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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
NATIONAL-STANDARD COMPANY
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
COMMON STOCK
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(2) Aggregate number of securities to which transaction
applies:
1,083,215
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
$1.00 (CASH PAYMENT TO SECURITY HOLDERS)
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$1,083,215
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(5) Total fee paid:
$217
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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[LOGO]
September 12, 2000
To the Shareholders of National-Standard Company:
You are cordially invited to attend a Special Meeting of Shareholders of
National-Standard Company (the "Company") to be held on September 22, 2000, as
set forth in the attached Notice of Special Meeting of Shareholders. At this
meeting you will be asked to consider and vote upon the approval and adoption of
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which NS
Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly-owned
subsidiary of The Heico Companies, LLC, a Delaware limited liability company
("Parent"), will be merged with and into the Company. Details of the proposed
merger and other important information are contained in the accompanying proxy
statement.
The merger is the second and final step in the acquisition of the Company by
Parent pursuant to the terms of the Merger Agreement. The first step was a
tender offer by Purchaser for all the outstanding shares of common stock of the
Company (the "Shares"). Upon expiration of the tender offer on August 4, 2000,
Purchaser purchased 4,705,354 Shares (approximately 81.5% of the outstanding
Shares) for $1.00 in cash per Share.
In the merger, the Company's remaining shareholders (other than Parent and
its subsidiaries) will receive the same consideration paid in the tender offer,
$1.00 in cash, for each Share owned, and thereafter they will have no further
equity interest in the Company.
Your Board of Directors, after careful consideration, has approved the
Merger Agreement and determined that the tender offer and the merger are fair to
and in the best interests of the Company and its shareholders. In addition, the
Board of Directors of the Company received a written opinion from U.S. Bancorp
Piper Jaffray, Inc. that, as of the date of its opinion and subject to the
matter described therein, the cash consideration of $1.00 per Share to be
received by shareholders pursuant to the tender offer and the merger is fair to
such shareholders from a financial point of view. The opinion is included as
Annex B to the enclosed proxy statement and you are urged to read the opinion in
its entirety. Your Board of Directors recommends that you vote FOR the approval
and adoption of the Merger Agreement.
Approval of the proposed merger requires the affirmative vote of the holders
of a majority of the outstanding Shares. As a result of the completion of the
tender offer, Purchaser owns and has the right to vote at the Special Meeting
sufficient Shares to cause the Merger Agreement to be approved without the
affirmative vote of any other shareholder. The Merger Agreement requires
Purchaser to vote all of its Shares in favor of approving and adopting the
Merger Agreement.
We urge you to read the enclosed material carefully and request that you
complete and return the enclosed proxy as soon as possible. You may, of course,
attend the Special Meeting and vote in person, even if you have previously
returned your proxy card.
Sincerely yours,
T. C. Wright
SECRETARY
<PAGE>
NATIONAL-STANDARD COMPANY
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 22, 2000
---------------------
September 12, 2000
To the Shareholders of National-Standard Company
A Special Meeting of Shareholders of National-Standard Company will be held
at the offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago,
Illinois, on September 22, 2000 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of June 26, 2000 (the "Merger Agreement"),
by and among Heico Holding, Inc., NS Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of The Heico
Companies, LLC, a Delaware limited liability company ("Parent"), and
National-Standard Company, an Indiana corporation (the "Company"),
pursuant to which: (a) Purchaser will be merged with and into the Company
(the "Merger"), with the Company as the surviving corporation; and
(b) each outstanding share of the Company's common stock, par value $.01
per share (the "Shares"), other than Shares held by Parent, the Company
or any of their respective subsidiaries, will be converted into the right
to receive $1.00 in cash, without interest; and
2. To consider and act upon any matters incidental to the foregoing and to
transact such other business as may properly come before the meeting or
any and all adjournments or postponements thereof.
Only holders of record of Shares at the close of business on August 7, 2000
are entitled to notice of and to vote at the Special Meeting or any adjournment
or postponement thereof.
Your attention is respectfully directed to the accompanying Proxy Statement.
We urge you to read it carefully. Whether or not you expect to attend the
meeting in person, please complete and return the enclosed proxy in the envelope
provided. The proxy may be revoked at any time before it is exercised in the
manner described in the Proxy Statement.
BY ORDER OF THE BOARD
OF DIRECTORS
T. C. Wright
SECRETARY
PLEASE COMPLETE AND SIGN THE ACCOMPANYING FORM OF PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU INTEND TO
BE PRESENT AT THE SPECIAL MEETING. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
NATIONAL-STANDARD COMPANY
PROXY STATEMENT
---------------------
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 22, 2000
---------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of National-Standard Company to be used at
a Special Meeting of Shareholders to be held at the offices of McDermott,
Will & Emery, 227 West Monroe Street, Chicago, Illinois, on
September 22, 2000, at 10:00 a.m., local time, and any adjournments or
postponements thereof.
The purpose of the Special Meeting is to consider and act upon a proposal
recommended by the Board of Directors of the Company to approve and adopt an
Agreement and Plan of Merger, dated as of June 26, 2000 (the "Merger
Agreement"), by and among Heico Holding, Inc., a Delaware corporation ("Heico"),
NS Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of The Heico Companies, LLC, a Delaware limited liability commpany
("Parent"), and National-Standard Company, an Indiana corporation (the
"Company"), pursuant to which Purchaser will be merged with and into the Company
(the "Merger"), with the Company as the surviving corporation and each
outstanding share of common stock, par value $.01 per share, of the Company (the
"Shares"), other than Shares held by Parent, the Company or any of their
respective subsidiaries, will be converted into the right to receive $1.00 in
cash, without interest thereon. A copy of the Merger Agreement is included in
this Proxy Statement as Annex A.
Purchaser was formed at the direction of Parent for the purpose of entering
into the Merger Agreement and effecting the transactions contemplated thereby.
For further information regarding Parent and Purchaser, see "Information
Concerning Parent and Purchaser."
Pursuant to the Merger Agreement, as the first step in the acquisition of
the Company by Parent and Purchaser, on July 10, 2000, Purchaser commenced a
cash tender offer (the "Offer") for all of the outstanding Shares at $1.00 per
Share in cash. After expiration of the Offer on August 4, 2000, Purchaser
purchased 4,705,354 Shares, constituting approximately 81.5% of the outstanding
Shares. The Merger is the second and final step in the acquisition by Parent and
Purchaser of all of the outstanding Shares. In the Merger each outstanding
Share, other than Shares held by Parent, the Company or any of their respective
subsidiaries, will be converted into the right to receive $1.00 in cash, without
interest, and the holders of such Shares will thereafter have no further equity
interest in the Company.
As a result of the purchase of Shares pursuant to the Offer, Purchaser has
the right to vote sufficient Shares to cause the Merger Agreement to be approved
and adopted without the affirmative vote of any other shareholder. The Merger
Agreement requires Purchaser to vote all of its Shares in favor of approving and
adopting the Merger Agreement.
Only holders of record of Shares at the close of business on August 7, 2000
(the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting. The Shares represent the only outstanding voting securities of the
Company and each Share represents the right to cast one vote. As of the Record
Date, there were 5,788,569 Shares outstanding held by approximately 1,330
holders of record.
Each shareholder is requested to sign and return the enclosed proxy card in
order to ensure that his or her Shares are voted. Proxies in the form enclosed,
unless previously revoked, will be voted at the Special Meeting. A shareholder
giving a proxy may revoke it at any time before it is voted at the Special
Meeting by sending in a proxy bearing a later date, by delivering a written
notice of revocation or by attending the Special Meeting in person and casting a
ballot or delivering notice of revocation of
<PAGE>
the proxy. If a choice or instruction is specified by the shareholder on a
signed and returned proxy card, the proxy will be voted in accordance with such
specification. If no choice or instruction is specified by such shareholder on a
signed and returned proxy card, the proxy will be voted as recommended by the
Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
A majority of the outstanding Shares entitled to vote, represented in person
or by proxy, is required for a quorum at the Special Meeting. Approval of the
proposed merger requires the affirmative vote of the holders of a majority of
the outstanding Shares or 2,894,285 Shares based on the number of Shares
outstanding on the Record Date. Purchaser owns and has the right to vote
4,705,354 Shares, or approximately 81.5% of the outstanding Shares, and
therefore can cause the Merger Agreement to be approved and adopted without the
affirmative vote of any other shareholder.
Dissenters' rights are not available in the Merger.
After the initial mailing of this Proxy Statement, proxies may be solicited
by telephone, telegram or personally by directors, officers and other employees
of the Company (who will not receive any additional compensation therefor). All
expenses with respect to the solicitation of proxies, including printing and
postage costs, will be paid by the Company.
All information contained in this Proxy Statement concerning Parent,
Purchaser and their affiliates (other than the Company), the financing of the
Offer and the Merger and plans for Parent and the Company after the Merger has
been supplied by Parent and Purchaser. With the exception of the aforementioned
information, all information contained in this Proxy Statement has been supplied
by the Company.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY
IN ANY JURISDICTION FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY
SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT SHALL
NOT, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS NOT BEEN ANY CHANGE IN THE
INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THE DATE OF THIS PROXY STATEMENT IS SEPTEMBER 12, 2000
------------------------
THIS PROXY STATEMENT IS FIRST BEING
SENT TO SHAREHOLDERS ON September 12, 2000
------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SUMMARY TERM SHEET FOR THE MERGER........................... 1
The Proposed Transaction.................................. 1
The Company Recommendation to Shareholders................ 1
Opinion of U.S. Bancorp Piper Jaffray..................... 1
The Special Meeting....................................... 1
The Merger................................................ 2
Payment for the Shares.................................... 2
INTRODUCTION................................................ 3
General................................................... 3
Voting At The Special Meeting............................. 3
THE MERGER.................................................. 5
Background of the Merger.................................. 5
Recommendation of the Board of Directors.................. 10
Opinion of the Company's Financial Advisor................ 12
Interests of Certain Persons in the Merger................ 12
Payment for the Shares.................................... 15
Purpose of the Offer and the Merger; Plans for the
Company................................................. 16
Certain Legal Matters; Regulatory Approvals............... 16
The Merger Agreement...................................... 17
Certain Federal Income Tax Consequences................... 28
FINANCING OF THE MERGER..................................... 29
INFORMATION CONCERNING THE COMPANY.......................... 29
The Business of the Company............................... 29
Directors and Executive Officers of the Company........... 30
INFORMATION CONCERNING PARENT, ACQUISTION AND AFFILIATES.... 31
PRICE RANGE OF THE SHARES; DIVIDENDS........................ 32
OWNERSHIP OF SHARES BY DIRECTORS, OFFICERS AND PRINCIPAL
SHAREHOLDERS.............................................. 33
PROXY SOLICITATION; REVOCATION OF PROXIES................... 34
OTHER MATTERS............................................... 34
INCORPORATED DOCUMENTS AND AVAILABLE INFORMATION............ 35
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ANNEXES
Annex A--The Merger Agreement............................... ANNEX A-1
Annex B--Opinion of U.S. Bancorp Piper Jaffray, Inc......... ANNEX B-1
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<PAGE>
SUMMARY TERM SHEET FOR THE MERGER
This summary term sheet for the merger highlights such information from this
proxy statement regarding the merger and the merger agreement. This summary term
sheet does not propose to be complete and is qualified in its entirety by the
more detailed information contained elsewhere in this proxy statement.
Accordingly, we encourage you to carefully read this entire proxy statement and
the documents to which we have referred you.
THE PROPOSED TRANSACTION
- THE PROPOSAL (PAGE 3). You are being asked to consider and vote upon a
proposal to approve the merger agreement pursuant to which Purchaser would
be merged with and into the Company, with the Company as the surviving
corporation. The Company will be wholly-owned by Parent as a result of the
merger.
- WHAT YOU WILL RECEIVE (PAGE 15). Upon completion of the merger, you will
be entitled to receive $1.00 in cash for each share of the Company's
common stock that you hold.
- THE ACQUIROR (PAGE 31). Parent is a privately owned holding company,
headquartered in Chicago, Illinois whose interests include construction
equipment and services, heavy machinery, materials handling, and other
interests. Parent is controlled by Mr. Michael E. Heisley, Sr. Purchaser
is a newly-formed Delaware corporation and has not conducted any business
other than in connection with the tender offer and the merger.
THE COMPANY RECOMMENDATION TO SHAREHOLDERS (PAGE 10)
Your board of directors has approved the merger agreement and determined
that the merger is fair to and in the best interests of the Company and its
shareholders. Your board recommends that shareholders vote FOR approval of the
merger agreement at the special meeting.
OPINION OF U.S. BANCORP PIPER JAFFRAY
On June 22, 2000, U.S. Bancorp Piper Jaffray, Inc., our financial advisor,
delivered its written opinion to the Board of Directors of the Company that, as
of the date of such opinion and based on and subject to the matters stated in
the opinion, the $1.00 per share in cash to be received by the holders of shares
of common stock of the Company in the tender offer and the merger is fair to
such shareholders from a financial point of view.
The opinion is attached as Appendix B to this proxy statement. You are urged
to read the opinion in its entirety.
THE SPECIAL MEETING
- DATE, TIME AND PLACE (PAGE 3). The special meeting will be held at the
offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago,
Illinois, on September 22, 2000 at 10:00 a.m., local time.
- REQUIRED VOTE (PAGE 3). Approval of the merger requires the affirmative
vote of the holders of a majority of the outstanding shares of the
Company's common stock.
- WHO MAY VOTE (PAGE 3). You are entitled to vote at the special meeting if
you owned shares of the Company's common stock at the close of business on
August 7, 2000, the record date for the special meeting. 5,788,569 shares
of the Company's common stock were outstanding as of the record date and
entitled to vote at the special meeting.
1
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- PROCEDURE FOR VOTING (PAGE 3). You may vote in either of two ways:
(1) by completing and returning the enclosed proxy card, or
(2) by appearing at the special meeting.
If you complete and return the enclosed proxy but wish to revoke it, you
must either file with the Secretary of the Company a written, later-dated notice
of revocation or send a later-dated proxy relating to the same shares to the
Secretary of the Company at or before the special meeting.
THE MERGER
- THE STRUCTURE (PAGE 17). Upon the terms and conditions of the merger
agreement, a wholly-owned subsidiary of the Parent will merge with and
into the Company. The Company will remain in existence as a wholly-owned
subsidiary of Parent. Upon approval of the merger agreement and
satisfaction of the other conditions to the merger specified therein,
Purchaser will be merged with and into the Company. At the time the merger
becomes effective, each outstanding share of common stock of the Company
(other than shares held by Parent, the Company or any subsidiary of Parent
or the Company) will automatically be converted into the right to receive
$1.00 in cash, without interest, and holders of such shares will
thereafter have no further equity interest in the Company.
- MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 28). The merger will be a
taxable transaction to you. For United States federal income tax purposes,
you will generally recognize gain or loss in the merger in an amount
determined by the difference between the cash you receive and the tax
basis in your shares of the Company's common stock. The Merger may also be
a taxable transaction for state, local and other purposes. Because
determining the tax consequences of the merger can be complicated, you
should consult your own tax advisor in order to understand fully how the
merger will affect you.
- DISSENTERS' RIGHTS (PAGE 17). The Company's shareholders do not have
dissenters' rights in the merger.
PAYMENT FOR THE SHARES
Promptly after consummation of the merger, a transmittal letter and
instructions for surrendering certificates formerly representing shares of
common stock of the Company will be mailed to each shareholder of record of the
Company at the effective time of the Merger. Parent has appointed EquiServe
Trust Company to act as the paying agent (the "Paying Agent"). DO NOT SEND SHARE
CERTIFICATES WITH YOUR PROXY.
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INTRODUCTION
GENERAL
This Proxy Statement is being furnished to shareholders of National-Standard
Company, an Indiana corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors (the "Board of Directors" or
the "Board") of the Company from holders of the outstanding shares of the Common
Stock, par value $.01 per share (the "Shares"), of the Company for use at the
Special Meeting of Shareholders to be held on September 22, 2000 at 10:00 a.m.,
local time, at the offices of McDermott, Will & Emery, 227 West Monroe Street,
Chicago, Illinois, and at any adjournments or postponements thereof (the
"Special Meeting").
At the Special Meeting, shareholders will be asked to approve and adopt the
Agreement and Plan of Merger, dated as of June 26, 2000 (the "Merger
Agreement"), by and among Heico Holding, Inc., a Delaware corporation ("Heico"),
NS Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of The Heico Companies, LLC, a Delaware limited liability company
("Heico"), and the Company. A copy of the Merger Agreement is included with this
Proxy Statement as Annex A. The Merger Agreement provides for the merger (the
"Merger") of Purchaser with and into the Company, with the Company to be the
surviving corporation (the "Surviving Corporation") in the Merger. As a result
of the Merger, the Company will become a wholly-owned subsidiary of Parent.
On June 26, 2000, the Company entered into the Merger Agreement with Heico
and Purchaser. On July 10, 2000, Purchaser commenced a cash tender offer for all
outstanding Shares pursuant to an Offer to Purchase (which, together with the
related letter of transmittal, constituted the "Offer"), at a price per Share of
$1.00 in cash. On August 7, 2000, Purchaser accepted for payment pursuant to the
Offer 4,705,354 Shares, consisting of all Shares validly tendered and not
withdrawn as of such date, at $1.00 in cash per Share. The Merger is intended to
follow the purchase of Shares pursuant to the Offer as the second and final step
in the acquisition of the Company pursuant to the Merger Agreement.
Approval of the Merger requires the affirmative vote of the holders of a
majority of the outstanding Shares as of the Record Date, or approximately
2,894,285 Shares. As a result of the purchase of Shares pursuant to the Offer,
Purchaser owns 4,705,354 Shares, constituting approximately 81.5% of the issued
and outstanding Shares as of the close of business on the Record Date. As
required by the Merger Agreement, Purchaser will vote all Shares owned by it in
favor of the approval and adoption of the Merger Agreement. Purchaser therefore
has sufficient voting power to cause the Merger Agreement to be approved without
the affirmative vote of any other shareholder.
Pursuant to the terms of the Merger Agreement, after the approval and
adoption of the Merger Agreement by the shareholders of the Company, the
satisfaction or waiver of the other conditions to the Merger and the filing of
Articles of Merger with the Indiana Secretary of State in accordance with the
provisions of the Indiana Business Corporation Law (the "IBCL") and with the
Delaware Secretary of State in accordance with the provisions of the Delaware
General Corporation Law (the date and time of such filings is hereinafter
referred to as the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the treasury
of the Company or owned by Parent or any direct or indirect subsidiary of Parent
or the Company (which will be cancelled and retired without any conversion
thereof and without any payment with respect thereto)) will be cancelled,
extinguished and converted into the right to receive $1.00 per Share in cash,
without interest thereon. At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of Shares shall thereafter be made.
VOTING AT THE SPECIAL MEETING
The Board of Directors has fixed the close of business on August 7, 2000 as
the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Special
3
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Meeting. At the close of business on the Record Date, there were 5,788,569
Shares issued and outstanding, each of which is entitled to one vote at the
Special Meeting, held by approximately 1,330 holders of record.
Shares represented by a properly signed, dated and returned proxy will be
treated as present at the meeting for purposes of determining a quorum, without
regard to whether the proxy is marked as casting a vote or abstaining. Proxies
relating to "street name" Shares that are voted by brokers will be counted as
Shares present for purposes of determining the presence of a quorum, but will
not be treated as Shares having voted at the Special Meeting as to the Merger
proposal if authority to vote is withheld by the broker. ACCORDINGLY,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST THE
APPROVAL OF THE MERGER AGREEMENT.
In order to vote on the approval of the Merger Agreement at the Special
Meeting, shareholders may attend the Special Meeting or deliver executed proxies
to the following address:
EQUISERVE
P.O. Box 9391
Boston, MA 02205-9969
INSTRUCTIONS WITH REGARD TO THE SURRENDER OF SHARE CERTIFICATES TO THE
PAYING AGENT, TOGETHER WITH A LETTER OF TRANSMITTAL TO BE USED FOR THIS PURPOSE,
WILL BE FORWARDED TO THE COMPANY'S SHAREHOLDERS AS PROMPTLY AS PRACTICABLE
FOLLOWING THE EFFECTIVE TIME. SHAREHOLDERS SHOULD SURRENDER SHARE CERTIFICATES
ONLY AFTER RECEIVING A LETTER OF TRANSMITTAL. SHAREHOLDERS SHOULD NOT SEND ANY
STOCK CERTIFICATES AT THIS TIME.
