<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
GRAPHIC INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
GRAPHIC INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
388678 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
---------------------------------
MARK C. POPE III
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
GRAPHIC INDUSTRIES, INC.
2155 MONROE DRIVE, N.E.
ATLANTA, GEORGIA 30324
(404) 874-3327
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
---------------------------------
Copy to:
G. WILLIAM SPEER, ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
SIXTEENTH FLOOR
191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303
(404) 572-6600
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Graphic Industries, Inc., a Georgia
corporation (the "Company"). The address of the principal executive offices of
the Company is 2155 Monroe Drive, N.E., Atlanta, Georgia 30324. The title of the
class of equity securities to which this Amendment No. 1 to
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9")
relates is the Common Stock, $.10 par value per share (the "Common Stock"), of
the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer disclosed in the Tender
Offer Statement on Schedule 14D-1 dated October 3, 1997, as amended and
supplemented by Amendment No. 1 to the Tender Offer Statement on Schedule 14D-1
dated October 17, 1997 (as so amended, the "Schedule 14D-1"), by Greenwich
Acquisition Corp., a Georgia corporation (the "Offeror") and a wholly-owned
subsidiary of Wallace Computer Services, Inc., a Delaware corporation
("Parent"), to purchase all outstanding Shares at a price of $21.75 per Share
(the "Offer Price"), net to the seller thereof in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
October 3, 1997 (the "Offer to Purchase"), the Supplement to Offer to Purchase
dated October 17, 1997 (the "Supplement") and the related revised Letter of
Transmittal (which together with any amendments or supplements thereto
constitute the "Offer"). The original Offer to Purchase and Letter of
Transmittal are filed as Exhibit 1 hereto and incorporated by reference herein,
and the Supplement and revised Letter of Transmittal are filed as Exhibit 11
hereto and incorporated by reference herein. The Offer is being made pursuant to
the terms of the Amended and Restated Agreement and Plan of Merger, dated as of
October 12, 1997 (the "Merger Agreement" or the "Amended and Restated Merger
Agreement"), which amended and restated the Agreement and Plan of Merger dated
as of September 28, 1997 (the "Original Merger Agreement") among the Company,
Parent and the Offeror. The Merger Agreement provides, among other things, that
after completion of the Offer, subject to the terms and conditions of the Merger
Agreement, the Offeror will be merged (the "Merger") with and into the Company
and each outstanding Share and share of Class B Common Stock, $.10 par value per
share, of the Company (collectively, the "Class B Shares") (other than those
held by the Company, any subsidiary of the Company, Parent, the Offeror or any
other subsidiary of Parent or by stockholders, if any, who are entitled to and
who properly exercise appraisal rights under the Georgia Business Corporation
Code (the "GBCC")) will be converted at the effective time of the Merger (the
"Effective Time") into the right to receive $21.75 in cash, without interest.
The Amended and Restated Merger Agreement amended the Original Merger Agreement
to provide for, among other things, (i) an increase in the price per Share to be
paid pursuant to the Offer from $18.50 per Share to $21.75 per Share, net to the
seller in cash without interest, and (ii) Parent to have the option (the "Merger
Option") to terminate the Offer and seek to acquire the Company solely by means
of the Merger. If Parent elects to exercise the Merger Option, the Merger shall
be subject to the conditions contained in the Amended and Restated Merger
Agreement, including (i) the receipt of requisite approval of the Company's
stockholders, (ii) the absence of any statute, order or injunction preventing
the consummation of the Merger, (iii) the absence of breaches by the Company of
its representations and warranties, covenants and agreements contained in the
Amended and Restated Merger Agreement, and (iv) the expiration or termination of
any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 applicable to the Merger. If Parent elects to exercise the Merger Option,
the Company shall promptly call and hold a meeting of its stockholders for the
purpose of obtaining the stockholders' approval of the Amended and Restated
Merger Agreement and prepare, file with the Commission and mail to the
stockholders a proxy statement relating to such meeting. The Amended and
Restated Merger Agreement is filed as Exhibit 12 hereto and is incorporated by
reference herein.
In connection with the execution of the Merger Agreement, Parent and the
Offeror entered into an Amended and Restated Stockholder Agreement dated as of
October 12, 1997 (the "Amended and Restated Stockholder Agreement" or the
"Stockholder Agreement") amending and restating the Stockholder Agreement dated
as of September 28, 1997 (the "Original Stockholder Agreement") with Mark C.
Pope III, the Chairman of the Board of Directors, President and the Chief
Executive Officer of the Company ("Mr. Pope"
1
<PAGE> 3
or the "Selling Stockholder"), pursuant to which the Selling Stockholder has
granted the Offeror an irrevocable option (the "Option") to purchase 432,089 of
the Shares and 2,239,046 of the Class B Shares (collectively, the "Option
Shares") owned of record by the Selling Stockholder at a price per share equal
to the Offer Price (the "Option Purchase Price"). The Selling Stockholder has
also agreed (i) so long as the Merger Agreement has not terminated, to tender
pursuant to the Offer the other 409,421 Shares owned by him, (ii) in the event
the Offeror purchases Shares pursuant to the Offer, to sell the other 2,064,046
Class B Shares owned by him to the Offeror at the time of the sale to the
Offeror of the Option Shares, and (iii) so long as the Merger Agreement has not
been terminated, upon the written request of the Offeror, to tender pursuant to
the Offer any Shares owned by him that constitute Option Shares. Upon transfer
of Class B Shares by the Selling Stockholder to the Offeror pursuant to the
Stockholder Agreement, all Class B Shares will automatically convert to Shares.
Pursuant to the Stockholder Agreement, the Selling Stockholder has also agreed
that, among other things, until September 28, 1998, he will not transfer the
Shares and Class B Shares owned by him (other than to Parent or the Offeror and
except that he may transfer Class B Shares that are not Option Shares to
"permitted transferees," generally members of his family or entities controlled
by them, provided such transferees agree to be bound by the Stockholder
Agreement) and will vote such Shares and Class B Shares in favor of the
transactions contemplated by the Merger Agreement and against certain competing
transactions at any meeting of stockholders of the Company called to vote
thereon. The Selling Stockholder owned individually or as general partner of a
family partnership 841,510 Shares and 4,303,092 Class B Shares, representing
approximately 10.4% and approximately 95.2% of the Shares and Class B Shares,
respectively, issued and outstanding as of October 12, 1997 (approximately 35.5%
of the Shares on a fully diluted basis). The Amended and Restated Stockholder
Agreement is filed as Exhibit 13 hereto and is incorporated by reference herein.
The purpose of the Offer, the Merger, the Merger Agreement, the Stockholder
Agreement and the transactions contemplated thereby is to enable Parent to
acquire control of, and the entire equity interest in, the Company.
In order to effect the Merger, the GBCC and the Amended and Restated
Articles of Incorporation of the Company (the "Charter") require the affirmative
vote of a majority of the total votes represented by the Shares and Class B
Shares, voting together, to approve the Merger Agreement (following the adoption
of the Merger Agreement by the Board of Directors of the Company, which the
Board of Directors effected by resolution on October 12, 1997). If the Offeror
acquires, through the Offer, the Stockholder Agreement or otherwise, a majority
of the outstanding Shares and Class B Shares (which would be the case if the
Offeror were to accept for payment Shares tendered pursuant to the Offer and the
Offeror were to purchase the Shares and Class B Shares it is entitled to
purchase under the Stockholder Agreement), it would have sufficient voting power
to effect the Merger without the vote of any other stockholder of the Company.
Pursuant to the Merger Agreement, the Company has agreed that, as soon as
practicable following the expiration of the Offer, it will call and hold a
meeting of stockholders for the purpose of obtaining the stockholder approval of
the Merger Agreement. Parent has agreed that all Shares owned by the Offeror or
any other subsidiary of Parent will be voted in favor of approval of the Merger
Agreement. The meeting of stockholders shall be held as soon as practicable
following the purchase of Shares pursuant to the Offer.
Pursuant to the Amended and Restated Merger Agreement, Parent may, at its
option, elect to terminate the Offer and seek to acquire the Company solely by
means of the Merger. Upon the exercise of the Merger Option, the Company has
agreed that, as soon as practicable following such exercise, it will call and
hold a meeting of stockholders for the purpose of obtaining the stockholder
approval of the Merger Agreement. If the Merger Option is exercised by Parent,
the vote of the Shares and Class B Shares owned by Mr. Pope, which he has agreed
to vote in favor of the Merger at any meeting of stockholders for the purpose of
obtaining the stockholder approval of the Merger Agreement, would be sufficient
to effect the Merger without the vote of any other stockholder of the Company.
2
<PAGE> 4
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares that, together with the Option Shares (to the extent not then tendered in
the Offer), will constitute a majority of the Shares and the Class B Shares
(determined on a fully diluted basis for all outstanding stock options,
securities convertible into Shares or Class B Shares and any other rights to
acquire Shares or Class B Shares).
The address of the principal executive offices of the Offeror and Parent,
as set forth in the Schedule 14D-1, is 2275 Cabot Drive, Lisle, Illinois 60532.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and certain of its executive officers, directors or affiliates are
described on pages 6 through 11 of the Company's Proxy Statement dated May 2,
1997 relating to its Annual Meeting of Shareholders held on June 3, 1997 (the
"Proxy Statement"). A copy of pages 6 through 11 of the Proxy Statement is filed
as Exhibit 4 hereto and the portions thereof referred to above are incorporated
by reference herein.
BACKGROUND INFORMATION:
In November 1996, Mr. Pope, the Company's largest stockholder, received a
letter from another publicly-owned printing company proposing that the Company
and such other printing company enter into discussions regarding an acquisition
of the Company. Such letter was accompanied by a financial analysis prepared by
such other company's financial advisor reflecting several possible business
combinations with the Company, involving consideration consisting of stock of
such other company or various combinations of cash and such stock. Mr. Pope had
several discussions with such other company, but no formal offer materialized
and the discussions were terminated on April 16, 1997.
On January 14, 1997, Mr. Pope met with Ronald J. Wareham, of R.J. Wareham &
Company, Incorporated (the "Wareham Company"), concerning the possible
engagement of the Wareham Company by the Company as its financial advisor. On
January 21, 1997, a meeting was held between Mr. Pope, Mr. Wareham and Carter D.
Pope concerning the possible purchase by Carter D. Pope of Atlanta Blue Print
Co. and Imaging Technologies Services, Inc., wholly-owned subsidiaries of the
Company (collectively "ITS"). Carter D. Pope is President of ITS and a member of
the Board of Directors of the Company. No further action was taken with respect
to that possible purchase of such companies until September 1997.
On January 15, 1997, a Financial Advisory Agreement with the Wareham
Company was entered into by the Company pursuant to which the Wareham Company
was engaged as financial advisor to the Company. Included among the services to
be provided by the Wareham Company was its agreement to contact possible
purchasers of the Company to determine the nature and extent of any interest
that they might have in acquiring the Company. Subsequent meetings between Mr.
Pope and Mr. Wareham were held on February 5 and February 18, 1997 to identify
possible purchasers of the Company. As agreed upon between Mr. Pope and Mr.
Wareham, the Wareham Company contacted a number of companies by letter and/or
telephone to determine whether any of such companies would be interested in
pursuing discussions with the Company concerning an acquisition of the Company.
A total of six companies in the printing or related industries and eight
financial buyers were contacted on behalf of the Company by or through the
Wareham Company between February 13, 1997 and May 21, 1997.
Except for the financial buyer referred to below, the companies or firms
contacted by the Wareham Company expressed a lack of interest in pursuing
discussions with the Company. In addition, Mr. Wareham contacted a major
investment banking firm about a possible leveraged recapitalization of the
Company. Mr. Wareham, Mr. Pope and Carter D. Pope met with such firm on May 21,
1997, but such transaction was not pursued further because, among other things,
Mr. Pope would have been required to leave a substantial amount of equity in the
Company and to manage a highly-leveraged company.
3
<PAGE> 5
The Wareham Company initially contacted Parent by letter dated May 5, 1997
to Robert J. Cronin, Chief Executive Officer of Parent, inquiring if Parent
would be interested in discussing a possible business combination with the
Company. On or about May 12, 1997, Michael T. Leatherman, Senior Vice President
and Chief Information Officer of Parent, telephoned Mr. Wareham to express
preliminary interest in a transaction with the Company and to schedule a meeting
with Mr. Wareham and Mr. Pope.
The initial meeting between the Company and Parent occurred on June 5,
1997, at which time Mr. Pope and Mr. Wareham met with Mr. Cronin and Mr.
Leatherman. During that meeting, the persons present discussed the Company's
operations and Parent's current strategy for expanding its commercial printing
operations through acquisitions. On June 12, 1997, Mr. Leatherman provided to
Mr. Wareham a preliminary list of information that Parent desired in connection
with its review of the Company. A Confidentiality Agreement was entered into
between the Company and Parent on July 3, 1997, and an information package
concerning the Company was provided to Parent in mid-July.
On June 27, July 28 and July 31, 1997, the Company held a series of
meetings with a potential financial buyer of the Company, and a proposal to
acquire control of the Company in a leveraged buy-out was received from such
financial buyer by the Company on July 31, 1997. However, after consultation
with Mr. Wareham and others, such proposal was deemed unacceptable by Mr. Pope
because, among other things, the price was deemed inadequate and the proposal
was highly conditional. Such proposal was not pursued further by Mr. Pope and
Mr. Wareham.
A meeting with Mr. Leatherman, Mr. Pope, John R. Pope, President of one of
the Company's subsidiaries and a member of the Board of Directors of the
Company, and Mr. Wareham was held in Atlanta on August 12, 1997. At this
meeting, the parties discussed the structure of a possible transaction, the
recent movement in the price for the Common Stock, and the general operations of
the Company. Mr. Pope indicated that, as noted above, a financial buyer had
expressed possible interest in acquiring the Company for a price in the range of
$15 to $16 per Share. Mr. Pope indicated that he believed a higher price was
more appropriate. The parties took note of the recent increases in market prices
for the Common Stock, and Mr. Leatherman indicated that Parent would consider a
price at or near $17.50 per Share. At the conclusion of this meeting, Mr.
Leatherman requested additional information concerning the Company.
A further meeting between the Company and Parent occurred on August 19,
1997 among Mr. Cronin, Mr. Leatherman, Mr. Pope, John R. Pope and Carter D.
Pope, at which time further discussions were held, although no specific proposal
was made or price agreed upon. This meeting was held at Parent's headquarters
and included visits to certain of Parent's operations in the Chicago area.
On August 21, 1997, telephone discussions concerning the increase in market
price for the Shares and announcement of recent acquisitions by the Company were
held among Mr. Pope, Mr. Benatar, Mr. Cronin and Mr. Leatherman, and on August
25, 1997, the Company sent Parent additional information concerning recent
acquisitions made by the Company.
On August 28, 1997, a meeting was held at Parent's headquarters among Mr.
Cronin, Mr. Leatherman, other representatives of Parent, and representatives of
Smith Barney Inc. ("Smith Barney"), financial advisor to Parent, Mr. Pope, John
R. Pope, Mr. Benatar and Mr. Wareham. At this meeting, the parties discussed the
possibility of a cash tender offer for the Company by Parent, and a price of
$18.50 per Share was mentioned as a price which Parent might be willing to pay
for the Company, assuming satisfactory completion of due diligence and
negotiation of a satisfactory merger agreement and an agreement with Mr. Pope
covering a portion of his Shares and Class B Shares. At this meeting the parties
did not agree on the number of Shares or Class B Shares of Mr. Pope to be
covered by the agreement with Mr. Pope. On September 4, 1997, Mr. Leatherman met
with certain members of the Company's management in Atlanta, at which time he
was given the opportunity to learn more about the Company's operations and how
they might be integrated with Parent's operations.
On August 29, 1997, the Company engaged Interstate/Johnson Lane Corporation
("Interstate/Johnson Lane") for purposes of rendering an opinion with respect to
the fairness, from a financial point of view, of the
4
<PAGE> 6
consideration to be received by the stockholders of the Company, in a possible
acquisition transaction with Parent.
During the week of September 9, 1997, Mr. Leatherman, various other members
of Parent's management, and representatives of Smith Barney held additional
meetings with the Company's management in Atlanta and members of Parent's
management also visited the Company's plants in Houston, Philadelphia and
Boston. Mr. Benatar and Mr. Leatherman also met on September 9 and 11, 1997
during Mr. Leatherman's visit to Atlanta and discussed various matters regarding
the Company, its fit with Parent and conditions in the printing industry
generally. In addition, management of Parent, representatives of Smith Barney,
Sidley & Austin, legal counsel to Parent, and Arthur Andersen LLP, the
independent accountants of Parent, reviewed certain information provided by the
Company in a data room in the Atlanta offices of Powell, Goldstein, Frazer &
Murphy LLP, legal counsel to the Company, and at a data room in the Atlanta
offices of Ernst & Young LLP, independent accountants of the Company.
On September 12, 1997, Sidley & Austin provided drafts of the Original
Merger Agreement and the Original Stockholder Agreement to the Company and to
Powell, Goldstein, Frazer & Murphy LLP, counsel for the Company and Mr. Pope. On
September 18 and 19, 1997, representatives of Sidley & Austin and Powell,
Goldstein, Frazer & Murphy LLP conducted telephonic discussions concerning the
terms of the proposed Original Merger Agreement and Stockholder Agreement. On
September 20, 1997, Sidley & Austin delivered revised drafts of the Original
Merger Agreement and the Original Stockholder Agreement to the Company, Mr. Pope
and their legal counsel.
On September 19, 1997, Mr. Benatar and Mr. Leatherman and legal counsel to
the Company and Parent had telephone conversations concerning the sale of ITS to
Carter D. Pope and the proposed terms of such sale. Mr. Leatherman advised that
the businesses conducted by ITS are not consistent with the long term strategic
objectives of Parent as they relate to its acquisition of the Company and stated
that Parent had no objection to the sale of ITS as proposed.
On September 24, 1997, at the regular quarterly meeting of the Board of
Directors of the Company, Mr. Pope advised the members of the Board of the
discussions to date with Parent and the possible terms of an acquisition of the
Company by Parent. Representatives of Interstate/Johnson Lane delivered their
verbal opinion as to the fairness, from a financial point of view, to the
holders of Common Stock of the consideration then proposed to be paid to them.
Carter D. Pope also expressed his continuing interest in acquiring ITS from the
Company, conditioned upon the acquisition of the Company by Parent, and offered
to enter into a contract to that effect. After consultation with its financial
and legal advisors, the Board determined that it was in the best interests of
the stockholders for discussions to continue with Parent and agreed to meet
again on September 28, 1997.
On September 25, 1997, Croft & Bender LLC was engaged by the Company to
render a fairness opinion with respect to the fairness, from a financial point
of view, to the Company of the consideration to be received by the Company from
the sale of ITS. Representatives of Croft & Bender LLC met on September 25 and
26, 1997, with Carter D. Pope and other representatives of ITS and with
representatives of the Company to obtain information necessary for them to
render their opinion, which was delivered to the Company on September 28, 1997.
Croft & Bender LLC stated in their opinion that the consideration to be received
by the Company from the sale of ITS is fair, from a financial point of view, to
the Company.
On September 25, 1997, members of Parent's management conducted additional
visits to certain of the Company's plants.
On September 26 and 27, 1997, members of management of the Company,
including presidents of the Company's operating subsidiaries, met with members
of management of Parent in Chicago to discuss how the operations of each of the
Company and Parent might be integrated. Final terms of the Original Merger
Agreement and the Original Stockholder Agreement were negotiated between legal
counsel for the Company and Parent. On September 27, 1997, Parent conveyed a
written offer to the Company, offering to enter into the proposed Original
Merger Agreement and Original Stockholder Agreement.
5
<PAGE> 7
On September 28, 1997, the Board of Directors of the Company met and, with
the advice of legal counsel, considered the written offer from Parent to acquire
the Company pursuant to the original Offer and the Merger at the original price
of $18.50 per Share. The Board also received and considered the written opinion
of Interstate/Johnson Lane with respect to the original Offer and the Merger and
the written opinion of Croft & Bender LLC with respect to the sale of ITS. Mr.
Pope advised the Board of the final terms of the Original Stockholder Agreement.
The terms of the Original Merger Agreement, the Original Stockholder Agreement
and the Stock Purchase Agreement (as defined below) providing for the sale of
ITS were reviewed with the Board by legal counsel to the Company. Following a
number of questions from, and discussions among, the directors, the Board of
Directors of the Company (i) approved and adopted the Original Merger Agreement
and determined that the original Offer and the Merger, considered as a whole,
were fair to and in the best interests of the Company and its stockholders, (ii)
recommended that the Company's stockholders tender their Shares in the original
Offer and approve and adopt the Original Merger Agreement and the Merger, and
(iii) approved the Stock Purchase Agreement providing for the sale of ITS, which
is described more fully below in this Item 3(b).
On September 28, 1997, immediately following the meeting of the Board of
Directors, the Original Merger Agreement and the Original Stockholder Agreement
were executed and delivered by the parties thereto. The Stock Purchase Agreement
was also executed and delivered. An announcement concerning the original Offer
and the Merger was made on September 28, 1997.
On October 3, 1997, the Offeror commenced the Offer at an offer price of
$18.50 per Share.
On October 6, 1997, Gerald F. Mahoney, Chairman of Mail-Well, Inc.
("Mail-Well"), telecopied a letter to Mr. Pope expressing interest in making an
offer for the Company and requesting access to the same due diligence materials
as had been provided to Parent. A copy of the letter was delivered to Parent as
required under the Original Merger Agreement. Parent then provided the Company
with copies of telecopied correspondence between Mr. Mahoney and Mr. Cronin,
which consisted of (i) letters dated October 2, 1997 and October 3, 1997 from
Mr. Mahoney to Mr. Cronin expressing an interest in purchasing certain assets of
the Company from Parent, after the consummation of the Merger, and indicating
that, if Parent were unwilling to agree to such a transaction, Mail-Well would
consider the possibility of making a competing offer to purchase the Company at
a price in excess of $18.50, and (ii) a letter dated October 6, 1997, from Mr.
Cronin to Mr. Mahoney advising Mr. Mahoney that Parent was not interested in
selling assets of the Company to Mail-Well.
On October 7, 1997, the Board of Directors of the Company met to consider
the October 6, 1997 letter from Mr. Mahoney to Mr. Pope. The Board of Directors
concluded that the October 6, 1997 letter from Mr. Mahoney was not sufficiently
definite with respect to the terms of an offer to acquire to the Company and did
not include sufficient evidence of the ability of Mail-Well to finance the
acquisition of the Company in order for the members of the Board of Directors to
determine, as required by the Original Merger Agreement, that it was necessary
in connection with the exercise of their fiduciary duties to allow Mail-Well
access to the materials requested. Mail-Well was informed of this conclusion on
October 7, 1997, following the meeting of the Board of Directors.
On October 9, 1997, the Company received a letter from Mr. Mahoney stating
that Mail-Well was willing, subject to reasonable and customary due diligence,
to pay at least $20.00 per share in cash for all of the Shares and Class B
Shares of the Company, on substantially the same terms as contained in the
Original Merger Agreement, to which was attached an executed bank commitment
letter relating to financing for Mail-Well's offer and an executed
confidentiality agreement. Later that day, the Board of Directors of the Company
met to consider Mail-Well's letter. The Board of Directors determined that, in
accordance with the terms of the Original Merger Agreement, it was permitted to
allow Mail-Well to review the same due diligence materials as had been provided
to Parent, but took no further action with respect to Mail-Well's letter.
Following the meeting of the Board of Directors, the Company advised Mail-Well
that it would be allowed access to the same information as had been provided to
Parent and access to the Company's management and facilities, subject to the
confidentiality agreement. On October 10, 1997, both the Company and Mail-Well
issued press releases relating to Mail-Well's October 9, 1997 letter and the
Company's decision
6
<PAGE> 8
to allow Mail-Well to commence its due diligence investigation of the Company.
The Board of Directors of the Company took no other position with respect to the
October 9, 1997 letter from Mail-Well.
On October 10, 1997, certain arrangements were made for material and
information related to the Company to be available to Mail-Well and certain
material related to the Company was sent to Mail-Well.
Beginning on October 10, 1997 and continuing on October 11, 1997, Parent
and its counsel had various discussions with Mr. Pope and his counsel, relating
to the possibility of an increase in the cash price to be paid in the Offer and
to certain modifications in the terms of the Original Stockholder Agreement and
the Original Merger Agreement (including the addition of the Merger Option). On
October 11, 1997, Parent's counsel delivered drafts of the Amended and Restated
Stockholder Agreement and the Amended and Restated Merger Agreement to Mr.
Pope's counsel. Later that day and on October 12, 1997 such counsel finalized
the terms of both agreements, subject to approval by the Boards of Directors of
Parent and the Company.
In the afternoon of October 12, 1997, following such approval by its Board
of Directors, Parent telecopied a letter to Mr. Pope proposing to increase the
Offer Price if Mr. Pope agreed, prior to Parent making such proposal to the
Company, to commit, for a period of one year, to vote the Shares and Class B
Shares owned by him against any merger or merger agreement (other than the
Merger and the Merger Agreement) and against certain other competing
transactions and not to (i) sell or otherwise transfer any Shares or Class B
Shares owned by him (subject to certain exceptions), (ii) enter into any voting
arrangement or (iii) convert the Class B Shares owned by him into Shares, in
each case, whether or not the Board of Directors of the Company accepted
Parent's proposal. Upon receipt of such written commitment by Mr. Pope, Parent
conveyed a written offer to the Board of Directors of the Company, offering to
enter into the Amended and Restated Merger Agreement simultaneously with Mr.
Pope's execution of the Amended and Restated Stockholder Agreement. The written
offer from Parent to the Board of Directors of the Company provided that the
offer would expire at 8:00 p.m. (eastern time) on October 12, 1997, and would be
deemed automatically rejected in the event of any disclosure to any person other
than an officer, director, employee or representative of the Company of such
offer or the fact that Parent had made such offer prior to acceptance by the
Company of such offer.
Upon receipt of such letter, the Board of Directors of the Company met to
consider the written offer from Parent. The Board received and considered the
verbal opinion of Interstate/Johnson Lane with respect to the revised Offer and
the Merger. The opinion was later confirmed in writing (a copy of which appears
as Annex A hereto). Following discussions among the directors, the Board of
Directors of the Company (i) approved and adopted the Amended and Restated
Merger Agreement and determined that the revised Offer and Merger considered as
a whole are fair to and in the best interests of the Company and its
stockholders and (ii) recommended that the Company's stockholders tender their
Shares in the Offer and approve and adopt the Amended and Restated Merger
Agreement and the Merger.
Immediately following the meeting of the Board of Directors of the Company,
the Amended and Restated Merger Agreement and the Amended and Restated
Stockholder Agreement were executed and delivered by the parties thereto. An
announcement concerning the Amended and Restated Merger Agreement and the
Amended and Restated Stockholder Agreement was made on October 12, 1997. The
Company, through its counsel, also informed Mail-Well of the execution of such
agreements and that Mail-Well's proposed due diligence investigation of the
Company was no longer appropriate.
The terms of the Merger Agreement and the Stockholder Agreement are
described more fully under the captions "Purpose of the Offer and the Merger;
Plans for the Company" and "The Merger Agreement and the Stockholder Agreement"
in the Offer to Purchase and the Supplement and such descriptions are
incorporated by reference herein.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES:
During its negotiations with the Company, Parent advised the Company that
the businesses conducted by ITS are not consistent with the long term strategic
objectives of Parent as they relate to its acquisition of the Company. ITS
provides: (i) imaging and reproduction products and services to architects,
engineers, contractors and other construction related markets; (ii) facilities
management operations on site for certain
7
<PAGE> 9
clients; and (iii) courier services to the business community. The Company has
entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with
Carter D. Pope pursuant to which Carter D. Pope has agreed to purchase and the
Company has agreed to sell all of the issued and outstanding capital stock of
ITS for a purchase price of $7,065,173, which represents the net book value of
ITS at August 31, 1997. The acquisition by Carter D. Pope of the stock of ITS is
conditioned upon the acceptance for payment of Shares by Parent pursuant to the
Offer. Carter D. Pope is Mr. Pope's son. The purchase of the stock of ITS by
Carter D. Pope was unanimously approved by the Board of Directors of the
Company, with the members of the Pope family abstaining. In reaching its
conclusion to approve the Stock Purchase Agreement, the Board of Directors
considered, among other things, the opinion of Croft & Bender LLC. Such opinion
states that the consideration to be received by the Company from the sale of ITS
is fair, from a financial point of view, to the Company. A copy of the opinion
of Croft & Bender LLC is filed as Exhibit 7 hereto and incorporated by reference
herein. A copy of the Stock Purchase Agreement is filed as Exhibit 5 hereto and
incorporated by reference herein.
Parent has agreed to allow the Company to offer employment agreements to
certain officers of the Company, including John R. Pope, President of Williams
Printing Company, a subsidiary of the Company, and a Director of the Company,
Alvan A. Herring, Jr., Vice President and a Director of the Company, Joseph A.
Fasolo, Donald S. Forshay, Jeffery Glover, and Jim R. Tidwell, each a Vice
President of the Company, Martin C. Kendall, Vice President and Chief Financial
Officer of the Company, and Donald P. Hunnicutt, Sr., Secretary of the Company,
and to certain regional managers of the Company and presidents of operating
subsidiaries of the Company. The provisions of such employment agreements and
the terms thereof will be negotiated between the Company and such employees
(subject to the Parent's consent) prior to acceptance for payment of Shares by
Parent pursuant to the Offer, and such employment agreements will become
effective at such time and will remain in effect after the Merger. It is
expected that terms of such employment agreements will range from one to three
years. Parent has expressed its interest in entering into a one-year consulting
arrangement with Mr. Pope, although the terms of such arrangement have not been
determined.
