the reorganization.
As of the record date, the Schottenstein family, through their ownership
of us and Retail Ventures, Inc., controlled approximately 50.6% of the
outstanding shares of American Eagle common stock and it is anticipated that
they will vote such shares in favor of the reorganization. As long as they do
so, approval of the reorganization is assured.
EFFECTIVE TIME
It is currently anticipated that, assuming all conditions to the
reorganization have been satisfied or waived, it will become effective on March
19, 1999.
RISK FACTORS
LIABILITIES THAT MAY BE ASSERTED AGAINST NEW AMERICAN EAGLE
In the reorganization, our affiliate, Natco LLC, will indemnify New
American Eagle from and against any of our liabilities or obligations existing
immediately before the merger or resulting from events in existence before the
merger. It is possible that Natco LLC will not have sufficient assets to
indemnify New American Eagle if a third party successfully asserts a substantial
claim against New American Eagle. New American Eagle's failure to collect such
indemnified amount from Natco LLC could have a material adverse effect on New
American Eagle.
Neither we nor American Eagle are aware of any liabilities or
obligations that have not been properly recorded on our books and records or
that are likely to be asserted by a third party in the future. We anticipate
that Natco LLC will have a net worth of approximately $15 million. The
indemnification applies if the liabilities or obligations are larger than the
value, if any, of our pre-existing tax benefits that are realized after the
reorganization.
4
<PAGE> 6
Natco LLC's owners will contribute back to Natco LLC any net after tax
distributions they receive, if necessary to allow Natco LLC to meet its
indemnification obligations to New American Eagle. Even so, we cannot assure you
that Natco LLC will have liquid assets sufficient to indemnify New American
Eagle if a third party successfully asserts a currently unknown, substantial
claim against New American Eagle.
AVAILABLE INFORMATION
We are not now subject to the informational requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
However, New American Eagle will be subject to these rules and regulations after
the reorganization, and in accordance therewith, will file reports, proxy
statements, and other information with the Securities and Exchange Commission.
The public may read and copy any materials filed by American Eagle or New
American Eagle at the SEC's Public Reference Room at:
450 Fifth Street, N.W.
Washington, D.C. 20549-0001
or at the public reference facilities of the regional offices of the SEC at:
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
7 World Trade Center
Suite 1300
New York, New York 10048-1102
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-732-0330. Such materials may also be accessed
electronically by means of the SEC's home page on the Internet at
http:\\www.sec.gov.
New American Eagle common stock will be listed on the Nasdaq National
Market after the reorganization, and accordingly such reports and other
information concerning New American Eagle will be available for inspection and
copying at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1504.
We have filed with the SEC under the Securities Act, and the rules and
regulations thereunder, a registration statement on Form S-4 with respect to the
shares of New American Eagle common stock issuable in the reorganization. This
prospectus/proxy statement does not contain all of the information contained in
the registration statement. Some portions of the registration statement have
been omitted as required by the rules and regulations of the SEC. Any statements
contained in this document or in any document incorporated by reference herein
concerning the provisions of any contract or other document are not necessarily
complete. You should refer to the copy of such contract or other document filed
as an exhibit to the registration statement for complete information. The
registration statement and attached exhibits should be available for your
inspection at the offices of the SEC at 450 Fifth Street, N.W., Washington D.C.
20549-0001, and copies may be obtained from the SEC at prescribed rates. Such
materials may also be accessed electronically by means of the SEC's home page on
the Internet at http:\\www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
We and American Eagle incorporate by reference into this
prospectus/proxy statement the following documents previously filed by American
Eagle with the SEC under the Securities Exchange Act:
(1) American Eagle's Annual Report on Form 10-K for the year ended January
31, 1998, filed on April 24, 1998;
(2) American Eagle's Definitive Proxy Statement for the Annual Meeting of
Stockholders, filed on May 5, 1998;
(3) American Eagle's Quarterly Report on Form 10-Q for the quarter ended
May 2, 1998, filed on June 12, 1998 and amended on June 16, 1998, for
the quarter ended August 1, 1998, filed on September 15, 1998, and for
the Quarter ended October 31, 1998, filed on November 24, 1998 and
amended on February 1, 1999;
(4) American Eagle's Definitive Proxy Statement for the special meeting of
the Stockholders, filed on September 28, 1998; and
(5) American Eagle's Current Report on Form 8-K, filed on November 9, 1998
and amended on January 12, 1999.
All documents filed by either us or and American Eagle under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act after the date of this
5
<PAGE> 7
prospectus/proxy statement and prior to the special meeting shall be deemed to
be incorporated by reference in this prospectus/proxy statement and to be a part
of this document from the date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus/proxy statement to the extent that a statement
contained in this document or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this document modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus/proxy statement.
6
<PAGE> 8
COMPARATIVE PER SHARE INFORMATION
The following table presents historical per share data for us and
American Eagle and combined pro forma per share data for New American Eagle. The
information should be read in conjunction with and is qualified in its entirety
by our and American Eagle's financial statements and accompanying notes included
herein or incorporated herein by reference. Natco Historical relates to our
historical financial statements exclusive of all transactions and related
amounts associated with the receivable liquidation business, which will be
contributed to Natco LLC and distributed to our stockholders immediately before
our merger with American Eagle. American Eagle's fiscal year ends on the
Saturday closest to January 31st. Our fiscal year end is December 31st. The nine
month period for American Eagle ended on October 31, 1998 while our nine month
period ended September 30, 1998. The respective year ends for 1997 were January
31, 1998 for American Eagle and December 31, 1997 for us.
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended January 31, 1998
October 31,1998
NATCO HISTORICAL (based upon 6,991,174
shares outstanding)
<S> <C> <C>
Net income - basic and diluted $0.81 $0.50
Book value $3.42 $2.61
AMERICAN EAGLE HISTORICAL
Net income - diluted $1.22 $0.85
Book value $5.39 $4.06
NEW AMERICAN EAGLE PRO FORMA COMBINED
Net income - diluted $1.22 $0.80
Book value $5.42 N/A
</TABLE>
7
<PAGE> 9
MARKET PRICE DATA; DIVIDEND POLICY
There is no public market for our common stock. American Eagle common stock
trades on the Nasdaq National Market under the symbol "AEOS." After the
reorganization, New American Eagle common stock will continue to be listed and
traded under the same symbol without interruption. The following table sets
forth the range of high and low sales prices for American Eagle common stock for
the periods indicated, as reported by the Nasdaq National Market. The prices
have been adjusted to reflect applicable stock splits.
<TABLE>
<CAPTION>
For the Quarters High Low
- ----------------- ---- ---
Ended
- -----
<S> <C> <C>
April 1997 $12.50 $8.13
July 1997 $16.76 $10.07
October 1997 $29.00 $15.50
January 1998 $40.41 $29.51
April 1998 $41.58 $15.50
July 1998 $53.50 $33.13
October 1998 $54.63 $28.25
January 1999 $69.56 $40.63
</TABLE>
On January 29, 1999, the last reported sales price of the American Eagle
common stock on the Nasdaq National Market was $68.38 per share. As of February
1, 1999, there were approximately 111 stockholders of record of American Eagle
common stock.
American Eagle has never paid cash dividends and New American Eagle
presently anticipates that all of its future earnings will be retained for the
development of its business and does not anticipate paying cash dividends in the
foreseeable future. The payment of any future dividends will be at the
discretion of New American Eagle's Board of Directors and will be based on
future earnings, financial condition, capital requirements and other relevant
factors.
8
<PAGE> 10
SELECTED FINANCIAL DATA
The following tables present: (1) our and American Eagle's selected
historical financial data; and (2) unaudited pro forma financial data for New
American Eagle. You should read the tables in conjunction with American Eagle's
historical financial statements, incorporated by reference in this
prospectus/proxy statement, with our historical financial statements, and with
New American Eagle's unaudited pro forma condensed consolidated financial
statements, included herein beginning at page F-2.
SELECTED HISTORICAL FINANCIAL DATA OF NATCO
(dollars in thousands, except share and per share data)
The following selected historical financial data has been extracted from
our financial statements by excluding all transactions and related amounts
associated with our receivable liquidation business, which will be distributed
to Natco LLC and spun off to our shareholders prior to the reorganization. The
per share amounts are based on the 6,991,174 pro forma shares to be outstanding
immediately prior to the reorganization.
<TABLE>
<CAPTION>
October December December December December December
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
-------- -------- -------- -------- -------- --------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss) $9,620 $5,955 $2,273 $(471) $12,033 $6,392
Net income (loss) $5,676 $3,513 $1,341 $(278) $7,100 $3,771
Basic and diluted net income (loss) $0.81 $0.50 $0.19 $(0.04) $1.02 $0.54
per share
Basic and diluted weighted average 6,991 6,991 6,991 6,991 6,991 6,991
shares outstanding-pro forma
Total assets $37,816 $28,196 $22,241 $19,968 $20,438 $8,405
Stockholders' equity $23,903 $18,227 $14,714 $13,373 $13,651 $6,551
</TABLE>
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<TABLE>
<CAPTION>
SELECTED HISTORICAL FINANCIAL DATA OF AMERICAN EAGLE
(dollars in thousands, except per share amounts)
Nine Months
Ended Fiscal Years Ended
-------------- -------------- ------------- -------------- ------------ -------------
October 31, January 31, February 1, February 3, July 29, July 30,
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales $374,493 $405,713 $326,404 $340,323 $296,563 $199,688
Operating income (loss) $46,308 $31,120 $8,859 $(1,073) $12,043 $11,952
Net income (loss) $29,229 $19,537 $5,925 $(1,334) $6,765 $6,629
Basic earnings (loss) per $1.30 $0.88 $0.27 $(0.06) $0.31 $0.35
share
Diluted earnings (loss) per $1.22 $0.86 $0.26 $(0.06) $0.30 $0.35
share
Basic weighted average 22,698 22,091 21,950 21,945 21,969 18,693
shares outstanding:
Diluted weighted average 24,000 22,816 22,694 21,945 22,430 18,705
shares outstanding:
Total assets $194,999 $144,795 $110,438 $95,363 $134,484 $82,863
Working capital $67,541 $48,486 $34,378 $24,775 $19,264 $27,173
Stockholders' equity $123,500 $90,808 $71,056 $63,796 $57,932 $50,125
Current ratio 1.94 1.90 1.87 1.78 1.25 1.83
Long term debt - - - - - -
- ------------------------------ -------------- -------------- ------------- -------------- ------------ -------------
</TABLE>
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UNAUDITED PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA OF NEW AMERICAN EAGLE
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
October 31, January 31,
1998 1998
---- ----
(Unaudited)
<S> <C> <C>
Net sales $374,493 $405,713
Operating income (loss) $46,308 $29,920
Net income (loss) $29,229 $18,337
Basic earnings (loss) per $1.30 $0.83
share (1)
Diluted earnings (loss) per $1.22 $0.80
share (1)
Basic weighted average 24,000 22,816
shares outstanding:
Diluted weighted average 23,920 22,836
shares outstanding:
Total assets $195,749 N/A
Working capital $68,141 N/A
Stockholders' equity $124,100 N/A
Current ratio 1.95 N/A
Long term debt - -
</TABLE>
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<PAGE> 13
THE REORGANIZATION
HOW IT WILL WORK
The Reorganization will proceed as follows:
- - Step 1: We will spin off all of our assets, primarily a portfolio of
receivables and notes held for investment, and liabilities to Natco LLC
except for our ownership of American Eagle stock. Then all of the
membership interests in Natco LLC will be distributed to our Schottenstein
family stockholders. We will declare a stock split so that our
Schottenstein family stockholders will own 6,991,174 shares of our common
stock, which is the same number of American Eagle shares that we own.
Immediately prior to the reorganization, we will have no material
liabilities and our only asset will be our American Eagle common stock.
- - Step 2: Our subsidiary will merge with and into American Eagle. American
Eagle will be the surviving corporation and will become our wholly owned
operating subsidiary. We will serve as a holding company. All of your shares
of American Eagle common stock will convert into the same number of shares
of New American Eagle common stock. The shares of American Eagle common
stock that we now own will be cancelled, but the Schottenstein family
stockholders will continue to own the same number of our shares as we own in
American Eagle before the reorganization. Our total number of outstanding
shares will be the same as American Eagle's prior to the reorganization.
- - Step 3: Immediately following the merger, American Eagle will change its
name to AE Stores Company. We will change our name to American Eagle
Outfitters, Inc.
<TABLE>
<S> <C> <C> <C>
BEFORE THE REORGANIZATION:
- -------------------------------------
Schottenstein family
----------------------
|
- ------------------------------------- |
|
- ------------------------------------- ---------------------------------- ----------------------------------
Natco Industries, Inc. Retail Ventures, Inc. public shareholders
(30.1%) (20.5%) (49.4%)
- ------------------------------------- ---------------------------------- ----------------------------------
| | |
--------------------------------------- -------------------------------------
|
-------------------------------------------
American Eagle Outfitters, Inc.
(Operating Company)
-------------------------------------------
AFTER THE REORGANIZATION:
- ------------------------------------- ---------------------------------- ----------------------------------
Schottenstein family Retail Ventures, Inc. public shareholders
(30.1%) (20.5%) (49.4%)
- ------------------------------------- ---------------------------------- ----------------------------------
| | |
--------------------------------------- -------------------------------------
|
------------------------------------------------
Natco/New American Eagle
(Holding Company)
------------------------------------------------
|
------------------------------------------------
AE Stores Company
(Operating Company)
------------------------------------------------
</TABLE>
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<PAGE> 14
BACKGROUND OF THE REORGANIZATION
On October 9, 1997, at a special meeting of the Board of Directors of
American Eagle, Jay L. Schottenstein, Chairman of American Eagle, suggested a
proposed combination of American Eagle with us. He indicated that such
combination would eliminate potential conflicts of interest between us and the
other stockholders of American Eagle. The conflicts of interest result from our
status as a corporation subject to taxation under Subchapter C of the Internal
Revenue Code. This status prevents us from receiving the full benefit of capital
gains preferential rates treatment on any sale of our American Eagle stock. This
status also entitles us to the benefit of a dividend received deduction in the
amount of 80% of any dividend paid by American Eagle. Mr. Schottenstein
acknowledged that payment of dividends would be in conflict with the
reinvestment of earnings and growth strategy historically pursued by American
Eagle. In response, the board formed a special committee consisting of Gilbert
W. Harrison, George Kolber and John L. Marakas.
On October 10, 1997, the committee met and hired Weil, Gotshal & Manges
LLP, as independent counsel. Thereafter, management of American Eagle determined
that it would be in the best interest of American Eagle to have the committee
considering the proposed combination consist entirely of outside directors.
On November 20, 1997, at a special meeting the Board of Directors, the size
of the Board was expanded from eight directors to twelve and Ari Deshe, Jon P.
Diamond, Michael G. Jesselson and Gerald E. Wedren were elected to the Board.
The Board then appointed Messrs. Jesselson, Marakas and Wedren as a
reconstituted special committee to consider, and to negotiate on behalf of
American Eagle, the terms of the proposed combination. At a meeting on November
21, 1997, the new special committee retained Benesch, Friedlander, Coplan &
Aronoff, as its independent counsel.
In February, 1998, our and American Eagle's management determined to
structure the combination in the form of the reorganization. We had considered
the possibility of either merging American Eagle into ourselves or merging
ourselves into American Eagle. These and other possible structures were rejected
for tax, regulatory and other reasons as well as because the alternatives did
not provide the benefits of a holding company structure. We then hired Skadden,
Arps, Slate, Meagher & Flom LLP as special tax counsel to obtain from the
Internal Revenue Service the private letter rulings on the reorganization.
On June 19, 1998, the special committee met with its independent counsel to
review the proposed terms of the merger agreement and the indemnification
agreement. Thereafter, the committee and its counsel began negotiating the terms
of the merger agreement and indemnification agreement with our representatives.
The committee had several telephonic meetings with its independent counsel to
consider a number of revised proposals, including meetings on June 29, July 23,
and August 4, 1998. At the request of the committee, the merger agreement was
revised to:
- - add a representation by us relating to the absence of environmental
liabilities;
- - add a condition that there be no material adverse change in the private
letter rulings;
- - add the condition that the SEC not object to our accounting for the
reorganization on a historical cost basis;
- - extend the survival of the representations and warranties from two years
to the earlier of four years or the expiration of the applicable statute
of limitations and ten years in the case of the environmental liabilities
representation; and
- - require that we pay all costs associated with the reorganization to the
extent permitted without affecting the tax free status of the
reorganization.
