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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Schedule 14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement Under Section 14(d)(4)
of the Securities Exchange Act of 1934
(Amendment No. ___)
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The Langer Biomechanics Group, Inc.
(Name of Subject Company)
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The Langer Biomechanics Group, Inc.
(Name of Person(s) Filing Statement)
Common Stock, par value $.02 per share
(Title of Class of Securities)
515707107
(CUSIP Number of Class of Securities)
Stephen V. Ardia
Chairman of the Board
The Langer Biomechanics Group, Inc.
450 Commack Road
Deer Park, New York 11729
Telephone: (631) 667-1200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of The Person(s) Filing Statement)
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With a copy to:
GARY T. MOOMJIAN, ESQ.
Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard, Suite 206
Mitchel Field, New York 11553
(516) 222-5100
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|_| Check box if the filing relates solely to preliminary communications made
before commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company is The Langer Biomechanics Group, Inc., a
New York corporation ("Langer" or the "Company"). The address of the principal
executive offices of Langer is 450 Commack Road, Deer Park, New York 11729 and
its telephone number is (631) 667-1200.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement (together with any Exhibits or Annexes
hereto, this "Statement") relates is the common stock, par value $.02 per share,
of Langer ("Common Stock" or the "Shares"). As of December 28, 2000, there were
2,613,181 Shares outstanding.
Item 2. Identity and Background of Filing Person.
The filing person of this Statement is the subject company, Langer. The
business address and business telephone number of Langer are as set forth in
Item 1(a) above.
This Statement relates to a tender offer by OrthoStrategies Acquisition
Corp. ("Purchaser"), a New York corporation and wholly owned subsidiary of
OrthoStrategies, Inc., a New York corporation ("OS"), as disclosed in a Tender
Offer Statement on Schedule TO (the "Schedule TO"), dated January 10, 2001, to
purchase up to 75% of the issued and outstanding shares of Common Stock at a
price of $1.525 per Share, net to the seller in cash, without interest (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated January 10, 2001 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as may be amended and supplemented from
time to time, together constitute the "Offer").
The Offer is being made pursuant to a Tender Offer Agreement, dated
December 28, 2000 (as such agreement may be amended and supplemented from time
to time, the "Tender Offer Agreement"), by and among Langer, OS and Purchaser.
The Schedule TO states that the principal office of OS and Purchaser is c/o
Andrew H. Meyers, 31 The Birches, Roslyn Estates, N.Y. 11576.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Except as set forth in the response to this Item 3 or in Schedule I
attached hereto or as incorporated by reference herein, to the knowledge of
Langer, there exists on the date hereof no material agreements, arrangements or
understandings and no actual or potential conflicts of interest between Langer
or its affiliates and either (1) Langer, its executive officers, directors or
affiliates or (2) OS or Purchaser, or any of their respective executive
officers, directors or affiliates.
Arrangements and Agreements with Executive Officers, Directors and Affiliates of
Langer
Certain contracts, arrangements or understandings between Langer or its
affiliates and certain of Langer's directors, executive officers and affiliates
are described in the Information Statement of the Company attached to this
Statement as Schedule I (the "Information Statement"). The Information Statement
is being furnished to the Company's shareholders pursuant to Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 promulgated thereunder in connection with OS' right granted pursuant to
the Tender Offer Agreement (after acquiring a majority of the Shares pursuant to
the Offer) to designate persons to the Board of Directors of the Company (the
"Langer Board") other than at a meeting of the shareholders of the Company. The
Information Statement is incorporated herein by reference.
Proxy Statement Disclosures
Certain contracts, agreements, arrangements and understandings between
Langer and its executive officers, directors and affiliates are described on
pages 3-5 of Langer's Proxy Statement for the Annual Meeting of Shareholders
held on August 2, 2000 (the "2000 Proxy Statement") in the sections "Beneficial
Ownership of the Company's Securities", "Executive Compensation", and
"Compensation of Directors", and in Items 10-12, inclusive, of Langer's Annual
Report on Form 10-K for the fiscal year ended February 29, 2000 (the "Form
10-K"). The 2000 Proxy Statement is filed herewith as Exhibit 7 and is
incorporated herein by reference. Items 10-12, inclusive, of the Form 10-K are
filed herewith as Exhibit 8 and are incorporated herein by reference. The
information incorporated herein by reference is considered to be a part of this
Statement, except for any information that is superseded by information included
directly in this Statement.
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Treatment of Stock Options
Reference is made to the Company's 1992 Stock Option Plan (the "1992 Stock
Option Plan"), which is filed as Exhibit 9 to this Statement and is incorporated
herein by reference. Under the 1992 Stock Option Plan, nonqualified and
incentive stock options have been granted to selected employees, officers,
directors, consultants and advisors of the Company.
Pursuant to the Tender Offer Agreement, the Company has agreed to redeem
certain outstanding stock options to purchase 225,000 Shares prior to the
purchase of the Shares by Purchaser at an aggregate redemption price of $70,635.
Other Transactions and Arrangements
In connection with the Tender Offer Agreement, on December 28, 2000, the
Company entered into letters of continued employment ("Letters of Employment")
with each of Thomas G. Archbold, Daniel J. Gorney and Ronald Spinelli, pursuant
to which each of such officers confirmed their agreements to remain in the
employ of the Company and, subject to the Company's right to terminate their
employment for cause, the Company confirmed its agreement to employ such
officers through the date on which the Offer is consummated or, if earlier, the
date on which the Tender Offer Agreement is terminated. Such Letters of
Employment also provide for a six month non-competition agreement.
As an incentive to those members of the Company's executive management who
are not Directors (Daniel J. Gorney, President and CEO; Thomas G. Archbold,
Chief Financial Officer; and Ronald Spinelli, Vice President of Operations) to
remain in the employ of the Company through the closing of the Offer and to
assist in the transition period following the Closing:
o the Company will provide bonuses to such executives if certain
performance targets are met at the month end preceding the Closing
of the Offer. Such bonus will be up to $20,000 for Mr. Gorney,
$20,000 for Mr. Archbold and $25,000 for Mr. Spinelli, with minimum
guaranteed bonuses to Messrs. Archbold and Spinelli of $5,000 each.
To receive such bonus, such individuals must remain in the employ of
the Company for 90 days following the Closing of the Offer.
o Langer will provide three months base salary as a severance payment
to Messrs. Archbold and Spinelli if they are terminated without
cause within six months of the Closing of the Offer. The Company has
committed to continue to employ Mr. Gorney, and Mr. Gorney has
committed to remain employed with the Company, for three months
after the Closing of the Offer; thereafter Mr. Gorney will be
entitled to receive three months base salary as a severance payment.
On August 2, 2000, the Board of Directors authorized the issuance of 4,000
shares of Common Stock to each of Messrs. Stephen V. Ardia, Kenneth Granat and
Thomas I. Altholz for their services as outside directors for the current fiscal
year, which issuance was decreased to 3,000 shares at a subsequent Board
meeting.
On November 29, 2000, the Company agreed to pay Stephen V. Ardia, Chairman
of the Board of the Board, the sum of $25,000 for his services rendered in
connection with the negotiation of the transactions contemplated by the Tender
Offer Agreement, $12,500 of which was paid on such date with the balance
authorized to be paid at the Langer Board meeting held on December 12, 2000. In
January 2001, it is anticipated that Langer will pay $40,000 to Mr. Ardia, which
amounts had previously not been paid but were due and owing to Mr. Ardia for his
services to the Company from November 1998 to November 2000.
On December 12, 2000, the Langer Board authorized the payment of $1,500 to
each of the outside directors for their recent services as directors.
Indemnification
As permitted by New York law, Article Eighth of the Company's Certificate
of Incorporation provides for the elimination of personal liability of the
directors of the Company to the fullest extent permitted by the provisions of
paragraph (b) of Section 402 of the New York Business Corporation Law. Section
402 of the New York Business Corporation Law does not eliminate or limit the
liability of any director if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled or that his acts violated Section 719 of the New York Business
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Corporation Law regarding improper dividends or distributions, purchase of
shares, distributions of assets or loans. A copy of such Article Eighth has been
filed as Exhibit 10 to this Statement and is incorporated herein by reference.
Article XI of the Company's By-Laws ("Article XI") provides that any
person made or threatened to be made a party to an action or proceeding, whether
civil or criminal, by reason of the fact that he, his testator or intestate,
then is or was a director, officer, employee or agent of the Company, or then
serves or has served any other corporation in any capacity at the request of the
Company, shall be indemnified by the Company against reasonable expenses,
judgments, fines and amounts actually and necessarily incurred in connection
with the defense of such action or proceeding or in connection with an appeal
therein, to the fullest extent permitted by the laws or the State of New York. A
copy of Article XI is filed as Exhibit 11 to this Statement and is incorporated
herein by reference.
