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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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NATIONAL-STANDARD COMPANY
(Name of Subject Company)
NATIONAL-STANDARD COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
637742107
(CUSIP Number of Class of Securities)
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TIMOTHY C. WRIGHT
GENERAL COUNSEL
NATIONAL-STANDARD COMPANY
1618 TERMINAL ROAD
NILES, MICHIGAN 49120
(616) 683-8100
WITH A COPY TO:
PATRICK J. MALONEY
BELL, BOYD & LLOYD LLC
70 WEST MADISON STREET, SUITE 3300
CHICAGO, ILLINOIS 60602-4207
(312) 372-1121
(Name, Address and Telephone Number of Persons Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company is National-Standard Company, an Indiana
corporation (the "Company"), the address of the principal executive offices of
the Company is 1618 Terminal Road, Niles, Michigan 49120 and the telephone
number of the principal executive offices of the Company is (616) 683-8100.
(b) The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9")
relates is the Company's common stock, par value $0.01 per share (the "Common
Stock"). Unless the context otherwise requires, as used herein, the term
"Shares" shall mean shares of the Common Stock. As of July 7, 2000, there were
5,788,569 Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) The name, address and telephone number of the Company, which is the
person filing this Schedule 14D-9, are set forth in Item 1 above. Unless the
context otherwise requires, references to the Company in this Schedule 14D-9 are
to the Company and its direct and indirect subsidiaries, viewed as a single
entity.
(b) This statement relates to the tender offer (the "Offer") by
NS Acquisition Corp. ("Purchaser"), a Delaware corporation and a direct wholly
owned subsidiary of Heico Holding, Inc., a Delaware corporation ("Parent"), to
purchase all the issued and outstanding Shares at a price of $1.00 per Share,
net to the seller in cash, without interest thereon, subject to the terms and
conditions set forth in Purchaser's Offer to Purchase, dated July 10, 2000, and
the related Letter of Transmittal (together with the Offer to Purchase, and as
they may be amended from time to time, the "Offer Documents"). The Offer is
described in the Tender Offer Statement on Schedule TO filed by Parent and
Purchaser with the Securities and Exchange Commission on July 10, 2000 (as
amended or supplemented, the "Schedule TO"). The Offer Documents indicate that
the principal executive offices of Purchaser and Parent are located at 5600
Three First National Plaza, Chicago, Illinois 60602.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of June 26, 2000 (the "Merger Agreement"), among the Company, Purchaser and
Parent. The Merger Agreement, which is Exhibit 1 to this Schedule 14D-9, is
incorporated herein by reference in its entirety.
The Merger Agreement provides that, following the consummation of the Offer,
upon the satisfaction or waiver of certain conditions, Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, each Share
outstanding immediately prior to the effective time of the Merger (other than
Shares held in the treasury of the Company, Shares owned by Parent, Purchaser or
any other wholly owned subsidiary of Parent, or Shares held by shareholders who
properly exercise their dissenters' rights, if any, under the Indiana Business
Corporation Law) will be converted, by virtue of the Merger and without any
action by the holder thereof, into the right to receive $1.00 per Share (or any
higher price paid per Share in the Offer), net to the seller in cash, without
interest thereon (the "Offer Price"). The Merger Agreement is summarized in
Section 11 of the Purchaser's Offer to Purchase.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its executive officers, directors or
affiliates are described in Schedule I attached to this Schedule 14D-9 and
incorporated herein by reference. Certain contacts between the Company and the
Parent and its affiliates are described in Item 4 of this Schedule 14D-9 under
the heading "Background."
Except as described or incorporated by reference herein, to the knowledge of
the Company, as of the date hereof, there exists no material contract,
agreement, arrangement or understanding and no actual or
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potential conflict of interest between the Company or its affiliates and
(i) the Company's executive officers, directors or affiliates or
(ii) Purchaser, Parent or their respective executive officers, directors or
affiliates.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
THE MERGER AGREEMENT
A summary of certain provisions of the Merger Agreement is set forth under
the caption "The Merger Agreement" in Section 11 of the Purchaser's Offer to
Purchase, and such summary is incorporated herein by reference. The summary is
not a complete description of the terms and conditions of the Merger Agreement
and is qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is filed with the Commission as an exhibit to this
Schedule 14D-9. The Merger Agreement may be examined, and copies obtained, at
the places and in the manner set forth in Section 8 of Purchaser's Offer to
Purchase, which is enclosed with this Schedule 14D-9.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of a Confidentiality
Agreement dated February 18, 2000 between the Company and Heico Acquisitions, an
affiliate of Parent (the "Confidentiality Agreement"). This summary is not a
complete description of the terms and conditions of the Confidentiality
Agreement and is qualified in its entirety by reference to the full text of the
Confidentiality Agreement, a copy of which is filed with the Commission as an
exhibit to this Schedule 14D-9. The Confidentiality Agreement may be examined,
and copies obtained, at the places and in the manner as set forth in Section 8
of the Purchaser's Offer to Purchase, which is enclosed with this
Schedule 14D-9.
Pursuant to the terms of the Confidentiality Agreement, Heico Acquisitions
agreed to provide, among other things, for the confidential treatment of certain
confidential information concerning the Company and of the discussions regarding
the Offer and the Merger. Heico Acquisitions agreed that for a period of one
year from the date of the Confidentiality Agreement neither it nor its
affiliates will solicit the employment of any officer or employee of the Company
without the prior written consent of the Company. Heico Acquisitions further
agreed that, unless the Company has so requested in writing, neither it nor its
affiliates will, for a period of one year from the date of the Confidentiality
Agreement, (i) effect, seek or propose to effect, or assist any other persons
in, among other things, any acquisition of any securities or assets of the
Company or any of its subsidiaries, any tender or exchange offer, merger or
other business combination involving the Company or any of its subsidiaries, any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries, or any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Commission) or consents to vote any voting securities of the Company;
(ii) form, join or in any way participate in a "group" or act in concert with
any other person or entity or otherwise become a "person" (both as defined under
Section 13(d) of the Securities Exchange Act of 1934) with respect to any voting
securities of the Company; or (iii) otherwise act alone or in concert with
others, to seek to control or influence the management, Board of Directors or
policies of the Company.
ARRANGEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Ronald B. Kalich, its President
and Chief Executive Officer, and Supplemental Compensation Agreements with
Michael K. Conn, Chief Financial Officer, David Lawrence, Treasurer, and
Timothy C. Wright, General Counsel and Secretary, described under the section
captioned "Certain Contracts with Named Executives" in Schedule I hereto. In the
event of a change of control (as defined therein), Messrs. Kalich, Conn, Wright
and Lawrence may, under certain circumstances, terminate the agreements and be
entitled to lump sum payments equal to the multiples of salary and bonus
specified in their respective agreements. The purchase of more than 50% of the
Shares
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pursuant to the Offer will constitute a change of control for purposes of those
agreements. The lump sum amounts that would be payable to Messrs. Kalich, Conn,
Wright and Lawrence if their respective agreements were terminated in accordance
with their terms would be up to approximately $1,428,000, $217,000, $243,000 and
$239,000, respectively, at August 31, 2000.
In addition, upon a change of control, Mr. Kalich will become vested in his
rights under the Company's Targeted Retirement Benefit Plan (described under the
caption "Certain Contracts with Named Executives" in Schedule I hereto). Under
that plan Mr. Kalich would be entitled to annual payments equal to approximately
$195,000 (assuming a change of control had occurred as of August 31, 2000). The
purchase of Shares pursuant to the Offer will constitute a change of control for
the purposes of the vesting of Mr. Kalich's rights under such plan.
OPTIONS AND RESTRICTED STOCK HELD BY EXECUTIVE OFFICERS AND DIRECTORS
The discussions under the headings "The Merger Agreement -- The Merger" and
"-- Treatment of Restricted Stock" set forth in Section 11 of the Purchaser's
Offer to Purchase are incorporated herein by reference.
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
The discussion under the heading "The Merger Agreement -- Indemnification"
set forth in Section 11 of the Purchaser's Offer to Purchase is incorporated
herein by reference.
APPRAISAL RIGHTS
Shareholders do not have dissenters' rights as a result of the Offer.
However, in the event the Common Stock is not registered on a national
securities exchange or quoted for trading on the Nasdaq National Market at the
record date for any shareholder vote on the Merger (if any such vote is
required) holders of Shares at the effective time of the Merger will have
certain rights pursuant to the provisions of Chapter 44 of the Indiana Business
Corporation Law ("IBCL") ("Chapter 44") to dissent and demand fair value of
their shares. Dissenters' rights will not be available if the Merger is effected
pursuant to the short-form merger provisions of the IBCL as described in
Section 11 of the Purchaser's Offer to Purchase. See Section 7 of the
Purchaser's Offer to Purchase for a discussion of the possible delisting of the
Shares. Under Chapter 44, dissenting shareholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (excluding any appreciation or depreciation in
anticipation of the Merger unless such exclusion would be inequitable) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per Share to be paid in the
Merger.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Company's Board of Directors, by unanimous vote of all directors present
at a meeting on June 26, 2000, has (i) determined that the Merger Agreement and
the transactions contemplated thereby (including the Offer and the Merger) are
advisable, fair to and in the best interests of the Company's stakeholders,
including shareholders, (ii) approved and adopted the Merger Agreement and the
transactions contemplated thereby (including the Offer and the Merger), and
(iii) resolved to recommend that the Company shareholders accept the Offer and
vote for the approval and adoption of the Merger Agreement and the Merger. This
recommendation is based in part upon an opinion received by the Company from
U.S. Bancorp Piper Jaffray Inc., the Company's financial advisor (the
"Advisor"), that the Offer Price to be
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received by the holders of Common Stock in the Offer and in the Merger is fair
to such shareholders (other than Parent and its affiliates) from a financial
point of view. The full text of the fairness opinion received by the Company
from the Advisor (the "Piper Jaffray Opinion") is filed as an exhibit to this
Schedule 14D-9 and attached as Annex A hereto. Shareholders are urged to read
such opinion in its entirety.