The indemnification agreement was revised to:
- - eliminate any benefit to our stockholders in the event of our willful
breach of the merger agreement;
- - extend indemnification from two years to the earlier of four years or the
applicable statute of limitations and ten years for environmental matters;
- - increase the net worth maintenance requirement for Natco LLC from $5
million to $10 million; and
- - require our stockholders to return after tax distributions if needed by
Natco LLC to meet its indemnification obligations.
On August 11, 1998, the special committee met with its independent counsel
and determined that the terms of the merger agreement and the indemnification
agreement were fair to American Eagle and in the best interests of American
Eagle and its unaffiliated stockholders. The special committee unanimously
determined to recommend approval of the merger
13
<PAGE> 15
agreement and the indemnification agreement to the American Eagle Board.
On August 14, 1998, at a special meeting of the American Eagle Board, based
on the recommendation of the special committee, the Board approved the
reorganization and authorized the execution of the merger agreement and
indemnification agreement and recommended that the stockholders of American
Eagle approve the reorganization. All directors voted in favor of the
reorganization, with Jay L. Schottenstein, Saul Schottenstein, Ari Deshe and Jon
P. Diamond abstaining from the vote.
On September 17, 1998, the board approved a proposal to change American
Eagle's state of incorporation from Ohio to Delaware. The reincorporation was
undertaken to allow American Eagle to benefit from Delaware's comprehensive,
modern and flexible corporation law. It was also undertaken to facilitate the
reorganization by eliminating dissenting stockholder appraisal rights in the
reorganization. The American Eagle stockholders approved the reorganization at a
meeting held on October 22, 1998. American Eagle changed its state of
incorporation on November 2, 1998.
On November 19, 1998, the special committee met with their counsel and
reaffirmed their approval of the merger agreement and the reorganization.
AMERICAN EAGLE'S REASONS FOR THE MERGER; RECOMMENDATION OF AMERICAN EAGLES'S
BOARD OF DIRECTORS
At a meeting on August 14, 1998, the American Eagle Board of Directors
determined that the merger is advisable and fair to and in the best interests of
American Eagle and its unaffiliated stockholders. The Board approved the
reorganization and recommended that the stockholders of American Eagle vote in
favor of the reorganization. In reaching these conclusions, the American Eagle
Board, with the assistance of management, the special committee and its
independent legal advisors, considered the following factors in favor of the
reorganization:
- - the unanimous recommendation of the special committee
- - the benefits to American Eagle of eliminating potential conflicts of
interest as to the financial objectives of American Eagle relating to the
payment of dividends instead of reinvesting earnings
- - the benefits to American Eagle of the holding company structure arising
from the reorganization and the resulting flexibility to implement any
future plans with respect to the corporate organization and operating
structure of New American Eagle
- - the reduction in the concentration of ownership of New American Eagle
providing the opportunity to increase liquidity in the market for New
American Eagle's common stock and enhancing its long term ability to raise
capital.
The special committee and the American Eagle Board also considered the expenses
to American Eagle and the risks associated with Natco LLC's ability to meet its
obligations under the indemnification agreement as factors detracting from the
fairness determination. The special committee and the American Eagle Board
determined that the benefits outweighed the costs in reaching their conclusion
that the reorganization is fair. The above factors include all material factors
considered, but is not intended to be exhaustive. Neither the special committee
nor the Board found it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching their
determination. In addition, individual members of the American Eagle Board may
have given different weight to different factors. Jay L. Schottenstein, Saul
Schottenstein, Ari Deshe and Jon P. Diamond, whose families are our
stockholders, abstained from voting on the reorganization.
For these reasons, the American Eagle Board of Directors recommends that
the stockholders of American Eagle vote FOR the proposal to approve the merger
agreement and the related transactions in the reorganization.
NATCO'S REASONS FOR THE MERGER; RECOMMENDATION OF NATCO'S BOARD OF DIRECTORS
In an action by written consent effective on November 25, 1998, our Board
of Directors unanimously approved the reorganization and the merger agreement
and recommended that all of our stockholders vote in favor of the
reorganization. In approving the reorganization, our Board considered:
- - the benefits to our stockholders of eliminating any potential conflict of
interest with respect to the financial objectives of American Eagle as
they relate to the payment of dividends instead of reinvesting earnings;
and
- - the efficiencies and cost savings to our stockholders resulting from no
longer being
14
<PAGE> 16
required to maintain us as a separate corporate entity.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this prospectus/proxy
statement. We urge you to read the merger agreement carefully.
The merger agreement provides that following the approval of the merger by
our stockholders and American Eagle, and the satisfaction or waiver of the other
conditions to the merger, Thorn Hill Acquisition Corp., a Delaware corporation
and our wholly owned subsidiary, will be merged with and into American Eagle,
with American Eagle continuing as the surviving corporation. Further, we will
change our name to "American Eagle Outfitters, Inc."
Upon the satisfaction or waiver of all conditions to the merger, the merger
will become effective upon the filing of a certificate of merger by Thorn Hill
and American Eagle with the Delaware Secretary of State in accordance with the
Delaware law. The effective time of the merger is expected to occur on or about
March 15, 1999.
In the merger, each outstanding share of American Eagle common stock,
except American Eagle stock that we own, will be automatically converted into
one fully paid and nonassessable share of New American Eagle common stock. The
American Eagle stock that we own will be cancelled. All of our outstanding
shares will remain outstanding as shares of New American Eagle, and the Thorn
Hill common stock held by us will be converted into all the outstanding common
stock of American Eagle.
INDEMNIFICATION AGREEMENT
Under the indemnification agreement, Natco LLC will indemnify each of
American Eagle, New American Eagle and their officers, directors, employees and
agents against any claims arising from:
- - our liabilities or obligations existing immediately prior to the merger or
resulting from events or occurrences in existence prior to the merger
- - any breach or inaccuracy of any representation or warranty made by us,
Thorn Hill or Natco LLC in the merger agreement; or
- - any breach or failure by us, Thorn Hill or Natco LLC to perform any of
their respective obligations under the merger agreement.
The indemnity only applies to losses that exceed the actual cash value of any
benefit received after the reorganization by American Eagle or New American
Eagle relating to any of our tax credits or the net operating loss carryover
immediately prior to the reorganization, and any other tax benefits, but only if
and to the extent such losses do not result from a willful breach of a
representation, warranty or covenant in the merger agreement by us, Thorn Hill
or Natco LLC. Natco LLC will not indemnify New American Eagle for claims
resulting from the merger, including any claim as to whether or not the merger
is a tax-free transaction or the amount and value to New American Eagle of our
net operating loss carry-forward. The indemnification obligation of Natco LLC
will extend for any claims made within the earlier of four years from the
effective time of the merger or expiration of the applicable statute of
limitations, except for:
- - claims relating to tax matters, which can be asserted by American Eagle or
New American Eagle through the applicable federal income tax statute of
limitations, or
- - claims relating to environmental matters, which can be asserted until the
earlier of the tenth anniversary of the effective time or expiration of
the applicable statute of limitations.
The members of Natco LLC will agree, severally and not jointly, to refrain from
taking any distribution that would result in the net worth of Natco LLC to be
less than $10,000,000, computed in accordance with generally accepted accounting
principles, as applied on a consistent basis at the end of each fiscal quarter
for a period of four years from the effective time. The members of Natco LLC
also will agree, severally and not jointly, to contribute back to Natco LLC the
net value, after giving effect to the income taxes payable thereon, of any
distributions received from Natco LLC, other than distributions to pay tax
generated by Natco LLC or taxes payable by the members as a result of the
initial receipt of their membership interests in Natco LLC, if necessary to
enable Natco LLC, to meet its obligations under the indemnification agreement.
EXCHANGE OF CERTIFICATES
The American Eagle common stock held by stockholders of American Eagle,
other than by us, will be converted into New American Eagle common stock upon
consummation of the merger. Therefore, stockholders of American Eagle will be
entitled to exchange their old certificates of American Eagle common stock for
new stock certificates representing
15
<PAGE> 17
New American Eagle common stock as a result of the merger.
National City Bank will deliver to the stockholders of record of American
Eagle a letter of transmittal and instructions for its use in effecting the
surrender of certificates representing shares of American Eagle common stock in
exchange for certificates representing the identical number of shares of New
American Eagle common stock.
Upon surrender of a certificate to National City Bank, together with a duly
executed letter of transmittal and any other required documents, the
stockholders of American Eagle will be entitled to receive, in exchange
therefor, a certificate representing the identical number of shares of New
American Eagle common stock.
If a certificate representing shares of American Eagle common stock has
been lost, stolen or destroyed, the stockholder will be required to submit an
affidavit describing the lost, stolen or destroyed certificate, the number of
shares evidenced thereby and affirming the status of that certificate in lieu of
surrendering such certificate to National City Bank, which shall deem such
certificate canceled; provided that New American Eagle may require the holder of
such certificate to provide New American Eagle with a bond in such amount as New
American Eagle may direct as a condition to issuing a new stock certificate.
If any certificate representing New American Eagle common stock is to be
issued in a name other than that in which the certificate previously
representing American Eagle common stock which is surrendered in exchange
therefor is registered, the certificate so surrendered must be properly endorsed
or otherwise be in proper form for transfer, and the person requesting such
exchange must pay to American Eagle, in advance, any transfer or other taxes due
by reason of the issuance of a certificate representing shares of New American
Eagle common stock or the making of a cash payment in any name other than that
of the registered holder of the certificate surrendered or must establish to the
satisfaction of New American Eagle that such tax has been paid or is not
payable.
American Eagle stockholders should not submit any stock certificates now
but rather should only submit stock certificates upon receipt of, and together
with, the letter of transmittal and instructions enclosed therewith.
NASDAQ LISTING
The shares of New American Eagle common stock to be issued in the
reorganization will be substituted for the American Eagle common stock currently
listed on the Nasdaq National Market under the symbol "AEOS." The shares of New
American Eagle common stock will trade on the Nasdaq National Market without any
interruption resulting from the reorganization.
NO DISSENTERS' RIGHTS
Dissenters' rights are not available to stockholders of American Eagle in
connection with the merger.
ACCOUNTING TREATMENT
American Eagle's assets and liabilites will be recorded at their historical
amounts in the financial statements of New Amreican Eagle. Purchase accounting
is not required because the reorganization will be accounted for as an
acquisition of minority interest without a substantial change in net assets,
operations, or ownership.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following are the material U.S. federal income tax consequences of the
merger to holders of American Eagle common stock who exchange such stock for New
American Eagle common stock under the merger. The following discussion addresses
only such stockholders who hold their American Eagle common stock as a capital
asset and does not address all of the U.S. federal income tax consequences that
may be relevant to particular stockholders in light of their individual
circumstances or to stockholders who are subject to special rules (including,
without limitation, financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or foreign currencies, foreign holders, persons
who hold such shares as a hedge against currency risk, or a constructive sale or
conversion transaction, or holders who acquired their shares through the
exercise of employee stock options or otherwise as compensation). The following
summary is not binding on the Internal Revenue Service. It is based upon the
Internal Revenue Code, laws, regulations, rulings and decisions in effect as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Tax consequences under state, local, and other foreign laws are not
addressed herein. Holders of American Eagle common stock are strongly urged to
consult their tax advisors as to the specific tax consequences to them of the
merger, including the applicability and effect of federal, state, local and
foreign income and other tax laws in their particular circumstances.
16
<PAGE> 18
We and American Eagle have received private letter rulings from the
Internal Revenue Service, based upon representations and information submitted
to the Internal Revenue Service, holding, among other things, that the merger
will be a reorganization under Section 368(a) of the Internal Revenue Code.
Based on these rulings, in the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, special tax counsel to us and American Eagle, subject to the qualifications
set forth above and contained herein, for U.S. federal income tax purposes:
- - no gain or loss will be recognized by American Eagle as a result of the
merger;
- - no gain or loss will be recognized by holders of American Eagle common
stock on their exchange of American Eagle common stock solely for New
American Eagle common stock in the merger;
- - the basis of the New American Eagle common stock received by each such
holder of American Eagle common stock in the merger will be the same as
the basis of the American Eagle common stock surrendered in exchange
therefor; and
- - the holding period of the New American Eagle common stock received by each
such holder of American Eagle common stock in the merger will include the
period during which that stockholder held the American Eagle common stock
surrendered in exchange therefor, provided such American Eagle common
stock is held as a capital asset on the date of the merger.
NATCO INDUSTRIES, INC.
GENERAL
We are a holding company owned by members of the Schottenstein family. Our
principal asset is 6,991,174 shares of American Eagle common stock, representing
approximately 30.1% of the outstanding shares of American Eagle. Our only other
material assets consist of a portfolio of receivables and notes held for
investment. We have no employees and rely on management services provided by
companies owned by the Schottenstein family.
HISTORICAL BACKGROUND AND BUSINESS
The first American Eagle store was opened in 1977 by Retail Ventures. In
1985, the stockholders of Retail Ventures acquired us. We had operated a chain
of mall-based specialty retail stores, which were converted after the
acquisition to American Eagle stores. Thereafter, until 1994, American Eagle
stores were operated as one business by two corporations, Retail Ventures and
us. In 1994, in connection with the initial public offering by American Eagle,
the American Eagle business was transferred to American Eagle in exchange for
the issuance of American Eagle stock to Retail Ventures and us. Thereafter, we
continued to own our American Eagle stock and to conduct a business of investing
in receivables and notes for collection.
NATCO LLC SPIN OFF
Prior to the merger, we will transfer all of our assets and liabilities,
other than our American Eagle common stock, to Natco LLC, our wholly owned
subsidiary. Thereafter, all of the membership interests in Natco LLC will be
distributed to the Schottenstein family in redemption of a portion of their
shares of our common stock. We will declare a stock split so that after the
redemption and prior to the effective time, our stockholders will own 6,991,174
shares of our common stock, which will represent approximately 30.1% of the
total ownership of New American Eagle at the effective time. Immediately prior
to the effective time, we are expected to have no liabilities and our only asset
will be its American Eagle stock.
NATCO DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding each of our current
executive officers and directors. As a condition of the merger, we are required
to elect the same officers and directors as American Eagle.
NAME AGE POSITION
Jay L. Schottenstein 44 Chairman of Board
and President
Thomas R. Ketteler 55 Treasurer, Director
Ari Deshe 47 Director
Jon P. Diamond 40 Director
Irwin A. Bain 45 Secretary
Jay L. Schottenstein has served as our President since 1985 and as Chairman
since 1991. Mr. Schottenstein has served as Chairman and Chief Executive Officer
of American Eagle and its predecessors since March 1992 and prior to that time
he served as a Vice President and Director of American Eagle's predecessors
since 1980. He has also served since March 1992 as Chairman and Chief Executive
Officer of Schottenstein Stores Corporation, a privately-held company with
interests in retailing,
17
<PAGE> 19
real estate and manufacturing. He has also served as Chairman since March 1992
of Value City Department Stores, Inc., a publicly-held company which is subject
to the reporting requirements of Section 13 of the Securities Exchange Act,
which operates a chain of off-price department stores and is 56.3% owned by
Schottenstein Stores Corporation, with the remaining shares publicly-held and
traded on the New York Stock Exchange. Mr. Schottenstein has served as a
director of Schottenstein Stores Corporation since 1982. He has also served as
an officer and director of various other corporations owned or controlled by
members of the Schottenstein family since 1976. Jay L. Schottenstein is the
nephew of Saul Schottenstein.
Thomas R. Ketteler has served as our Vice President-Finance, Treasurer and
a Director since 1985. Mr. Ketteler has been a director of American Eagle since
January 1994. Mr. Ketteler has served Schottenstein Stores Corporation as Chief
Operating Officer since April 1995, as a director since 1985 and Vice President
of Finance since 1981. Prior to that time, he was a partner in the firm of
Alexander Grant and Company, Certified Public Accountants. Mr. Ketteler is an
officer and director of various other corporations owned or controlled by the
Schottenstein family. Since May 1997, Mr. Ketteler has also served as a director
of the Crowley Milner & Co., a publicly-held company which is subject to the
reporting requirements of Section 13 of the Exchange Act.
Ari Deshe has served as one of our directors since November 1998. Mr. Deshe
has been a director of American Eagle since November 1997. Since 1996, Mr. Deshe
has served as Chairman and Chief Executive Officer of Safe Auto Insurance
Company, a property and casualty insurance company, and he served as President
and Chief Executive Officer from 1993 to 1996. Prior to that, Mr. Deshe served
as President of Safe Auto Insurance Agency from 1992 to 1993 and President of
Employee Benefit Systems, Inc. from 1982 to 1992. He also serves on the Board of
Directors of Value City Department Stores, Inc.