Tender Offer Agreement
The following summary of the Tender Offer Agreement is qualified in its
entirety by reference to the Tender Offer Agreement, a copy of which is filed as
Exhibit 1 to this Statement and is incorporated herein by reference. The Tender
Offer Agreement should be read in its entirety for a more complete description
of the matters summarized below. Capitalized terms used in this summary of the
Tender Offer Agreement and not otherwise defined in this Statement shall have
the meanings set forth in the Tender Offer Agreement.
The Offer. The Tender Offer Agreement provides for the making of the
Offer. The Tender Offer Agreement provides that the Purchaser will commence the
Offer and that, subject to the satisfaction or waiver of the Offer Conditions
set forth in Annex A to the Tender Offer Agreement and certain other conditions
referred to in the Tender Offer Agreement and the provisions regarding proration
of the Shares to be purchased, Purchaser will purchase all Shares validly
tendered and not withdrawn that it is obligated to purchase pursuant to the
Offer. The Tender Offer Agreement provides that, unless previously approved by
the Company in the writing, Purchaser will not make any change in the terms and
conditions of the Offer which (i) decreases the price per Share payable in the
Offer, (ii) changes the form of consideration payable in the Offer (other than
by adding consideration) or (iii) imposes additional conditions to the Offer
that are materially adverse to the holders of the Shares.
Without the consent of the Langer Board, Purchaser may (i) extend the
Offer or increase the Offer Price to the extent required by law, or (ii) extend
the Offer from time to time; provided, however, that if all Offer Conditions
have been satisfied or waived, the Offer cannot be extended for more than five
business days without the written consent of the Company unless applicable laws
or regulations so require.
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, or may
delay the acceptance for payment of or payment for, any tendered Shares, or may,
in its sole discretion, terminate or amend the Offer as to any Shares not paid
for if (i) prior to the expiration of the Offer (x) less than 1,332,722 Shares
shall have been validly tendered and not withdrawn (the "Minimum Condition") or
(y) any necessary or required consent, registration, approval, permit or
authorization of any governmental entity applicable to the Offer shall not have
been obtained or (ii) on or after December 29, 2000 and at or before the time of
payment for any of such Shares tendered any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NASDAQ SmallCap
Market for a period in excess of three hours (other than a suspension or
limitation triggered by price fluctuations and suspensions or limitations
resulting from physical damage to or interference with the systems of
NASDAQ provided such interference is not related to market conditions),
(ii) a declaration of a banking moratorium in the United States or any
suspension of payments in respect of banks in the United States, (iii) a
commencement or escalation of a war, armed hostilities on or other
international or national calamity resulting in a general mobilization of
a substantial portion of the armed forces of the United States; (iv) the
imposition by the Federal Reserve of a limitation on the extension of
credit by United States banks or a decline of at least 30% in either the
Dow Jones
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Average of Industrial Stocks or the Standard & Poor's 500 index from the
date of the Tender Offer Agreement;
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements contained
in the Tender Offer Agreement, any representation or warranty of the
Company in the Tender Offer Agreement shall have been inaccurate or
incomplete as of the date of the Tender Offer Agreement, except for such
exceptions, which individually or in the aggregate, would not constitute a
material breach of any representation or warranty of the Company in the
Tender Offer Agreement; or any representation or warranty of the Company
set forth in the Tender Offer Agreement shall have been inaccurate or
incomplete as of the Closing Date, except for such exceptions as of the
Closing Date which, individually or in the aggregate, would not have a
material adverse effect on the financial condition, business or results of
operations of the Company and its subsidiaries taken as a whole (a
"Company Material Adverse Effect").
(c) there shall be instituted or pending any action, litigation,
proceeding, investigation or other application (an "Action") before any
court or other governmental authority by any governmental authority or
instituted or pending any action by any other person, domestic or foreign:
(i) challenging the acquisition by Purchaser of Shares, seeking to
restrain or prohibit the consummation of the transactions contemplated by
the Offer, seeking to obtain any material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Offer; (ii)
seeking to prohibit, or impose any material limitations on, Purchaser's
ownership or operation of all or any portion of its or the Company's
business or assets (including the business or assets of their respective
affiliates and subsidiaries), or to compel Purchaser to dispose of or hold
separate all or any portion of Purchaser's or the Company's business or
assets (including the business or assets of their respective affiliates
and subsidiaries) as a result of the transactions contemplated by the
Offer, (iii) seeking to make acceptance for payment, purchase of, or
payment for, some or all of the Shares illegal or render Purchaser unable
to, or result in a delay in, or restrict, the ability of Purchaser to
accept for payment, purchase or pay for some or all of the Shares; (iv)
seeking to impose material limitations on the ability of Purchaser
effectively to acquire or hold or to exercise full rights of ownership of
the Shares including, without limitation, the right to vote the Shares
purchased by it on an equal basis with all other Shares on all matters
properly presented to the stockholders; or (v) that, in any event, is
reasonably likely to have a Company Material Adverse Effect.
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed applicable to the Offer,
or any other action shall have been taken, proposed or threatened, by any
court or other governmental entity that could be expected to, directly or
indirectly, result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any action referred to
in clauses (i) through (v) of paragraph (c) above;
(e) any person, entity or group shall have entered into a definitive
agreement or an agreement in principle with respect to a tender offer or
exchange offer for some portion or all of the Shares or a merger,
consolidation, acquisition, reorganization, recapitalization or other
business combination with or involving the Company;
(f) the Langer Board (or a special committee thereof) shall have
amended, modified or withdrawn its approval or recommendation of the Offer
or the Tender Offer Agreement or shall have endorsed, approved or
recommended any other Company Acquisition Proposal, or shall have resolved
to do any of the foregoing; or
(g) the Tender Offer Agreement shall have been terminated by the
Company or Purchaser in accordance with its terms or Purchaser shall have
reached an agreement or understanding in writing with the Company
providing for termination or amendment of the Offer or delay in payment
for the Shares;
which in the reasonable judgment of Purchaser, in any such case, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment of
or payment for the Shares.
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Further, Purchaser will have no obligation to accept for payment or pay
for any tendered shares, unless, as of the closing time each of the following
additional conditions shall have been satisfied:
a. Andrew H. Meyers shall have been elected President and Chief
Executive Officer of the Company, and his employment with the
Company shall not have been terminated by the Company without cause,
unless Mr. Meyers shall have declined to accept or continue
employment;
b. Stephen V. Ardia, Kenneth Granat, Thomas I. Altholz and Justin
Wernick shall have resigned from the Company's board of directors
and Andrew H. Meyers and up to four individuals designated by
OrthoStrategies reasonably acceptable to the board of directors of
the Company shall have been elected to the Company's board of
directors (unless OS fails to designate acceptable nominees);
c. The Shareholders Agreement shall be in full force and effect unless
breached or terminated by OS;
d. The Company shall have issued and outstanding no more than 2,613,181
Shares plus such number of Shares as may be issued pursuant to the
exercise of options outstanding as of the commencement of the Offer;
e. The Company's Agreements with its current bank, American National
Bank, and the extension thereof to the earlier to occur of February
28, 2001 or the closing of the Offer shall remain in full force and
effect;
f. The Company shall have obtained all consents, agreements and
governmental approvals necessary or appropriate for consummation of
the Offer, other than those relating to agreements which provide for
payment or receipt by the Company of less than $12,500;
g. Except for the bonuses and severance payments discussed above in
"Item 3. Past Contacts, Transactions, Negotiations and Agreements"
consummation of the Offer will not give rise to any obligation for
severance, bonus, change of control or "golden parachute" payments
to any of the Company's employees;
h. The OS Option Agreement and the related Registration Rights
Agreement shall have been executed and delivered by Langer and the
OS Options shall have been granted;
i. No change shall have occurred in any governmental regulation of and
reimbursement rules relating to the business of the Company or its
products which has a Company Material Adverse Effect.
The conditions set forth above are for the sole benefit of Purchaser and
may be asserted by Purchaser regardless of the circumstances giving rise to such
condition or may be waived by Purchaser, by express and specific action to that
effect, in whole or in part at any time and from time to time in its sole
discretion. The failure by Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
Directors. The Tender Offer Agreement provides that the Company will use
its best efforts to facilitate the election to the Langer Board, effective as of
the purchase of (i) at least a majority of the issued and outstanding Shares and
(ii) subject to the Offer Conditions, all Shares tendered pursuant to the Offer,
of Andrew H. Meyers and, at Purchaser's option, four additional persons
designated by Purchaser subject to the reasonable approval by the Langer Board
of each designee. Further, the Company has agreed to use its best efforts to
facilitate the resignation, effective as of the purchase of (i) at least a
majority of the issued and outstanding Shares and, (ii) subject to the
conditions of the Offer, all Shares tendered pursuant to the Offer, of Kenneth
Granat, Thomas I. Altholz and Stephen V. Ardia from the Langer Board. Upon the
purchase of Shares pursuant to the Offer, the Company, if so requested by
Purchaser, has agreed to use reasonable efforts to facilitate the appointment of
such persons designated by Purchaser necessary to constitute the same
proportionate representation of each committee of the Langer Board, each board
of directors of each Subsidiary of the Company and each committee of each such
board (in each case to the extent of the Company's ability to elect such
persons) as Purchaser's representatives constitute of the Langer Board. The
Company's obligations to facilitate the appointment of
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designees of Purchaser to the Langer Board shall be subject to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder.