As set forth in the Offer Documents, Purchaser will purchase Shares tendered
prior to the close of the Offer if there shall have been validly tendered and
not withdrawn at the expiration of the Offer a number of Shares equal to at
least a majority of the then outstanding Shares (the "Minimum Condition") and if
all other conditions to the Offer have been satisfied or waived. Shareholders
should be aware that if as a consequence of their failure to tender the Minimum
Condition is not satisfied, or any of the other conditions to the Offer are not
satisfied, Purchaser is not obligated to purchase any Shares, and subject to the
limitations under the Merger Agreement, can terminate the Offer and the Merger
Agreement and not proceed with the Merger. Under Indiana law, the approval of
the Board and the affirmative vote of the holders of a majority of the
outstanding Shares are required to approve the Merger. Accordingly, if the
Minimum Condition is satisfied, Purchaser will have sufficient voting power to
cause the approval of the Merger without the vote of any other shareholder.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
August 4, 2000, unless Purchaser, as required under the Merger Agreement as
described in the Offer to Purchase or otherwise in its discretion, elects to
extend the period in which the Offer is open. A copy of the press release issued
by the Company on June 27, 2000 announcing the Merger and the Offer is filed as
an exhibit to this Schedule 14D-9 and is incorporated herein by reference in its
entirety.
(b) Background of the Offer; Reasons for the Recommendation.
BACKGROUND
In September 1998, the Company engaged the Advisor to evaluate strategic
alternatives available to the Company. In October 1998, the Advisor presented an
analysis of a proposal it had received from The Heico Companies LLC ("Heico"),
an affiliate of the Parent, in which Davis Wire Corporation ("Davis Wire"), a
subsidiary of The Heico Companies, LLC, would acquire control of the Company,
with shareholders of the Company having the option to either retain shares in a
new entity formed by the merger of Davis Wire and the Company, or receive $5.00
per share in cash. The Board of Directors determined at that time that the
Company should remain independent, and the Company did not pursue Heico's
proposal. The Company's Board of Directors and management instead adopted a
revised business plan based on focusing on the Company's core businesses,
seeking to improve the Company's financial structure through cost reductions,
increasing productivity of the Company's operations, and selling non-core
assets. The Board and management believed that the Heico proposal did not
reflect the full value that could potentially be realized if the Company's
business plan was successfully implemented. After the Company's Board and
management determined that the Company would remain independent and would pursue
its revised business plan, the Company terminated the Advisor's engagement in
March 1999.
The Company continued to implement its strategy of focusing on its core
businesses and seeking to improve its financial structure through cost
reductions, increased productivity and the sale of non-core assets. The Company
was able to pay down significant amounts of debt through these sales. However,
adverse pricing developments at both the supplier and customer levels continued
to have a negative effect on earnings and cash flow, while putting a strain on a
reduced borrowing base.
On December 23, 1999, Ronald B. Kalich, President and Chief Executive
Officer of the Company, received a letter from Richard D. Denison of First San
Francisco Corporation, an investment banker representing Heico. The letter
stated that Mr. Denison believed a possible business combination continued to
have economic merit. On January 4, 2000, Mr. Kalich received a telephone call
from Mr. Denison and advised him that his inquiry would be reported to the Board
of Directors of the Company at its next
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scheduled meeting on January 27, 2000. Following a discussion of these contacts
at that Board meeting and on the recommendation of the Company's management, the
board authorized Mr. Kalich to pursue exploratory discussions. Management's
recommendation was based on its belief that because of the complementary nature
of the businesses of the Company and Davis Wire, a combination with Davis Wire
could be beneficial for all of the Company's stakeholders. As a result,
management and the Board determined not to actively pursue other potential
purchasers of the Company at that time.
On February 10, 2000, Mr. Kalich met with Mr. Heisley and Mr. Denison at the
Company's executive offices. They discussed the Company's capital needs and
different possible structures for a transaction.
On February 11, 2000, Mr. Kalich reported on this meeting to the Executive
Committee of the Board (David Craigmile, Charles Schroeder and Mr. Kalich). The
Executive Committee authorized Mr. Kalich to pursue the matter further with the
Parent.
On February 13, 2000, at an American Wire Producers Association Meeting in
San Diego, California, Mr. Kalich held informal discussions with the chief
executive officer of another company which had earlier (in 1997) expressed an
interest in a business combination with the Company. Such chief executive
officer indicated that any merger discussions with the Company should be
deferred to some time in the future because such chief executive officer and his
management team were focusing on another transaction at that time.
On February 18, 2000, Mr. Kalich sent a confidentiality agreement to Thomas
H. Pearson, a representative of the Parent. The confidentiality agreement was
executed and returned on February 24, 2000.
On March 7, 2000, Mr. Kalich, Michael K. Conn (Vice President of Finance and
Administration and Chief Financial Officer of the Company), and Rex Northcutt
(Director of Accounting at the Company) met in Chicago with Mr. Pearson and
E. A. Roskovensky, President of Davis Wire. At this meeting each party presented
summary financial information. The parties agreed that there was enough economic
potential in the possible combination of the businesses to warrant further
mutual due diligence.
From March 15 to March 17, 2000 representatives of Davis Wire conducted
plant visits at the Company's Niles, Michigan and Stillwater, Oklahoma plants.
On March 17, 2000, Mr. Kalich and Ken Staudinger, General Manager of the
Company's Bead Wire Group, and Larry Thomas, General Manager of the Company's
Weld Wire Group, visited Davis Wire's Kent, Washington facility. They met there
with Mike Quirk, Vice President and General Manager of Kent Davis Wire, and Don
Meiser, Vice President of Sales for Kent Davis Wire.
On March 20, 2000, Mr. Kalich received from Mr. Roskovensky a due diligence
request list.
On March 21, 2000, Mr. Kalich participated in a conference call with
Mr. Roskovensky and Stanley H. Meadows (Director and Assistant Secretary of the
Parent) addressing the conduct of further due diligence and the possible
structure of a transaction.
At a regularly scheduled meeting of the Company's Board on March 22, 2000,
Mr. Kalich updated the Board on details of discussions to date with the Parent.
The Board authorized Mr. Kalich to continue discussions.
From April 3 to April 7, 2000, representatives of Davis Wire conducted due
diligence at the Company's headquarters. At an April 5, 2000 meeting of the
Executive Committee of the Board, Mr. Kalich reported the results of discussions
with Davis Wire to date and was authorized to continue such discussions.
On May 1, 2000, Mr. Kalich met with Mr. Roskovensky. Mr. Roskovensky
reviewed various alternative transactions involving a combination of Davis Wire
and the Company. In addition, the preliminary results
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of an environmental study that Davis Wire had conducted were reviewed. This
study suggested possible environmental liabilities significantly in excess of
amounts the Company considered appropriate.
From May 2 to May 13, 2000, Mr. Kalich and Mr. Roskovensky communicated
several times regarding the valuations of the Company and Davis Wire and the
assets and liabilities of each Company.
From May 15 to May 19, 2000, financial, operational, legal and environmental
representatives of the Company conducted due diligence reviews at the Davis Wire
Facilities in Irwindale, California, Hayward, California, and Kent, Washington.
On May 23, 2000, Mr. Kalich and Mr. Conn met with Mr. Meadows and
Mr. Roskovensky at the Parent's offices in Chicago. At that meeting,
representatives of the Parent, after expressing continued concern over future
environmental liabilities of the Company, proposed a transaction in which the
Company and Davis Wire (which for purposes of the proposed transactions would
include Davis Wire's affiliates Jaenson Wire Corporation and Davis Wire Pueblo
Corporation) would merge, with Company shareholders receiving stock in the
surviving company, with no option to receive cash. Heico's proposal provided for
a formula to determine the percentage of shares to be held by Company
shareholders based on each entity's earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and liabilities. At that time, the
proposal contemplated Company shareholders receiving between 8% and 13% of the
surviving company. On that date, Davis Wire gave Mr. Kalich a letter summarizing
these terms.
At a meeting on May 24, 2000, Mr. Kalich reported to the Board on the
background leading up to the latest proposal from the Parent and the
alternatives management had explored, and summarized the Parent's proposal. The
alternatives discussed included the discussions with the other party on
February 13 referred to above, and that party's failure to pursue such
discussions, the possibility of the Company approaching one of its foreign joint
venture partners concerning a possible business combination, which management
did not consider a viable alternative given the time frame in which the Company
had begun to believe it might face a deteriorating liquidity position, as well
as the Company remaining independent, which management also did not believe was
a viable long-term alternative in light of the Company's possible future
liquidity problems. The Company's board of directors authorized management to
pursue a transaction with the Parent. Pursuant to the Board's direction, the
Advisor's engagement was renewed on May 26, 2000. By the time of such renewal,
management's discussions with Parent had reached a fairly advanced stage, and
the Advisor was asked principally to advise the Company with respect to that
transaction. Management did not believe other viable alternative transactions
were available to the Company, and thus did not request that the Advisor solicit
alternative transactions, because (i) although the Company's troubled financial
situation had been generally known throughout its industry, no other proposals
had been received from third parties, and (ii) management did not believe there
was time to conduct such a solicitation before the Company's liquidity position
might force a bankruptcy filing.