Jon P. Diamond has served as one of our directors since November 1998. Mr.
Diamond has been a director of American Eagle since November 1997. Since 1996,
Mr. Diamond has served as President and Chief Operating Officer of Safe Auto
Insurance Company, a property and casualty insurance company, and he served as
Executive Vice President and Chief Operating Officer from 1993 to 1996. Mr.
Diamond served as Vice President of Schottenstein Stores Corporation from March
1987 to March 1993 and served in various management positions of Schottenstein
Stores Corporation since 1983. He also serves on the Board of Directors of Value
City Department Stores, Inc..
Irwin A. Bain has served as our General Counsel and Secretary since October
1991. Mr. Bain has served as General Counsel and Secretary of Schottenstein
Stores Corporation since June 1991.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
- -------
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the Financial
Statements and the Pro Forma Condensed Consolidated Financial Statements
included elsewhere in this prospectus.
Prior to the proposed reorganization, our principal assets were 6,991,174
shares of American Eagle common stock, representing 30.1% of the outstanding
shares, and a portfolio of receivables and notes held for investment. We have no
employees and rely on management services from an affiliated company to service
and collect our portfolio of receivables and notes. As part of the proposed
reorganization, all of our assets and liabilities except for our ownership of
American Eagle stock will be distributed to the Schottenstein family
stockholders. The portfolio of receivables and notes have been separately
managed and financed and will continue to be operated and financed separately
from our ownership of American Eagle in the future. Because these businesses are
dissimilar and there are no shared facilities, management or costs, our
financial statements have been retroactively restated to reflect the
reorganization of the business. As a result, our financial statements reflect no
revenues, expenses, taxes or activity other than the equity in earnings
associated with our investment in American Eagle and the related tax effect. The
efficiencies and cost savings resulting from no longer being required to
maintain us as a separate corporate entity will be realized principally in the
operation of the receivable business distributed to the Schottenstein family
stockholders and are not reflected in our financial statements presented.
Results of Operations
- ---------------------
Equity in earnings (losses) of Associated Company. Our equity in the
earnings (losses) of American Eagle is the most significant element in our net
income. Such amounts, which are recorded based upon American Eagle's quarter end
or year end closest to our financial statement presented, fluctuate
significantly from period to period based upon
18
<PAGE> 20
American Eagle's reported earnings and our ownership of American Eagle. Our
ownership in American Eagle is affected by any sales or purchases of American
Eagle stock by us and stock issuances and reacquisitions by American Eagle.
Although we have not purchased or sold any American Eagle stock since American
Eagle's initial public offering in 1994, our ownership of American Eagle has
decreased from approximately 31.5% as of January 1, 1995 to 30.6% as of October
31, 1998. Our equity in the earnings (losses) of American Eagle are also
affected by other changes in the stockholders' equity of American Eagle. Such
amounts are not considered significant by management and our equity in the
earnings (losses) of American Eagle have been increased or decreased by those
amounts in the year they occur. Our investment in American Eagle increased by
$2,273,000 for the year ended December 31, 1996, $5,995,000 for the year ended
December 31, 1997 and $9,620,000 for the ten months ended October 31, 1998 due
to the recognition of our equity in the earnings of American Eagle.
Financial Condition
- -------------------
Our stockholders' equity at October 31, 1998 was approximately $24 million,
compared to $18.2 million at December 31, 1997, $14.7 million at December 31,
1996 and $13.4 million at December 31, 1995. Our financial condition is
dependent upon the results of American Eagle's operations.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT OF NEW AMERICAN EAGLE
OWNERSHIP OF COMMON STOCK
The following tables set forth information with regard to the beneficial
ownership of American Eagle's common stock on December 31, 1998, and the
beneficial ownership of New American Eagle common stock at such date on a pro
forma basis following the merger, by:
- - each person known by American Eagle and us who will own beneficially more
than 5% of the outstanding shares of New American Eagle's common stock
- - each of New American Eagle's directors
- - the executive officers of New American Eagle named in the summary
compensation table included in the Proxy Statement of American Eagle, dated
May 1, 1998 and incorporated herein by reference
- - all directors and executive officers of New American Eagle as a group.
All share amounts and per share data included in these tables and
throughout this proxy statement have been restated to reflect the January 1998
stock split and the May 1998 stock split. In the first table, the percent of
shares each stockholder owns is based upon: (1) the 23,299,615 shares assumed to
be outstanding immediately following the merger; and (2) the number of shares,
if any, as to which the named person has the right to acquire beneficial
ownership upon the exercise of stock options exercisable within 60 days of
December 31, 1998.
Jay L. Schottenstein serves as Chairman and Chief Executive Officer of
Retail Ventures, and is the beneficial owner of 69.9% of that company's
outstanding voting securities. Therefore, he may be deemed to be the beneficial
owner of the 4,775,375 shares of American Eagle common stock held by Retail
Ventures. Geraldine Schottenstein, who is the mother of Jay L. Schottenstein,
Ann Schottenstein Deshe and Susan Schottenstein Diamond, is the beneficial owner
of 76.8% of our outstanding securities. Therefore, she may be deemed to be the
beneficial owner of the shares of American Eagle common stock that we hold. Saul
Schottenstein is a director of Retail Ventures and the uncle of Jay L.
Schottenstein, Ann Schottenstein Deshe and Susan Schottenstein Diamond.
19
<PAGE> 21
<TABLE>
<CAPTION>
Stockholder Shares Owned at December 31, 1998 Shares Owned after Merger (1)
- ----------- --------------------------------- -----------------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Natco Industries, Inc. 6,991,174 30.1% --- *
Retail Ventures, Inc. 4,775,375 20.5% 4,775,375 20.5%
Jay L. Schottenstein 4,923,659 21.1% 7,747,816 33.2%
Geraldine Schottenstein 6,991,174 30.1% 5,371,437 23.0%
Saul Schottenstein 22,500 * 160,939 *
George Kolber 123,439 * 123,439 *
Ari Deshe 5,250 * 2,690,968 11.5%
Jon P. Diamond 5,813 * 1,348,671 5.8%
Martin P. Doolan 21,375 * 21,375 *
Gilbert W. Harrison 6,975 * 6,975 *
Michael G. Jesselson 6,750 * 6,750 *
Thomas R. Ketteler 12,965 * 12,965 *
John L. Marakas 19,125 * 19,125 *
David W. Thompson 41,400 * 41,400 *
Gerald E. Wedren 2,250 * 2,250 *
Joseph E. Kerin 12,560 * 12,560 *
Roger S. Markfield 289,653 1.2% 289,653 1.2%
Laura A. Weil 28,775 * 28,775 *
All directors and executive officers 5,525,638 23.7% 12,516,811 50.2%
<FN>
* Represents less than 1% of the outstanding common stock.
</TABLE>
Some of the stockholders listed above hold a portion of their shares: (1)
subject to exercisable options; or (2) subject to shared voting and investment
power with another person. The table below illustrates the number of shares, if
any, that each such stockholder holds subject to these conditions.
20
<PAGE> 22
<TABLE>
<CAPTION>
- ----------------------------- ------------------------- ------------------------------------------------------------
Stockholder Shares held subject to Shares to which stockholder shares investment and voting
- ----------- ----------------------- --------------------------------------------------------
exercisable options power
------------------- -----
- ----------------------------- ------------------------- ------------------------------------------------------------
<S> <C> <C>
Natco Industries, Inc. None None
- ----------------------------- ------------------------- ------------------------------------------------------------
Retail Ventures, Inc. None None
- ----------------------------- ------------------------- ------------------------------------------------------------
Jay L. Schottenstein 148,250 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Geraldine Schottenstein None 4,028,578 shares held in trust for family members to which
Ms. Schottenstein is Trustee or Trust Advisor
- ----------------------------- ------------------------- ------------------------------------------------------------
George Kolber 22,500 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Ari Deshe 5,250 2,690,968 shares held in trust for family members to which
Ann Deshe is Trustee or Trust Advisor
- ----------------------------- ------------------------- ------------------------------------------------------------
Jon Diamond 5,250 1,343,421 shares held in trust for family members to which
Susan Diamond is Trustee or Trust Advisor
- ----------------------------- ------------------------- ------------------------------------------------------------
Martin P. Doolan 21,375 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Gilbert W. Harrison 6,750 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Michael G. Jesselson 2,250 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Thomas R. Ketteler 7,340 None
- ----------------------------- ------------------------- ------------------------------------------------------------
John L. Marakas 12,375 None
- ----------------------------- ------------------------- ------------------------------------------------------------
David W. Thompson 24,750 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Gerald E. Wedren 2,250 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Joseph E. Kerin 3,600 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Roger S. Markfield 10,500 None
- ----------------------------- ------------------------- ------------------------------------------------------------
Laura A. Weil 15,650 None
- ----------------------------- ------------------------- ------------------------------------------------------------
</TABLE>
OWNERSHIP OF RETAIL VENTURES AND NATCO
The following table shows the shares of Retail Ventures and our common
stock owned beneficially by each person owning more than 5% of the shares, each
director or executive officer owning any shares, and by all directors and
executive officers of American Eagle as a group, as of November 30, 1998. Except
for Saul Schottenstein, for each stockholder listed below, all shares
beneficially owned are shares: (1) held in trust for family members as to which
that stockholder is either Trustee or Trust Advisor; and (2) over which the
stockholder has sole and/or shared voting and investment power. Saul
Schottenstein owns all of his Natco shares and five shares of Retail Ventures
directly, and holds the rest of his Retail Venture shares as Trustee of trusts
for various family members.
<TABLE>
<CAPTION>
Shares of Retail Shares of Natco
Ventures Common Percent of Common Percent of
Stock Class Stock Class
----- ----- ----- -----
Stockholder
- -----------
<S> <C> <C> <C> <C>
Jay L. Schottenstein 349.5 69.9% 7,372.3 40.4%
Saul Schottenstein 51.0 10.2% 361.4 2.0%
Geraldine Schottenstein 153.0 30.6% 14,383.2 78.8%
Ann Schottenstein Deshe 97.0 19.4% 7,010.9 38.4%
Susan Schottenstein Diamond 48.5 9.7% 3,505.5 19.2%
All directors and executive officers as a group 354.5 70.9% 7,733.7 42.4%
</TABLE>
21
<PAGE> 23
DESCRIPTION OF NATCO SECURITIES
General. Our authorized capital stock consists of 125,000,000 shares of
common stock and 5,000,000 shares of preferred stock. As of the date of this
prospectus/proxy statement, none of our preferred stock is issued and
outstanding and 18,250 shares of common stock is issued and outstanding.
Immediately prior to the effective time, we will have 6,991,174 shares
outstanding.
Common stock/stockholders' rights. Holders of our common stock are entitled
to:
- - Dividends, if our Board of Directors legally declares them; however, if we
have shares of preferred stock outstanding, no dividends or other
distributions, other than dividends payable in common stock, may be made
with respect to the common stock unless full cumulative dividends on the
shares of preferred stock have been paid. This includes redemptions and
purchases.
- - One vote per share for the election of directors and on all other matters.
Our issued and outstanding shares of common stock are fully paid and
non-assessable.
- - If we undergo a voluntary or involuntary dissolution, liquidation, or
winding up, a pro rata share of all of our remaining assets available for
distribution, after we fully satisfy the prior rights of (1) creditors,
including holders of our indebtedness; and (2) holders of our preferred
stock.
Holders of our common stock are not entitled to:
- - preemptive rights
- - conversion or redemption rights
- - cumulative voting rights in the election of directors
Our Board of Directors is divided into three classes (Class I, II, and
III). Directors are elected to hold office for a three-year term. A plurality
vote is required to elect the directors, while in all other matters, the vote
required to take action is an affirmative vote of a majority of the shares
present (in person or by proxy) and entitled to vote where a quorum is present.
Preferred Stock. Our Board of Directors may issue shares of preferred stock
in one or more series and, from time to time as permitted by law, fix or change
the designations, number of shares, dividends, redemption rights, sinking fund
requirements, liquidation prices, conversion rights, and other rights,
qualifications, limitations or restrictions.
STOCKHOLDER RIGHTS AFTER THE REORGANIZATION
After the reorganization is completed, there will be no material
differences between the rights of American Eagle stockholders and the rights of
New American Eagle stockholders, except for the following differences in New
American Eagle's Certificate of Incorporation: (1) the authorized number of
shares; (2) the classification of the Board of Directors; and (3) the election
to be governed by Section 203 of the Delaware General Corporate Law.
These changes are illustrated in the table below.
<TABLE>
<CAPTION>
- ------------------------------------------------ ----------------------------- -------------------------------------
CHARACTERISTIC AMERICAN EAGLE NEW AMERICAN EAGLE
- ------------------------------------------------ ----------------------------- -------------------------------------
<S> <C> <C>
1) Authorized number of shares 1) 30,000,000 shares of 1) 125,000,000 shares of common
common stock stock, and 5,000,000 shares of
preferred stock
- ------------------------------------------------ ----------------------------- -------------------------------------
2) Classified board of directors with 2) No classified board of 2) Classified board of directors;
staggered terms directors; directors three classes (I, II, and II);
elected for one year term directors elected for terms of
three years
- ------------------------------------------------ ----------------------------- -------------------------------------
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C> <C>
3) Election to be governed by sec. 203 of the 3) Governed by sec. 203. 3) Not governed by sec. 203.
Delaware General Corporate Law. This section
prohibits a business combination with any
interested stockholder for three years after
such stockholder became "interested," unless
the corporation satisfies the conditions of
sec. 203. A corporation may choose whether
to be governed by this provision.
- ------------------------------------------------ ----------------------------- -------------------------------------
</TABLE>
EXPERTS
Our financial statements as of December 31, 1997 and 1996, and for the
years ended December 31, 1997, 1996 and 1995 included in this prospectus/proxy
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of American Eagle Outfitters, Inc. as
of January 31, 1998, February 1, 1997, and February 3, 1996, and for the fiscal
years ended January 31, 1998, February 1, 1997, the six month period ended
February 3, 1996, and the fiscal year ended July 29, 1995, incorporated by
reference in this prospectus/proxy statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon, in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
With respect to the unaudited consolidated interim financial information of
American Eagle for the quarters ended May 2, 1998, August 1, 1998, and October
31, 1998, incorporated by reference in this prospectus/proxy statement, Ernst &
Young LLP have reported that they have applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate reports included in American Eagle's Quarterly Reports on Form 10-Q for
the quarters ended May 2, 1998, August 1, 1998, and October 31, 1998, and
incorporated herein by reference, state that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
considering the limited nature of the review procedures applied. The independent
auditors are not subject to the liability provisions of Section 11 of the
Securities Act for their reports on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the auditors within the meaning of Sections 7 and 11 of
the Securities Act.
LEGAL MATTERS
The validity of New American Eagle common stock to be issued to the
stockholders of American Eagle under the merger and other legal matters in
connection with the merger will be passed upon for us by Porter, Wright, Morris
& Arthur, Columbus, Ohio. U.S. federal income tax matters relating to the merger
will be passed upon for us and American Eagle by Skadden, Arps, Slate, Meagher &
Flom LLP.
23
<PAGE> 25
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
FINANCIAL STATEMENTS OF NATCO
<S> <C>
Independent Auditors' Report.............................................................................. F- 2
Balance Sheets as of December 31, 1996 and 1997 and October 31, 1998 (unaudited) ........................ F- 3
Statements of Income (Loss) for the years ended December 31, 1995, 1996, and 1997 and
for the ten months ended October 31, 1998 (unaudited)............................................ F-4
Statements of Changes in Stockholders' Equity for the years ended December 31, 1995, 1996, and 1997
and for the ten months ended October 31, 1998 (unaudited) ..................................... F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996, and 1997 and
for the ten months ended October 31, 1998 (unaudited) ........................................... F-6
Notes to Financial Statements ............................................................................ F-7
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS .......................................... F-10
Unaudited Pro Forma Balance Sheet as of October 31, 1998 ................................................. F-11
Unaudited Pro Forma Statement of Operations for the nine months ended October 31, 1998 ................... F-12
Unaudited Pro Forma Statement of Operations for the year ended January 31, 1998 .......................... F-13
Notes the to Unaudited Pro Forma Condensed Consolidated Financial Statements ............................. F-14
</TABLE>
F - 1
<PAGE> 26
Report of Independent Auditors
The Board of Directors and Stockholders
Natco Industries, Inc.