4
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
In September 1998, the Company engaged the U.S. Bancorp Piper Jaffray, Inc.
("U.S. Bancorp Piper Jaffray" or 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 Parent, in which Davis Wire
Corporation ("Davis Wire"), a subsidiary of Parent, 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
Parent'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 Parent's 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 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. In addition, based on management's prior discussions
with Parent's representatives, management expected that Company shareholders
would have the option in any transaction to retain an equity interest in the
combined enterprises. 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
5
<PAGE>
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 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. Parent's proposal
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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
Company's board of directors authorized management to pursue a transaction with
the Parent. 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. Pursuant to the Board's direction, 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.
Also on May 26, the Company renewed its engagement of the Advisor.
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
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.
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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 Jon 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 the 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 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
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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.
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.
On July 10, 2000, Purchaser commenced a cash tender offer for all of the
outstanding Shares at $1.00 per Share, in cash. The offer period expired on
August 4, 2000 and on August 7, 2000 Purchaser acquired 4,705,354 Shares,
consisting of all Shares tendered in the tender offer. The Shares acquired by
Purchaser in the tender offer constitute approximately 81.5% of the outstanding
Shares.
On August 14, 2000, six of the Company's nine directors resigned from the
Board pursuant to the Merger Agreement. The size of the Board was then reduced
to seven members and Purchaser designated four persons who were subsequently
elected as directors.
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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 that the $1.00 per Share to be received by the
holders of Common Stock in the Offer and in the Merger (the "Offer Price") 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 attached as Annex B.
Shareholders are urged to read such opinion in its entirety. The Advisor has
consented to the reproduction in full of its fairness opinion herein.
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 of the Merger" 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;
(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
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U.S. Bancorp Piper Jaffray, is attached to this Proxy Statement as Annex B
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.
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OPINION OF THE COMPANY'S FINANCIAL ADVISOR
U.S. Bancorp Piper Jaffray was retained by the Company to act as its
financial advisor in connection with the Offer and the Merger. The Company
requested that U.S. Bancorp Piper Jaffray evaluate the fairness, from a
financial point of view, to the holders of Shares (other than Parent and its
affiliates) of the consideration to be received by such holders in the Offer and
the Merger. On June 26, 2000, at a meeting of the Board of Directors of the
Company held to evaluate the proposed transaction with Parent, U.S. Bancorp
Piper Jaffray delivered an oral opinion (subsequently confirmed by delivery of a
written opinion dated such date) to the Board of Directors of the Company to the
effect that, as of the date of such opinion and based upon and subject to
certain matters stated in such opinion, the cash consideration to be received by
holders of Shares (other than Parent and its affiliates) in the Offer and the
Merger was fair, from a financial point of view, to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF U.S. BANCORP PIPER JAFFRAY DATED
JUNE 26, 2000, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX B AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES ARE URGED TO READ THIS
OPINION CAREFULLY IN ITS ENTIRETY. U.S. BANCORP PIPER JAFFRAY'S OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE CASH CONSIDERATION TO BE RECEIVED BY
HOLDERS OF SHARES (OTHER THAN PARENT AND ITS AFFILIATES) IN THE OFFER AND THE
MERGER FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE
OFFER, THE MERGER OR RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF U.S. BANCORP PIPER JAFFRAY SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
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 payable upon consummation
of the Merger, 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.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that certain members of the Company's
management and Board have certain interests which may be considered conflicts of
interest in connection with the Merger.
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 below. 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 Shares pursuant to the
Offer constituted a change of control for purposes of those
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agreements. The lump sum amounts that would be payable to Messrs. Kalich, Conn,
Wright and Lawrence if their agreements were terminated in accordance with their
terms would be up to approximately $1,400,000, $192,000, $212,000 and $218,000,
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 below.
Under that plan Mr. Kalich would be entitled to annual payments equal to
approximately $179,000 (assuming a change of control had occurred as of
August 31, 2000). The purchase of Shares pursuant to the Offer constituted a
change of control for the purposes of the vesting of Mr. Kalich's rights under
such plan.
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.
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.
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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 resigned from the Board of Directors of the Company and
from his position as Vice Chairman on August 14, 2000.
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.
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.
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
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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 PLAN
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.
PAYMENT FOR THE SHARES
Promptly after consummation of the Merger, the Paying Agent will send a
transmittal letter and instructions to each person that was a record holder of
Shares immediately prior to the Effective Time advising such holder of the
procedure for surrendering his or her certificate or certificates in exchange
for $1.00 in cash for each formerly outstanding Share. To receive the payment to
which they are entitled pursuant to the terms of the Merger Agreement,
shareholders must carefully comply with the instructions on such transmittal
letter and return it, along with their certificates, to the Paying Agent
pursuant to the terms thereof. DO NOT SEND SHARE CERTIFICATES WITH YOUR PROXY.
Interest will not be paid on the amounts payable upon surrender of certificates
which formerly represented the Shares. If the cash price of $1.00 per share is
to be paid to any person other than the registered holder of such Shares, it
will be a condition to the payment by the Paying Agent that the surrendered
certificate is properly endorsed for transfer and the person requesting delivery
of the cash price will pay to the Paying Agent any transfer or other taxes as a
result of the payment to a person other than the registered holder unless such
person can establish to the reasonable satisfaction of the Paying Agent that
such tax has been paid or is not payable. None of the Paying Agent, Parent,
Purchaser or the Company shall be liable to a holder of Shares for any cash
delivered pursuant to the Merger Agreement to any public official pursuant to
applicable abandoned property, escheat and similar laws.
One year after consummation of the Merger, the Paying Agent will deliver to
the Parent any cash funds not theretofore disbursed to holders of certificates
formerly representing Shares, and thereafter the holders of such certificates
shall look to the Parent (subject to applicable abandoned property, escheat or
other similar laws) for any cash payments due as a result of the Merger for the
Share formerly represented by such certificates.
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PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
The purpose of the Offer and the Merger is for Parent to acquire the entire
equity interest in the Company. Once Parent controls the Company, Parent
believes it will have the ability to implement changes at the Company that are
intended to increase the profitability of the Company. The Merger will allow
Parent to acquire all outstanding Shares not tendered and purchased pursuant to
the Offer. Upon consummation of the Merger, the Company will be a wholly-owned
subsidiary of Parent.
CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
ANTITRUST MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Offer could not be consummated until notifications
had been given and certain information had been furnished to the FTC and the
Antitrust Division of the U.S. Department of Justice (the "Antitrust Division").
The waiting period under the HSR Act expired on August 3, 2000.
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 the Effective Time, 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
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 Merger on antitrust grounds will not be
made or, if such a challenge is made, of the results thereof.
INDIANA BUSINESS COMBINATION LAW
Chapter 43 of the IBCL establishes a five-year period beginning with the
acquisition of 10% of the voting power of the outstanding voting shares of a
"resident domestic corporation" (which definition includes the Company) during
which certain business transactions involving the acquiring shareholder are
prohibited unless, prior to the acquisition of such interest, the board of
directors of the resident domestic corporation approves the acquisition of such
interest or the proposed business combination. The Board of Directors has
approved the Merger Agreement and Purchaser's acquisition of Shares pursuant to
the Offer. Therefore, Chapter 43 does not apply to the Merger Agreement.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not believe that any state takeover statutes apply to the
Merger. Purchaser has not currently complied with any state takeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Merger and nothing in
this proxy statement or any action taken in connection with the Merger is
intended as a waiver of such right. In the event it is asserted that one or more
state takeover laws is applicable to the Merger, and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Merger,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be delayed in continuing or consummating the Merger.
The Board of Directors has taken the necessary action to render control
share acquisitions provisions and business combinations provisions of Indiana
Law, and any other potentially applicable anti-takeover or similar statute or
regulation inapplicable to the Merger Agreement and the transactions
contemplated thereby.
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CONTROL SHARE STATUTE
A number of states (including Indiana, where the Company is incorporated)
have adopted laws and regulations applicable to attempts to acquire securities
of corporations which are incorporated, or have substantial assets,
stockholders, principal executive offices or principal places of business, or
whose business operations otherwise have substantial economic effects, in such
states. In EDGAR V. MITE CORP., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS CORP. V.
DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of Indiana may,
as a matter of corporate law and, in particular, with respect to those aspects
of corporate law concerning corporate governance, constitutionally disqualify a
potential acquirer from voting on the affairs of a target corporation without
the prior approval of the remaining stockholders. The state law before the
Supreme Court was by its terms applicable only to corporations that had a
substantial number of holders in the state and were incorporated there.
Under Chapter 42 of the IBCL, with certain exceptions, a person proposing to
acquire or acquiring voting shares of an "issuing public corporation" (which
definition includes only corporations having at least 100 shareholders,
principal place of business, office or substantial assets within Indiana, and in
which more than 10% of its shareholders are Indiana residents, more than 10% of
its shares are owned by Indiana residents, or which have 10,000 or more
shareholders who are Indiana residents) sufficient to entitle that person to
exercise voting power within any of the ranges of one-fifth to one-third of all
voting power, more than one-third but less than one-half of all voting power, or
a majority or more of all voting power (a "control share acquisition") may give
a notice of such fact to the corporation containing certain specified data. The
acquiring person may request that the directors call a special meeting of
shareholders for the purpose of considering the voting rights to be accorded the
shares so acquired ("control shares"), and the control shares have voting rights
only to the extent granted by a resolution approved by the shareholders. The
resolution must be approved by a majority of the votes entitled to be cast by
each voting group entitled to vote separately on the proposal, excluding shares
held by the acquiring person and shares held by management. Control shares as to
which the required notice has not been filed and any control shares not accorded
full voting rights by the shareholders may be redeemed at fair market value by
the corporation if it is authorized to do so by its articles of incorporation or
bylaws before a control share acquisition has occurred (the Company is
authorized to make such a redemption). Shareholders are entitled to dissenter's
rights with respect to the control share acquisition in the event that the
control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority of all voting power. The Company Board
can "opt out" of the Control Share Statute through an amendment to the By-laws.
The Company has taken action necessary to render Chapter 42 inapplicable to
the Merger.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement
application to the Merger. The summary is qualified in its entirety by reference
to the Merger Agreement, which is incorporated herein by reference and a copy of
which has been included as Annex A hereto.
THE MERGER
The Merger Agreement provides that, subject to the terms and conditions set
forth in the Merger Agreement and the applicable provisions of the IBCL,
Purchaser will be merged with and into the Company and the separate existence of
Purchaser will cease. The Company will be the Surviving Corporation of the
Merger and will be entirely owned by Parent. In the Merger, each share of common
stock of Purchaser outstanding immediately prior to the Effective Time will be
converted into and
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exchanged for one validly issued, fully paid and non-assessable share of Common
Stock, $.01 par value per share, of the Surviving Corporation. At the Effective
Time, each Share issued and outstanding immediately prior to the Effective Time
(other than Shares owned by Parent or Purchaser or held by the Company, all of
which shall be cancelled) will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive $1.00
per Share (the "Merger Consideration"). At and after the Effective Time, any
outstanding option to purchase shares of Common Stock (each a "Company Stock
Option") or other stock-based awards of the Company granted under the Company's
plans or agreements pursuant to which stock options or restricted stock awards
or other stock-based awards of the Company have been or may be granted
(collectively, the "Company Stock Plans") and any outstanding warrant or other
right convertible or exchangeable into shares of capital stock of the Company
(each a "Company Warrant") will, in accordance with the terms of the applicable
Company Stock Plan or Company Warrant, by virtue of the Merger and without any
further action on the part of the Company, Parent, Purchaser or the holder of
any such Company Stock Option or Company Warrant, be automatically converted
into the right to receive an amount per share of Common Stock into which such
Company Stock Option (regardless of any vesting schedule) or Company Warrant is
exercisable or convertible equal to (i) the Merger consideration less (ii) any
applicable exercise price or conversion price with respect to such Company Stock
Option or Company Warrant as of the Effective Time. At the Effective Time, all
outstanding Company Stock Options shall be cancelled and all Company Stock Plans
shall be terminated and of no further force or effect. The Merger Agreement
provides that (subject to the provisions of the Merger Agreement and the
applicable provisions of the IBCL) the closing of the Merger shall occur
promptly following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of the conditions to the Merger set forth in the Merger
Agreement.
SHAREHOLDER MEETING
The Merger Agreement provides that unless shareholder action is taken by
written consent, the Company shall call and hold a meeting of its shareholders
(the "Company Meeting") as promptly as practicable following the purchase of
Shares by Purchaser pursuant to the Offer for the purpose of voting upon the
approval of the Merger, and the Company shall use its reasonable best efforts to
hold the Company Meeting as soon as practicable after such date. The Company
shall set the record date for the Company Meeting or any action taken by written
consent for the approval of the Merger as the date on which Purchaser becomes
the record holder of all Shares purchased pursuant to the Offer. The Merger
Agreement provides that Parent shall cause all Shares purchased by Purchaser
pursuant to the Offer and all other Shares owned by Parent or any other
subsidiary or affiliate of Parent to be voted in favor of the approval of the
Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. These include representations and warranties by the Company
with respect to (i) the due organization, existence and the qualification, good
standing, corporate power and authority of the Company and its subsidiaries;
(ii) the due authorization, execution, and delivery of the Merger Agreement and
certain ancillary documents executed in connection therewith and the
consummation of the transactions contemplated thereby, and the validity and
enforceability thereof except for any required approval under the IBCL and the
Board of Directors approval and adoption of the Merger Agreement and the
ancillary documents executed therewith and the consummation of the transactions
contemplated thereby and the Board of Directors resolution to recommend that the
shareholders accept the Offer and vote for the approval and adoption of the
Offer and the Merger; (iii) the compliance by the Company and its subsidiaries
with all applicable foreign, federal, state or local laws, statutes, ordinances,
rules, regulations, orders, judgments, rulings and decrees of any foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority, or any court,
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arbitration, board or tribunal; (iv) the absence of consents and approvals
necessary for consummation by the Company of the Merger and the absence of any
violations, breaches or defaults which would result from compliance by the
Company with any provision of the Merger Agreement; (v) the capitalization of
the Company, including the number of shares of capital stock of the Company
outstanding; (vi) compliance with the Securities Act of 1933, as amended (the
"Securities Act") and the Exchange Act, in connection with each registration
statement, report, proxy statement or information statement (as defined under
the Exchange Act) prepared by the Company since September 30, 1997, the
Schedule 14D-9, the information statement, if any, filed by the Company in
connection with the Offer pursuant to Rule 14f-1 under the Exchange Act and any
schedule required to be filed by the Company with the Commission or any
amendment or supplement thereto; (vii) compliance with generally accepted
accounting principles in connection with the audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company; (viii) the absence of untrue statements or omission of material facts;
(ix) the absence of certain changes or effects; (x) the absence of undisclosed
liabilities; (xi) the absence of pending or (to the knowledge of the Company)
threatened claims, actions, suits, proceedings, arbitrations, investigations or
audits; (xii) in connection with the Company's tax preparation, compliance with
all applicable tax laws, payment and filing of all taxes and no undisclosed tax
liability; (xiii) employee benefit plans; (xiv) compliance with any applicable
provision of any law, statue, ordinance or regulation; (xv) certain fees in
connection with the transactions contemplated by the Merger Agreement;
(xvi) environmental matters; (xvii) the Company and its subsidiaries are in
possession of all permits necessary for the Company or its subsidiaries to lease
and operate its properties or to carry out the business of the Company;
(xviii) in connection with material contracts, all of the contracts are valid
and in full force; (xix) receipt of the opinion of U.S. Bancorp Piper Jaffray;
(xx) state takeover statutes; (xxi) intellectual property matters;
(xxii) maintenance of insurance; (xxiii) the Company and its subsidiaries have
good and marketable title to their assets; (xxiv) the absence of untrue
statements of a material fact or omission of material facts in connection with
the Schedule 14D-9 filed by the Company with the Commission; and (xxv) the
absence of untrue statements of a material fact or omission of a material fact
from the representations and warranties made by the Company in the Merger
Agreement, statements or information contained in the Company disclosure
schedule or in any information furnished by the Company to Parent pursuant to
the provisions of the Merger Agreement.
Parent has also made certain representations and warranties, including with
respect to (i) the due incorporation, existence, good standing and, subject to
certain limitations, corporate power and authority of Parent and Purchaser;
(ii) the due authorization, execution and delivery of the Merger Agreement and
certain ancillary documents executed in connection therewith and the
consummation of the transactions contemplated thereby, and the validity and
enforceability thereof; (iii) subject to certain exceptions and limitations, the
compliance by the Parent and Purchaser with any governmental body, agency,
official or authority; (iv) subject to certain exceptions and limitations, the
absence of consents and approvals necessary for consummation of the transactions
contemplated by the Merger Agreement by Parent and Purchaser and the absence of
any violations, breaches or defaults which would result from compliance by
Parent and Purchaser with any provision of the Merger Agreement; (v)subject to
certain exceptions and the absence of untrue statements of a material fact or
omission to state any material fact in connection with the information supplied
by Parent; (vi) the absence of any finders' or advisor's fees; (vii) subject to
certain exception and limitations, in connection with the Offer, the absence of
untrue statements of a material fact or omission of a material fact;
(viii) absence of any material misstatements or omissions in the Offer to
Purchase distributed to the Shareholders of the Company, the Schedule TO and the
exhibits thereto filed by Purchaser with the Commission and (ix) the sufficiency
of funds available to Purchaser for the consummation of the Offer and the
Merger.
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CONDUCT UNTIL THE MERGER
The Company has agreed that from the date of the Merger Agreement until the
Effective Time, the Company and its subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and relationships
with third parties. Without limiting the generality of the foregoing, from the
date of the Merger Agreement until the Effective Time, without the prior written
consent of Parent:
(i) the Company will not, and will not permit any of its subsidiaries
to, adopt or propose any change in its certificate or articles of
incorporation or by-laws;
(ii) the Company will not, and will not permit any subsidiary of the
Company to, adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than
transactions between direct and/or indirect wholly owned subsidiaries of the
Company);
(iii) the Company will not, and will not permit any subsidiary of the
Company to, issue, sell, transfer, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class or series of the Company or any of its
subsidiaries other than issuances of Common Stock pursuant to the exercise
of Company Stock Options that are outstanding on the date of the Merger
Agreement;
(iv) the Company will not (x) split, combine, subdivide or reclassify
its outstanding shares of capital stock, or (ii) declare, set aside or pay
any dividend or other distribution payable in cash, stock or property with
respect to its capital stock;
(v) the Company will not, and will not permit any subsidiary of the
Company to, redeem, purchase or otherwise acquire directly or indirectly any
of the Company's capital stock, Company Stock Options or Company Warrants or
Company subsidiary stock options or warrants, except for repurchases,
redemptions or acquisitions required by or in connection with the terms of
any Company Stock Plan;
(vi) the Company will not amend the terms (including the terms relating
to accelerating the vesting or lapse of repurchase rights or obligations) of
any employee or director stock options or other stock based awards or any
warrants;
(vii) the Company will not, and will not permit any subsidiary of the
Company to, (i) grant any severance or termination pay to (or amend any such
existing arrangement with) any director, officer or employee of the Company
or any of its subsidiaries, (ii) enter into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or
any of its subsidiaries, (iii) increase any benefits payable under any
existing severance or termination pay policies or employment agreements,
(viii) increase, other than customary periodic increases in the ordinary
course of business, (or amend the terms of) any compensation, bonus or other
benefits payable to directors, officers or employees of the Company or any
of its subsidiaries or (v) permit any director, officer or employee who is
not already a party to an agreement or a participant in a plan providing
benefits upon or following a "change in control" to become a party to any
such agreement or a participant in any such plan;
(ix) the Company will not, and will not permit any of its subsidiaries
to, acquire a material amount of assets or property of any other person,
other than the purchase of inventory in the ordinary course of business;
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(x) the Company will not, and will not permit any of its subsidiaries
to, sell, lease, license or otherwise dispose of any material amount of
assets or property except pursuant to existing contracts or commitments or
otherwise in the ordinary course of business;
(xi) except for any such change which is required by reason of a
concurrent change in GAAP, the Company will not, and will not permit any
subsidiary of the Company to, change any method of accounting or accounting
practice used by it;
(xii) the Company will not, and will not permit any subsidiary of the
Company to, enter into any joint venture, partnership or other similar
arrangement;
(xiii) the Company will not, and will not permit any of its subsidiaries
to, take any action that would make any representation or warranty of the
Company in the Merger Agreement inaccurate in any material respect at, or as
of any time prior to, the Effective Time;
(xiv) the Company will not make or change any Tax election, settle any
audit or file any amended Tax Returns, except in the ordinary course of
business consistent with past practice; and
(xv) the Company will not, and will not permit any of its subsidiaries
to, agree or commit to do any of the foregoing.