The Company has indemnification agreements (collectively, the
"Indemnification Agreements") with its directors and officers. Each
Indemnification Agreement provides that the Company will indemnify and hold
harmless the director or officer party to it (an "Indemnitee") to the fullest
extent permitted by the Charter, By-laws and the GBCC, against all expenses,
liability and loss (including attorneys' fees, judgments, fines, and amounts
paid or to be paid in any settlement approved in advance by the Company, such
approval not to be unreasonably withheld) (collectively, "Indemnifiable
Expenses") actually and reasonably incurred or suffered by Indemnitee in
connection with any present or future threatened, pending or contemplated
investigation, claim, action, suit, or proceeding, whether civil, criminal,
administrative or investigative (collectively, "Indemnifiable Litigation"): (i)
to which Indemnitee is or was a party or is threatened to be made a party by
reason of any action or inaction in Indemnitee's capacity as a director or
officer of the Company, or (ii) with respect to which Indemnitee is otherwise
involved by reason of the fact that Indemnitee is or was serving as a director,
officer, employee or agent of the Company, or of any subsidiary or division, or
is or was serving at the request to the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
The Company is not obligated under the Indemnification Agreements to make
any payment in connection with any claim made against the Indemnitee: (i) for
which payment is actually made to the Indemnitee under a valid and collectible
insurance policy, except in respect of any excess beyond the amount of payment
under such insurance; (ii) for which the Indemnitee is entitled to
indemnification and/or payment by reason of having given notice of any
circumstance which might give rise to a claim under any policy of insurance, the
terms of which have expired prior to the effective date of the applicable
Indemnification Agreement; (iii) for which the Indemnitee is indemnified by the
Company otherwise than pursuant to the applicable Indemnification Agreement;
(iv) based upon or attributable to the Indemnitee gaining any personal profit or
advantage to which he was not legally entitled; (v) for an accounting of profits
made from the purchase or sale by the Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or similar provisions of any state
8
<PAGE> 10
statutory law; or (vi) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the foregoing,
the Indemnitee shall be protected under the appropriate Indemnification
Agreement as to any claims upon which suit may be brought against him by reason
of any alleged dishonesty on his part, unless a judgment or other final
adjudication thereof adverse to Indemnitee shall establish that he committed
acts of active and deliberate dishonesty with actual dishonest purpose and
intent, which acts were material to the cause of action so adjudicated. In
addition, pursuant to the Indemnification Agreements, the Company will pay
Indemnifiable Expenses incurred by an Indemnitee in connection with any
Indemnifiable Litigation in advance of the final disposition thereof, provided
that the Company has received an undertaking from or on behalf of Indemnitee to
repay the amounts advanced to the extent that it is ultimately determined that
Indemnitee is not entitled to be indemnified by the Company under the
appropriate Indemnification Agreement or otherwise. The form of Indemnification
Agreement is filed as Exhibit 6 hereto and is incorporated by reference herein.
The Merger Agreement provides that Parent will maintain the existing
directors' and officers' liability insurance for a period of six years from the
earlier of the date the Offeror first purchases Shares pursuant to the Offer or
the Effective Time; provided that there is no obligation on the part of Parent
to pay annual premiums in excess of 150% of the last annual premium paid prior
to the date of the Merger Agreement (the "Maximum Premium"), except that if the
annual premiums exceed the Maximum Premium, Parent will be obligated to obtain
an insurance policy with the greatest coverage available for a cost not
exceeding the Maximum Premium. The Merger Agreement also provides that all
rights to indemnification by the Company for acts or omissions occurring at or
prior to the Effective Time in favor of the current or former directors,
officers, employees and agents of the Company and its subsidiaries as provided
in their respective organizational documents shall continue after the Effective
Time.
In connection with the Company's acquisition of Baum Printing, Inc. in
1989, the Company agreed to pay Joseph A. Fasolo, who was the executive vice
president and a stockholder of Baum Printing, Inc., a payment upon a change of
control of the Company. Mr. Fasolo, now a Vice President of the Company, may
receive up to $500,000 as a result of the Offer and the Merger, exclusive of
payments in respect of options held by him to purchase Shares.
Except as set forth above, to the best knowledge of the Company, there are
no contracts, agreements or understandings or any actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company's
executive officers, directors or affiliates or (ii) Parent or the Offeror or
their respective executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the Company met on September 24, 1997 to
discuss and consider a possible proposal for the acquisition of the Company by
Parent. During such meeting, the Board of Directors discussed the terms of a
possible acquisition proposal as communicated by Parent to management and
reviewed the terms of a proposed Original Merger Agreement with legal counsel to
the Company, Interstate/ Johnson Lane and the Wareham Company. Following such
discussion and review, the Board of Directors determined that it was in the best
interests of the stockholders for discussions to continue with Parent. Parent
conveyed a written offer to the Chairman of the Board of Directors of the
Company on September 27, 1997, offering to enter into the proposed Merger
Agreement and the proposed Stockholder Agreement. The Board of Directors of the
Company met again on September 28, 1997 and reviewed the terms of the Original
Merger Agreement and the Original Stockholder Agreement with legal counsel,
received the written opinion of Interstate/Johnson Lane with respect to the
fairness, from a financial point of view, of the consideration to be received by
the Company's stockholders in the original Offer and the Merger, and: (i)
determined that the original Offer and the Merger, considered as a whole, were
fair to and in the best interests of the Company and its stockholders; (ii)
approved and adopted the Original Merger Agreement; and (iii) recommended that
the Company's stockholders tender their Shares in the original Offer and approve
and adopt the Original Merger Agreement and the Merger. On October 12, 1997
Parent conveyed a written offer to the Board of Directors of the Company
offering to enter into the proposed Amended and Restated Merger Agreement which,
among other things, increased the Offer Price from $18.50 to $21.75 and provided
for the Merger Option. The Board
9
<PAGE> 11
of Directors of the Company met on October 12, 1997 and reviewed the terms of
the Amended and Restated Merger Agreement and the Amended and Restated
Stockholder Agreement with legal counsel, received the verbal opinion of
Interstate/Johnson Lane with respect to the fairness, from a financial point of
view, of the consideration to be received by the Company's stockholders in the
revised Offer and the Merger, and: (i) determined that the revised Offer and the
Merger, considered as a whole, are fair to and in the best interests of the
Company and its stockholders; (ii) approved and adopted the Amended and Restated
Merger Agreement; and (iii) recommended that the Company's stockholders tender
their Shares in the Offer and approve and adopt the Merger Agreement and the
Merger.
(b) In reaching its conclusion and making its determinations as outlined in
paragraph (a) above, the Board of Directors considered a number of factors,
including, without limitation, the following:
(i) the consideration proposed to be paid by Parent pursuant to the
Offer and the Merger relative to: (A) the Company's historical sales;
earnings before interest, taxes, depreciation and amortization ("EBITDA");
earnings before interest and taxes ("EBIT"); net income and book value; (B)
its internal expectations concerning sales, EBITDA, EBIT, net income and
book value; (C) recent and historical market prices for the Common Stock;
and (D) the results of a discounted cash flow analysis;
(ii) the familiarity of the Board of Directors with the business,
financial condition and prospects of the Company; the nature of the
Company's industry and markets, including, in particular, the belief of the
Board of Directors that consolidation in the Company's industry will
continue in an increasingly competitive acquisition market and that for the
Company to maintain a leadership position in its industry would require
continued growth, including by way of acquisitions, substantial capital
resources, and further geographic expansion; and the belief of the Board of
Directors that the consideration proposed to be paid by Parent pursuant to
the Offer and the Merger reflects the values inherent in the Company;
(iii) issues concerning management succession at the Company;
(iv) the desire of Mr. Pope, the largest stockholder of the Company,
who owns approximately 35.5% of the total of the Shares and Class B Shares
outstanding on a fully diluted basis and who possesses approximately 82% of
the total votes which might be cast at a meeting of stockholders of the
Company (assuming prior exercise of all outstanding stock options and
conversion of all outstanding debentures of the Company), to sell the
Company to Parent, and his agreement with Parent (which was necessary to
induce Parent to offer to increase the Offer Price) to commit, for a period
of one year, to vote the Shares and Class B Shares owned by him against any
merger or merger agreement (other than the Merger and the Merger Agreement)
and against certain other competing transactions and not to (a) sell or
otherwise transfer any Shares or Class B Shares owned by him (subject to
certain exceptions), (b) enter into any voting arrangement or (c) convert
the Class B Shares owned by him into Shares, in each case, whether or not
the Board of Directors accepted Parent's proposal to enter into the Amended
and Restated Merger Agreement;
(v) that the written offer from Parent to enter into the Amended and
Restated Merger Agreement, which provided for an increase in the Offer
Price to $21.75 per Share, would by its terms expire at 8:00 p.m. on
October 12, 1997 and be deemed to have been rejected if disclosed to anyone
other than officers, directors, employees and representatives of the
Company prior to its acceptance;
(vi) the opinion of Interstate/Johnson Lane (described below) to the
effect that the consideration to be received by stockholders of the Company
pursuant to the Offer and the Merger is fair, from a financial point of
view, to such stockholders;
(vii) that all of the Company's stockholders will receive the same
price and consideration for their Shares and Class B Shares;
(viii) the financial strength of Parent and the absence of any
financing condition in the Offer or in the Merger Agreement;
(ix) that the Mail-Well proposal of October 9, 1997 contained a number
of conditions, including satisfactory completion of a due diligence
investigation of the Company, and that Mail-Well's bank
10
<PAGE> 12
financing commitment, which accompanied its proposal, was, in the view of
the Board, more conditional than Parent's bank financing commitment
relating to the Offer and the Merger; and
(x) the realization that, if the Company failed to enter into the
Amended and Restated Merger Agreement offered by Parent, and Mail-Well did
not subsequently offer to enter into a merger agreement with the Company
providing for its acquisition by Mail-Well, stockholders of the Company
would receive only $18.50 per share under the Original Merger Agreement,
rather than the higher Offer Price of $21.75 being proposed by Parent.
OPINION OF INTERSTATE/JOHNSON LANE CORPORATION
Interstate/Johnson Lane was retained by the Company to render an opinion
with respect to the fairness, from a financial point of view, of the
consideration to be received by the holders of the outstanding Common Stock of
the Company from a possible transaction with Parent. Interstate/Johnson Lane
delivered to the Board of Directors of the Company its written opinion dated
September 28, 1997 and updated on October 12, 1997 based upon the Amended and
Restated Merger Agreement (the "Interstate/Johnson Lane Opinion") to the effect
that, as of the date thereof, based on the matters set forth therein, the
consideration to be received by the holders of Common Stock in the Offer and the
Merger is fair, from a financial point of view, to such stockholders. The
consideration was determined based upon negotiations between the parties,
without any involvement of Interstate/Johnson Lane.
Interstate/Johnson Lane has consented to the inclusion of the
Interstate/Johnson Lane Opinion in this Schedule 14D-9.
THE FULL TEXT OF THE INTERSTATE/JOHNSON LANE OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX A TO THIS SCHEDULE 14D-9 AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE INTERSTATE/JOHNSON LANE
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE OPINION IN ANNEX A. THE COMPANY'S STOCKHOLDERS ARE URGED TO READ THE
INTERSTATE/JOHNSON LANE OPINION IN ITS ENTIRETY. THE INTERSTATE/JOHNSON LANE
ANALYSES AND OPINION WERE PREPARED FOR AND ADDRESSED TO THE BOARD OF DIRECTORS
OF THE COMPANY AND ARE DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF COMMON STOCK OF THE
COMPANY IN CONNECTION WITH THE OFFER AND THE MERGER AND DO NOT CONSTITUTE AN
OPINION AS TO THE MERITS OF THE OFFER OR THE MERGER OR A RECOMMENDATION TO ANY
HOLDER OF SHARES AS TO WHETHER OR NOT TO TENDER THEIR SHARES OR AS TO HOW TO
VOTE IN CONNECTION WITH THE MERGER.
Interstate/Johnson Lane is a nationally recognized investment banking firm
and was selected by the Company based on the firm's reputation and general
investment banking experience, including its experience in rendering fairness
opinions. Interstate/Johnson Lane, as part of its investment banking business,
is engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
In connection with rendering the Interstate/Johnson Lane Opinion,
Interstate/Johnson Lane, among other things, (i) reviewed a draft of the Merger
Agreement; (ii) reviewed annual audited financial statements for the Company and
Parent for the prior three fiscal years, interim unaudited financial statements
through April 30, 1997 for Parent and interim unaudited financial statements
through July 31, 1997 for the Company; (iii) reviewed publicly available
information including recent Securities and Exchange Commission ("SEC") filings
and stockholder communications for the Company and for Parent, respectively;
(iv) met with members of the senior management of the Company to discuss its
business, financial condition, operating results, and projections; (v) compared
certain financial and stock market data for the Company with similar data for
selected publicly held commercial printing companies; (vi) reviewed the
financial terms of certain recent
11
<PAGE> 13
business combinations in the printing industry; (vii) reviewed premiums paid
historically for certain other publicly traded companies deemed relevant; (viii)
reviewed historical market price, volume data, and dividend history for the
Shares compared with comparable companies; (ix) reviewed a discounted cash flow
analysis for the Company; (x) reviewed published research reports and investment
opinions on the Company and the commercial printing industry; and (xi) performed
such other financial studies and analyses as we deemed appropriate.
In rendering the Interstate/Johnson Lane Opinion, Interstate/Johnson Lane
relied without independent verification upon the accuracy and completeness of
all the financial and other information furnished to it by or on behalf of the
Company, and others, including published information that Interstate/Johnson
Lane considered in its review. Interstate/Johnson Lane relied upon the
reasonableness of all projections and forecasts provided to it by the management
of the Company and assumed the attainability of such results and that they were
prepared in accordance with accepted practice on bases reflecting the best
currently available estimates and good faith judgments of the Company's
management. Interstate/Johnson Lane's opinion is based upon the economic,
monetary, market and other conditions and circumstances existing and known to it
as of the date of the Interstate/Johnson Lane Opinion, and Interstate/Johnson
Lane assumed that there were no material changes in the assets, financial
condition, results of operation, business or prospects of the Company since the
date of the most recent financial statements made available to it.
Interstate/Johnson Lane has not made or considered any independent evaluations
or appraisals of the assets or liabilities (contingent or otherwise) of either
the Company or any of its subsidiaries. Interstate/Johnson Lane does not express
any opinion regarding the value of any of the Company's specific individual
assets. Interstate/Johnson Lane has also assumed, with the Company's consent,
that obtaining any necessary regulatory approvals and third party consents for
the Offer or the Merger or otherwise will not have an adverse effect on the
Company, Parent or the combined company.
The following is a summary of the material financial analyses originally
presented by Interstate/Johnson Lane to the Board of Directors of the Company on
September 24, 1997, and updated in a presentation on October 12, 1997. The
summary does not purport to be a complete description of the analyses performed
by Interstate/Johnson Lane in connection with providing its opinion to the
Company's Board of Directors.
Comparable Companies Analysis. Based on publicly available information and
First Call consensus earnings estimates, Interstate/Johnson Lane reviewed and
compared actual and estimated selected financial, operating and stock market
information and financial ratios of the Company to a group of ten companies.
(First Call compiles earnings estimates published by selected research analysts
for use by the investment community.) The Company was compared to a group of ten
commercial printing companies consisting of Banta Corporation, Bowne & Co.,
Inc., Cadmus Communications Corporation, Champion Industries Inc., Consolidated
Graphics, Inc., Devon Group, Inc., Merrill Corporation, R.R. Donnelley & Sons
Co., Mail-Well, Inc. and World Color Press, Inc. (the "Selected Printing
Companies"). The Company was also compared with a subset of the above companies,
based on the elimination of companies whose compound annual growth rate for
sales over the past three fiscal years was greater than 20%. The subset of the
selected companies consists of the following five companies: Banta Corporation,
Bowne & Co., Inc., Cadmus Communications Corporation, Devon Group, Inc. and R.R.
Donnelley & Sons Co. (the "Subset of Selected Printing Companies"). The
historical financial information and ratios analyzed for the companies are as of
their respective most recent reported periods.
Interstate/Johnson Lane's observations included, among other things, the
following: The Company had a compound annual growth rate in sales over the past
three fiscal years of 12.1% compared with the median of 19.8% for the Selected
Printing Companies and 15.6% for the Subset of Selected Printing Companies. The
Company had a net debt to book value of total capital ratio of 52.1% compared
with the median of 40.3% for the Selected Printing Companies and 19.6% for the
Subset of Selected Companies (net debt equals short-term debt plus long-term
debt less cash and cash equivalents; book value of total capital equals book
value of shareholders' equity plus net debt). The Company had a market value of
capitalization to EBITDA multiple of 8.1 times compared to the median of 7.0
times for the Selected Printing Companies and 6.2 times for the Subset of
Selected Printing Companies (market value of capitalization equals the market
value of shareholders' equity plus net debt; EBITDA equals earnings before
interest, taxes, depreciation and amortization). The
12
<PAGE> 14
Company had a market value of capitalization to EBIT multiple of 13.3 times
compared to the median of 12.3 times for the Selected Printing Companies and
10.2 times for the Subset of Selected Printing Companies (EBIT equals earnings
before interest and taxes). The Company had a market value of capitalization to
sales multiple of 0.9 times compared to the median of 1.0 times for the Selected
Printing Companies and 1.0 times for the Subset of Selected Printing Companies.
Interstate/Johnson Lane also observed, among other things, the following:
The Company had a return on equity of 12.4% compared to the median of 15.3% for
the Selected Printing Companies and 13.1% for the Subset of Selected Printing
Companies. The Company had an operating cash flow margin, operating income
margin and net income margin of 11.4%, 6.9% and 3.2%, respectively, compared to
the median of 14.2%, 8.6% and 4.4%, respectively, for the Selected Printing
Companies and 14.0%, 8.5% and 4.8%, respectively, for the Subset of Selected
Printing Companies. The Company had a price to earnings multiple of 18.9, 17.5
and 16.1 times earnings for the latest twelve months, 1997 and 1998,
respectively, compared to the median of 24.2, 21.3 and 15.3 times, respectively,
for the Selected Printing Companies and 20.4, 18.5 and 15.3 times, respectively,
for the Subset of Selected Printing Companies.
Although Selected Printing Companies were used for comparison purposes,
none of such companies is directly comparable to the Company. Accordingly, an
analysis of the results of such a comparison is not purely mathematical but
involves complex considerations and judgments concerning differences in
historical and projected financial and operating characteristics of the Selected
Printing Companies and other factors that could affect the public trading value
of the Selected Printing Companies or the Company to which they are being
compared.
Comparable Transactions Analysis. Interstate/Johnson Lane reviewed certain
information relating to 12 announced or completed mergers and acquisitions since
August 1, 1993 in which a United States commercial printing company was acquired
or merged into another entity (the "Selected Printing Company Transactions") in
a transaction with a value in excess of $20 million. Such analysis indicated
that the median values of the transaction value to EBIT, to EBITDA and to net
sales for the Selected Printing Company Transactions were 10.3 times, 6.2 times
and 0.7 times, respectively, compared with the multiples of the transaction
value to EBIT, to EBITDA and to net sales of 13.3 times, 8.1 times and 0.9
times, respectively, for the transactions contemplated by the Merger Agreement.
The median values of the transaction equity value to book equity value and to
net income for the Selected Printing Company Transactions were 1.8 times and 9.9
times, respectively, compared to a transaction equity value to book equity value
of 2.7 times and to net income of 21.8 times to be paid pursuant to the
transactions contemplated by the Merger Agreement.
Premiums Paid Analysis. Because of the limited number of recent public
printing company acquisitions, Interstate/Johnson Lane broadened its premiums
paid analysis to include acquisitions of companies in the service and
manufacturing industries which were comparable in transaction size to the price
to be paid pursuant to the Merger. Interstate/Johnson Lane reviewed certain
information relating to 27 announced or completed transactions since September
1, 1995 in which a public company in the service industry was acquired or merged
into another entity (the "Selected Service Company Transactions") in a
transaction with a value between $250 and $500 million. Such analysis indicated
that the median premium paid relative to the seller's stock price 9 months, 6
months, 3 months, 1 month and 1 week prior to the public announcement of the
acquisition of the acquired company (or the acquiror's interest in the
transaction) was 56.3%, 55.7%, 50.8%, 44.5% and 31.9%, respectively, for the
Selected Service Company Transactions compared to the premium to be paid
pursuant to the transactions contemplated by the Merger Agreement, relative to
the Company's stock price 9 months, 6 months, 3 months, 1 month and 1 week prior
to the public announcement of the Offer and the Merger of 130.5%, 90.2%, 64.2%,
34.9% and 19.2%, respectively.
Interstate/Johnson Lane reviewed certain information relating to 28
announced or completed transactions since September 1, 1995 in which a public
company in the manufacturing industry was acquired or merged into another entity
(the "Selected Manufacturing Company Transactions") in a transaction with a
value between $250 and $500 million. Such analysis indicated that the median
premium paid relative to the seller's stock price 9 months, 6 months, 3 months,
1 month and 1 week prior to the public announcement of a possible acquisition of
the acquired company (or the acquiror's interest in the transaction) was 55.1%,
40.5%,
13
<PAGE> 15
37.5%, 34.3% and 33.0%, respectively, for the Selected Manufacturing Company
Transactions compared to the premium to be paid pursuant to the transactions
contemplated by the Merger Agreement, relative to the Company's stock price 9
months, 6 months, 3 months, 1 month and 1 week prior to the public announcement
of the Offer and the Merger of 130.5%, 90.2%, 64.2%, 34.9% and 19.2%,
respectively.
Discounted Cash Flow Analysis. Interstate/Johnson Lane performed a
discounted cash flow analysis to determine a range of present values per share
of the Common Stock assuming the Company made no acquisitions after fiscal year
1998 and was sold at the end of fiscal 2003 (the "Internal Growth Case") or made
$24 million in acquisitions annually in fiscal 1999 through 2003 and was sold at
the end of fiscal 2003 (the "Acquisition Case"). Based on the Company's fiscal
1998 budget and additional information supplied by management, base revenues
(excluding acquisitions) were forecast to increase by 5.0% per year from fiscal
1999 to 2003, and operating margins were forecast to be constant. The
information provided by management assumed that there was no recession affecting
the commercial printing industry from fiscal 1999 to 2003 and that the
acquisitions were financed with debt.
For the terminal values in both cases, Interstate/Johnson Lane assumed that
the Company would be sold at the end of fiscal 2003 at an EBITDA multiple range
consistent with those seen in the Selected Printing Company Transactions and
with the EBITDA multiple to be paid pursuant to the transactions contemplated by
the Merger Agreement, (6.75 to 7.25 times EBITDA). The free cash flow streams
and terminal values were presently valued using a range of discount rates from
11% to 13%.
Applying the above multiples and discount rates, Interstate/Johnson Lane
determined that the value of the Common Stock in the Internal Growth Case ranged
from approximately $16.44 to $20.52 per share, and in the Acquisition Case
ranged from approximately $17.89 to $22.86 per share.
Other Considerations. Interstate/Johnson Lane also considered that the
Company had certain other discussions with prospective acquirors of the Company
over the last 11 months and considered the nature and results of those
discussions as presented by the Company.
The summary set forth above describes the material analyses that
Interstate/Johnson Lane performed, but does not purport to be a complete
description of such analyses or the analyses performed. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or a summary description.
Interstate/Johnson Lane believes that its analyses must be considered as a
whole and that selecting portions of its analyses without considering all
factors and analyses would create an incomplete view of the analyses and
processes underlying its opinion. Interstate/Johnson Lane did not attribute any
particular weight to any analysis or factor considered by it but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. In its analyses, Interstate/Johnson Lane relied upon numerous
assumptions made by the Company with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
control of the Company or Parent. Analyses based on forecasts of future results
are not necessarily indicative of actual values, which may be significantly more
or less favorable than suggested by such analyses. No company or transaction
used as a comparison in the analysis is identical to the Company or to the
transactions contemplated by the Merger Agreement. Additionally, estimates of
the value of businesses do not purport to be appraisals or necessarily
reflective of the prices at which businesses actually may be sold. Because such
estimates are inherently subject to uncertainty, Interstate/Johnson Lane does
not assume responsibility for the accuracy of such estimates. Interstate/
Johnson Lane's analyses were prepared solely for purposes of its opinion
rendered to the Company's Board of Directors regarding the fairness of the
proposed consideration to be received by holders of Shares pursuant to the
transactions contemplated by the Merger Agreement and do not purport to be
appraisals or necessarily reflect the prices at which the Company or Shares
actually may be sold.
For the services of Interstate/Johnson Lane as financial advisor to the
Company in connection with the Offer and the Merger, Interstate/Johnson Lane
will receive a fee of $275,000, of which $100,000 has been paid. No portion of
Interstate/Johnson Lane's fee is contingent upon the consummation of the Offer
or the closing of the Merger. In addition, the Company has agreed to reimburse
Interstate/Johnson Lane for its
14
<PAGE> 16
reasonable out-of-pocket expenses incurred in connection with the Offer and the
Merger, but not to exceed $10,000, and to indemnify Interstate/Johnson Lane
against certain liabilities, including certain liabilities arising under the
federal securities laws.
Interstate/Johnson Lane has advised the Company that, in the ordinary
course of its business as a full-service securities firm, Interstate/Johnson
Lane may, subject to certain restrictions, actively trade the equity or debt
securities of the Company or of Parent for its own account or for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On January 15, 1997, the Company engaged Wareham Company as a financial
advisor to the Company in connection with the possible sale of ITS and the
possible acquisition or merger of the Company. Pursuant to the engagement, the
Company agreed to pay to Wareham Company an initial advisory fee of $25,000 for
services related to the possible sale of ITS and $25,000 for services related to
the possible acquisition or merger of the Company and a final advisory fee of
$540,000 payable as a result of the Offer. In addition, the Company agreed to
indemnify Wareham Company against certain liabilities arising out of or in
connection with its engagement.
On August 29, 1997, the Company engaged Interstate/Johnson Lane to render
an opinion with respect to the fairness, from a financial point of view, of the
consideration to be received by the Company's stockholders in a possible
acquisition transaction with Parent. Pursuant to the engagement, the Company
agreed to pay to Interstate/Johnson Lane a total fee of $275,00 upon delivery of
the original opinion and the updated opinion regardless of the conclusion
reached in such opinions. In addition, the Company agreed to reimburse
Interstate/Johnson Lane for out-of-pocket expenses incurred in connection with
its engagement up to $10,000 and to indemnify Interstate/Johnson Lane against
certain liabilities, including certain liabilities arising under the federal
securities laws.
On September 25, 1997, the Company engaged Croft & Bender LLC to render an
opinion with respect to the fairness, from a financial point of view, of the
consideration to be received by the Company in connection with the proposed sale
of ITS to Carter D. Pope. Pursuant to the engagement, the Company agreed to pay
to Croft & Bender LLC a fee of $25,000 upon delivery of the opinion regardless
of the conclusion reached in such opinion, to reimburse Croft & Bender LLC for
out-of-pocket expenses incurred in connection with its engagement, and to
indemnify Croft & Bender LLC against certain liabilities arising out of or in
connection with its engagement.
Neither the Company nor, to the best of the Company's knowledge, any person
acting on its behalf intends to employ, retain or compensate any person to make
solicitations or recommendations to stockholders in connection with the Offer.
ITEM 6. RECENT TRANSACTIONS.
(a) (i) On August 4, 1997, Mr. Pope purchased 1,250 Shares at a price of
$15.00 per share.
(ii) On August 11, 1997, Martin C. Kendall, Vice President and Chief
Financial Officer of the Company, sold 2,633 Shares at a price of $15.00
per share.
(iii) On August 26, 1997, Jeffery Glover, a Vice President of the
Company, purchased 5,000 Shares at a price of $18.25 per share.
(iv) On September 26, 1997, Jim R. Tidwell, a Vice President of the
Company, purchased 5,000 Shares at a price of $18.80 per share.
(v) On October 3, 1997, Mr. Pope (a) transferred 25,000 Class B Shares
to each of his four children as gifts, (b) transferred 75,000 Class B
Shares to the Mark C. Pope, III Irrevocable Insurance Trust, and (c)
transferred 1,621,622 Class B Shares to Pope Family Partners, L.P.
15
<PAGE> 17
(vi) On October 7, 1997, Mr. Pope transferred a total of 31,000 Shares
to children, grandchildren, and certain other family members, as gifts.
(b) To the best knowledge of the Company, each of the Company's executive
officers, directors and affiliates presently intends to tender the Shares held
by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in Items 2 and 3(b) hereof, no negotiation is
underway or is being undertaken by the Company in response to the Offer which
relates to or could result in: (i) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any of its subsidiaries; (ii)
a purchase, sale or transfer of a material amount of assets by the Company or
any of its subsidiaries; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Items 3(b) and 4 hereof, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer, which relate to or would result in one or more of the
matters referred to in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The updated opinion of Interstate/Johnson Lane, dated October 12, 1997, is
attached hereto as Annex A and incorporated by reference herein.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
Exhibit 1 -- Offer to Purchase of Greenwich Acquisition Corp. dated
October 3, 1997 and related Letter of Transmittal.(1)
Exhibit 2 -- Agreement and Plan of Merger dated as of September 28, 1997
among the Company, Wallace Computer Services, Inc. and
Greenwich Acquisition Corp.(1)
Exhibit 3 -- Stockholder Agreement dated as of September 28, 1997 among
Wallace Computer Services, Inc., Greenwich Acquisition Corp.
and Mark C. Pope III.(1)
Exhibit 4 -- Pages 6 through 11 of the Proxy Statement of the Company
dated May 2, 1997.(1)
Exhibit 5 -- Stock Purchase Agreement dated as of September 28, 1997
between the Company and Carter D. Pope.(1)
Exhibit 6 -- Form of Indemnification Agreement between the Company and
its directors and officers.(1)
Exhibit 7 -- Opinion of Croft & Bender LLC dated September 28, 1997.(1)
Exhibit 8 -- Letter to stockholders of the Company dated October 3,
1997.(1)
Exhibit 9 -- Letter to holders of Class B Common Stock of the Company
dated October 3, 1997 accompanied by a Conversion and Tender
Request.(1)
Exhibit 10 -- Opinion of Interstate/Johnson Lane dated September 28,
1997.(1)
Exhibit 11 -- Supplement to Offer to Purchase of Greenwich Acquisition
Corp. dated October 17, 1997 and revised Letter of
Transmittal.
Exhibit 12 -- Amended and Restated Agreement and Plan of Merger dated as
of October 12, 1997 among the Company, Wallace Computer
Services, Inc. and Greenwich Acquisition Corp.
Exhibit 13 -- Amended and Restated Stockholder Agreement dated as of
October 12, 1997 among Wallace Computer Services, Inc.,
Greenwich Acquisition Corp. and Mark C. Pope, III.
</TABLE>
16
<PAGE> 18
Exhibit 14 -- Press release issued by the Company and Wallace Computer
Services, Inc. on October 12, 1997.
Exhibit 15 -- Letter to Stockholders of the Company dated October 17,
1997.(2)
Exhibit 16 -- Letter to holders of Class B Common Stock of the Company
dated October 17, 1997 accompanied by Conversion and Tender
Request.(3)
Exhibit 17 -- Updated Opinion of Interstate/Johnson Lane dated October 12,
1997.(4)
- -------------------------
(1) Previously filed.
(2) Included in copies mailed to stockholders.
(3) Will be mailed to holders of Class B Common Stock of the Company only.
(4) Included as Annex A hereto.
17
<PAGE> 19
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 17, 1997
By: /s/ Mark C. Pope III
------------------------------------
Mark C. Pope III
Chairman of the Board, President and
Chief Executive Officer
18
<PAGE> 20
ANNEX A
[INTERSTATE/JOHNSON LANE LETTERHEAD]
October 12, 1997
Board of Directors
Graphic Industries, Inc.
2155 Monroe Drive, NE
Atlanta, Georgia 30324
Gentlemen:
You have requested an update to our opinion dated September 28, 1997 as to
the fairness, from a financial point of view, to the holders of the outstanding
common stock of Graphic Industries, Inc. ("Graphic Industries") of the
consideration to be received in the proposed tender offer (the "Offer") by
Greenwich Acquisition Corporation ("Greenwich"), a Georgia corporation and
wholly owned subsidiary of Wallace Computer Services, Inc. ("Wallace"), for all
of the outstanding common stock of Graphic Industries and the merger of
Greenwich with and into Graphic Industries (the "Merger"). The Offer and the
Merger will be effected pursuant to the terms and conditions set forth in the
Amended and Restated Agreement and Plan of Merger among Wallace, Greenwich, and
Graphic Industries dated as of October 12, 1997 (the "Agreement").