We have audited the accompanying balance sheets of Natco Industries, Inc.
(Natco), as described in Note 1, as of December 31, 1996 and 1997, and the
related statements of income (loss), changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of Natco's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Natco Industries, Inc., as
described in Note 1, as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
December 4, 1998
F - 2
<PAGE> 27
Natco Industries, Inc.
Balance Sheets
(In thousands, except per share information)
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1996 1997 1998
--------------------------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Investment in associated company $22,241 $28,196 $37,816
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred tax liability $ 7,527 $ 9,969 $13,913
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares
authorized; no shares issued and
outstanding
Common stock, $.01 par value;
25,000 shares authorized; 18,250
shares issued and outstanding -- -- --
Paid-in capital 244 244 244
Retained earnings 14,470 17,983 23,659
-----------------------------
Total stockholders' equity 14,714 18,227 23,903
-----------------------------
Total liabilities and stockholders' equity $22,241 $28,196 $37,816
=============================
</TABLE>
See accompanying notes and Unaudited Pro Forma Condensed Consolidated Financial
Statements.
F - 3
<PAGE> 28
Natco Industries, Inc.
Statements of Income (Loss)
(In thousands)
<TABLE>
<CAPTION>
Ten months
ended October,
YEARS ENDED DECEMBER 31, 31
1995 1996 1997 1998
-------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Equity in net income (loss) of
associated company (American
Eagle Outfitters, Inc.) $ (471) $ 2,273 $ 5,955 $ 9,620
Income tax expense (benefit) (193) 932 2,442 3,944
---------------------------------------------------
Net income (loss) $ (278) $ 1,341 $ 3,513 $ 5,676
====================================================
</TABLE>
See accompanying notes and Unaudited Pro Forma Condensed Consolidated Financial
Statements.
F - 4
<PAGE> 29
Natco Industries, Inc.
Statements of Changes in Stockholders' Equity
Years Ended December 31, 1995, 1996, and 1997 and
Ten Months Ended October 31, 1998
(In thousands, except share information)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED TREASURY
SHARES STOCK CAPITAL EARNINGS STOCK TOTAL
========================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 18,250 $- $489 $14,162 $(1,000) $13,651
Net loss - - - (278) - (278)
Retirement of treasury stock - - (245) (755) 1,000 -
----------------------------------------------------------------------------------------
Balance December 31, 1995 18,250 - 244 13,129 - 13,373
Net income - - - 1,341 - 1,341
----------------------------------------------------------------------------------------
Balance December 31, 1996 18,250 - 244 14,470 - 14,714
Net income - - - 3,513 - 3,513
----------------------------------------------------------------------------------------
Balance December 31, 1997 18,250 - 244 17,983 - 18,227
Net income (unaudited) - - - 5,676 - 5,676
----------------------------------------------------------------------------------------
Balance October 31, 1998 (unaudited) 18,250 $- $244 $23,659 $ - $23,903
========================================================================================
</TABLE>
See accompanying notes and Unaudited Pro Forma Condensed Consolidated Financial
Statements.
F - 5
<PAGE> 30
Natco Industries, Inc.
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
YEARS ENDED DECEMBER 31, OCTOBER 31,
1995 1996 1997 1998
-------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (278) $ 1,341 $ 3,513 $ 5,676
Adjustments to net income (loss) to net cash
provided (used) by operating activities:
increase (decrease) in deferred income
taxes (193) 932 2,442 3,944
Equity in losses (earnings) of associated
company 471 (2,273) (5,955) (9,620)
-------------------------------------------------
Net cash from operating activities -- -- -- --
Net change in cash and equivalents -- -- -- --
Cash and equivalents
Beginning of year -- -- --
-------------------------------------------------
End of year $ -- $ -- $ -- $ --
=================================================
</TABLE>
See accompanying notes and Unaudited Pro Forma Condensed Consolidated Financial
Statements.
F - 6
<PAGE> 31
Natco Industries, Inc.
Notes to Financial Statements
1. ORGANIZATION AND NATURE OF BUSINESS
The accompanying financial statements are prepared for inclusion in a
registration statement relating to the merger of American Eagle Outfitters, Inc.
(American Eagle) with and into a wholly owned subsidiary of Natco (Natco). Prior
to the proposed reorganization, Natco will transfer all of its assets and
liabilities, other than its American Eagle shares, to a newly formed limited
liability company in exchange for all of the interest in the limited liability
company. The principal components of these transferred assets are Natco's
investment in purchased receivable and notes and mortgages receivable from
affiliates. The purchased receivables are primarily unsecured consumer
receivables that are purchased at a discount to their face value from various
businesses located throughout the United States. A company that is affiliated
through common control, services and collects the purchased receivables for
Natco. Natco will distribute these limited liability company interests to
Natco's shareholders in connection with the merger by American Eagle with and
into a wholly-owned Natco subsidiary. These statements retroactively reflect the
spin-off of the interests in the limited liability company to Natco's
shareholders immediately prior to the merger with American Eagle, and therefore,
all aspects of Natco's purchased receivables business have been eliminated from
the accompanying financial presentation.
Prior to the merger, Natco will declare a stock split so that current
shareholders will own 6,991,174 shares of Natco Common Stock.
Historical earnings per share information for Natco is not meaningful and has
been omitted. On a pro forma basis earnings per share information is included
in the Unaudited Pro Forma Condensed Consolidated Financial Statements
included in this prospectus/ proxy statement beginning at page F-10.
These financial statements retroactively reflect the reorganization of the
business as a change in the reporting entity in accordance with Staff Accounting
Bulletin No. 93 and present the investment in American Eagle and related net
deferred tax liabilities which will be consolidated with American Eagle.
2. SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FEDERAL INCOME TAXES
Natco follows the liability method for accounting for income taxes. Accordingly,
a deferred tax liability/asset is recorded for all transactions that are
reported in different years for financial reporting versus tax purposes. Under
this liability method, the amount of deferred taxes on the balance sheet is
adjusted annually for changes in tax rates or other provisions of the income tax
law.
F - 7
<PAGE> 32
3. INVESTMENT IN ASSOCIATED COMPANY
The financial information presented for American Eagle is as of and for the
52/53 week year that ends on the Saturday nearest to January 31. Consolidated
financial information for American Eagle is summarized as follows:
<TABLE>
<CAPTION>
(In Thousands)
NINE MONTHS
FEBRUARY 1, JANUARY 31, ENDED OCTOBER 31,
1997 1998 1998
--------------------------------------
(unaudited)
<S> <C> <C> <C>
Current assets $ 73,760 $102,473 $139,040
Long term assets 36,678 42,322 55,959
--------------------------------------
Total assets $110,438 $144,795 $194,999
Current liabilities $ 39,382 $ 53,987 $ 71,499
Stockholders' equity $ 71,056 $ 90,808 $123,500
Net sales $326,404 $405,713 $374,493
Net income $ 5,925 $ 19,537 $ 29,229
Net income and other changes
in stockholders' equity $ 7,260 $ 19,752 $ 32,692
</TABLE>
Other changes in stockholders' equity, which management considers insignificant,
are the result of stock issuances and certain acquisitions subsequent to Natco's
initial investment in American Eagle and have been included in equity earnings.
As of October 31, 1998, Natco owned approximately 30.6% of the common stock of
American Eagle, an entity under common control of the Schottenstein family.
American Eagle operates a chain of mall-based retail specialty stores. The
investment in American Eagle is accounted for using the equity method of
accounting.
4. INCOME TAXES
The significant items giving rise to the deferred income tax assets
(liabilities), as of December 31, 1996, 1997 and October 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
1996 1997 1998
---------------------------------------
(unaudited)
<S> <C> <C> <C>
Deferred income tax assets (liabilities):
Equity in earnings of American Eagle $ (8,294) $(10,736) $(14,680)
Net operating loss carryforwards and alternative
minimum tax credits 767 767 767
--------------------------------------
Total deferred income tax liabilities, net $ (7,527) $ (9,969) $(13,913)
======================================
</TABLE>
F - 8
<PAGE> 33
4. INCOME TAXES (CONTINUED)
The components of income tax expense (benefit) for the years ended December 31,
1995, 1996, and 1997 and the ten months ended October 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
1995 1996 1997 1998
---------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ -- $ -- $ -- $ --
Deferred:
Net increase (decrease) in deferred
income tax liabilities
(193) 932 2,442 3,944
-------------------------------------------
Total income tax expense
(benefit) $ (193) $ 932 $2,442 $3,944
===========================================
</TABLE>
The difference between the U.S. federal statutory income tax rate and Natco's
effective rate are:
<TABLE>
<CAPTION>
OCTOBER 31,
1995 1996 1997 1998
---------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
U.S. federal statutory income tax rate
(35.0)% 35.0% 35.0% 35.0%
State income taxes, net of federal effect
(6.0) 6.0 6.0 6.0
--------------------------------------------
(41.0)% 41.0% 41.0% 41.0%
===========================================
</TABLE>
Natco has generated net operating losses (NOLs) that may be used to offset
future taxable income. Each year's NOL has a maximum 15-year carryforward
period. Natco's ability to fully use its NOL carryforwards is dependent upon
future taxable income. As of December 31, 1997, Natco has NOL carryforwards of
approximately $300,000, subject to various expiration dates beginning in 2000
and ending 2008, and alternative minimum tax credit carryforwards of
approximately $650,000 available to reduce future taxes payable. The potential
tax benefit of these NOL carryforwards of $300,000 using a 35% effective tax
rate represents a deferred tax asset. No valuation allowance has been recorded
for the realization of the asset as management expects future income to be
sufficient to fully recognize the carryforwards.
5. STOCKHOLDERS' EQUITY
In October 1995, Natco retired the 18,250 shares that it held in treasury and
reduced the number of authorized shares from 1,000,000 shares to 25,000 shares.
This resulted in charges of $182 to common stock, $244,500 to paid-in capital,
and $755,318 to retained earnings.
F - 9
<PAGE> 34
Unaudited Pro Forma Condensed Consolidated Financial Statements
The Unaudited Pro Forma Statements of Operations of New American Eagle for the
fiscal year ended January 31, 1998 and the nine months ended October 31, 1998
(the "Pro Forma Statements of Operations"), and the Unaudited Pro Forma Balance
Sheet of New American Eagle as of October 31, 1998 (the "Pro Forma Balance
Sheet" and together with the Pro Forma Statement of Operations, the "Pro Forma
Condensed Consolidated Financial Statements"), have been prepared to illustrate
the effect of the Reorganization of Natco and the Merger of Natco and American
Eagle which has been accounted for as an acquisition of minority interest
without a substantial change in net assets, operations or company ownership. The
Pro Forma Statements of Operations give pro forma effect to the Reorganization
and the Merger as if they had occurred on February 2, 1997. The Pro Forma
Balance Sheet gives effect to the Reorganization and the Merger as if they
occurred on October 31, 1998. The Pro Forma Condensed Consolidated Financial
Statements do not purport to be indicative of the results of operations or the
financial position of New American Eagle that would have actually been obtained
had such transactions been completed as of the assumed dates and for the periods
presented, or which may be obtained in the future. The pro forma adjustments are
described in the accompanying notes and are based upon available information and
certain assumptions that New American Eagle believes to be reasonable.
The Pro Forma Condensed Consolidated Financial Statements including the notes
thereto are qualified in their entirety by reference to, and should be read in
conjunction with, the historical consolidated financial statements of American
Eagle which are incorporated by reference and the historical financial
statements of Natco which are included elsewhere in this Prospectus/Proxy
Statement.
An estimate of the total cost of the Reorganization and the Merger has been made
and charged to the Pro Forma Statement of Operations based on available
information. The actual costs may differ from those included herein. Any such
difference, however, is not believed to be material.
F - 10
<PAGE> 35
Unaudited Pro Forma Balance Sheet
October 31, 1998
<TABLE>
<CAPTION>
American Pro Forma Pro Forma
Eagle Natco Adjustments Consolidated
(1)October (1)October
31, 1998 31, 1998
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $44,045 - - $44,045
Merchandise inventory 74,934 - - 74,934
Accounts and note receivable, including 6,086 - - 6,086
related party
Prepaid expenses and other 6,560 - - 6,560
Deferred income taxes 7,415 - 750 (3) 8,165
-----------------------------------------------------------------
Total current assets $139,040 $0 $750 $139,790
Net property, plant and equipment 52,534 - - 52,534
Investment in American Eagle Outfitters, Inc. - 37,816 (37,816) (2) 0
Other assets 3,425 - - 3,425
-----------------------------------------------------------------
Total assets $194,999 $37,816 $(37,066) $195,749
-----------------------------------------------------------------
Current liabilities:
Accounts payable $35,766 - - $35,766
Accrued compensation and payroll taxes 12,918 - - 12,918
Accrued rent 12,092 - - 12,092
Accrued income and other taxes 6,009 - - 6,009
Deferred tax liability - 13,913 (13,913) (2),(3) 0
Other liabilities and accrued expenses 4,714 - 150 (5) 4,864
-----------------------------------------------------------------
Total current liabilities $71,499 $13,913 $(13,763) 71,649
-----------------------------------------------------------------
Stockholders' equity $123,500 $23,903 $(23,303)(2),(5) $124,100
-----------------------------------------------------------------
Total liabilities and stockholders' equity $194,999 $37,816 $(37,066) $195,749
-----------------------------------------------------------------
</TABLE>
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
F - 11
<PAGE> 36
Unaudited Pro Forma Statement of Operations
For the nine months ended October 31, 1998
<TABLE>
<CAPTION>
American Natco (1) Pro Forma Pro Forma
Eagle (1) October Adjustments Consolidated
October 31, 31, 1998
1998
<S> <C> <C> <C> <C>
Net sales $374,493 $374,493
Cost of sales, including certain buying, 227,793 227,793
occupancy and warehousing expenses
---------------------------------------------------------------
Gross profit 146,700 0 0 146,700
Selling, general and administrative expenses 94,191 94,191
Depreciation and amortization 6,201 6,201
----------------------------------------------------------------
Operating income 46,308 0 0 46,308
Equity in earnings of associated company - 9,620 (9,620) (4) 0
Interest income, net 1,676 1,676
-------------------------------------------------------------
Income before income taxes 47,984 $9,620 $(9,620) 47,984
Provision for income taxes 18,755 3,944 (3,944) (4) 18,755
-------------------------------------------------------------
Net income $29,229 $5,676 $(5,676) $29,229
--------------------------------------------------------------
Basic income per common share $1.30 $ 0.81 $1.30
---------------------------------------------------------------
Diluted income per common share $1.22 $ 0.81 $1.22
---------------------------------------------------------------
Weighted average common shares outstanding 22,698 6,991 22,580
- - basic
Weighted average common shares outstanding 24,000 6,991 24,000
- - diluted
</TABLE>
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
F - 12
<PAGE> 37
Unaudited Pro Forma Statement of Operations
For the year ended
January 31, 1998
<TABLE>
<CAPTION>
American Natco(1) Pro Forma Pro Forma
Eagle(1) December Adjustments Consolidated
January 31, 31, 1997
1998
<S> <C> <C> <C> <C>
Net sales $405,713 $405,713
Cost of sales, including certain buying, 268,746 268,746
occupancy and warehousing expenses
--------------------------------------------------------------
Gross profit 136,967 0 0 136,967
Selling, general and administrative expenses 98,529 0 1,200 (5) 99,729
Depreciation and amortization 7,318 7,318
--------------------------------------------------------------
Operating income $31,120 0 (1,200) $29,920
Equity in earnings of associated company - 5,955 (5,955) (4) -
Interest income, net 1,158 1,158
--------------------------------------------------------------
Income before income taxes $32,278 5,955 (7,155) $31,078
Provision for income taxes 12,741 2,442 (2,442) (4) 12,741
--------------------------------------------------------------
Net income $19,537 3,513 (4,713) $18,337
---------------------------------------------------------------
Basic income per common share $0.88 $0.50 $0.83
Diluted income per common share $0.86 $0.50 $0.80
Weighted average common shares outstanding 22,091 6,991 22,091
- - basic
Weighted average common shares outstanding 22,816 6,991 22,816
- - diluted
</TABLE>
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
F - 13
<PAGE> 38
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
1. American Eagle has adopted a fiscal year that ends on the Saturday
closest to January 31st. Natco has a calendar year end. The respective
year ends and interim periods have been combined for the accompanying
pro forma presentation.