Representations and Warranties. The Tender Offer Agreement contains
certain customary representations and warranties of the parties. These include
representations and warranties of the Company with respect to, among other
matters, its organization, authority, capitalization, subsidiaries, corporate
records, SEC filings, financial statements, absence of certain changes,
liabilities, property owned or leased, title to and condition of property,
taxes, permits, compliance with laws, contractual and other obligations,
accounts payable and receivable, employee benefit plans, compensation, labor
matters, insurance, intellectual property and litigation. OS and Purchaser also
have made certain representations and warranties with respect to organization,
authority, ownership, corporate affiliations, prior activities, litigation, the
availability of funds to finance the Offer, contractual obligations and other
matters.
Conduct of Company Operations Pending the Purchase of the Shares Pursuant
to the Offer. The Company has agreed that, prior to the earlier of the purchase
of the Shares pursuant to the Offer or the termination of the Tender Offer
Agreement, unless Purchaser or OS shall otherwise agree in writing and except as
otherwise contemplated in the Tender Offer Agreement:
(a) the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and the Company and each
of its subsidiaries shall use commercially reasonable efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business associates in the
ordinary and usual course of business;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of its subsidiaries; (ii) amend its
Certificate of Incorporation or By-Laws; (iii) split, combine or
reclassify the outstanding Shares; or (iv) declare, set aside or pay any
dividend payable in cash, stock or property with respect to the Shares;
(c) neither the Company nor any of its subsidiaries shall (i) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or any subsidiary or any other property or
assets (other than, in the case of the Company, shares issuable pursuant
to options outstanding on the date of the Tender Offer Agreement which are
not to be redeemed under such agreement); (ii) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any assets other
than the sale of inventory and the sale or disposal of assets of
insignificant value in the ordinary and usual course of business; (iii)
incur or modify any indebtedness; provided, however, that the Company's
relationship with its lending institution will terminate on the earlier to
occur of February 28, 2001 or the closing date of the Offer (the "Closing
Date") and at such time the Company will repay the approximately $90,000
owed to such institution; (iv) acquire directly or indirectly by
redemption or otherwise any shares of the capital stock of the Company;
(v) make or authorize capital expenditures other than in the ordinary and
usual course of business and in amounts not exceeding those contemplated
by the Company's current capital expenditure budget set forth in the
Company Disclosure Schedule to the Tender Offer Agreement (the "Company
Disclosure Schedule"); or (vi) make or authorize any acquisition of, or
investment in, assets or stock of any other person or entity or merge or
consolidate with any person or entity;
(d) except as provided in the Tender Offer Agreement or the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries shall
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer, employee or consultant of
the Company or its subsidiaries; and neither the Company nor any of its
subsidiaries shall establish, adopt, enter into, make any new grants or
awards under or amend, any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
employee stock ownership, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement or
any other benefit plan for the benefit of any directors, officers or
employees;
(e) except as set forth on the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries shall (i) settle or compromise any
claims or litigation (including any claims for taxes made by a government
entity) whereby the Company would be liable for in excess of $12,500, (ii)
modify, amend
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or terminate any of its material contracts or waive, release or assign any
material rights or claims, (iii) cancel or forgive any indebtedness owed
to the Company or any of its subsidiaries by any officer, director,
employee or consultant of the Company or any of its subsidiaries, or (iv)
cancel or forgive any other indebtedness owed to the Company or any of its
subsidiaries other than inter-company debt;
(f) neither the Company nor any of its subsidiaries shall make any
tax election for a tax return or permit any insurance policy naming it as
a beneficiary or a loss payable payee to be canceled or terminated;
(g) neither the Company nor any of its subsidiaries shall enter into
any contract or agreement under which the consideration to be paid or
received by the Company exceeds $15,000 other than open purchase orders
for materials or inventory in the ordinary course of business;
(h) neither the Company nor any of its subsidiaries knowingly shall
take or fail to take any action that (i) is reasonably likely to result in
any failure of the Offer, unless such action is taken by the Langer Board
after consultation with Company counsel to fulfill its fiduciary
obligations to the Company's shareholders; or (ii) is reasonably likely to
make any representation or warranty of the Company contained in the Tender
Offer Agreement inaccurate at, or as of any time prior to, Purchaser's
purchase of Shares pursuant to the Offer; and
(i) neither the Company nor any of its subsidiaries will authorize
or enter into any agreement to do any of the foregoing.
Other Potential Offers. The Tender Offer Agreement provides that from the
date thereof until the earlier of the purchase of the Shares or the termination
of such Agreement in accordance with its terms, the Company and its subsidiaries
and the officers, directors, employees or other agents of the Company and its
subsidiaries and any other related party will not, directly or indirectly, (i)
take any action to solicit, initiate or encourage any Company Acquisition
Proposal (as defined below) or (ii) unless otherwise required in accordance with
the fiduciary duties of the Langer Board under applicable law as advised by
counsel to the Company, engage in discussions or negotiations with, or disclose
any nonpublic information relating to the Company or any of its subsidiaries or
afford access to the properties, books or records of the Company or any of its
subsidiaries to, any person or entity that may be considering making, or has
made, a Company Acquisition Proposal. The Company has agreed to promptly notify
OS after receipt of any Company Acquisition Proposal or any request for
nonpublic information relating to the Company or any of its subsidiaries or for
access to the properties, books or records of the Company or any of its
subsidiaries by any person or entity that may be considering making, or has
made, a Company Acquisition Proposal. "Company Acquisition Proposal" means any
offer or proposal for, or any indication of interest in, a merger,
consolidation, reorganization, recapitalization or other business combination
involving the Company or any of its subsidiaries or the acquisition of any
equity interest in, or a substantial portion of the assets of, the Company or
any of its subsidiaries, whether pursuant to a tender offer or otherwise, other
than the transactions contemplated by the Tender Offer Agreement.
Notices of Certain Events. Pursuant to the Tender Offer Agreement, the
Company is required to notify OS of, and in the case of the items in clauses (i)
through (v) provide, if applicable, OS copies of:
(i) any notice or other communication from any person or entity
alleging that the consent of such person (or other person or entity) is or
may be required in connection with the transactions contemplated by the
Tender Offer Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by the Tender Offer Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating
to or involving or otherwise affecting the Company or any of its
subsidiaries which, if pending on the date of the Tender Offer Agreement,
would have been required to have been disclosed pursuant to the terms
thereof or which relate to the consummation of the transactions
contemplated by such Agreement;
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(iv) the receipt by the Company of any documents, records,
environmental agency reports and correspondence related to or concerning
any environmental condition relevant to the Company premises or any
facilities or operations thereon, or any off-site disposal of hazardous
wastes; and
(v) the occurrence of any Company Material Adverse Effect.
Further Actions. Pursuant to the Tender Offer Agreement, each of OS,
Purchaser and the Company has agreed to use its best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by the Tender Offer Agreement.
Interim Employment and Stock Options. The Tender Offer Agreement provides
that from the date of such Agreement to the earlier of the consummation of the
Offer or the termination of such Agreement, the Company will employ Andrew H.
Meyers, a principal of OS and Purchaser, in an advisory capacity. In addition,
Mr. Meyers will be appointed as an observer to the Langer Board with the right
to receive all notices and reports provided to the Board and to attend all
meetings of the Board (except as relates to the transactions contemplated by the
Tender Offer Agreement).
In connection with such employment, the Company has granted stock options
to Mr. Meyers pursuant the Company's 1992 Stock Option Plan to purchase 175,000
shares of Common Stock at $1.525 per share. Such options are not exercisable
until the date of the closing of the Offer and the approval by the shareholders
of an increase in the number of shares of Common Stock underlying the 1992 Stock
Option Plan. The options are exercisable over a ten year term and vest in three
equal annual installments commencing December 31, 2001.
Option Grant and Registration Rights Agreement. Pursuant to the Tender
Offer Agreement, the Company has agreed to grant OS or its designees upon the
closing of the Offer, an option to purchase up to 1,400,000 shares of Common
Stock. This Option grant will be made in order to enable OS to fund the growth
of the Company, although OS has no obligation to exercise these Options or to
provide any other financial support to the Company. The option is exercisable
for a period of 180 days commencing on the Closing Date. The exercise price is
initially $1.525 per share, increasing to $1.550 per share 91 days after the
Closing Date, $1.575 per share 121 days after the Closing Date and $1.60 per
share from the 151st day after the Closing Date until its expiration.
In connection with the grant of the option to OS to purchase 1,400,000
shares of Common Stock, the Company has agreed to enter into a Registration
Rights Agreement, on the closing of the Offer, pursuant to which it will use its
best efforts to register the shares underlying such option and any other shares
held by the holders of the shares underlying such option under the Securities
Act of 1933, as amended, during the three year period commencing on the date of
such Registration Rights Agreement at the request of holders of at least 50% of
such shares. Pursuant to such Registration Rights Agreement, the Company will
also agree to register such shares if the Company, for itself or for any of its
security holders, shall at anytime register shares under the Securities Act,
except in the case of certain registrations. The Company will also pay all
expenses incurred in connection with any such registration.