ACCESS TO INFORMATION
From the date of the Merger Agreement to the Effective Time, to the extent
permitted by applicable law, the Company will upon reasonable request give
Parent, its counsel, financial advisors, auditors and other authorized
representatives access to the offices, properties, books and records of the
Company and its subsidiaries during normal business hours, furnish to Parent,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such Persons may
reasonably request and will instruct its own employees, counsel and financial
advisors to cooperate with Parent in its investigation of the business of the
Company; provided that no investigation of the Company's business shall affect
any representation or warranty given by the Company hereunder, and the Company
shall not be required to provide any such information if the provision of such
information may cause a waiver of an attorney-client privilege.
NO SOLICITATION
The Company has agreed in the Merger Agreement that the Company and its
subsidiaries will not, and will use its reasonable best efforts to cause its
respective officers, directors, employees, investment bankers, consultants,
attorneys, accountants, agents and other representatives not to, directly or
indirectly, take any action to solicit, initiate, encourage or facilitate the
making of any Acquisition Proposal or any inquiry with respect thereto or engage
in substantive discussions or negotiations with any Person with respect thereto,
or in connection with any Acquisition Proposal or potential Acquisition
Proposal, disclose any nonpublic information relating to it or its subsidiaries
or afford access to the properties, books or records of it or its subsidiaries
to, any Person that has made, or to such party's knowledge, is considering
making, any Acquisition Proposal; provided, however, that, in the event that
(X) the Company shall receive a Superior Proposal that was not solicited by it
and did not otherwise result from a breach under the no solicitation provision
of the Merger Agreement, (Y) prior to receipt of Company Shareholder Approval,
the Board of Directors determines in its good faith judgment, after receiving
the advice of outside counsel, that, in light of this Superior Proposal, if the
Company fails to participate in such discussions or negotiations with, or
provide such information to, the party making the Superior Proposal, there is a
reasonable possibility that such Board of Directors would be in violation of its
fiduciary duties under applicable law, and (Z) after giving Parent three
business day's notice of its intention to do so, the Company may (i) furnish
information with respect to it and its subsidiaries to the person making such
Superior Proposal pursuant to a customary
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confidentiality agreement containing terms generally no less restrictive than
the terms contained in the confidentiality agreement (but not containing any
exclusivity provision and permitting the person to submit to the Board of
Directors Acquisition Proposals with respect to the Company provided that any
such Acquisition Proposal is subject to the approval of the Board of Directors)
provided that a copy of all such written information is simultaneously provided
to Parent and (ii) participate in discussions and negotiations regarding such
Superior Proposal.
The Merger Agreement provides that it does not prevent the Board of
Directors from complying with Rule 14e-2 under the Exchange Act with regard to
an Acquisition Proposal; provided that the Board of Directors shall not
recommend that the shareholders of the Company tender their shares in connection
with a tender offer except to the extent, after receiving a Superior Proposal,
the Board of Directors determines in its good faith judgment, after receiving
the advice of outside legal counsel, that, in light of the Superior Proposal,
there is a reasonable possibility that the Board of Directors would be in
violation of its fiduciary duties under applicable law if it fails to make such
a recommendation.
The Company has agreed to (A) promptly (and in no event later than 48 hours
after receipt of any Acquisition Proposal) notify (which notice shall be
provided orally and in writing and shall identify the person making the
Acquisition Proposal and set forth the material terms thereof) the Parent after
receipt of any Acquisition Proposal, or any request for nonpublic information
relating to the Company or any subsidiary of the Company or for access to the
properties, books or records of the Company or any subsidiary of the Company by
any person that has made, or to such party's knowledge may be considering
making, an Acquisition Proposal, and (B) will keep the Parent reasonably
informed of any changes to the material terms of any such Acquisition Proposal
or request. The Company has agreed to, and shall cause its subsidiaries to,
immediately cease and cause to be terminated, and use reasonable best efforts to
cause its officers, directors, employees, investment bankers, consultants,
attorneys, accountants, agents and other representatives to, immediately cease
and cause to be terminated, all discussions and negotiations, if any, that have
taken place prior to the date hereof with any persons with respect to any
Acquisition Proposal.
Under the Merger Agreement, "Acquisition Proposal" means any written offer
or proposal for, or any written indication of interest in, any (i) direct or
indirect acquisition or purchase of a business or asset of the Company or any of
its subsidiaries that constitutes 20% or more of the net revenues, net income or
assets of the Company and its subsidiaries, taken as a whole; (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of the Company or any of its subsidiaries whose business constitutes
20% or more of the net revenues, net income or assets of the Company and its
subsidiaries, taken as a whole; (iii) tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries whose
business constitutes 20% or more the net revenues, net income or assets of the
Company and its subsidiaries, taken as a whole; or (iv) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its subsidiaries whose business
constitutes 20% or more of the net revenue, net income or assets of the Company
and its subsidiaries, taken as a whole, other than the transactions contemplated
by this Agreement. Under the Merger Agreement, "Superior Proposal" means any
bona fide written Acquisition Proposal for or in respect of all of the
outstanding shares of the Common Stock (i) on terms that the Board of Directors
determines in its good faith judgment (after consultation with U.S. Bancorp
Piper Jaffray or another financial advisor of nationally recognized reputation
and taking into account all the terms and conditions of the Acquisition Proposal
deemed relevant by such Board of Directors, including any break-up fees, expense
reimbursement provisions, conditions to consummation, and the ability of the
party making such proposal to obtain financing for such Acquisition Proposal)
are more favorable from a financial point of view to its shareholders than the
Merger; and (ii) that constitutes a transaction that, in such Board of
Directors' judgment, is
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<PAGE>
reasonably likely to be consummated on the terms set forth, taking into account
all legal, financial, regulatory and other aspects of such proposal.
The Company agrees that it will take the necessary steps promptly to inform
its officers, directors, investment bankers, consultants, attorneys,
accountants, agents and other representatives of the obligations undertaken in
the no solicitation provision of the Merger Agreement.
FEES AND EXPENSES
Except as set forth below or as otherwise provided in the Merger Agreement,
whether or not the Offer or the Merger is consummated, all fees, costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement will be paid by the party incurring such
fees, costs and expenses. The Company shall pay the expenses related to
printing, filing and mailing of the proxy statements.
REASONABLE BEST EFFORTS; FURTHER ASSURANCES
The Merger Agreement provides that the Company and Parent shall each
cooperate with the other and use (and shall cause their respective subsidiaries
to use) their respective reasonable best efforts to promptly (i) take or cause
to be taken all necessary actions, and do or cause to be done all things,
necessary, proper or advisable under the Merger Agreement and applicable laws to
consummate and make effective the Offer and the Merger and the other
transactions contemplated by the Merger Agreement as soon as practicable,
including, without limitation, preparing and filing promptly and fully all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtain all approvals, consents, registrations, permits, authorizations and
other confirmations required to be obtained from any third party necessary,
proper or advisable to consummate the Offer and the Merger and the other
transactions contemplated by the Merger Agreement.
Subject to applicable laws relating to the exchange of information, the
Company and Parent shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to the
Company and its subsidiaries or Parent and its subsidiaries, as the case may be,
that appears in any filing made with, or written materials submitted to, any
third party and/or any governmental authority in connection with the Offer and
the Merger and the other transactions contemplated by the Merger Agreement.
At and after the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company or Purchaser, any deeds, bills of sale, assignments or assurances
and to take any other actions and do any other things, in the name and on behalf
of the Company or Purchaser, reasonably necessary to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the Company,
Parent and Purchaser to consummate the Merger are subject to the satisfaction
(or, to the extent legally permissible, waiver) of the following conditions:
(a) the Merger Agreement and the Merger shall have been approved and
adopted by the shareholders of the Company in accordance with Indiana Law
and the Company shall have complied with the information and notice
requirements of Rule 14c-2 of the Exchange Act, if applicable;
23
<PAGE>
(b) any applicable waiting period (including any extension thereof)
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR
Act"), as amended, relating to the Merger shall have expired or been
terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(d) all required approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger
and the consummation of the other transactions contemplated thereby shall
have been obtained (and all relevant statutory, regulatory or other
governmental waiting periods, whether domestic, foreign or supranational,
shall have expired) unless the failure to receive any such approval or
consent would not, and would not be reasonably expected to, have a material
adverse effect on Parent at or after the Effective Time and (ii) all such
approvals and consents which have been obtained shall be on terms that would
not, and would not reasonably be expected to, have a material adverse effect
on Parent at or after the Effective Time.
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. The obligations of
Parent and Purchaser to consummate the Merger are subject to the satisfaction
(or, to the extent legally permissible, waiver) of the following further
conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations under the Merger Agreement required to be performed by it at
or prior to the Effective Time, (ii) the representations and warranties of
the Company contained in the Merger Agreement and in any certificate or
other writing delivered by the Company pursuant thereto shall be true and
correct in all material respects at and as of the Effective Time as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), and (iii) Parent shall have
received a certificate signed by an executive officer of the Company to the
foregoing effect;
(b) there shall not be instituted or pending any action or proceeding by
any governmental authority (whether domestic, foreign or supranational)
before any court or governmental authority or agency, domestic, foreign or
supranational, seeking to (i) restrain, prohibit or otherwise interfere with
the ownership or operation by Parent or any subsidiary of Parent of all or
any portion of the business of the Company or any of its subsidiaries or of
Parent or any of its subsidiaries or to compel Parent or any subsidiary of
Parent to dispose of or hold separate all or any portion of the business or
assets of the Company or any of its subsidiaries or of Parent or any of its
subsidiaries; (ii) to impose or confirm limitations on the ability of Parent
or any subsidiary of Parent effectively to exercise full rights of ownership
of the shares of the Common Stock (or shares of stock of the Surviving
Corporation) including, without limitation, the right to vote any shares of
the Common Stock (or shares of stock of the Surviving Corporation) on any
matters properly presented to shareholders; or (iii) seeking to require
divestiture by Parent or any subsidiary of Parent of any shares of the
Common Stock (or shares of stock of the Surviving Corporation), if any such
matter referred in subclauses (i), (ii) and (iii) would, or would reasonably
be expected to, have a material adverse effect on Parent at or after the
Effective Time;
(c) there shall not be any statute, rule, regulation, injunction, order
or decree, enacted, enforced, promulgated, entered, issued or deemed
applicable to the Merger and the other transactions contemplated pursuant to
the Merger Agreement (or in the case of any statute, rule or regulation,
awaiting signature or reasonably expected to become law), by any court,
government or governmental authority or agency or legislative body,
domestic, foreign or supranational, that would, or would reasonably be
expected to, have a material adverse effect on Parent at or after the
Effective Time;
24
<PAGE>
(d) since the date of the Merger Agreement, there shall not have
occurred a material adverse effect with respect to the Company, nor shall
there have occurred a change or event which would reasonably be expected to
have a material adverse effect on the Company;
(e) the Foothill Consent shall have been obtained;
(f) there shall not have been a subsequent development (including any
settlement or final settlement offer from counsel for the plaintiffs) in any
action or proceeding pending on the date of the Merger Agreement relating to
the Company or any of its subsidiaries or there shall not have been
instituted any action or proceeding subsequent to the date of the Merger
Agreement that would (i) have a material adverse effect on the Company, or
(ii) make materially more costly (A) the making of the Offer, (B) the
acceptance for payment of, or payment for, some or all of the shares
pursuant to the Offer, (C) the purchase of shares pursuant to the Offer, or
(D) the consummation of the Merger; or
(g) the Company shall not have (i) petitioned or applied to any tribunal
for or consented to the appointment of a receiver, (ii) admitted in writing
its inability to pay its debts as they mature, (iii) made an assignment for
the benefit of creditors, (iv) been adjudicated bankrupt or insolvent,
(v) filed voluntarily or had filed against it a petition in bankruptcy or a
petition or an answer seeking reorganization or any arrangement with
creditors or to take advantage of any bankruptcy, reorganization,
insolvency, dissolution or liquidation law or statute, or (vi) become unable
to conduct its business, taken as a whole, substantially as currently
conducted (including the purchase of inventory and supplies and the payment
of liabilities).
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the Company
to consummate the Merger is subject to the satisfaction (or, to the extent
legally permissible, waiver) of the following further conditions:
(a) (i) Each of Parent and Purchaser shall have performed in all
material respects all of its obligations under the Merger Agreement required
to be performed by it at or prior to the Effective Time, (ii) the
representations and warranties of Parent and Purchaser contained in the
Merger Agreement and in any certificate or other writing delivered by Parent
or Purchaser pursuant thereto shall be true and correct in all material
respects at and as of the Effective Time as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as
of such earlier date), and (iii) the Company shall have received a
certificate signed by an executive officer of Parent to the foregoing
effect;
(b) there shall not be any statute, rule, regulation, injunction, order
or decree, enacted, enforced, promulgated, entered, issued or deemed
applicable to the Merger and the other transactions contemplated thereby (or
in the case of any statute, rule or regulation, awaiting signature or
reasonably expected to become law), by any court, government or governmental
authority or agency or legislative body, domestic, foreign or supranational,
that would, or would reasonably be expected to, have a material adverse
effect on the business of the Surviving Corporation at or after the
Effective Time; and
(c) the Foothill Consent shall have been obtained.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger by the shareholders of the
Company and Parent:
(a) by mutual consent of the Parent and the Company;
(b) (i) by Parent (provided that Parent is not then in material breach
of any representation, warranty, covenant or other agreement contained in
the Merger Agreement), if there has been a breach by the Company of any of
its representations, warranties, covenants or agreements
25
<PAGE>
contained in the Merger Agreement in any material respect, or any such
representation and warranty shall have become untrue, in any such case such
that the provision regarding conditions to the obligations of Parent and
Purchaser contained in the Merger Agreement will not be satisfied and such
breach or condition has not been promptly cured within 30 days following
receipt by the Company of written notice of such breach; (ii) by the Company
(provided that the Company is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
there has been a breach by Parent of any of its representations, warranties,
covenants or agreements contained in this Agreement in any material respect,
or any such representation and warranty shall have become untrue, in any
such case such that the provision regarding conditions to the obligations of
the Company in the Merger Agreement will not be satisfied and such breach or
condition has not been promptly cured within 30 days following receipt by
Parent of written notice of such breach;
(c) by either Parent or the Company if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or
any governmental entity preventing or prohibiting consummation of the Offer
or the Merger shall have become final and nonappealable;
(d) by either Parent or the Company if (i) the Offer shall not have been
consummated before October 23, 2000 or (ii) the Merger shall not have been
consummated before December 22, 2000, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to
terminate the Merger Agreement to perform or observe in all material
respects the covenants and agreements of such party set forth herein;
provided, however, that this Agreement may be extended not more than
60 days by Parent or the Company by written notice to the other party if the
Merger shall not have been consummated as a direct result of (i) the Company
or Parent having failed to receive all regulatory approvals or consents
required to be obtained by the Company or Parent with respect to the Offer
or Merger or (ii) the existence of litigation or any governmental proceeding
seeking to prevent or prohibit consummation of the Offer or the Merger;
provided further, that this Agreement may be extended up to 90 days by
Parent (and the Company agrees to such extension), in its sole discretion,
in the event the Foothill Consent shall not have been obtained prior to the
dates set forth in section (d) of the provision regarding termination in the
Merger Agreement; provided further, that the Company may not terminate this
Agreement due to the failure to obtain the Foothill Consent prior to the
expiration of the period referred to in the immediately preceding proviso;
(e) by the Company if it determines to accept a Superior Proposal;
provided that such termination under clause (e) shall not be effective
unless the Company gives notice to the Parent at least three business day
prior to acceptance of a Superior Proposal and shall not be effective until
the Company has delivered the Company breakup fee as set forth in the
provision regarding the effect of termination in the Merger Agreement
resulting in the breakup fee. The Company shall not accept a Superior
Proposal unless it terminates this Agreement;
(f) by Parent, if the Board of Directors of the Company shall have
failed to recommend or withdrawn or modified or changed in a manner adverse
to Parent its approval or recommendation of the Merger Agreement, the Offer
or the Merger, whether or not permitted by the terms hereof, or shall have
failed to call the Company Shareholder Meeting, or shall have recommended a
Superior Proposal (or the Board of Directors shall resolve to do any of the
foregoing);
(g) by Parent if the Merger Agreement shall fail to receive the
requisite vote for approval and adoption by the shareholders of the Company
at the Company's Shareholder Meeting or any adjournment or postponement
thereof (except in connection with a breach by Parent of its covenants under
the Merger Agreement);
(h) by the Company if the Agreement shall fail to receive the requisite
vote for approval and adoption by the shareholders of the Company at the
Company's Shareholder Meeting or any
26
<PAGE>
adjournment or postponement thereof (except in connection with a breach by
the Company of its covenants under the Merger Agreement); or
(i) by Parent if Parent or Purchaser, as the case may be, shall have
terminated the Offer, or the Offer shall have expired, without Parent or
Purchaser, as the case may be, purchasing any shares of the Common Stock
thereunder.
EFFECT OF TERMINATION
In the event of the termination of the Merger Agreement by either the
Company or Parent pursuant to the provision regarding termination under the
Merger Agreement, the Merger Agreement shall forthwith become void, there shall
be no liability under the Merger Agreement on the part of Parent or the Company,
other than as provided under the sections of the Merger Agreement regarding
effect of termination, fees and expenses, the confidentiality provisions, and
except to the extent that such termination results from the willful and material
breach by a party of any of its representations, warranties, covenants or
agreements set forth in the Merger Agreement.
In the event of termination of the Merger Agreement without consummation of
the transactions contemplated thereby by the Company pursuant to termination by
the Company if it accepts a Superior Proposal then the Company shall make
payment to Parent simultaneously therewith by wire transfer of immediately
available funds of a breakup fee in the amount of $1,250,000 (the "Company
Breakup Fee") plus all expenses incurred by Parent in connection with the
transactions contemplated thereby (which expenses shall not exceed $500,000 in
the aggregate).
If (i) the Merger Agreement is terminated without consummation of the
transactions contemplated in the Merger Agreement by the Company if the
Agreement shall fail to receive the requisite vote for approval and adoption by
the shareholders and (ii) at the time of the vote on the Merger by the
shareholders of the Company at the Company's Shareholder Meeting or adjournment
or postponement thereof (except in connection with a breach by the Company of
its covenants under the Merger Agreement), an unsolicited Acquisition Proposal
shall have been proposed, then the Company shall immediately make payment of the
Company Breakup Fee plus all expenses incurred by Parent in connection with the
transactions contemplated thereby (which expenses shall not exceed $500,000 in
the aggregate) to the Parent by wire transfer of immediately available funds
upon consummation of an Acquisition Proposal if such Acquisition Proposal is
consummated within twelve (12) months from the time of the vote of the
shareholders of the Company on the Merger and such consummated Acquisition
Proposal is with the party (or an affiliate of the party) which had proposed an
unsolicited Acquisition Proposal which was received by the Company prior to the
Company's shareholders' vote.