2. Natco reports earnings in American Eagle based upon the most recent
publicly released financial information of American Eagle which
generally is within one month of Natco's reporting period. Adjustment
to eliminate Natco's equity investment in American Eagle and the
related deferred tax liability.
3. Adjustments to reclassify deferred tax assets in the accounts of Natco
from net liabilities to assets. The underlying deferred tax assets
relate to the alternative minimum tax credits and net operating tax
loss carryforwards of Natco as included in the financial statements of
Natco included elsewhere herein.
4. Adjustment to eliminate the results of American Eagle which are
recorded on an equity basis in the financial statements of Natco.
5. Adjustment to recognize costs related to the Reorganization and the
Merger.
F - 14
<PAGE> 39
APPENDIX A
- ------------------------------------------------------------------------------
PLAN OF REORGANIZATION AND MERGER AGREEMENT
Among
NATCO INDUSTRIES, INC.
THORN HILL ACQUISITION CORP.
NATCO LIMITED LIABILITY COMPANY
and
AMERICAN EAGLE OUTFITTERS, INC.
- -------------------------------------------------------------------------------
A-1
<PAGE> 40
Dated as of November 30, 1998
This Plan of Reorganization and Merger Agreement ("Agreement") is
entered into effective as of November 30, 1998, by and among NATCO INDUSTRIES,
INC., a Delaware corporation ("Natco"), THORN HILL ACQUISITION CORP., a Delaware
corporation and wholly owned subsidiary of Natco ("Acquisition"), AMERICAN EAGLE
OUTFITTERS, INC., a Delaware corporation ("AEO"), and NATCO LIMITED LIABILITY
COMPANY, a Delaware Limited Liability Company ("Natco LLC"). AEO is hereinafter
sometimes referred to as the "Surviving Corporation."
WHEREAS, Natco, Acquisition and AEO desire that Acquisition merge with
and into AEO (the "Merger"), upon the terms and conditions set forth herein and
in accordance with the Delaware General Corporation Law (the "Delaware Law")
with the result that AEO shall continue as the surviving corporation and thereby
become a wholly owned subsidiary of Natco as provided herein and the separate
existence of Acquisition (except as it may be continued by operation of law)
shall cease; and
WHEREAS, the parties are effecting the Merger in order to (i) avoid
potential shareholder conflicts that may arise with respect to operating and
other plans of AEO, (ii) facilitate any future plans to restructure AEO, (iii)
enhance AEO's long-term ability to raise debt and/or equity capital and (iv)
achieve certain administrative efficiencies; and
WHEREAS, on the date of this Agreement, Natco is authorized to issue
70,000,000 shares of common stock, par value $0.01per share ("Natco Common
Stock"), and 5,000,000 shares of Preferred Stock, par value $0.01 per share
("Natco Preferred Stock), and has issued and outstanding 18,250 shares of Natco
Common Stock and no shares of Natco Preferred Stock; Acquisition is authorized
to issue 1,000 shares of common stock, par value $0.01 per share ("Acquisition
Common Stock") and has issued and outstanding 100 shares of Acquisition Common
Stock; and AEO is authorized to issue 30,000,000 shares of common stock, par
value $0.01 per share ("AEO Common Stock"), of which 22,989,475 shares were
outstanding as of November 30, 1998, with an additional 1,830,806 shares being
subject to outstanding stock options (the "AEO Stock Options") previously
granted under AEO's 1994 Stock Option Plan (the "AEO Option Plan"); and
WHEREAS, Natco desires that, immediately prior to the Merger, (i) the
membership interests (the "LLC Interests") that it holds in Natco LLC, a
wholly-owned subsidiary of Natco, be distributed to the Natco Shareholders in
redemption for a proportional portion of the outstanding 18,250 shares of Natco
Common Stock, and (ii) each of the remaining shares of Natco Common Stock
outstanding after the redemption shall be increased to a total of 6,991,174
shares as the result of a stock split, all as hereinafter provided; and
WHEREAS, Natco, Acquisition and AEO desire that, at the Effective Time
(as hereinafter defined), each of the shares of AEO Common Stock outstanding
immediately prior to the Effective Time, excluding the 6,991,174 shares of AEO
Common Stock owned by Natco (the "Natco AEO Shares"), shall be automatically
converted into the right to receive an identical
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number of fully paid and nonassessable shares of Natco Common Stock, and that
each of the Natco AEO Shares shall be cancelled, all as hereinafter provided;
and
WHEREAS, Natco, Acquisition and AEO desire that, at the Effective Time,
each of the 100 shares of Acquisition Common Stock shall be changed and
converted into an equal number of shares of AEO Common Stock; and
WHEREAS, Natco desires, immediately after the Merger, to amend its
Certificate of Incorporation to change its name to "American Eagle Outfitters,
Inc."; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a tax free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the respective Boards of Directors of Natco, Acquisition and
AEO have approved the Merger and the other transaction contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
ACTIONS PRIOR TO THE MERGER
SECTION 1.01 NATCO REDEMPTION. Immediately prior to the Effective Time,
Natco shall cause the LLC Interests to be distributed to Natco shareholders in
proportion to their ownership interests in Natco and in redemption a
proportionate portion of the outstanding 18,250 shares of Natco Common Stock.
SECTION 1.02 AMENDMENT OF NATCO CERTIFICATE AND STOCK SPLIT. The
Directors and Shareholders of Natco, in approving this Agreement, hereby approve
amendment of Article First of Natco's Certificate of Incorporation to read in
its entirety as follows:
FIRST: The name of the Corporation shall be American
Eagle Outfitters, Inc.
The officers of Natco are authorized to file a Certificate of Amendment with the
Delaware Secretary of State setting forth the above amendment after the
Effective Time.
SECTION 1.03 NATCO STOCK SPLIT. The Directors of Natco hereby declare a
stock dividend (stock split) payable to shareholders of record immediately prior
to the Effective Time, in the amount of whole shares of Natco Common Stock equal
to the number of new shares of
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Natco Common Stock for each one share of Natco Common Stock outstanding
immediately prior to the Effective Time necessary so that there will be
outstanding 6,991,174 shares of Natco Common Stock immediately prior to the
Effective Time.
ARTICLE II
THE MERGER
SECTION 2.01 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement and Delaware
Law, AEO shall be merged with and into Acquisition, the separate existence of
Acquisition (except as it may be continued by operation of law) shall cease, and
AEO shall continue as the Surviving Corporation under the corporate name "AE
Stores Company."
SECTION 2.02 EFFECT OF THE MERGER. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to, and assume all the rights
and obligations of Acquisition in accordance with Delaware Law.
SECTION 2.03 CONSUMMATION OF THE MERGER. As soon as practicable after
the satisfaction or waiver of the conditions to the obligations of the parties
to effect the Merger set forth herein, provided that this Agreement has not been
terminated previously, the parties hereto will cause the Merger to be
consummated by filing with the Secretary of State of Delaware, a properly
executed certificate of merger in accordance with Delaware Law (the close of
business on the date of such filing or the time or date so specified in the
filing as the effective date of the Merger being the "Effective Time").
SECTION 2.04 CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. The Certificate of Incorporation of the
Surviving Corporation from and after the Effective Time shall be the Certificate
of Incorporation of Acquisition as in effect immediately prior to the Effective
Time, until thereafter amended in accordance with the provisions thereof and as
provided by Delaware Law. The By-Laws of the Surviving Corporation from and
after the Effective Time shall be the By-Laws of Acquisition as in effect
immediately prior to the Effective Time, continuing until thereafter amended in
accordance with the provisions thereof and the Certificate of Incorporation of
the Surviving Corporation and as provided by Delaware Law. The initial directors
and officers of the Surviving Corporation shall be the directors and officers,
respectively, of Acquisition immediately prior to the Effective Time, in each
case until their removal or until their respective successors are duly elected
and qualified.
SECTION 2.05 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either AEO or
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Acquisition, or otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its officers and directors or their designees shall be
authorized to execute and deliver, in the name and on behalf of either AEO or
Acquisition, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of such corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such corporation and otherwise to carry out the purposes
of this Agreement.
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01 CONVERSION OF AEO COMMON STOCK. At the Effective Time,
each share of Common Stock, without par value, of AEO issued and outstanding
immediately prior to the Effective Time, excluding the Natco AEO Shares, shall
be converted, by virtue of the Merger, into the right to receive one share of
Natco Common Stock.
SECTION 3.02 CANCELLATION OF AEO COMMON STOCK OWNED BY NATCO. At the
Effective Time, by virtue of the Merger and without further action on the part
of Natco, each Natco AEO Share shall be cancelled.
SECTION 3.03 RETENTION OF NATCO COMMON STOCK. At the Effective Time,
each of the 6,991,174 shares of Natco Common Stock outstanding immediately prior
to the Effective Time, shall remain outstanding and unchanged by virtue of the
Merger.
SECTION 3.04 CONVERSION OF ACQUISITION COMMON STOCK. At the Effective
Time, each share of common stock of Acquisition, without par value, issued and
outstanding immediately prior to the Effective Time, shall remain outstanding
and, by virtue of the Merger, automatically and without any action on the holder
thereof, be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
SECTION 3.05 EXCHANGE OF AEO STOCK CERTIFICATES. Promptly after the
Effective Time, each former AEO shareholder, other than Natco, shall receive a
letter of transmittal (the "Transmittal Letter") and instructions for its use in
effecting the surrender of their stock certificates previously representing AEO
Common Stock in exchange for stock certificates representing their shares of
Natco Common Stock. Upon delivery to National City Bank (the "Transfer Agent")
of certificates for the AEO Common Stock and the Transmittal Letter completed in
due form, each such shareholder will be entitled to receive a certificate
representing that number of the shares of Natco Common Stock being issued
pursuant to SECTION 3.01 herein.
SECTION 3.06 CONVERSION OF AEO STOCK OPTIONS. At the Effective Time,
Natco shall adopt the AEO Option Plan and each unexercised AEO Stock Option that
is outstanding
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immediately prior to the Effective Time shall be converted automatically at the
Effective Time into an option to purchase the exact same number of shares of
Natco Common Stock, without any change in the option exercise price or the other
terms and conditions of such options.
ARTICLE IV
CLOSING
SECTION 4.01 CLOSING. The closing of the Merger (the "Closing") shall
be scheduled to occur at the offices of Porter, Wright, Morris & Arthur,
Columbus, Ohio, at 10:00 a.m. local time, on a date as soon as practicable after
the satisfaction or waiver of the conditions to the obligations of the parties
to effect the Merger set forth herein (the "Closing Date"). The Closing, and all
transactions to occur at the Closing, shall be deemed to have taken place at,
and shall be effective as of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF AEO. AEO represents and
warrants to Natco and Natco LLC as follows:
(a) ORGANIZATION AND QUALIFICATION. AEO is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. AEO is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the properties, assets, financial condition,
operating results or business of AEO (an "AEO Material Adverse Effect").
(b) CAPITALIZATION. The authorized capital stock of AEO consists of
30,000,000 shares of AEO Common Stock. As of the date of this Agreement,
22,989,475 shares of AEO Common Stock are issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable, and an
additional 1,830,806 shares of AEO Common Stock are reserved for issuance
pursuant to outstanding AEO Stock Options.
(c) AUTHORITY RELATIVE TO AGREEMENT. AEO has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by AEO and the consummation by it of the transactions contemplated hereby have
been duly authorized by AEO's Board of Directors and no other corporate
approvals or proceedings on the part of AEO are necessary to authorize this
Agreement and the transactions contemplated hereby, other than approval by the
AEO shareholders. This Agreement has been duly executed and delivered by AEO and
constitutes the
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legal, valid and binding obligation of AEO, enforceable against AEO in
accordance with its terms.
(d) NON-CONTRAVENTION. The execution and delivery of this Agreement by
AEO and the consummation by AEO of the transactions contemplated hereby will not
(i) violate or conflict with any provision of the Certificate of Incorporation
or Code of Regulations of AEO, (ii) result in any material violation of,
conflict with, or default (or an event which with notice or lapse of time or
both would constitute a default) or loss of a benefit under, or permit the
termination of or the acceleration of any obligation under, any mortgage,
indenture, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to AEO or any of
its respective properties, or (iii) result in the creation or imposition of any
claim in favor of any third person or entity upon the assets of AEO, other than
any such violation, conflict, default, loss, termination or acceleration that
would not have an AEO Material Adverse Effect or materially and adversely affect
the ability of AEO to consummate the transactions contemplated hereby.
(e) CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by AEO
in connection with the execution and delivery of this Agreement by AEO or the
consummation by AEO of the transactions contemplated hereby, except for (i) any
necessary filings pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Securities and Exchange
Commission (the "SEC") thereunder, (ii) the filing of a certificate of merger
with the Secretary of State of Delaware in accordance with the Delaware Law,
(iii) the filing of a form of notice with the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvement Act (the "HSR Act"), and (iv) such
consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not have an AEO
Material Adverse Effect or materially and adversely affect the ability of AEO to
consummate the transactions contemplated hereby.
SECTION 5.02 REPRESENTATIONS AND WARRANTIES OF NATCO, ACQUISITION AND
NATCO LLC. Each of Natco, Acquisition and Natco LLC, jointly and severally,
represents and warrants to AEO as follows:
(a) ORGANIZATION AND QUALIFICATION.
(i) NATCO. Natco is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Natco is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so
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qualified would not have a material adverse effect on the financial condition,
operating results or business of Natco and its subsidiaries, taken as a whole (a
"Natco Material Adverse Effect").
(ii) NATCO LLC. Natco LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Natco LLC is duly qualified as a foreign limited liability
company to do business, and is in good standing, in each jurisdiction in which
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the financial condition, operating
results or business of Natco LLC and its subsidiaries, taken as a whole (a
"Natco LLC Material Adverse Effect").
(iii) ACQUISITION. Acquisition is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Acquisition was incorporated on November 25, 1998 for the purpose of effecting
the Merger and has no business operations, no material properties or assets and
has no liabilities or obligations.
(b) CAPITALIZATION.
(i) NATCO. The authorized capital stock of Natco consists of 70,000,000
shares of Natco Common Stock and 5,000,000 shares of Preferred Stock. As of the
date of this Agreement, 18,250 shares of Natco Common Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and no shares of Natco Preferred Stock are issued or outstanding.
No subscription, warrant, option, convertible security, stock appreciation or
other right (contingent or other) to purchase or acquire any shares of any class
of capital stock of Natco is authorized or outstanding and there is not any
commitment of Natco to issue any shares, warrants, options or other such rights
or to distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Natco does not have any obligation (contingent or other)
to purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(ii) NATCO LLC. The authorized membership interests of Natco LLC are
owned 100% by Natco, all of which are duly authorized, validly issued, fully
paid and nonassessable. No subscription, warrant, option, convertible security,
security appreciation or other right (contingent or other) to purchase or
acquire any membership interest of any class of Natco LLC is authorized or
outstanding and there is not any commitment of Natco LLC to issue any membership
interest, warrants, options or other such rights or to distribute to holders of
any class of its membership interests any evidences of indebtedness or assets.
Natco LLC does not have any obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its membership interests or to pay any dividend or
make any other distribution in respect thereof.
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(iii) ACQUISITION. The authorized capital stock of Acquisition consists
of 1,000 shares of Acquisition Common Stock. As of the date of this Agreement,
100 shares of Acquisition Common Stock are issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable. No
subscription, warrant, option, convertible security, stock appreciation or other
right (contingent or other) to purchase or acquire any shares of any class of
capital stock of Acquisition is authorized or outstanding and there is not any
commitment of Acquisition to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Acquisition does not have any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
(c) AUTHORITY RELATIVE TO AGREEMENTS.
(i) NATCO. Natco has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Natco and the consummation by Natco
of the transactions contemplated hereby have been duly authorized by the Board
of Directors and approved by the shareholders of Natco, no other corporate
approvals or proceedings on the part of Natco are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Natco and constitutes the legal, valid and binding
obligation of Natco, enforceable against Natco in accordance with its terms.
(ii) NATCO LLC. Natco LLC has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement by Natco LLC and the consummation
by Natco LLC of the transactions contemplated hereby have been duly authorized
and approved by all of the members of Natco LLC, no other corporate approvals or
proceedings on the part of Natco LLC are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Natco LLC and constitutes the legal, valid and binding
obligation of Natco LLC, enforceable against Natco LLC in accordance with its
terms.