Funding. Purchaser has received binding commitments from the shareholder
of OS and certain investors to deliver to Purchaser at the Closing the funds
necessary to purchase the Shares or to purchase the Shares individually (or by
designees) pursuant to the Offer.
Directors' and Officers' Insurance. After the Closing of the Offer, the
Company has agreed to continue to maintain its existing officers' and directors'
liability insurance for a period of three years, or provide substantially the
same coverage.
Termination. The Tender Offer Agreement may be terminated and the Offer
abandoned at any time prior to the Closing of the purchase of the Shares:
(i) by mutual written consent of the Company and OS upon a vote of
their respective Boards of Directors;
(ii) by either the Company or OS, if there shall be any applicable
domestic law, rule or regulation that makes consummation of the Offer
illegal or otherwise prohibited or if any judgment, injunction, order
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or decree of a court of competent jurisdiction shall restrain or prohibit
the consummation of the Offer, and such judgment, injunction, order or
decree shall become final and nonappealable;
(iii) by Purchaser by action of the Board of Directors of Purchaser
at any time prior to the time Purchaser purchases Shares pursuant to the
Offer, if (w) the Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in the Tender
Offer Agreement to be complied with or performed by the Company, and such
failure shall not have been cured prior to the earlier of (A) five (5)
business days following the giving of written notice to the Company of
such failure or (B) the business day prior to the date on which the Offer
is then scheduled to expire, (x) the Langer Board shall have amended or
modified in a manner adverse to Purchaser its approval or recommendation
of the Offer, shall have withdrawn such recommendation or shall have,
approved or recommended any other Company Acquisition Proposal, or shall
have resolved to do any of the foregoing, or (y) the shareholders of the
Company shall have tendered less than 1,332,722 of the Shares or the
shareholders which are party to the Shareholders Agreement shall have
tendered in the aggregate less than 1,305,606 of their Shares in
accordance with the Shareholders Agreement; and, in each case, OS and
Purchaser are not in violation of the their representations and warranties
set forth in the Tender Offer Agreement.
(iv) by the Company by action of the Langer Board at any time prior
to the time Purchaser purchases Shares pursuant to the Offer, if Purchaser
(x) shall have failed to comply in any material respect with any of the
covenants or agreements contained in the Tender Offer Agreement to be
compiled with or performed by Purchaser, and such failure shall not have
been cured prior to the earlier of (A) five (5) business days following
the giving of written notice to Purchaser of such failure or (B) the
business day prior to the date on which the Offer is then scheduled to
expire or (y) shall have failed to commence the Offer within the time
required in the Tender Offer Agreement and the Company is not in violation
of its representations and warranties set forth in the Tender Offer
Agreement;
(v) by the Company by action of the Langer Board, if such Board
receives or there is publicly announced a bona fide written Company
Acquisition Proposal (which Company Acquisition Proposal was unsolicited
and did not otherwise result from a breach of a specified section of the
Tender Offer Agreement) and the Langer Board determines in good faith (i)
that such Company Acquisition Proposal is reasonably likely, if
consummated, to result in a transaction more favorable to the Company's
shareholders from a financial point of view than the transaction
contemplated by the Tender Offer Agreement (a "Superior Proposal") and
(ii) after consultation with outside counsel, that approval, acceptance or
recommendation of such Company Acquisition Proposal or tender or exchange
offer is necessary in order for its directors to comply with their
respective fiduciary duties, and the Company shall substantially
concurrently with such termination enter into a definitive agreement
containing the terms of a Superior Proposal, provided, however, that the
Company shall give three days prior notice thereof to Purchaser;
(vi) by either the Company or OS if the Offer shall not have been
consummated by March 31, 2001 (other than through the failure of the party
seeking termination to comply with its obligations under the Tender Offer
Agreement).
If the Tender Offer Agreement is terminated, no party shall have any
liability or further obligation to any other party to the Tender Offer
Agreement, except (i) if the Tender Offer Agreement is terminated by the Company
because of a Superior Proposal, then the Company shall reimburse Purchaser's
reasonable out of pocket costs and expenses actually incurred in connection with
the Tender Offer Agreement and the transactions contemplated hereby, (ii) if (x)
the Purchaser terminates the Tender Offer Agreement pursuant to clause (x) of
section (iii) above or the Company shall have terminated the Tender Offer
Agreement when it did not have a right to do so under such Agreement, then the
Company shall reimburse Purchaser's reasonable out-of-pocket costs and expenses
actually incurred in connection with the Tender Offer Agreement and the
transactions contemplated thereby; or (y) the Purchaser shall terminate the
Tender Offer Agreement pursuant to clause (w) or (y) of section (iii) above,
then the Company shall reimburse Purchaser's reasonable out-of-pocket expenses
actually incurred in connection with the Tender Offer Agreement and the
transactions contemplated thereby up to a maximum of $325,000, of which the
first $250,000 would be paid in cash and the excess over $250,000 paid in Shares
valued at $1.525 per Share; and (iii) if the Company terminates the Tender Offer
Agreement pursuant to section (iv) above, or the Purchaser shall have terminated
the Tender Offer Agreement when it did
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not have the right to do so under such Agreement, the Purchaser shall reimburse
the Company's reasonable out of pocket costs and expenses actually incurred in
connection with the Tender Offer Agreement and the transactions contemplated
thereby up to a maximum of $150,000.
Expenses. Except upon a termination as described above, each party shall
bear its own expenses in connection with the Tender Offer Agreement and the
transactions contemplated thereby.
Shareholders Agreement
As a condition and inducement to OS and Purchaser entering into the Tender
Offer Agreement, concurrently with the execution of the Tender Offer Agreement,
OS, Purchaser, Langer and Trigran Investments, L.P., The Granat Family Limited
Partnership, Kenneth Granat, Kenneth Granat 1990 Family Trust, Stephen V. Ardia,
Justin Wernick, Daniel J. Gorney, Thomas I. Altholz and Donald Cecil (each a
"Shareholder" and collectively the "Shareholders") have entered into a
Shareholders Agreement (the "Shareholders Agreement"). The following summary of
the Shareholders Agreement is qualified in its entirety by reference to the
Shareholders Agreement, a copy of which is filed as Exhibit 2 to this Statement
and is incorporated by reference herein. The Shareholders Agreement should be
read in its entirety for a more complete description of the matters summarized
herein.
Tender of Shares. Pursuant to the Shareholders Agreement, each Shareholder
has agreed to tender the Shares owned by such Shareholder to the Purchaser as
promptly as practicable after the commencement of the Offer. With respect to the
Shares tendered by the Shareholders pursuant to the Shareholder's Agreement, the
Shareholders will receive the same price per share with respect to the Offer
received by the other shareholders of the Company pursuant to the Offer. Each
Shareholder has further agreed that if the Offer is not completed or is
terminated due to the receipt of a Company Acquisition Proposal at a higher per
share price than the initial Offer Price of $1.525 per share, then, upon the
Purchaser's election exercised no later than March 31, 2001 (the "Purchase
Period"), the Shareholders shall nonetheless sell all of their Shares to the
Purchaser at $1.525 per share.
Voting of Shares. Each Shareholder has further agreed that, during the
period commencing on the date of the Shareholders Agreement and continuing until
the end of the Purchase Period, the Shareholder will vote (or cause to be voted)
its Shares against (i) any amendment of the Company's Certificate of
Incorporation or by-laws which would be reasonably likely to impede, frustrate,
prevent or nullify the Offer or any of the other transactions contemplated by
the Tender Offer Agreement or change in any manner the voting rights of the
Company's Common Stock, (ii) any action that would cause the Company to breach
any representation, warranty or covenant contained in the Tender Offer
Agreement, or (iii) any action to elect to the Langer Board anyone other than
the designees of Purchaser or replacements of existing directors, which
replacement directors agree to resign on the closing of the Offer.
Representations and Warranties. Each Shareholder has made in the
Shareholders Agreement certain customary representations and warranties
including, without limitation, representations and warranties as to power and
authority, ownership of the Shares, and no conflicts or legal bar. The Company
has also made certain customary representations and warranties including,
without limitation, representations and warranties as to power and authority and
organization, and OS and the Purchaser have also made certain customary
representations and warranties, including, without limitation, representations
and warranties as to power and authority, organization, investment intent and
sophistication.
Restriction on Transfer. Each Shareholder has agreed, during the period
commencing on the date of the Shareholders Agreement and ending on the earlier
of (i) the purchase of the Shares by the Purchaser pursuant to the Offer or the
Shareholders Agreement and (ii) March 31, 2001, not to (i) sell, transfer, give,
pledge, assign or otherwise dispose of by gift or otherwise (collectively,
"Transfer") its Shares or options, or consent to any such Transfer or enter into
any contract, option or arrangement for the Transfer of the Shares or options or
(ii) enter into any voting arrangement, directly or indirectly, whether by
proxy, voting agreement or otherwise, with respect to its Shares or shares
issuable upon exercise of options.