DIRECTORS AND OFFICERS INSURANCE; INDEMNIFICATION
The Merger Agreement provides that the Parent will maintain in effect for
not less than six years after the Effective Time the Company's current directors
and officers insurance policies, if such insurance is obtainable (or policies of
at least the same coverage containing terms and conditions no less advantageous
to the current and all former directors and officers of the Company), with
respect to acts or failures to act prior to the Effective Time, including acts
relating to the transactions contemplated by the Merger Agreement; provided,
however, that in order to maintain or procure such coverage, the Parent shall
not be required to maintain or obtain policies providing such coverage except to
the extent such coverage can be provided at an annual cost of no greater than
150% of the most recent annual premium paid by the Company prior to the date of
the Merger Agreement (the "Cap"); and provided, further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, the Parent will only be required to obtain only as much
coverage as can be obtained by paying an annual premium equal to the Cap. Parent
agrees that all rights to indemnification for acts or omissions occurring prior
to the Effective Time now existing in favor of the current or former directors
or officers of the Company and its subsidiaries (the
27
<PAGE>
"Indemnified Parties") as provided in their respective articles of incorporation
or by-laws (or similar organizational documents) shall survive the Effective
Time and shall continue in full force and effect in accordance with their
respective terms. The provisions of the Merger Agreement regarding Director and
Officer liability are intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties, their heirs and their
representatives.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER TO HOLDERS WHOSE SHARES ARE CONVERTED INTO THE RIGHT TO RECEIVE CASH IN
THE MERGER. THE SUMMARY IS BASED ON THE PROVISIONS OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), APPLICABLE CURRENT AND PROPOSED UNITED STATES
TREASURY REGULATIONS ISSUED THEREUNDER, JUDICIAL AUTHORITY AND ADMINISTRATIVE
RULINGS AND PRACTICE, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY WITH
RETROACTIVE EFFECT, AT ANY TIME AND, THEREFORE, THE FOLLOWING STATEMENTS AND
CONCLUSIONS COULD BE ALTERED OR MODIFIED. THE DISCUSSION DOES NOT ADDRESS
HOLDERS OF SHARES IN WHOSE HANDS SHARES ARE NOT CAPITAL ASSETS, NOR DOES IT
ADDRESS HOLDERS WHO HOLD SHARES AS PART OF A HEDGING, "STRADDLE," CONVERSION OR
OTHER INTEGRATED TRANSACTION, OR WHO RECEIVED SHARES UPON CONVERSION OF
SECURITIES OR EXERCISE OF WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OR PURSUANT
TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR TO
HOLDERS OF SHARES WHO ARE IN SPECIAL TAX SITUATIONS (SUCH AS INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, UNITED STATES
EXPATRIATES OR NON-U.S. PERSONS). NOR DOES IT ADDRESS ANY ASPECT OF FOREIGN,
STATE OR LOCAL TAXATION OR ESTATE AND GIFT TAXATION.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH
HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH SHAREHOLDER AND THE
PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash in exchange for Shares pursuant to the Merger will be
taxable for federal income tax purposes and may also be taxable under applicable
state, local or foreign tax laws. A shareholder who receives cash will generally
recognize gain or loss for federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received by the shareholder and
the shareholder's adjusted tax basis in the Shares exchanged therefor. Gain or
loss must be determined separately for each block of Shares exchanged (for
example, Shares acquired at the same cost in a single transaction). Such gain or
loss will be capital gain or loss (provided that the Shares are held as capital
assets) and any such capital gain or loss will be long term if, as of the date
of the exchange, the Shares were held for more than one year.
The foregoing discussion may not be applicable to certain types of
shareholders or Shares, including shareholders who acquired Shares pursuant to
the exercise of options or otherwise as compensation, individuals who are not
citizens or residents of the United States, and foreign corporations, Shares
held as part of a straddle, hedge, conversion transaction, synthetic security or
other integrated investment, or entities that are otherwise subject to special
tax treatment under the Code (such as dealers in securities or foreign currency,
insurance companies, regulated investment companies, tax-exempt entities,
financial institutions, and investors in pass-through entities).
28
<PAGE>
FINANCING OF THE MERGER
The Merger is not conditioned upon any financing arrangements. The amount of
funds required by Purchaser to purchase all of the outstanding Common Stock
pursuant to the Merger and to pay related fees and expenses is expected to be
approximately $1,200,000. Purchaser will obtain these funds from Parent. To the
extent the needed funds are not available from working capital, Parent will
borrow under the loan agreement described below.
On March 31, 2000, Heico and Parent (collectively, the "Borrowers") entered
into a second amended and restated credit agreement ("2000 Credit Agreement")
with a group of banks. Under the terms of the 2000 Credit Agreement, the lenders
agreed to provide revolving loans from time to time of up to $250 million, due
July 30, 2003, to be used for working capital and for other general corporate
purposes. Up to $50 million of the revolving credit facility can be used to
support outstanding letters of credit. Interest on the loans under the 2000
Credit Agreement is based on the agent bank's reference rate or the Eurodollar
rate plus a factor which depends on the Borrowers' consolidated ratio of funded
debt to earnings before taxes, interest, depreciation and amortization. In
addition, Borrowers pay a commitment fee on the unused amounts of the credit
facility. The revolving loans under the 2000 Credit Agreement are guaranteed by
certain restricted subsidiaries of the Borrowers and are otherwise unsecured,
subject to a negative pledge covenant. The 2000 Credit Agreement contains
certain financial covenants restricting dividend payments, repurchase of shares,
investments, issuance of additional debt, among other matters. Under the terms
of the 2000 Credit Agreement, $185.9 million was available for investments at
March 31, 2000. As of March 31, 2000, the Company had outstanding letters of
credit of $8 million used principally to support insurance and bonding programs.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") place restrictions on the amount of
credit that may be extended for the purposes of purchasing margin stock,
including if such credit is secured directly or indirectly by margin stock.
Purchaser believes that the financing of the acquisition of the Shares will be
in full compliance with the margin regulations.
INFORMATION CONCERNING THE COMPANY
THE BUSINESS OF THE COMPANY
The Company and its subsidiaries currently operate in the wire and
engineered products segments. The Company produces tire bead wire, welding wire,
stainless steel spring and specialty wire, and plated wire. These wire products
are supplied to major markets consisting of tire, spring, automotive component,
electric component, telecommunications and fabricated metal products. The
Company also produces wire cloth, nonwoven metal fiber materials, filters and
inflator housings for automotive air bag inflators, which are sold primarily to
automotive air bag manufacturers. The principal address of the Company is 1618
Terminal Road, Niles, Michigan 49120. The Company's telephone number is
(616) 683-8100.
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
reports filed with the Commission. These reports and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at
regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C.
29
<PAGE>
20549. Electronic filings filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval, or EDGAR, system, including those made by or
in respect of the Company, are publicly available through the Commission's home
page on the Internet at http://www.sec.gov.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The management of the Company is under the direction of the Board. The Board
is currently comprised of seven directors: Ranko Cucuz, Michael F. Heisley, Sr.,
Ronald B. Kalich, Stanley H. Meadows, Donald R. Sheley, Jr., Emily Heisley
Stoeckel, E. A. Roskovensky. Mr. Heisley, Mr. Meadows, Ms. Heisley Stoeckel and
Mr. Roskovensky were designated by Parent an appointed to the Board on
August 21, 2000 pursuant to the Merger Agreement.
The following information regarding the directors is provided as of
August 30, 2000.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
---------------- -------- ------------------------------------------------------------
<S> <C> <C>
Ranko Cucuz................ 55 Chairman and Chief Executive Officer of Hayes Lemmerz
International, Inc. (automobile industry supplier).
Michael F. Heisley, Sr..... 63 President and Chief Executive Officer of The Heico
Companies, LLC, since March 1997; Chairman of the Board of
Directors of Davis Wire Corporation and WorldPort
Communications, Inc.; Director and Chairman and Chief
Executive Officer of NS Acquisition Corporation.
Mr. Heisley is the father of Emily Heisley Stoeckel.
Ronald B. Kalich........... 52 President and Chief Executive Officer of the Company since
November 1999; previously President, Getz Brothers &
Co., Inc. (international distribution company); Director,
The Carbide/ Graphite Group, Inc., Thomas and Betts Corp.
Stanley H. Meadows......... 55 Assistant Secretary of The Heico Companies, LLC, since March
1997; 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.
Donald R. Sheley, Jr....... 58 Formerly Vice President Finance and CFO, Standard Products,
Co.
Emily Heisley Stoeckel..... 36 Managing Director of Heico Acquisitions since 1995; Director
of Tom's Foods, Inc. Ms. Stoeckel is the daughter of
Michael E. Heisley, Sr.
E. A. Roskovensky.......... 54 President and Secretary of NS Acquisition Corp.; President
and Chief Executive Officer of Davis Wire Corporation;
Director, QuadraMed Corporation.
</TABLE>
30
<PAGE>
INFORMATION CONCERNING PARENT AND PURCHASER
PURCHASER
Purchaser, a newly incorporated Delaware corporation, has not conducted any
business other than in connection with the Offer and the Merger Agreement. All
of the issued and outstanding shares of capital stock of Purchaser are held by
Parent. The principal address of Purchaser is c/o Heico Holding, Inc., 5600
Three First National Plaza, Chicago, Illinois 60602. The telephone number is
(312) 419-8220.
PARENT
Parent, a Delaware limited liability company, is a privately owned holding
company headquartered in Chicago, Illinois. Activities include construction
equipment and services, heavy machinery, materials handling, and other
interests. Parent is controlled by Michael E. Heisley, Sr. The principal
executive offices of Parent are located at 5600 Three First National Plaza,
Chicago, Illinois 60602. The telephone number is (312) 419-8220.
Neither Parent nor Purchaser is subject to the informational reporting
requirements of the Exchange Act, nor are any of them required to file reports
and other information with the Commission relating to their respective
businesses, financial condition or other matters. Except as otherwise disclosed
in this Proxy Statement, neither Parent nor Purchaser has made, or is making,
any provision in connection with the Merger to grant unaffiliated security
holders access to the files of either Parent or Purchaser.
31
<PAGE>
PRICE RANGE OF THE SHARES; DIVIDENDS
The primary market for the Shares is the American Stock Exchange. The ticker
symbol for the Shares is "NSD." The following table sets forth, for the
Company's fiscal periods indicated, the high and low sales prices per share of
Common Stock as reported on the American Stock Exchange Composite Transaction
Reporting System. The Company did not pay cash dividends on its Common Stock
during the periods set forth below.
<TABLE>
<CAPTION>
HIGH LOW
----------------------- -----------------------
<S> <C> <C>
1998:
First Quarter............................................... 8 1/16 5 1/8
Second Quarter.............................................. 6 7/8 5 5/16
Third Quarter............................................... 6 1/8 4 13/16
Fourth Quarter.............................................. 5 3 1/16
1999:
First Quarter............................................... 3 15/16 2 1/2
Second Quarter.............................................. 4 1/8 3
Third Quarter............................................... 6 7/16 2 7/8
Fourth Quarter.............................................. 5 7/8 2 3/8
2000:
First Quarter............................................... 4 1/16 2 1/2
Second Quarter.............................................. 3 1/2 1 3/4
Third Quarter............................................... 2 1/2 7/8
Fourth Quarter (through September 8, 2000).................. 1 1/8 7/8
</TABLE>
On September 8, 2000, the closing market price per Share on the American
Stock Exchange was $1. Shareholders are urged to obtain current market
quotations for the Shares.
The Shares are presently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are neither listed on a national securities exchange nor held by
300 or more holders of record. Upon consummation of the Merger the shares will
be suspended from trading by the American Stock Exchange and the registration of
the Shares under the Exchange Act will be terminated. The Shares will no longer
be margin securities under the rules of the Board of Governors of the Federal
Reserve System.
The termination of the registration of the Shares under the Exchange Act
will substantially reduce the information required to be furnished by the
Company to the Commission and to the shareholders and will render inapplicable
certain provisions of the Exchange Act such as the short-swing profit recovery
provisions of Section 16(b).
32
<PAGE>
OWNERSHIP OF SHARES BY DIRECTORS,
OFFICERS AND PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP OF MANAGEMENT
The table set forth below, including the footnotes, contains information as
of August 30, 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 % OF CLASS
---------- ------------------ ----------
<S> <C> <C>
Mike Conn......................................... 1,000 *
David Craigmile................................... 0 0
Ranko Cucuz....................................... 0 0
Ronald B. Kalich.................................. 0 0
William D. Grafer................................. 0 0
Michael E. Heisley, Sr............................ 4,705,354(1) 81.5
David L. Lawrence................................. 0 0
Stanley H. Meadows................................ 0 0
Ernest J. Nagy.................................... 0 0
E.A. Roskovensky.................................. 0 0
Michael B. Savitske............................... 0 0
Charles E. Schroeder.............................. 0 0
Donald R. Sheley, Jr.............................. 0 0
Emily Heisley Stoeckel............................ 0 0
Donald F. Walter.................................. 0 0
Timothy C. Wright................................. 0 0
Executive Officers and Directors as a Group....... 4,706,354 81.5
</TABLE>
------------------------
* Indicates less than 1% of Class
(1) Includes 4,705,354 Shares held by Purchaser. Purchaser is a wholly-owned
subsidiary of Parent and Mr. Heisley controls Parent.
33
<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>
Michael E. Heisley, Sr............................ 4,705,354(1) 81.5
c/o Heico Holding, Inc.
5600 Three First National Plaza
Chicago, Illinois 60602
Thomas W. Mittler................................. 355,800(2) 6.1
3607 South Main Street
South Bend, Indiana 46601
</TABLE>
------------------------
(1) Includes 4,705,354 Shares held by Purchaser. Purchaser is a wholly-owned
subsidiary of Parent and Mr. Heisley controls Parent.
(2) According to a report on Schedule 13G filed by Thomas W. Mittler filed on
February 7, 2000.
PROXY SOLICITATION; REVOCATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of Directors. All
expenses of this solicitation, including the cost of preparing and mailing this
Proxy Statement, will be borne by the Company. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of the Company in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses, in connection
with such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation material to beneficial
owners of Shares held of record by such persons, and the Company may reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
If the Special Meeting is adjourned for any reason, the approval of the
Merger Agreement shall be considered and voted upon by shareholders at the
subsequent adjourned meeting.
IT IS URGED THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED
ENVELOPE.
You may revoke your proxy at any time prior to its exercise by sending in a
proxy bearing a later date, by delivering a written notice of revocation or by
attending the Special Meeting in person and casting a ballot or delivering
notice of revocation of your proxy.
OTHER MATTERS
The Board does not know of any other business which may be presented for
consideration at the Special Meeting. If any business not described herein
should come before the Special Meeting, the persons named in the enclosed proxy
will vote on those matters in accordance with their best judgment.
34
<PAGE>
INCORPORATED DOCUMENTS AND AVAILABLE INFORMATION
The following documents or portions of documents are incorporated by
reference in this Proxy Statement and are deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999; and
(2) The Company's Quarterly Report on Form 10-Q for the nine months ended
July 2, 2000.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Proxy Statement modifies or replaces such statement.
The Company undertakes to provide by first class mail, without charge, to
any person to whom a copy of this Proxy Statement has been delivered, on the
written or oral request of such person, a copy of any or all of the documents
referred to above which have been incorporated in this Proxy Statement by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference therein). Requests for such copies should
be directed to the Company at 1618 Terminal Road, Niles, Michigan 49120.
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters is required
to be disclosed in reports filed with the Commission. These reports and other
information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection and copying
at prescribed rates at regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic filings
filed through the Commission's Electronic Data Gathering, Analysis and
Retrieval, or EDGAR, system, including those made by or in respect of the
Company, are publicly available through the Commission's home page on the
Internet at http://www.sec.gov.
BY ORDER OF THE BOARD
OF DIRECTORS
T.C. Wright
SECRETARY
September 12, 2000
35
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JUNE 26, 2000
BY AND AMONG
NATIONAL-STANDARD COMPANY,
HEICO HOLDING, INC.
AND
NS ACQUISITION CORP.
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 26,
2000, is made by and among NATIONAL-STANDARD COMPANY, an Indiana corporation
(the "Company"), HEICO HOLDING, INC., a Delaware corporation ("Parent"), and NS
ACQUISITION CORP., a Delaware corporation ("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, in furtherance of Merger Subsidiary's acquisition of all of the
issued and outstanding shares of common stock, par value $.01 per share of the
Company (the "Shares" or the "Company Common Stock"), it is proposed that Merger
Subsidiary make a cash tender offer (the "Offer") to acquire all of the issued
and outstanding shares of Company Common Stock for $1.00 per Share, net to the
seller in cash, upon the terms and conditions set forth in this Agreement and
the Offer.
WHEREAS, the Board of Directors of the Company has (i) approved this
Agreement, (ii) resolved to recommend the Offer to the Company's stockholders
and (iii) deems it advisable and in the best interests of the Company's
stockholders to consummate the merger of Merger Subsidiary with and into the
Company on the terms and conditions set forth in this Agreement (the "Merger").
WHEREAS, the respective Boards of Directors of Parent and Merger Subsidiary
have approved this Agreement, and deem it advisable and in the best interests of
their respective stockholders to consummate the Merger on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
THE OFFER
Section 1.1. THE OFFER.
(a) Subject to the provisions of this Agreement and this Agreement not
having been terminated, Merger Subsidiary shall use reasonable efforts to
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act")) the Offer within 10 business days of the date hereof. The
obligation of Merger Subsidiary to commence the Offer and to accept for payment,
and to pay for any shares of Company Common Stock tendered pursuant to the Offer
shall be subject to the satisfaction of the conditions set forth in EXHIBIT A
and the terms and conditions of this Agreement (the "Offer Conditions"). Subject
to the provisions of this Agreement, the Offer shall initially expire on the
20th business day from and after the date the Offer is commenced, including the
date of the commencement of the Offer as the first business day in accordance
with Rule 14d-2 under the Exchange Act, unless this Agreement is terminated in
accordance with Article 9, in which case the Offer (whether or not previously
extended in accordance with the terms hereof) shall expire on such date of
termination.
(b) Merger Subsidiary expressly reserves the right to waive any condition
set forth on EXHIBIT A without the consent of the Company, and to make any other
changes in the terms and conditions of the Offer. However, without the prior
written consent of the Company, Merger Subsidiary shall not (i) reduce the
maximum number of Shares subject to the Offer; (ii) decrease the Offer Price;
(iii) change the form of consideration payable in the Offer; (iv) amend or
modify the Offer Conditions in any manner adverse to the holders of Shares; or
(v) waive the requirement for the Foothill Consent (as defined below) to have
been obtained at the expiration of the Offer. Notwithstanding the foregoing,
Merger Subsidiary may, without the consent of the Company, extend the Offer at
any time and from time to time: (i) if at the then scheduled expiration date of
the Offer any of the Offer Conditions shall not have been satisfied or waived,
until such time as all such conditions shall have been satisfied or waived;
(ii) for any period required by any statute or rule, regulation, interpretation
or position of the Securities and Exchange Commission (the "Commission") or its
staff applicable to the Offer; (iii) for
<PAGE>
any period required by applicable law in connection with an increase in the
consideration to be paid pursuant to the Offer; and (iv) from time to time, for
an aggregate period of not more than ten (10) business days (for all such
extensions under this clause (iv)) beyond the latest expiration date that would
be permitted under clause (i), (ii) or (iii) of this sentence. Subject to and in
accordance with the terms and conditions of the Offer and this Agreement (but
subject to the right of termination in accordance with Article 9), Merger
Subsidiary shall accept for payment and pay for, in accordance with the terms of
the Offer, all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after the expiration of the Offer. In addition to the
foregoing, Merger Subsidiary may provide for a "subsequent offering period" to
the extent provided in Rule 14d-11 under the Exchange Act after the purchase of
Shares pursuant to the Offer.
Section 1.2 ACTIONS BY MERGER SUBSIDIARY. Within ten (10) business days
following execution of this Agreement, Merger Subsidiary shall file with the
Commission a Tender Offer Statement on Schedule TO, including all exhibits
thereto (together with all amendments and supplements thereto, the "Schedule
TO") with respect to the Offer, the Merger and the other transactions
contemplated hereby. The Schedule TO shall contain or incorporate by reference
an offer to purchase (the "Offer to Purchase") and forms of the related letter
of transmittal and any related documents (the Schedule TO, the Offer to Purchase
and such other documents, together with all supplements or amendments thereto,
collectively, the "Offer Documents"). The Company and its counsel shall be given
an opportunity to review and comment upon the Offer Documents prior to the
filing thereof with the Commission. The Offer Documents shall comply in all
material respects with the requirements of the Exchange Act. On the date filed
with the Commission and on the date first published, sent or given to the
Company's stockholders, the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Merger Subsidiary with respect to information supplied
by the Company for inclusion in the Offer Documents. Merger Subsidiary agrees to
correct promptly any information provided by it for use in the Offer Documents
if and to the extent such information shall have become false or misleading in
any material respect, and Merger Subsidiary further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the
Commission and to be disseminated to all of the holders of Shares as and to the
extent required by applicable federal securities laws. The Company agrees to
notify Merger Subsidiary promptly as to any information provided by it for use
in the Offer Documents if and to the extent such information shall have become
false or misleading in any material respect, and Merger Subsidiary further
agrees to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the Commission and to be disseminated to all of the holders of
Shares as and to the extent required by applicable federal securities laws.