(iii) ACQUISITION. Acquisition has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement by Acquisition and the consummation
by Acquisition of the transactions contemplated hereby have been duly authorized
by the Board of Directors and approved by the shareholders of Acquisition, no
other corporate approvals or proceedings on the part of Acquisition are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Acquisition and
constitutes the legal, valid and binding obligation of Acquisition, enforceable
against Acquisition in accordance with its terms.
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(d) NON-CONTRAVENTION.
(i) NATCO. The execution and delivery of this Agreement by Natco and
the consummation by Natco of the transactions contemplated hereby will not (i)
violate or conflict with any provision of the Certificate of Incorporation or
By-Laws of Natco, (ii) result in any violation of, conflict with, or default (or
an event which with notice or lapse of time or both would constitute a default)
or loss of a benefit under, or permit the termination of or the acceleration of
any obligation under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Natco or any
of its respective properties, or (iii) result in the creation or imposition of
any claim in favor of any third person or entity upon the assets of Natco, other
than any such violation, conflict, default, loss, termination or acceleration
that would not have a Natco Material Adverse Effect or materially and adversely
affect the ability of Natco to consummate the transactions contemplated hereby.
(ii) NATCO LLC. The execution and delivery of this Agreement by Natco
LLC and the consummation by Natco LLC of the transactions contemplated hereby
will not (i) violate or conflict with any provision of the Certificate of
Formation or Operating Agreement of Natco LLC, (ii) result in any violation of,
conflict with, or default (or an event which with notice or lapse of time or
both would constitute a default) or loss of a benefit under, or permit the
termination of or the acceleration of any obligation under, any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Natco LLC or any of its respective properties, or (iii)
result in the creation or imposition of any claim in favor of any third person
or entity upon the assets of Natco LLC, other than any such violation, conflict,
default, loss, termination or acceleration that would not have a Natco LLC
Material Adverse Effect or materially and adversely affect the ability of Natco
LLC to consummate the transactions contemplated hereby.
(iii) ACQUISITION. The execution and delivery of this Agreement by
Acquisition and the consummation by Acquisition of the transactions contemplated
hereby will not (i) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Acquisition, (ii) result in any violation of,
conflict with, or default (or an event which with notice or lapse of time or
both would constitute a default) or loss of a benefit under, or permit the
termination of or the acceleration of any obligation under, any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Acquisition or any of its respective properties, or
(iii) result in the creation or imposition of any claim in favor of any third
person or entity upon the assets of Acquisition.
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(e) CONSENTS.
(i) NATCO. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by Natco
in connection with the execution and delivery of this Agreement by Natco or the
consummation by Natco of the transactions contemplated hereby, except for (i)
the filing of a certificate of merger with the Secretary of State of the State
of Delaware in accordance with the Delaware Law, (ii) the filing of a form of
notice with the Federal Trade Commission under the HSR Act, and (iii) such
consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not have a Natco
Material Adverse Effect or materially and adversely affect the ability of Natco
to consummate the transactions contemplated hereby.
(ii) NATCO LLC. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by Natco
LLC in connection with the execution and delivery of this Agreement by Natco LLC
or the consummation by Natco LLC of the transactions contemplated hereby, except
for such consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would have a Natco LLC
Material Adverse Effect or materially and adversely affect the ability of Natco
LLC to consummate the transactions contemplated hereby or to conduct it's
business after the Effective Time.
(iii) ACQUISITION. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by
Acquisition in connection with the execution and delivery of this Agreement by
Acquisition or the consummation by Acquisition of the transactions contemplated
hereby, except for (i) the filing of a certificate of merger with the Secretary
of State of Delaware in accordance with the Delaware Law, (ii) the filing of a
form of notice with the Federal Trade Commission under the HSR Act, and (iii)
such consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not materially
and adversely affect the ability of Acquisition to consummate the transactions
contemplated hereby.
(f) ACTIONS PENDING.
(i) NATCO. Except as set forth on schedule 5.02(f) attached hereto,
there is no action, suit, dispute, investigation, proceeding or claim pending
or, to the best knowledge of Natco, threatened against or affecting Natco, or
its respective properties or rights, before any court, administrative agency,
governmental body, arbitrator, mediator or other dispute resolution body that
would have a Natco Material Adverse Effect or would materially adversely affect
the ability of Natco to consummate the transactions contemplated hereby, or the
ability of Natco or the Surviving Corporation to conduct the business of the
Surviving Corporation after the Effective
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Time, and Natco is not aware of any facts or circumstances which may give rise
to any of the foregoing. Natco is not subject to any order, judgment, decree,
injunction, stipulation, or consent order of or with any court or other
governmental agency. Natco has not entered into any agreement to settle or
compromise any proceeding pending or threatened against it which has involved
any obligation other than the payment of money or for which Natco has any
continuing obligation.
(ii) NATCO LLC. Except as set forth on schedule 5.02(f) attached
hereto, there is no action, suit, dispute, investigation, proceeding or claim
pending or, to the best knowledge of Natco LLC, threatened against or affecting
Natco LLC, or its respective properties or rights, before any court,
administrative agency, governmental body, arbitrator, mediator or other dispute
resolution body that would have a Natco LLC Material Adverse Effect or would
materially and adversely affect the ability of Natco LLC to consummate the
transactions contemplated hereby, or the ability of the Surviving Corporation to
conduct the business of the Surviving Corporation after the Effective Time, and
Natco LLC is not aware of any facts or circumstances which may give rise to any
of the foregoing. Natco LLC is not subject to any order, judgment, decree,
injunction, stipulation, or consent order of or with any court or other
governmental agency. Natco LLC has not entered into any agreement to settle or
compromise any proceeding pending or threatened against it which has involved
any obligation other than the payment of money or for which Natco LLC has any
continuing obligation.
(iii) ACQUISITION. There is no action, suit, dispute, investigation,
proceeding or claim pending or, to the best knowledge of Acquisition, threatened
against or affecting Acquisition, or its respective properties or rights, before
any court, administrative agency, governmental body, arbitrator, mediator or
other dispute resolution body that would materially adversely affect the ability
of Acquisition to consummate the transactions contemplated hereby, or the
ability of Acquisition or the Surviving Corporation to conduct the business of
the Surviving Corporation after the Effective Time, and Acquisition is not aware
of any facts or circumstances which may give rise to any of the foregoing.
Acquisition is not subject to any order, judgment, decree, injunction,
stipulation, or consent order of or with any court or other governmental agency.
Acquisition has not entered into any agreement to settle or compromise any
proceeding pending or threatened against it which has involved any obligation
other than the payment of money or for which Acquisition has any continuing
obligation.
(g) COMPLIANCE WITH LAW; PERMITS.
(i) NATCO. Natco is not in default in any material respect under any
order or decree of any court, governmental authority, arbitrator or arbitration
board or tribunal or under any laws, ordinances, governmental rules or
regulations to which Natco or its respective properties or assets is subject.
Natco possesses all material permits necessary for Natco to own, use and
maintain its properties and assets or required for the conduct of its business
in substantially the same manner as it is currently conducted. Each of such
permits is in full force and effect and no proceeding is pending, or, to the
best knowledge of Natco, threatened, to modify, suspend,
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revoke or otherwise limit any of such permits and no administrative or
governmental actions have been taken or, to the best knowledge of Natco,
threatened, in connection with the expiration or renewal of any of such permits.
(ii) NATCO LLC. Natco LLC is not in default in any material respect
under any order or decree of any court, governmental authority, arbitrator or
arbitration board or tribunal or under any laws, ordinances, governmental rules
or regulations to which Natco LLC or its respective properties or assets is
subject. Natco LLC possesses all material permits necessary for Natco LLC to
own, use and maintain its properties and assets or required for the conduct of
its business in substantially the same manner as it is currently conducted. Each
of such permits is in full force and effect and no proceeding is pending, or, to
the best knowledge of Natco LLC, threatened, to modify, suspend, revoke or
otherwise limit any of such permits and no administrative or governmental
actions have been taken or, to the best knowledge of Natco LLC, threatened, in
connection with the expiration or renewal of any of such permits.
(iii) ACQUISITION. Acquisition is not in default in any material
respect under any order or decree of any court, governmental authority,
arbitrator or arbitration board or tribunal or under any laws, ordinances,
governmental rules or regulations to which Acquisition or its respective
properties or assets is subject.
(h) BROKERS.
(i) NATCO. Natco has not used any broker or finder in connection with
the transactions contemplated hereby, and Natco does not or shall not have any
liability or otherwise suffer or incur any loss as a result of or in connection
with any brokerage or finder's fee or other commission of any person retained by
Natco in connection with any of the transactions contemplated by this Agreement.
(ii) NATCO LLC. Natco LLC has not used any broker or finder in
connection with the transactions contemplated hereby, and Natco LLC does not or
shall not have any liability or otherwise suffer or incur any loss as a result
of or in connection with any brokerage or finder's fee or other commission of
any person retained by Natco LLC in connection with any of the transactions
contemplated by this Agreement.
(iii) ACQUISITION. Acquisition has not used any broker or finder in
connection with the transactions contemplated hereby, and Acquisition does not
or shall not have any liability or otherwise suffer or incur any loss as a
result of or in connection with any brokerage or finder's fee or other
commission of any person retained by Acquisition in connection with any of the
transactions contemplated by this Agreement.
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(i) MATERIAL CONTRACTS.
(i) NATCO. Natco has not received notice of any cancellation or
termination of, or of any threat to cancel or terminate, any material contracts
or agreements where such cancellation or termination would have a Natco Material
Adverse Effect.
(ii) NATCO LLC. Natco LLC has not received notice of any cancellation
or termination of, or of any threat to cancel or terminate, any material
contracts or agreements where such cancellation or termination would have a
Natco LLC Material Adverse Effect.
(iii) ACQUISITION. Acquisition is not a party to any material contracts
or agreements other than this Agreement.
(j) ACCURACY OF STATEMENTS.
(i) NATCO. To the best of Natco's knowledge, neither this Agreement nor
any schedule, exhibit, statement, list, document, certificate or other
information furnished or to be furnished by or on behalf of Natco to AEO in
connection with this Agreement or any of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
(ii) NATCO LLC. To the best of Natco's knowledge, neither this
Agreement nor any schedule, exhibit, statement, list, document, certificate or
other information furnished or to be furnished by or on behalf of Natco LLC to
AEO in connection with this Agreement or any of the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
(iii) ACQUISITION. To the best of Natco's knowledge, neither this
Agreement nor any schedule, exhibit, statement, list, document, certificate or
other information furnished or to be furnished by or on behalf of Acquisition to
AEO in connection with this Agreement or any of the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
(k) FINANCIAL INFORMATION; BOOKS AND RECORDS OF NATCO. Natco has
delivered to AEO copies of its audited financial statements for the years ended
December 31, 1996 and 1997, and its unaudited financial statements for the ten
months ended October 31, 1998 (collectively, the "Natco Financial Information").
The Natco Financial Information fairly presents in all material respects the
financial condition and the results of operations of Natco as at the respective
dates of and for the periods referred to therein, all in accordance with
generally accepted accounting principles applied on a consistent basis
throughout all periods, subject, in the case of unaudited
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interim financial statements, to normal year-end and audit adjustments (the
effect of which are not or will not, individually or in the aggregate, be
materially adverse). The books of account, minute books and other records of
Natco, all of which have been made available to AEO: (i) are complete and
correct in all material respects; (ii) have been maintained consistent with past
practice; (iii) have recorded therein all material properties and assets and
liabilities of Natco; and (iv) reflect all material transactions entered into by
Natco or to which Natco is a party.
(l) LIABILITIES.
(i) NATCO. Natco does not have any material liabilities, obligations or
indebtedness of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise), other than as set forth in the Natco
Financial Information or as specifically identified in a schedule hereto or as
incurred in the ordinary course of business since October 31, 1998. At the
Effective Time, Natco will have no liabilities, obligations or indebtedness of
any nature (whether known or unknown and whether absolute, accrued, contingent
or otherwise).
(ii) NATCO LLC. Natco LLC does not have any material liabilities,
obligations or indebtedness of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise), other than as set forth in the
Natco Financial Information or as specifically identified in a schedule hereto
or as incurred in the ordinary course of business since October 31, 1998.
(iii) ACQUISITION. Acquisition does not have any material liabilities,
obligations or indebtedness of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise). At the Effective Time, Acquisition
will have no liabilities, obligations or indebtedness of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise).
(m) ENVIRONMENTAL LAWS. Natco complies and has complied with all
Environmental Laws except where any noncompliance has not resulted in, or could
not reasonably be expected to result in, individually or in the aggregate, any
material liability under Environmental Laws; and there are no past or present
events, conditions, circumstances, practices, plans or legal requirements that
could reasonably be expected to result in material liability to Natco under
Environmental Laws. For purposes of this Agreement, "Environmental Laws" means
all applicable federal, state and local statutes, rules, regulations,
ordinances, orders, decrees and common law, as they exist at the date hereof,
relating in any manner to contamination, pollution or protection of human health
or the environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste Disposal Act, the
Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act,
the Toxic Substances Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the Safe Drinking Water Act,
all as amended, and similar state laws.
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ARTICLE VII
COVENANTS
SECTION 6.01 TAX MATTERS.
(a) Each of the parties to this Agreement will use all reasonable
efforts to cause the Merger to qualify as a tax free reorganization under the
Code as contemplated by the private letter rulings referred to in Section
7.01(f).
(b) None of AEO, Acquisition, Natco, Natco LLC or any of their
affiliates will before or after the Closing Date file any tax or informational
return, make any disclosure or otherwise take any position or any action,
including but not limited to any action described below, that (i) is
inconsistent with the representations made to the Internal Revenue Service (the
"IRS") in the private letter rulings referred to in Section 7.01(f) and (g), as
subsequently amended or updated, or (ii) is inconsistent with the Merger
qualifying as a reorganization under Section 368(a) of the Code, or (iii) would
alone or in conjunction with any other action cause the Merger not to qualify as
a reorganization under said section of the Code. AEO, Acquisition, Natco and
Natco LLC will file all returns, reports or statements and take such other
actions as may be required to have the Merger qualify as a reorganization under
said section of the Code and to comply with regulations under Section 368 of the
Code as they apply to the Merger.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) this Agreement and the Merger shall have been approved and adopted
by the requisite vote of the shareholders of AEO;
(b) this Agreement and the Merger shall have been approved and adopted
by the requisite vote or consent of the shareholders of Natco and by the consent
of Acquisition's sole shareholder;
(c) the expiration or earlier termination of any waiting period under
the HSR Act shall have occurred;
(d) no preliminary or permanent injunction or other order, decree or
ruling issued by any court of competent jurisdiction nor any statute, rule,
regulation or order entered, promulgated or enacted by any governmental,
regulatory or administrative agency or authority shall be in effect that would
prevent the consummation of the Merger as contemplated hereby;
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(e) the shares of Common Stock of Natco to be issued in the Merger
shall have been approved for listing on the Nasdaq National Market, subject to
official notice of issuance;
(f) Natco and AEO shall have received supplemental private letter
rulings from the IRS, in form and substance satisfactory to each of them,
substantially to the effect that the private letter rulings from the IRS
relating to the Merger remain in full force and effect;
(g) there shall be no material adverse change to the private letter
rulings from the IRS relating to the Merger; and
(h) the SEC shall not object to Natco's accounting for the Merger on a
historical cost basis.
SECTION 7.02 CONDITIONS TO THE OBLIGATION OF AEO TO EFFECT THE MERGER.
The obligation of AEO to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the following additional conditions:
(a) Natco, Acquisition and Natco LLC shall have performed and complied
in all material respects with all obligations and agreements required to be
performed and complied with by it under this Agreement at or prior to the
Effective Time;
(b) the representations and warranties of Natco, Acquisition and Natco
LLC contained in this Agreement that are qualified as to materiality shall be
true and correct and all such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case, as
of the date hereof and at and as of the Effective Time as if made at and as of
such date;
(c) AEO shall have received a certificate from the Chief Executive
Officer of Natco, Acquisition and Natco LLC, dated as of the Effective Time, to
the effect that the conditions set forth in paragraphs (a) and (b) above have
been satisfied;
(d) Prior to the Effective Time, Natco shall have amended and restated
its Certificate of Incorporation and By-Laws so that they are in substantially
the same form as those of AEO, except for the number of authorized shares of
Natco Common Stock, the Natco Preferred Stock and the classification of Natco's
Board of Directors;
(e) At the Effective Time, the directors and officers of AEO
immediately prior to the Effective Time shall be the officers and directors of
Natco and, in the case of officers, to serve at the pleasure of the Board of
Directors of Natco and, in the case of the directors to serve in the following
classes until their successors are duly elected and qualified: Class I directors
- - Ari Deshe, Martin P. Doolan, Michael G. Jesselson and Jay L. Schottenstein;
Class II directors - John L. Marakas, David W. Thompson, Gerald E. Wedren and
Saul Schottenstein; and Class III directors - Jon P. Diamond, Gilbert W.