In arriving at our updated opinion, we, among other things, (i) reviewed
the October 12, 1997 draft of the Agreement; (ii) reviewed annual audited
financial statements for Graphic Industries and Wallace for the prior three
fiscal years, interim unaudited financial statements through April 30, 1997 for
Wallace and interim unaudited financial statements through July 31, 1997 for
Graphic Industries; (iii) reviewed publicly available information including
recent Securities and Exchange Commission ("SEC") filings and stockholder
communication for Graphic Industries and for Wallace, respectively; (iv) met
with members of the senior management of Graphic Industries to discuss its
business, financial condition, operating results, and projections; (v) compared
certain financial and stock market data for Graphic Industries with similar data
for selected publicly held commercial printing companies; (vi) reviewed the
financial terms of certain recent business combinations in the printing
industry; (vii) reviewed premiums paid historically for certain other publicly
traded companies deemed relevant; (viii) reviewed historical market price,
volume data, and dividend history for the common stock of Graphic Industries
compared with comparable companies; (ix) reviewed a discounted cash flow
analysis for Graphic Industries; (x) reviewed published research reports and
investment opinions on Graphic Industries and the commercial printing industry;
and (xi) performed such other financial studies and analyses as we deemed
appropriate. We were not requested to and did not solicit the interest of third
parties in submitting a competing offer for the acquisition of Graphic
Industries.
In rendering this opinion, we have relied upon the accuracy and
completeness of all financial and other information furnished to us by or on
behalf of Graphic Industries, and others, including published information that
we considered in our review. We were not requested to and generally have not
undertaken to verify independently the accuracy and completeness of such
information. We have relied upon the reasonableness of all projections and
forecasts provided to us by the management of Graphic Industries and have
assumed the attainability of such results and that they were prepared in
accordance with accepted practice on bases reflecting the best currently
available estimates and good faith judgments of Graphic Industries' management.
We have not independently verified any such information. Our opinion herein is
based upon the economic, monetary and market and other conditions and
circumstances existing and known to us as of the date hereof and we have assumed
that there have been no material changes in the assets, financial condition,
results of operation, business or prospects of Graphic Industries since the date
of the most recent financial statements
A-1
<PAGE> 21
made available to us. We have not made or considered any independent evaluations
or appraisals of the assets or liabilities (contingent or otherwise) of either
Graphic Industries or Wallace. Consequently, we do not express any opinion
regarding the value of any of Graphic Industries' or Wallace's specific
individual assets. We were not requested to, and therefore did not, participate
in the structuring or negotiating of the Offer or the Merger.
Interstate/Johnson Lane Corporation, as part of its investment banking
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Pursuant to
our engagement in connection with this fairness opinion, we will receive a fee
for our services in rendering said opinion.
The opinion expressed herein is provided to the Graphic Industries Board of
Directors and does not constitute a recommendation to any stockholder of Graphic
Industries as whether to tender shares pursuant to the Offer or as to how any
such stockholder should vote on the Merger. The opinion, and any supporting
analysis or other material supplied by us may not be quoted, referred to, or
used in any public filing or in any written document without the prior written
approval of Interstate/Johnson Lane Corporation; provided that we hereby consent
to the inclusion of this letter as an attachment to the amended Schedule 14D-9
of Graphic Industries relating to the Offer and the Merger or as an attachment
to the Proxy Statement to be filed with the SEC by Graphic Industries and to be
submitted to the stockholders of Graphic Industries in connection with the Offer
and the Merger.
Based upon the foregoing considerations and our review and analysis, it is
our opinion that as of the date hereof the consideration to be received by the
common stockholders of Graphic Industries in the Offer and the Merger is fair,
from a financial point of view, to the common stockholders of Graphic
Industries.
Sincerely,
/s/INTERSTATE/JOHNSON LANE CORPORATION
- --------------------------------------
INTERSTATE/JOHNSON LANE CORPORATION
A-2
<PAGE> 22
GRAPHIC INDUSTRIES, INC.
2155 MONROE DRIVE, N.E.
ATLANTA, GEORGIA 30324
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
October 17, 1997
This information is being furnished by Graphic Industries, Inc., a Georgia
corporation (the "Company"), to its stockholders in connection with the possible
designation by Wallace Computer Services, Inc., a Delaware corporation
("Parent"), pursuant to the Amended and Restated Agreement and Plan of Merger
dated as of October 12, 1997 (the "Merger Agreement") among the Company, Parent
and Greenwich Acquisition Corp., a Georgia corporation (the "Offeror") and a
wholly-owned subsidiary of Parent, of persons to be elected to the Board of
Directors of the Company other than at a meeting of the Company's stockholders.
Pursuant to the Merger Agreement, the Offeror commenced a tender offer (the
"Offer") disclosed in the Tender Offer Statement on Schedule 14D-1 dated October
3, 1997 as amended and supplemented by Amendment No. 1 to the Tender Offer
Statement on Schedule 14D-1 dated October 17, 1997. The terms and conditions of
the Offer are set forth in the Offer to Purchase dated October 3, 1997 (the
"Offer to Purchase"), the Supplement to the Offer to Purchase dated October 17,
1997 (the "Supplement") and related Letter of Transmittal, which are being
mailed by the Offeror to the Company's stockholders concurrently herewith. The
Merger Agreement also provides, among other things, for the merger (the
"Merger") of the Offeror into the Company, with the Company surviving as a
wholly-owned subsidiary of Parent, as more fully described in the Offer to
Purchase and in the Company's Amendment No. 1 to Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") being mailed to the Company's
stockholders concurrently herewith.
The Company had 8,097,472 shares of Common Stock, $.10 par value per share
("Common Stock") and 4,518,817 shares of Class B Common Stock, $.10 par value
per share ("Class B Stock") outstanding as of October 12, 1997.
THE BOARD OF DIRECTORS
AND EXECUTIVE OFFICERS
OF THE COMPANY
GENERAL
The Board of Directors of the Company presently consists of nine members.
The current terms of all existing directors expire upon the election and
qualification of the directors to be elected at the next annual meeting of
stockholders.
Pursuant to the Company's Articles of Incorporation, each share of Common
Stock is entitled to one vote and each share of Class B Stock is entitled to 10
votes. With respect to the election of directors, if, on the record date for the
determination of stockholders entitled to vote on directors, the number of
outstanding shares of Class B Stock is less than 12.5% of the total number of
shares outstanding, the holders of the Common Stock, voting as a class, shall
elect a number of directors equal to 25% (rounded up to the nearest whole
number) of the Board of Directors and the holders of the Common Stock and Class
B Stock, voting together as a single class, shall elect the remaining directors.
If on such record date the number of outstanding shares of Class B Stock is
greater than 12.5% of the total number of shares outstanding, the holders of the
Common Stock, voting as a class, shall elect a number of directors equal to 25%
(rounded up to the nearest whole number) of the Board of Directors and the
holders of the Class B Stock, voting as a class, shall elect the remaining
directors. As of September 26, 1997, the outstanding Class B Stock represented
approximately 36% of the total shares outstanding.
The Merger Agreement provides that promptly after such time as the Offeror
acquires a majority of the combined voting power of the shares of Common Stock
and Class B Stock, the Offeror shall be entitled to
<PAGE> 23
designate at its option up to that number of directors of the Company's Board of
Directors as will give the Offeror a majority of such directors and the Company
shall, at such time, cause the Offeror's designees to be so elected by its
existing Board of Directors.
The Offeror has informed the Company that in the event the Offeror acquires
a majority of the voting power of the outstanding Common Stock and the Class B
Stock, Offeror will request the Company to take all necessary action to decrease
the number of members of the Board to seven and to elect Robert J. Cronin,
Michael T. Leatherman, Michael J. Halloran and Michael O. Duffield to the Board
of Directors of the Company. The Company intends to request that Ralph N.
Strayhorn, Jr., Warren E. Andrews and Leo Benatar serve as the three continuing
directors.
Information concerning the Offeror's director designees is set forth on
Attachment 1 hereto. To the best knowledge of the Company, none of such
designees beneficially owns any equity securities of the Company.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares and percentage of the
outstanding shares of Common Stock beneficially owned by (i) each director, (ii)
each executive officer named in the executive compensation tables set forth
herein, (iii) each person known by management of the Company to own beneficially
more than 5% of any class of the Company's voting securities and (iv) all
directors and executive officers as a group, as of October 15, 1997, unless
otherwise indicated. An asterisk indicates ownership of less than 1% of the
class of Common Stock.
OWNERSHIP OF SHARES
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------------------------------
SOLE SHARED
VOTING OR VOTING OR ATTRIBUTED
NAME OF INVESTMENT INVESTMENT BENEFICIAL PERCENT
BENEFICIAL OWNER POWER POWER OWNERSHIP OF CLASS(1)
---------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Mark C. Pope III 841,510(2) 0(3) 75,100(4) 11.3%(2)(3)(4)
William A. Wood, Jr. 8,500 0 0 *
John R. Pope 60,701 0(3) 0 *(5)
Leo Benatar 3,000 0 0 *
Ralph N. Strayhorn, Jr. 7,830 0 1,860(6) *
Warren E. Andrews 0 22,500(7) 0 *
Carter D. Pope 202,016 0 0 2.5(5)
Alvan A. Herring, Jr. 47,630 0 0 *
James A. Hatcher 0 0(3) 118,150(8) 1.5(3)(5)(8)
David S. Fraser(9) 6,167 0 0 *
Donald S. Forshay 6,833 0 0 *
Ellis T. Alexander(10) 500 0 0 *
FMR Corp. (Fidelity Investments) 589,000(11) 0 0 7.3
All directors and executive
officers as a group (16 persons) 1,216,274(2) 22,500(3) 204,129 17.8(12)
</TABLE>
- -------------------------
(1) Calculated by taking into account all shares as to which the indicated
person or group has sole or shared voting or investment power or attributed
beneficial ownership, but without regard to the shares of Common Stock
issuable upon conversion of either (i) shares of Class B Stock held by that
person or group or (ii) any of the Company's Convertible Debentures, and
without regard to the disclaimers of beneficial ownership referred to in
Notes (3), (4), and (7) of this table.
(2) Does not include (i) 2,681,470 shares of Class B Stock (59.3% of the Class
B Stock outstanding as of the October 15, 1997) held by Mr. Pope, and (ii)
1,621,622 shares of Class B Stock (35.9% of the Class B Stock outstanding
as of October 15, 1997) held by Pope Family Partners L.P. of which Mr. Pope
is the sole General Partner, each of which is convertible at the option of
the holder into one
2
<PAGE> 24
share of Common Stock. If these shares of Class B Stock were included, Mr.
Pope's Percent of Class of Common Stock would be 41.5%.
(3) Does not include an aggregate of 12,308 shares of Common Stock issuable
upon conversion of $200,000 face value of the Company's Convertible
Debentures held by the Betty Williams Marital Trust. Mr. Pope, Mr. J. Pope
and Mr. Hatcher's spouse are the co-trustees of the trust. Mr. Pope, Mr. J.
Pope and Mr. Hatcher disclaim beneficial ownership of the shares held by
the Betty Williams Marital Trust.
(4) Mr. Pope disclaims beneficial ownership of the indicated shares, which are
beneficially owned, controlled and held of record by his spouse and by the
Betty Williams Marital Trust.
(5) Does not include 25,000 shares of Class B Stock held by each of John R.
Pope, Carter D. Pope and the spouse of James A. Hatcher, each of which is
convertible at the option of the holder into one share of Common Stock. If
these shares of Class B Stock were included, their Percent of Class of
Common Stock would be 1.1%, 2.8% and 1.8%, respectively.
(6) Mr. Strayhorn disclaims beneficial ownership of the indicated shares, which
are beneficially owned, controlled and held of record by his spouse.
(7) Jointly owned with Mr. Andrews' spouse, with whom he shares voting and
investment power.
(8) The indicated shares are beneficially owned, controlled and held of record
by Mr. Hatcher's spouse.
(9) Mr. Fraser resigned from the position as Chief Financial Officer and
Treasurer of the Company as of June 30, 1997.
(10) Mr. Alexander resigned from his position as a Vice President of the Company
as of September 19, 1997.
(11) The indicated shares are controlled by FMR Corp. ("FMR") through certain of
its affiliates and subsidiaries in their capacities as investment advisers
to various funds. Edward C. Johnson 3d and Abigail P. Johnson, together
with other members of their family and trusts for their benefit, may be
deemed to control FMR and may therefore be deemed to beneficially own the
indicated shares. Each of FMR and Edward and Abigail Johnson has the
authority to dispose of all of the indicated shares. The foregoing
information is based solely on a Report on Schedule 13G filed with the
Securities and Exchange Commission and the Company. The address of FMR and
Edward and Abigail Johnson is 82 Devonshire Street, Boston, Massachusetts
02109.
(12) If the shares of Common Stock issuable upon conversion of the Class B Stock
referenced in Note (2) and Note (5) and the shares of Common Stock issuable
upon conversion of the Convertible Debentures referenced in Note (3) to
this table were included, the group's Percent of Class of Common Stock
would be 46.7%.
CURRENT DIRECTORS
The following table sets forth for each current director of the Company
(based upon information supplied by him) his name, age, positions with the
Company, principal occupation and business experience for the past five years
and prior service as a director of the Company.
<TABLE>
<CAPTION>
POSITION WITH COMPANY,
PRINCIPAL OCCUPATION,
BUSINESS EXPERIENCE, DIRECTOR
NAME OTHER DIRECTORSHIPS AGE SINCE
---- ---------------------- --- --------
<S> <C> <C> <C>
Mark C. Pope III(1) Chairman of the Board and Chief Executive Officer 72 1970
of Graphic Industries since 1970; President of
Graphic Industries, 1970-1989
William A. Wood, Jr. Former Vice President of Graphic Industries, 78 1978
1986-1996; President of The Stein Printing
Company, Inc., 1978-1986(2)
John R. Pope(1) President of Williams Printing Company since 1990; 53 1970
Executive Vice President of Williams Printing
Company, 1989-1990; Vice President -- Sales of
Williams Printing Company, 1969-1989(2)
</TABLE>
3
<PAGE> 25
<TABLE>
<CAPTION>
POSITION WITH COMPANY,
PRINCIPAL OCCUPATION,
BUSINESS EXPERIENCE, DIRECTOR
NAME OTHER DIRECTORSHIPS AGE SINCE
---- ---------------------- --- --------
<S> <C> <C> <C>
Carter D. Pope(1) President of Imaging Technologies Services, Inc. 41 1988
since 1995; President of Atlanta Blue Print Co.
since 1989; Executive Vice President of Atlanta
Blue Print Co., 1987-1989; Vice President of
Atlanta Blue Print Co., 1986-1987; Salesman, The
Stein Printing Company, 1982-1986(2)
Alvan A. Herring, Jr. Vice President of Graphic Industries since 1990; 54 1990
President of Foote & Davies, 1989-1990 (commercial
printers); Senior Vice President of Foote &
Davies, 1982-1989
James A. Hatcher(1) Vice President and General Counsel of Cox Cable 45 1992
Communications, Inc., since 1992; Secretary and
General Counsel of Cox Enterprises, Inc.,
1988-1992; Secretary of various subsidiaries of
Cox Enterprises, Inc. 1988-1992
Leo Benatar Senior Partner and Associated Consultant of A.T. 67 1997
Kearney, Inc.; Senior Vice President of Sonoco
Products Company 1993-1996; Chairman and CEO of
Engraph, Inc., 1981-1995; Chairman of Engraph,
Inc., 1995-1996 (manufacturer of packaging and
product identification materials); Aaron Rents,
Inc. (a furniture and appliance retailer);
Interstate Bakeries Corporation (baker and
distributor of fresh bakery products); Mohawk
Industries, Inc. (carpet manufacturer); Paxar
Corporation (apparel systems and identification
products); and Schuller Corporation (manufacturer
of insulation and building products)
Ralph N. Strayhorn, Jr. Of Counsel to Kilpatrick Stockton LLP (formerly 74 1984
Petree Stockton) since 1988; General Counsel and
Secretary of The Wachovia Corporation and Wachovia
Bank and Trust Company, N.A., 1978-1988
Warren E. Andrews Chairman of the Board of W. E. Andrews Co., Inc., 76 1984
1952-1989 (acquired by Graphic Industries in
1984)(2)
</TABLE>
DIRECTORS FEES AND ATTENDANCE
Members of the Board of Directors of the Company who are not officers of
the Company or any of its subsidiaries receive annual directors' fees of $5,000,
plus $350 for each meeting of the Board or the Audit Committee attended and
reimbursement for travel expenses. Directors who are officers of the Company or
any of its subsidiaries receive $150 for each Board meeting attended and are
reimbursed for travel expenses. For meetings held during fiscal 1997,
non-officer directors received total fees as follows: Mr. Strayhorn and Clifford
Kirtland (formerly a member of the Board of Directors), as members of the Board
of Directors and the Audit Committee, received total fees of $7,100 each,
Messrs. Andrews and Hatcher received total fees of $6,400 each. Mr. Pope, Mr.
Pope IV(3), Mr. Wood, Mr. J. Pope, Mr. C. Pope and Mr. Herring, directors who
are also officers, received total fees of $600 each.
- -------------------------
(1) John R. Pope and Carter D. Pope are sons and Mr. Hatcher is the son-in-law
of Mark C. Pope III.
(2) Imaging Technologies Services, Inc., Atlanta Blue Print Co., Williams
Printing Company, The Stein Printing Company, Inc. and W. E. Andrews Co.,
Inc. are wholly-owned subsidiaries of the Company.
(3) Mark C. Pope, IV resigned from his position as a director and officer of the
Company as of September 12, 1996.
4
<PAGE> 26
CERTAIN TRANSACTIONS
Certain of the Company's executive officers and directors have participated
in transactions between the Company and entities in which they have a material
interest. See "Compensation Committee Interlocks and Insider Participation" for
a description of these transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Pope is an executive officer of the Company and also serves on its
Executive Committee, which determines executive officers' salary and bonuses.
Mr. Andrews and Mr. Wood serve on the Stock Option Committee, which awards
compensation in the form of stock options to executive officers and other
employees of the Company.
MEETINGS AND COMMITTEES
During fiscal 1997, the Board of Directors met four times and did not have
a nominating or compensation committee. The Executive Committee of the Board of
Directors, which consists of Mr. Pope, Mr. C. Pope, Mr. J. Pope and Mr.
Strayhorn determines salary and bonus compensation for the Company's executive
officers. The Executive Committee met 12 times during fiscal 1997. The Stock
Option Committee, which consists of Messrs. Wood and Andrews, determined stock
option awards for all executive officers and other key associates of the
Company. The Stock Option Committee met four times during fiscal 1997. The Audit
Committee met two times during fiscal 1997 and consisted of Messrs. Kirtland,
Strayhorn and Pope IV(1). The Audit Committee is responsible for reviewing and
making recommendations regarding the Company's employment of independent
auditors, the annual audit of the Company's financial statements and the
Company's internal accounting practices and policies. Each director of the
Company attended at least 75% of the meetings of the Board of Directors and the
committees of which he was a member.
CURRENT EXECUTIVE OFFICERS
Officers are elected annually and serve at the discretion of the Board of
Directors. In addition to Mr. Pope and Mr. Herring, the current executive
officers of the Company are as follows:
<TABLE>
<CAPTION>
POSITION WITH COMPANY, PRINCIPAL OCCUPATION,
NAME BUSINESS EXPERIENCE, OTHER DIRECTORSHIPS AGE
---- -------------------------------------------- ---
<S> <C> <C>
Joseph A. Fasolo Vice President of Graphic Industries since 1994; President 55
of Baum Printing, Inc. 1988-1996(2)
Jim R. Tidwell Vice President of Graphic Industries since 1993; President 57
of Craftsman Printing Company since 1993; President of
Heritage Press, Inc. 1991-93; President of Wetmore & Company
1988-91(2)
Donald S. Forshay Vice President-Sales & Marketing of Graphic Industries since 51
1996; Vice President-Sales & Marketing of Custom Printing
Co. 1995-1996; and Vice President Sales & Marketing Hart
Graphics Co. 1989-1995
Jeffery Glover Vice President of Graphic Industries since 1996; President 38
of Wetmore & Company since 1993; and Executive Vice
President Wetmore & Company 1991-1993(2)
Martin C. Kendall Vice President and Chief Financial Officer since 1997; 45
Director of Acquisitions 1989-1997
Donald P. Hunnicutt, Sr. Secretary of Graphic Industries since 1987; Controller of 53
Graphic Industries 1983-1987
</TABLE>
- -------------------------
(1) Mark C. Pope, IV resigned from his position as a director and officer of the
Company as of September 12, 1996.
(2) Baum Printing, Inc., Craftsman Printing Company, Heritage Press, Inc., The
Stein Printing Company, Inc., Wetmore & Company and Williams Printing
Company are wholly-owned subsidiaries of the Company.
5
<PAGE> 27
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and greater than 10%
shareholders ("Reporting Persons") to file certain reports ("Section Reports")
with respect to beneficial ownership of the Company's equity securities. Based
solely on a review of the Section Reports filed by Reporting Persons with
respect to fiscal year ended January 31, 1997, all filing requirements
applicable to Reporting Persons have been complied with.
EXECUTIVE COMPENSATION
The Company has no standing compensation committee; however, the Executive
Committee of the Board of Directors determines salary and bonus compensation for
all executive officers of the Company and the Stock Option Committee determines
stock option awards for all executive officers and other key associates of the
Company. The Executive Committee is composed of Mark C. Pope III, Chairman of
the Board and CEO, Mr. Carter D. Pope, Mr. John R. Pope and Mr. Ralph W.
Strayhorn, Jr. directors of the Company. The Stock Option Committee is composed
of Mr. William A. Wood, Jr. and Mr. Warren E. Andrews, directors of the Company.
COMPENSATION REPORT OF THE EXECUTIVE AND STOCK OPTION COMMITTEES OF THE BOARD OF
DIRECTORS OF THE COMPANY.
The Company seeks to attract and retain key executives who will assist the
Company in meeting its annual and long-term sales and profit goals, thereby
serving the interest of the Company's Shareholders. The elements of the
Company's executive compensation are annual cash compensation (salary and
bonuses) and stock options. The Executive Committee believes that the demands
and expectations of clients and the Company warrant better than median levels of
compensation. The Company's compensation practices are designed to achieve the
following goals:
1. Provide salaries that are competitive with those paid to executives in
similar positions at private and public companies in each of the
Company's key market areas.
2. Create a link between the executive's compensation and the Company's
performance through stock options and bonus opportunities.
3. Align the financial interest of the executives with that of the
shareholders by means of stock options and bonus opportunities in order
to increase shareholder value.
The cash compensation of executive officers (including the CEO) is reviewed
annually and adjustments are considered in view of the Executive Committee's
assessment of (1) the Company's sales, profit and stock price performance; (2)
the executive officers' individual leadership and experience; and (3)
compensation levels of executives in similar positions at private and public
companies in each of the Company's key market areas. Stock options are granted
from time to time to provide incentives to executives to work toward financial
objectives that support total shareholder returns in the form of market price
appreciation and dividends. The Company's Named Executive Officers received
options in fiscal 1997 to provide such an incentive.
The Company provides medical and other similar benefits to its executive
officers on the same basis as made available to other employees of the Company.
Mr. Wood and Mr. Andrews cannot receive any stock options under the
Company's 1988 Incentive Stock Option Plan, 1991 Stock Option Plan or 1995 Stock
Option Plan because Mr. Wood and Mr. Andrews serve on the committee
administering the Company's Stock Option Plans and must remain "disinterested"
under applicable securities laws and rules.
Submitted by the members of the Executive Committee and the Stock Option
Committee of The Board of Directors of Graphic Industries, Inc.
MARK C. POPE III
RALPH N. STRAYHORN, JR.
CARTER D. POPE
WILLIAM A. WOOD, JR.
JOHN R. POPE
WARREN E. ANDREWS
6
<PAGE> 28
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock with the
cumulative total return of the S&P 500 Stock Index and the cumulative total
return for the Company's peer group for the period of five years commencing on
January 31, 1992 and ending on January 31, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG GRAPHIC INDUSTRIES, INC.,
THE S&P 500 INDEX, AND THE COMPANY'S PEER GROUP**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THE COMPANY S&P 500 PEER GROUP
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1/92 100.00 100.00 100.00
1/93 140.00 111.00 109.00
1/94 143.00 125.00 129.00
1/95 178.00 125.00 123.00
1/96 196.00 174.00 148.00
1/97 181.00 220.00 152.00
</TABLE>
* Assumes $100 invested on January 31, 1992 in Graphic Industries, Inc. the S&P
500 Stock Index and a Peer Group constructed by the Company. Total return
assumes reinvestment of dividends.
** The Company's Peer Group is comprised of fourteen publicly-held printing
companies with operations in the commercial printing industry similar to
those of the Company. The companies in the peer group are: Banta Corp., Bowne
& Co. Inc., Cadmus Communications Corp., Consolidated Graphics, Inc., Courier
Corp., Devon Group, Inc., R.R. Donnelley & Sons Co., Merrill Corp., Moore
Ltd., Quebecor, Inc. World Color Press, Inc., Mail-Well, Inc., Valassis
Communications, Inc., Big Flower Press Holdings, Inc.
7
<PAGE> 29
EXECUTIVE COMPENSATION TABLES
The following tables set forth certain information required by the
Securities and Exchange Commission relating to various forms of compensation of
certain executive officers (the "Named Executive Officers") of the Company with
respect to the periods presented.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------------
----------------------------------------
--------------------------------------------------------------------------------
AWARDS PAYOUTS
--------------------------------------------------------------------------------
RESTRICTED LONG-TERM
OTHER ANNUAL STOCK OPTIONS/ INCENTIVE PLAN
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS
POSITION YEAR ($) ($) (1995 AND 1996) ($) (#)(1) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark C. Pope III 1997 $323,900 0 0 0 25,000 0
Chairman & CEO 1996 $354,967 0 0 0 0 0
1995 $348,000 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Alvan A. Herring, 1997 $271,557 0 0 0 0 0
Jr.
Vice President 1996 $263,350 0 0 0 12,000 0
1995 $225,500 0 0 0 7,500 0
- ------------------------------------------------------------------------------------------------------------------
Donald S. Forshay 1997 $207,702 0 0 0 0 0
Vice President- 1996 (3) -- -- -- -- --
Marketing 1995 (3) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Ellis T. 1997 $194,312 0 0 0 0 0
Alexander(4)
Vice President 1996 (3) -- -- -- -- --
1995 (3) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
David S. Fraser(5) 1997 $163,783 0 0 0 0 0
CFO & Treasurer 1996 $145,750 0 0 0 14,000 0
1995 $101,596 0 0 0 13,000 0
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------- ------------------
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL (1994 AND 1995)
POSITION ($)
- ---------------------- ------------------
<S> <C>
Mark C. Pope III $3,000(2)
Chairman & CEO 3,000(2)
3,000(2)
- ----------------------
Alvan A. Herring, $3,000(2)
Jr.
Vice President 3,000(2)
3,000(2)
- ----------------------
Donald S. Forshay $2,943(2)
Vice President- --
Marketing --
- ----------------------
Ellis T. $3,000(2)
Alexander(4)
Vice President --
- ----------------------
David S. Fraser(5) $3,000(2)
CFO & Treasurer 1,500(2)
0
- ----------------------
</TABLE>
(1) Options granted in fiscal 1995 were granted pursuant to the Graphic
Industries, Inc. 1991 Stock Option Plan. Options granted in fiscal 1996 and
fiscal 1997 were granted pursuant to the Graphic Industries, Inc. 1995 Stock
Option Plan.
(2) These amounts represent the Company's matching contributions to the named
executives' 401(k) accounts, under the Company's Profit Sharing Plan, during
the indicated years.
(3) The indicated persons were not executive officers of the Company in fiscal
years 1995 and 1996.
(4) Mr. Alexander resigned from his position as a Vice President of the Company
as of September 19, 1997.
(5) Mr. Fraser resigned from his position as Chief Financial Officer and
Treasurer of the Company as of June 30, 1997.
8
<PAGE> 30
FISCAL 1997 OPTION GRANTS
This table presents information regarding fiscal 1997 option grants to the
Named Executive Officers. The Company has no outstanding stock appreciation
rights and granted no stock appreciation rights during fiscal 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN FISCAL 1997
- -------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- -------------------------------------------------------------------------------------------------------------------
% OF TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR(3) ($/SH) DATE ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Pope III 8,333(1) 10.75% 9.08 7/31/97 9,666 13,749
8,333(1) 10.75% 9.08 7/31/98 9,666 13,749
8,334(1) 10.75% 9.08 7/31/99 9,667 13,751
Mr. Herring -- -- -- -- -- --
== == == == == ==
Mr. Forshay 3,333(2) 4.3% 8.75 7/31/97 4,966 6,599
3,333(2) 4.3% 8.75 7/31/98 4,966 6,599
3,334(2) 4.3% 8.75 7/31/99 4,968 6,601
Mr. Alexander(4) -- -- -- -- -- --
== == == == == ==
Mr. Fraser(5) -- -- -- -- -- --
== == == == == ==
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These stock options were granted on July 24, 1997 at an exercise price equal
to the then current fair market value of the Common Stock, plus 10%,
pursuant to the Graphic Industries, Inc. 1995 Stock Option Plan. Mr. Pope's
options vest in one third annual installments beginning on July 1, 1997.
Upon a merger, consolidation or other reorganization of the Company
involving the exchange, conversion, adjustment or other modification of
outstanding options, optionees will be entitled to receive shares of stock,
other securities or other property to which terms of the agreement of
merger, consolidation or other reorganization would entitle the optionee to
receive had he been a holder of record of the shares of Common Stock as to
which he could exercise the option.
(2) These stock options were granted on June 27, 1996 at an exercise price equal
to the current fair market value of the Common Stock pursuant to the Graphic
Industries, Inc. 1995 Stock Option Plan. Mr. Forshay's options vest in one
third annual installments beginning on July 1, 1997. Upon a merger,
consolidation or other reorganization of the Company involving the exchange,
conversion, adjustment or other modification of outstanding options,
optionees will be entitled to receive shares of stock, other securities or
other property to which terms of the agreement of merger, consolidation or
other reorganization would entitle the optionee to receive had he been a
holder of record of the shares of Common Stock as to which he could exercise
the option.
(3) Based on options to purchase 77,500 shares granted in fiscal 1997.
(4) Mr. Alexander resigned from his position as a Vice President of the Company
as of September 19, 1997.
(5) Mr. Fraser resigned from his position as Chief Financial Officer and
Treasurer of the Company as of June 30, 1997.