Merger Subsidiary agrees to provide the Company and its counsel any comments
Merger Subsidiary or its counsel may receive from the Commission or its staff
with respect to the Offer Documents promptly after receipt of such comments.
Merger Subsidiary shall use its reasonable efforts to respond to such comments
promptly and shall provide the Company copies of any written responses and
telephonic notification of any verbal responses by Merger Subsidiary or its
counsel. Parent and Merger Subsidiary shall provide for inclusion in the
Schedule 14D-9 (as defined below) and the Information Statement (as defined
below) any information reasonably requested by the Company, and to the extent
requested by the Company, Parent and Merger Subsidiary shall cooperate in the
preparation of the Schedule 14D-9 and the Information Statement.
Section 1.3. ACTIONS BY THE COMPANY.
(a) The Company hereby consents to the inclusion in the Offer Documents of
information relating to the recommendation of the Board of Directors of the
Company described in Section 3.2(b). The Company shall provide for inclusion in
the Offer Documents any information reasonably requested
ANNEX A-2
<PAGE>
by Merger Subsidiary, and to the extent requested by Merger Subsidiary, the
Company shall cooperate in the preparation of the Offer Documents.
(b) As soon as reasonably practicable on or after the date of the
commencement of the Offer, the Company shall file with the Commission a
Solicitation/Recommendation Statement on Schedule 14d-9 with respect to the
Offer (such Schedule 14d-9, together with all amendments and supplements
thereto, "Schedule 14D-9") containing the recommendations of the Board of
Directors of the Company described in Section 3.2(b) and shall disseminate the
Schedule 14D-9 to the stockholders of the Company to the extent required by
Rule 14D-9 promulgated under the Exchange Act and any other applicable federal
or state securities laws. The Company shall cooperate with Merger Subsidiary in
mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. Merger Subsidiary and its counsel shall
be given an opportunity to review and comment upon the Schedule 14D-9 prior to
the filing thereof with the Commission. The Schedule 14D-9 shall comply in all
material respects with the requirements of the Exchange Act. On the date filed
with the Commission and on the date first published, sent or given to the
Company's stockholders, the Schedule 14D-9 shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Merger Subsidiary for inclusion in the Schedule 14D-9. The Company agrees to
correct promptly any information provided by it for use in the Schedule 14D-9 if
and to the extent such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the Commission and to
be disseminated to all of the holders of Shares as and to the extent required by
applicable federal securities laws. Merger Subsidiary agrees to notify the
Company promptly as to any information provided by it for use in the
Schedule 14D-9 if and to the extent such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
Commission and to be disseminated to all of the holders of Shares as and to the
extent required by applicable federal securities laws. The Company agrees to
provide Merger Subsidiary and its counsel in writing any comments the Company or
its counsel may receive from the Commission or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments. The Company agrees
to use its reasonable efforts, after consultation with Merger Subsidiary, to
respond promptly to all such comments of and requests by the Commission. The
Company shall provide Merger Subsidiary copies of any written responses and
telephonic notification of any verbal responses by the Company and its counsel.
(c) In connection with the Offer, the Company shall promptly, or shall cause
its transfer agent to promptly, furnish Merger Subsidiary with mailing labels
containing the names and addresses of the record holders of Shares, each as of
the most recent date together with copies of all lists of stockholders and
security position listings and all other information in the Company's possession
or control regarding the beneficial owners of Company Common Stock, and shall
furnish to Merger Subsidiary such information and assistance (including updated
lists of stockholders, security position listings and computer files) as Merger
Subsidiary may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, Merger Subsidiary
shall hold in confidence the information contained in any of such labels, lists
and files, shall use such information only in connection with the Offer and the
Merger, and, if this Agreement is terminated in accordance with Section 9.1,
shall deliver to the Company all copies of such information then in its
possession.
ANNEX A-3
<PAGE>
Section 1.4 BOARD OF DIRECTORS.
(a) Promptly upon the purchase of and payment for any Shares by Merger
Subsidiary which represent at least a majority of the outstanding Shares, Merger
Subsidiary shall be entitled to designate such number of directors, rounded up
to the next whole number, on the Board of Directors of the Company as is equal
to the product of the total number of directors on such Board (giving effect to
the directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Merger
Subsidiary bears to the total number of Shares then outstanding. The Company
shall, upon request of Merger Subsidiary, use its reasonable best efforts
promptly either to increase the size of its Board of Directors, including by
amending the By-laws of the Company if necessary to so increase the size of such
Board of Directors, or secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable Merger Subsidiary's designees to
be so elected or appointed to the Company's Board of Directors, and shall use
its reasonable best efforts to cause Merger Subsidiary's designees to be so
elected or appointed at such time. At such time, the Company shall, upon the
request of Merger Subsidiary, also cause persons designated by Merger Subsidiary
to constitute the same percentage (rounded up to the next whole number) as is on
the Company's Board of Directors of (i) each committee of the Company's Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary of
the Company, and (iii) each committee (or similar body) of each such board. The
Company's obligations to appoint designees to the Board of Directors shall be
subject to Section 14(f) of the Exchange Act. The Company shall take, at its
expense, all action necessary to effect any such election, and shall include in
the Schedule 14D-9 the information required by Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder.
(b) Following the election or appointment of Merger Subsidiary's designees
pursuant to this Section 1.4 and prior to the Effective Time, the approval of a
majority of the directors of the Company then in office who are not designated
by Merger Subsidiary shall be required to authorize any permitted termination of
this Agreement by the Company, any material amendment of this Agreement, any
extension of time for the performance of any of the obligations or other acts of
Parent or Merger Subsidiary, and any waiver of compliance with any of the
agreements or conditions contained herein for the benefit of the Company.
ARTICLE 1A
THE MERGER
Section 1A.1 THE MERGER.
(a) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file articles of merger with the Secretary of State of the State
of Indiana and a certificate of merger with the Secretary of State of the State
of Delaware and make all other filings or recordings required by the Business
Corporation Act of the State of Indiana (the "Indiana Law") and the General
Corporation Law of the State of Delaware (the "Delaware Law") to be made in
connection with the Merger. The Merger shall become effective at such time as
the articles of merger is duly filed with the Secretary of State of the State of
Indiana and the certificate of merger is duly filed with the Secretary of State
of the State of Delaware or, if agreed to by the Company and Parent, at such
later time as is specified in the articles of merger (the "Effective Time").
(b) At the Effective Time, Merger Subsidiary shall be merged with and into
the Company in accordance with the requirements of Indiana Law and Delaware Law,
whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation").
ANNEX A-4
<PAGE>
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Indiana Law and Delaware Law.
(d) The closing of the Merger (the "Closing") shall take place (i) at the
offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois
60606, as soon as practicable, but in any event within three business days,
after the day on which the last to be fulfilled or waived of the conditions set
forth in Article 8 (other than those conditions that by their nature are to be
fulfilled at the Closing, but subject to the fulfillment or waiver of such
conditions) shall be fulfilled or waived in accordance with this Agreement or
(ii) at such other place and time or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
Section 1A.2 CONVERSION OF SHARES.
(a) At the Effective Time by virtue of the Merger and without any action on
the part of the holder thereof:
(i) each share of Company Common Stock held by the Company as treasury
stock or owned by Parent or any subsidiary of Parent or the Company
immediately prior to the Effective Time shall be canceled, and no payment
shall be made with respect thereto;
(ii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation; and
(iii) each share of Company Common Stock outstanding immediately prior to
the Effective Time shall, except as otherwise provided in
Section 1A.2(a)(i), be converted into the right to receive $1.00 per share
(the "Merger Consideration").
(b) From and after the Effective Time, all shares of Company Common Stock
converted in accordance with Section 1A.2(a)(iii) shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares (a "Certificate")
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration. From and after the Effective Time, all certificates
representing the common stock of Merger Subsidiary shall be deemed for all
purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with
Section 1A.2(a)(ii).
Section 1A.3 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent shall appoint an exchange agent
reasonably acceptable to the Company (the "Exchange Agent") for the purpose of
exchanging Certificates for the Merger Consideration. Parent will make available
to the Exchange Agent, as needed, the Merger Consideration to be delivered in
respect of the shares of Company Common Stock. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each holder
of record of shares of Company Common Stock as of the Effective Time, a letter
of transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) in such form as the Company
and Parent may reasonably agree, for use in effecting delivery of shares of
Company Common Stock to the Exchange Agent.
(b) Each holder of shares of Company Common Stock that have been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a Certificate, together with a properly completed letter of
transmittal, will be entitled to receive the Merger Consideration in respect of
the shares of Company Common Stock represented by such Certificate. Until so
ANNEX A-5
<PAGE>
surrendered, each such Certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration. No
interest will be paid or will accrue on the cash payable upon surrender of any
Certificate.
(c) If any portion of the Merger Consideration is to be paid to any Person
other than the Person in whose name the applicable surrendered Certificate is
registered, it shall be a condition to the payment of the Merger Consideration
that the surrendered Certificate shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such delivery of the
Merger Consideration shall pay to the Exchange Agent any transfer or other taxes
required as a result of such payment to a Person other than the registered
holder of such Certificate or establish to the reasonable satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of shares of Company Common Stock. If, after the Effective Time,
Certificates are presented to the Exchange Agent, the Surviving Corporation or
Parent, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this
Article 1A.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1A.3(a) that remains unclaimed by the holders of
shares of Company Common Stock one year after the Effective Time shall be
returned to Parent, upon demand, and any such holder who has not exchanged his
shares of Company Common Stock for the Merger Consideration in accordance with
this Section 1A.3 prior to that time shall thereafter look only to Parent for
delivery of the Merger Consideration in respect of such holder's shares.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any holder of shares for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property laws.
Section 1A.4 STOCK OPTIONS AND WARRANTS; RESTRICTED STOCK.
(a) At and after the Effective Time, any outstanding option to purchase
shares of Company Common Stock (each a "Company Stock Option") or other
stock-based awards of the Company granted under the Company's plans or
agreements pursuant to which stock options or restricted stock awards or other
stock-based awards of the Company have been or may be granted (collectively, the
"Company Stock Plans") and any outstanding warrant or other right convertible or
exchangeable into shares of capital stock of the Company (each a "Company
Warrant") will, in accordance with the terms of the applicable Company Stock
Plan or Company Warrant, by virtue of the Merger and without any further action
on the part of the Company, Parent, Merger Subsidiary or the holder of any such
Company Stock Option or Company Warrant, be automatically converted into the
right to receive an amount per share of Company Common Stock into which such
Company Stock Option (regardless of any vesting schedule) or Company Warrant is
exercisable or convertible equal to (i) the Merger Consideration LESS (ii) any
applicable exercise price or conversion price with respect to such Company Stock
Option or Company Warrant as of the Effective Time. At the Effective Time, all
outstanding Company Stock Options shall be cancelled and all Company Stock Plans
shall be terminated and of no further force or effect.
(b) At and after the Effective Time, any outstanding restricted stock awards
of the Company (each a "Company Restricted Stock Award") granted under any
Company Stock Plan will, by virtue of the Merger and without any further action
on the part of the Company, Parent, Merger Subsidiary or the holder of such
Company Restricted Stock Award, entitle the holder thereof to receive an amount
per share of Company Common Stock covered by such Restricted Stock Award equal
to the Merger Consideration and all restrictions under such awards shall lapse
as of the Effective Time.
ANNEX A-6
<PAGE>
Section 1A.5 ADJUSTMENTS. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of the Company shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, any issuance of additional shares of capital stock of
the Company upon exercise of any Company Convertible Securities outstanding on
the date of this Agreement, or any similar transaction, or any stock dividend
thereon with a record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Company Common Stock
the same economic effect as contemplated by this Agreement prior to such event.
Section 1A.6 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to Article 1 or Article 1A such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by the Surviving Corporation or
Parent, as the case may be.
Section 1A.7 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming the Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, the posting by that Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to be paid in respect of the Shares
represented by such Certificates as contemplated by this Article 1A.
Section 1A.8 DISSENTING COMPANY STOCKHOLDERS. Notwithstanding any
provision of this Agreement to the contrary, if required by Indiana Law, but
only to the extent required thereby, shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time and which are
held by holders of such shares who have properly exercised appraisal rights with
respect thereto in accordance with Section 23-1-44-8 of Indiana Law (the
"Dissenting Shares") will not be exchangeable for the right to receive the
Merger Consideration. Each holder of such Dissenting Shares will be entitled to
receive payment of the appraised value of such Shares in accordance with the
provisions of such Section 23-1-44-8 unless and until such holder fails to
perfect or effectively waives, withdraws or loses his or her rights to appraisal
and payment under Indiana Law. If, after the Effective Time, any such holder
fails to perfect or effectively waives, withdraws or loses such right, such
shares will thereupon be treated as if they had been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Parent prompt
notice of any demands received by the Company for appraisals of shares of
Company Common Stock prior to the Effective Time and, prior to the Effective
Time, the Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal or offer to settle or settle any such demands.
ARTICLE 2
CERTAIN GOVERNANCE MATTERS
Section 2.1 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
certificate or articles of incorporation of the Company in effect at the
Effective Time shall be the articles of incorporation of the Surviving
Corporation (until amended in accordance with applicable law).
ANNEX A-7
<PAGE>
Section 2.2 BY-LAWS OF THE SURVIVING CORPORATION. The by-laws of the
Company in effect at the Effective Time shall be the by-laws of the Surviving
Corporation (until amended in accordance with applicable law).
Section 2.3 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. From and
after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation and (b) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as set forth in
the disclosure schedules relating to the sections of this Agreement identified
therein delivered by the Company to Parent simultaneously with the execution of
this Agreement (the "Company Disclosure Schedules"):
Section 3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Indiana, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. For purposes
of this Agreement, a "Material Adverse Effect" or "material adverse change" with
respect to any Person means any change, effect, event or occurrence that has a
material adverse impact on the financial condition, business, liabilities,
properties, assets, prospects or results of operations of such Person and its
Subsidiaries taken as a whole. The Company has heretofore made available to
Parent true and complete copies of the Company's articles of incorporation and
by-laws as currently in effect.
Section 3.2 CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by the Company of this
Agreement, other agreements contemplated hereby (the "Ancillary Agreements") to
which the Company is a party (the "Company Ancillary Agreements") and the
consummation by the Company of the transactions contemplated hereby and thereby
are within the Company's corporate powers and, except for any required approval
by the Company's stockholders in accordance with Indiana Law (the "Company
Stockholder Approval") in connection with the consummation of the Merger, have
been duly authorized by all necessary corporate action. The affirmative vote of
holders of the outstanding shares of Company Common Stock having votes
representing a majority of the votes of all such outstanding capital stock,
voting together as a single class, in favor of the approval and adoption of this
Agreement and the Merger is the only vote of the holders of any of the Company's
capital stock necessary in connection with consummation of the Merger. Assuming
due authorization, execution and delivery of this Agreement and the Ancillary
Agreements to which Parent and/or Merger Subsidiary is a party (the "Parent
Ancillary Agreements") by Parent and Merger Subsidiary, as applicable, each of
this Agreement and the Company Ancillary Agreements constitutes a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights, and to general equity principles.
ANNEX A-8
<PAGE>
(b) The Company's Board of Directors, at a meeting duly called and held, has
(i) determined that this Agreement and the transactions contemplated hereby
(including the Offer and the Merger) are advisable, fair to and in the best
interests of the Company's stakeholders, including stockholders, (ii) approved
and adopted this Agreement and the transactions contemplated hereby (including
the Offer and the Merger), and (iii) resolved to recommend that the Company
stockholders accept the Offer and vote for the approval and adoption of this
Agreement and the Merger. The Company's Board of Directors shall continue to
recommend that the Company stockholders accept the Offer and vote for the
approval and adoption of this Agreement and the Merger, subject to Section 7.9.
Section 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement, the Company Ancillary Agreements
and the consummation by the Company of the transactions contemplated hereby and
thereby require no action by or in respect of, or filing by the Company with,
any governmental body, agency, official or authority other than (a) the filing
of a certificate and/or articles of merger in connection with the Merger in
accordance with Indiana Law, Delaware Law and applicable laws of any other
state, (b) compliance with any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), (c) compliance with any applicable
requirements of the Exchange Act, (d) compliance with any applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and (e) other actions
or filings which if not taken or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the Company's consummation of the Merger.
Section 3.4 NON-CONTRAVENTION. The execution, delivery and performance by
the Company of this Agreement, the Company Ancillary Agreements and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (a) contravene or conflict with the articles of
incorporation or by-laws of the Company, (b) assuming compliance with the
matters referred to in Section 3.3 and subject to receipt of the Company
Stockholder Approval, contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company or any of its Subsidiaries,
(c) subject to receipt of the Company Stockholder Approval, constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of the Company or any of its Subsidiaries or to a loss
of any benefit to which the Company or any of its Subsidiaries is entitled under
any provision of any agreement, contract or other instrument binding upon the
Company or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by the Company or any of its Subsidiaries, or
(d) result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries, except for such contraventions, conflicts or
violations referred to in clause (b) or defaults, rights of termination,
cancellation or acceleration, or losses or Liens referred to in clause (c) or
(d) that would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. For purposes of this Agreement, "Lien" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset other than any such mortgage,
lien, pledge, charge, security interest or encumbrance (i) for Taxes (as defined
in Section 3.13) not yet due or (ii) which is a carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like lien arising in the
ordinary course of business. Neither the Company nor any Subsidiary of the
Company is a party to any agreement that expressly limits the ability of the
Company or any Subsidiary of the Company to compete in or conduct any line of
business or compete with any Person or in any geographic area or during any
period of time.
Section 3.5 CAPITALIZATION. The authorized capital stock of the Company
consists of 25,600,000 shares, consisting of 25,000,000 shares of Company Common
Stock and 600,000 shares of Preferred Stock, par value $1.00 per share. As of
the close of business on June 23, 2000, there were outstanding 5,788,569 shares
of Company Common Stock and no other shares of capital stock or other voting
ANNEX A-9
<PAGE>
securities of the Company were then outstanding. All outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. Except for (i) Company Stock Options to
acquire no more than 1,230,500 shares of Company Common Stock issued pursuant to
the Company Stock Plans, and (ii) Company Warrants to acquire no more than
100,000 shares of Company Common Stock, there are no outstanding options,
warrants or other rights to acquire from the Company, and no preemptive or
similar rights, subscription or other rights, convertible or exchangeable
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of the Company, obligating the Company to issue, transfer
or sell, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company or obligating
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible or exchangeable security, agreement,
arrangement or commitment (each of the foregoing, a "Company Convertible
Security"). Schedule 3.5 sets forth a list of all Company Stock Options and
Company Warrants listing the holder, the number of shares of Company Common
Stock into which such Company Stock Options or Company Warrants are exercisable
or convertible, and the exercise price. Since the close of business on June 23,
2000, the Company has not issued any shares of capital stock or any Company
Convertible Securities other than the issuance of Company Common Stock in
connection with the exercise of the Company Stock Options described above. There
are no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Convertible Securities.
Section 3.6 SUBSIDIARIES.
(a) Each Subsidiary of the Company is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, has all
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except for those the absence
of which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. For purposes of this Agreement,
the word "Subsidiary" when used with respect to any Person means any other
Person, whether incorporated or unincorporated, of which (i) more than fifty
percent of the securities or other ownership interests or (ii) securities or
other interests having by their terms ordinary voting power to elect more than
fifty percent of the board of directors or others performing similar functions
with respect to such corporation or other organization, is directly owned or
controlled by such Person or by any one or more of its Subsidiaries. Each
Subsidiary of the Company is duly qualified to do business and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) All of the outstanding capital stock of, or other ownership interests
in, each Subsidiary of the Company is, directly or indirectly, owned by the
Company. All shares of capital stock of, or other ownership interests in,
Subsidiaries of the Company, directly or indirectly, owned by the Company are
owned free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding
options, warrants or other rights to acquire from the Company or any of its
Subsidiaries, and, except as may be required by applicable foreign corporate
laws, no preemptive or similar rights, subscriptions or other rights,
convertible or exchangeable securities, agreements, arrangements or commitments
of any character, relating to, the capital stock of any Subsidiary of the
Company, obligating the Company or any of its Subsidiaries to issue, transfer or
sell, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary of the Company or
obligating the Company or any Subsidiary of the Company to grant, extend or
enter into any such option, warrant, subscription or other right, convertible or
exchangeable security, agreement,
ANNEX A-10
<PAGE>
arrangement or commitment (each of the foregoing, a "Company Subsidiary
Convertible Security"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire from any
Person (other than the Company or a wholly owned Subsidiary of the Company) any
outstanding shares of capital stock of any Subsidiary of the Company or any
Company Subsidiary Convertible Securities.