On May 26, 2000, Mr. Kalich, Timothy C. Wright, General Counsel and
Secretary of the Company, and Patrick Maloney and Craig Walker of Bell, Boyd &
Lloyd LLC, the Company's outside counsel ("Bell Boyd"), participated in a
conference telephone call with Mr. Meadows and Helen Friedli of McDermott,
Will & Emery, the Parent's outside counsel ("McDermott"). During that call
Mr. Meadows and Ms. Friedli indicated that, in order to make the transaction
more tax-efficient for the Parent and certain of its affiliates, the Parent was
suggesting a revised structure in which Company shareholders would receive
shares in a corporation that would manage, and whose sole asset would be an
ownership interest in, a limited liability company, which would in turn own and
operate the businesses of Davis Wire, Jaenson Wire Corporation, Davis Wire
Pueblo Corporation and the Company. During that call, the Parent's
representatives indicated that a draft merger agreement would be provided to the
Company by the end of the following week.
On June 2, 2000, one of the Company's principal suppliers suspended
production of the Company's order because it believed the Company was not in
compliance with its current payment obligations. After discussions with the
Company, the supplier resumed production; however, management of the Company
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determined that it would be desirable to announce a transaction as soon as
possible in order to reassure suppliers as to the Company's continued viability.
Mr. Kalich contacted Mr. Roskovensky to suggest that the parties execute a
letter of intent pending the completion of a definitive merger agreement.
Mr. Roskovensky indicated that might be possible, and therefore on June 2, 2000,
Bell Boyd prepared and delivered to Mr. Roskovensky and Mr. Meadows a draft
letter of intent. Also on June 2, 2000, McDermott forwarded to the Company and
Bell Boyd a draft merger agreement.
On June 7, 2000, Bell Boyd provided comments on the first draft of the
merger agreement to McDermott. On June 8, 2000, McDermott provided its version
of a letter of intent to the Company and Bell Boyd.
On June 9, 2000, Mr. Kalich, Michael Murphy of the Advisor, and
Messrs. Maloney and Walker of Bell Boyd met with Mr. Meadows, Ms. Friedli and
Eric Orsic of McDermott. After a discussion of each party's proposed version of
a letter of intent, the Company's representatives determined that the provisions
the Parent would require in a letter of intent (including, among other things, a
break-up fee of $2,000,000) were not acceptable. The parties agreed instead to
proceed directly to negotiate and sign a definitive agreement as promptly as
practicable. The parties then negotiated with respect to certain provisions of
the draft merger agreement.
On June 12, 2000, McDermott provided the Company and Bell Boyd with a
revised draft of the merger agreement.
On June 13, 2000, Mr. Roskovensky and Donn Laden, Chief Financial Officer of
Davis Wire, and John Hicks, a representative of Parent, met with Mr. Kalich,
Mr. Conn and representatives of the Advisor at the Company's offices in Niles,
Michigan. At this meeting, the Parent's representatives indicated that their
pricing formula was then indicating that Company shareholders would receive only
4-5% of the stock in the new merged entity. The representatives of the Advisor
indicated that they would need more information regarding Davis Wire, as well as
a more definitive understanding of the consideration to be received by Company
shareholders, for the Board to evaluate the transaction.
On June 14, 2000, Bell Boyd provided McDermott with comments on the most
recent draft merger agreement. Among other things, these comments reflected
various concerns the Company and its counsel had with the proposed structure of
the transaction and with the Parent's proposal that the consideration to be
received by Company shareholders not be fixed at the time of signing, but would
be subject to adjustment prior to closing. In light of those concerns,
Mr. Murphy of the Advisor contacted Mr. Meadows on June 13, 2000 and again the
next day to discuss those concerns and to ask whether the Parent would consider
a cash transaction. Mr. Murphy and Mr. Meadows had several subsequent
discussions concerning the consideration in a cash transaction, with
Mr. Meadows indicating that the price would be less than $1.00 per share, and
Mr. Murphy requesting that the Parent consider a price closer to then-current
trading prices of the Common Stock. On June 16, 2000, Mr. Meadows told
Mr. Murphy that he would make a proposal for a cash transaction on June 19,
2000. Also on June 16, 2000, the Company provided disclosure schedules relating
to the draft merger agreement to the Parent.
In addition, during the week of June 12 to June 16, 2000, management of the
Company had discussions with the Company's lender, Foothill Capital Corporation
("Foothill") in which Foothill indicated that the Company had reached the limits
of its borrowing capacity under its current arrangements, and that Foothill
would not consider providing any additional financing unless the Company
executed an agreement providing for some form of restructuring or business
combination.
On June 19, 2000, the Parent sent a proposed letter of intent to the Company
suggesting a cash merger at $1.00 per share. Parent suggested a cash merger
because of its concerns, as well as those expressed to it by the Company and its
representatives, that in light of the significant issues that existed concerning
the structure and terms of a stock transaction, the parties would be unable to
reach an agreement on the terms of such a transaction in a timely manner.
Management directed Mr. Murphy to
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attempt to negotiate a higher price, and directed Bell Boyd to ask McDermott to
provide a draft agreement reflecting the new structure. On June 22, 2000,
McDermott provided a new draft agreement contemplating a cash merger at $1.00
per share.
During the week of June 19 to June 23, 2000, Mr. Kalich and Mr. Conn held
discussions with the other company that in February had requested that any
merger discussions be deferred. While that company indicated that it continued
to be interested in a possible transaction with the Company, it also indicated
that it would not be able to consider a transaction on a timetable that came at
all close to what the Company's management believed was required. Management
believed, based on discussions with Foothill and certain of its principal
suppliers, that if a definitive transaction was not announced by the end of June
2000, those parties would take actions requiring the Company to make a
bankruptcy filing. The other party had indicated that it would need to conduct
full due diligence before making a definitive offer, which it was not in a
position to begin promptly.
On the morning of June 23, 2000, the Company's board of directors met to
further consider the proposed transaction. All of the directors were present
except for Mr. Cucuz, who was out of the country and unreachable. Mr. Walter
participated by telephone. The directors were provided with copies of the draft
merger agreement as well as related materials. Management made presentations
concerning the Company's financial situation and the background of the
transaction. Management's presentations included a discussion of the possibility
of a bankruptcy filing, which management believed would have a serious negative
effect on the Company's businesses and operating cash flows, and would result in
little or no value being realized for shareholders. Bell Boyd explained the
terms of the transaction and reviewed related legal issues. Representatives of
the Advisor then presented materials to the directors analyzing the financial
aspects of the transaction, and indicated that they were prepared to deliver a
fairness opinion concerning the transaction as proposed. After further
discussion among the directors, management was directed to attempt to finalize
the transaction, but to continue to seek a higher price, all subject to director
review over the weekend of the materials received at the meeting.
Later that afternoon, Mr. Murphy conveyed to Mr. Meadows the Board's desire
for a higher price. Mr. Meadows responded that Parent would not increase its
$1.00 per share offer. Also later that afternoon, Ms. Friedli of McDermott
informed Bell Boyd that the Parent now wished to pursue a cash tender offer
structure. Still later on June 23, 2000, Bell Boyd sent a marked copy of the
latest draft of the merger agreement to McDermott.
On June 24, 2000, representatives of McDermott and Bell Boyd negotiated by
phone concerning the Company's latest comments on the merger agreement. Later on
June 24, 2000, McDermott distributed a revised draft of the merger agreement
reflecting the tender offer structure.
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On the morning of June 26, 2000, representatives of Bell Boyd and McDermott
negotiated concerning the provisions of the final version of the merger
agreement. A meeting of the Board of Directors of the Company was held by
telephone conference call at 3:00 p.m. Central time on June 26 (with all
directors present except Mr. Cucuz, who was still out of the country and
unreachable), at which the revised terms of the transaction (including the
tender offer structure and its effects) were discussed. After this discussion
the Advisor delivered its fairness opinion. The Board then (i) determined that
the Merger Agreement and the transactions contemplated thereby (including the
Offer and the Merger) are advisable, fair to and in the best interests of the
Company's stakeholders, including shareholders, (ii) approved and adopted the
Merger Agreement and the transactions contemplated thereby (including the Offer
and the Merger), subject to finalization of definitive terms, and
(iii) resolved to recommend that the Company shareholders accept the Offer and
vote for the approval and adoption of the Merger Agreement and the Merger. After
further negotiations between Bell Boyd and McDermott that afternoon and evening,
the Merger Agreement was finalized and executed by the parties that night.
The Company announced the execution of the Merger Agreement before the
opening of the market on the morning of June 27, 2000.