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Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Langer Board.
At a meeting held on December 19, 2000, the Langer Board unanimously (i)
determined that the Offer was fair to, and in the best interest of, Langer's
shareholders; (ii) approved the Tender Offer Agreement and the transactions
contemplated thereby, including the Offer; and (iii) recommended that Langer
shareholders accept the Offer and tender their Shares thereunder. A Letter to
the Shareholders communicating the Langer Board's recommendation and a press
release announcing the Offer are filed herewith as Exhibits 12 and 5,
respectively, and are incorporated by reference herein.
(b) Background; Reasons for the Recommendation of the Langer Board.
The Langer Board's recommendation is based in part on the oral opinion
(which was subsequently confirmed in writing) delivered by Cronkite & Kissell
("C&K") to the effect that, and based upon and subject to the matters described
in the opinion, the price of $1.525 to be received pursuant to the Offer by
shareholders was fair, from a financial point of view, to such shareholders.
Background of the Transactions
On June 8, 1998, Mr. Meyers contacted Kenneth Granat, a director and
significant shareholder of Langer, to ascertain whether Langer was interested in
being acquired. On June 17, 1998, Mr. Meyers and Warren B. Kanders met with Mr.
Granat. Another meeting was held on September 18, 1998, among Mr. Meyers, Mr.
Granat and Thomas I. Altholz, another director of Langer. Although there were
preliminary discussions regarding the possibility of Langer being acquired or
Mr. Meyers becoming involved in the management of Langer, no agreement was
reached at this time and Mr. Meyers determined to suspend his efforts.
In January 2000 Mr. Meyers again contacted Mr. Granat to determine whether
there was any interest in selling his shareholdings in Langer. Mr. Granat
referred Mr. Meyers to Stephen V. Ardia, Chairman of Langer. On January 6, 2000,
Mr. Ardia explained to Mr. Meyers that Langer was then in the midst of various
initiatives and was not interested in commencing discussions regarding any major
transactions until these initiatives had been completed.
On July 26, 2000, Mr. Meyers spoke with Mr. Ardia to ascertain whether
Langer was then interested in being acquired. Thereafter, a Confidentiality
Agreement was entered into between Langer and OrthoStrategies dated July 26,
2000. Mr. Meyers and Mr. Ardia then began a series of discussions which
continued for several weeks during which they considered various possible
structures for a transaction, including the purchase of the assets of Langer, a
merger of the companies or a purchase of the shares of principal shareholders of
Langer. The Langer board of directors first considered the acquisition proposal
from OrthoStrategies at a meeting held on August 2, 2000.
On August 10, 2000, attorneys from Herrick, Feinstein LLP, counsel to Mr.
Meyers and OrthoStrategies, contacted Kaufman & Moomjian, LLC, counsel to
Langer, to discuss the due diligence materials that would need to be reviewed
and the general terms of an acquisition transaction with a view to entering into
a letter of intent. From August 10, 2000, through September 14, 2000,
representatives of Langer, including its legal counsel, had various discussions
with representatives of OrthoStrategies and participated in various conference
calls during which they considered alternative structures. After these
negotiations, the board of directors of Langer met on September 16, 2000 and
ratified the execution of a Letter of Intent, dated September 14, 2000, wherein
OrthoStrategies confirmed its interest, subject to the completion of its due
diligence, to acquire Langer by means of a merger whereby Langer would become a
wholly-owned subsidiary of OrthoStrategies. The Letter of Intent contemplated
that OrthoStrategies would pay the shareholders of Langer $1.75 per Share,
subject to adjustment based on Langer's net worth and net working capital as of
the closing date of the merger.
Subsequent to the execution of the Letter of Intent, Herrick, Feinstein
LLP, on behalf of OrthoStrategies, delivered a letter to Langer, dated September
19, 2000, specifying various documents and financial and other materials
required by OrthoStrategies in connection with its review of the business and
affairs of Langer.
During the course of its due diligence review, in light of Langer's
inability to meet forecasted results of operations, OrthoStrategies determined
that it was not willing to acquire all of the outstanding Shares of Langer on
the terms set forth in the Letter of Intent. In October 2000, OrthoStrategies
advised Langer that it was
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no longer interested in consummating the transaction contemplated by the Letter
of Intent, but that nevertheless, it was interested in acquiring a controlling
interest in Langer at a lower price. Representatives of OrthoStrategies and
Langer continued to negotiate modifications to the proposed transaction. The
Langer board of directors met October 19, 2000, October 25, 2000, October 31,
2000 and November 8, 2000 to review the status of negotiations with
OrthoStrategies.
These discussions resulted in the execution and delivery by
OrthoStrategies and Langer of a document captioned "Term Sheet for Revised
Transaction" dated November 10, 2000 ("Term Sheet"). In the Term Sheet
OrthoStrategies confirmed its intent, subject to its continued due diligence and
the financial results of Langer, to conduct a tender offer for up to 75% of the
outstanding Shares of Langer at a price of $1.525 per share, with a minimum
required tender of 51% of the outstanding Shares. The Term Sheet further
provided that certain shareholders of Langer, holding in the aggregate
approximately 51.4% of the outstanding Shares would, at the time OrthoStrategies
and Langer entered into the Tender Offer Agreement, enter into an agreement
wherein they would agree to tender their shares in the Offer and, in certain
events, to sell their Shares directly to OrthoStrategies. The Term Sheet also
provided that Langer would grant OrthoStrategies options to purchase 1,400,000
Shares exercisable for 180 days after closing of the tender offer, at an initial
exercise price of $1.525 per share, increasing to $1.550 per share 91 days after
Closing; $1.575 per share 121 days after Closing; and $1.60 per share 151 days
after Closing.
The Langer Board of Directors met on November 11, 2000 to review and
discuss the final form of the Term Sheet, which had been circulated to the
Directors prior to the meeting; the Board approved the Term Sheet and authorized
Steven V. Ardia, Chairman, to execute and deliver the Term Sheet.
Subsequent to the execution of the Term Sheet, OrthoStrategies continued
its review of the business and affairs of Langer, and counsel to
OrthoStrategies, counsel to Langer and counsel to the parties to the
Shareholders Agreement negotiated and exchanged several drafts of the Tender
Offer Agreement, Shareholders Agreement and other agreements described herein.
On November 29, 2000, the Langer Board of Directors met and reviewed the
negotiations of the definitive agreements with OrthoStrategies and the open
issues and authorized Steven V. Ardia, Chairman of Langer, to continue
negotiations with OrthoStrategies.
The Board of Directors of Langer held a meeting on December 10, 2000 to
consider in general the progress of negotiations with OrthoStrategies, and on
December 11, 2000, the board of directors of Langer held a meeting to consider
the drafts which had been proposed of the Tender Offer Agreement and related
documents. At the December 11, 2000 meeting, representatives of OrthoStrategies
made a presentation regarding its proposal and its plans for Langer.
The Board of Directors of Langer met on December 19, 2000 to review the
substantially final definitive Tender Offer Agreement, Shareholders Agreement
and related agreements; determined that it was in the best interests of Langer
to proceed with the proposed transaction with OrthoStrategies; and authorized
the execution of such agreements by Steven V. Ardia, Chairman, subject to
changes approved by him.
Reasons for the Transaction: Factors Considered by the Langer Board.
In approving the Offer, the Tender Offer Agreement and the transactions
contemplated thereby and recommending that all shareholders accept the Offer and
tender their Shares pursuant to the Offer, the Langer Board considered a number
of factors including:
(i) the presentations and views expressed by management of the
Company regarding, among other things:
(a) the financial condition, results of operations, cash
flows, business and prospects of the Company;
(b) the fact that the ability of the Company to raise the
long-term capital needed to grow the Company's business on terms
acceptable to the Company was uncertain;
(c) the fact that other available capital raising alternatives
were likely to be more dilutive to the shareholders; and
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(d) the fact that the structure of the transaction proposed by
OS should result in a rapid consummation of the transaction.
(ii) the opinion of Cronkite & Kissel, dated as of December 28,
2000, to the effect that as of such date the $1.525 per share to be
received by the holders of Shares was fair to such holders, from a
financial point of view. The full text of the written opinion, dated
December 28, 2000 of C&K, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is included as
Exhibit 6 to this Statement and is incorporated herein by reference. The
opinion of C&K is directed only to the fairness, from a financial point of
view, of the cash consideration to be received in the Offer by holders of
Shares 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 such opinion carefully
in its entirety.