Section 3.7 COMMISSION FILINGS.
(a) The Company has made available to Parent (i) its annual reports on
Form 10-K for its fiscal years ended September 30, 1997, 1998 and 1999,
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended after
September 30, 1999, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of the
Company held since September 30, 1999, and (iv) all of its other reports,
statements, schedules and registration statements filed with the Commission
since September 30, 1999 (the documents referred to in this Section 3.7(a) and
such items filed after the date of this Agreement being referred to collectively
as the "Company Commission Documents"). The Company's quarterly report on
Form 10-Q for its fiscal quarter ended March 31, 2000 is referred to as the
"Company 10-Q".
(b) As of its filing date, each Company Commission Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act.
(c) As of its filing date, each Company Commission Document filed pursuant
to the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by the Company pursuant to the Securities Act since September 30, 1999, as
of the date such statement or amendment became effective did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
Section 3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included in its annual
reports on Form 10-K and the quarterly reports on Form 10-Q referred to in
Section 3.7 present fairly, in all material respects, the financial position of
the Company and its Subsidiaries as of the dates thereof and their results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments and the absence of notes in the case of any unaudited interim
financial statements), in each case in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto). For purposes of this Agreement, "Company
Balance Sheet" means the consolidated balance sheet of the Company as of
March 31, 2000 set forth in the Company 10-Q and "Company Balance Sheet Date"
means March 31, 2000.
Section 3.9 DISCLOSURE DOCUMENTS. Neither (i) the proxy statement or
information statement of the Company (the "Company Proxy Statement") to be filed
with the Commission in connection with the Merger, nor (ii) any amendment or
supplement thereto, will, at the date the Company Proxy Statement or any such
amendment or supplement is first mailed to stockholders of the Company or at the
time such stockholders vote on the adoption and approval of this Agreement and
the transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company Proxy Statement will, when filed, comply as to form
in all material respects with the requirements of the Exchange Act. No
representation or warranty is made by the Company in this Section 3.9 with
respect to statements made or incorporated by reference therein
ANNEX A-11
<PAGE>
based on information supplied by Parent or Merger Subsidiary for inclusion or
incorporation by reference in the Company Proxy Statement.
Section 3.10 ABSENCE OF CERTAIN CHANGES. Since the Company Balance Sheet
Date, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course, consistent with past practice, and there has
not been:
(a) any event, occurrence or development which, individually or in the
aggregate, would have, or reasonably be expected to have, a Material Adverse
Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of their capital stock or any Company
Convertible Securities or Company Subsidiary Convertible Securities;
(c) any amendment of any material term of any outstanding security of the
Company or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the Company
or any of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any material amount of assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries taken
as a whole, other than transactions, commitments, contracts, agreements or
settlements (including without limitation settlements of litigation and tax
proceedings) in the ordinary course of business consistent with past practice
and those contemplated by this Agreement;
(e) any change in any method of accounting or accounting practice by the
Company or any of its Subsidiaries, except for any such change which is required
by reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment to
any such existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation, supplemental retirement or other similar agreement (or
any amendment to any such existing agreement) with any director, officer or
employee of the Company or any of its Subsidiaries, (iii) increase in, or
accelerated vesting and/or payment of, benefits under any existing severance or
termination pay policies or employment agreements or (iv) increase in or
enhancement of any rights or features related to compensation, bonus or other
benefits payable to directors, officers or employees of the Company or any of
its Subsidiaries, in each case, other than in the ordinary course of business
consistent with past practice;
(g) any material Tax election made or changed, any material audit settled or
any material amended Tax Returns filed; or
(h) any action which, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 5.1.
Section 3.11 NO UNDISCLOSED LIABILITIES. There are no liabilities of the
Company or any Subsidiary of the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities disclosed or provided for in the Company Balance Sheet or in
the notes thereto or otherwise taken into account in the calculation of the
Merger Consideration;
(b) liabilities incurred since the date of the Company Balance Sheet in the
ordinary course of business; and
ANNEX A-12
<PAGE>
(c) obligations under this Agreement and filing fees and advisor fees and
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement.
Section 3.12 LITIGATION. There is no action, suit, proceeding or known
investigation pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries or any of their
respective properties or any of their respective officers or directors before
any court or arbitrator or any governmental body, agency or official except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or prevent or materially delay the consummation of the Merger.
Neither the Company nor any Subsidiary is subject to any outstanding order,
writ, injunction or decree.
Section 3.13 TAXES.
(a) Except as provided for in the Company Balance Sheet (including the notes
thereto), (i) all Company Tax Returns required to be filed with any taxing
authority by, or with respect to, the Company and its Subsidiaries have been
filed in accordance with all applicable laws; (ii) the Company and its
Subsidiaries have timely paid all Taxes shown as due and payable on the Company
Tax Returns that have been so filed, and, as of the time of filing, the Company
Tax Returns correctly reflected the facts regarding the income, business,
assets, operations, activities and the status of the Company and its
Subsidiaries (other than Taxes which are being contested in good faith and for
which adequate reserves are reflected on the Company Balance Sheet); (iii) the
charges, accruals and reserves for Taxes with respect to the Company and its
Subsidiaries reflected on the Company Balance Sheet are adequate under GAAP to
cover the Tax liabilities accruing through the date thereof; (iv) there is no
action, suit, proceeding, audit or claim now proposed or pending against or with
respect to the Company or any of its Subsidiaries in respect of any Tax where
there is a reasonable possibility of an adverse determination; (v) to the best
of the Company's knowledge and belief, neither the Company nor any of its
Subsidiaries is liable for any Tax imposed on any entity other than such Person,
except as the result of the application of Treas. Reg. Sections 1.1502-6 (and
any comparable provision of the tax laws of any state, local or foreign
jurisdiction) to the affiliated group of which the Company is the common parent,
and (vi) no deficiency for any Tax has been asserted or assessed by a taxing
authority against the Company or any of its Subsidiaries which deficiency has
not been paid (other than deficiencies which are being contested in good faith
and for which adequate reserves are reflected on the Company Balance Sheet). For
purposes of this Agreement, "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, excise, stamp, real or personal property, AD
VALOREM, withholding, social security (or similar), unemployment, occupation,
use, production, service, service use, license, net worth, payroll, franchise,
severance, transfer, recording, employment, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, profits, disability, sales, registration, value added,
alternative or add-on minimum, estimated or other taxes, assessments or charges
imposed by any federal, state, local or foreign governmental entity and any
interest, penalties, or additions to tax attributable thereto. For purposes of
this Agreement, "Tax Returns" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(b) Neither the Company nor any of its Subsidiaries have been requested in
writing to give any currently effective waivers extending the statutory period
of limitation applicable to any federal or state income tax return for any
period.
(c) There are no Tax liens upon any property or assets of the Company or any
of its Subsidiaries except liens for current Taxes not yet due.
ANNEX A-13
<PAGE>
Section 3.14 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the term "Company Employee Plans" shall
mean and include: each management, consulting, non-compete, employment,
severance or similar contract, plan, including, without limitation, all Company
Stock Plans, arrangement or policy applicable to any director, former director,
employee or former employee of the Company and each plan, program, policy,
agreement or arrangement (written or oral), providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded, which is maintained,
administered or contributed to by the Company or any Subsidiary and covers any
employee or director or former employee or director of the Company or any
Subsidiary, or under which the Company has any liability, contingent or
otherwise (including but not limited to each "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")). The Disclosure Schedule sets forth a list of each Company
Employee Plan.
(b) Each Company Employee Plan has been established and maintained in
material compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations (including but not limited to
ERISA and the Code) which are applicable to such Plan. No Company Employee Plan
is a "multiemployer plan," as defined in Section 3(37) of ERISA.
(c) Neither the Company nor any affiliate of the Company has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of the Company of incurring any such liability. All contributions required to be
made under the terms of any Company Employee Plan maintained in the United
States have been made, and, where applicable to a Company Employee Plan, the
Company and its affiliates have complied with the minimum funding requirements
under Section 412 of the Code and Section 302 of ERISA with respect to each such
Company Employee Plan.
(d) With respect to each Company Employee Plan which is subject to Title IV
of ERISA, (i) the present value of accrued benefits under such Company Employee
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Company Employee Plan's actuary with
respect to such Company Employee Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Company Employee Plan
allocable to such accrued benefits, (ii) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company
Employee Plan for which the 30-day notice requirement has not been waived, and
(iii) no condition exists which would subject the Company or any Company
Subsidiary to any fine under Section 4071 of ERISA.
(e) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code and, to
the Company's knowledge, no circumstances exist which will adversely affect such
qualification or exemption.
(f) No director or officer or other employee of the Company or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit (including any acceleration of
vesting or lapse of repurchase rights or obligations with respect to any Company
Stock Plans or other benefit under any compensation plan or arrangement of the
Company) solely as a result of the transactions contemplated hereby; and no
payment made or to be made to any current or former employee or director of the
Company or any of its affiliates by reason of the
ANNEX A-14
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transactions contemplated hereby (whether alone or in connection with any other
event) will constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
(g) Since the Company Balance Sheet Date, there has been no amendment to, or
change in employee participation or coverage under, any Company Employee Plan
which would materially increase the expense of maintaining such Company Employee
Plan above the level of the expense incurred in respect thereof for the
12 months ended on the Company Balance Sheet Date.
(h) The Company and its Subsidiaries are in material compliance with all
applicable federal, state, local and foreign statutes, laws, (including without
limitation, common law), judicial decisions, regulations, ordinances, rules,
judgments, orders and codes respecting employment, employment practices, labor,
terms and conditions of employment and wages and hours, and no work stoppage or
labor strike against the Company and its Subsidiaries are pending or, to the
knowledge of the Company, threatened, nor are the Company and its Subsidiaries
involved in or, to the knowledge of the Company, threatened with any labor
dispute, grievance (other than ordinary, immaterial individual grievances), or
litigation relating to labor matters involving any employees. There are no
suits, actions, disputes, claims (other than routine claims for benefits), known
investigations or audits pending or, to the knowledge of the Company, threatened
in connection with any Company Employee Plan.
(i) The Company Stock Plans allow for the treatment of Company Options as
provided in Section 1A.4.
Section 3.15 COMPLIANCE WITH LAWS. Neither the Company nor any of its
Subsidiaries is in violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances or regulations except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.16 FINDERS' OR ADVISORS' FEES. Other than USBancorp Piper
Jaffray (a copy of whose engagement letter has been delivered to Parent), there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 3.17 ENVIRONMENTAL MATTERS.
(a) The Company and its Subsidiaries (i) are in material compliance with
all, and are not subject to any material liability with respect to, any
Environmental Laws (as defined below), (ii) hold or have applied for all
Environmental Permits (as defined below) and (iii) are in compliance with their
respective Environmental Permits, except where the failure to have applied for
or be in compliance with any such Environmental Permit would not, individually
or in the aggregate, have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law.
(c) Neither the Company nor any of its Subsidiaries (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree or
judicial order relating to compliance with Environmental Laws, Environmental
Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Hazardous Materials (as defined below) and, no litigation,
other proceeding or known investigation is pending or, to the knowledge of the
Company, threatened with respect thereto, or (ii) is an indemnitor in connection
with any threatened or asserted claim by any third-party indemnitee for any
liability under any Environmental Law or relating to any Hazardous Materials;
and
ANNEX A-15
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(d) None of the real property owned or leased by the Company or any Company
Subsidiary is listed or, to the knowledge of the Company, proposed for listing
on the "National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state or foreign list of sites requiring investigation or
cleanup.
(e) For purposes of this Agreement:
(i) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
(ii) "Environmental Laws" means any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, treaty, writ or order and
any enforceable judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement,
in each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and
safety or natural resources, including, without limitation, those relating
to the use, handling, presence, transportation, treatment, storage,
disposal, release, threatened release or discharge of Hazardous Materials or
noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
(iii) "Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
(iv) "Hazardous Materials" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (b) any
chemical, material or other substance defined or regulated as toxic or
hazardous or as a pollutant or contaminant or waste under any applicable
Environmental Law.
Section 3.18 PERMITS. Each of the Company and its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals, clearances
and orders of any domestic or foreign governmental, administrative or judicial
authority necessary for the Company or any of its Subsidiaries to own, lease and
operate its properties or to carry on their respective businesses in the manner
as they are now being conducted (the "Company Permits"), and all such Company
Permits are valid, and in full force and effect, except where the invalidity or
failure to be in full force and effect, or the failure to have any of the
Company Permits, would neither, individually or in the aggregate, (a) have a
Material Adverse Effect on the Company nor (b) prevent or materially delay the
performance of this Agreement by the Company. No suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits would neither, individually or in the aggregate,
(a) have a Company Material Adverse Effect on the Company nor (b) prevent or
materially delay the performance of this Agreement by the Company.
Section 3.19 MATERIAL CONTRACTS.
(a) The Company Disclosure Schedules set forth a complete and correct list
of all agreements of the following types to which the Company or any of its
Subsidiaries is a party or may be bound (collectively, the "Material
Contracts"): (i) employment, severance, termination, consulting and retirement
agreements that are not terminable "at will"; (ii) agreements which involve
future payments by the Company of more than $50,000 or which are not cancelable
without penalty by the Company in less than 60 days, (iii) royalty and licensing
agreements of the Company acting as a licensor; (iv) agreements with any labor
organization or other collective bargaining unit; (v) agreements for the
purchase, sale or lease of any real estate; (vi) agreements for the sale of
assets material to the operation of the Company's business other than in the
ordinary course of business or the grant of any preferential rights to purchase
any such material assets; (vii) agreements which contain provisions
ANNEX A-16
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requiring the Company or any Subsidiary to indemnify any person not entered into
in the ordinary course of business consistent with past practice; (viii) joint
venture agreements or other agreements involving the sharing of profits;
(ix) agreements (including, without limitation, agreements not to compete and
exclusivity agreements) that reasonably could be interpreted to impose any
restriction on any business operations of the Company or the Company
Subsidiaries, except for agreements containing restrictions that would not have
a the Material Adverse Effect on the Company; or (x) any other agreements that
are material to the conduct of the business of the Company and its Subsidiaries.
(b) All the Material Contracts are valid and in full force and effect on the
date hereof (except to the extent they have previously expired in accordance
with their terms) and constitute legal, valid and binding obligations of, and
are legally enforceable against, the Company or any of its Subsidiaries which is
a party thereto, and to the knowledge of the Company, the other party or
respective parties thereto. To the knowledge of the Company, there have been no
threatened cancellations thereof and no outstanding disputes thereunder, except
such that would not have a the Material Adverse Effect on the Company. Each of
the Company and its Subsidiaries has in all material respects performed all the
obligations under the Material Contracts required to be performed by the Company
and its Subsidiaries to date. The Company is not in default, and to the
Company's knowledge, no party is in default, in any material respect under any
of the Material Contracts, and there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default, except for defaults which would
not in the aggregate reasonably be expected to have a Material Adverse Effect.
True and complete copies of all Material Contracts have been delivered to Parent
or made available for inspection.
Section 3.20 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of USBancorp Piper Jaffray to the effect that, as of the date of its
opinion, the Offer Price and the Merger Consideration are fair from a financial
point of view to the holders of shares of Company Common Stock.
Section 3.21 TAX TREATMENT. [INTENTIONALLY OMITTED.]
Section 3.22 TAKEOVER STATUTES AND CHARTER PROVISIONS. The Board of
Directors of the Company has taken the necessary action to render control share
acquisitions provisions and business combinations provisions of Indiana Law, and
any other potentially applicable anti-takeover or similar statute or regulation
inapplicable to this Agreement and the transactions contemplated hereby.
Section 3.23 INTELLECTUAL PROPERTY MATTERS.
(a) The Company and its Subsidiaries own, free and clear of all Liens, or
have the right to use pursuant to valid license, sublicense, agreement or
permission all items of Intellectual Property (as defined in Section 3.23(b))
necessary for their operations as presently conducted. The conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
interfere with, infringe upon, misappropriate or violate any of the Intellectual
Property rights of any third party which would result in a Material Adverse
Effect on the Company. To the best of the Company's knowledge and belief, no
third party has interfered with, infringed upon, misappropriated, diluted,
violated or otherwise come into conflict with any Intellectual Property rights
of the Company or any of its Subsidiaries which would result in a Material
Adverse Effect on the Company.
(b) The term "Intellectual Property" as used in this Agreement means,
collectively, patents, trademarks, service marks, trade dress, logos, trade
names, Internet domain names, designs, slogans and general intangibles of like
nature, copyrights and all registrations, applications, reissuances,
continuations, continuations-in-part, revisions, extensions, reexaminations and
associated good will with respect to each of the foregoing, computer software
(including source and object codes), computer programs, computer data bases and
related documentation and materials, data, documentation, technology, trade
secrets, confidential business information (including ideas, formulae,
algorithms,
ANNEX A-17
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models, methodologies, compositions, know-how, manufacturing and production
processes and techniques, research and development information, drawings,
designs, plans, proposals and technical data, financial, marketing and business
data and pricing and cost information) and other intellectual property rights
(in whatever form or medium).
Section 3.24 INSURANCE. The Company maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of the Company, except where the failure to maintain such insurance would
not be reasonably expected to have a Material Adverse Effect on the Company.
Section 3.25 TITLE TO ASSETS; LIENS. The Company and each of its
Subsidiaries has good and marketable title in fee simple to all its real
property and good title to all its leasehold interests and other properties, as
reflected in the Company Balance Sheet, except for properties and assets that
have been disposed of in the ordinary course of business since the date of such
balance sheet, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except (i) liens for current taxes,
payments of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in character, amount
or extent and do not materially detract from the value, or interfere with the
present use of the property subject thereto or affected thereby, or otherwise
materially impair the Company's business operations or (iii) as disclosed in the
Company Commission Documents, and except for such matters, which individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Company (any of the foregoing, a "Permitted Lien"). All leases
under which the Company leases any real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event which with
notice or lapse of time or both would become a default by the Company or, to the
Company's knowledge, any other party thereto, which would reasonably be expected
to have a Material Adverse Effect on the Company. The Company Disclosure
Schedule sets forth all liens and security interests granted by the Company or
any of its Subsidiaries to third parties, except for Permitted Liens.
Section 3.26 OFFER DOCUMENTS. None of the Schedule 14D-9, the information
statement, if any, filed by the Company in connection with the Offer pursuant to
Rule 14f-1 under the Exchange Act (the "Information Statement"), any schedule
required to be filed by the Company with the Commission or any amendment or
supplement thereto, at the respective times such documents are filed with the
Commission or first published, sent or given to the Company's stockholders, will
contain any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading except that no representation is made by the Company with respect
to information supplied by the Parent or Merger Subsidiary specifically for
inclusion in the Schedule 14D-9 or Information Statement or any amendment or
supplement. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Offer Documents, at the time
such documents are filed with the Commission, or first published, sent or given
to the Company's stockholders, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. If at any time prior to the
Effective Time the Company shall obtain knowledge of any facts with respect to
itself, any of its officers and directors or any of its Subsidiaries that would
require the supplement or amendment to the Schedule 14D-9 or the information
supplied by the Company for inclusion or incorporation by reference in the Offer
Documents in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or to comply with
applicable laws, such amendment or supplement shall be promptly filed with the
Commission and, as required by applicable law, disseminated to the stockholders
of the Company, and in the event Parent shall advise the Company as to its
obtaining knowledge of any facts that would make it necessary to supplement or
ANNEX A-18
<PAGE>
amend any of the foregoing documents, the Company shall promptly amend or
supplement such document as required and distribute the same to its
stockholders.