REASONS FOR THE RECOMMENDATION
In reaching its conclusions to approve the Merger and recommend that
shareholders accept the Offer, the Board of Directors of the Company considered
a number of factors, including the following:
(i) analysis of the historical and projected financial condition,
results of operations and cash flows of the Company and the Company's
current and projected liquidity position, which, among other things, showed
the Company having insufficient sources of liquidity, absent the provision
to the Company of additional financing by a third party;
(ii) the actions by the Company's senior lender, Foothill Capital
Corporation, and certain of the Company's suppliers that are described under
"Background" and their likely adverse effect on the Company's liquidity
position, as well as the statements made by Foothill Capital Corporation to
the Company's management that it would be willing to consider the provision
of additional short-term financing if a merger agreement were entered into;
(iii) the financial and other terms and conditions of the Offer and the
Merger Agreement including the likely timing of the Offer and Merger;
(iv) the Board's view of the likelihood of additional liquidity
resources being available to the Company from Heico after consummation of
the Offer;
(v) the competitive environment in which the Company operates including
the ability of the Company to raise prices or otherwise seek improved terms
from customers in any material respect;
(vi) the history of Heico and its affiliates in the wire business
including the record of profitability achieved by Heico's affiliate, Davis
Wire;
(vii) the interests of certain directors and executive officers in the
transaction under certain agreements and plans applicable to them;
(viii) that the $1.00 per Share price to be received by the Company's
shareholders in both the Offer and the Merger would be payable in cash, thus
eliminating any uncertainties in valuing the consideration to be received by
the Company's shareholders;
(ix) that the Offer and the Merger would not be subject to any financing
condition and that Parent has represented that the funds necessary to
consummate the Offer and the Merger are available and will be provided to
Purchaser;
9
<PAGE>
(x) the written opinion of US Bancorp Piper Jaffray that the Offer Price
to be received by the holders of Common Stock in the Offer and the Merger is
fair to such shareholders (other than Parent and its affiliates) from a
financial point of view (a copy of the Piper Jaffray Opinion which sets
forth the assumptions made, matters considered and limitations on the review
undertaken by U.S. Bancorp Piper Jaffray, is attached to this Schedule 14D-9
as Annex A and is incorporated herein by reference). This opinion is
directed only to the fairness, from a financial point of view, of the $1.00
per Share cash consideration to be received in the Offer and the Merger by
holders of Shares (other than Parent and its affiliates) and is not intended
to constitute, and does not constitute, a recommendation as to whether any
shareholder should tender Shares pursuant to the Offer. HOLDERS OF SHARES
ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY;
(xi) the presentation of US Bancorp Piper Jaffray to the Board of
Directors at its meetings on June 23, 2000 and June 26, 2000, respectively,
as to various financial and other matters involving the Company and the
transaction which the Board of Directors deemed relevant, including, among
other things, (a) a review of the Company's historical financial performance
and other data provided to US Bancorp Piper Jaffray by the Company relating
to the Company's business, (b) a review of the historical stock prices and
trading volumes of the Shares, (c) a review of the enterprise value implied
by the Offer Price and liabilities to be assumed in the Merger in relation
to enterprise values of certain publicly traded companies deemed comparable
by U.S. Bancorp Piper Jaffray, (d) a review of the enterprise value implied
by the Offer Price and liabilities to be assumed in the Merger in relation
to transaction values in certain other transactions deemed comparable by
U.S. Bancorp Piper Jaffray, and (f) an analysis of the Company's liquidity
position;
(xii) management's discussions with other potential interested parties
concerning possible business combinations;
(xiii) the fact that, to the extent required by the fiduciary obligations
of the Company's Board of Directors under Indiana law and subject to certain
conditions contained in the Merger Agreement, the Company may terminate the
Merger Agreement in order to approve a tender offer or exchange offer for
the Shares or other proposed business combination by a third party on terms
more favorable to the Company's shareholders than the Offer and the Merger
taken together, upon the payment of a $1.25 million termination fee, plus
expenses of Parent and Purchaser;
(xiv) the future of the Company's employees;
(xv) the impact of the Offer and the Merger on existing options and
shares of restricted stock;
(xvi) the opinion of management that in the event of a bankruptcy filing,
shareholders would likely receive less than $1.00 per share due to the
administrative and other costs and damage to the business associated with a
bankruptcy proceeding;
(xvii) the recent trading prices and low trading volume for the Common
Stock which suggested that trades were infrequently being made and thus,
because there was not an active market of buyers and sellers, the current
market prices for Common Stock may not be a reliable indication of fair
value; and
(xviii) the impact on the communities in which the Company's facilities
are located, and on its customers and suppliers, if a transaction was not
completed and a bankruptcy filing became necessary.
The foregoing is not intended to be exhaustive, but is intended to include
many of the material factors considered by the Company's Board. In view of the
complexity and variety of the issues, the Board did not attempt to quantify or
otherwise attempt to assign any relative or specific weights to the specific
factors considered, and individual directors may have given differing weights to
different factors.
(c) To the best knowledge of the Company, all of its executive officers and
directors currently intend to tender pursuant to the Offer all Shares held of
record or beneficially owned by them.
10
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained U.S. Bancorp Piper Jaffray Inc. as its financial
advisor in connection with a possible transaction involving the Company.
Pursuant to its agreement with the Advisor, the Company agreed to pay the
Advisor (i) a retainer of $25,000 upon its initial engagement in September 1998,
(ii) an additional retainer of $50,000 in May 2000, and (iii) a fee of $100,000
for each fairness opinion it rendered. In addition, the Advisor will receive a
fee upon the consummation of the Merger equal to $725,000, with the fairness
opinion fees previously described being credited against such amount. In
addition, the Company has agreed to reimburse the Advisor for its out-of-pocket
expenses, including the fees and disbursements of its counsel, and to indemnify
the Advisor and its partners, employees, agents, affiliates or controlling
persons against certain liabilities relating to or arising out of its
engagement, including liabilities under Federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer and the Merger.
The Advisor has consented to the reproduction in full of its fairness
opinion in the Schedule 14D-9. A copy of the Advisor's opinion is attached
hereto as Annex A.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
During the past 60 days, no transactions in the Shares have been effected by
the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate, or subsidiary of the Company, except as follows:
On the dates indicated below, the trustee of the Company's Employee Stock
Savings Plan acquired the number of shares shown, at the prices indicated, on
behalf of such Plan.
<TABLE>
<CAPTION>
NUMBER PURCHASE
DATE OF SHARES PRICE
---- --------- --------
<S> <C> <C>
05/01/2000 300 $2.1250
05/03/2000 200 2.2500
05/05/2000 1,300 2.2212
05/08/2000 8,000 2.5000
05/08/2000 2,000 2.5000
05/10/2000 3,200 2.3750
05/16/2000 1,500 2.3750
05/26/2000 500 2.0625
05/30/2000 6,200 1.9375
06/08/2000 500 2.1250
06/09/2000 5,533 2.0339
06/26/2000 26 1.5000
</TABLE>
On the dates indicated below, the trustee of the Company's Hourly Employees'
Savings and Investment Plan acquired the number of shares shown, at the prices
indicated, on behalf of such Plan.
<TABLE>
<CAPTION>
NUMBER PURCHASE
DATE OF SHARES PRICE
---- --------- --------
<S> <C> <C>
06/09/2000 76 $2.0000
06/26/2000 174 1.5000
</TABLE>
11
<PAGE>
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) Except as set forth or incorporated by reference herein, no negotiation
is being undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) an extraordinary transaction, such as a merger
or reorganization, involving the Company or any subsidiary thereof; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary thereof; (iii) a tender offer for or other acquisition of securities
by or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
(b) Except as set forth or incorporated by reference herein, there is no
transaction, board resolution, agreement in principle or signed contract in
response to the Offer that relates to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION.
(a) State Business Combination Law
INDIANA. A number of states throughout the United States have enacted
takeover statutes that purport, in varying degrees, to be applicable to attempts
to acquire securities of corporations that are incorporated or have assets,
shareholders, executive offices or places of business in those states. In EDGAR
V. MITE CORP., the Supreme Court of the United States invalidated on
constitutional grounds the Illinois Business Takeover Act, which, as a matter of
state securities law, made certain corporate acquisitions more difficult. In CTS
CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United
States held that a state may, as a matter of corporate law and, in particular,
those laws concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
prior approval of the remaining shareholders, provided that the laws were
applicable only under certain conditions.
Chapter 42 of the IBCL ("Chapter 42") states that unless the articles of
incorporation or the bylaws of an "issuing public corporation" provide that the
provisions of Chapter 42 do not apply to acquisitions of shares of such issuing
public corporation, an acquiring person, such as Purchaser, who makes a "control
share acquisition" with respect to such issuing public corporation may not
exercise voting rights pertaining to any "control shares" unless such rights are
conferred by holders of a majority of the outstanding shares of voting stock of
such issuing public corporation, excluding shares held by such acquiring person
or any officer or employee director of such issuing public corporation
("interested shares"), at a meeting of the shareholders. Chapter 42 defines
"issuing public corporation" as any corporation that has: (i) 100 or more
shareholders, (ii) its principal office or substantial assets within Indiana,
and (iii) more than 10% of its shareholders residing in Indiana, more than 10%
of its shares owned by Indiana residents or 10,000 shareholders residing in
Indiana. Chapter 42 defines "control shares" as an aggregate number of shares
owned by a person or in respect of which the person may exercise or direct the
exercise of the voting power of the issuing public corporation in an election of
directors within any of the following ranges: (a) one-fifth or more but less
than one-third, (b) one-third or more but less than a majority, or (c) a
majority or more. Chapter 42 defines a "control share acquisition" as the
acquisition of either ownership or the power to direct the voting power of
issued and outstanding control shares. The Company has taken action necessary to
render Chapter 42 inapplicable to the Offer.
Chapter 43 of the IBCL ("Chapter 43") generally prohibits an Indiana
corporation from engaging in a "business combination" (defined generally as a
variety of transactions, including mergers) with an "interested shareholder"
(defined generally as a person that is the beneficial owner of 10% or more of a
corporation's outstanding voting stock) for a period of five years following the
date that such person became an interested shareholder, unless, among other
things, prior to the date such person became an interested shareholder, the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the shareholder becoming an interested
shareholder. The Company
12
<PAGE>
Board has approved the Merger Agreement and the Purchaser's acquisition of
shares pursuant to the Offer. Therefore, Chapter 43 does not apply to the
Merger.