9
<PAGE> 31
INDIVIDUAL OPTION EXERCISES IN FISCAL 1997 AND VALUES AT JANUARY 31, 1997
This table presents information regarding fiscal 1997 option exercises and
the value of unexercised options held by the Named Executive Officers at January
31, 1997.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR-END OPTION VALUE
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END AT FY-END
ACQUIRED (#) ($)(2)
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Pope III 0 0 0/25,000 0/$16,750
- ------------------------------------------------------------------------------------------------------------------
Mr. Herring 3,750 $2,813 0/12,000 0/$12,000
- ------------------------------------------------------------------------------------------------------------------
Mr. Forshay 0 0 0/10,000 0/$10,000
- ------------------------------------------------------------------------------------------------------------------
Mr. Alexander(3) 668 $1,082 0/10,000 0/$10,000
- ------------------------------------------------------------------------------------------------------------------
Mr. Fraser(4) 0 0 0/11,167 0/$11,167
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the difference between the market price of the shares on the date
of exercise and the exercise price.
(2) Represents the value of unexercised, in-the-money options at January 31,
1997, based upon the $9.75 closing price of the Common Stock on that date.
Amounts have been rounded to the nearest dollar.
(3) Mr. Alexander resigned from his position as a Vice President of the Company
as of September 19, 1997.
(4) Mr. Fraser resigned from his position as Chief Financial Officer and
Treasurer of the Company as of June 30, 1997.
CHANGES IN CONTROL
The Offer, if consummated, will result in a change in control of the
Company. See the Offer to Purchase for additional information concerning the
Offer, Parent and the Offeror.
10
<PAGE> 32
ATTACHMENT 1
OFFEROR'S DIRECTOR DESIGNEES
Offeror has provided the Company with the following information regarding
those persons who it intends to designate as directors of the Company following
consummation of the Offer. The Company assumes no responsibility for the
accuracy or completeness of such information.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS AGE
---- ---------------------------------------------- ---
<S> <C> <C>
Robert J. Cronin..................... Chief Executive Officer and Director of the Offeror. 52
President and Chief Executive Officer of Parent and
Director since November 11, 1992. President and Chief
Operating Officer of Parent from June 1, 1992 until
November 11, 1992. Also a director of Landauer
Corporation.
Michael T. Leatherman................ President and Director of the Offeror. Senior Vice 44
President/Chief Information Officer of Parent since
1992.
Michael J. Halloran.................. Vice President, Chief Financial Officer and Director of 49
the Offeror. Vice President/Chief Financial
Officer/Assistant Secretary of Parent since 1995. Vice
President/Chief Financial Officer/Secretary of Parent
from 1990 to 1995.
Michael O. Duffield.................. Senior Vice President/Operations of Parent since 1992. 45
</TABLE>
<PAGE> 1
Supplement to
Offer To Purchase For Cash
All Outstanding Shares of Common Stock
of
GRAPHIC INDUSTRIES, INC.
at
$21.75 NET PER SHARE
by
GREENWICH ACQUISITION CORP.
a wholly owned subsidiary of
WALLACE COMPUTER SERVICES, INC.
- --------------------------------------------------------------------------------
THE OFFER HAS NOT BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER
SUCH NUMBER OF SHARES OF COMMON STOCK, $.10 PAR VALUE PER SHARE, OF THE
COMPANY (THE "SHARES") THAT, TOGETHER WITH THE SHARES AND CLASS B SHARES
(AS DEFINED HEREIN) SUBJECT TO THE OPTION (AS DEFINED HEREIN) CONTAINED IN
THE STOCKHOLDER AGREEMENT (AS DEFINED HEREIN) (TO THE EXTENT NOT THEN
TENDERED IN THE OFFER), WOULD CONSTITUTE A MAJORITY OF THE SHARES AND
CLASS B SHARES THAT IN THE AGGREGATE ARE OUTSTANDING, DETERMINED ON A
FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS, THE CONVERTIBLE
DEBENTURES (AS DEFINED HEREIN), OTHER SECURITIES CONVERTIBLE INTO SHARES
OR CLASS B SHARES AND ANY OTHER RIGHTS TO ACQUIRE SHARES OR CLASS B
SHARES, (II) ANY WAITING PERIOD UNDER THE HSR ACT (AS DEFINED HEREIN)
APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED
OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER AND (III)
THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF
THE OFFER TO PURCHASE (AS DEFINED HEREIN) AND SECTION 8 OF THIS
SUPPLEMENT.
THIS OFFER (THE "OFFER") IS BEING MADE IN CONNECTION WITH THE AMENDED
AND RESTATED AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 12, 1997
(THE "MERGER AGREEMENT"), AMONG WALLACE COMPUTER SERVICES, INC., GREENWICH
ACQUISITION CORP. AND GRAPHIC INDUSTRIES, INC. (THE "COMPANY"). THE BOARD
OF DIRECTORS OF THE COMPANY HAS APPROVED AND ADOPTED THE MERGER AGREEMENT,
APPROVED THE OFFER AND THE MERGER (AS DEFINED HEREIN), HAS DETERMINED THAT
THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF
THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender Shares should either (i) complete and
sign the revised Letter of Transmittal or a facsimile thereof in accordance with
the instructions in the revised Letter of Transmittal and deliver the revised
Letter of Transmittal with the Shares and all other required documents to the
Depositary (as defined in the Offer to Purchase) or follow the procedure for
book-entry transfer set forth in Section 3 of the Offer to Purchase or (ii)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee effect the transaction for the stockholder. Stockholders having
Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such person if they desire to tender their
Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis or who cannot deliver
all required documents to the Depositary, in each case prior to the expiration
of the Offer, must tender such Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Supplement or the revised Letter of Transmittal may be directed
to the Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of this Supplement.
------------------------
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
October 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction................................................ 1
1. Amended Terms of the Offer.............................. 3
2. Procedure for Tendering Shares.......................... 4
3. Price Range of Shares; Dividends........................ 4
4. Source and Amount of Funds.............................. 4
5. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company Since September 28,
1997.................................................... 4
6. Purpose of the Offer and the Merger; Plans for the
Company................................................. 6
7. The Merger Agreement and the Stockholder Agreement...... 6
8. Certain Conditions to the Offeror's Obligations......... 10
9. Certain Legal Matters................................... 10
10. Miscellaneous........................................... 10
</TABLE>
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK OF GRAPHIC INDUSTRIES, INC.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase,
dated October 3, 1997 (the "Offer to Purchase"), of Greenwich Acquisition Corp.,
a Georgia corporation (the "Offeror") and a wholly owned subsidiary of Wallace
Computer Services, Inc., a Delaware corporation ("Parent"). Pursuant to this
Supplement to Offer to Purchase (this "Supplement"), the Offeror is now offering
to purchase all outstanding shares of Common Stock, par value $.10 per share
(the "Shares"), of Graphic Industries, Inc., a Georgia corporation (the
"Company"), at a purchase price of $21.75 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, as amended and supplemented by this Supplement, and in the
related revised Letter of Transmittal (which together with any amendments or
supplements hereto or thereto constitute the "Offer").
Except as otherwise set forth in this Supplement, the terms and conditions
previously set forth in the Offer to Purchase remain applicable in all respects
to the Offer, and this Supplement should be read in conjunction with the Offer
to Purchase. Unless the context requires otherwise, capitalized terms used
herein but not otherwise defined herein have the meaning given to such terms in
the Offer to Purchase.
The Offeror, Parent, and the Company have entered into an Amended and
Restated Agreement and Plan of Merger, dated as of October 12, 1997 (as used
herein, the "Merger Agreement" or the "Amended and Restated Merger Agreement"),
which amended and restated the Agreement and Plan of Merger, dated as September
28, 1997 (the "Original Merger Agreement"), among the Offeror, Parent and the
Company and provides for, among other things, (i) an increase in the price per
Share to be paid pursuant to the Offer from $18.50 per Share to $21.75 per
Share, net to the seller in cash, without interest, and (ii) Parent to have the
option to terminate the Offer and seek to acquire the Company solely by means of
the Merger (as defined herein). See Section 7 of this Supplement.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION, EXCEPT AS MAY BE REQUIRED BY THE GUARANTEED DELIVERY PROCEDURE
DESCRIBED IN SECTION 3 OF THE OFFER TO PURCHASE, IF SUCH PROCEDURE WAS UTILIZED.
If Shares are accepted for payment and paid for by the Offeror pursuant to the
Offer, such stockholders will receive, subject to the conditions of the Offer,
the increased offer price of $21.75 per Share. See Section 4 of the Offer to
Purchase for the procedures to properly withdraw Shares tendered pursuant to the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED AND ADOPTED THE AMENDED
AND RESTATED MERGER AGREEMENT, APPROVED THE OFFER AND THE MERGER (AS DEFINED
HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
The Company has advised the Offeror that Interstate/Johnson Lane
Corporation ("Interstate/Johnson Lane"), the Company's financial advisor, has
delivered to the Company's Board of Directors its written opinion that, as of
the date of the Amended and Restated Merger Agreement, the consideration to be
received by the Company's stockholders pursuant to the Offer and the Merger is
fair, from a financial point of view, to the Company's stockholders. A copy of
such opinion is contained in the Company's Amendment No. 1 to
Solicitation/Recommendation Statement on Schedule 14D-9 which is being
distributed to the Company's stockholders.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH
NUMBER OF SHARES THAT, TOGETHER WITH THE SHARES AND CLASS B SHARES SUBJECT TO
THE OPTION (AS DEFINED HEREIN) CONTAINED IN THE STOCKHOLDER AGREEMENT (AS
DEFINED HEREIN) (TO THE EXTENT NOT TENDERED IN THE OFFER), WOULD CONSTITUTE A
MAJORITY OF THE SHARES AND CLASS B SHARES THAT IN THE AGGREGATE ARE OUTSTANDING,
DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING
1
<PAGE> 4
STOCK OPTIONS, THE CONVERTIBLE DEBENTURES (AS DEFINED HEREIN), OTHER SECURITIES
CONVERTIBLE INTO SHARES OR CLASS B SHARES AND ANY OTHER RIGHTS TO ACQUIRE SHARES
OR CLASS B SHARES (THE "MINIMUM CONDITION"), (II) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
ACT"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED
OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER AND (III) THE
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF THE OFFER
TO PURCHASE AND SECTION 8 OF THIS SUPPLEMENT.
The Amended and Restated Merger Agreement provides that, among other
things, after the purchase of Shares pursuant to the Offer and the satisfaction
of the other conditions set forth in the Amended and Restated Merger Agreement
and in accordance with the relevant provisions of the Georgia Business
Corporation Code, as amended (the "GBCC"), the Offeror will be merged with and
into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be a wholly owned subsidiary of Parent. At the effective time of the
Merger (the "Effective Time"), each Share and Class B Share that is issued and
outstanding (other than Shares and Class B Shares owned by the Company, any
subsidiary of the Company, Parent, the Offeror, any other subsidiary of Parent
or by stockholders, if any, who are entitled to and who properly exercise
appraisal rights under the GBCC) will be converted into the right to receive
from the Surviving Corporation $21.75 (or any higher price that may be paid for
each Share pursuant to the Offer) in cash, without interest thereon (the "Offer
Price"). The Amended and Restated Merger Agreement also provides that Parent
may, at its option, elect to terminate the Offer and seek to acquire the Company
solely by means of the Merger (the "Merger Option"). See Section 5 of the Offer
to Purchase for a description of certain tax consequences of the Offer and the
Merger.
In connection with the execution of the Amended and Restated Merger
Agreement, the Offeror and Parent entered into an Amended and Restated
Stockholder Agreement dated as of October 12, 1997 (as used herein, the "Amended
and Restated Stockholder Agreement" or the "Stockholder Agreement"), with Mark
C. Pope III (the "Selling Stockholder"), amending and restating the Stockholder
Agreement, dated as of September 28, 1997 (the "Original Stockholder
Agreement"), among Parent, the Offeror and the Selling Stockholder, pursuant to
which such Selling Stockholder has granted to the Offeror an irrevocable option
to purchase (the "Option"), and following the purchase of any Shares in the
Offer the Offeror has agreed to purchase, 432,089 of the Shares and 2,239,046 of
the Class B Shares (collectively, the "Option Shares") owned of record by the
Selling Stockholder at a price per share equal to the Offer Price. The Selling
Stockholder has also agreed (i) so long as the Amended and Restated Merger
Agreement has not terminated, to tender pursuant to the Offer the other 409,421
Shares owned by him, (ii) in the event the Offeror purchases Shares pursuant to
the Offer, to sell the other 2,064,046 Class B Shares owned by him to the
Offeror at the time of the sale to the Offeror of the Option Shares and (iii) so
long as the Amended and Restated Merger Agreement has not been terminated, to,
upon the written request of the Offeror, tender pursuant to the Offer any Shares
owned by him that constitute Option Shares. Pursuant to the Amended and Restated
Stockholder Agreement, the Selling Stockholder has also agreed that, among other
things, until September 28, 1998, the Selling Stockholder will not transfer any
Shares or Class B Shares owned by him to any person other than the Offeror or
the Offeror's designee (except for certain permitted transfers) and will vote
all of the Shares and Class B Shares owned by him in favor of the transactions
contemplated by the Amended and Restated Merger Agreement and against certain
competing transactions at any meeting of stockholders of the Company called to
vote thereon. The Selling Stockholder owned 841,510 Shares and 4,303,092 Class B
Shares, representing approximately 10.4% and approximately 95.2% of the Shares
and Class B Shares, respectively, issued and outstanding as of October 12, 1997
(approximately 35.5% of the Shares on a fully diluted basis). Upon transfer of
Class B Shares by the Selling Stockholder to the Offeror pursuant to the Amended
and Restated Stockholder Agreement, all Class B Shares will automatically
convert to Shares.
The Merger Agreement and the Stockholder Agreement are more fully described
in Section 13 of the Offer to Purchase and Section 7 of this Supplement.
The Merger Agreement provides that, promptly after the Offeror acquires a
majority of the combined voting power of the Shares and the Class B Shares, the
Offeror will be entitled to designate such number of directors on the Board of
Directors of the Company as will give the Offeror, subject to compliance with
2
<PAGE> 5
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a majority of such directors and the Company shall, at such time, cause
the Offeror's designees to be so elected by its existing Board of Directors.
However, until the Effective Time the Board of Directors of the Company shall
have at least three directors who were directors on the date of the Merger
Agreement and who are not officers of the Company. The Company has agreed, at
the option of Parent, either to increase the size of the Board of Directors of
the Company and/or obtain the resignation of such number of directors as is
necessary to enable the Offeror's designees to be elected or appointed to the
Board.
The Company has advised the Offeror that as of October 12, 1997, there were
(a) 8,097,472 Shares issued and outstanding, (b) outstanding stock options to
purchase not in excess of 690,510 Shares, (c) 1,180,433 Shares reserved for
issuance upon conversion of the Company's 7% Convertible Subordinated Debentures
due May 15, 2006 (the "Convertible Debentures") and (d) 4,518,817 Class B Shares
issued and outstanding. As of the date hereof, neither the Offeror nor Parent
beneficially owns any Shares except to the extent that Parent and the Offeror
are deemed to beneficially own Shares as a result of the Amended and Restated
Stockholder Agreement. Accordingly, on a fully diluted basis the aggregate
amount of Shares and Class B Shares outstanding as of October 12, 1997 was
14,487,232. Because the Offeror has the right pursuant to the Stockholder
Agreement to purchase 2,671,135 Option Shares, the Minimum Condition will be
satisfied if (exclusive of Option Shares or Shares issuable upon the conversion
of Option Shares), at least 4,572,482 Shares, approximately 56.5% of the
outstanding Shares as of October 12, 1997 (approximately 31.6% of the Shares on
a fully diluted basis), are validly tendered and not withdrawn prior to the
Expiration Date (as defined herein). As noted above, pursuant to the Stockholder
Agreement, the Selling Stockholder has agreed to tender the 409,421 Shares not
constituting Option Shares owned by him, which represent approximately 5.1% of
the outstanding Shares as of October 12, 1997 (approximately 2.8% of the Shares
on a fully diluted basis).
THIS SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE OFFER TO PURCHASE
AND THE RELATED REVISED LETTER OF TRANSMITTAL, COPIES OF WHICH MAY BE OBTAINED
IN THE MANNER SET FORTH ON THE BACK COVER OF THIS SUPPLEMENT. THE OFFER TO
PURCHASE, THIS SUPPLEMENT AND THE RELATED REVISED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. AMENDED TERMS OF THE OFFER.
Section 1 of the Offer to Purchase is hereby amended and supplemented by
the following:
The price per Share to be paid pursuant to the Offer has been increased
from $18.50 to $21.75 per Share, net to the seller in cash, without interest.
Upon the terms and subject to the conditions of the Offer, the Offeror will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 4 of
the Offer to Purchase. All holders whose Shares are accepted for payment
pursuant to the Offer will receive the increased Offer Price in respect of each
Share so accepted. All references to Offer and Offer Price in the Offer to
Purchase, this Supplement and any Letter of Transmittal are deemed to refer to
the Offer as amended as described above and the increased Offer Price,
respectively.
Pursuant to the Amended and Restated Merger Agreement, Parent may, at its
option, elect to terminate the Offer and seek to acquire the Company solely by
means of the Merger. See Section 7 of this Supplement. Public announcement of
any such termination of the Offer by the Offeror will be made in the manner
described in Section 1 of the Offer to Purchase.
The Company has provided the Offeror with the Company's list of
stockholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. This Supplement and the related revised Letter of
Transmittal will be mailed to record holders of Shares whose names appear on the
Company's stockholder list and will be furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
3
<PAGE> 6
2. PROCEDURE FOR TENDERING SHARES.
Section 3 of the Offer to Purchase is hereby amended and supplemented by
the following:
Tendering stockholders should use the revised Letter of Transmittal and the
revised Notice of Guaranteed Delivery included with this Supplement. However, to
the extent either of the revised Letter of Transmittal or the revised Notice of
Guaranteed Delivery is not available, tendering stockholders may continue to use
the original Letter of Transmittal and the original Notice of Guaranteed
Delivery that were provided with the Offer to Purchase. Although such original
Letter of Transmittal refers only to the Offer to Purchase, stockholders using
such original Letter of Transmittal to tender their Shares will nevertheless
receive $21.75 per Share for each Share validly tendered and not properly
withdrawn and accepted for payment pursuant to the Offer, subject to the
conditions of the Offer.
Stockholders who have previously validly tendered Shares pursuant to the
Offer using the original Letter of Transmittal or the original Notice of
Guaranteed Delivery and who have not properly withdrawn such Shares have validly
tendered Shares for purposes of the Offer, as amended, and need not take any
further action, except as may be required by the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase if such procedure was utilized.
3. PRICE RANGE OF SHARES; DIVIDENDS.
Section 6 of the Offer to Purchase is hereby amended and supplemented by
the following:
The high and low sales prices per Share on the NYSE from October 3, 1997,
the date of the Offer to Purchase, through October 16, 1997 were $22 and
$18 3/8, respectively. On October 10, 1997, the last full day of trading prior
to the public announcement of the execution of the Amended and Restated Merger
Agreement, the closing price per Share as reported on the NYSE was $21 5/16. On
October 16, 1997, the last full day of trading prior to the mailing of this
Supplement, the closing price per Share as reported on the NYSE was $21 13/16.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
4. SOURCE AND AMOUNT OF FUNDS.
Section 10 of the Offer to Purchase is amended by the substitution of the
following for the first paragraph of such Section:
The Offeror estimates that the total amount of funds required to acquire
the Shares and Class B Shares pursuant to the Offer, the Merger and the Amended
and Restated Stockholder Agreement (exclusive of related fees and expenses) will
be approximately $315,100,000 (assuming the exercise of all outstanding options
and the conversion of the Convertible Debentures into Shares).
5. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE
COMPANY SINCE SEPTEMBER 28, 1997.
Section 11 of the Offer to Purchase is hereby amended and supplemented by
the following:
On October 2, 1997 and October 3, 1997, Mr. Cronin received telecopied
correspondence from Gerald F. Mahoney, Chairman of Mail-Well, Inc.
("Mail-Well"), expressing an interest in purchasing certain assets of the
Company from Parent, after the consummation of the Merger. The correspondence
also indicated that if Parent were unwilling to agree to such a transaction
Mail-Well would consider the possibility of making a competing offer to purchase
the Company at a price in excess of $18.50. On October 3, 1997, the Offeror
commenced the Offer at an offer price of $18.50. On October 6, 1997, Mr. Cronin
advised Mr. Mahoney by telecopied letter that Parent was not interested in
selling assets of the Company to Mail-Well. Also on October 6th, Mr. Mahoney
telecopied a letter to Mr. Pope expressing interest in making an offer for the
Company and requesting access to the same due diligence materials as had been
provided to Parent. Also on such date, copies of the telecopied correspondence
between Mr. Mahoney and Mr. Cronin were provided by Parent to the Company.
4
<PAGE> 7
On October 7, 1997, the Board of Directors of the Company met to consider
the October 6, 1997 letter from Mr. Mahoney to Mr. Pope. The Board of Directors
concluded that the October 6, 1997 letter from Mr. Mahoney was not sufficiently
definite with respect to the terms of an offer to acquire to the Company and did
not include sufficient evidence of the ability of Mail-Well to finance the
acquisition of the Company in order for the members of the Board of Directors to
determine, as required by the Original Merger Agreement, that it was necessary
in connection with the exercise of their fiduciary duties to allow Mail-Well
access to the materials requested. Mail-Well was informed of this conclusion on
October 7, 1997, following the meeting of the Board of Directors.
On October 9, 1997, the Company received a letter from Mr. Mahoney stating
that Mail-Well was willing, subject to reasonable and customary due diligence,
to pay at least $20.00 per share in cash for all of the Shares and Class B
Shares of the Company, on substantially the same terms as contained in the
Original Merger Agreement, to which was attached an executed bank commitment
letter relating to financing for Mail-Well's offer and an executed
confidentiality agreement. Later that day, the Board of Directors of the Company
met to consider Mail-Well's letter. The Board of Directors determined that, in
accordance with the terms of the Original Merger Agreement, it was permitted to
allow Mail-Well to review the same due diligence materials as had been provided
to Parent, but took no further action with respect to Mail-Well's letter.
Following the meeting of the Board of Directors, the Company advised Mail-Well
that it would be allowed access to the same information as had been provided to
Parent and access to the Company's management and facilities, subject to the
confidentiality agreement. On October 10, 1997, both the Company and Mail-Well
issued press releases relating to Mail-Well's October 9, 1997 letter and the
Company's decision to allow Mail-Well to commence its due diligence
investigation of the Company.
Beginning on October 10, 1997 and continuing on October 11th, Parent and
its counsel had various discussions with Mr. Pope and his counsel, relating to
the possibility of an increase in the cash price to be paid in the Offer and to
certain modifications in the terms of the Original Stockholder Agreement and the
Original Merger Agreement (including the addition of the Merger Option). On
October 11, 1997, Parent's counsel delivered drafts of the Amended and Restated
Stockholder Agreement and the Amended and Restated Merger Agreement to Mr.
Pope's counsel. Later that day and on October 12, 1997, such counsel finalized
the terms of both agreements, subject to approval by the Boards of Directors of
Parent and the Company.
In the afternoon of October 12, 1997, following such approval by its Board
of Directors, Parent telecopied a letter to Mr. Pope proposing to increase the
Offer Price if Mr. Pope agreed, prior to Parent making such proposal to the
Company, to commit, for a period of one year, to vote the Shares and Class B
Shares owned by him against any merger or merger agreement (other than the
Merger and the Merger Agreement) and against certain other competing
transactions and not to (i) sell or otherwise transfer any Shares or Class B
Shares owned by him (subject to certain exceptions), (ii) enter into any voting
arrangement or (iii) convert the Class B Shares owned by him into Shares, in
each case, whether or not the Board of Directors of the Company accepted
Parent's proposal. Upon receipt of such written commitment by Mr. Pope, Parent
conveyed a written offer to the Board of Directors of the Company, offering to
enter into the Amended and Restated Merger Agreement simultaneously with Mr.
Pope's execution of the Amended and Restated Stockholder Agreement. The written
offer from Parent to the Board of Directors of the Company provided that the
offer would expire at 8:00 p.m. (eastern time) on October 12, 1997, and would be
deemed automatically rejected in the event of any disclosure to any person,
other than an officer, director, employee or representative of the Company, of
such offer or the fact Parent had made such offer prior to acceptance by the
Company of such offer.
Upon receipt of such letter, the Board of Directors of the Company met to
consider the written offer from Parent. The Board received and considered the
verbal opinion of Interstate/Johnson Lane with respect to the revised Offer and
the Merger. Following discussions among the directors, the Board of Directors of
the Company (i) approved and adopted the Amended and Restated Merger Agreement
and determined that the Offer and the Merger considered as a whole are fair to
and in the best interests of the Company and its stockholders and (ii)
recommended that the Company's stockholders tender their Shares in the Offer and
approve and adopt the Amended and Restated Merger Agreement and the Merger.
5
<PAGE> 8
Immediately following the meeting of the Board of Directors of the Company,
the Amended and Restated Merger Agreement and the Amended and Restated
Stockholder Agreement were executed and delivered by the parties thereto. An
announcement concerning the Amended and Restated Merger Agreement and the
Amended and Restated Stockholder Agreement was made on October 12, 1997. The
Company, through its counsel, also informed Mail-Well of the execution of such
agreements and that Mail-Well's proposed due diligence investigation of the
Company was no longer appropriate.
6. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
Section 12 of the Offer to Purchase is hereby amended by substitution of
the following for the second and third paragraphs of such Section:
In order to effect the Merger, the GBCC and the Amended and Restated
Articles of Incorporation of the Company (the "Charter") require the affirmative
vote of a majority of the total votes represented by the Shares and Class B
Shares, voting together, to approve the Amended and Restated Merger Agreement
(following the adoption of the Amended and Restated Merger Agreement by the
Board of Directors of the Company, which the Board of Directors effected by
resolution on October 12, 1997). If the Offeror acquires, through the Offer, the
Amended and Restated Stockholder Agreement or otherwise, a majority of the
outstanding Shares and Class B Shares (which would be the case if the Offeror
were to accept for payment Shares tendered pursuant to the Offer and the Offeror
were to purchase the Shares and Class B Shares it is entitled to purchase under
the Amended and Restated Stockholder Agreement), it would have sufficient voting
power to effect the Merger without the vote of any other stockholder of the
Company.
Pursuant to the Amended and Restated Merger Agreement, the Company has
agreed that, as soon as practicable following the expiration of the Offer, it
will call and hold a meeting of stockholders for the purpose of obtaining the
stockholder approval of the Amended and Restated Merger Agreement. Parent has
agreed that all Shares owned by the Offeror or any other subsidiary of Parent
will be voted in favor of approval of the Amended and Restated Merger Agreement.
The meeting of stockholders shall be held as soon as practicable following the
purchase of Shares pursuant to the Offer.
Pursuant to the Amended and Restated Merger Agreement, Parent may, at its
option, elect to terminate the Offer and seek to acquire the Company solely by
means of the Merger. Upon the exercise of the Merger Option, the Company has
agreed that, as soon as practicable following such exercise, it will call and
hold a meeting of stockholders for the purpose of obtaining the stockholder
approval of the Amended and Restated Merger Agreement. If the Merger Option is
exercised by Parent, the vote of the Shares and Class B Shares owned by the
Selling Stockholder, which he has agreed to vote in favor of the Merger at any
meeting of stockholders for the purpose of obtaining the stockholder approval of
the Amended and Restated Merger Agreement, would be sufficient to effect the
Merger without the vote of any other stockholder of the Company.
7. THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT.
Section 13 of the Offer to Purchase is hereby amended and supplemented by
the following:
The Merger Agreement
The Offer. The Offeror has amended the Offer in accordance with the terms
of the Amended and Restated Merger Agreement to provide for an Offer Price of
$21.75.
The Merger Option. The Amended and Restated Merger Agreement provides that
Parent may, at its option and upon written notice to the Company, elect to
terminate the Offer and seek to acquire the Company solely by means of the
Merger. If Parent elects to exercise the Merger Option, the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction, or waiver under certain circumstances, of certain conditions
contained in the Amended and Restated Merger Agreement, including (i) the
receipt of the requisite approval of the Company's stockholders, (ii) the
absence of any statute, order or injunction preventing the consummation of the
Merger, (iii) the absence of breaches by the Company of its
6
<PAGE> 9
representations and warranties, covenants and agreements contained in the
Amended and Restated Merger Agreement and (iv) the expiration or termination of
any waiting period under the HSR Act applicable to the Merger. If Parent elects
to exercise the Merger Option, the Company shall promptly call and hold a
meeting of its stockholders for the purpose of obtaining the stockholders'
approval of the Amended and Restated Merger Agreement and prepare, file with the
Commission and mail to stockholders a proxy statement relating to such meeting.
Stock Based Compensation. Prior to the earlier of the purchase of Shares
pursuant to the Offer or the Effective Time, the Company shall terminate each
stock option plan, stock appreciation right plan, limited stock appreciation
right plan, restricted stock plan, employee stock purchase plan, or any other
plan or arrangement providing for compensation wholly or partially in the form
of Shares (excluding any plan which is intended to be qualified under section
401(a) of the Internal Revenue Code of 1986, as amended) (collectively, the
"Stock-Based Compensation Plans"), and shall grant no additional options or
awards under such plans. Immediately upon the purchase of Shares pursuant to the
Offer, or immediately prior to the Effective Time, if earlier, all outstanding
options or awards under the Stock-Based Compensation Plans, whether vested or
unvested, shall cease to be exercisable, shall be cancelled by the Company, and
shall thereafter represent only a right to receive, upon its surrender to the
Company, a cash payment from the Company in an amount (if any) equal to the
number of Shares subject to each such surrendered option or award multiplied by
the difference (if positive) between the exercise price per Share (if any)
covered by the option or award and the highest per Share price paid to
stockholders of the Company in the Offer.