Section 3.27 MATERIAL INFORMATION. No representations or warranties by the
Company in this Agreement and no statements or information contained in the
Company Disclosure Schedule, or in any certificate furnished or to be furnished
by the Company to Parent pursuant to the provisions of this Agreement, contain
or will contain any untrue statement of a material fact or omit or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that except as set forth in
the disclosure schedules delivered by Parent to the Company simultaneously with
the execution of this Agreement (the "Parent Disclosure Schedules"):
Section 4.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except for those
the absence of which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as
contemplated by this Agreement.
Section 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement, the Parent
Ancillary Agreements and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby and thereby are within the corporate powers of
Parent and Merger Subsidiary and have been duly authorized by all necessary
corporate action. Assuming due authorization, execution and delivery of this
Agreement by the Company, each of this Agreement and the Parent Ancillary
Agreements constitutes a valid and binding agreement of each of Parent and
Merger Subsidiary, in each case enforceable against such party in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
Section 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement, the Parent
Ancillary Agreements and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby and thereby require no action by or in respect
of, or filing by Parent or Merger Subsidiary with, any governmental body,
agency, official or authority other than (a) the filing of a certificate and/or
articles of merger in connection with the Merger in accordance with Indiana Law,
Delaware Law and applicable laws of any other state, (b) compliance with any
applicable requirements of the HSR Act, (c) compliance with any applicable
requirements of the Exchange Act, (d) compliance with any applicable
requirements of the Securities Act, and (e) other actions or filings which if
not taken or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent or prevent or materially delay Parent's and/or Merger
Subsidiary's consummation of the Merger.
Section 4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement, the Parent Ancillary Agreements
and the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby and thereby do not and will not (a) contravene or conflict
with the articles of incorporation or certificate of incorporation, as the case
may be, or by-laws of Parent or Merger Subsidiary, (b) assuming compliance with
the matters referred
ANNEX A-19
<PAGE>
to in Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Parent or any of its Subsidiaries, (c) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Parent or any of its Subsidiaries or
to a loss of any benefit to which Parent or any of its Subsidiaries is entitled
under any provision of any agreement, contract or other instrument binding upon
Parent or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by Parent or any of its Subsidiaries or (d) result in
the creation or imposition of any Lien on any asset of Parent or any of its
Subsidiaries, except for such contraventions, conflicts or violations referred
to in clause (b) or defaults, rights of termination, cancellation or
acceleration, or losses or Liens referred to in clause (c) or (d) that would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 4.5 DISCLOSURE DOCUMENTS. None of the information supplied or to
be supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement or any amendment or supplement thereto will, at the date the Proxy
Statement or any amendment or supplement thereto is first mailed to the
stockholders of the Company or at the time the stockholders vote on the adoption
and approval of this Agreement and the transactions contemplated hereby, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 4.6 FINDERS' OR ADVISORS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Parent or any of its Subsidiaries who might be entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement.
Section 4.7 OFFER DOCUMENTS. None of the Offer Documents or any amendment
or supplement thereto, at the respective times such documents are filed with the
Commission or first published, sent or given to the Company's stockholders, will
contain any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading except that no representation is made by the Parent or Merger
Subsidiary with respect to information supplied by the Company specifically for
inclusion in the Offer Documents or any amendment or supplement. None of the
information supplied or to be supplied by Parent or Merger Subsidiary for
inclusion or incorporation by reference in the Schedule 14D-9 or Information
Statement will, at the time such documents are filed with the Commission or
distributed to the Company's stockholders, contain any untrue statements of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time prior to the
Effective Time the Parent or Merger Subsidiary shall obtain knowledge of any
facts with respect to itself, any of its officers and directors or any of its
Subsidiaries that would require the supplement or amendment to the Offer
Documents or the information supplied by Parent or Merger Subsidiary for
inclusion or incorporation by reference in the Schedule 14D-9 or Information
Statement in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, or to comply with
applicable laws, such amendment or supplement shall be promptly filed with the
Commission and, as required by applicable laws, disseminated to the stockholders
of the Company, and in the event the Company shall advise Parent or Merger
Subsidiary as to its obtaining knowledge of any facts that would make it
necessary to supplement or amend any of the foregoing documents, Parent or
Merger Subsidiary shall promptly amend or supplement such document as required
and distribute the same to the Company's stockholders.
Section 4.8 MATERIAL INFORMATION. No representations or warranties by
Parent in this Agreement and no statements or information contained in the
Parent Disclosure Schedule, or in any certificate furnished or to be furnished
by Parent to the Company pursuant to the provisions of this Agreement,
ANNEX A-20
<PAGE>
contain or will contain any untrue statement of a material fact or omit or will
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
Section 4.9 FUNDING. Parent and Merger Subsidiary have, or will have made
available to them from their affiliates, all funds necessary to consummate the
Offer and the Merger and to pay their related fees and expenses.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
Section 5.1. CONDUCT OF THE COMPANY. From the date of this Agreement until
the Effective Time, the Company and its Subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their reasonable best efforts to preserve intact their business organizations
and relationships with third parties. Without limiting the generality of the
foregoing, from the date of this Agreement until the Effective Time without the
prior written consent of Parent:
(a) the Company will not, and will not permit any of its Subsidiaries to,
adopt or propose any change in its certificate or articles of incorporation or
by-laws;
(b) the Company will not, and will not permit any Subsidiary of the Company
to, adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than transactions between
direct and/or indirect wholly owned Subsidiaries of the Company);
(c) the Company will not, and will not permit any Subsidiary of the Company
to, issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of the Company or any of its Subsidiaries other than issuances
of Company Common Stock pursuant to the exercise of Company Stock Options that
are outstanding on the date of this Agreement;
(d) the Company will not (i) split, combine, subdivide or reclassify its
outstanding shares of capital stock, or (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to its capital stock;
(e) the Company will not, and will not permit any Subsidiary of the Company
to, redeem, purchase or otherwise acquire directly or indirectly any of the
Company's capital stock, Company Convertible Securities or Company Subsidiary
Convertible Securities, except for repurchases, redemptions or acquisitions
required by or in connection with the terms of any Company Stock Plan;
(f) the Company will not amend the terms (including the terms relating to
accelerating the vesting or lapse of repurchase rights or obligations) of any
employee or director stock options or other stock based awards or any warrants;
(g) the Company will not, and will not permit any Subsidiary of the Company
to, (i) grant any severance or termination pay to (or amend any such existing
arrangement with) any director, officer or employee of the Company or any of its
Subsidiaries, (ii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any of its Subsidiaries,
(iii) increase any benefits payable under any existing severance or termination
pay policies or employment agreements, (iv) increase, other than customary
periodic increases in the ordinary course of business, (or amend the terms of)
any compensation, bonus or other benefits payable to directors, officers or
employees of the
ANNEX A-21
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Company or any of its Subsidiaries or (v) permit any director, officer or
employee who is not already a party to an agreement or a participant in a plan
providing benefits upon or following a "change in control" to become a party to
any such agreement or a participant in any such plan;
(h) the Company will not, and will not permit any of its Subsidiaries to,
acquire a material amount of assets or property of any other Person, other than
the purchase of inventory in the ordinary course of business;
(i) the Company will not, and will not permit any of its Subsidiaries to,
sell, lease, license or otherwise dispose of any material amount of assets or
property except pursuant to existing contracts or commitments or otherwise in
the ordinary course of business;
(j) except for any such change which is required by reason of a concurrent
change in GAAP, the Company will not, and will not permit any Subsidiary of the
Company to, change any method of accounting or accounting practice used by it;
(k) the Company will not, and will not permit any Subsidiary of the Company
to, enter into any joint venture, partnership or other similar arrangement;
(l) the Company will not, and will not permit any of its Subsidiaries to,
take any action that would make any representation or warranty of the Company
hereunder inaccurate in any material respect at, or as of any time prior to, the
Effective Time;
(m) the Company will not make or change any Tax election, settle any audit
or file any amended Tax Returns, except in the ordinary course of business
consistent with past practice; and
(n) the Company will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
ARTICLE 6
COVENANTS OF PARENT
Parent agrees that:
Section 6.1. OBLIGATIONS OF MERGER SUBSIDIARY. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
Section 6.2 DIRECTOR AND OFFICER LIABILITY.
(a) Parent will maintain in effect for not less than six years after the
Effective Time, the Company's current directors and officers insurance policies,
if such insurance is obtainable (or policies of at least the same coverage
containing terms and conditions no less advantageous to the current and all
former directors and officers of the Company) with respect to acts or failures
to act prior to the Effective Time; provided, however, that in order to maintain
or procure such coverage, Parent shall not be required to maintain or obtain
policies providing such coverage except to the extent such coverage can be
provided at an annual cost of no greater than 150% of the most recent annual
premium paid by the Company prior to the date hereof (the "Cap"); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained only
by paying an annual premium in excess of the Cap, Parent shall only be required
to obtain as much coverage as can be obtained by paying an annual premium equal
to the Cap.
(b) Parent agrees that all rights to indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the current or
former directors or officers of the Company and its Subsidiaries (the
"Indemnified Parties") as provided in their respective articles of incorporation
or by-laws (or similar organizational documents) shall survive the Effective
Time and shall continue in full
ANNEX A-22
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force and effect in accordance with their respective terms. The provisions of
this Section 6.2 are intended to be for the benefit of, and shall be enforceable
by, each of the Indemnified Parties, their heirs and their representatives.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.1. PROXY STATEMENT.
(a) If approval or action in respect of the Merger by the stockholders of
the Company is required by applicable law, the Company shall prepare and file
with the Commission the Company Proxy Statement. Each of Parent and the Company
shall furnish all information concerning it and the holders of its capital stock
as the other may reasonably request in connection with such actions and the
preparation of the Proxy Statement. As promptly as practicable after the
purchase of Shares by Merger Subsidiary pursuant to the Offer, the Company shall
mail the Proxy Statement to its stockholders. The Proxy Statement shall include
the recommendation of the Board of Directors of the Company in favor of the
Merger, unless otherwise required by the applicable fiduciary duties of the
directors of the Company, as determined by such directors in good faith after
consultation with independent legal counsel. No modification or withdrawal of
such recommendation shall relieve the Company of its obligation to submit this
Agreement and the transactions contemplated hereby to its stockholders in
accordance with applicable law.
No amendment or supplement to the Proxy Statement will be made by Parent or
the Company without the approval of the other party (which approval shall not be
unreasonably withheld or delayed). Parent and the Company each will advise the
other, promptly after it receives notice thereof, of any request by the
Commission for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the Commission for additional information.
(b) The information supplied by Parent for inclusion in the Proxy Statement
shall not, at, (i) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company,
(ii) the time of the Company Meeting (as defined below), and (iii) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event or
circumstance relating to Parent or any of its Subsidiaries, or their respective
officers or directors, should be discovered by Parent which should be set forth
in an amendment or a supplement to the Proxy Statement, Parent shall promptly
inform the Company. All documents that the Company is responsible for filing
with the Commission in connection with the transactions contemplated herein will
comply as to form and substance in all material aspects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(c) The information supplied by the Company for inclusion in the Proxy
Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company, (ii) the time of the Company Meeting, and (iii) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to the Company or any of its Subsidiaries, or their respective officers
or directors, should be discovered by the Company which should be set forth in
an amendment or a supplement to the Proxy Statement, the Company shall promptly
inform Parent. All documents that Parent is responsible for filing with the
Commission in connection with the transactions contemplated herein will
ANNEX A-23
<PAGE>
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
Section 7.2. STOCKHOLDERS' MEETING. Unless stockholder action is taken by
written consent, the Company shall call and hold a meeting of its stockholders
(the "Company Meeting") as promptly as practicable following the purchase of
Shares by Merger Subsidiary pursuant to the Offer for the purpose of voting upon
the approval of the Merger, and the Company shall use its reasonable best
efforts to hold the Company Meeting as soon as practicable after such date. The
Company shall set the record date for the Company Meeting or any action taken by
written consent for the approval of the Merger as the date on which Merger
Subsidiary becomes the record holder of all Shares purchased pursuant to the
Offer. Parent shall cause all Shares purchased by Merger Subsidiary pursuant to
the Offer and all other Shares owned by Parent or any other Subsidiary or
affiliate of Parent to be voted in favor of the approval of the Merger.
Section 7.3. REASONABLE BEST EFFORTS. The Company and Parent shall each
cooperate with the other and use (and shall cause their respective Subsidiaries
to use) their respective reasonable best efforts to promptly (i) take or cause
to be taken all necessary actions, and do or cause to be done all things,
necessary, proper or advisable under this Agreement and applicable laws to
consummate and make effective the Offer and the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including,
without limitation, preparing and filing promptly and fully all documentation to
effect all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals, consents, registrations, permits, authorizations and other
confirmations required to be obtained from any third party necessary, proper or
advisable to consummate the Offer and the Merger and the other transactions
contemplated by this Agreement. Subject to applicable laws relating to the
exchange of information, the Company and Parent shall have the right to review
in advance, and to the extent practicable each will consult the other on, all
the information relating to the Company and its Subsidiaries or Parent and its
Subsidiaries, as the case may be, that appears in any filing made with, or
written materials submitted to, any third party and/or any governmental
authority in connection with the Offer and the Merger and the other transactions
contemplated by this Agreement.
Section 7.4. CERTAIN FILINGS. The Company and Parent shall cooperate with
one another (a) in connection with the preparation of the Company Proxy
Statement, (b) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (c) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Company Proxy Statement
and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 7.5. ACCESS TO INFORMATION. From the date hereof until the
Effective Time, to the extent permitted by applicable law, the Company will upon
reasonable request give Parent, its counsel, financial advisors, auditors and
other authorized representatives access to the offices, properties, books and
records of the Company and its Subsidiaries during normal business hours,
furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct its own
employees, counsel and financial advisors to cooperate with Parent in its
investigation of the business of the Company; PROVIDED that no investigation of
the Company's business shall affect any representation or warranty given by the
Company hereunder, and the Company shall not be required to provide any such
information if the provision of such information may cause a waiver of an
attorney-client privilege. All information obtained by Parent or the Company
pursuant to this Section 7.5 shall be kept confidential in accordance with, and
shall otherwise be subject to the terms of, the Confidentiality Agreement dated
February 18, 2000 between Parent and the Company (the "Confidentiality
Agreement").
ANNEX A-24
<PAGE>
Section 7.6. PUBLIC ANNOUNCEMENTS. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and
shall not issue any press release or make any public statement without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, any such press release or public
statement as may be required by applicable law or any agreement with the
American Stock Exchange may be issued prior to such consultation, if the party
making the release or statement has used its reasonable efforts to consult with
the other party.
Section 7.7. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take any
other actions and do any other things, in the name and on behalf of the Company
or Merger Subsidiary, reasonably necessary to vest, perfect or confirm of record
or otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of the Company acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger.
Section 7.8. NOTICES OF CERTAIN EVENTS.
(a) Each of the Company and Parent shall promptly notify the other party of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The Company and Parent shall promptly notify the other party of any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge threatened against, relating to or involving or otherwise
affecting such party or any of its Subsidiaries which relate to the consummation
of the transactions contemplated by this Agreement.
Section 7.9. NO SOLICITATION.
(a) The Company and its Subsidiaries will not, and will use its reasonable
best efforts to cause its respective officers, directors, employees, investment
bankers, consultants, attorneys, accountants, agents and other representatives
not to, directly or indirectly, take any action to solicit, initiate, encourage
or facilitate the making of any Acquisition Proposal or any inquiry with respect
thereto or engage in substantive discussions or negotiations with any Person
with respect thereto, or in connection with any Acquisition Proposal or
potential Acquisition Proposal, disclose any nonpublic information relating to
it or its Subsidiaries or afford access to the properties, books or records of
it or its Subsidiaries to, any Person that has made, or to such party's
knowledge, is considering making, any Acquisition Proposal; PROVIDED, HOWEVER,
that, in the event that (x) the Company shall receive a Superior Proposal that
was not solicited by it and did not otherwise result from a breach of this
Section 7.9, (y) prior to receipt of Company Stockholder Approval, the Board of
Directors of the Company determines in its good faith judgment, after receiving
the advice of outside counsel, that, in light of this Superior Proposal, if the
Company fails to participate in such discussions or negotiations with, or
provide such information to, the party making the Superior Proposal, there is a
reasonable possibility that such Board of Directors would be in violation of its
fiduciary duties under applicable law, and (z) after giving Parent three
business day's notice of its intention to do so, the Company may (i) furnish
information with respect to it and its subsidiaries to the Person making such
Superior Proposal pursuant to a customary confidentiality agreement containing
terms generally no less restrictive than the terms contained in the
Confidentiality Agreement (but not containing any exclusivity provision and
permitting the Person to
ANNEX A-25
<PAGE>
submit to the Board of Directors of the Company Acquisition Proposals with
respect to the Company provided that any such Acquisition Proposal is subject to
the approval of the Board of Directors of the Company) provided that a copy of
all such written information is simultaneously provided to Parent and
(ii) participate in discussions and negotiations regarding such Superior
Proposal.
(b) Nothing contained in this Agreement shall prevent the Board of Directors
of the Company from complying with Rule 14e-2 under the Exchange Act with regard
to an Acquisition Proposal; PROVIDED that the Board of Directors of the Company
shall not recommend that the stockholders of the Company tender their shares in
connection with a tender offer except to the extent, after receiving a Superior
Proposal, the Board of Directors of the Company determines in its good faith
judgment, after receiving the advice of outside legal counsel, that, in light of
the Superior Proposal, there is a reasonable possibility that the Board of
Directors would be in violation of its fiduciary duties under applicable law if
it fails to make such a recommendation.
(c) The Company will (A) promptly (and in no event later than 48 hours after
receipt of any Acquisition Proposal) notify (which notice shall be provided
orally and in writing and shall identify the Person making the Acquisition
Proposal and set forth the material terms thereof) the Parent after receipt of
any Acquisition Proposal, or any request for nonpublic information relating to
the Company or any Subsidiary of the Company or for access to the properties,
books or records of the Company or any Subsidiary of the Company by any Person
that has made, or to such party's knowledge may be considering making, an
Acquisition Proposal, and (B) will keep the Parent reasonably informed of any
changes to the material terms of any such Acquisition Proposal or request. The
Company shall, and shall cause its Subsidiaries to, immediately cease and cause
to be terminated, and use reasonable best efforts to cause its officers,
directors, employees, investment bankers, consultants, attorneys, accountants,
agents and other representatives to, immediately cease and cause to be
terminated, all discussions and negotiations, if any, that have taken place
prior to the date hereof with any Persons with respect to any Acquisition
Proposal.
For purposes of this Agreement, "Acquisition Proposal" means any written
offer or proposal for, or any written indication of interest in, any (i) direct
or indirect acquisition or purchase of a business or asset of the Company or any
of its Subsidiaries that constitutes 20% or more of the net revenues, net income
or assets of the Company and its Subsidiaries, taken as a whole; (ii) direct or
indirect acquisition or purchase of 20% or more of any class of equity
securities of the Company or any of its Subsidiaries whose business constitutes
20% or more of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole; (iii) tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning 20% or more of any
class of equity securities of the Company or any of its Subsidiaries whose
business constitutes 20% or more the net revenues, net income or assets of the
Company and its Subsidiaries, taken as a whole; or (iv) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries whose business
constitutes 20% or more of the net revenue, net income or assets of the Company
and its Subsidiaries, taken as a whole, other than the transactions contemplated
by this Agreement. For purposes of this Agreement, "Superior Proposal" means any
bona fide written Acquisition Proposal for or in respect of all of the
outstanding shares of Company Common Stock (i) on terms that the Board of
Directors of the Company determines in its good faith judgment (after
consultation with USBancorp Piper Jaffray or another financial advisor of
nationally recognized reputation and taking into account all the terms and
conditions of the Acquisition Proposal deemed relevant by such Board of
Directors, including any break-up fees, expense reimbursement provisions,
conditions to consummation, and the ability of the party making such proposal to
obtain financing for such Acquisition Proposal) are more favorable from a
financial point of view to its stockholders than the Merger; and (ii) that
constitutes a transaction that, in such Board of Directors' judgment, is
reasonably likely to be consummated on the terms set forth, taking into account
all legal, financial, regulatory and other aspects of such proposal.
ANNEX A-26
<PAGE>
(d) The Company agrees that it will take the necessary steps promptly to
inform its officers, directors, investment bankers, consultants, attorneys,
accountants, agents and other representatives of the obligations undertaken in
this Section 7.9.