Indiana also has a takeover offers statute that by its terms would be
inapplicable to the Offer because the Company does not have its principal place
of business in Indiana.
(b) Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to these requirements.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act as soon as practicable following commencement of the
Offer. Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar-day waiting period following the filing by the Parent, unless the
Antitrust Division and the FTC terminate the waiting period prior thereto. In
addition, the Antitrust Division or the FTC may extend such waiting period by
requesting additional information or documentary material from Parent. If such a
request is made with respect to the Offer, the waiting period related to the
Offer will expire at 11:59 p.m., Washington, D.C. time, on the 10th day after
substantial compliance by Parent with such request. With respect to each
acquisition, the Antitrust Division or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. Expiration or
termination of applicable waiting periods under the HSR Act is a condition to
Purchaser's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares pursuant
to the Offer, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or the
consummation of the Merger or seeking the divestiture of Shares acquired by
Purchaser or the divestiture of substantial assets of Parent or its
subsidiaries, or the Company or its subsidiaries. Private parties may also bring
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, of the results thereof.
13
<PAGE>
ITEM 9. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<S> <C>
1 Merger Agreement among the Company, Heico Holding, Inc. and
NS Acquisition Corp. dated as of June 26, 2000 (incorporated
herein by reference to Exhibit (a)(5)(iv) to Schedule TO of
Heico Holding, Inc. and NS Acquisition Corp., filed on
July 10, 2000).
2 Employment Agreement effective November 16, 1999 between
Ronald B. Kalich and the Company.*
3 Form of Supplemental Compensation Agreement with Certain
Officers (incorporated by reference to Exhibit 10(a)(iv) to
the Company's Annual Report on Form 10-K for the Fiscal Year
ended September 30, 1997)
4 Opinion of U.S. Bancorp Piper Jaffray Inc., dated June 26,
2000 (attached to Schedule 14D-9 mailed to shareholders as
Annex A).
5 Consent of U.S. Bancorp Piper Jaffray Inc.*
6 Press Release issued by the Company on June 27, 2000
(incorporated herein by reference to Exhibit 99.1 to the
Company's current report on Form 8-K dated June 27, 2000).
7 Confidentiality Agreement dated February 18, 2000 between
the Company and Heico Acquisitions.*
8 Letter dated July 10, 2000 from Ronald B. Kalich to the
shareholders of the Company (included with Schedule 14D-9
mailed to shareholders).
</TABLE>
------------------------
* Previously filed.
14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
July 21, 2000 NATIONAL-STANDARD COMPANY
By: /s/ RONALD B. KALICH
------------------------------------------
Ronald B. Kalich
President and Chief Executive Officer
</TABLE>
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
1 Merger Agreement among the Company, Heico Holding, Inc. and
NS Acquisition Corp. dated as of June 26, 2000 (incorporated
herein by reference to Exhibit (a)(5)(iv) to Schedule TO of
Heico Holding, Inc. and NS Acquisition Corp., filed on
July 10, 2000).
2 Employment Agreement effective November 16, 1999 between
Ronald B. Kalich and the Company.*
3 Form of Supplemental Compensation Agreement with Certain
Officers (incorporated by reference to
Exhibit 10(a)(iv) to the Company's Annual Report on
Form 10-K for the Fiscal Year ended September 30, 1997).
4 Opinion of U.S. Bancorp Piper Jaffray Inc., dated June 26,
2000 (attached to Schedule 14D-9 mailed to shareholders as
Annex A).
5 Consent of U.S. Bancorp Piper Jaffray Inc.*
6 Press Release issued by the Company on June 27, 2000
(incorporated herein by reference to Exhibit 99.1 to the
Company's current report on Form 8-K dated June 27, 2000).
7 Confidentiality Agreement dated February 18, 2000 between
the Company and Heico Acquisitions.*
8 Letter dated July 10, 2000 from Ronald B. Kalich to the
shareholders of the Company (included with Schedule 14D-9
mailed to shareholders).
</TABLE>
------------------------
* Previously filed.
<PAGE>
SCHEDULE I
NATIONAL-STANDARD COMPANY
1618 TERMINAL ROAD
NILES, MICHIGAN 49120
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about July 10, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of National-Standard Company (the "Company") to the holders of
record of shares of Common Stock, par value $0.01 per share, of the Company (the
"Shares"). You are receiving this Information Statement in connection with the
possible election of persons designated by the Purchaser (as defined below) to a
majority of the seats on the Board of Directors of the Company.
On June 26, 2000, the Company, Heico Holding, Inc., a Delaware corporation
("Parent"), and NS Acquisition Corp, a Delaware corporation ("Purchaser"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") in
accordance with the terms and subject to the conditions of which (i) Parent will
cause the Purchaser to commence a tender offer (the "Offer") for all outstanding
Shares, at a price of $1.00 per Share net to the seller in cash, and
(ii) Purchaser will be merged with and into the Company (the "Merger"). As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Parent.
The Merger Agreement requires the Company to take such action as Purchaser
may reasonably request to cause Purchaser's designees to be elected to the Board
of Directors under the circumstances described therein. See "Board of Directors
and Executive Officers -- Right to Designate Directors; Purchaser Designees"
below.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Schedule
14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on July 10,
2000. The Offer is scheduled to expire at 12:00 midnight, New York City Time, on
Friday, August 4, 2000, unless the Offer is extended.
The information contained in this Information Statement concerning Purchaser
and Parent has been furnished to the Company by Purchaser and Parent, and the
Company assumes no responsibility for the accuracy of completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of July 7, 2000, there were 5,788,569
Shares outstanding, 1,230,500 shares reserved for issuance upon exercise of
outstanding options and 100,000 shares reserved for issuance upon exercise of an
outstanding stock purchase warrant. The Board of Directors currently consists of
eight members, divided into three classes with staggered terms of three years.
At each annual meeting of shareholders, directors of the class whose term
expires on the date of such meeting are elected to hold office for three years.
I-1
<PAGE>
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment for at least a majority of the outstanding Shares, Parent and Purchaser
shall be entitled to designate the number of directors, rounded up to the
nearest whole number, as will give Parent and Purchaser representation on the
Company's Board of Directors equal to the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to the directors
designated by Parent and Purchaser) and the percentage that the aggregate number
of Shares so purchased bears to the total number of Shares then outstanding. The
Company has agreed that, upon request of Parent, it will promptly either
increase the size of its Board of Directors or exercise its reasonable best
efforts to secure the resignations of such number of its incumbent directors as
is necessary to enable Parent's designees to be so elected or appointed to the
Company's Board of Directors, and that it shall cause Parent's designees to be
so elected or appointed at such time.
Parent and Purchaser have indicated that they will designate Michael E.
Heisley, Sr., E.A. Roskovensky, Stanley H. Meadows and Emily Heisley Stoeckel as
Parent's designees (the "Parent Designees").
Mr. Michael F. Heisley, Sr. has been President and Chief Executive Officer
of Heico Holding, Inc. since October 1997. Prior to October 1997, he was
Chairman of the Board of Heico Holding, Inc. Mr. Heisley serves as Chairman of
the board of directors of Davis Wire Corporation and WorldPort
Communications, Inc. Mr. Heisley serves as Director and Chairman and Chief
Executive Officer of NS Acquisition Corporation. Mr. Heisley is the father of
Emily Heisley Stoeckel.
Mr. Stanley H. Meadows has served as a Director and Assistant Secretary of
Heico Holding, Inc. since October 1997. Mr. Meadows is also Director and
Assistant Secretary of NS Acquisition Corp. Mr. Meadows is the president of a
professional corporation that is a partner at the law firm of McDermott, Will &
Emery since 1985.
Ms. Emily Heisley Stoeckel has served as a Director of Heico Holding, Inc.
since October 1997. Since 1995, Ms. Stoeckel has been Managing Director of Heico
Acquisitions. Ms. Stoeckel is also a Director of Tom's Foods, Inc. Ms. Stoeckel
is the daughter of Michael E. Heisley, Sr.
Mr. E. A. Roskovensky serves as President and Secretary of NS Acquisition
Corp. He is also the President and Chief Executive Officer of Davis Wire
Corporation. Mr. Roskovensky serves on the board of directors of QuadraMed
Corporation.
None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any directors
or executive officers of the Company, or (iii) to the best knowledge of the
Purchaser, beneficially owns any securities (or rights to acquire such
securities) of the Company, except that The Heico Companies, L.L.C., an
affiliate of Parent of which Michael E. Heisley, Sr. is the President and Chief
Executive Officer, is the beneficial owner of 25,500 Shares (representing 0.4%
of the outstanding Shares). The Company has been advised by Purchaser that, to
the best of Purchaser's knowledge, none of the Parent Designees has been
involved in any transactions with the Company or any of its directors, executive
officers or affiliates which are required to be disclosed herein or in the
Schedule 14D-9.
It is expected that the Parent Designees may assume office at any time
following the acceptance for payment of, and payment for, any Shares pursuant to
the Offer, and that, upon assuming office, the Parent Designees will thereafter
constitute at least a majority of the Board of Directors.
Biographical information concerning each of the Company's current directors
and executive officers is presented on the following pages.
I-2
<PAGE>
DIRECTORS
The names of the members of the Board of Directors, and certain information
with respect to each, are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATION BECAME
NAME AGE AND OTHER INFORMATION A DIRECTOR
---- -------- --------------------- -----------
<S> <C> <C> <C>
DIRECTORS WHOSE TERM EXPIRES IN 2001
David F. Craigmile 72 Executive Committee member, The Lincoln Foundation 1989
for Business Excellence; Director, Elkay
Manufacturing Company; formerly President, Elkay
Manufacturing Company (plumbing and drinking water
products), 1985 to 1994.