Harrison, Thomas R. Ketteler and George Kolber; and
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(f) Natco LLC and its members shall have duly executed and delivered an
Indemnification Agreement substantially in the form attached hereto as Exhibit
A, and otherwise in form and substance satisfactory to AEO.
SECTION 7.03 CONDITIONS TO THE OBLIGATION OF NATCO AND ACQUISITION TO
EFFECT THE MERGER. The obligations of Natco and Acquisition to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) AEO shall have performed and complied in all material respects with
all obligations and agreements required to be performed and complied with by it
under this Agreement at or prior to the Effective Time;
(b) the representations and warranties of AEO contained in this
Agreement that are qualified as to materiality shall be true and correct and all
such representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case, as of the date hereof and at and
as of the Effective Time as if made at and as of such date;
(c) Natco and Acquisition shall have received a certificate from the
Chief Operating Officer of AEO, dated as of the Effective Time, to the effect
that the conditions set forth in paragraphs (a) and (b) above have been
satisfied.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.01 TERMINATION AND ABANDONMENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval by the shareholders of Natco and AEO:
(a) by mutual action of the Boards of Directors of Natco and AEO;
(b) by AEO, if the conditions set forth in Sections 7.01 and 7.02 shall
not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Natco, Acquisition or Natco LLC on or before the
Effective Time or expressly waived in writing by AEO; or
(c) by Natco, if the conditions set forth in Sections 7.01 and 7.03
shall not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by AEO on or before the Effective Time or expressly
waived in writing by Natco; or
(d) by Natco or AEO (i) if there has been a material breach of a
representation or warranty made by the other party the effect of which is an AEO
Material Adverse Effect or a
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Natco Material Adverse Effect, as the case may be, or (ii) if there has been a
breach by the other party in any material respect of the covenants set forth in
this Agreement.
SECTION 8.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement and the abandonment of the Merger pursuant to Section 8.01, this
Agreement shall thereafter become void and have no effect, and no party hereto
shall have any liability to any other party hereto or its shareholders or
directors or officers in respect thereof, except as set forth in Section 9.02.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise specified, the representations and warranties of Natco, Acquisition
and Natco LLC contained herein shall survive the Closing for a period expiring
at the close of business on the earlier of the fourth anniversary of the Closing
Date or the applicable statute of limitations (the "Survival Date"), except that
(a) the representations and warranties set forth in Article V relating to taxes
shall survive until expiration of the applicable statute of limitations, and (b)
the representations and warranties set forth in Section 5.02(m) shall survive
until the tenth anniversary of the Closing Date. The representations and
warranties of AEO contained herein shall survive the Closing for a period
expiring at the close of business on the Survival Date.
SECTION 9.02 EXPENSES, ETC. Whether or not the transactions
contemplated by this Agreement are consummated, Natco agrees that it shall have
the sole obligation to pay both its own and AEO's fees and expenses solely and
directly related to the reorganization contemplated hereunder, including the
fees and expenses of counsel, accountants, and other experts, and Natco LLC
agrees to assume such obligation of Natco to the extent such payments have not
been made by the Effective Time, in each case Natco or Natco LLC shall pays such
fees and expenses of AEO only to the maximum extent and in the manner permitted
under Section 368(a)(1)(B) of the Code.
SECTION 9.03 PUBLICITY; CONFIDENTIALITY. AEO, Natco and Natco LLC agree
that this Agreement and the exchange of information pursuant thereto is
confidential and they will not disclose or issue any press release or make any
other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, except that
AEO or Natco and Natco LLC may make such public disclosure that it believes in
good faith to be required by law or any applicable rules and regulations of a
national securities exchange or the NASD (in which event such party shall
consult with the other prior to making such disclosure).
SECTION 9.04 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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SECTION 9.05 NOTICES. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by fax or mailed by registered or
certified mail, postage prepaid, and shall be deemed given upon receipt, as
follows:
If to Natco (prior to the Effective Time), Acquisition or Natco LLC to:
NATCO INDUSTRIES, INC.
1800 Moler Road
Columbus, Ohio 43207
Phone: 614-449-4332
Fax: 614-443-0972
Attention: Irwin A. Bain, Esq., General Counsel
If to AEO or Natco (after the Effective Time), to:
AMERICAN EAGLE OUTFITTERS, INC.
150 Thorn Hill Drive
Warrendale, Pennsylvania 15086-7528
Phone: 412-779-5221
Fax: 412-779-5535
Attention: George Kolber, COO
<TABLE>
<CAPTION>
with copies to:
<S> <C>
Benesch, Friedlander, Coplan & Aronoff Porter, Wright, Morris & Arthur
2300 BP America Building 41 South High Street
200 Public Square Columbus, Ohio 43215
Cleveland, OH 44114-2378 Phone: 614-227-2219
Phone: 216-363-4686 Fax: 614-227-4492
Fax: 216-363-4588 Attention: Neil Bulman, Jr., Esq.
Attention: Michael K.L. Wager, Esq
</TABLE>
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 9.06 WAIVERS. AEO, on the one hand, and Natco, Acquisition and
Natco LLC, on the other hand, may, by written notice to the other, (i) extend
the time for the performance of any of the obligations or other actions of the
other under this Agreement; (ii) waive any inaccuracies in the representations
or warranties of the other contained in this Agreement or in any document
delivered pursuant to this Agreement; (iii) waive compliance with any of the
conditions of the other contained in this Agreement; or (iv) waive performance
of any of the obligations of the other under this Agreement. Except as provided
in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party
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taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 9.07 AMENDMENTS, SUPPLEMENTS, ETC. At any time, this Agreement
may be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all of the parties
hereto.
SECTION 9.08 ENTIRE AGREEMENT. This Agreement and its schedules and
exhibits, and the documents to be executed or delivered at the Effective Time in
connection herewith, constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or such other documents, and none of the parties shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
SECTION 9.09 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
SECTION 9.10 BINDING EFFECT, BENEFITS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
SECTION 9.11 ASSIGNABILITY. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 9.12 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
SECTION 9.13 VARIATION AND AMENDMENT. This Agreement may be varied or
amended at any time before or after the approval and adoption of this Agreement
by the shareholders of AEO by action of the respective Boards of Directors of
AEO and Natco, without action by the shareholders thereof, provided that after
approval and adoption of this Agreement by AEO's
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shareholders no such variance or amendment shall, without consent of such
shareholders, increase the consideration that the holders of the capital stock
of Natco shall be entitled to receive upon the Effective Time pursuant to
Article III hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
NATCO INDUSTRIES, INC.
By: /s/ JAY L. SCHOTTENSTEIN
------------------------------------------
Jay L. Schottenstein, Chief Executive Officer
THORN HILL ACQUISITION CORP.
By: /s/ JAY L. SCHOTTENSTEIN
------------------------------------------
Jay L. Schottenstein, President
NATCO LIMITED LIABILITY COMPANY
By: Natco Industries, Inc., its sole Member
By: /s/ JAY L. SCHOTTENSTEIN
------------------------------------------
Jay L. Schottenstein, President
AMERICAN EAGLE OUTFITTERS, INC.
By: /s/ GEORGE KOLBER
------------------------------------------
George Kolber, Chief Operating Officer
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Article SEVENTH of New American Eagle's Certificate of
Incorporation provides that New American Eagle shall, to the fullest extent
permitted by applicable law as then in effect, indemnify any person who was or
is a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he was a director, officer, or employee
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise. The Corporation shall indemnify against all
expenses (including attorneys' fees), judgements, fines and amounts paid in
settlement actually and reasonably incurred by him in connection therewith.
Without limiting the generality of the foregoing, the Corporation may enter into
one or more agreements with any person that provide for indemnification greater
or different than that provided in Article SEVENTH.
In determining the right to indemnification, New American
Eagle has the burden of proof that the indemnitee has not met the applicable
standard of conduct. If successful in whole or in part in such a proceeding, the
indemnitee is entitled to be indemnified for expenses incurred in connection
with such proceeding. All reasonable expenses incurred by an indemnitee in
connection with any proceeding shall be paid by New American Eagle in advance of
the final disposition after receipt of a statement from the indemnitee
requesting such advance.
Article SEVENTH expressly states that neither the amendment
nor repeal of the Bylaws or the Certificate of Incorporation shall adversely
affect any right to indemnification for acts occurring prior to such amendment
or repeal. The right of indemnification and advancement of expenses provided by
Article SEVENTH is not exclusive of any other rights of indemnification or
advancement of expenses that may be available.
All indemnification rights in Article IX of New American
Eagle's Bylaws are contract rights. If any provision of Article IX is held
invalid, illegal or unenforceable, the remaining provisions of Article IX shall
not be affected. An indemnitee also may elect, as an alternative to the Article
IX procedures, to follow procedures authorized by applicable corporate law or
statute. Article IX sets forth specific procedures for the advancement of
expenses and for the determination of entitlement to indemnification.
Advancement of expenses are to be paid by the Corporation
within 20 days after the receipt by the Corporation of a statement or statements
from the claimant requesting such advance or advances provided that the claimant
delivers an undertaking to repay all amounts so advanced unless it shall
ultimately be determined that such person is entitled to be indemnified. To
obtain indemnification, a claimant shall submit to the Corporation a written
request, including therein or therewith such documentation and information as is
reasonably available to the claimant and is reasonably necessary to determine
and to what extent the claimant is entitled to indemnification. In the event the
determination of entitlement is to be made by Independent Counsel as set forth
in the Certificate of Incorporation, the Independent Counsel shall be selected
by the Board of Directors. If it is so determined that the claimant is entitled
to indemnification, payment to the claimant shall be made within 10 days after
such determination. If a claim has not been paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation,
the claimant may at any time bring suit against the Corporation to recover the
unpaid amount and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim.
If a determination shall be made that the claimant is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding. The Corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to Article IX that the procedures and
presumptions of the Bylaw are
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not valid, binding, and enforceable and shall stipulate in such proceeding that
the Corporation is bound by all the provisions of the By-Law. An indemnitee who
is determined not to be entitled to indemnification may appeal such
determination either through the courts or by arbitration.
(b) Under Section 145 of the Delaware Law, indemnification of any
person who is or was a party or threatened to be made so in any action by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or was serving as such of another corporation of other enterprise at
the request of the corporation is permitted against expenses, fines and amounts
paid in settlement actually and reasonably incurred by him in such proceeding
where the indemnified person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and in
criminal actions where he had no reasonable cause to believe his conduct was
unlawful. Indemnification is also permitted in lawsuits brought by or on behalf
of the corporation if the standards of conduct described above are met, except
that no indemnification is permitted in respect to any matter in which the
person is adjudged to be liable to the corporation unless a court shall
determine that indemnification is fair and reasonable in view of all the
circumstances of the case. Indemnification against expenses (including
attorneys' fees) actually and reasonably incurred by directors, officers,
employees and agents is required under Section 145 of the Delaware Law in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a lawsuit of the type described above. In cases where
indemnification is permissive, a determination as to whether the person met the
applicable standard of conduct must be made (unless ordered by a court) by
majority vote of the disinterested directors, by independent legal counsel, or
by the stockholders. Such indemnification rights are specifically not deemed to
be exclusive of other rights of indemnification by agreement or otherwise and
the corporation is authorized to advance expenses incurred prior to the final
disposition of a matter upon receipt of an undertaking to repay such amounts on
a determination that indemnification was not permitted in the circumstances of
the case.
(c) Under Section 145 of the Delaware Law and Article IX of the Bylaws,
New American Eagle may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee, or agent of New American Eagle, or
who, while serving in such capacity, is or was at the request of New American
Eagle, a director, officer, employee or agent of another corporation or other
enterprise, against liability asserted against or incurred by such person in any
such capacity whether or not New American Eagle would have the power to provide
indemnity under Section 145 or the Bylaws. New American Eagle has obtained
insurance which, subject to certain exceptions, insures the directors and
officers of New American Eagle and its subsidiary.
(d) New American Eagle has succeeded to indemnification contracts with
its directors and certain officers which provide that such directors and
officers will be indemnified to the fullest extent provided by Section 145 of
the Delaware Law (or such other future statutory provision authorizing or
permitting indemnification) against all expenses (including attorneys' fees),
judgments, fines and settlement amounts, actually and reasonably paid or
incurred by them in any action or proceeding, including any action by or in the
right of New American Eagle, by reason of the fact that they were a director,
officer, employee or agent of New American Eagle, or were serving at the request
of New American Eagle as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
No indemnity will be provided under such indemnification
contracts (i) except to the extent that the aggregate losses to be indemnified
pursuant thereto exceed the amount for which the indemnitee is indemnified
pursuant to any directors and officers liability insurance purchased and
maintained by New American Eagle; (ii) in respect to remuneration paid to an
indemnitee if it shall be determined by a final judgment that such remuneration
was in violation of law; (iii) on account of any suit in which judgment is
rendered against an indemnitee for an accounting of profits made from the
purchase or sale by indemnitee of securities of New American Eagle pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law; (iv) on account of the indemnitee's act or omission being finally
adjudged to have been not in good faith or involving intentional misconduct or a
knowing violation of law; or (v) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.
II-2
<PAGE> 63
(e) Article SEVENTH of New American Eagle's Certificate of
Incorporation provides that a director of New American Eagle shall not be
personally liable to New American Eagle or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to New American Eagle or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under Section 174 of
the General Corporation Law of the State of Delaware; or (iv) for any
transaction from which the director derived any improper personal benefit.
The above discussion of New American Eagle's By-Laws, Certificate of
Incorporation, indemnification agreements, and of Section 145 of the Delaware
Law is not intended to be exhaustive and is respectively qualified in its
entirety by such By-Laws, Certificate of Incorporation and statutes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Plan of Reorganization and Agreement and Plan of Merger, dated as
of November 30, 1998 among Natco Industries, Inc., American Eagle
Outfitters, Inc., and Thorn Hill Acquisition Corp. (See Appendix A)
*3.1 Amended and Restated Certificate of Incorporation of Natco
Industries, Inc.
3.2 Amended and Restated Bylaws of Natco Industries, Inc. (Previously
filed as Exhibit 3.2 to Registration Statement on Form S-4
(Registration No. 333-68609) filed December 9, 1998, and
incorporated by reference herein).
4.1 Articles Fourth, Fifth, Sixth and Seventh of Natco's Amended and
Restated Certificate of Incorporation. (See Exhibit 3.1).
4.2 Articles II, V and VI of Natco's Bylaws. (See Exhibit 3.2).
5.1 Opinion of Porter, Wright, Morris & Arthur. (Previously filed as
Exhibit 5.1 to Registration Statement on Form S-4 (Registration No.
333-68609) filed December 9, 1998, and incorporated by reference
herein).
*8.1 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP re Tax
Matters.
10.1 Form of Indemnification Agreement, dated as of January __, 1999,
among American Eagle Outfitters, Inc., Natco Industries, Inc. and
Natco Limited Liability Company. (Previously filed as Exhibit 10.1
to Registration Statement on Form S-4 (Registration No. 333-68609)
filed December 9, 1998, and incorporated by reference herein).
*15 Acknowledgment Letter of Ernst & Young LLP.
21.1 Subsidiaries of Natco Industries, Inc. (Previously filed as Exhibit
21.1 to Registration Statement on Form S-4 (Registration No.
333-68609) filed December 9, 1998, and incorporated by reference
herein).
*23.1 Consent of Ernst & Young LLP.
23.2 Consent of Porter, Wright, Morris & Arthur (included in Exhibit
5.1).
24.1 Powers of Attorney. (Previously filed as Exhibit 24.1 to
Registration Statement on Form S-4 (Registration No. 333-68609)
filed December 9, 1998, and incorporated by reference herein).
27.1 Financial Data Schedule. (Previously filed as Exhibit 27.1 to
Registration Statement on Form S-4 (Registration No. 333-68609)
filed December 9, 1998, and incorporated by reference herein).
99.1 Form of Proxy Card. (Previously filed as Exhibit 99.1 to
Registration Statement on Form S-4 (Registration No. 333-68609)
filed December 9, 1998, and incorporated by reference herein).