Indemnification. Pursuant to the Amended and Restated Merger Agreement,
Parent and the Offeror agreed that all rights to indemnification for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
current or former directors, officers, employees and agents of the Company and
its subsidiaries as provided in their respective articles of incorporation or
by-laws (or similar organizational documents) shall survive the Merger and shall
continue in full force and effect in accordance with their terms. For six years
from the earlier of the date the Offeror first purchases Shares pursuant to the
Offer or the Effective Time, Parent shall maintain in effect the Company's
current directors' and officers' liability insurance covering those persons who
are currently covered by the Company's directors' and officers' liability
insurance policy; provided, that in no event shall Parent be required to pay a
premium in any one year in an amount in excess of 150 percent of the last per
annum amount of premiums paid by the Company prior to the date of the Amended
and Restated Merger Agreement; and provided, further, that if the annual
premiums of such insurance coverage exceed such amount, Parent shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
Termination. The Amended and Restated Merger Agreement provides that it may
be terminated at any time prior to the Effective Time, whether before or after
the approval of the terms of the Amended and Restated Merger Agreement by the
stockholders of the Company: (a) by mutual written consent of Parent and the
Company; (b) by either Parent or the Company: (i) if (x) as a result of the
failure of any of the conditions to the Offer, as set forth in Section 15 of the
Offer to Purchase, the Offer shall have terminated or expired in accordance with
its terms without the Offeror having accepted for payment any Shares pursuant to
the Offer or (y) the Offeror shall not have accepted for payment any Shares
pursuant to the Offer prior to March 31, 1998 or, if the Merger Option has been
exercised by Parent, the Merger has not been effected prior to June 30, 1998
(provided that the right to terminate the Amended and Restated Merger Agreement
pursuant to this clause (b)(i) shall not be available to any party whose failure
to perform any of its obligations under the Amended and Restated Merger
Agreement results in the failure of any such condition to the Offer or if the
failure of such condition results from facts or circumstances that constitute a
breach of any representation or warranty under the Amended and Restated Merger
Agreement by such party) or (ii) if any governmental entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or payment
for, Shares pursuant to the Offer or Shares or Class B Shares pursuant to the
Merger and such order, decree or ruling or other action shall have become final
and nonappealable; (c) by Parent or the Offeror prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the Amended
and Restated Merger Agreement which (i) would give rise to the
7
<PAGE> 10
failure of the conditions described in paragraph (e) or (f) of Section 15 of the
Offer to Purchase and (ii) cannot be or has not been cured within 20 days after
the giving of written notice to the Company; (d) by Parent or the Offeror if
either Parent or the Offeror is entitled to terminate the Offer as a result of
the occurrence of any event described in paragraph (d) of Section 15 of the
Offer to Purchase; (e) by the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior Proposal
and the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that termination of the Amended and Restated
Merger Agreement is necessary in order to comply with its fiduciary duties under
applicable law; provided, that it has complied with the notice provisions
therein and it complies with requirements of the Amended and Restated Merger
Agreement relating to payment of Expenses and the Termination Fee (each as
defined below under "Fees and Expenses"); (f) by the Company, if the Offeror or
Parent shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in the
Amended and Restated Merger Agreement, which breach or failure to perform is
incapable of being cured or has not been cured within 20 days after the giving
of written notice to Parent or the Offeror, as applicable; or (g) by the
Company, if the Offer has not been timely commenced. In the event of a
termination of the Amended and Restated Merger Agreement by either the Company
or Parent, the Amended and Restated Merger Agreement shall forthwith become void
(except for certain specified provisions, including those pertaining to the
payment of certain expenses and fees and except for certain confidentiality
obligations of the parties) and there shall be no liability or obligation on the
part of Parent, the Offeror or the Company or their respective officers or
directors, other than for liability for any breach of the Amended and Restated
Merger Agreement.
Fees and Expenses. Except as otherwise provided in the Amended and
Restated Merger Agreement, whether or not the Merger is consummated, all fees
and expenses incurred in connection with the Offer, the Merger and the Amended
and Restated Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such fees and expenses whether or not the Offer or
the Merger is consummated.
The Amended and Restated Merger Agreement provides that the Company will
pay, or cause to be paid, in same day funds to Parent (a) the amount of the
Expenses and (b) $6,750,000 (the "Termination Fee") under the circumstances and
at the times set forth as follows: (i) if Parent or the Offeror terminates the
Amended and Restated Merger Agreement in accordance with the provisions
described in clause (d) under "Termination" above, the Company shall pay the
Expenses and the Termination Fee upon demand; (ii) if the Company terminates the
Amended and Restated Merger Agreement in accordance with the provisions
described in clause (e) under "Termination" above, the Company shall pay the
Expenses and the Termination Fee concurrently therewith; and (iii) if, at the
time of any other termination of the Amended and Restated Merger Agreement, a
Takeover Proposal shall have been made (other than a Takeover Proposal made
prior to the date of the Amended and Restated Merger Agreement), the Company
shall pay the Expenses, if terminated by the Company, concurrently therewith or,
if terminated by Parent, upon demand; in addition, if within 18 months of such
termination, the Company shall enter into an Acquisition Agreement providing for
a Takeover Proposal or a Takeover Proposal shall be consummated, the Company
shall pay the Termination Fee concurrently with the earlier of the entering into
of such Acquisition Agreement or the consummation of such Takeover Proposal. For
purposes of the Amended and Restated Merger Agreement, "Expenses" means
documented and reasonable out-of-pocket fees and expenses incurred or paid by or
on behalf of Parent in connection with the Offer, the Merger or the consummation
of any of the transactions contemplated by the Amended and Restated Merger
Agreement, including all fees and expenses of law firms, commercial banks,
investment banking firms, accountants, experts and consultants to Parent.
The Stockholder Agreement
Pursuant to the terms and conditions of the Stockholder Agreement, the
Selling Stockholder has granted to the Offeror the Option to purchase 432,089 of
the Shares and 2,239,046 of the Class B Shares owned by the Selling Stockholder
at a price per share equal to the Offer Price (the "Option Purchase Price"). As
of October 12, 1997, the Selling Stockholder owned 841,510 Shares and 4,303,092
Class B Shares.
The Option may be exercised at any time on or prior to September 28, 1998
(the "Option Expiration Date"), in the event that (i) a Specified Event (as
defined below) shall have occurred on or prior to the
8
<PAGE> 11
Option Expiration Date and (ii) the waiting period under the HSR Act with
respect to the exercise of the Option shall have expired or been terminated. For
purposes of the Stockholder Agreement, the term "Specified Event" means any of
the following events: (i) Parent or Offeror shall have terminated the Amended
and Restated Merger Agreement in accordance with the provisions described in
clause (d) under "Termination" above, (ii) the Company shall have terminated the
Amended and Restated Merger Agreement in accordance with the provisions
described in clause (e) under "Termination" above, (iii) prior to termination of
the Amended and Restated Merger Agreement, a Takeover Proposal shall have been
commenced or the Company shall have entered into an agreement with respect to,
approved or recommended or taken any action to facilitate, a Takeover Proposal
or (iv) the Offeror shall have accepted for payment, and paid for, Shares in the
Offer. Under the Stockholder Agreement, the Offeror has agreed to exercise the
Option in the event that the Offeror accepts for payment, and pays for, any
Shares pursuant to the Offer. The Selling Stockholder has also agreed that, so
long as the Amended and Restated Merger Agreement has not been terminated, the
Selling Stockholder will tender pursuant to the Offer, and not withdraw, the
Shares owned by the Selling Stockholder which are not Option Shares and, upon
the request of the Offeror, tender pursuant to the Offer, and not withdraw, the
Shares owned by the Selling Stockholder which are Option Shares. In the event
that the Offeror shall have accepted for payment Shares pursuant to the Offer,
at the Closing Time (as defined in the Stockholder Agreement), the Selling
Stockholder shall also sell to the Offeror and the Offeror shall purchase from
the Selling Stockholder at the Option Purchase Price the Class B Shares owned by
the Selling Stockholder that are not Option Shares and which have not
theretofore been converted into Shares and tendered pursuant to the Offer. In
addition, under certain circumstances, the Offeror has the option to require the
Selling Stockholder to sell the Option Shares pursuant to a Takeover Proposal
then pending and to remit to the Offeror with respect to each Option Share sold
the gross proceeds from such sale less the Offer Price.
In the Stockholder Agreement, the Selling Stockholder has further agreed
that, until the Option Expiration Date, (a) the Selling Stockholder shall vote
any Shares or Class B Shares owned by him in favor of the Merger and the Amended
and Restated Merger Agreement, provided the terms of the Amended and Restated
Merger Agreement have not been amended to adversely affect the Selling
Stockholder; (b) the Selling Stockholder shall vote any Shares or Class B Shares
owned by him against (i) any other merger agreement or merger, consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any other
Takeover Proposal or (ii) any amendment of the Company's Charter or By-laws or
other proposal or transaction involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Amended and Restated Merger
Agreement or any of the other transactions contemplated by the Amended and
Restated Merger Agreement; and (c) the Selling Stockholder shall not (i) except
for certain permitted transfers, sell, transfer, pledge, assign or otherwise
dispose of, or enter into any contract, option or other arrangement (including
any profit sharing arrangement) with respect to the sale, transfer, pledge,
assignment or other disposition of, the Shares or Class B Shares owned by him to
any person other than the Offeror or the Offeror's designee, (ii) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection, directly or indirectly, with any Takeover Proposal or (iii) convert
the Class B Shares owned by him into Shares.
In addition, the Selling Stockholder has agreed that such Selling
Stockholder shall not, and shall not permit any investment banker, attorney or
other adviser or representative of the Selling Stockholder to, (i) directly or
indirectly solicit, initiate or encourage the submission of, any Takeover
Proposal or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal.
The foregoing summary of certain provisions of the Amended and Restated
Merger Agreement and the Amended and Restated Stockholder Agreement, copies of
which are filed as exhibits to the Schedule 14D-1, is qualified in its entirety
by reference to the text of the Amended and Restated Merger Agreement and the
Amended and Restated Stockholder Agreement.
9
<PAGE> 12
8. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS.
Section 15 of the Offer to Purchase is hereby amended by substituting the
following for clause (i) of the first paragraph of such Section (referred to in
the Offer to Purchase as the "Minimum Condition"):
"(i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that,
together with the Shares and Class B Shares subject to the Option
contained in the Stockholder Agreement (to the extent not tendered in
the Offer), would constitute a majority of the Shares and Class B
Shares that in the aggregate are outstanding, determined on a fully
diluted basis for all outstanding stock options, the Convertible
Debentures, other securities convertible into Shares or Class B Shares
and any other rights to acquire Shares or Class B Shares"
The foregoing amends the Minimum Condition only by adding the parenthetical
"(to the extent not tendered in the Offer)".
9. CERTAIN LEGAL MATTERS.
Section 16 of the Offer to Purchase is hereby amended and supplemented by
the following:
U.S. Antitrust. On October 10, 1997, Parent and the Company filed with the
Antitrust Division of the Department of Justice and the Federal Trade Commission
its Hart-Scott-Rodino Notification and Report Forms. Under the provisions of the
HSR Act applicable to the Offer, the acquisition of Shares pursuant to the Offer
may be consummated following the expiration of a 15 calendar day waiting period
following the filing of the Notification and Report Forms, unless Parent or the
Company receives a request for additional information from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. The 15-day waiting period will therefore expire at 11:59 p.m., New York
time, on October 25, 1997, unless a request for additional information is made.
State Takeover Laws. Section 14-2-1132 is inapplicable to the transactions
contemplated by the Merger Agreement, and to the Company in general, because the
Company has not provided in its By-laws that Section 14-2-1132 shall be
applicable to the Company.
Certain Charter Provisions. The Offer, the Merger and the other
transactions contemplated by the Amended and Restated Merger Agreement have been
approved by the Board of Directors of the Company. Accordingly, stockholder
approval of the Amended and Restated Merger Agreement for purposes of effecting
the Merger will only require the approval of the holders of a majority of the
votes of the issued and outstanding Shares and Class B Shares having the right
to vote thereon and voting together as a single class. Following the purchase by
the Offeror of Class B Shares pursuant to the Amended and Restated Stockholder
Agreement, all outstanding Class B Shares will automatically convert to Shares.
10. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in the Offer to
Purchase, this Supplement or in the related revised Letter of Transmittal and,
if any such information or representation is given or made, it should not be
relied upon as having been authorized by the Offeror or Parent.
The Offeror and Parent have filed with the Commission an amendment to the
Schedule 14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3
promulgated thereunder. Such filing, including
10
<PAGE> 13
exhibits, may be examined and copies may be obtained at the same places and in
the same manner as set forth with respect to the Company in Section 8 of the
Offer to Purchase (except that they will not be available at the regional
offices of the Commission).
EXCEPT AS AMENDED AND SUPPLEMENTED HEREBY AND BY THE REVISED LETTER OF
TRANSMITTAL, ALL PROVISIONS OF THE OFFER TO PURCHASE REMAIN UNAFFECTED AND THIS
SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE OFFER TO PURCHASE AND THE
REVISED LETTER OF TRANSMITTAL.
GREENWICH ACQUISITION CORP.
October 17, 1997
11
<PAGE> 14
Facsimile copies of the revised Letter of Transmittal will be accepted. The
revised Letter of Transmittal and certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<S><C>
By Overnight Courier: By Mail: By Hand Delivery:
SunTrust Bank, Atlanta SunTrust Bank, Atlanta Continental Stock Transfer
58 Edgewood Avenue P.O. Box 4625 & Trust Company
Room 225 Atlanta, Georgia 30302 19th Floor
Atlanta, Georgia 30303 2 Broadway
New York, New York
</TABLE>
Facsimile Transmission:
(For Eligible Institutions Only)
(404) 332-3875
For Information, please call
1-800-568-3476
Any questions or requests for assistance or additional copies of the Offer
to Purchase, this Supplement and the revised Letter of Transmittal and revised
Notice of Guaranteed Delivery may be directed to the Information Agent or the
Dealer Manager at their respective telephone numbers and locations listed below.
Stockholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC. LOGO
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
(212) 816-2592
<PAGE> 15
LETTER OF TRANSMITTAL
to Tender Shares of Common Stock
of
GRAPHIC INDUSTRIES, INC.
Pursuant to the Offer to Purchase
dated October 3, 1997
and the Supplement thereto
dated October 17, 1997
by
GREENWICH ACQUISITION CORP.
a wholly owned subsidiary of
WALLACE COMPUTER SERVICES, INC.
- --------------------------------------------------------------------------------
THE OFFER HAS NOT BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 31, 1997, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<C> <C> <C>
By Overnight Courier: By Mail: By Hand Delivery:
- ------------------------------------- ------------------------------------- -------------------------------------
SunTrust Bank, Atlanta SunTrust Bank, Atlanta Continental Stock Transfer
58 Edgewood Avenue P.O. Box 4625 & Trust Company
Room 225 Atlanta, Georgia 30302 19th Floor
Atlanta, Georgia 30303 2 Broadway
New York, New York
</TABLE>
Facsimile Transmission:
(For Eligible Institutions Only)
(404) 332-3875
For Information, please call
1-800-568-3476
------------------------
DELIVERY OF THIS REVISED LETTER OF TRANSMITTAL TO AN ADDRESS, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS REVISED
LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND
COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS REVISED LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS REVISED LETTER OF TRANSMITTAL IS COMPLETED.
This revised Letter of Transmittal is to be completed or the original
Letter of Transmittal previously circulated with the Offer to Purchase (as
defined below) is to used by stockholders of Graphic Industries, Inc., a Georgia
corporation (the "Company"), if certificates are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
delivery of Shares (as defined below) is to be made by book-entry transfer to
the Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (hereinafter collectively referred to as the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITORY.
While the original Letter of Transmittal previously circulated with the
Offer to Purchase refers only to such Offer to Purchase, stockholders who use
such Letter of Transmittal to tender their Shares will nevertheless receive
$21.75 per Share for each Share validly tendered and not properly withdrawn and
accepted for payment pursuant to the Offer (as defined in the Supplement dated
October 17, 1997 to the Offer to Purchase (the "Supplement")), subject to the
conditions of the Offer.
Stockholders who have previously validly tendered and not properly
withdrawn their Shares pursuant to the Offer are not required to take any
further action to receive, subject to the conditions of the Offer, the increased
Offer price of $21.75 per Share, if Shares are accepted for payment and paid for
pursuant to the Offer, except as may be required by the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase, if such procedure was
utilized.
<PAGE> 16
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or who
cannot comply with the book-entry transfer procedures on a timely basis, may
nevertheless tender their Shares pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase. See Instruction 2.
2
<PAGE> 17
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
REPRESENTED
SHARE CERTIFICATE BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
========================================================
TOTAL SHARES.........................
- -----------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are being tendered. See Instruction 4.
- -----------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution_______________________________________________
Account No. at______________________________________________________________
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.________________________________________________________
[ ]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s)_______________________________________
Date of Execution of Notice of Guaranteed Delivery________________________
Window Ticket Number (if any)_____________________________________________
Name of Institution which Guaranteed Delivery_____________________________
If delivery is by book-entry transfer_____________________________________
Name of Tendering Institution_____________________________________________
Account No. ____________________________________________________________at
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.______________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-----------------------------------
<PAGE> 18
Ladies and Gentlemen:
The undersigned hereby tenders to Greenwich Acquisition Corp. (the
"Offeror"), a Georgia corporation and a wholly owned subsidiary of Wallace
Computer Services, Inc., a Delaware corporation ("Parent"), the above-described
shares of Common Stock, $.10 par value per share (the "Shares"), of Graphic
Industries, Inc., a Georgia corporation (the "Company"), pursuant to the
Offeror's offer to purchase all of the outstanding Shares at a purchase price of
$21.75 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated October
3, 1997 (the "Offer to Purchase"), as amended and supplemented by the Supplement
thereto, dated October 17, 1997 (the "Supplement"), receipt of which is hereby
acknowledged, and in this revised Letter of Transmittal (which, together with
the Offer to Purchase, and any amendments or supplements hereto or thereto,
collectively constitute the "Offer"). The Offer is being made in connection with
the Amended and Restated Agreement and Plan of Merger, dated as of October 12,
1997 (the "Merger Agreement"), among Parent, the Offeror and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Offeror all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof) and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares (and all such other Shares or securities), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and all
such other Shares or securities), or transfer ownership of such Shares (and all
such other Shares or securities) on the account books maintained by any of the
Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidence of transfer and authenticity, to or upon the order of the
Offeror, (b) present such Shares (and all such other Shares or securities) for
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and all such other
Shares or securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Offeror prior to the time of any vote or
other action (and any and all other Shares or other securities or rights issued
or issuable in respect of such Shares) at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned meeting), any
actions by written consent in lieu of any such meeting or otherwise. This proxy
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and all such other Shares or other securities or rights), and no
subsequent proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect of such Shares) and that when the same are
accepted for payment by the Offeror, the Offeror will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. The undersigned, upon
request, will execute and deliver any additional documents deemed by the
Depositary or the Offeror to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby (and all such other Shares
or other securities or rights).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal
<PAGE> 19
representatives, successors and assigns of the undersigned. Except as stated in
the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase, as amended and
supplemented by the Supplement, and in the instructions hereto will constitute
an agreement between the undersigned and the Offeror upon the terms and subject
to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of any Shares purchased and return
any certificates for Shares not tendered or not purchased (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the check for the purchase price of any Shares purchased and return any Shares
not tendered or not purchased in the name(s) of, and mail said check and any
certificates to, the person(s) so indicated. The undersigned recognizes that the
Offeror has no obligation, pursuant to the "Special Payment Instructions," to
transfer any Shares from the name of the registered holder(s) thereof if the
Offeror does not accept for payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
certificates for Shares not tendered or not purchased are to be issued in the
name of someone other than the undersigned or if Shares tendered hereby and
delivered by book-entry transfer which are not accepted for payment are to be
returned by credit to an account at one of the Book-Entry Transfer Facilities
other than designated above.
Issue: [ ] Check [ ] Certificate to:
Name:
(Please Print)
Address:
-----------------------------------------------
- -------------------------------------------------------
(Zip Code)
- -------------------------------------------------------
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
[ ] Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below
Check appropriate box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the undersigned or to the undersigned at an address other
than that shown below the undersigned's signature(s).
Mail check and/or certificates to:
Name:
(Please Print)
Address:
-----------------------------------------------
- -------------------------------------------------------
(Zip Code)
- -------------------------------------------------------
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
<PAGE> 20
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Guarantee Program, the Stock
Exchange Medallion Program, or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this revised Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. Delivery of Letter of Transmittal and Shares. For a stockholder validly
to tender Shares pursuant to the Offer, either a properly completed and duly
executed revised Letter of Transmittal or the original Letter of Transmittal (or
facsimile thereof) is to be used either if certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if the delivery of Shares is to be made by book-entry transfer
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Certificates for all physically delivered Shares, or a confirmation of a
book-entry transfer into the Depositary's account at one of the Book-Entry
Transfer Facilities of all Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) and any other documents required by this revised Letter of
Transmittal, or an Agent's Message in the case of a book-entry delivery, must be
received by the Depositary at one of its addresses set forth on the front page
of this revised Letter of Transmittal by the Expiration Date. Stockholders who
cannot deliver their Shares and all other required documents to the Depositary
by the Expiration Date must tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to
such procedures: (a) such tender must be made by or through an Eligible
Institution; (b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror, must be received by
the Depositary prior to the Expiration Date; and (c) the certificates for all
tendered Shares, in proper form for tender, or a confirmation of a book-entry
transfer into the Depositary's account at one of the Book-Entry Transfer
Facilities of all Shares delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), and any other documents required by this revised Letter of
Transmittal must be received by the Depositary within three trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided in
Section 3 of the Offer to Purchase. The term "trading day" is any day on which
the New York Stock Exchange is open for business.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY A CONFIRMATION OF A BOOK-ENTRY TRANSFER). IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
<PAGE> 21
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing a Letter of Transmittal (or a
manually signed facsimile thereof), the tendering stockholder waives any right
to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares represented by any certificate delivered
to the Depositary are to be tendered, fill in the number of Shares which are to
be tendered in the box entitled "Number of Shares Tendered." In such case, a new
certificate for the remainder of the Shares represented by the old certificate
will be sent to the person(s) signing this revised Letter of Transmittal unless
otherwise provided in the appropriate box on this revised Letter of Transmittal,
as promptly as practicable following the expiration or termination of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this revised Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this revised Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this revised Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
Shares not tendered or not purchased are to be returned, in the name of any
person other than the registered holder(s), in which case the certificate(s) for
such Shares tendered hereby must be endorsed, or accompanied by, appropriate
stock powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on the certificate for such Shares. Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this revised Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this revised Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of the authority of such person so to act must be
submitted.
6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS REVISED
LETTER OF TRANSMITTAL.
<PAGE> 22
7. Special Payment and Delivery Instruction. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this revised Letter of Transmittal or if the check or any certificates
for Shares not tendered or not purchased are to be mailed to someone other than
the person(s) signing this revised Letter of Transmittal or to the person(s)
signing this revised Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this revised Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer may request that
Shares not purchased be credited to such account at any of the Book-Entry
Transfer Facilities as such stockholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facilities
designated above.
8. Substitute Form W-9. The tendering stockholder is required to provide
the Depositary with such stockholder's correct TIN on Substitute Form W-9, which
is provided below, unless an exemption applies. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
a $50 penalty and to 31% federal income tax backup withholding on the payment of
the purchase price for the Shares.
9. Foreign Holders. Foreign holders must submit a completed IRS Form W-8 to
avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this revised Letter of
Transmittal.
10. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of the Offer to Purchase, the Supplement and this revised
Letter of Transmittal may be obtained from the Information Agent or the Dealer
Manager at their respective addresses or telephone numbers set forth below.
11. Waiver of Conditions. The conditions of the Offer may be waived by the
Offeror (subject to certain limitations in the Merger Agreement), in whole or in
part, at any time or from time to time, in the Offeror's sole discretion.
IMPORTANT: THIS REVISED LETTER OF TRANSMITTAL OR THE ORIGINAL LETTER OF
TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF OR THEREOF (TOGETHER WITH
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9. If such stockholder is an
individual, the TIN is such stockholder's Social Security Number. If the
Depositary is not provided with the correct TIN, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such stockholder with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
<PAGE> 23
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of such stockholder's correct
TIN by completing the form certifying that the TIN provided on the Substitute
Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report.
<PAGE> 24
SIGN HERE
(Complete Substitute Form W-9 below)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
- -----------------------------------------------------------
(See Substitute Form W-9)
Dated:
- -------------------------------------------------------------------------------,
1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Dated:
- -------------------------------------------------------------------------------,
1997
- --------------------------------------------------------------------------------
<PAGE> 25
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: SUNTRUST BANK, ATLANTA
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT
FORMW-9 AND CERTIFY BY SIGNING AND DATING BELOW. TIN:
Social Security Number
or Employer
Identification Number
-------------------------------------------------------------------------------------------
Department of the PART II--For Payees exempt from backup withholding, see the enclosed Guidelines for
Treasury, Internal Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
Revenue Service instructed therein.
PAYOR'S REQUEST FOR -----------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION Certification--Under penalties of perjury, I certify that:
NUMBER ("TIN") AND
CERTIFICATION (1) The number shown on this form is my correct TIN (or I am waiting for a number
to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividend, or (c) the IRS has notified me that I am no longer
subject
to backup withholding.
-----------------------------------------------------------------------------------------
SIGNATURE DATE: ________________
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have
mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social
Security Administration Officer or (2) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments
pursuant to the Offer made to me thereafter will be withheld until I provide a number.
Signature: Date:
-------------------------------------------- ----------------------
</TABLE>
<PAGE> 26
The Information Agent for the Offer is:
MORROW & CO., INC. LOGO
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
(212) 816-2592
<PAGE> 1
Execution Copy
--------------
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
WALLACE COMPUTER SERVICES, INC.,
GREENWICH ACQUISITION CORP.,
AND
GRAPHIC INDUSTRIES, INC.
DATED AS OF OCTOBER 12, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
<TABLE>
ARTICLE I
The Offer
<S> <C> <C>
SECTION 1.01. The Offer 2
SECTION 1.02. Company Actions 4
ARTICLE II
The Merger
SECTION 2.01. The Merger 6
SECTION 2.02. Closing 6
SECTION 2.03. Effective Time 6
SECTION 2.04. Effects of the Merger 6
SECTION 2.05. Articles of Incorporation and By-laws 6
SECTION 2.06. Directors 7
SECTION 2.07. Officers 7
SECTION 2.08. Option to Consummate Acquisition Solely Through Merger 7
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituet Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock 7
(a) Capital Stock of Sub 7
(b) Cancellation of Treasury Stock and Parent
Owned Stock 7
(c) Conversion of Shares and Class B Shares 8
(d) Shares of Dissenting Stockholders 8
SECTION 3.02. Exchange of Certificates 8
(a) Paying Agent 8
(b) Exchange Procedure 9
(c) No Further Ownership Rights in Shares
or Class B Shares 10
(d) Termination of Payment Fund 10
(e) No Liability 10
</TABLE>
-i-
<PAGE> 3
<TABLE>
ARTICLE IV
Representations and Warranties of the Company
<S> <C> <C>
SECTION 4.01. Organization 11
SECTION 4.02. Subsidiaries 11
SECTION 4.03. Capitalization 11
SECTION 4.04. Authority 12
SECTION 4.05. Consents and Approvals; No Violations 12
SECTION 4.06. SEC Reports and Financial Statements 13
SECTION 4.07. Absence of Certain Changes or Events 14
SECTION 4.08. No Undisclosed Liabilities 15
SECTION 4.09. Information Supplied 15
SECTION 4.10. Benefit Plans; Employees and Employment
Practices 16
SECTION 4.11. Contracts; Indebtedness 19
SECTION 4.12. Litigation 19
SECTION 4.13. Compliance with Applicable Law 20
SECTION 4.14. Tax Matters 20
SECTION 4.15. State Takeover Statutes; Charter Provisions 22
SECTION 4.16. Environmental Matters 22
SECTION 4.17. Intellectual Property 23
SECTION 4.18. Brokers; Schedule of Fees and Expenses 24
SECTION 4.19. Opinion of Financial Advisor 24
ARTICLE V
Representations and Warranties of Parent and Sub
SECTION 5.01. Organization 25
SECTION 5.02. Authority 25
SECTION 5.03. Consents and Approvals; No Violations 25
SECTION 5.04. Information Supplied 26
SECTION 5.05. Interim Operations of Sub 26
SECTION 5.06. Brokers 26
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company 26
(a) Ordinary Course 26
(b) Dividends; Changes in Stock 27
(c) Issuance of Securities 27
(d) Governing Documents 27
(e) No Acquisitions 27
(f) No Dispositions 28
(g) Indebtedness 28
(h) Advice of Changes; Filings 28
(i) Tax Matters 28
(j) Capital Expenditures 29
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
(k) Discharge of Liabilities 29
(l) Benefit Plans 29
(m) Compensation 29
(n) Material Contracts 29
(o) General 30
SECTION 6.02. No Solicitation 30
SECTION 6.03. Third Party Standstill Agreements 32
SECTION 6.04. Other Actions 32
SECTION 6.05. Certain Waivers and Consents 32
SECTION 6.06. Information Relating to Certain
Benefit Plans 32
SECTION 6.07. Certain Deliveries 33
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy
Statement 33
SECTION 7.02. Access to Information 34
SECTION 7.03. Reasonable Best Efforts 35
SECTION 7.04. Directors 35
SECTION 7.05. Fees and Expenses 36
SECTION 7.06. Indemnification; Insurance 37
SECTION 7.07. Certain Litigation 37
SECTION 7.08. Stock-Based Compensation 38
SECTION 7.09. Allocation of Shares Under Qualified Plans 38
ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation To
Effect the Merger 39
(a) Company Stockholder Approval 39
(b) No Injunctions or Restraints 39
(c) Purchase of Shares 39
SECTION 8.02. Conditions to Each Party's Obligation to Effect
the Merger Upon Exercise of the Merger Option 39
(a) Company Stockholder Approval 39
(b) No Injunctions or Restraints 39
(c) Performance of Obligations; Representations
and Warranties 39
(d) HSR Period 40
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination 40
SECTION 9.02. Effect of Termination 41
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 9.03. Amendment 41
SECTION 9.04. Extension; Waiver 42
ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations, Warranties
and Agreements 42
SECTION 10.02. Notices 42
SECTION 10.03. Interpretation 43
SECTION 10.04. Counterparts 44
SECTION 10.05. Entire Agreement; No Third Party
Beneficiaries 44
SECTION 10.06. Governing Law 44
SECTION 10.07. Publicity 44
SECTION 10.08. Assignment 44
SECTION 10.09. Merger of the Company into Sub 45
SECTION 10.10. Enforcement 45
</TABLE>
-iv-
<PAGE> 6
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement") dated
as of October 12, 1997, among WALLACE COMPUTER SERVICES, INC., a Delaware
corporation ("Parent"), GREENWICH ACQUISITION CORP., a Georgia corporation and
a wholly owned subsidiary of Parent ("Sub"), and GRAPHIC INDUSTRIES, INC., a
Georgia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Parent, Sub and the Company are parties to that certain Agreement
and Plan of Merger dated as of September 28, 1997 (the "Original Merger
Agreement");
WHEREAS, pursuant to the Original Merger Agreement, on October 3, 1997 Sub
commenced a tender offer (the "Existing Offer") to purchase the shares of
Common Stock, par value $.10 per share, of the Company (the "Company Common
Stock"; the shares of Company Common Stock being hereinafter referred to as the
"Shares") at a purchase price of $18.50 per share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Original Merger Agreement, in furtherance of the acquisition of
the Company by Parent;
WHEREAS, Parent, Sub and the Company wish to amend the Original Merger
Agreement to provide for the amendment of the offer price to be paid for the
Shares in Sub's tender offer and the consideration to be paid for the Shares
and the Class B Shares (as defined below) in the Merger (as defined below) and
to make certain other amendments to the Original Merger Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub
to amend the Existing Offer (as so amended and as it may be further amended
from time to time as permitted under this Agreement, the "Offer") to increase
the purchase price for the Shares to $21.75 per share (such amount, or any
higher price that may be paid for each Share in the Offer, being hereinafter
referred to as the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this
Agreement; and the Board of Directors of the Company has adopted resolutions
approving the Offer and the Merger and recommending that holders of Shares
accept the Offer and that the Company's stockholders approve and adopt this
Agreement;
<PAGE> 7
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each approved the merger of Sub into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement, whereby each
of the Shares and each share of Class B Common Stock, par value $.10 per share,
of the Company (the "Class B Common Stock"; the shares of Class B Common Stock
being hereinafter referred to as the "Class B Shares"), other than the Shares
and Class B Shares owned directly or indirectly by Parent or the Company and
Dissenting Shares (as defined in Section 3.01(d)), will be converted into the
right to receive the Offer Price;
WHEREAS, the Board of Directors of the Company has approved the terms of
the Amended and Restated Stockholder Agreement (the "Stockholder Agreement") to
be entered into by Parent, Sub and Mark C. Pope III, as a stockholder of the
Company, concurrently with the execution of this Agreement as an inducement to
Parent to enter into this Agreement, which Amended and Restated Stockholder
Agreement supersedes the Stockholder Agreement dated as of September 28, 1997
among such parties (the "Original Stockholder Agreement"); and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
The Offer
--------
SECTION 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of
this Agreement, Sub shall, and Parent shall cause Sub to, amend the Existing
Offer to reflect the Offer Price and to make such other amendments as are
necessary to conform the Existing Offer to this Agreement. The obligation of
Sub to, and of Parent to cause Sub to, amend the Offer and accept for payment,
and pay for, any Shares tendered pursuant to the Offer shall be subject only to
the conditions set forth in Exhibit A (the "Offer Conditions") and to the terms
and conditions of this Agreement, including the Merger Option (as defined
herein) (any of which may be waived in whole or in part by Sub in its sole
discretion, except that Sub shall not waive the Minimum Condition (as defined
in Exhibit A) without the consent of the Company). Sub expressly reserves the
-2-
<PAGE> 8
right to modify the terms of the Offer, except that, without the consent of the
Company, Sub shall not (i) reduce the number of Shares subject to the Offer,
(ii) reduce the Offer Price, (iii) impose any other conditions to the Offer
other than the Offer Conditions or modify the Offer Conditions (other than to
waive any Offer Conditions to the extent permitted by this Agreement), (iv)
except as provided in the next sentence, extend the Offer or (v) change the form
of consideration payable in the Offer. Notwithstanding the foregoing, Sub may,
without the consent of the Company, (i) extend the Offer, if at the scheduled or
extended expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or the staff thereof applicable to the Offer and (iii) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 15
business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence, in each case subject to the
right of Parent, Sub or the Company to terminate this Agreement pursuant to the
terms hereof. Parent and Sub agree that if at any scheduled expiration date of
the Offer, the Minimum Condition or the HSR Condition (as defined in Exhibit A)
shall not have been satisfied and none of the conditions set forth in
paragraphs (a), (b), (c), (d), (e), (f), (g) or (h) of Exhibit A shall exist,
at therequest of the Company (confirmed in writing), Sub shall extend the
Offer from time to time, subject to the right of Parent, Sub or the Company to
terminate this Agreement pursuant to the terms hereof. Subject to the terms
and conditions of the Offer and this Agreement, Sub shall, and Parent shall
cause Sub to, accept for payment, and pay for, all Shares validly tendered and
not withdrawn pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) On the date of amendment of the Existing Offer, Parent and Sub shall
file with the SEC an amendment (the "14D-1 Amendment") to its Tender Offer
Statement on Schedule 14D-1 dated as of October 3, 1997 (as amended from time
to time, the "Schedule 14D-1") with respect to the Offer, which shall contain
such amendments and supplements to the offer to purchase and a related letter
of transmittal and summary advertisement as Parent, in its reasonable judgment,
shall deem necessary (such Schedule 14D-1 and the documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"), and Parent and Sub shall cause to
be disseminated the Offer Documents to holders of Shares as and to the extent
required by applicable Federal securities laws. Parent, Sub and the Company
each agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and
-3-
<PAGE> 9
Parent and Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to holders of Shares, in each case as and to
the extent required by applicable Federal securities laws. The Company and its
counsel shall be given reasonable opportunity to review and comment upon the
Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company. Parent and Sub agree to provide the Company and
its counsel any comments Parent, Sub or their counsel may receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments and to cooperate with the Company and its counsel in responding
to any such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely basis
the funds necessary to accept for payment, and pay for, any Shares that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors
of the Company, at a meeting duly called and held, at which all directors were
present, duly and unanimously adopted resolutions approving and adopting this
Agreement, approving the Offer, the Merger and the Stockholder Agreement,
determining that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders and recommending that holders of
Shares accept the Offer and that the Company's stockholders approve this
Agreement and the Merger. The Company represents and warrants that its Board
of Directors has received the opinion of Interstate/Johnson Lane Corporation
that the proposed consideration to be received by holders of Shares pursuant to
the Offer, and by holders of Shares and Class B Shares pursuant to the Merger,
is fair to such holders from a financial point of view, and a complete and
correct signed copy of such opinion will be promptly delivered by the Company
to Parent. The Company has been advised by each of its directors and executive
officers that each such person intends to tender all Shares owned by such
person pursuant to the Offer.