(iii) the all cash consideration offered by OS;
(iv) the support of the transaction by Kenneth Granat and his
affiliates, the largest shareholder of the Company;
(v) the terms of the Tender Offer Agreement which would not prevent
the Company from accepting a Superior Proposal,
(vi) the absence of a financing condition on Purchaser's obligation
to consummate the Offer;
(vii) the fact that in view of the discussion held with various
parties management of the Company believed it was unlikely that in the
near term any other party would propose a transaction that would be more
favorable to the Company and its shareholders than the Offer;
(viii) the extensive arms-length negotiations between the Company
and OS leading to the belief on behalf of the Langer Board that $1.525 per
Share represented the highest price per Share that could be negotiated
with OS;
(ix) a review of the strategic alternatives available to the
Company, none of which the Langer Board or management of the Company
believed to be as favorable to Company shareholders as the Offer;
(x) the fact that Andrew Meyers, the founder of the Purchaser and
who is anticipated to be a significant shareholder and the President and
Chief Executive Officer of the Company, has been an executive in the
orthotics industry since 1979 and has a significant presence in the
musculoskeletal industry; and
(xi) the other terms and conditions of the Offer and Tender Offer
Agreement.
The foregoing discussion of information and factors considered and given
weight by the Langer Board is not intended to be exhaustive, but is believed to
include all of the material factors considered by the Langer Board. In view of
the variety of factors considered in connection with its evaluation of the
Offer, the Langer Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determinations and recommendations. In addition, individual members of
Langer's Board may have given different weights to different factors.
(c) Intent to Tender.
To Langer's knowledge after reasonable inquiry, all of Langer's executive
officers, directors and affiliates currently intend to tender all Shares held of
record or beneficially owned by them pursuant to the Offer. The foregoing does
not include any Shares over which, or with respect to which, any such executive
officer, director or affiliate acts in a fiduciary or representative capacity or
is subject to the instructions of a third party with respect to such tender.
Trigran Investments, L.P., The Granat Family Limited Partnership, Kenneth
Granat, Kenneth Granat 1990 Family Trust, Stephen V. Ardia, Dr. Justin Wernick,
Daniel J. Gorney, Thomas I. Altholz and Donald Cecil, which together own
approximately 51.4% of the outstanding Shares, have entered into a Shareholders
Agreement with OS and Purchaser pursuant to which they have agreed to tender
their Shares and have granted to Purchaser the right to purchase their Shares
even if the Offer is terminated upon the terms and subject to the conditions
contained therein. See "Shareholders Agreement" under Item 3 of this Statement.
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Item 5. Persons/Assets, Retained, Employed, Compensated or Used.
Pursuant to an agreement, dated November 15, 2000, the Company formally
retained Cronkite & Kissell to render a fairness opinion with respect to the
Offer. Pursuant to such agreement, C&K is entitled to a fee of $22,500,
inclusive of out-of-pocket expenses.
Except as described above, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any person to
solicit or make recommendations to shareholders on its behalf concerning the
Offer.
Item 6. Interest in Securities of the Subject Company.
No transactions in Shares have been effected during the past 60 days by
the Company or, to the knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company.
Item 7. Purposes of the Transaction and Plans or Proposals.
The Company is not currently undertaking or engaged in any negotiations in
response to the Offer which relate to, or would result in, (1) a tender offer
for or other acquisition of the Company's securities by the Company, any
subsidiary of the Company or any other person; (2) an extraordinary transaction,
such as a merger, reorganization or liquidation, involving the Company or any
subsidiary of the Company; (3) any purchase, sale or transfer of a material
amount of assets of the Company or any subsidiary of the Company; or (4) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
There are no transactions, Langer Board resolutions, agreements in
principle or signed contracts in response to the Offer that relate to or would
result in one or more of the matters referred to in this Item 7.
Item 8. Additional Information.
Section 14(f) Information Statement.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Purchaser, pursuant to the Tender
Offer Agreement, of certain persons to be appointed to the Langer Board other
than at a meeting of Langer's shareholders.
Item 9. Exhibits.
Exhibit No. Description
----------- -----------
1. Tender Offer Agreement, dated as of December 28, 2000, by and
among Langer, OS and Purchaser (Filed as Exhibit 10.1 to the
Current Report on Form 8-K filed by Langer on January 5, 2001
(the "Form 8-K") and incorporated herein by reference).
2. Shareholders Agreement, dated as of December 28, 2000, among OS,
Purchaser and Langer and the individuals and entities listed on
Exhibit A attached thereto (Filed as Exhibit 10.2 to the Form 8-K
and incorporated herein by reference).
3. Form of Option Agreement in favor of OS for 1,400,000 Shares
(incorporated by reference to Exhibit (d)(1)(C) to the Schedule
TO of Purchaser filed on January 10, 2001 (the "Schedule TO")).
4. Form of Registration Rights Agreement between Langer and OS
(incorporated by reference to Exhibit (d)(1)(D) to the Schedule
TO).
5. Press Release issued by Langer on December 29, 2000.
6. Opinion of Cronkite & Kissell, dated December 28, 2000.
7. Langer Proxy Statement for the Annual Meeting of Shareholders
held on August 2, 2000 (Filed on Schedule 14A on June 30, 2000
and incorporated herein by reference).
8. Items 10-12, inclusive, of Langer Annual Report on Form 10-K/A
for the fiscal year ended February 29, 2000 (Filed by Langer on
May 19, 2000 and incorporated herein by reference).
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Exhibit No. Description
----------- -----------
9. 1992 Stock Option Plan (Filed as Exhibit 4 to the Registration
Statement on Form S-8 filed by Langer on January 14, 2000 and
incorporated herein by reference).
10. Article Eighth of the Certificate of Incorporation of Langer.
11. Article XI of the By-Laws of Langer.
12. Letter, dated January 10, 2001, of Langer to shareholders.
13. Stock Option Agreement of Andrew Meyers, dated December 28, 2000
(incorporated by reference to Exhibit (a)(1)(f) to the Schedule
TO).
14. Severance/Non-Compete Letter of Thomas G. Archbold, dated
December 28, 2000 (incorporated by reference to Exhibit (d)(1)(P)
to the Schedule TO).
15. Severance/Non-Compete Letter of Daniel J. Gorney, dated December
28, 2000 (incorporated by reference to Exhibit (d)(2)(O) to the
Schedule TO).
16. Severance/Non-Compete Letter of Ronald Spinelli, dated December
28, 2000 (incorporated by reference to Exhibit (d)(1)(Q) to the
Schedule TO).
17. Letter Agreement, dated December 28, 2000 among OS, Langer,
Stephen V. Ardia, Kenneth Granat, Justin Wernick and Thomas I.
Altholz (Filed as Exhibit 10.3 to the Form 8-K and incorporated
herein by reference).
18. Offer to Purchase, dated January 10, 2001 (incorporated by
reference to Exhibit (a)(1) to the Schedule TO).
19. Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(2) to the Schedule TO).
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
/s/ Thomas G. Archbold
------------------------------
Name: Thomas G. Archbold
Title: Chief Financial Officer
Dated: January 10, 2001
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SCHEDULE I
THE LANGER BIOMECHANICS GROUP, INC.
450 Commack Road
Deer Park, New York 11729
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
General
This information statement (the "Information Statement") is being mailed
on or about January 10, 2001 as part of the Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to holders of record of
shares of Common Stock, par value $.02 per share (the "Shares"), of The Langer
Biomechanics Group, Inc. ("Langer" or the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by OrthoStrategies Acquisition Corp., a New York corporation (the
"Purchaser") and wholly owned subsidiary of OrthoStrategies, Inc., a New York
corporation ("OS"), to a majority of the seats on the Board of Directors of
Langer (the "Langer Board") other than at a meeting of the Shareholders of
Langer. Such election would occur pursuant to the terms of a Tender Offer
Agreement (the "Tender Offer Agreement"), dated as of December 28, 2000, by and
among Langer, the Purchaser and OS. The Tender Offer Agreement is more fully
described under Item 3 of the Schedule 14D-9, of which this Information
Statement is a part. Capitalized terms used and not otherwise defined herein
have the meanings assigned to them in the Schedule 14D-9.
Pursuant to the Tender Offer Agreement, the Purchaser will commence a
tender offer (the "Offer") for up to 1,959,886 Shares (representing 75% of the
Shares currently outstanding) at a price of $1.525 per Share, net to the seller
in cash.
The Tender Offer Agreement provides that, effective as of the purchase of
(i) at least a majority of the issued and outstanding Shares and (ii) subject to
the Offer Conditions as set forth in the Tender Offer Agreement, all Shares
tendered pursuant to the Offer, the Company will use its best efforts to
facilitate the election to the Langer Board of Andrew H. Meyers and, at
Purchaser's option, four additional persons designated by Purchaser ("Purchaser
Designees") subject to the reasonable approval by the Langer Board of each
designee. Further, the Company has agreed to use its best efforts to facilitate
the resignation, effective as of the purchase of (i) at least a majority of the
issued and outstanding Shares and (ii) subject to the Offer Conditions, all
Shares tendered pursuant to the Offer, of Kenneth Granat, Thomas I. Alholz and
Stephen V. Ardia from the Langer Board.
If the Tender Offer Agreement is terminated or if Purchaser does not
accept Shares tendered for payment, then Purchaser will not have any right to
designate directors for election to the Langer Board.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action.
The information contained in this Information Statement concerning OS and
Purchaser has been furnished to the Company by OS. The Company assumes no
responsibility for the accuracy or completeness of such information.