Ranko Cucuz 55 Chairman and Chief Executive Officer of Hayes 1997
Lemmerz International, Inc. (automobile industry
supplier).
Donald F. Walter 68 Financial Consultant, Walter & Keenan Financial 1983
Consulting Co.; Director, MetroBanCorp., CerProbe
Corp.
DIRECTORS WHOSE TERM EXPIRES IN 2002
Ronald B. Kalich 52 President and Chief Executive Officer of the 1998
Company since November 1999; previously President,
Getz Brothers & Co., Inc. (international
distribution company); Director, The
Carbide/Graphite Group, Inc., Thomas and Betts
Corp.
Ernest J. Nagy 70 Formerly Chairman, Tri Star Distributing, Inc., 1986
1995 to 1999 (distributor of electronic components
for RV industry); previously Chairman, Sudler,
Nagy, Inc. (real estate management and
investments), 1992 to 1995; past Chairman,
President and CEO of Riblet Products Corp.
(supplier to the mobile home and RV manufacturing
industry); 1975 to 1990.
Donald R. Sheley, Jr. 58 Formerly Vice President Finance and CFO, Standard 1999
Products Co.
DIRECTORS WHOSE TERM EXPIRES IN 2003
Michael B. Savitske 58 Vice Chairman of the Company since November 1999; 1989
Previously President and Chief Executive Officer
of the Company; Director, Protection Mutual
Insurance Co.
Charles E. Schroeder 64 President, Miami Corporation (a private investment 1973
company).
</TABLE>
The Board of Directors has a standing Audit Committee, a Governance
Committee, and an Executive Committee.
I-3
<PAGE>
The Audit Committee, composed of nonemployee directors, oversees the audit
of the corporate accounts through independent public accountants whom it
recommends for selection by the Board of Directors. The Committee reviews the
scope of the audit with such accountants and their related fees. The Committee
held three meetings during the 1999 fiscal year. The members of the Committee
were Mr. Nagy, Chairman, Mr. Kalich, Mr. Schroeder, and Mr. Sheley. Effective in
November 1999, Mr. Kalich withdrew from serving on this Committee.
The Governance Committee, composed of nonemployee directors, reviews and
recommends executive and director compensation, including bonus payments to
elected corporate officers. It also has as its stated purpose to develop,
establish and recommend to the Board criteria for the nomination and tenure of
the directors and to submit for approval of the Board nominees for election as
directors at each annual meeting of shareholders and for any vacancy that may
occur on the Board. The Committee may consider nominees recommended by
shareholders or anyone else, or, in its discretion, may limit its consideration
to nominees selected by the Committee. Any shareholder wishing to recommend a
nominee may forward such recommendation to the Governance Committee, c/o the
Secretary of the Company. The Committee members communicate with each other from
time to time in person and by telephone and act on matters by either a formal
meeting or by unanimous written consent. The Committee held three meetings
during the 1999 fiscal year. The members of the Committee are Mr. Walter,
Chairman, Mr. Craigmile, and Mr. Cucuz.
The Executive Committee has, during the interval between regular meetings of
the Board of Directors, the authority to exercise all the powers of the Board
which may be legally delegated to it in the management and direction of the
business and affairs of the Company. The Committee held two meetings during the
1999 fiscal year. The members of the Committee are Mr. Schroeder, Chairman,
Mr. Craigmile, and, effective in November 1999, Mr. Kalich.
The Company's Board of Directors held seven meetings during the 1999 fiscal
year. All directors were present for 75% or more of the total number of meetings
of the Board and its Committees.
I-4
<PAGE>
GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Governance Committee is composed of Donald F. Walter (Chairman), David
F. Craigmile and Ranko Cucuz. None of our current or past executive officers or
employees serves on the Governance Committee. None of our executive officers
serves on the board or the compensation committee of any entity whose directors
or officers serve on our Governance Committee.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for service on the Board. Directors who are not employees of the
Company each receive an annual retainer of $16,000 (the Chairman's retainer is
$40,000), plus a fee of $800 for each Board or Committee meeting attended and
$250 for each subsequent meeting attended in the same day. All directors are
reimbursed for out-of-pocket expenses in attending Board or Committee meetings;
directors, as such, do not participate in any Executive Compensation Plans.
Under the Company's Directors' Retirement Income Plan, a nonemployee
director is entitled to receive an annual retirement benefit, paid quarterly,
equal to the annual retainer payable to the director during his last full year
on the Board. A director's normal retirement date is the later of age 70 or the
end of any term of service on the Board in which he attains age 70. No director
whose appointed or elected service on the Board is less than five years will be
entitled to a retirement benefit. Such amount is payable over a period as
measured by the shortest of:
(a) life, or
(b) years of service on the Board as computed in full quarters, or
(c) 10 years.
The above benefits are payable only to the retired director. In the event of
death while on the Board, a death benefit equal to a full year's retainer fee
will be paid to the director's designated beneficiary. Directors appointed or
elected after November 20, 1996, who have not previously served on the Board,
are not eligible to participate in this plan.
Current and new nonemployee directors participate in the Stock Option Plan
for Nonemployee Directors ("Directors' Plan"). Under this Directors' Plan, each
nonemployee director will be granted an option to purchase 2,000 shares of
Common Stock on the first business day after the date on which the Annual
Meeting of Shareholders is held.
The option price for each option granted to nonemployee directors shall be
100% of the fair market value of the shares subject to option on the date of
option grant. The option term shall be ten years. The period of exercise
following death shall be one year. In the event of any other termination of
service on the Board, each option shall be exercisable for the lesser of three
years or the balance of its ten-year term.
Grants to date under the Directors' Plan include an initial grant of 12,000
option shares at an option price of $8.50 made January 24, 1997; a grant of
14,000 option shares at an option price of $5.8125 made January 23, 1998; a
grant of 14,000 option shares at an option price of $3.9375 made January 29,
1999; and a grant of 12,000 option shares at an option price of $2.375 made
January 31, 2000.
I-5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
POSITION(S) HELD OFFICER OF THE
NAME WITH THE COMPANY COMPANY SINCE
---- ---------------- --------------
<S> <C> <C>
Ronald B. Kalich President and Chief Executive Officer 1999
Michael K. Conn Vice President, Finance and Administration 2000
David L. Lawrence Treasurer, Assistant Secretary 1987
Timothy C. Wright General Counsel and Secretary 1996
</TABLE>
Mr. Conn was appointed Vice President, Finance & Administration and Chief
Financial Officer on January 3, 2000. Mr. Conn has been with the Company for 13
years and previously served as Director of Tax and Financial Reporting and more
recently as Director of Administration. Prior to joining the Company, Mr. Conn,
a CPA, held various positions with Price Waterhouse from 1977 to 1986.
Mr. Kalich joined the Company in 1999. Prior to joining the Company,
Mr. Kalich was President and CEO of Getz International, a unit of The Marmon
Group, from 1993 to 1999. Prior to 1993, he held executive positions with
Danaher Corporation, Forstman Little & Company, and Cooper Industries, from 1972
to 1993.
Mr. Wright joined the Company in 1996. Mr. Wright operated his own practice,
Wright Associates, from 1993 to 1996 and also served as General Counsel for
CAPCO Automotive Products Corporation beginning in 1995. Prior to 1993,
Mr. Wright held senior in-house counsel positions with Uniroyal Technology
Corporation from 1989 to 1992 and Clark Equipment Company from 1979 to 1989.
I-6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------- -------------------
(A) (B) (C) (D) (E) (G) (I)
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (#) COMPENSATION(2)
--------------------------- ---- ------ ----- --------------- --- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael B. Savitske 1999 $325,000 $ 0 $2,127 150,000 $5,000
President and 1998 322,500 48,061 2,140 10,000 4,750
Chief Executive Officer 1997 307,500 0 2,794 10,000 4,750
William D. Grafer 1999 183,300 0 904 50,000 5,000
Vice President, Finance 1998 181,975 22,599 743 5,000 4,869
1997 174,750 0 829 10,000 5,243
David L. Lawrence 1999 113,300 0 0 25,000 4,513
Treasurer, Assistant 1998 112,475 13,968 0 2,500 3,374
Secretary 1997 108,000 0 0 5,000 3,240
Timothy C. Wright 1999 118,000 0 219 15,000 4,418
Secretary, General Counsel 1998 117,125 14,545 294 2,500 2,655
1997 113,375 0 0 5,000 4,750
</TABLE>
--------------------------
(1) Amounts reimbursed during the fiscal year for payment of taxes.
(2) Amounts are Company-matching contributions to the Employees' Stock Savings
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------- ---------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- --- ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Michael B. Savitske......... 150,000 33% $2.9375 October 14, 2008 $277,050 $702,300
William D. Grafer........... 50,000 11% 2.9375 October 14, 2008 92,350 234,100
David L. Lawrence........... 25,000 5% 2.9375 October 14, 2008 46,175 117,050
Timothy C. Wright........... 15,000 3% 2.9375 October 14, 2008 27,705 70,230
</TABLE>
I-7
<PAGE>
YEAR-END OPTION VALUE TABLE(1)
<TABLE>
<CAPTION>
(A) (D) (E)
NUMBER OF UNEXERCISED
OPTIONS AT VALUED OF UNEXERCISED IN-THE-MONEY
NAME SEPT. 30, 1999 OPTIONS AT SEPT. 30, 1999(2)
---- -------------- ----------------------------
(ALL EXERCISABLE) (ALL EXERCISABLE)
<S> <C> <C>
Michael B. Savitske.......................... 290,000 $ --
William D. Grafer............................ 107,000 --
David L. Lawrence............................ 55,000 --
Timothy C. Wright............................ 22,500 --
</TABLE>
------------------------
(1) No options were exercised during the fiscal year.