(b) On the date the 14D-1 Amendment is filed with the SEC, the Company
shall file with the SEC an amendment to its Solicitation/ Recommendation
Statement on Schedule 14D-9 dated as of October 3, 1997 with respect to the
Existing Offer (such Schedule 14D-9, as amended from time to time, the
"Schedule 14D-9") containing the recommendation described in paragraph (a)
(subject to the right of the Board of Directors of the Company to withdraw or
modify its approval or recommendation of the Offer, the Merger and this
Agreement as set forth in Section 6.02(b)), and the Company shall cause to be
disseminated the Schedule 14D-9 to holders of Shares as and to the extent
required by applicable Federal securities laws. Each of the
-4-
<PAGE> 10
Company, Parent and Sub agrees promptly to correct any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or supplement the Schedule
14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to holders of Shares, in each case as and to the
extent required by applicable Federal securities laws. Parent and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to stockholders of the
Company. The Company agrees to provide Parent and its counsel any comments the
Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments and to cooperate
with Parent, Sub and their counsel in responding to any such comments.
(c) In connection with the Offer and the Merger, the Company shall cause
its transfer agent or agents to furnish Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares and Class B
Shares as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of stockholders,
security position listings and computer files and all other information in the
Company's possession or control, to the extent reasonably available to the
Company, regarding the beneficial owners of Shares, Class B Shares and any
securities convertible into Shares, and shall furnish to Sub such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Parent 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 Merger,
Parent and Sub and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information
only in connection with the Offer and the Merger and, if this Agreement shall
be terminated, will, upon request, deliver, and will use their best efforts to
cause their agents to deliver, to the Company all copies of such information
then in their possession or control.
(d) The Company shall transmit to each holder of Class B Shares
contemporaneously with the transmission of the Offer Documents to the holders
of Shares (i) the Offer Documents, (ii) a letter stating that holders of Class
B Shares who wish to participate in the Offer must request the conversion of
their Class B Shares into Shares pursuant to the Amended and Restated Articles
of Incorporation of the Company and (iii) a form of conversion request, which
conversion request shall provide that a holder of Class B Shares requests
conversion thereof simultaneous with Sub's first acceptance for payment of
Shares pursuant to the
-5-
<PAGE> 11
Offer, and that the Shares received upon such conversion shall be deemed
validly tendered pursuant to the Offer.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Georgia Business
Corporation Code (the "GBCC"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 2.03). Following the Effective Time,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the GBCC.
SECTION 2.02. Closing. The closing of the Merger will take place at 10:00
a.m. on a date mutually agreed to by Parent and the Company, which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the GBCC and shall make all other filings or recordings required
under the GBCC. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Georgia, or at such other time as Sub and the Company shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the effects
set forth in Section 14-2-1106 of the GBCC.
SECTION 2.05. Articles of Incorporation and By-laws. (a) The Amended and
Restated Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended as of the Effective Time so
that Article V of such Amended and Restated Articles of Incorporation reads in
its entirety as follows: "The total number of shares of all classes of stock
that the corporation shall have authority to issue is 1,000 shares of Common
Stock, par value $.10 per share. Any references to Class B Common Stock, Class B
Stock or Preferred Stock contained in any other Article hereof shall be
-6-
<PAGE> 12
disregarded." Such Amended and Restated Articles of Incorporation, as so
amended, shall be the articles of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) The By-laws of Sub as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 2.08. Option to Consummate Acquisition Solely Through Merger.
Notwithstanding anything to the contrary contained in this Agreement, Parent
may, at its option and upon written notice to the Company, elect to terminate
the Offer and seek to acquire the Company solely by means of the Merger (the
"Merger Option"). If Parent elects to exercise the Merger Option, the Merger
shall be subject to the conditions set forth in Section 8.02 hereof (instead of
Section 8.01 hereof). Upon Parent's election of the Merger Option, the Company
shall promptly take the actions described in Section 7.01 with respect to
obtaining the Company Stockholder Approval. To the extent deemed necessary by
Parent in connection with the exercise of the Merger Option, the Company shall
enter into an amendment and restatement of this Agreement with Parent and Sub.
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Shares or Class B Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $.10 per share, of the
Surviving Corporation.
-7-
<PAGE> 13
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
Share and Class B Share that is owned by the Company or by any subsidiary
of the Company and each Share and Class B Share that is owned by Parent,
Sub or any other subsidiary of Parent shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor.
(c) Conversion of Shares and Class B Shares. Subject to Section
3.01(d), each Share and Class B Share issued and outstanding (other than
Shares and Class B Shares to be canceled in accordance with Section
3.01(b)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price (the "Merger
Consideration"). As of the Effective Time, all such Shares and Class B
Shares 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 or Class B Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Stockholders.
Notwithstanding anything in this Agreement to the contrary, any issued and
outstanding Shares or Class B Shares held by a person (a "Dissenting
Stockholder") who objects to the Merger and complies with all the
provisions of GBCC concerning the right of holders of Shares and/or Class
B Shares to dissent from the Merger and require appraisal of their Shares
and/or Class B Shares ("Dissenting Shares") shall not be converted as
described in Section 3.01(c), but shall be converted into the right to
receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the GBCC. If, after the Effective
Time, such Dissenting Stockholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the GBCC, his Shares and/or Class B Shares shall be deemed to
be converted as of the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any
demands for appraisal of Shares or Class B Shares received by the Company
and (ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not,
without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to
the Effective Time, Parent shall designate a bank or trust company to act as
paying agent in the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make available, or cause the
-8-
<PAGE> 14
Surviving Corporation to make available, to the Paying Agent cash in amounts
and at the times necessary for the payment of the Merger Consideration
upon surrender of certificates representing Shares or Class B Shares as part of
the Merger pursuant to Section 3.01 (it being understood that any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent).
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares or Class B Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of
a Certificate for cancellation to the Paying Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
Shares or Class B Shares theretofore represented by such Certificate shall
have been converted pursuant to Section 3.01, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares or Class B Shares that is not registered in the
transfer records of the Company, payment may be made to a person other
than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall
pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish
to the satisfaction of the Surviving Corporation that such tax has been
paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares or Class B Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 3.01. No interest will be paid or will accrue on the
cash payable upon the surrender of any Certificate. Parent, Sub, the
Surviving Corporation, the Company or the Paying Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Shares or Class B Shares such amounts
as Parent, Sub, the Surviving Corporation, the Company or the Paying Agent
is required to deduct and withhold with respect to the making of such
payment under the Code (as hereinafter defined) or under any
-9-
<PAGE> 15
provisions of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent, Sub, the Surviving Corporation, the
Company or the Paying Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the
Shares or Class B Shares in respect of which such deduction or
withholding was made by Parent, Sub, the Surviving Corporation, the
Company or the Paying Agent.
(c) No Further Ownership Rights in Shares or Class B Shares. All cash
paid upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares and Class B Shares theretofore represented by such
Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares and the Class B
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Article III.
(d) Termination of Payment Fund. Any portion of the funds made
available to the Paying Agent to pay the Merger Consideration which remains
undistributed to the holders of Shares or Class B Shares for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
Shares or Class B Shares who have not theretofore complied with this Article III
and the instructions set forth in the letter of transmittal mailed to such
holders after the Effective Time shall thereafter look only to Parent for
payment of the Merger Consideration to which they are entitled.
(e) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article III would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 4.05)), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.
-10-
<PAGE> 16
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.01. Organization. The Company and each of its subsidiaries
(as defined in Section 10.03) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
being conducted. The Company and each of its subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a material adverse effect (as defined in Section 10.03)
on the Company or prevent or materially delay the consummation of the Offer
and/or the Merger. The Company has delivered to Parent complete and correct
copies of its Amended and Restated Articles of Incorporation and By-laws
and the articles of incorporation and by-laws (or similar organizational
documents) of its subsidiaries.
SECTION 4.02. Subsidiaries. Item 4.02 of the letter from the Company
to Parent dated as of September 28, 1997, which letter relates to the Original
Merger Agreement and is designated therein as the Company Disclosure Letter (the
"Company Letter") lists each subsidiary of the Company. Except as set forth in
Item 4.02 of the Company Letter, all the outstanding shares of capital stock of
each such subsidiary are owned by the Company, by another wholly owned
subsidiary of the Company or by the Company and another wholly owned subsidiary
of the Company, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), and are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Item 4.02 of the Company Letter and
except for the capital stock of its subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture, limited liability company or other
entity.
SECTION 4.03. Capitalization. The authorized capital stock of the
Company consists of 20,000,000 Shares, 10,000,000 Class B Shares and 500,000
shares of Preferred Stock, no par value per share. At the close of business on
September 26, 1997, (i) 8,086,951 Shares were issued and outstanding, (ii)
83,287 Shares were held by the Company in its treasury, (iii) 1,506,163 Shares
were reserved for issuance upon exercise of options to purchase Shares ("Company
Stock Options") issued pursuant to the
-11-
<PAGE> 17
Company's stock option plans, (iv) 307,374 shares were reserved for issuance
under the Company's Associate Stock Purchase Plan and 477,786 shares were
reserved for issuance under the Company's 1992 Stock Award Plan, (v) 1,190,954
Shares were reserved for issuance upon conversion of the Company's 7%
Convertible Subordinated Debentures due May 15, 2006 (the "Convertible
Debentures"), (vi) 4,518,817 Class B Shares were issued and outstanding and
(vii) no Class B Shares were held by the Company in its treasury. Except as
set forth above, as of the date of this Agreement, no shares of capital stock
or other voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and
all shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth above, there are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth above, as of the
date of this Agreement, there are not any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries
or obligating the Company or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement, there
are not any outstanding contractual obligations of the Company or any of its
subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or (ii) to vote or to dispose of any shares of the
capital stock of any of the Company's subsidiaries.
SECTION 4.04. Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and, subject to the
approval of this Agreement by the holders of a majority of the combined voting
power of the Shares and the Class B Shares (the "Company Stockholder
Approval"), to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation by the Company
of the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated (in
each case, other than, with respect to the Merger, the Company Stockholder
Approval). This Agreement has been duly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding
-12-
<PAGE> 18
obligation of Parent and Sub, constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
SECTION 4.05. Consents and Approvals; No Violations. Except as set forth
in Item 4.05 of the Company Letter, and except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including the filing with the SEC of the Schedule 14D-9
and a proxy statement relating to any required Company Stockholder Approval
(the "Proxy Statement")), the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the GBCC, the laws of other states in which
the Company is qualified to do or is doing business, state takeover laws and
foreign and supranational laws relating to antitrust and anticompetition
clearances, neither the execution, delivery or performance of this Agreement by
the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the Amended and Restated Articles of Incorporation or By-laws of
the Company or of the similar organizational documents of any of its
subsidiaries, (ii) require any filing with, or permit, authorization, consent
or approval of, any Federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material
adverse effect on the Company or prevent or materially delay the consummation
of the Offer and/or the Merger), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its subsidiaries or any of their properties
or assets, except in the case of clauses (iii) or (iv) for violations, breaches
or defaults that would not have a material adverse effect on the Company or
prevent or materially delay the consummation of the Offer and/or the Merger.
SECTION 4.06. SEC Reports and Financial Statements. The Company and
each of its subsidiaries has filed with the SEC, and has heretofore made
available to Parent true and complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it since February 1,
1994, under the Exchange Act or the Securities Act of 1933 (the
-13-
<PAGE> 19
"Securities Act") (such forms, reports, schedules, statements and other
documents, including any financial statements or schedules included therein,
are referred to as the "Company SEC Documents"). The Company SEC Documents, at
the time filed, (a) did not contain any untrue statement of a material fact or
omit to state a 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 and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder.
Except to the extent that information contained in any Company SEC Document has
been revised or superseded by a subsequently filed Company Filed SEC Document
(as defined in Section 4.07) (a copy of which has been made available to Parent
prior to the date hereof), none of the Company SEC Documents contains an untrue
statement of a material fact or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the Company
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
SECTION 4.07. Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Company Filed SEC Documents") or in Item 4.07 of
the Company Letter, since February 1, 1997, the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course, and
there has not been (i) any material adverse change with respect to the Company,
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock (other than regular quarterly
cash dividends not in excess of $.07 per Share and $.05 per Class B Share with
usual record and payment dates and in accordance with the Company's present
dividend policy) or any redemption, purchase or other acquisition of any of its
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (x) any granting by the Company
-14-
<PAGE> 20
or any of its subsidiaries to any officer of the Company or any of its
subsidiaries of any increase in compensation, except in the ordinary course of
business (including in connection with promotions) consistent with past
practice or as was required under employment agreements in effect as of
September 26, 1997, (y) any granting by the Company or any of its subsidiaries
to any such officer of any increase in severance or termination pay, except as
part of a standard employment package to any person promoted or hired, or as
was required under employment, severance or termination agreements in effect as
of September 26, 1997, or (z) except employment agreements in the ordinary
course of business consistent with past practice with employees other than any
executive officer of the Company, any entry by the Company or any of its
subsidiaries into any employment, consulting, severance, termination or
indemnification agreement with any such employee or executive officer, (v) any
damage, destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a material adverse effect on the Company,
(vi) any revaluation by the Company of any of its material assets or (vii) any
material change in accounting methods, principles or practices by the Company.
SECTION 4.08. No Undisclosed Liabilities. Except as and to the extent
set forth in Item 4.08 of the Company Letter or in the Company's Annual Report
to Shareholders for the fiscal year ended January 31, 1997, as of January 31,
1997, neither the Company nor any of its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto). Since January 31, 1997, except as and to the extent set forth
in Item 4.08 of the Company Letter or in the Company Filed SEC Documents,
neither the Company nor any of its subsidiaries has incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, that would be
reasonably expected to have a material adverse effect on the Company.
SECTION 4.09. Information Supplied. None of the information supplied
or to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
(iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting (as
defined in Section 7.01), contain any untrue statement of a
-15-
<PAGE> 21
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 are made, not misleading. The Schedule 14D-9,
the Information Statement and the Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
SECTION 4.10. Benefit Plans; Employees and Employment Practices. (a)
Except as disclosed in the Company Filed SEC Documents or Item 4.10(a) of the
Company Letter, since the date of the most recent audited financial statements
included in the Company Filed SEC Documents, there has not been any adoption or
amendment in any material respect (including any increase or improvements in
benefits or coverage) by the Company or any of its subsidiaries of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, fringe benefit, excess supplemental
executive compensation, employee stock purchase, stock appreciation, restricted
stock or other material employee benefit plan, policy, arrangement or
understanding (whether or not in writing) providing benefits to any current or
former employee, officer or director of the Company or any of its subsidiaries
(collectively, "Benefit Plans"); provided that, with respect to any Benefit
Plans sponsored by a subsidiary of the Company, the foregoing representation is
limited to the actual knowledge of the Company. Except as disclosed in Item
4.10(a) of the Company Letter, there exist no employment, consulting,
severance, termination or indemnification agreements, or any other similar
arrangements or understandings (whether or not in writing) between the Company
or any of its subsidiaries and any current or former employee, officer or
director of the Company or any of its subsidiaries.
(b) Item 4.10(b) of the Company Letter contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to
herein as "Pension Plans"), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) and all other Benefit Plans maintained, sponsored or
contributed to, by the Company or any of its subsidiaries for the benefit of
any current or former employees, officers or directors of the Company or any of
such subsidiaries (the "Subject Benefit Plans"); provided that, with respect to
any Subject Benefit Plans sponsored by a subsidiary of the Company
("Subsidiary Subject Benefit Plans"), the foregoing representation is limited
to the actual knowledge of the Company.
-16-
<PAGE> 22
The Company has delivered to Parent true, complete and correct copies of
(i) each Subject Benefit Plan listed in Item 4.10(b) of the Company Letter,
including any amendments thereto (or, in the case of any unwritten Subject
Benefit Plans, descriptions thereof), (ii) the most recent annual report on
Form 5500 (and related schedules and financial statements or opinions required
in connection therewith) filed with the Internal Revenue Service with respect
to each such Subject Benefit Plan (if any such report was required), (iii) if
applicable, the most recent actuarial report with respect to each such Subject
Benefit Plan, (iv) the most recent summary plan description (and a summary of
material modifications, if applicable) for each such Subject Benefit Plan, (v)
if applicable, the most recent determination letter issued by the Internal
Revenue Service with respect to each such Subject Benefit Plan and (vi) if
applicable, each trust agreement and group annuity contract relating to each
such Subject Benefit Plan. Any Benefit Plan that is not a Subject Benefit Plan
is either required by and maintained in accordance with applicable local law or
is immaterial to the applicable subsidiary.
(c) Except as disclosed in Item 4.10(c) of the Company Letter, all
Pension Plans listed in Item 4.10(b) of the Company Letter which are intended
to be tax-qualified have been timely amended to comply with ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), including changes
required by the Unemployment Compensation Amendments of 1992 and the Omnibus
Budget Reconciliation Act of 1993, and determination letters in respect of such
Pension Plans have been received from the Internal Revenue Service to the
effect that such Pension Plans are qualified and exempt from Federal income
taxes under Section 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the best knowledge of the
Company, has revocation been threatened, nor has any such Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification or
materially increase its costs. With respect to any Pension Plan maintained
by a subsidiary of the Company, the representation set forth in the preceding
sentence is limited to the actual knowledge of the Company.
(d) Except as disclosed in Item 4.10(d) of the Company Letter, each
Benefit Plan has been administered in all material respects in conformity with
its terms and the applicable requirements of ERISA and the Code and other
applicable laws; and all contributions required to be made have been made in
accordance with the provisions of each such Benefit Plan and with ERISA and the
Code and other applicable laws.
(e) Except as disclosed in on Item 4.10(e) of the Company Letter, none of
the Company or any of its subsidiaries, or any other person or entity that,
together with the Company, is
-17-
<PAGE> 23
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code,
currently maintains or has maintained, or has or had any obligation to
contribute to, during the five-year period preceding the date hereof any
"defined benefit plan" (within the meaning of Section 3(35) of ERISA) or any
"multiemployer plan" (within the meaning of Section 3(37) of ERISA), or has
incurred any liability under Title IV of ERISA or to the Pension Benefit
Guaranty Corporation that has not been fully paid as of the date hereof. None
of the Company, any officer of the Company, any of the Benefit Plans which are
subject to ERISA, including the Pension Plans, any trusts created thereunder
or, to the knowledge of the Company, any trustee or administrator thereof or
any subsidiary of the company (or officer thereof), has engaged in a non-exempt
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary responsibility that
could reasonably be expected to subject the Company, any of its subsidiaries or
any officer of the Company or any of its subsidiaries to any tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or to any liability
or civil penalty under Section 502(i) or (1) of ERISA.
(f) With respect to any Benefit Plan that is an employee welfare benefit
plan, except as disclosed in Item 4.10(f) of the Company Letter, (i) no such
Benefit Plan is funded through a "welfare benefits fund", as such term is
defined in Section 419(e) of the Code, (ii) each such Benefit Plan that is a
"group health plan," as such term is defined in Section 607 of ERISA, complies
with the applicable requirements of part 6 of Title I of ERISA, (iii) each such
Benefit Plan that is a "group health plan," as such term is defined in Section
706 of ERISA, complies with the applicable requirements of part 7 of Title I of
ERISA and (iv) except as disclosed on Item 4.10(f) of the Company Letter, each
such Benefit Plan (including any such Plan covering
retirees or other former employees) may be amended or terminated without
material liability to the Company or any of its subsidiaries on or at any time
after the consummation of the Offer.
(g) Except as disclosed on Item 4.10(g) of the Company Letter, with
respect to each Benefit Plan, all material reports and information required to
be filed with the U.S. Department of Labor, the Internal Revenue Service or
each Benefit Plan participant have been timely filed.
(h) There is no dispute, arbitration, claim, suit or grievance, pending
or threatened, involving a Benefit Plan (other than routine claims for benefits
payable under any such plan), and, to the knowledge of the Company, there is no
basis for such a claim.
(i) Item 4.10(i) of the Company Letter sets forth the names of all
current officers and directors of the Company and
-18-
<PAGE> 24
all employees of the Company whose compensation is in excess of $80,000 per
year, together with each employee's current salary, most recent bonus
(excluding sales bonuses), date of birth and date of employment.
(j) Except as disclosed in Item 4.10(j) of the Company Letter, there are
no material controversies, strikes, work stoppages or disputes pending or, to
the knowledge of the Company, threatened between the Company or any of its
subsidiaries and any current or former employees, no labor union or other
collective bargaining unit represents or has ever represented any employee of
the Company or any of its subsidiaries and no organizational effort by any
labor union or other collective bargaining unit currently is under way or
threatened with respect to any employee. A true, complete and correct copy of
any applicable collective bargaining agreement has been provided to Parent, and
the Company and its subsidiaries are in compliance in all material respects
with the terms thereof.
SECTION 4.11. Contracts; Indebtedness. (a) Except as disclosed in Item
4.11 of the Company Letter or in the Company Filed SEC Documents, there are no
contracts or agreements that are material to the business, properties, assets,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole. Neither the Company nor any of its subsidiaries
is in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, except for violations or
defaults that could not reasonably be expected to result in a material adverse
effect on the Company.
(b) Item 4.11 of the Company Letter sets forth (i) a list of all
agreements, instruments and other obligations pursuant to which any
indebtedness of the Company or any of its subsidiaries in a principal amount in
excess of $250,000 is outstanding or may be incurred and (ii) the respective
principal amounts outstanding thereunder as of August 31, 1997.
SECTION 4.12. Litigation. Except as disclosed in Item 4.12 of the
Company Letter or in the Company Filed SEC Documents, as of the date of this
Agreement, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries that could reasonably be expected to have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger. Except as disclosed in Item 4.12 of the Company
Letter or in the Company Filed SEC
-19-
<PAGE> 25
Documents, as of the date of this Agreement, neither the Company nor any of
its subsidiaries is subject to any outstanding judgment, order, writ,
injunction or decree that could reasonably be expected to have a material
adverse effect on the Company or prevent or materially delay the consummation
of the Offer and/or the Merger.
SECTION 4.13. Compliance with Applicable Law. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals that
would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except where the failure so to comply would not have a material adverse effect
on the Company or prevent or materially delay the consummation of the Offer
and/or the Merger. Except as disclosed in the Company Letter or in the Company
Filed SEC Documents, to the knowledge of the Company, the businesses of the
Company and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations that would not have a material adverse effect on the Company or
prevent or materially delay the consummation of the Offer and/or the Merger. To
the knowledge of the Company, except as set forth in the Company Filed SEC
Documents, as of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or threatened, other than, in each case, those the outcome of which
would not be reasonably expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or the
Merger.
SECTION 4.14. Tax Matters. Except as set forth in Item 4.14 of the
Company Letter:
(a) The Company and each of its subsidiaries has filed all Federal income
tax returns and reports and all other material tax returns and reports required
to be filed by it. All such returns and reports are complete and correct in
all material respects. The Company and each of its subsidiaries has paid (or
the Company has paid on its subsidiaries' behalf) all taxes (as defined below)
shown as due on such returns and reports and all material taxes for which no
return was required to be filed, and the most recent financial statements
contained in the Company Filed SEC Documents reflect an adequate reserve for
all taxes payable by the Company and its subsidiaries for all taxable periods
and portions thereof through the date of such financial statements.
(b) No material tax return of the Company or any of its subsidiaries is
under audit or, to the knowledge of the Company, examination by any taxing
authority. Each material
-20-
<PAGE> 26
deficiency resulting from any audit or examination relating to taxes of the
Company or any of its subsidiaries by any taxing authority has been paid.
No material issues relating to taxes were raised in writing by the relevant
taxing authority during any presently pending audit or examination, and no
material issues relating to taxes were raised in writing by the relevant taxing
authority in any completed audit or examination that can reasonably be expected
to recur in a later taxable period. The
Federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the Internal
Revenue Service for all years through the taxable year ended January 31, 1994.
(c) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes and no
power of attorney with respect to any taxes has been executed or filed with any
taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory
liens for taxes not yet due.
(e) None of the Company or any of its subsidiaries is a party to or is
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any advance
pricing agreement, closing agreement or other agreement relating to taxes with
any taxing authority), in all cases other than this Agreement.
(f) None of the Company or any of its subsidiaries shall be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of the Code
or comparable provisions of state, local or foreign tax law.
(g) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its subsidiaries under any contract, plan, program,
arrangement or understanding currently in effect.
(h) No amount or other entitlement that could be received (whether in
cash or property or the vesting of property) by any Person who, with respect to
the Company or any of its affiliates, is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Company Benefit Plan currently in
-21-
<PAGE> 27
effect will be characterized as an "excess parachute payment" or a
"parachute payment" (as such terms are defined in Section 280G(b)(1) of the
Code) as a result of any of the transactions contemplated by this Agreement.
(i) No taxes will be required to be withheld under Section 1445, and no
sales taxes, transfer, real property transfer or gains taxes, or similar taxes
will be imposed as a result of the transactions contemplated by this Agreement.
(j) As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, use, excise, employment, withholding
and other taxes, tariffs or governmental charges of any nature whatsoever,
together with any interest and penalties, and "tax return" shall include any
return, report 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.
SECTION 4.15. State Takeover Statutes; Charter Provisions. Section
14-2-1111 of the GBCC is inapplicable to the Offer, the Merger, this Agreement,
the Stockholder Agreement and the transactions contemplated by this Agreement
and the Stockholder Agreement. The action of the Board of Directors of the
Company in approving and adopting this Agreement and approving the Offer, the
Merger and the Stockholder Agreement is sufficient (i) to render inapplicable
to the Offer, the Merger, this Agreement, the Stockholder Agreement and the
transactions contemplated by this Agreement and the Stockholder Agreement the
supermajority voting provisions of Article VII of the Company's Amended and
Restated Articles of Incorporation and (ii) to comply with the provisions of
Section 14-2-1132 of the GBCC. To the knowledge of the Company, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Offer, the Merger, this Agreement, the Stockholder Agreement or
any of the transactions contemplated by this Agreement or the Stockholder
Agreement.