The Purchaser Designees
The Tender Offer Agreement provides that promptly upon the purchase of at
least a majority of the issued and outstanding Shares and, subject to the Offer
Conditions, all Shares tendered pursuant to the Offer, the Company shall use its
best efforts to facilitate the election to the Langer Board of Andrew H. Meyers
and, at
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Purchaser's option, four additional persons designated by Purchaser, which
designees shall constitute a majority or all of the Langer Board, and Langer
shall use its best efforts to secure the resignation of Stephen V. Ardia,
Kenneth Granat and Thomas I. Altholz (who are currently directors of the
Company). At such time, the Company will also use its best efforts to facilitate
the appointment of such persons designated by Purchaser necessary to constitute
the same proportionate representation of (i) each committee of the Langer Board,
(ii) each board of directors of each subsidiary of the Company and (iii) each
committee of each such board, as Purchaser's Designees constitute of the Langer
Board.
The Company's obligation to appoint Purchaser Designees to the Langer
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company has agreed to promptly take all actions
required pursuant to such Section and Rule in order to fulfill its obligations
under the Tender Offer Agreement to cause the Purchaser Designees to be elected
to the Langer Board.
Purchaser has informed the Company that it is anticipated that the
Purchaser Designees will be those individuals listed in the Offer to Purchase, a
copy of which is being mailed to the Company's shareholders together with this
Schedule 14D-9 and Information Statement. Purchaser has informed the Company
that each of the individuals listed in the Offer to Purchase has consented to
act as a director, if so designated. The information on such Purchaser Designees
listed in the Offer to Purchase is incorporated herein by reference. If
necessary, Purchaser may choose additional or other designees of Purchaser,
subject to the requirements of Rule 14f-1. It is expected that the Purchaser
Designees will assume office promptly upon the purchase by Purchaser, pursuant
to the Offer, of at least a majority of the issued and outstanding Shares and
that they will thereafter constitute at least a majority of the Langer Board.
Based solely on the information set forth in the Offer to Purchase, none
of the Purchaser Designees (i) is currently a director of, or holds any position
with, the Company, other than Andrew H. Meyers who is being employed by the
Company during the Offer in an advisory capacity, (ii) has a familial relation
with any directors or executives officers of the Company, or (iii) to the best
knowledge of OS and except as set forth in the Offer to Purchase, beneficially
owns any securities (or any rights to acquire such securities) of the Company.
The Company has been advised by OS that, to the best of OS' knowledge, none of
the Purchaser Designees has been involved in any transactions with the Company
or any of its directors, officers or affiliates which are required to be
disclosed pursuant to the rules and regulations of the SEC, except as may be
disclosed herein.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares constitute the only class of voting stock of the Company
currently issued and outstanding. The Company is authorized is issue 250,000
shares of Preferred Stock, $1.00 par value, of which 1,306 shares were issued as
Series A Preferred Stock and later converted to Shares. The holders of the
Common Stock are entitled to one vote per Share. As of December 28, 2000, there
were 2,613,181 Shares issued and outstanding and an aggregate 301,000 Shares
subject to outstanding options. Currently, the Langer Board consists of four
members. Each director is elected to serve until the next annual meeting of
shareholders and until his successor is elected and qualified.
Information About the Langer Board
The names of the current members of the Langer Board, their ages and
certain biographical information about each of them are set forth below.
Director
Name Age Office Since
---- --- ------ --------
Stephen V. Ardia .......... 58 Chairman of the Board 1998
Kenneth Granat ............ 55 Director 1995
Dr. Justin Wernick ........ 64 Chief Medical Director,
Secretary and Director 1971
Thomas I. Altholz ......... 49 Director 1997
Mr. Ardia has been Chairman of the Board of Directors of the Company since
January 1999 and has been a Director of the Company since November 1998. From
1969 to 1994, he was employed by Goulds Pumps, Inc., including most recently as
President and Chief Executive Officer. Goulds Pumps, Inc. is a Fortune 500
manufacturer of industrial and residential pumps. From 1995 to 1999, Mr. Ardia
was President at Environment
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One Corporation, a maker of advanced, environmentally sensitive sewage
collection systems. Mr. Ardia serves on the Board of Directors of the New York
College of Chiropractic Medicine.
Mr. Granat has been a Director of the Company since January 1995,
including serving as Chairman of the Board from January 1995 to January 1999.
Since 1987, he has been President of Active Screw and Fastener, Inc., an Elk
Grove Village, Illinois company engaged in full line distribution of fasteners
with plants in Chicago, Illinois and Tucson, Arizona. Since 1991, he has also
been Vice President and a Director of Trigran Investments Inc., Deerfield,
Illinois, the general partner and investment advisor for Trigran Investments,
L.P., a more that 10 percent shareholder of the Company. Mr. Granat holds a J.D.
from the University of Illinois as well as a B.B.A. degree in Business from the
University of Michigan.
Dr. Wernick is a co-founder of the Company and has been Executive Vice
President (until July 1, 1997), Secretary and a Director of the Company since
its formation. Effective July 1, 1997, Dr. Wernick has been serving as Chief
Medical Director of the Company. In addition, since July 1997, Dr. Wernick has
been Medical Director of Eneslow Comfort Shoe Centers, a shoe retailer. Dr.
Wernick is a Diplomat of the American Board of Podiatric Orthopedics, a Fellow
of the American College of Foot Orthopedics and of the American Academy of
Podiatric Sports Medicine and a member of several other professional societies.
In 1975, he was the President of the Nassau County division, Podiatry Society of
the State of New York and was presented the Podiatrist of the Year Award from
that Society in that same year. Since 1969, he has held various academic
positions at the New York College of Podiatric Medicine and since 1979 has been
serving as a professor with the Department of Orthopedic Sciences at the New
York College of Podiatric Medicine. He has guest lectured and directed
educational programs, both nationally and internationally, at many other
podiatric colleges and seminars during the past 20 years. He has co-authored a
book entitled "Practical Manual for a Basic Approach to Biomechanics" in 1972
and a report entitled "Radiologic Study of Motion of the Foot within a Ski Boot"
which was published in the Journal of the American Podiatry Association for
which he is also a corresponding consultant. Dr. Wernick received his podiatric
medical degree from M.J. Lewi College of Podiatry (now known as the New York
College of Podiatric Medicine).
Mr. Altholz has been a Director of the Company since June 1997. Mr.
Altholz has been President, owner and Chief Executive Officer of TIA Solutions,
Highland Park, Illinois, a business-consulting firm, since 1997. From 1980 to
November 1995, he was President and owner of Inlander Steindler Paper Company
(ISP), a paper distribution company with regional sales and warehousing centers
in the Midwest, which company was acquired by Alco Standard in November 1995. He
has served on several industry advisory Boards such as Minnesota Mining and
Manufacturing (3M) and Scott Paper, and was Chairman of Affiliated Paper
Companies. He is a member of the Board of Directors of Regal Ware, Inc., a
company engaged in manufacturing and marketing of houseware products, and
Northmoor Country Club and also is a member of the Board of Trustees of Ripon
College. Mr. Altholz received his B.A. in Economics from Ripon College in Ripon,
Wisconsin.
Langer Board Meetings and Committees
During the fiscal year ended February 29, 2000 ("fiscal 2000"), the Board
of Directors held three meetings.
While the Company has an Audit Committee, there are no Nominating or
Compensation Committees. The Audit Committee's function is to review the
adequacy of the Company's internal controls, oversee the financial reporting
process and to meet periodically with management and independent auditors. The
Audit Committee, which currently consist of Messrs. Ardia, Granat and Altholz,
met once during fiscal 2000.
Director Compensation
Directors, who are not employees of the Company, are generally compensated
by means of the issuance of Shares. In this connection, the Board of Directors
granted 4,000 Shares to each of the outside directors for fiscal 2000 and 3,000
Shares, as well as $1,500 in cash, for fiscal 2001. In addition, the Company has
agreed to pay Stephen V. Ardia, Chairman of the Board, the sum of $20,000 for
each of the yearly periods ended November 28, 1999 and 2000 for his services as
Chairman of the Board and $25,000 for his services rendered in connection with
the negotiation of the transactions contemplated by the Tender Offer Agreement.
Directors are also reimbursed for their out-of-pocket expenses in connection
with their attendance at Langer Board meetings.
3
<PAGE>
Executive Officers of the Company.
The names of the executive officers who are not also directors of the
Company, their ages and certain information about them are set forth below.
Principal Occupation
Positions and Offices and Employment
Name Age with Langer During Past Five Years
----- --- ------------------ --------------------
Daniel J. Gorney .. 56 President and Chief Mr. Gorney has been
Executive Officer President and Chief
Executive Officer of the
Company since November
1998. From 1996 to 1998, he
was Chief Executive Officer
of Lifevision, LLC., a
health care service
company. From 1994 to 1996,
Mr. Gorney was Chief
Operating Officer of
Visionics Corporation, a
vision care company. He
received a B.A. in history
and business from the
University of Buffalo with
advanced studies in
Organizational Development
and Marketing Management.