- ---------------------------
* Filed herewith
II-3
<PAGE> 64
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the required information is
included in the financial statements or the notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes: (1) to file during any
period in which offers or sales are being made, a post effective amendment to
this registration statement: (i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume or securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; (2) that for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; (3)
to remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of the Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is
II-4
<PAGE> 65
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Registration Statement, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Columbus, State of Ohio, on this 1st day of February,
1999.
NATCO INDUSTRIES, INC.
By: /s/Thomas R. Ketteler
-----------------------------------
Thomas R. Ketteler, Vice President,
Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*Jay L. Schottenstein Chairman and President February 1, 1999
- --------------------- (Principal Executive Officer)
Jay L. Schottenstein
/s/Thomas R. Ketteler Vice President, Treasurer and February 1, 1999
- --------------------- Director
Thomas R. Ketteler (Principal Financial Officer)
*Jon P. Diamond Director February 1, 1999
- ---------------------
Jon P. Diamond
*Ari Deshe Director February 1, 1999
- ---------------------
Ari Deshe
*By: /s/Thomas R. Ketteler
- -----------------------------------------
Thomas R. Ketteler, attorney-in-fact
for each of the persons indicated
II-6
<PAGE> 1
Exhibit 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NATCO INDUSTRIES, INC.
* * * * * * * * * * * * * * * * * * * * * * * * *
The above corporation, NATCO Industries, Inc. (the "Corporation"),
existing pursuant to the General Corporation Law of the State of Delaware,
desiring to give notice of corporate action effectuating the restatement and
amendment of its Certificate of Incorporation, sets forth the following facts:
(i) The date of filing of the Corporation's original Certificate
of Incorporation was January 26, 1972;
(ii) The Corporation's present name is NATCO Industries, Inc.;
(iii) The Corporation was originally incorporated under the name
National Apparel Industries, Inc.;
(iv) This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 and 245 of the General
Corporation Law of the State of Delaware; and
(v) The exact text of the Amended and Restated Certificate of
Incorporation is amended to read as follows:
FIRST. The name of the Corporation is: Natco Industries, Inc.
SECOND. The address of its registered office in the State of Delaware
is 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is One Hundred Thirty Million
(130,000,000) shares, consisting of 125,000,000 shares of common stock, $0.01
par value per share (the "Common Stock"), and 5,000,000 shares of Preferred
Stock, $.01 par value per share (the "Preferred Stock").
(b) Each holder of Common Stock shall be entitled to one vote for each
share of Common Stock held of record on all matters presented for vote of the
stockholders. Subject to the provisions of the General Corporation Law of the
State of Delaware, dividends may be paid on the Common Stock at such times and
in such amounts as the Board of Directors shall determine. Upon the dissolution,
liquidation, or winding up of the Corporation, after any preferential amounts to
be distributed to the holders of the Preferred Stock then outstanding have been
paid or declared set apart for payment, the holders of Common Stock shall be
entitled to receive all remaining assets of the Corporation available for
distribution to its stockholders ratably and proportioned to the number of
shares held by them.
(c) The Board of Directors is hereby authorized, by resolution or
resolutions, to establish, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, additional series of Preferred
Stock. Before any shares of any such additional series are issued, the Board of
Directors shall fix and determine, and is hereby expressly empowered to fix and
determine, by resolution or resolutions, the number of shares constituting such
series and the distinguishing characteristics and the relative rights,
preferences, privileges and immunities, if any, and any qualifications,
limitations or restrictions thereof, of the shares thereof, so far as not
inconsistent with the provisions of this Article FOURTH. Without limiting the
generality of the foregoing, the
<PAGE> 2
Board of Directors may fix and determine: (i) the designation of such series and
the number of shares which shall constitute such series of such shares; (ii) the
rate of dividend, if any, payable on the shares of such series; (iii) whether
the shares of such series shall be cumulative, non-cumulative or partially
cumulative as to dividends, and the dates from which any cumulative dividends
are to accumulate; (iv) whether the shares of such series may be redeemed, and,
if so, the price or prices at which and the terms and conditions on which shares
of such series may be redeemed; (v) the amount payable upon shares of such
series in the event of the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation; (vi) the sinking fund provisions,
if any, for the redemption of the shares of such series; (vii) the voting
rights, if any, of the shares of such series; (viii) the terms and conditions,
if any on which shares of such series may be converted into shares of the Common
Stock of the Corporation or any other class or series; (ix) whether the shares
of such series are to be preferred over shares of Common Stock of the
Corporation or any other class or series as to dividends, or upon voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Corporation, or otherwise; and (x) any other characteristics, preferences,
limitations, rights, privileges, immunities or terms not inconsistent with the
provisions of this Article FOURTH.
Any shares of Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock, without designation as
to series, and may be reissued as part of any series of Preferred Stock created
by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
FIFTH. In addition to all of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter or repeal the Bylaws
of the Corporation.
SIXTH. No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
SEVENTH. (a) The Corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer or
employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other
<PAGE> 3
applicable laws as presently or hereinafter in effect against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection therewith. Without
limiting the generality of the foregoing, the Corporation may enter into one or
more agreements with any person that provide for indemnification greater or
different than that provided in this Article Seventh.
(b) Expenses incurred by a director, officer or employee in defending a
civil or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer or employee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation.
(c) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which a person
seeking indemnification and advancement of expenses may be entitled under any
statute, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefits of the
heirs, executors and administrators of such a person.
(d) For the purposes of this Article Seventh, references to "the
Corporation" include, in addition to the resulting or surviving corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article Seventh
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
(e) Neither the Corporation nor its directors or officers nor any
person acting on its behalf shall be liable to any person for any determination
as to the existence or absence of conduct that would provide a basis for making
or refusing to make any payment under this Article Seventh, in reliance upon the
advice of counsel.
(f) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
any improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
(g) Neither the amendment nor repeal of this Article Seventh, nor the
adoption of any provision of this Amended and Restated Certificate of
Incorporation inconsistent with this Article Seventh, shall eliminate or reduce
the effect of this Article Seventh in respect of any matter occurring, or any
cause of action, suit or claim that would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
EIGHTH. The Corporation shall have perpetual existence.
NINTH. Amendments.
<PAGE> 4
(a) The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by the laws of
Delaware, and all rights conferred herein upon stockholders, directors and
others are granted subject to this reservation and subject to paragraph (b)
below.
(b) The provisions set forth in this Article NINTH and in Articles
TENTH and ELEVENTH of this Amended and Restated Certificate of Incorporation may
not be altered, amended or repealed in any respect, and new provisions
inconsistent therewith may not be adopted unless such action is approved by the
affirmative vote of the holders of at least eighty (80%) of all of the
outstanding shares of capital stock of the Corporation entitled to vote on such
matter at a meeting of stockholders called for that purpose, except that if the
Board of Directors, by an affirmative vote of at least three-fourths (75%) of
the entire Board of Directors, recommends approval of such amendment to this
Amended and Restated Certificate of Incorporation to the stockholders, such
approval may be effected by the affirmative vote of the holders of a majority of
the outstanding shares of capital stock of the Corporation present in person or
represented by proxy and entitled to vote on such matter at a meeting of
stockholders called for that purpose.
TENTH. Board of Directors.
(a) Number, Election and Terms of Directors. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors. The number of the directors of the Corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the Corporation, except that the minimum number of
directors shall be fixed at no less than three (3) and the maximum number of
directors shall be fixed at no more than fifteen (15). The directors shall be
divided into three classes, Class I, Class II, and Class III. Each such class
shall consist, as nearly as possible, of one-third of the total number of
directors and remaining directors shall be included within each such class or
classes as the Board of Directors shall designate. Class I directors shall hold
office initially for a term expiring at the 1999 annual meeting of stockholders;
Class II directors shall hold office initially for a term expiring at the 2000
annual meeting of stockholders; and Class III directors shall hold office
initially for a term expiring at the 2001 annual meeting of stockholders. At
each annual meeting of stockholders, successors to the class of directors whose
term expires at that annual meeting shall be elected to hold office for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible. A director shall hold office, subject
to any removal, death, resignation, or retirement, until the annual meeting for
the year in which his term expires and until his successor shall be elected and
qualified. Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
(b) Stockholder Nomination of Director Candidates. Nominations for
election to the Board of Directors of the Corporation at a meeting of
stockholders may be made by the Board of Directors, on behalf of the Board of
Directors by any nominating committee appointed by the Board of Directors, or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting. Nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the Corporation at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders. The notice shall set
forth: (i) the name and address of the stockholder who intends to make the
nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the Corporation which are
beneficially owned by each nominee and by the nominating stockholder; (v) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of
1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the Corporation, if
elected. The chairman of the meeting of stockholders may, if the facts warrant,
determine that a nomination was not made in accordance with the foregoing
procedures, and if the chairman should so determine, the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
(c) Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
<PAGE> 5
disqualification, removal or other cause shall be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum, or by a sole remaining director. A director, including any director
chosen to fill a newly created directorship or any vacancy, shall hold office
until the next annual meeting following his election or appointment to the Board
of Directors for the class of director to which he is appointed, as applicable,
and until such director's successor shall have been elected and qualified. In no
case will a decrease in the number of directors shorten the term of any
incumbent director.
(d) Removal. Notwithstanding any other provision of this Amended and
Restated Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified by the
General Corporation Law of the State of Delaware, this Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation), any director or
the entire board of directors of the Corporation may be removed from office at
any time, but only for cause and only by the affirmative vote of the holders of
at least eighty percent (80%) of all of the outstanding shares of capital stock
of the Corporation entitled to vote on the election of directors at a meeting of
stockholders called for that purpose, except that if the Board of Directors, by
an affirmative vote of at least three-fourths (75%) of the entire Board of
Directors, recommends removal of a director to the stockholders, such removal
may be effected by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Corporation present in person or
represented by proxy and entitled to vote on the election of directors at a
meeting of stockholders called for that purpose.
(e) Directors Elected by Holders of Preferred Stock. Notwithstanding
the classification provisions set forth in paragraph (a) above, whenever the
holders of any one or more classes or series of Preferred Stock issued by this
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies, terms of removal, and other features of such
directorships shall be governed by the terms of Article FOURTH and the
resolution or resolutions establishing such class or series adopted pursuant
thereto and such directors so elected shall not be divided into classes pursuant
to this Article TENTH unless expressly provided by such terms.
(f) Committees. Wherever the term "Board of Directors" is used in this
Amended and Restated Certificate of Incorporation, such term shall mean the
Board of Directors of the Corporation; provided, however, that, to the extent
any committee of directors of the Corporation is lawfully entitled to exercise
the powers of the Board of Directors, such committee may exercise any right or
authority of the Board of Directors under this Amended and Restated Certificate
of Incorporation.
ELEVENTH. Stockholder Action. Any action required or permitted to be
taken by any stockholders of the Corporation must be effected at a duly called
annual or special meeting of such stockholders and may not be effected by any
consent in writing by such stockholders, unless such consent is the unanimous
consent of all stockholders. Except as may be otherwise required by law, special
meetings of stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the Board of
Directors.
IN WITNESS WHEREOF, Natco Industries, Inc. has caused this Amended and
Restated Certification of Incorporation to be signed by Jay L. Schottenstein,
its President, and attested by Irwin A. Bain, its Secretary, this 22nd day of
January, 1999.
Attest: /s/Jay L. Schottenstein
-------------------------------
Jay L. Schottenstein, President
/s/Irwin A. Bain
- ------------------------
Irwin A. Bain, Secretary
<PAGE> 1
Exhibit 8.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
February 1, 1999
Natco Industries, Inc.
1800 Moler Road
Columbus, Ohio 43207
American Eagle Outfitters, Inc.
150 Thorn Hill Drive
Warrendale, Pennsylvania 15086
Re: U.S. Federal Income Tax Consequences of the Merger
--------------------------------------------------
Gentlemen:
We are acting as special tax counsel to Natco Industries, Inc.
("Natco") and American Eagle Outfitters, Inc. ("American Eagle"), in connection
with the merger pursuant to which Thorn Hill Acquisition Corp., a wholly-owned
subsidiary of Natco, will merge with and into American Eagle with American Eagle
surviving the merger, as described in the Registration Statement on Form S-4
filed with the United States Securities and Exchange Commission (the
"Commission") on February 1, 1999 (the "Registration Statement"). Natco and
American Eagle each have received a private letter ruling regarding the Merger
from the Internal Revenue Service (the "Original Rulings") pursuant to their
joint request (the "Original Ruling Request"). In addition, Natco and American
Eagle each have received supplemental rulings (the "Supplemental Rulings" and,
together with the Original Rulings, the "Tax Rulings") pursuant to their joint
request (the "Supplemental Ruling Request" and, together with the Original
Ruling Request, the "Ruling Requests"). You have requested our opinion
concerning certain United States federal income tax consequences of the merger
as set forth in the Tax Rulings. Capitalized terms not defined herein shall have
the meanings ascribed to them in the Registration Statement.
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, representations, and
covenants contained in originals or copies, certified or otherwise identified to
our satisfaction, of the Ruling Requests, the Tax Rulings, the Registration
Statement and such other documents as we have deemed necessary or appropriate as
a basis for the opinion set forth below. Our opinion is conditioned upon, among
other things, the initial and continuing accuracy and completeness of such
facts, information, representations, and covenants.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
<PAGE> 2
Natco Industries, Inc.
American Eagle Outfitters, Inc.
February 1, 1999
Page 2
of all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such documents. We have assumed that all of the
transactions related to the merger will be consummated in the manner described
in the Tax Rulings, the Ruling Requests and the Registration Statement.
In rendering our opinion, we have considered the Tax Rulings
and the applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations promulgated thereunder, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service, and such
other authorities as we have considered relevant, all of which are potentially
subject to change, possibly with retroactive effect. A change in any of the
authorities upon which our opinion is based could affect our conclusions.
Based solely on the foregoing, and subject to the discussion
set forth under the caption "U.S. Federal Income Tax Consequences" in the Proxy
Statement/Prospectus included within the Registration Statement (the "Proxy
Statement/Prospectus"), we are of the opinion that, under current law, for
United States federal income tax purposes, the merger will be a reorganization
under Section 368(a) of the Code.
Except as set forth above, we express no opinion to any party
as to any tax consequences, whether federal, state, local or foreign, of any
transactions or events contemplated by or referred to in the Tax Rulings, the
Ruling Requests or the Registration Statement. This opinion is expressed as of
the date hereof, unless otherwise expressly stated, and we disclaim any
undertaking to advise you of any subsequent changes of the facts stated,
referenced, or assumed herein or any subsequent changes in applicable law.
This opinion is being provided in connection with the filing
of the Registration Statement. We acknowledge that you will rely on this opinion
in providing disclosure to the American Eagle Shareholders of the material U.S.
Federal Income Tax Consequences of the merger. In addition, we consent to the
use of our name in the Proxy Statement/Prospectus under the heading "U.S.
Federal Income Tax Consequences of the Merger" and to the filing of this opinion
with the Commission as an exhibit to the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission promulgated thereunder.
Except as set forth above this opinion is not to be used, circulated, quoted or
otherwise referred to for any purpose without our prior written consent.
Sincerely yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
Exhibit 15
Acknowledgment Letter
The Board of Directors and
Stockholders of American Eagle
Outfitters, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Forms S-4) and related Joint Proxy Statement/Prospectus of Natco Industries,
Inc. and American Eagle Outfitters, Inc. of our reports dated May 20, 1998,
August 19, 1998, and November 17, 1998 related to the unaudited condensed
consolidated interim financial statements of American Eagle Outfitters, Inc.
which are included in the Form 10-Q for the quarters ended May 2, 1998,
August 1, 1998, and October 31, 1998.
Pursuant to Rule 436(c) of the Securities Act of 1933, our reports are not part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
January 29, 1999
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Prospectus/Proxy Statement
of Natco Industries, Inc. and American Eagle Outfitters, Inc. for the
registration of 16,279,300 shares of Natco Industries, Inc.'s common stock to
be issued in connection with the Reorganization and Merger of Natco Industries,
Inc. and American Eagle Outfitters, Inc. and to the incorporation by reference
therein of our report dated March 3, 1998 (except for Note 13, as to which the
date is April 14, 1998) with respect to the consolidated financial statements of
American Eagle Outfitters, Inc. included in its Annual Report (Form 10-K) for
the year ended January 31, 1998 filed with the Securities and Exchange
Commission and our report dated December 4, 1998 with respect to the financial
statements of Natco for the year ended December 31, 1997 included herein.
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
January 29, 1999