SECTION 4.16. Environmental Matters. (a) Except as set forth in Item
4.16 of the Company Letter, neither the Company nor any of its subsidiaries has
(i) placed, held, located, released, transported or disposed of any Hazardous
Substances (as defined below) on, under, from or at any of the Company's or any
of its subsidiaries' properties or any other properties, other than in a
manner that could not, in all such cases taken individually or in the
aggregate, reasonably be expected to result in a material adverse effect on the
Company, (ii) any knowledge or reason to know of the presence of any Hazardous
Substances on, under or at any of the Company's or any of its subsidiaries'
properties or any other property but arising from the Company's or any of its
subsidiaries' properties, other than in a manner that could not reasonably be
expected to result in a
-22-
<PAGE> 28
material adverse effect on the Company, or (iii) received any written notice
(A) of any violation of any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity relating to any matter of
pollution, protection of the environment, environmental regulation or control
or regarding Hazardous Substances on, under or emanating from any of the
Company's or any of its subsidiaries' properties or any other properties
(collectively, "Environmental Laws") that has not been resolved or settled with
the relevant Governmental Entity, (B) of the institution or pendency of any
suit, action, claim, proceeding or investigation by any Governmental Entity or
any third party in connection with any such violation, (C) requiring the
response to or remediation of Hazardous Substances at or arising from any of
the Company's or any of its subsidiaries' properties or any other properties,
(D) alleging noncompliance by the Company or any of its subsidiaries with the
terms of any permit required under any Environmental Law in any manner
reasonably likely to require material expenditures or to result in material
liability or (E) demanding payment for response to or remediation of Hazardous
Substances at or arising from any of the Company's or any of its subsidiaries'
properties or any other properties, except in each case for the notices set
forth in Item 4.16 of the Company Letter. For purposes of this Agreement, the
term "Hazardous Substance" shall mean any toxic or hazardous materials or
substances, including asbestos, buried contaminants, chemicals, flammable
explosives, radioactive materials, petroleum and petroleum products and any
substances defined as, or included in the definition of, "hazardous
substances", "hazardous wastes," "hazardous materials" or "toxic substances"
under any Environmental Law.
(b) Except as set forth in Item 4.16 of the Company Letter, no
Environmental Law imposes any obligation upon the Company or its subsidiaries
arising out of or as a condition to any transaction contemplated by this
Agreement or the Stockholder Agreement, including any requirement to modify or
to transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree, except
where any failure to notify or place any notice would not reasonably be expected
to result in a material adverse effect on the Company or prevent or materially
delay the consummation of the Offer and/or the Merger. No Lien has been placed
upon any of the Company's or its subsidiaries' properties under any
Environmental Law.
(c) Except as set forth in the Item 4.16 of the Company Letter, none of
the Company or any of its subsidiaries owns, operates or leases any facility
qualifying as an industrial establishment under the New Jersey Industrial Site
Recovery Act.
-23-
<PAGE> 29
SECTION 4.17. Intellectual Property. The Company and its subsidiaries
own, or are validly licensed or otherwise have the right to use, all patents,
patent rights, trademarks, trade names, service marks, copyrights, know how and
other proprietary intellectual property rights and computer programs
(collectively, "Intellectual Property Rights") that are material to the conduct
of the business of the Company and its subsidiaries taken as a whole. Item
4.17 of the Company Letter sets forth a description of all Intellectual
Property Rights that are material to the conduct of the business of the Company
and its subsidiaries taken as a whole. Except as set forth in Item 4.17 of the
Company Letter, no claims are pending or, to the knowledge of the Company,
threatened that the Company or any of its subsidiaries is infringing or
otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right so as to materially adversely affect any of the
Company's material Intellectual Property Rights, and the Company is not aware
of any basis for any such claims. To the knowledge of the Company, except as
set forth in Item 4.17 of the Company Letter, no person is infringing the
rights of the Company or any of its subsidiaries with respect to any material
Intellectual Property Right so as to materially adversely affect such
Intellectual Property Right.
SECTION 4.18. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than
Interstate/Johnson Lane Corporation and R. J. Wareham & Company, Incorporated,
the fees and expenses of which will be paid by the Company (and as reflected in
agreements between Interstate/Johnson Lane Corporation and the Company and R.
J. Wareham & Company, Incorporated and the Company, copies of which have been
furnished to Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The estimated fees and expenses incurred and to be
incurred by the Company in connection with this Agreement and the transactions
contemplated by this Agreement (including the fees of the Company's legal
counsel and the legal counsel for its financial advisor) are set forth in Item
4.18 of the Company Letter.
SECTION 4.19. Opinion of Financial Advisor. The Company has received the
opinion of Interstate/Johnson Lane Corporation, dated the date of this
Agreement, to the effect that, as of the date of this Agreement, the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a complete and correct signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to Parent.
-24-
<PAGE> 30
ARTICLE V
Representations and Warranties
of Parent and Sub
Parent and Sub represent and warrant to the Company as follows:
SECTION 5.01. Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted.
SECTION 5.02. Authority. Parent and Sub have requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and Sub and no other corporate proceedings on the part of Parent and Sub
are necessary to authorize this Agreement or to consummate such transactions.
This Agreement has been duly executed and delivered by Parent and Sub, as the
case may be, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, constitutes a valid and binding obligation of each
of Parent and Sub enforceable against them in accordance with its terms.
SECTION 5.03. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act (including the filing with
the SEC of the Offer Documents), the HSR Act, the GBCC, the laws of other
states in which Parent is qualified to do or is doing business, state takeover
laws and foreign and supranational laws relating to antitrust and
anticompetition clearances, neither the execution, delivery or performance of
this Agreement by Parent and Sub nor the consummation by Parent and Sub of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective certificate of incorporation or by-laws of
Parent and Sub, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity (except where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings
would not be reasonably expected to prevent or materially delay the
consummation of the Offer and/or the Merger), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which Parent or
-25-
<PAGE> 31
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Offer and/or the Merger.
SECTION 5.04. Information Supplied. None of the information supplied or
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in the case of the
Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy Statement, at the time the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, 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 are made, not misleading. The Offer Documents will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made
by Parent or Sub with respect to statements made or incorporated by reference
therein based on information supplied by the Company specifically for inclusion
or incorporation by reference therein.
SECTION 5.05. Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 5.06. Brokers. No broker, investment banker, financial advisor
or other person, other than Smith Barney Inc., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company. Until such time as Parent's
designees shall constitute a majority of the
-26-
<PAGE> 32
members of the Board of Directors of the Company, the Company agrees as to
itself and its subsidiaries that (except as expressly contemplated or permitted
by this Agreement or except to the extent that Parent shall otherwise consent
in writing):
(a) Ordinary Course. The Company shall, and shall cause its subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and shall use
all reasonable best efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with the Company and its subsidiaries.
(b) Dividends; Changes in Stock. The Company shall not, and shall not
permit any of its subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock (other than regular
quarterly cash dividends not in excess of $.07 per Share or $.05 per Class B
Share with usual record and payment dates and in accordance with the Company's
present dividend policy), except for dividends by a direct or indirect wholly
owned subsidiary of the Company to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities.
(c) Issuance of Securities. The Company shall not, and shall not permit
any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of,
any shares of its capital stock of any class or any securities convertible
into, or any rights, warrants, calls, subscriptions or options to acquire, any
such shares or convertible securities, or any other ownership interest
(including stock appreciation rights or phantom stock) other than (i) the
issuance of Shares upon the exercise of stock options pursuant to Stock-Based
Compensation Plans outstanding on the date of this Agreement and in accordance
with the terms of such stock options, (ii) the issuance of Shares upon the
conversion of Class B Shares, and (iii) the issuance of Shares upon the
conversion of any Convertible Debentures.
(d) Governing Documents. The Company shall not, and shall not permit any
of its subsidiaries to, amend or propose to amend its articles of
incorporation or by-laws (or similar organizational documents).
-27-
<PAGE> 33
(e) No Acquisitions. The Company shall not, and shall not permit any of
its subsidiaries to, acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, limited liability company,
association or other business organization or division thereof or (ii) any
assets having a purchase price in excess of $1,000,000, individually, or
$5,000,000, in the aggregate, except purchases of inventory in the ordinary
course of business consistent with past practice and expenditures consistent
with the Company's current capital budget previously furnished to Parent.
(f) No Dispositions. Except as disclosed in Item 6.01(f) of the Company
Letter, other than sales of its products to customers and immaterial
dispositions of personal property, in each case in the ordinary course of
business consistent with past practice, the Company shall not, and shall not
permit any of its subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of
its assets.
(g) Indebtedness. The Company shall not, and shall not permit any of its
subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business consistent with past practice, or (ii) make any loans, advances or
capital contributions to, or investments in, any other person, other than to
the Company or any direct or indirect wholly owned subsidiary of the Company,
except for travel advances made in the ordinary course of business.
(h) Advice of Changes; Filings. The Company shall confer on a regular
basis with Parent with respect to operational matters and promptly advise
Parent orally and in writing of any material adverse change with respect to
the Company. The Company shall promptly provide to Parent (or its counsel)
copies of all filings made by the Company with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
(i) Tax Matters. The Company shall not make any tax election that would
have a material effect on the tax liability of the Company or any of its
subsidiaries or settle or compromise any tax liability of the Company or any of
its subsidiaries that would materially affect the tax liability of the Company
or any
-28-
<PAGE> 34
of its subsidiaries. The Company shall, before filing or causing to be
filed any material tax return of the Company or any of its subsidiaries or
settling any tax liability not described in the preceding sentence, consult
with Parent and its advisors as to the positions and elections that may be
taken or made with respect to such return or with respect to such settlement.
(j) Capital Expenditures. Neither the Company nor any of its
subsidiaries shall make or agree to make any new capital expenditure or
expenditures other than expenditures consistent with the Company's current
capital budget previously furnished to Parent.
(k) Discharge of Liabilities. The Company shall not, and shall not
permit any of its subsidiaries to, pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, (i) in the ordinary course of business consistent with past
practice or in accordance with their terms, of claims, liabilities or
obligations recognized or disclosed in the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Company Filed
SEC Documents or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice or (ii) of claims,
liabilities or obligations to the extent they are less than $50,000 and
unrelated to the Company's stockholders or the transactions contemplated by
this Agreement and the Stockholder Agreement, or waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its subsidiaries is a party.
(l) Benefit Plans. Except as disclosed in Item 6.01(l) of the Company
Letter, neither the Company nor any of its subsidiaries shall enter into or
accept, or amend any existing, severance plan, agreement or arrangement or
enter into or amend any Benefit Plan or employment or consulting agreement,
other than as required by law.
(m) Compensation. Neither the Company nor any of its subsidiaries shall
increase the compensation payable or to become payable to its directors,
officers or employees, except for increases required under employment
agreements existing on the date hereof, and increases for employees in the
ordinary course of business consistent with past practice that, in any event,
do not increase such employee's aggregate compensation by more than 5% over
such employee's aggregate compensation in effect on the date hereof, or grant
any severance or termination pay to, or enter into any employment or severance
payment, or establish, adopt, enter into, or amend in any material respect or
take action to enhance in any material respect or accelerate any rights or
benefits under, any collective bargaining, bonus, profit sharing, thrift,
compensation, employment, termination,
-29-
<PAGE> 35
severance or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee, except, in each case, as may be
required to comply with applicable law or regulation.
(n) Material Contracts. Except in the ordinary course of business,
neither the Company nor any of its subsidiaries shall (i) modify, amend or
terminate any material contract or agreement to which the Company or such
subsidiary is a party or (ii) waive, release or assign any material rights or
claims.
(o) General. The Company shall not, and shall not permit any of its
subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions otherwise prohibited by this Section 6.01.
SECTION 6.02. No Solicitation. (a) The Company shall, and shall direct
and use reasonable best efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as hereinafter defined). The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information), or take any other
action designed or reasonably likely to facilitate, any inquiries or the making
of any proposal which constitutes, or may reasonably be expected to lead to,
any Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal; provided, however, that if, at any time prior
to the acceptance for payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the
Company may, in response to a Takeover Proposal which was not solicited
subsequent to the date hereof, and subject to compliance with Section 6.02(c),
(x) furnish information with respect to the Company to any person pursuant to a
customary confidentiality agreement (as determined by the Company after
consultation with its outside counsel) and (y) participate in negotiations
regarding such Takeover Proposal. For purposes of this Agreement, "Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 20% or more of the assets of the
Company and its subsidiaries or 20% or more of any class of equity securities
of the Company or any of its subsidiaries, any 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,
any
-30-
<PAGE> 36
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries, other than the transactions contemplated by this Agreement, or
any other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Offer and/or the Merger
or which would reasonably be expected to dilute materially the benefits to
Parent of the transactions contemplated by this Agreement and the Stockholder
Agreement.
(b) Except as set forth in this Section 6.02, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors or such
committee of the Offer, the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal. Notwithstanding the
foregoing, in the event that prior to the acceptance for payment of Shares
pursuant to the Offer the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so
in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, the Board of Directors of the Company may (subject to
this and the following sentences) (x) withdraw or modify its approval or
recommendation of the Offer, the Merger and this Agreement or (y) approve or
recommend a Superior Proposal (as defined below) or terminate this Agreement
(and concurrently with or after such termination, if it so chooses, cause the
Company to enter into an Acquisition Agreement with respect to any Superior
Proposal), but in each of the cases set forth in this clause (y), only at a
time that is after the fifth business day following Parent's receipt of written
notice (a "Notice of Superior Proposal") advising Parent that (i) the Board of
Directors of the Company has received a Superior Proposal and (ii) the actions
the Board of Directors of the Company intends to take with respect to such
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
made by a third party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the combined voting
power of the shares of Company Common Stock and Class B Common Stock then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Board of Directors of the Company determines in its good
faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders
-31-
<PAGE> 37
than the Offer and the Merger and for which financing, to the extent required,
is then committed.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.02, the Company shall immediately advise Parent
orally and in writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request or Takeover
Proposal and the identity of the person making such request or Takeover
Proposal. The Company will keep Parent fully informed of the status and
details (including amendments or proposed amendments) of any such request or
Takeover Proposal.
(d) Nothing contained in this Section 6.02 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by the
Exchange Act or from making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, such disclosure is required by applicable
state or Federal securities laws or is necessary in order to comply with its
fiduciary duties to the Company's stockholders under applicable law; provided,
however, neither the Company nor its Board of Directors nor any committee
thereof shall, except as permitted by Section 6.02(b), withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to the Offer,
this Agreement or the Merger or approve or recommend, or propose publicly to
approve or recommend, a Takeover Proposal.
SECTION 6.03. Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its subsidiaries is a party
(other than any involving Parent) unless the Company's Board of Directors shall
have determined in good faith, after consultation with outside counsel, that it
is necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law.
SECTION 6.04. Other Actions. Except as expressly contemplated or
permitted by this Agreement, the Company shall not, and shall not permit any of
its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not
so qualified becoming untrue in any material respect or (iii) any of the Offer
Conditions not being satisfied (subject to the Company's right to take actions
specifically permitted by Section 6.02).
-32-
<PAGE> 38
SECTION 6.05. Certain Waivers and Consents. The Company shall use its
reasonable best efforts to obtain any and all waivers or consents necessary
from the lenders listed on Item 6.05 of the Company Letter prior to the
acceptance by Sub of any Shares tendered pursuant to the Offer.
SECTION 6.06. Information Relating to Certain Benefit Plans. (a) As soon
as practicable, but in no event later than October 28, 1997, the Company shall
deliver to Parent each of the items listed in clauses (i) through (vi) of the
second sentence of Section 4.10(b) hereof with respect to each Subsidiary
Subject Benefit Plan, to the extent such information was not previously
delivered to Parent in accordance with Section 4.10(b) hereof.
(b) The Company represents and warrants that after September 28, 1997 and
prior to the date hereof it delivered to the union pension fund office for each
multiemployer plan to which the Company and its subsidiaries contribute a
written request for a withdrawal liability calculation or for information that
will allow the Company to make such a calculation. The Company shall deliver
such information to Parent no later than one business day following the receipt
by the Company.
SECTION 6.07. Certain Deliveries. The Company shall deliver to Parent,
not more than 20 days prior to, but not later than, Sub's acceptance for
payment of any Shares pursuant to the Offer, a statement in accordance with
Treas. Reg. Section Section 1.1445-2(c)(3) and 1.897-2(h), and neither Parent
nor Sub shall have actual knowledge that such statement is false or received a
notice that the statement is false pursuant to Treas. Reg. Section 1.1445-4.
In addition, the Company shall deliver to Parent on the date Sub first accepts
for payment any Shares pursuant to the Offer the notification to the Internal
Revenue Service, in accordance with the requirements pursuant to Treas. Reg.
Section 1.897-(h)(2), of delivery of the statement referred to in the
preceding sentence, signed by a responsible corporate officer of the Company.
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement. (a)
If the Company Stockholder Approval is required by law, the Company shall, as
soon as practicable following (i) the expiration of the Offer or (ii) the
exercise by Parent of the Merger Option, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Stockholders Meeting") for the
purpose of obtaining the Company Stockholder Approval. The Company shall,
through its Board of Directors (but subject to the right of its Board of
Directors to withdraw or modify its approval or recommendation of the Offer,
the Merger
-33-
<PAGE> 39
and this Agreement as set forth in Section 6.02(b)), recommend to its
stockholders that the Company Stockholder Approval be given. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 7.01(a) shall not be affected by
(i) the commencement, public proposal, public disclosure or communication to the
Company of any Takeover Proposal or (ii) the withdrawal or modification by
the Board of Directors of the Company of its approval or recommendation of the
Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law, the Company
shall, at Parent's request, as soon as practicable following (i) the expiration
of the Offer or (ii) the exercise by Parent of the Merger Option, prepare and
file a preliminary Proxy Statement with the SEC and shall use its reasonable
best efforts to respond to any comments of the SEC or its staff and to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the satisfaction of the
staff. The Company shall notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the Stockholders Meeting there shall occur any event that should be
set forth in an amendment or supplement to the Proxy Statement, the Company
shall promptly prepare and mail to its stockholders such an amendment or
supplement. The Company shall not mail any Proxy Statement, or any amendment
or supplement thereto, to which Parent reasonably objects. Parent shall
cooperate with the Company in the preparation of the Proxy Statement or any
amendment or supplement thereto.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer and
all other Shares owned by Parent or any subsidiary of Parent to be voted in
favor of the Company Stockholder Approval.
SECTION 7.02. Access to Information. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which the Company is
subject (from which it shall use reasonable best efforts to be released) and
subject to the terms of the Confidentiality Agreement (the "Confidentiality
Agreement"), dated July 3, 1997, between the Company and Parent, the Company
shall, and shall cause each of its subsidiaries to, afford to Parent and to the
officers, employees, accountants, counsel and other representatives of Parent
all reasonable access, during normal business hours during the period prior to
the Effective Time, to all their respective properties, books,
-34-
<PAGE> 40
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its subsidiaries to) furnish promptly to Parent (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of the
Federal or state securities laws or the Federal tax laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request.
SECTION 7.03. Reasonable Best Efforts. Except as otherwise contemplated
in this Agreement, each of the Company, Parent and Sub agree to use its
reasonable best efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed on itself with
respect to the Offer and the Merger (which actions shall include furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and shall promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their subsidiaries in connection with the
Offer and the Merger. Except as otherwise contemplated in this Agreement, each
of the Company, Parent and Sub shall, and shall cause its subsidiaries to, use
its reasonable best efforts to take all reasonable actions necessary to obtain
(and shall cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, Sub,
the Company or any of their subsidiaries in connection with the Offer and the
Merger or the taking of any action contemplated thereby or by this Agreement,
except that no party need waive any substantial rights or agree to any
substantial limitation on its operations or to dispose of any assets. Without
limiting the foregoing, Parent shall (i) contemporaneously with the purchase of
Shares pursuant to the Offer, lend, contribute or otherwise transfer to the
Company funds in an amount sufficient to enable the Company to repay its then
outstanding indebtedness under the Amended and Restated Credit Agreement dated
as of July 15, 1997 referred to in Item 4.05 of the Company Letter and (ii) use
its reasonable best efforts to cause the Company to repay such indebtedness
contemporaneously with such purchase and obtain the release of all guaranties
and security interests granted in connection with such indebtedness.
SECTION 7.04. Directors. Promptly upon Sub having acquired a majority of
the combined voting power of the Shares and Class B Shares, Sub shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such directors, and the Company shall, at such
time, cause Sub's designees to be so elected by its existing Board of
Directors; provided, however, that in the event that Sub's designees are
elected to the Board of Directors
-35-
<PAGE> 41
of the Company, until the Effective Time such Board of Directors shall have at
least three directors who are directors on the date of this Agreement and who
are not officers of the Company (the "Independent Directors"); and provided
further that, in such event, if the number of Independent Directors shall be
reduced below three for any reason whatsoever, the remaining Independent
Directors or Director shall designate a person or persons to fill such vacancy
or vacancies, each of whom shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate three persons to fill such vacancies who shall
not be officers or affiliates of the Company or any of its subsidiaries, or
officers or affiliates of Parent or any of its subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action requested by
Parent that is reasonably necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with
the foregoing, the Company will promptly, at the option of Parent, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Sub's designees to be elected or appointed to, and to constitute a majority of
the directors on, the Company's Board of Directors as provided above.
SECTION 7.05. Fees and Expenses. (a) Except as provided below in this
Section 7.05, all fees and expenses incurred in connection with the Offer, the
Merger, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent (x) the amount of the Expenses (as hereinafter defined) and (y)
$6,750,000 (the "Termination Fee") under the circumstances and at the times set
forth as follows:
(i) if Parent or Sub terminates this Agreement under Section
9.01(d), the Company shall pay the Expenses and the Termination Fee upon
demand;
(ii) if the Company terminates this Agreement under Section 9.01(e),
the Company shall pay the Expenses and the Termination Fee concurrently
therewith; and
(iii) if, at the time of any other termination of this Agreement
(other than by the Company pursuant to
-36-
<PAGE> 42
Section 9.01(f) or 9.01(g)), a Takeover Proposal shall have been made
(other than a Takeover Proposal made prior to the date hereof), the
Company shall pay the Expenses, if terminated by the Company, concurrently
therewith or, if terminated by Parent, upon demand; in addition, if within
18 months of such termination, the Company shall enter into an Acquisition
Agreement providing for a Takeover Proposal or a Takeover Proposal shall
be consummated, the Company shall pay the Termination Fee concurrently
with the earlier of the entering into of such Acquisition Agreement or the
consummation of such Takeover Proposal.
"Expenses" shall mean documented and reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all fees and expenses of law firms, commercial banks,
investment banking firms, accountants, experts and consultants to Parent.
SECTION 7.06. Indemnification; Insurance. (a) Parent and Sub agree that
all rights to indemnification for acts or omissions occurring at or prior to
the Effective Time now existing in favor of the current or former directors,
officers, employees and agents (the "Indemnified Parties") of the Company and
its subsidiaries as provided in their respective articles of incorporation or
by-laws (or similar organizational documents) shall survive the Merger and
shall continue in full force and effect in accordance with their terms.
(b) For six years from the earlier of the date Sub first purchases Shares
pursuant to the Offer or the Effective Time, Parent shall maintain in effect
the Company's current directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent); provided, however, that in no event shall Parent be
required to pay a premium in any one year in an amount in excess of 150 percent
of the last per annum amount of premiums paid by the Company prior to the date
hereof; and, provided, further, that if the annual premiums of such insurance
coverage exceed such amount, Parent shall be obligated to obtain a policy with
the greatest coverage available for a cost not exceeding such amount.
(c) This Section 7.06 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
SECTION 7.07. Certain Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against the Company or
any of its directors by any
-37-
<PAGE> 43
stockholder of the Company relating to the Offer, the Merger, this Agreement or
the Stockholder Agreements, without the prior written consent of Parent. In
addition, the Company shall not voluntarily cooperate with any third party that
may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the
Merger and shall cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Offer or the Merger; provided,
however, that the foregoing shall not limit any rights of the Company under
Section 6.02(b).
SECTION 7.08. Stock-Based Compensation. (a) Prior to the earlier of
purchase of Shares pursuant to the Offer or the Effective Time, the Company
shall terminate each stock option plan, stock appreciation right plan, limited
stock appreciation right plan, restricted stock plan, employee stock
purchase plan, or any other plan or arrangement providing for compensation
wholly or partially in the form of Shares (excluding any plan which is intended
to be qualified under section 401(a) of the Code) (collectively, the
"Stock-Based Compensation Plans"), and shall grant no additional options or
awards under such Stock-Based Compensation Plans.
(b) Immediately upon the purchase of Shares pursuant to the Offer, or
immediately prior to the Effective Time, if earlier, all outstanding options or
awards under the Stock-Based Compensation Plans, whether vested or unvested,
shall cease to be exercisable, shall be canceled by the Company, and shall
thereafter represent only a right to receive, upon its surrender to the
Company, a cash payment from the Company in an amount (if any) equal to the
number of Shares subject to each such surrendered option or award multiplied by
the difference (if positive) between the exercise price per Share (if any)
covered by the option or award and the Offer Price.
(c) All amounts payable pursuant to this Section shall be subject to any
required withholding of taxes and shall be paid without interest.
SECTION 7.09. Allocation of Shares Under Qualified Plans. The Company
shall take such action as is necessary so that, prior to the earlier of the
purchase of Shares pursuant to the Offer or the Effective Time, (i) no
participant in a Pension Plan that is a defined contribution plan intended to
be qualified under section 401(a) of the Code can have any additional amount
allocated to the participant's account in the form of Shares or in the form of
any other securities of the Company and (ii) to the extent any such plan
provides for investment of participants' accounts in an investment fund which
is invested primarily in Shares, no participant may direct that any portion of
the participant's account be invested in such fund (other than the portion of
such account invested in such fund immediately prior to the earlier of the
purchase of Shares pursuant to the Offer or the Effective Time).
-38-
<PAGE> 44
ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger (other than
pursuant to the Merger Option) shall be subject to the satisfaction (or waiver
by each party) prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. If required by applicable law,
the Company Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of
the Merger shall be in effect; provided, however, that each of the
parties shall have used reasonable best efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible
any injunction or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
SECTION 8.02. Conditions to Each Party's Obligation To Effect the Merger
Upon Exercise of the Merger Option. The respective obligation of each party to
effect the Merger upon the exercise by Parent of the Merger Option shall be
subject to the satisfaction (or waiver by each party, in the case of (a) or (b)
below, or Parent, in the case of (c) below) prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. If required by law, the Company
Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of
the Merger shall be in effect; provided, however, that each of the
parties shall have used reasonable best efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible
any injunction or other order that may be entered.
-39-
<PAGE> 45
(c) Performance of Obligations; Representations and Warranties.
The Company shall have performed in all material respects any material
obligation and complied in all material respects with any material
agreement or covenant of the Company to be performed or complied with by
it under this Agreement; and each of the representations and warranties
of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct as of the Closing Date as if made
on and as of the Closing Date and each of the representations and
warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects on the
Closing Date as if made on and as of the Closing Date.
(d) HSR Period. Any waiting period under the HSR Act applicable
to the Merger shall have expired or been terminated.
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions the Offer shall have terminated or expired in accordance
with its terms without Sub having accepted for payment any Shares
pursuant to the Offer or (y) Sub shall not have accepted for
payment any Shares pursuant to the Offer prior to March 31, 1998
or, if the Merger Option has been exercised by Parent, the Merger
has not been effected prior to June 30, 1998; provided, however,
that the right to terminate this Agreement pursuant to this Section
9.01(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure of any such condition or if the failure of such condition
results from facts or circumstances that constitute a breach of any
representation or warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action
-40-
<PAGE> 46
permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, shares of Company Common
Stock pursuant to the Offer or shares of Company Common Stock or
Class B Shares pursuant to the Merger and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by Parent or Sub prior to the purchase of Shares pursuant to
the Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which
(i) would give rise to the failure of a condition set forth in paragraph
(e) or (f) of Exhibit A and (ii) cannot be or has not been cured within
20 days after the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to
terminate the Offer as a result of the
occurrence of any event set forth in paragraph (d) of Exhibit A to this
Agreement;
(e) by the Company in accordance with Section 6.02(b), provided
that it has complied with all provisions thereof, including the notice
provisions therein, and simultaneously with such termination the Company
pays to Parent the Expenses and the Termination Fee specified under
Section 7.05(b)(ii);
(f) by the Company, if Sub or Parent shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform is incapable of being cured or has not been cured
within 20 days after the giving of written notice to Parent or Sub, as
applicable; or
(g) by the Company, if the Offer has not been timely commenced in
accordance with Section 1.01.
SECTION 9.02. Effect of Termination. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 9.01,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to the last sentence of Section
1.02(c), Section 4.18, Section 5.06, Section 7.05, this Section 9.02 and
Article X; provided, however, that nothing herein shall relieve any party for
liability for any breach hereof.
SECTION 9.03. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by
-41-
<PAGE> 47
their respective Boards of Directors, at any time before or after obtaining the
Company Stockholder Approval (if required by law), but, after the purchase of
Shares pursuant to the Offer, no amendment shall be made which decreases the
Merger Consideration and, after the Company Stockholder Approval, no amendment
shall be made which by law requires further approval by such stockholders
without obtaining such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. Following the election or appointment of the Sub's designees pursuant
to Section 7.04 and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent and Sub's respective obligations
under this Agreement or (iv) take any action to amend or otherwise modify the
Company's Certificate of Incorporation or By-Laws.
SECTION 9.04. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) subject to the
provisions of Section 9.03, extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) subject to the
provisions of Section 9.03, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) subject to the provisions of Section 9.03, waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations, Warranties and Agreements.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time of
the Merger.
SECTION 10.02. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed),
-42-
<PAGE> 48
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to:
Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Attention: Chairman
Telecopy No.: (404) 874-7589
and with a copy (which copy shall not constitute a
notice) to:
Powell, Goldstein, Frazer & Murphy, LLP
191 Peachtree Street, NE
Atlanta, Georgia 30303
Attention: G. William Speer
Telecopy No.: (404) 572-5958
and
(b) if to the Parent or Sub, to:
Wallace Computer Services, Inc.
2275 Cabot Drive
Lisle, Illinois 60532
Attention: President
Telecopy No.: (630) 588-5111
and with a copy (which copy shall not constitute a
notice) to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Frederick C. Lowinger and
Steve Sutherland
Telecopy No.: (312) 853-7036
SECTION 10.03. Interpretation. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or
a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information
-43-
<PAGE> 49
referred to has been made available if requested by the party to whom such
information is to be made available. As used in this Agreement, the term
"subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
person. As used in this Agreement, "material adverse change" or "material
adverse effect" means, when used in connection with the Company, any change or
effect (or any development that, insofar as can reasonably be foreseen, is
likely to result in any change or effect) or fact or condition that,
individually or in the aggregate with any such other changes or effects, is
materially adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Company and its subsidiaries taken as
a whole.
SECTION 10.04. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
SECTION 10.05. Entire Agreement; No Third Party Beneficiaries. This
Agreement, the Stockholder Agreement and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof (including the Original Merger Agreement and the Original
Stockholder Agreement), and except as provided in Section 7.06 are not intended
to confer upon any person other than the parties hereto or thereto any rights
or remedies hereunder or thereunder.
SECTION 10.06. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Georgia without regard to
any applicable conflicts of law.