Ronald Spinelli ... 44 Vice President -- Mr. Spinelli has been Vice
Operations President -- Operations of
the Company since October
1999. From 1998 to 1999, he
was Director of Operations
for Thompson Industries, a
manufacturer of industry
bearings. From 1988 to
1998, he was a Director of
Engineering for Pall
Corporation, a manufacturer
of biomedical and
industrial filtration
devices. Mr. Spinelli
received a B.S. in
Mechanical Engineering from
the University of
Wisconsin.
Thomas G. Archbold.. 40 Vice President -- Mr. Archbold has been Vice
Finance and Chief President -- Finance of the
Financial Officer Company since June 1999.
From 1996 to 1999, he was
Corporate Controller of
United Capital Corporation,
a publicly traded company
with interests in real
estate and manufacturing.
From 1994 to 1996, he was
Director of Finance of AIL
Systems, Inc., a
manufacturer of electronic
equipment. Prior to that,
Mr. Archbold spent nine
years with Ernst & Young
LLP, including four years
as an audit senior manager,
and he is a C.P.A. He
received a B.S. in
accounting from C.W. Post
College.
SECURITY OWNERSHIP
Security Ownership of Officers and Directors.
According to the information furnished to the Company as of December 28,
2000, the directors of the Company, the Company's "named executive officers"
(the "Named Executive Officers") within the meaning of Item 402(a)(3) of
Regulation S-K, and all directors and executive officers as a group,
beneficially owned shares of the Company's Common Stock as set forth below.
Beneficial ownership has been determined for purposes herein in accordance with
Rule 13d-3 of the Exchange Act pursuant to which a person is deemed to be the
beneficial owner of securities if such person has or shares voting power or
investment power with respect to such securities or has the right to acquire
beneficial ownership within 60 days of December 28, 2000.
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<PAGE>
Number of
Name (and address of 5% holders) Shares Owned Percent
-------------------------------- ------------ -------
Kenneth Granat ................................. 782,353(1) 29.4%
Dr. Justin Wernick ............................. 224,867 8.6%
Stephen V. Ardia ............................... 135,000(2) 5.0%
Daniel J. Gorney ............................... 40,000(3) 1.5%
Thomas I. Altholz .............................. 56,500(4) 2.2%
All Directors and Officers
As a Group (7 persons) ....................... 1,238,723(5) 44.8%
----------
(1) Includes 45,000 shares issuable under outstanding stock options
exercisable within sixty days and 620,953 shares held by Trigran
Investments, L.P. Mr. Granat is a Director and Vice President of the
general partner of Trigran Investments, L.P. An additional 30,000 shares
are owned by The Granat Family Limited Partnership, of which Mr. Granat is
a general partner, and 10,400 shares are owned by The Kenneth Granat 1990
Family Trust, of which Mr. Granat is a beneficiary. Mr. Granat also owns
76,000 shares personally.
(2) Includes 75,000 shares issuable under outstanding stock options
exercisable within sixty days.
(3) Includes 20,000 shares issuable under outstanding stock options
exercisable within sixty days.
(4) Includes 5,000 shares issuable under outstanding stock options exercisable
within sixty days.
(5) Includes 154,000 shares issuable under outstanding stock options
exercisable within sixty days.
Security Ownership of Certain Beneficial Owners.
The following table sets forth information with respect to persons other
than directors or the Named Executive Officers known to the Company to
beneficially own more than five percent (5%) of the Shares, as of December 28,
2000:
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent
---------------- ----------------------- -------
Donald Cecil ....................... 248,553 9.5%
1114 Avenue of the Americas
New York, New York 10036
On December 28, 2000, as a condition and inducement to OS and Purchaser
entering into the Tender Offer Agreement, Trigran Investments, L.P., The Granat
Family Limited Partnership, Kenneth Granat, The Kenneth Granat 1990 Family
Trust, Dr. Justin Wernick and Messrs. Ardia, Gorney, Altholz and Cecil
(collectively, the "Shareholders") entered into a Shareholders Agreement (the
"Shareholders Agreement") with OS and Purchaser. The Shareholders hold, in the
aggregate, 1,342,273 Shares, or approximately 51.4% of the issued and
outstanding Shares. Pursuant to the Shareholders Agreement, each Shareholder has
agreed to (i) tender its Shares to Purchaser in the Offer, (ii) vote (or cause
to be voted) its shares against (a) any amendment of the Company's Certificate
of Incorporation or by-laws, which amendment would be reasonably likely to
impede, frustrate, prevent or nullify the Offer or any of the other transactions
contemplated by the Tender Offer Agreement or change in any manner the voting
rights of any class of Company Common Stock, (b) any action that would cause the
Company to breach any representation, warranty or covenant of the Company
contained in the Tender Offer Agreement or (c) any action to elect to the Langer
Board anyone other than the Purchaser Designees or replacements of existing
directors, which replacement directors agree to resign on the closing of the
Offer; (iii) not sell, transfer, give, pledge, assign or otherwise dispose of
(collectively, "Transfer"), or consent to any Transfer of their Shares or
options or any interest therein or enter into any contract, option or other
arrangement with respect to the Transfer of their Shares or options to any
person; (iv) not enter into any voting arrangement, directly or indirectly,
whether by proxy, voting agreement or otherwise, with respect to their Shares
and shares issuable upon exercise of their options or commit or agree to take
any of the foregoing actions; and (v) sell all of his or its Shares to
Purchaser, upon Purchaser's election to purchase prior to March 31, 2001, at
$1.525 in the event the Offer is not completed or is terminated due to the
receipt by the Company or its shareholders of an acquisition proposal at a
higher price per share than $1.525.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
executive officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities ("10% shareholders") to file
with the SEC reports of ownership on a Form 3 and changes in ownership on a
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<PAGE>
Form 4 or a Form 5. Such executive officers, directors and 10% shareholders are
also required by SEC rules to furnish the Company with copies of all Section
16(a) forms that they file. The Company is not aware of any late filings of, or
failures to file, during the fiscal year ended February 29, 2000, the reports
required by Section 16(a).
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth certain information regarding the cash
compensation paid by the Company during each of the Company's last three fiscal
years to the Company's Chief Executive Officer and to each of the Company's
executive officers who received salary and bonus payments in excess of $100,000
during the last fiscal year (the "Named Executive Officers").
Annual Compensation Long-term
--------------------------- Compensation
Name and Fiscal Salary Bonus Other Options
Principal Positions Year $ $ $ (No. of Shares)
----------------- ------ ------- ------- ------- --------------
Daniel J. Gorney .......... 2000 158,830 (2) 25,000
President and Chief 1999 34,663(1) (2) 15,000
Executive Officer
Gary L. Grahn ............. 1999 160,000 64,000 26,666(3)
Former President and 1998 160,000 53,440 (2)
Chief Executive Officer
----------
(1) Mr. Gorney's employment commenced on November 30, 1998.
(2) Less than 10% of the total annual salary and bonus.
(3) Mr. Grahn's employment was terminated in December 1998; other compensation
of $26,666 represents severance pay and other minor non-disclosed items
that are less than 10% of total annual salary and bonus.
Options Grants in Last Fiscal Year
Option grants during the fiscal year ended February 29, 2000 to the two
named executive officers were as follows:
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------- Annual Rates
Number of Percent of of Stock Price
Securities Total Options Appreciation
Underlying Granted Exercise or for Option Term(1)
Options to Employees Base Price Expiration --------------------
Name Granted(#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
------ ----------- -------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Gorney ..... 25,000 23.8 $1.50 5/18/09 $23,584 $59,675
Gary L. Grahn ........ -- -- -- -- -- --
</TABLE>
----------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be received upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Company's common stock over the term of the
options. These numbers do not take into account provisions of certain
options providing for termination of the option following termination of
employment.
Fiscal Year-end Option Values
The table below sets forth information regarding unexercised options held
by the Company's Named Executive Officers as of February 29, 2000. No options
were exercised by the Company's Named Executive Officers during fiscal 2000.
6
<PAGE>
No. of Securities Underlying Value of Unexercised
Unexercised Options At In-the-Money Options
Fiscal Year End At Fiscal Year End
Exercisable/Unexercisable Exercisable/Unexercisable
Name # $(1)
---- ---------------------------- -------------------------
Daniel J. Gorney ...... 20,000/80,000 9,425/37,700
Gary L. Grahn ......... -/- -/-
----------
(1) The closing bid price per share of Common Stock as reported by NASDAQ on
February 29, 2000 was $1.69. Value is calculated on the difference between
the option exercise of in-the-money options and $1.69 multiplied by the
number of shares of Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
None of the Named Executive Officers has an employment agreement with the
Company. Certain employees of the Company have entered into arrangements with
the Company in connection with Purchaser's Offer. For a discussion of these
arrangements, see Item 3 under "Arrangements with Executive Officers, Directors
or Affiliates of the Company" in the Schedule 14D-9 of which this Information
Statement forms a part.
7