(2) The exercise price on all unexercised options at September 30, 1999 was in
excess of the fair market value of the underlying securities on that date.
CERTAIN CONTRACTS WITH NAMED EXECUTIVES
MR. KALICH'S EMPLOYMENT AGREEMENT
Under his employment agreement with the Company, Mr. Kalich received a
one-time signing bonus in the amount of $40,000, and will receive an annual base
salary of at least $400,000. During the fiscal year ending September 30, 2000,
Mr. Kalich is also entitled to receive a minimum bonus of not less than $36,000,
which bonus will increase to not less than $100,000 if the Company meets a
designated net income target for the then ending fiscal year. Mr. Kalich will be
eligible for bonuses in subsequent years.
The Company may terminate Mr. Kalich's employment for "cause" including
willful failure to perform, after notice and opportunity to cure, or certain
criminal or fraudulent conduct or acts of moral turpitude. Mr. Kalich may
terminate his employment and continue to receive certain benefits, described
below, upon a change of control or for "good reason," including failure of
shareholders to approve his stock option grant as proposed, material reduction
in responsibility, material decrease in compensation, significant relocation, or
if the Company is unwilling to extend Mr. Kalich's employment on terms at least
as favorable to Mr. Kalich after his initial three-year term. If the Company
terminates Mr. Kalich's employment other than for cause or because of death or
disability or if Mr. Kalich terminates for good reason, Mr. Kalich is entitled
to a lump sum cash payment equal to two (2) times his annual base salary then in
effect and the continuation of his health care and insurance benefits provided
under his employment agreement for the ensuing twenty-four months. If
Mr. Kalich's employment terminates due to death or disability, he (or his
estate) will be entitled to continued payments of base salary for 24 months (net
of disability payments, if applicable).
Under the agreement, if his employment is terminated pursuant to a change in
control of the Company, Mr. Kalich is entitled to a lump sum cash payment. The
Company's payment to Mr. Kalich under such circumstances would be 2.99 times his
annual base salary then in effect plus 2.99 times the average of his previous
two years' bonuses. The payments, in any event, would be limited to the amount
that could be received by Mr. Kalich without any loss of tax deduction to the
Company for payment under Section 280G of the Internal Revenue Code, dealing
with so-called "Excess Parachute Payments." Under the agreement, a "change in
control" is defined as (i) the acquisition of control of the Company's Board of
Directors by any single entity (or group of entities acting in concert);
(ii) the transfer of at least 51% of the Company's Common Stock to any single
entity (or group of entities acting in concert); or (iii) any acquisition by the
Company of its own Common Stock which acquisition results in (A) fewer than 300
persons owning the Company's Common Stock, or (B) the Company no longer being
listed on a national securities exchange.
I-8
<PAGE>
Mr. Kalich's employment agreement entitles him to participate in the
Company's Targeted Retirement Benefit Plan, described below, and to be vested in
his calculated benefit at the end of the initial term of his agreement.
Mr. Kalich's employment agreement provides for a non-competition period of
three years following his termination of employment.
AGREEMENTS WITH OTHER NAMED EXECUTIVES
On May 1, 1999, the Company entered into an employment agreement with its
then President and Chief Executive Officer, Michael B. Savitske. Under the
agreement, Mr. Savitske agreed to assist the Company's Board of Directors in
searching for a successor President and Chief Executive Officer and to manage an
orderly transition of leadership of the Company from Mr. Savitske to his
successor. Mr. Savitske continues to serve the Company as its Vice Chairman.
On November 16, 1999 Mr. Savitske entered into a new agreement with the
Company pursuant to which he resigned his positions as President and Chief
Executive Officer, and, in a non-active role, remained entitled to receive his
then-current salary and benefits through April 30, 2001. On that date, he will
be entitled to participate in the Company's pension and retirement plans.
On December 31, 1999, Mr. Grafer resigned from his position as Chief
Financial Officer of the Company upon entering into an agreement with the
Company on substantially the same terms as that of Mr. Savitske, with an
expiration date of June 30, 2001.
The Company also has existing Supplemental Compensation Agreements (the
"Agreements") with Mr. Conn, Mr. Lawrence and Mr. Wright, which, following a
change in control of the Company, provide for a lump sum compensation payment to
the executive in the event of his termination of employment by the Company, or
by such executive following a substantial change in his job responsibilities.
The lump sum payments for Messrs. Conn, Lawrence and Wright are equal to two
times their respective "base amounts" (as defined under Section 280G(b)(3) of
the Internal Revenue Code).
A "change of control" is defined in such Agreements as: (i) the acquisition
by any person or entity (other than any Company employee benefit plan) of 30% or
more of combined voting power of the Company's outstanding securities; or
(ii) shareholder approval of any consolidation or merger where, following such
consolidation or merger, the Company's original shareholders do not hold at
least 60% of the voting securities of the surviving corporation; or
(iii) during any 24-month period, the individuals (including "qualified
replacements") who, at the beginning of the period, make up the Board of
Directors, cease, for any reason, to constitute a majority of the Board; or
(iv) shareholder approval of any sale, lease, exchange or other transfer of all,
or substantially all, of the Company's assets to any entity in which the
Company, or its shareholders, own less than 60% of that entity's outstanding
voting securities. The Agreements extend through September 30, 2000.
SALARIED EMPLOYEES' RETIREMENT PLAN
The Salaried Employees' Retirement Plan (the "Plan") is a defined benefit
plan and provides for an annual lifetime pension at normal retirement age (the
later of age 65 or five years of participation in the Plan) equal to 1.5% of the
participant's total cash compensation from the Company (including any
contributions made to the Employees' Stock Savings Plan from their pre-tax
remuneration) for the period of covered employment occurring after October 1,
1987. The compensation elements upon which the Plan benefits are based are
salary and payments of cash awards under the various incentive plans.
The Company funds the entire cost of the Plan by periodic contributions to
the Plan trust on an actuarial basis. Company contributions to the trust are not
allocated to the account of any particular employee; officers participate in the
Plan on the same basis as all other employees of the Company who are covered by
the Plan.
I-9
<PAGE>
Should they continue their covered employment with the Company at their 1999
annual rate of cash compensation until attainment of normal retirement age, the
annual lifetime pension at normal retirement age under the Plan would be $33,150
for Mr. Kalich, $48,965 for Mr. Savitske; $51,977 for Mr. Grafer; $39,442 for
Mr. Lawrence; and $18,503 for Mr. Wright.
SUPPLEMENTAL RETIREMENT PLANS
The Supplemental Retirement Plan (the "SRP") provides an annual supplemental
pension benefit to any participant in the Salaried Employees' Retirement Plan
whose benefit under that plan is reduced or limited as a result of rules set
forth in the Internal Revenue Code. The funding of the cost of this benefit will
come from the general assets of the Company.
Should they continue their covered employment with the Company at their 1999
annual rate of cash compensation until attainment of normal retirement age, the
annual lifetime benefit at normal retirement age under the SRP would be $46,740
for Mr. Kalich, $30,458 for Mr. Savitske, and $4,638 for Mr. Grafer.
The Targeted Retirement Benefit Plan (the "Targeted Plan") provisions
provide that participants' retirement benefit will not be less than 55% of final
average earnings. To the extent that Company funded benefits from the Salaried
Employees' Retirement Plan and all other sources do not achieve this target, the
Targeted Plan will make up the difference. The funding of the cost of the
Targeted Plan will come from the general assets of the Company. Current
participants are Mr. Kalich, Mr. Savitske and Mr. Grafer.
Should they continue their covered employment with the Company at their 1999
annual rate of cash compensation until attainment of normal retirement age, the
estimated annual lifetime benefit at normal retirement age under the Targeted
Plan would be $119,316 for Mr. Kalich, $59,806 for Mr. Savitske and $15,607 for
Mr. Grafer.
I-10
<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF MANAGEMENT
The table set forth below, including the footnotes, contains information as
of June 26, 2000 concerning beneficial ownership of Common Stock by the
directors, named executive officers of the Company and by all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
MANAGEMENT OWNED BENEFICIALLY(1) % OF CLASS(5)
---------- --------------------- -------------
<S> <C> <C>
David F. Craigmile.......................................... 19,150 --
Ranko Cucuz................................................. 7,000 --
Ronald B. Kalich............................................ 263,975(2) 4.4
William D. Grafer........................................... 120,304(2) 2.0
David L. Lawrence........................................... 75,079(2) 1.3
Ernest J. Nagy.............................................. 12,000 --
Michael B. Savitske......................................... 307,065(2) --
Charles E. Schroeder........................................ 16,050(3) --
Donald R. Sheley, Jr........................................ 4,000 --
Donald F. Walter............................................ 13,800(4) --
Timothy C. Wright........................................... 36,187(2) --
Executive Officers and Directors as a Group................. 940,965(2) 14.2
</TABLE>
------------------------
(1) Includes in some cases shares held in fiduciary capacity or by wives,
children or relatives. The inclusion of these shares is not an admission of
beneficial ownership for any other purpose. Each nominee, director or
executive has sole voting and investment power over the shares shown as
beneficially owned except as noted in footnotes (3) and (4) below and except
for shares held in the Employees' Stock Savings Plan, as to which they have
sole voting but no investment power. Also includes shares that may be
acquired within 60 days of June 26, 2000, through the exercise of stock
options under the National-Standard Company Stock Option Plan for
Nonemployee Directors or the 1993 National-Standard Stock Option Plan.