Section 7.10. TAKEOVER STATUTES. If any anti-takeover or similar statute
or regulation is or may become applicable to the transactions contemplated
hereby, each of the parties and its Board of Directors shall grant such
approvals and take all such actions as are reasonable and legally permissible so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
ARTICLE 8
CONDITIONS TO THE MERGER
Section 8.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:
(a) this Agreement and the Merger shall have been approved and adopted by
the stockholders of the Company in accordance with Indiana Law and the Company
shall have complied with the information and notice requirements of Rule 14c-2
of the Exchange Act, if applicable;
(b) any applicable waiting period (including any extension thereof) under
the HSR Act relating to the Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(d) (i) all required approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger and
the consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, whether domestic, foreign or supranational, shall have expired) unless
the failure to receive any such approval or consent would not, and would not be
reasonably expected to, have a Material Adverse Effect on Parent at or after the
Effective Time and (ii) all such approvals and consents which have been obtained
shall be on terms that would not, and would not reasonably be expected to, have
a Material Adverse Effect on Parent at or after the Effective Time.
Section 8.2. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or, to the extent legally permissible,
waiver) of the following further conditions:
(a) (i) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true and correct in all material respects at
and as of the Effective Time as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such earlier
date), and (iii) Parent shall have received a certificate signed by an executive
officer of the Company to the foregoing effect;
(b) there shall not be instituted or pending any action or proceeding by any
governmental authority (whether domestic, foreign or supranational) before any
court or governmental authority or agency, domestic, foreign or supranational,
seeking to (i) restrain, prohibit or otherwise interfere with the ownership or
operation by Parent or any Subsidiary of Parent of all or any portion of the
business of the Company or any of its Subsidiaries or of Parent or any of its
Subsidiaries or to compel Parent or any Subsidiary of Parent to dispose of or
hold separate all or any portion of the business or assets of
ANNEX A-27
<PAGE>
the Company or any of its Subsidiaries or of Parent or any of its Subsidiaries;
(ii) to impose or confirm limitations on the ability of Parent or any Subsidiary
of Parent effectively to exercise full rights of ownership of the shares of
Company Common Stock (or shares of stock of the Surviving Corporation)
including, without limitation, the right to vote any shares of Company Common
Stock (or shares of stock of the Surviving Corporation) on any matters properly
presented to stockholders; or (iii) seeking to require divestiture by Parent or
any Subsidiary of Parent of any shares of Company Common Stock (or shares of
stock of the Surviving Corporation), if any such matter referred in subclauses
(i), (ii) and (iii) would, or would reasonably be expected to, have a Material
Adverse Effect on Parent at or after the Effective Time;
(c) there shall not be any statute, rule, regulation, injunction, order or
decree, enacted, enforced, promulgated, entered, issued or deemed applicable to
the Merger and the other transactions contemplated hereby (or in the case of any
statute, rule or regulation, awaiting signature or reasonably expected to become
law), by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, that would, or would
reasonably be expected to, have a Material Adverse Effect on Parent at or after
the Effective Time;
(d) since the date of this Agreement, there shall not have occurred a
Material Adverse Effect with respect to the Company, nor shall there have
occurred a change or event which would reasonably be expected to have a Material
Adverse Effect on the Company;
(e) the consent and waiver of Foothill Capital Corporation ("Foothill") with
respect to the Offer and the Merger and the termination of the Company Warrant
issued to Foothill shall have been obtained (the "Foothill Consent");
(f) there shall not have been a subsequent development (including any
settlement or final settlement offer from counsel for the plaintiffs) in any
action or proceeding pending on the date of this Agreement relating to the
Company or any of its Subsidiaries or there shall not have been instituted any
action or proceeding subsequent to the date of this Agreement that would
(i) have a Material Adverse Effect on the Company, or (ii) make materially more
costly (A) the making of the Offer, (B) the acceptance for payment of, or
payment for, some or all of the shares pursuant to the Offer, (C) the purchase
of shares pursuant to the Offer, or (D) the consummation of the Merger; or
(g) the Company shall not have (i) petitioned or applied to any tribunal for
or consented to the appointment of a receiver, (ii) admitted in writing its
inability to pay its debts as they mature, (iii) made an assignment for the
benefit of creditors, (iv) been adjudicated bankrupt or insolvent, (v) filed
voluntarily or had filed against it a petition in bankruptcy or a petition or an
answer seeking reorganization or any arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, dissolution or
liquidation law or statute, or (vi) become unable to conduct its business, taken
as a whole, substantially as currently conducted (including the purchase of
inventory and supplies and the payment of liabilities).
Section 8.3. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger is subject to the satisfaction (or, to
the extent legally permissible, waiver) of the following further conditions:
(a) (i) Each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) the representations and warranties of
Parent and Merger Subsidiary contained in this Agreement and in any certificate
or other writing delivered by Parent or Merger Subsidiary pursuant hereto shall
be true and correct in all material respects at and as of the Effective Time as
if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date, and (iii) the Company shall
have received a certificate signed by an executive officer of Parent to the
foregoing effect;
ANNEX A-28
<PAGE>
(b) there shall not be any statute, rule, regulation, injunction, order or
decree, enacted, enforced, promulgated, entered, issued or deemed applicable to
the Merger and the other transactions contemplated hereby (or in the case of any
statute, rule or regulation, awaiting signature or reasonably expected to become
law), by any court, government or governmental authority or agency or
legislative body, domestic, foreign or supranational, that would, or would
reasonably be expected to, have a Material Adverse Effect on the business of the
Surviving Corporation at or after the Effective Time; and
(c) the Foothill Consent shall have been obtained.
ARTICLE 9
TERMINATION
Section 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of the Company and Parent:
(a) by mutual consent of Parent and the Company;
(b) (i) by Parent (provided that Parent is not then in material breach of
any representation, warranty, covenant or other agreement contained herein), if
there has been a breach by the Company of any of its representations,
warranties, covenants or agreements contained in this Agreement in any material
respect, or any such representation and warranty shall have become untrue, in
any such case such that Section 8.2(a) will not be satisfied and such breach or
condition has not been promptly cured within 30 days following receipt by the
Company of written notice of such breach;
(ii) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), if there has been a breach by Parent of any of its
representations, warranties, covenants or agreements contained in this
Agreement in any material respect, or any such representation and warranty
shall have become untrue, in any such case such that Section 8.3(a) will not
be satisfied and such breach or condition has not been promptly cured within
30 days following receipt by Parent of written notice of such breach;
(c) by either Parent or the Company if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or any
Governmental Entity preventing or prohibiting consummation of the Offer or the
Merger shall have become final and nonappealable;
(d) by either Parent or the Company if (i) the Offer shall not have been
consummated before October 23, 2000 or (ii) the Merger shall not have been
consummated before December 22, 2000, unless the failure of the Closing to occur
by such date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe in all material respects the covenants and
agreements of such party set forth herein; PROVIDED, HOWEVER, that this
Agreement may be extended not more than 60 days by Parent or the Company by
written notice to the other party if the Merger shall not have been consummated
as a direct result of (i) the Company or Parent having failed to receive all
regulatory approvals or consents required to be obtained by the Company or
Parent with respect to the Offer or Merger or (ii) the existence of litigation
or any governmental proceeding seeking to prevent or prohibit consummation of
the Offer or the Merger; PROVIDED FURTHER, that this Agreement may be extended
up to 90 days by Parent (and the Company agrees to such extension), in its sole
discretion, in the event the Foothill Consent shall not have been obtained prior
to the dates set forth in this Section 9.1(d); PROVIDED FURTHER, that the
Company may not terminate this Agreement due to the failure to obtain the
Foothill Consent prior to the expiration of the period referred to in the
immediately preceeding proviso.
ANNEX A-29
<PAGE>
(e) by the Company if it determines to accept a Superior Proposal; provided
that such termination under clause (e) shall not be effective unless the Company
gives notice to the Parent at least three business day prior to acceptance of a
Superior Proposal and shall not be effective until the Company has delivered the
Company Breakup Fee pursuant to Section 9.2(b). The Company shall not accept a
Superior Proposal unless it terminates this Agreement.
(f) by Parent, if the Board of Directors of the Company shall have failed to
recommend or withdrawn or modified or changed in a manner adverse to Parent its
approval or recommendation of this Agreement, the Offer or the Merger, whether
or not permitted by the terms hereof, or shall have failed to call the Company
Stockholder Meeting, or shall have recommended a Superior Proposal (or the Board
of Directors of the Company shall resolve to do any of the foregoing);
(g) by Parent if the Agreement shall fail to receive the requisite vote for
approval and adoption by the stockholders of the Company at the Company's
Stockholder Meeting or any adjournment or postponement thereof (except in
connection with a breach by Parent of its covenants under this Agreement).
(h) by the Company if the Agreement shall fail to receive the requisite vote
for approval and adoption by the stockholders of the Company at the Company's
Stockholder Meeting or any adjournment or postponement thereof (except in
connection with a breach by the Company of its covenants under this Agreement).
(i) by Parent if Parent or Merger Subsidiary, as the case may be, shall have
terminated the Offer, or the Offer shall have expired, without Parent or Merger
Subsidiary, as the case may be, purchasing any shares of Company Common Stock
thereunder.
Section 9.2. EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement by either the Company
or Parent pursuant to Section 9.1, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Parent or the
Company, other than the provisions of this Section 9.2, Section 9.3 the
confidentiality provisions hereof, and except to the extent that such
termination results from the willful and material breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
(b) In the event of termination of this Agreement without consummation of
the transactions contemplated hereby by the Company pursuant to Section 9.1(e)
then the Company shall make payment to Parent simultaneously therewith by wire
transfer of immediately available funds of a breakup fee in the amount of
$1,250,000 (the "Company Breakup Fee") plus all expenses incurred by Parent in
connection with the transactions contemplated hereby (which expenses shall not
exceed $500,000 in the aggregate).
(c) If (i) this Agreement is terminated without consummation of the
transactions contemplated in this Agreement by the Company pursuant to
Section 9.1(h) and (ii) at the time of the vote on the Merger by the
stockholders of the Company, an unsolicited Acquisition Proposal shall have been
proposed, then the Company shall immediately make payment of the Company Breakup
Fee plus all expenses incurred by Parent in connection with the transactions
contemplated hereby (which expenses shall not exceed $500,000 in the aggregate)
to the Parent by wire transfer of immediately available funds upon consummation
of a Acquisition Proposal if such Acquisition Proposal is consummated within
twelve (12) months from the time of the vote of the stockholders of the Company
on the Merger and such consummated Acquisition Proposal is with the party (or an
affiliate of the party) which had proposed an unsolicited Acquisition Proposal
which was received by the Company prior to the Company's stockholders' vote on
the Merger.
Section 9.3. FEES AND EXPENSES. All expenses incurred by the parties
hereto shall be borne solely and entirely by the party which has incurred the
same. The Company shall pay the expenses related to printing, filing and mailing
of the Proxy Statement.
ANNEX A-30
<PAGE>
ARTICLE 10
MISCELLANEOUS
Section 10.1. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given,
if to Parent or Merger Subsidiary, to:
Heico Holding, Inc.
5600 Three First National Plaza
Chicago, Illinois 60602
Attention: Michael E. Heisley
Facsimile No.: (312) 419-9417
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Attention: Helen R. Friedli, P.C.
Facsimile No.: (312) 984-7700
if to the Company, to:
National-Standard Corporation
1618 Terminal Road
Niles, Michigan 49120
Attention: Tim Wright
Facsimile No.: (616) 683-0303
with a copy to:
Bell, Boyd & Lloyd, LLC
Three First National Plaza
Chicago, Illinois 60602-4207
Attention: Patrick J. Maloney, Esq.
Facsimile No.: (312) 372-2098
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties. Each such notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
Section 10.2. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time.
Section 10.3. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement (including the Exhibits and Schedules
hereto) may be amended or waived prior to the Effective Time at any time prior
to or after the receipt of the Company Stockholder Approval, if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Parent and Merger Subsidiary, or in the case of a waiver, by the
party against whom the waiver is to be effective; PROVIDED that after the
receipt of any such approval, if any such amendment or waiver shall by law or in
accordance with the rules and regulations
ANNEX A-31
<PAGE>
of the Amex requires further approval of stockholders, the effectiveness of such
amendment or waiver shall be subject to the necessary stockholder approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Merger Subsidiary of its obligations hereunder.
Section 10.5. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Indiana, without regard
to principles of conflicts of law.
Section 10.6. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement, or the transactions contemplated hereby or thereby may be
brought in any federal or state court located in the State of Indiana or
Illinois, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10.1 shall be deemed
effective service of process on such party.
Section 10.7. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 10.8. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) constitutes the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof. No provision of this Agreement or any other
agreement contemplated hereby is intended to confer on any Person other than the
parties hereto any rights or remedies.
Section 10.9. CAPTIONS. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 10.10. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable
ANNEX A-32
<PAGE>
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section 10.11. NO PREJUDICE. This Agreement has been jointly prepared by
the parties hereto and the terms hereof shall not be construed in favor of or
against any party on account of its participation in such preparation.
Section 10.12. WORDS IN SINGULAR AND PLURAL FORM; GENDER. Words used in
the singular form in this Agreement shall be deemed to import the plural, and
vice versa, as the sense may require and words importing one gender shall
include the other two.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
NATIONAL STANDARD COMPANY
By: ____________________________
Name:
Title:
HEICO HOLDING, INC.
By: ____________________________
Name:
Title:
NS Acquisition Corp.
By: ____________________________
Name:
Title:
ANNEX A-33
<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer or this Agreement, Parent or
Merger Subsidiary, as the case may be, shall not be required to accept for
payment or to pay for any shares of Company Common Stock not theretofore
accepted for payment or paid for, and may terminate (except as set forth in the
last paragraph of this Exhibit A) or amend the Offer if at any time on or after
the date of this Agreement and before the acceptance of such Shares for payment
or the payment therefor, any of the following conditions exist or shall occur
and remain in effect:
(a) (i) the Company shall not have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
scheduled or extended expiration of the Offer, (ii) the representations and
warranties of the Company contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto shall not be true and
correct in all material respects at and as of the scheduled or extended
expiration of the Offer as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
and (iii) Parent shall not have received a certificate signed by an executive
officer of the Company to the foregoing effect;
(b) there shall have been instituted or pending any action or proceeding by
any governmental authority (whether domestic, foreign or supranational) before
any court or governmental authority or agency, domestic, foreign or
supranational, seeking to (i) restrain, prohibit or otherwise interfere with the
ownership or operation by Parent or any Subsidiary of Parent of all or any
portion of the business of the Company or any of its Subsidiaries or of Parent
or any of its Subsidiaries or to compel Parent or any Subsidiary of Parent to
dispose of or hold separate all or any portion of the business or assets of the
Company or any of its Subsidiaries or of Parent or any of its Subsidiaries;
(ii) to impose or confirm limitations on the ability of Parent or any Subsidiary
of Parent effectively to exercise full rights of ownership of the shares of
Company Common Stock (or shares of stock of the Surviving Corporation)
including, without limitation, the right to vote any shares of Company Common
Stock (or shares of stock of the Surviving Corporation) on any matters properly
presented to stockholders; or (iii) seeking to require divestiture by Parent or
any Subsidiary of Parent of any shares of Company Common Stock (or shares of
stock of the Surviving Corporation), if any such matter referred in subclauses
(i), (ii) and (iii) would, or would reasonably be expected to, have a Material
Adverse Effect on Parent at or after the scheduled or extended expiration of the
Offer;
(c) there shall have been any statute, rule, regulation, injunction, order
or decree, enacted, enforced, promulgated, entered, issued or deemed applicable
to the Offer or the Merger and the other transactions contemplated hereby (or in
the case of any statute, rule or regulation, awaiting signature or reasonably
expected to become law), by any court, government or governmental authority or
agency or legislative body, domestic, foreign or supranational, that would, or
would reasonably be expected to, have a Material Adverse Effect on Parent at or
after the scheduled or extended expiration of the Offer;
(d) since the date of this Agreement, there shall have occurred a Material
Adverse Effect with respect to the Company, or there shall have occurred a
change or event which would reasonably be expected to have a Material Adverse
Effect on the Company;
(e) the consent and waiver of Foothill Capital Corporation ("Foothill") with
respect to the Offer and the Merger and the termination of the Company Warrant
issued to Foothill shall not have been obtained at the expiration of the Offer;
(f) there shall have been a subsequent development (including any settlement
or final settlement offer from counsel for the plaintiffs) in any action or
proceeding pending on the date of this Agreement relating to the Company or any
of its Subsidiaries or there shall have been instituted any action or proceeding
subsequent to the date of this Agreement that would (i) have a Material Adverse
ANNEX A-34
<PAGE>
Effect on the Company, or (ii) make materially more costly (A) the making of the
Offer, (B) the acceptance for payment of, or payment for, some or all of the
shares pursuant to the Offer, (C) the purchase of shares pursuant to the Offer,
or (D) the consummation of the Merger;
(g) the Company shall have (i) petitioned or applied to any tribunal for or
consented to the appointment of a receiver, (ii) admitted in writing its
inability to pay its debts as they mature, (iii) made an assignment for the
benefit of creditors, (iv) been adjudicated bankrupt or insolvent, (v) filed
voluntarily or had filed against it a petition in bankruptcy or a petition or an
answer seeking reorganization or any arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, dissolution or
liquidation law or statute, or (vi) become unable to conduct its business, taken
as a whole, substantially as currently conducted (including the purchase of
inventory and supplies and the payment of liabilities);
(h) this Agreement shall have been terminated in accordance with its terms;
(i) Parent and the Company shall have agreed that Parent or Merger
Subsidiary, as the case may be, shall terminate the Offer or postpone the
acceptance for payment of or payment for Shares thereunder; or
(j) there shall not have been validly tendered and not withdrawn at the
expiration of the Offer, a number of shares of Company Common Stock equal to at
least a majority of the then outstanding shares of Company Common Stock.
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may be asserted by Parent or Merger Subsidiary regardless of the
circumstances giving rise to any such condition and may be waived by Parent and
Merger Subsidiary, in whole or in part, at any time and from time to time, in
the discretion of Parent and Merger Subsidiary. The failure by Parent or Merger
Subsidiary at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right, the waiver of such right with respect to any
particular facts or circumstances shall not be deemed a waiver with respect to
any other facts or circumstances, and each right will be deemed an ongoing right
which may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Company Common Stock not theretofore accepted for payment
shall promptly be returned by the depositary to the tendering stockholders.
If the Offer Condition specified in Section (g) of this Exhibit A shall not
be satisfied due to the filing of an involuntary petition against the Company
seeking the relief specified in such Section (g), Parent and Merger Subsidiary
may not terminate the Offer until thirty (30) days after the filing of such
involuntary petition if the involuntary petition shall not have been dismissed
prior to that time.
ANNEX A-35
<PAGE>
ANNEX B
[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;
(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
<PAGE>
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.
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.
ANNEX B-2
<PAGE>
It is understood that our opinion is intended solely 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.
ANNEX B-3
<PAGE>
PROXY NATIONAL-STANDARD COMPANY COMMON STOCK PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING ON SEPTEMBER 22, 2000
The undersigned appoints MICHAEL E. HEISLEY, SR. and STANLEY H. MEADOWS,
or either of them, with full power of substitution, as proxies to vote all
shares of Common Stock held by the undersigned at the Special Meeting of
Shareholders of National-Standard Company to be held at the offices of
McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois at 10:00
a.m., local time, on September 22, 2000, and at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR item 1.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
(CONTINUED FROM THE OTHER SIDE)
MARK THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION.
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as
of June 26, 2000, by and among Heico Holding, Inc., NS Acquisition Corp.,
a Delaware Corporation ("Purchaser") and wholly-owned subsidiary of The
Heico Companies, LLC, a Delaware limited liability company ("Parent"),
and National-Standard Company (the "Company") pursuant to which Purchaser
will be merged with and into the Company, with the Company as the
surviving corporation; and (b) each outstanding share of the Company's
common stock, par value $.01 per share (the "Shares"), other than Shares
held by Parent, the Company or any of their respective subsidiaries, will
be converted into the right to receive $1.00 in cash, without interest.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: ____________________, 2000
___________________________________
___________________________________
Signature(s)
Please sign exactly as your name
appears. Joint owners should each
sign personally. Where applicable,
indicate your official position or
representation capacity.