(2) Shares shown as beneficially owned include 49,320 shares held in trust under
the Employees' Stock Savings Plan, and 845,500 shares which may be acquired
within 60 days of June 26, 2000 through the exercise of stock options under
the 1993 National-Standard Stock Option Plan and the National-Standard
Company Stock Option Plan for Nonemployee Directors.
(3) Includes 5,831 shares voted by Mr. Schroeder as trustee of certain family
trusts. The inclusion of these shares is not an admission of beneficial
ownership for any other purpose.
(4) Not included are 5,000 shares owned by the Edward and Irma Hunter
Foundation, on which board Mr. Walter serves as trustee and shares voting
and investment power with other trustees. Mr. Walter disclaims beneficial
ownership of such shares.
(5) Less than 1% unless otherwise indicated.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and officer of the Company is required to report to the
Securities and Exchange Commission his or her transactions in the Common Stock
of the Company. During Fiscal 1999, all reports were filed on a timely basis.
I-11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table set forth below contains information concerning other principal
shareholders known to the Company to own beneficially more than five percent of
the Company's outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIAL OWNER OWNED BENEFICIALLY % OF CLASS
---------------- ------------------ ----------
<S> <C> <C>
National-Standard Company
Master Investment Trust................................... 2,017,175(1) 34.8
c/o U.S. Bank National Association
Attn: T. Sandwick SPEN0502
180 East 5th Street
St. Paul, MN 55101
National-Standard Company
Employees' Stock Savings Trust............................ 725,313(2) 12.5
c/o Key Trust Company of Indiana, N.A.
101 South Main Street
Elkhart, Indiana 46516
The Killen Group, Inc....................................... 389,928(3) 6.7
1189 Lancaster Avenue
Berwyn, Pennsylvania 19312
Thomas W. Mittler........................................... 355,800(4) 6.1
3607 South Main Street
South Bend, Indiana 46601
</TABLE>
------------------------
(1) U.S. Bank National Association has informed the Company that it held, as of
May 31, 2000, these shares of the Company's Common Stock as Trustee under
the Company's Master Investment Trust. Under the terms of the Trust, the
Company's Investment Committee directs the Trustee with respect to
disposition and voting of such shares.
(2) Key Trust has advised the Company that it held, as of July 5, 2000, these
shares as Trustee under the Company's Employees' Stock Savings Plan. Under
terms of the Trust, the shares held therein are voted by the Trustee in the
same proportion as the voting instructions received from the Plan's
participants.
(3) According to a report on Schedule 13G filed by The Killen Group, Inc.
("Killen") on February 15, 2000, Killen has sole voting power over 259,834
of such shares.
(4) According to a report on Schedule 13G filed by Thomas W. Mittler filed on
February 7, 2000.
I-12
<PAGE>
ANNEX A
[LOGO]
233 South Wacker Drive
Suite 3620
Chicago, IL 60606
312 920-2130
Fax 312 920-2145
June 26, 2000
The Board of Directors
National-Standard Company
Members of the Board of Directors:
National-Standard Company, an Indiana corporation (the "Company") and Heico
Holdings, Inc., or its designated affiliate (the "Acquirer"), propose to enter
into an Agreement and Plan of Merger (the "Agreement") pursuant to which (i) a
wholly owned subsidiary of the Acquirer would commence a tender offer (the
"Offer") for all the issued and outstanding shares of common stock of the
Company (the "Shares") at a price of $1.00 per share net to the seller in cash
(the "Consideration"), and (ii) following the consummation of the Offer, the
subsidiary of the Acquirer would be merged with and into the Company (the
"Merger"), with each Share, other than treasury Shares or Shares held by the
Acquirer or any affiliate of the Acquirer or as to which dissenter's rights have
been perfected, being converted into the right to receive $1.00 in cash. The
Offer and the Merger are also referred to herein as the "Transaction."
You have asked us whether, in our opinion, the Consideration to be received by
the holders of the Shares pursuant to the Merger Agreement is fair from a
financial point of view to such holders.
U.S. Bancorp Piper Jaffray Inc. ("U.S. Bancorp Piper Jaffray"), as a customary
part of its investment banking business, is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
underwritings and secondary distributions of securities, private placements, and
valuations for estate, corporate and other purposes. For our services in
rendering this opinion, the Company will pay us a fee that is not contingent
upon the consummation of the Transaction. In addition, the Company has agreed to
pay us an additional fee that is contingent upon the consummation of this, or
any other, Transaction. In the past, we have been engaged by the Company to
perform analyses of certain strategic alternatives and the potential impact of
these alternatives on shareholder value. The Company has also agreed to
indemnify us against certain liabilities in connection with this engagement.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have:
(i) Reviewed a draft of the Merger Agreement dated June 24, 2000;
(ii) Reviewed the Annual Reports on Form 10-K for the Company for the three
fiscal years ended September 30, 1997, 1998 and 1999;
(iii) Reviewed the Quarterly Reports on Form 10-Q for the Company for the
quarters ended December 31, 1999, and March 31, 2000;
<PAGE>
The Board of Directors
National-Standard Company
June 26, 2000
Page 2
(iv) Reviewed unaudited financial results and certain other operating data
for the Company for the period ended May 31, 2000 and certain financial
forecasts for the Company;
(v) Been informed by the Company of the potential effects of insolvency on
the Company and the effect an insolvency could be expected to have with
respect to the value of the Shares;
(vi) Conducted discussions with members of senior management and
representatives of the Company concerning the financial condition,
liquidity, operating performance and balance sheet of the Company and
the prospects for the Company, generally, and the matters described
above in clauses (ii), (iii) and (iv), as well as the Company's
business and prospects before and after giving effect to the
Transaction, and conducted discussions with members of senior
management and representatives of the Company concerning the matters
described in clause (v) above;
(vii) Reviewed the historical prices and trading activity for the Shares;
(viii) Reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions which we deemed
relevant;
(ix) Compared certain financial data of the Company with certain financial
and securities data of companies we deemed similar to the Company.
We have relied upon and assumed with your consent the accuracy, completeness and
fairness of the financial statements, liquidity analysis, and other information
provided by the Company or otherwise made available to us and have not assumed
responsibility for independently verifying such information. We have assumed
with your consent that the information provided pertaining to the Company has
been prepared on a reasonable basis in accordance with industry practice and,
with respect to financial planning data, reflects the best currently available
estimates and judgment of the Company's management as to the expected future
financial performance of the Company, and that the management of the Company is
not aware of any information or facts that would make the information provided
to us incomplete or misleading. We have also assumed with your consent that
there have been no material changes in the Company's assets, financial
condition, results of operations, business or prospects since the date of the
last financial statements or information made available to us.
We have assumed, with your consent, that (i) the Company will be unable to
secure alternative financing in sufficient time to provide working capital to
continue operations, (ii) the Company may soon be in default under agreements
with its vendors resulting in an unwillingness of vendors to continue
relationships with the Company, (iii) as a result, it is unlikely that the
Company will be able to continue as a going concern in the absence of
consummation of the Transaction and would likely seek protection from creditors
under the bankruptcy laws, and (iv) the likely result of a bankruptcy proceeding
would be no value to Company shareholders.
U.S. Bancorp Piper Jaffray has not been asked to, nor have we, solicited any
alternative financing transactions or business combinations and we have relied
on the Company's representations with respect the availability or absence of
such alternatives.
2
<PAGE>
The Board of Directors
National-Standard Company
June 26, 2000
Page 3
In arriving at our opinion, we have not performed any appraisals or valuations
of specific assets or liabilities of the Company, have not been furnished with
any such appraisals or valuations, have made no physical inspection of the
properties or assets of the Company and express no opinion regarding the
liquidation value of the Company.
We have also assumed with your consent that the final form of the Merger
Agreement, as and when executed, will be the same in all material respects as
the last draft thereof reviewed by us.
Without limiting the generality of the foregoing, we have undertaken no
independent analysis of any pending or threatened litigation, possible
unasserted claims or other contingent liabilities, to which either the Company
or its affiliates is a party or may be subject and at the Company's direction
and with its consent, our opinion makes no assumption concerning and therefore
does not consider, the possible assertion of claims, outcomes or damages arising
out of any such matter.
Our opinion is necessarily based upon the assumptions made and information
available to us, facts and circumstances and economic, material and other
conditions as they exist and are subject to evaluation on the date hereof;
events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We are not expressing any opinion herein as to
the prices at which Shares have traded or at which such Shares may trade at any
future time.
It is understood that our opinion is intended for your benefit and use in
connection with your evaluation of the Transaction and does not address any
other aspect of the Merger or any other transaction related to the Transaction.
Our opinion does not address the merits of your underlying decision to proceed
with or effect the Transaction and does not constitute a recommendation to any
shareholder whether to tender their Shares in the Offer or how any shareholder
should vote or otherwise act with respect to the Merger or the Merger Agreement.
Our opinion is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering or sale of securities, without our prior
written consent, except as provided in our engagement letter dated
September 15, 1998 and amended May 26, 2000.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by holders of Shares of the Company
pursuant to the Merger Agreement is fair, from a financial point of view, to
such holders.
Sincerely,
U.S. BANCORP PIPER JAFFRAY INC.
3