SECTION 10.07. Publicity. Except as otherwise required by law, court
process or the rules of the New York Stock Exchange, for so long as this
Agreement is in effect, neither the Company nor Parent shall, or shall permit
any of its subsidiaries to, issue or cause the publication of any press release
or other public announcement with respect to the transactions contemplated by
this Agreement without prior consultation with the other party, which consent
shall not be unreasonably withheld.
SECTION 10.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any
-44-
<PAGE> 50
or all of its rights, interests and obligations hereunder to Parent or to any
direct or indirect wholly owned subsidiary of Parent. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 10.09. Merger of the Company into Sub. If at any time prior to
the Closing Date Parent notifies the Company that it desires for the Company to
be merged with and into Sub (in lieu of Sub merging with and into the Company),
the Company, Parent and Sub will promptly negotiate in good faith an amendment
to and restatement of this Agreement which provides for such changes to this
Agreement as are necessary or appropriate to effectuate such merger (and upon
finalization thereof, the parties will promptly enter into such amendment and
restatement).
SECTION 10.10. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state, this being in addition to any other remedy to which they are
entitled at law or in equity.
-45-
<PAGE> 51
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
--------------------
Name: Robert J. Cronin
Title: President
GREENWICH ACQUISITION CORP.
By: /s/ Robert J. Cronin
--------------------
Name: Robert J. Cronin
Title: Chief Executive Officer
GRAPHIC INDUSTRIES, INC.
By: /s/ Mark C. Pope III
--------------------
Name: Mark C. Pope III
Title: Chairman
-46-
<PAGE> 52
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement, Sub shall
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 Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless (i) there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer such number of Shares that,
together with the Shares and Class B Shares subject to the Option contained in
the Stockholder Agreement (to the extent not then tendered in the Offer), would
constitute a majority of the Shares and Class B Shares that in the aggregate
are outstanding, determined on a fully diluted basis for all outstanding stock
options, the Convertible Debentures, other securities convertible into Shares
or Class B Shares and any other rights to acquire Shares or Class B Shares (the
"Minimum Condition") and (ii) any waiting period under the HSR Act applicable
to the purchase of Shares pursuant to the Offer shall have expired or been
terminated (the "HSR Condition"). Furthermore, notwithstanding any other term
of the Offer or this Agreement, Sub shall not be required to accept for payment
or, subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after
the date of this Agreement and before the expiration of the Offer (or, in the
case of conditions related to regulatory matters, before the acceptance of such
Shares for payment or the payment therefor), any of the following conditions
exists (other than as a result of any action or inaction of Parent or any of
its subsidiaries that constitutes a breach of this Agreement):
(a) there shall be threatened or pending by any Governmental Entity
any suit, action or proceeding (i) challenging the acquisition by Parent
or Sub of any Shares under the Offer or pursuant to the Stockholder
Agreement, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other
transactions contemplated by this Agreement or the Stockholder Agreement
(including the voting provisions thereunder), or seeking to obtain from
the Company, Parent or Sub any damages that are material in relation to
the Company and its subsidiaries taken as a whole, (ii) seeking to
prohibit or materially limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of a material portion of
the business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, or
<PAGE> 53
to compel the Company or Parent to dispose of or hold separate any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as
a whole, as a result of the Offer or any of the other transactions
contemplated by this Agreement or the Stockholder Agreement, (iii)
seeking to impose material limitations on the ability of Parent or Sub to
acquire or hold, or exercise full rights of ownership of, any Shares to
be accepted for payment pursuant to the Offer or purchased under the
Stockholder Agreement including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the
Company, (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect any material portion of
the business or operations of the Company or its subsidiaries or (v)
which otherwise is reasonably likely to have a material adverse effect on
the business, properties, assets, financial condition, results of
operations or prospects of the Company and its subsidiaries taken as a
whole; or there shall be pending by any other person any suit, action or
proceeding which is reasonably likely to have a material adverse effect
on the business, properties, assets, financial condition, results of
operations or prospects of the Company and its subsidiaries taken as a
whole.
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any Governmental Entity any
statute, rule, regulation, judgment, order or injunction, other than the
application to the Offer or the Merger of applicable waiting periods
under the HSR Act, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
(c) there shall have occurred any material adverse change with
respect to the Company;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or
Sub its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Takeover Proposal or (ii) the
Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in
each case at the date of this Agreement and at the scheduled or extended
expiration of the Offer;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of
<PAGE> 54
the Company to be performed or complied with by it under this Agreement;
(g) there shall have occurred and continued to exist for not less
than three business days (i) any general suspension of trading in, or
limitation on prices for, securities on a national securities exchange in
the United States (excluding any coordinated trading halt triggered
solely as a result of a specified decrease in a market index), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) any limitation (whether or
not mandatory) by any Governmental Entity on, or other event that
materially adversely affects, the extension of credit by banks or other
lending institutions, (iv) a commencement of a war or armed hostilities
or other national or international calamity directly or indirectly
involving the United States which in any case is reasonably expected to
have a material adverse effect on the Company or to materially adversely
affect Parent's or Sub's ability to complete the Offer and/or the Merger
or materially delay the consummation of the Offer and/or the Merger;
(h) the Stockholder Agreement shall not be in full force and effect
or the Stockholder (as defined therein) shall be in material breach
thereof or have indicated his intention not to perform his obligations
thereunder; and
(i) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Sub and
may, subject to the terms of this Agreement, be waived by Parent and Sub in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and 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. Terms used but not defined herein shall have the meanings assigned to
such terms in the Agreement to which this Exhibit A is a part.
<PAGE> 1
Execution Copy
AMENDED AND RESTATED STOCKHOLDER AGREEMENT
AMENDED AND RESTATED STOCKHOLDER AGREEMENT (this "Agreement"),
dated as of October 12, 1997, among WALLACE COMPUTER SERVICES, INC., a Delaware
corporation ("Parent"), GREENWICH ACQUISITION CORP., a Georgia corporation and
a wholly owned subsidiary of Parent ("Sub"), and Mark C. Pope III (the
"Stockholder"), individually and as the general partner of Pope Family
Partners, L.P., a Georgia limited partnership (the "Partnership").
WHEREAS, Parent, Sub and Graphic Industries, Inc., a Georgia
corporation (the "Company"), propose to enter into an Amended and Restated
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "Merger Agreement") amending and restating the
Agreement and Plan of Merger dated as of September 28, 1997, among Parent, Sub
and the Company (the "Original Merger Agreement") and providing for the
amendment of the Existing Offer (as defined in the Merger Agreement) to provide
for the making of a cash tender offer (as such offer may be amended from time
to time, the "Offer") by Sub for any and all shares of Common Stock, par value
$.10 per share, of the Company (the "Common Stock") at the Offer Price (as
defined in the Merger Agreement) and the merger of the Company and Sub (the
"Merger") or, at the option of Parent, the acquisition of the Company by Parent
solely pursuant to the Merger;
WHEREAS, the Stockholder owns, individually or through the
Partnership, (i) 841,510 shares (the "Owned Common Shares") of Common Stock and
(ii) 4,303,092 shares (the "Owned Class B Shares" and, together with the Owned
Common Shares, the "Owned Shares") of Class B Common Stock, par value $.10 per
share, of the Company (the "Class B Shares");
WHEREAS, simultaneous with the execution of the Original
Merger Agreement, the parties hereto entered into the Stockholder Agreement
dated as of September 28, 1997 (the "Original Stockholder Agreement");
WHEREAS, the parties hereto desire to amend the Original
Stockholder Agreement in certain respects; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement, which amends and restates the Original Stockholder Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger
<PAGE> 2
Agreement, and in consideration of the premises and the representations,
warranties and agreements contained herein, the parties agree as follows:
1. PURCHASE OF SHARES.
(a) The Stockholder hereby grants Sub an irrevocable option (the "
Option") to purchase 2,239,046 of the Owned Class B Shares and 432,089 of the
Owned Common Shares for a purchase price per share (the "Per Share Purchase
Price") equal to the Offer Price (as defined in the Merger Agreement) (such
Owned Class B Shares and Owned Common Shares, as they may be adjusted by any
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company or as the Owned Class B Shares may be adjusted by conversion
into shares of Common Stock, other than the payment of regular cash dividends
consistent with past practice being referred to herein as the "Subject
Shares"). The Option may be exercised in whole (but not in part) at any time
after September 28, 1997 and on or prior to the first anniversary thereof (such
first anniversary, the "Option Expiration Date") in the event that (i) a
Specified Event (as defined in Section 1(b) below) shall have occurred on or
prior to the Option Expiration Date and (ii) the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with
respect to the exercise of the Option shall have expired or been terminated.
(b) The term "Specified Event" shall mean (i) Parent or Sub shall have
terminated the Merger Agreement under Section 9.01(d) thereof, (ii) the Company
shall have terminated the Merger Agreement under Section 9.01(e) thereof, (iii)
prior to termination of the Merger Agreement, a Takeover Proposal (as defined
in the Merger Agreement) shall have been commenced or the Company shall have
entered into an agreement with respect to, approved or recommended or taken any
action to facilitate, a Takeover Proposal or (iv) Sub shall have accepted for
payment, and paid for, shares of Common Stock in the Offer.
(c) In the event that Sub wishes to exercise the Option, Sub may do so
by giving written notice (the date of such notice being herein called the
"Notice Date") to the Stockholder specifying that all the Subject Shares are to
be purchased and specifying the place, time and date (not earlier than two
trading days, nor later than 10 trading days from the Notice Date) for the
closing of the purchase by Sub pursuant to such exercise (such date and time
being herein called the " Closing Time"). In the event that any share of
Common Stock is accepted for payment, and paid for,
-2-
<PAGE> 3
by Sub pursuant to the Offer, Sub shall be obligated to exercise the Option no
later than two trading days following the date of such payment and close the
purchase of and pay for such Subject Shares within two trading days following
the date of such exercise. A "trading day" shall mean any date on which the
New York Stock Exchange shall be open for business.
(d) In the event that Sub shall have accepted for payment shares of
Common Stock pursuant to the Offer, then at the Closing Time the Stockholder
shall also sell to Sub and Sub shall purchase from the Stockholder, at the Per
Share Exercise Price, the Owned Class B Shares which are not Subject Shares and
which have not theretofore been converted to shares of Common Stock and
tendered pursuant to the Offer.
(e) In the event the Option becomes exercisable and the Specified
Event causing such exercisability is an event referred to in clause (i), (ii)
or (iii) of Section 1(b), then, at the option of Sub and in lieu of any
exercise of the Option, Sub may require the Stockholder to sell the Subject
Shares pursuant to any Takeover Proposal (as defined in the Merger Agreement)
then pending and to remit to Sub with respect to each Subject Share sold the
gross proceeds from such sale less the Offer Price. If Sub exercises its
rights pursuant to this Section 1(e), then upon such remittance the Option
shall terminate.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
hereby represents and warrants to Parent and Sub as follows:
(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Stockholder and the Partnership and constitutes a valid and binding obligation
of the Stockholder and the Partnership enforceable in accordance with its
terms. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time or both) under any provision of, any
trust agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or regulation
applicable to the Stockholder or the Partnership or to either of their
respective property or assets. Except for
-3-
<PAGE> 4
the expiration or termination of the waiting period under the HSR Act and
informational filings with the SEC, no consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the Stockholder in connection with the execution and delivery of
this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(b) The Shares. The Stockholder, individually or through the
Partnership, has good and marketable title to the Owned Shares, free and clear
of any claims, liens, encumbrances and security interests whatsoever. The
Stockholder, individually or through the Partnership, owns no shares of Common
Stock or Class B Common Stock, other than the Owned Shares.
(c) Class B Shares Transferred to Permitted Transferees. As of the
date of the Original Stockholder Agreement, the Stockholder owned 175,000 Class
B Shares (the "Transferred Shares"), in addition to the Owned Class B Shares,
which he transferred to Permitted Transferees (as defined in the Amended and
Restated Articles of Incorporation of the Company)in accordance with the terms
of the Original Stockholder Agreement. The Stockholder agrees that any failure
of the holders of the Transferred Shares to take, with respect to such
Transferred Shares, any of the actions required to be taken by the Stockholder
pursuant to this Agreement with respect to Owned Class B Shares that are not
Subject Shares, shall be deemed to be a breach of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) Parent and Sub hereby represent and warrant to the Stockholder
that each of Parent and Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent and Sub, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This
Agreement has been duly executed and delivered by Parent and Sub and
constitutes a valid and binding obligation of Parent and Sub enforceable in
accordance with its terms.
(b) Securities Act. The Subject Shares will be acquired in
compliance with, and Sub will not offer to sell or otherwise dispose of any
Subject Shares so acquired by it
-4-
<PAGE> 5
in violation of any of, the registration requirements of the Securities Act of
1933, as amended.
4. COVENANTS OF THE STOCKHOLDER. Up to and including the Option
Expiration Date, the Stockholder agrees as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with respect
to the Merger and the Merger Agreement is sought, the Stockholder shall vote
(or cause to be voted) the Owned Shares in favor of the Merger, the approval of
the Merger Agreement and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to adversely affect
the Stockholder.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Owned Shares against (i) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or any other Takeover Proposal or (ii) any
amendment of the Company's articles of incorporation or by-laws or other
proposal or transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge, assign
or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the
sale, transfer, pledge, assignment or other disposition of, the Owned Shares to
any person other than Sub or Sub's designee, (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, in connection,
directly or indirectly, with any Takeover Proposal or (iii) convert the Owned
Class B Shares into Common Stock (except in connection with the sale of Owned
Class B Shares to Sub pursuant to Section 1 of this Agreement); provided,
however, that the Stockholder may transfer to a Permitted Transferee (as
defined in the Amended and Restated Articles of Incorporation of the Company)
Owned Class B Shares that do not constitute Subject Shares if such Permitted
Transferee agrees in writing (x) to perform the obligations of the
-5-
<PAGE> 6
Stockholder under this Agreement with respect to such transferred Owned Class B
Shares (as though no such transfer had occurred) and (y) to not take any of the
actions referred to in clause (i), it being understood and agreed that any
breach of the foregoing by such Permitted Transferee shall constitute a breach
by the Stockholder of this Agreement.
(d) The Stockholder shall not, nor shall he permit any investment
banker, attorney or other adviser or representative of the Stockholder to, (i)
directly or indirectly solicit, initiate or encourage the submission of, any
Takeover Proposal or (ii) directly or indirectly participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated, the
Stockholder shall tender pursuant to the Offer, and not withdraw, all Owned
Common Shares which are not Subject Shares.
(f) So long as the Merger Agreement has not been terminated and
notwithstanding any other term of this Agreement, the Stockholder shall, as
soon as practicable after receipt of a written request from Sub (in the sole
discretion of Sub), tender pursuant to the Offer any Owned Common Shares that
constitute Subject Shares. Except to the extent requested by Sub (in its sole
discretion), the Stockholder shall not withdraw any of the shares tendered
pursuant to the foregoing.
5. FURTHER ASSURANCES. The Stockholder will, from time to
time, execute and deliver, or cause to be executed and delivered, such
additional or further transfers, assignments, endorsements, consents and other
instruments as Parent or Sub may reasonably request for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns and, in
-6-
<PAGE> 7
the case of the Stockholder, the heirs, executors and administrators of the
Stockholder.
7. TERMINATION. Except as provided otherwise herein, this
Agreement shall terminate upon the earliest of (i) the Option Expiration Date,
(ii) the Effective Time (as defined in the Merger Agreement) or (iii) a valid
termination of the Merger Agreement by the Company pursuant to Section 9.01(f)
or 9.01(g) thereof.
8. GENERAL PROVISIONS.
(a) Payments. All payments required to be made to Stockholder
pursuant to this Agreement shall be made by wire transfer of immediately
available funds to an account designated by Stockholder within one trading day
prior to such payment.
(b) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(c) Expenses. Except as set forth in Section 1 of this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
(d) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(e) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to:
Wallace Computer Services, Inc.
2275 Cabot Drive
Lisle, Illinois 60532
Attention: President
Facsimile: (630) 588-5111
-7-
<PAGE> 8
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Frederick C.
Lowinger and Steven Sutherland
Facsimile: (312) 853-7036
(ii) if to the Stockholder, to:
Mark C. Pope III
c/o Graphic Industries, Inc.
2155 Monroe Drive, N.E.
Atlanta, Georgia 30324
Facsimile: (404) 874-7589
with a copy to:
Powell, Goldstein, Frazer
& Murphy, LLP
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Attention: G. William Speer
Facsimile: (404) 572-6999
(e) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counter parties have been signed
by each of the parties and delivered to the other party, it being understood
that each party need not sign the same counterpart.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes
the entire agreement and
-8-
<PAGE> 9
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof (including the
Original Stockholder Agreement) and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia without regard to any
applicable conflicts of law.
9. STOCKHOLDER CAPACITY. The Stockholder does not make any
agreement or understanding in his capacity as a director or officer of the
Company. The Stockholder signs solely in his capacity as the record holder and
beneficial owner of the Owned Shares and nothing herein shall limit or affect
any actions taken by the Stockholder in his capacity as an officer or director
of the Company to the extent specifically permitted by the Merger Agreement.
10. PERFORMANCE BY SUB. Parent covenants and agrees for
the benefit of the Stockholder that it shall cause Sub to perform in full each
obligation of Sub set forth in this Agreement.
11. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States,
this being in addition to any other remedy to which they are entitled at law or
in equity.
-9-
<PAGE> 10
IN WITNESS WHEREOF, each of Parent and Sub has caused this
Agreement to be signed by its officer thereunto duly authorized and the
Stockholder has signed this Agreement, all as of the date first written above.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
---------------------
Name: Robert J. Cronin
Title: President
GREENWICH ACQUISITION CORP.
By: /s/ Robert J. Cronin
---------------------
Name: Robert J. Cronin
Title: Chief Executive Officer
/s/ Mark C. Pope III
---------------------
Mark C. Pope III, Individually and
as General Partner of Pope Family
Partners, L.P., a Georgia limited
partnership.
-10-
<PAGE> 1
[WALLACE NEWS RELEASE LETTERHEAD]
WALLACE NEWS RELEASE
FOR IMMEDIATE RELEASE
WALLACE AND GRAPHIC INDUSTRIES ANNOUNCE AMENDED MERGER AGREEMENT
TO PROVIDE FOR PRICE OF $21.75
Lisle, Ill., Sunday, October 12, 1997 -- Wallace Computer Services, Inc.
(NYSE:WCS) and Graphic Industries, Inc. (NYSE:GII) today announced that they
have agreed to an amended Merger Agreement which provides for an increase in
the price of Wallace's tender offer for all the outstanding common stock of
Graphic Industries from $18.50 to $21.75.
Wallace further announced an amendment to its agreement with Graphic
Industries' largest stockholder, Mark C. Pope III, who has agreed to tender or
sell 100% of his shares to Wallace as part of the acquisition. He further
agreed to vote 100% of his shares for the Wallace Merger Agreement and against
any other offer, and not to tender or sell his shares to any party other than
Wallace. Mr. Pope owns approximately 41% of the total shares outstanding,
including substantially all of the supervoting Class B shares.
The Merger Agreement between Wallace and Graphic Industries has also
been amended to, among other things, permit Wallace, if it so elects, to
terminate the tender offer and complete the acquisition of Graphic Industries
solely by merger. Mr. Pope, as the holder of 82% of the aggregate voting power
of the currently outstanding shares of Graphic Industries, has agreed in his
stockholder agreement with Wallace to vote for such merger.
The scheduled expiration date of Wallace's tender offer of midnight,
New York City time on October 31, 1997 will not be affected by these
amendments. Graphic Industries shareholders will receive amended tender offer
materials shortly.
#####
<PAGE> 1
[GRAPHIC INDUSTRIES, INC. LOGO]
GRAPHIC INDUSTRIES, INC.
October 17, 1997
TO OUR STOCKHOLDERS:
On October 12, 1997, Graphic Industries, Inc. ("Graphic") entered into an
Amended and Restated Agreement and Plan of Merger, dated as of October 12, 1997
(the "Merger Agreement"), among Wallace Computer Services, Inc., Greenwich
Acquisition Corp. and Graphic. Pursuant to the Merger Agreement, Greenwich
Acquisition Corp. has amended its tender offer for the outstanding shares of
common stock of Graphic by increasing the price offered for such shares to
$21.75 per share, net to the seller in cash. The shares of common stock of
Graphic not acquired in the tender offer will be converted into the right to
receive $21.75 per share in cash pursuant to a merger of Graphic with Greenwich
Acquisition Corp. (subject to appraisal rights).
The amount to be paid pursuant to the tender offer is increased from the
$18.50 per share in cash originally offered. Your Board of Directors has
approved the tender offer, the Merger Agreement and the merger contemplated
thereby and determined that the tender offer and the merger, considered as a
whole, are fair to and in the best interests of the stockholders of Graphic.
Accordingly, your Board of Directors recommends that all of the stockholders of
Graphic accept the tender offer and tender all of their shares.
In arriving at its decision, the Board of Directors considered a number of
factors, including the opinion of Interstate/Johnson Lane Corporation, Graphic's
financial advisor, that the consideration to be received by the stockholders in
the tender offer and the merger is fair to the stockholders from a financial
point of view.
Accompanying this letter is a copy of Amendment No. 1 to Graphic's
Solicitation/Recommendation Statement on Schedule 14D-9, which contains
information regarding the factors considered by the Board of Directors in its
deliberations, a copy of the opinion of Interstate/Johnson Lane Corporation and
certain other information regarding the tender offer and the merger, and a copy
of an amended Information Statement pursuant to Rule 14f-1 under the Securities
Exchange Act of 1934, as amended. In addition, enclosed is the Supplement dated
October 17, 1997 to the Offer to Purchase dated October 3, 1997 of Greenwich
Acquisition Corp. together with related materials, including a revised Letter of
Transmittal to be used for tendering your shares. I urge you to read the
enclosed materials carefully before making a decision with respect to tendering
your shares in the tender offer.
I personally, along with the Board of Directors, management and associates
of Graphic, wish to thank you for your loyal support through the years.
Sincerely,
/s/MARK C. POPE III
-----------------------------
Mark C. Pope III
Chairman, President and Chief
Executive Officer
<PAGE> 1
GRAPHIC INDUSTRIES, INC. LOGO
GRAPHIC INDUSTRIES, INC.
October 17, 1997
TO HOLDERS OF CLASS B COMMON STOCK:
On October 3, 1997, Greenwich Acquisition Corp., a Georgia corporation and
a wholly-owned subsidiary of Wallace Computer Services, Inc., a Delaware
Corporation ("Wallace") commenced a tender offer for all the outstanding shares
of the Common Stock of Graphic Industries, Inc., a Georgia corporation
("Graphic"), at $18.50 per share net to the seller in cash. On October 12, 1997,
the Board of Directors of Graphic entered into an Amended and Restated Agreement
and Plan of Merger, dated as of October 12, 1997 (the "Merger Agreement") among
Wallace, Greenwich Acquisition Corp. and Graphic. Pursuant to the Merger
Agreement, Greenwich Acquisition Corp. has amended its tender offer for the
outstanding shares of common stock of Graphic by increasing the price offered
for such shares to $21.75 per share, net to the seller in cash. The shares of
Common Stock of Graphic not acquired in the tender offer will be converted into
the right to receive $21.75 per share in cash pursuant to a merger of Graphic
with Greenwich Acquisition Corp. (subject to appraisal rights). Holders of Class
B Common Stock of Graphic (the "Class B Shares") may convert the Class B Shares
into Common Stock on a one-for-one basis. Holders of Class B Shares will be
required to convert such Class B Shares to Common Stock in order to tender such
shares in the tender offer.
Your Board of Directors has approved the tender offer, the merger agreement
and the merger and determined that the tender offer and the merger, considered
as a whole, are fair to and in the best interests of the stockholders of
Graphic. Accordingly, your Board of Directors recommends that all of the
stockholders of Graphic accept the tender offer and tender all of their shares.
In arriving at its decision, the Board of Directors considered a number of
factors, including the opinion of Interstate/Johnson Lane Corporation, Graphic's
financial advisor, that the consideration to be received by the stockholders in
the tender offer and the merger is fair to the stockholders from a financial
point of view.
Accompanying this letter is a copy of Amendment No. 1 to Graphic's
Solicitation/Recommendation Statement on Schedule 14D-9, which contains
information regarding the factors considered by the Board of Directors in its
deliberations, a copy of the opinion of Interstate/Johnson Lane Corporation and
certain other information regarding the tender offer and the merger, and a copy
of an Information Statement pursuant to Rule 14f-1 under the Securities Exchange
Act of 1934, as amended. In addition, enclosed is the Offer to Purchase dated
October 3, 1997, and the Supplement to Offer to Purchase dated October 17, 1997,
of Greenwich Acquisition Corp., together with related materials, including the
Conversion and Tender Request referred to below. I urge you to read the enclosed
materials carefully before making a decision with respect to converting and
tendering your shares in the tender offer.
As a holder of Class B Shares, you may wish to convert such shares into
shares of Common Stock in order to tender shares in the tender offer.
Accompanying this letter is a Conversion and Tender Request to be used in
connection with the conversion of Class B Shares and the tender of the shares of
Common Stock received upon such conversion.
I personally, along with the Board of Directors, management and associates
of Graphic, wish to thank you for your loyal support through the years.
Sincerely,
/s/ MARK C. POPE III
-----------------------------
Mark C. Pope III
Chairman, President and Chief
Executive Officer
<PAGE> 2
CONVERSION AND TENDER REQUEST
THIS CONVERSION AND TENDER REQUEST AND ALL REQUIRED SHARE CERTIFICATES AND
DOCUMENTS MUST BE RECEIVED BY SUNTRUST BANK, ATLANTA, AS DEPOSITARY, ON OR
BEFORE OCTOBER 31, 1997 (UNLESS EXTENDED) (THE "EXPIRATION DATE").
The address of the Depositary is:
SUNTRUST BANK, ATLANTA
<TABLE>
<C> <C>
By Overnight Courier: By Mail:
- -------------------------------------------- --------------------------------------------
SunTrust Bank, Atlanta
58 Edgewood Avenue SunTrust Bank, Atlanta
Room 225 P.O. Box 4625
Atlanta, Georgia 30303 Atlanta, Georgia 30302
</TABLE>
Facsimile Transmission:
(For Eligible Institutions Only)
(404) 332-3875
For Information, please call
1-800-568-3476
------------------------
TO: GRAPHIC INDUSTRIES, INC. (the "Company")
SUNTRUST BANK, ATLANTA (the "Depositary")
The undersigned holder of the Class B Common Stock, par value $.10 per
share, of the Company described below ("Class B Shares") hereby (i) requests
conversion of such Class B Shares pursuant to the Amended and Restated Articles
of Incorporation of the Company into an equal number of shares of Common Stock,
par value $.10 per share ("Common Shares"), of the Company, and (ii) tenders the
Common Shares received upon such conversion pursuant to the Offer (as defined
below), in each case on the terms and conditions set forth below:
1. The undersigned hereby requests conversion of the Class B Shares
described below, and requests that such conversion be effected on the date
(the "Conversion Date") Greenwich Acquisition Corp., a Georgia corporation
(the "Offeror") and a wholly owned subsidiary of Wallace Computer Services,
Inc., a Delaware corporation, first accepts for payment Common Shares
pursuant to the Offeror's offer to purchase all of the outstanding Common
Shares at a purchase price of $21.75 per Common Share, net to seller in
cash, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated October 3, 1997 (the "Offer to Purchase") and the
Supplement to Offer to Purchase dated October 17, 1997 (the "Supplement"),
receipt of which is hereby acknowledged, and the related Letter of
Transmittal (which together with the Offer to Purchase and the Supplement
constitute the "Offer"), and contemporaneously therewith, provided,
however, that if the Conversion Date does not occur prior to 12:00 midnight
(New York time) on January 31, 1998, such Class B Shares shall be returned
to the undersigned. The undersigned may withdraw this Conversion and Tender
Request prior to the purchase of the Common Shares by contacting the
Company c/o SunTrust Bank, Atlanta.
2. The undersigned hereby tenders to the Offeror pursuant to the Offer
all Common Shares received upon the conversion of the Class B Shares
tendered hereby. The undersigned is entitled to the withdrawal rights
described in the Offer to Purchase.
3. Subject to and effective upon conversion of the Class B Shares
tendered hereby, the undersigned hereby appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to
the Common Shares received upon such conversion so that such Common Shares
may be tendered under the Offer. Such power of attorney is coupled with an
interest and is irrevocable.
4. Subject to and effective upon acceptance for payment of and payment
for the Common Shares tendered herewith, the undersigned hereby sells,
assigns and transfers to or upon the order of the Offeror all right, title
and interest in and to all the Common Shares that are being tendered hereby
(and any and
1
<PAGE> 3
all other Common Shares or other securities issued or issuable in respect
thereof) and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Common Shares (and
all such other Common Shares or securities), with full power of
substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (a) deliver certificates for such
Common Shares (and all such other Common Shares or securities), or transfer
ownership of such Common Shares (and all such other Common Shares or
securities) on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the
Offeror, (b) present such Common Shares (and all such other Common Shares
or securities) for transfer on the books of the Company and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Common Shares (and all such other Common Shares or securities), all in
accordance with the terms of the Offer.
5. The undersigned hereby irrevocably appoints each designee of the
Offeror as the attorney-in-fact and proxy of the undersigned, each with
full power of substitution, to exercise all voting and other rights of the
undersigned in such manner as each such attorney and proxy or his
substitute shall in his sole judgment deem proper, with respect to all of
the Common Shares tendered hereby which have been accepted for payment by
the Offeror prior to the time of any vote or other action (and any and all
other Common Shares or other securities or rights issued or issuable in
respect of such Common Shares) at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned
meeting), any actions by written consent in lieu of any such meeting or
otherwise. This proxy is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Common Shares by
the Offeror in accordance with the terms of the Offer. Such acceptance for
payment shall revoke any other proxy or written consent granted by the
undersigned at any time with respect to such Common Shares (and all such
other Common Shares or other securities or rights), and no subsequent
proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective).
6. The undersigned hereby represents and warrants that (i) the
undersigned has full power and authority to request the conversion of the
Class B Shares tendered hereby and to tender, sell, assign and transfer the
Common Shares received upon such conversion and tendered hereby (and any
and all other Common Shares or other securities or rights issued or
issuable in respect of such Common Shares), (ii) the Class B Shares
tendered hereby for conversion are free and clear of all liens,
restrictions, charges and encumbrances and are not subject to any adverse
claim and (iii) when the Common Shares received upon conversion and
tendered hereby are accepted for payment by the Offeror, the Offeror will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary, the Company or the Offeror
to be necessary or desirable to complete the conversion of the Class B
Shares and the sale, assignment and transfer of the Common Shares tendered
hereby (and all such other Common Shares or other securities or rights).
7. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Except as
stated in the Offer, the tender of the Common Shares is irrevocable.
The undersigned understands that tenders of the Class B Shares for
conversion and of the Common Shares received upon conversion of the Class B
Shares, pursuant to any one of the procedures described in this Conversion and
Tender Request and in the instructions hereto will constitute an agreement
between the undersigned and the Company with respect to the conversion of the
Class B Shares and between the undersigned and the Offeror with respect to the
tender of the Common Shares upon the terms and subject to the conditions of the
Offer.
2
<PAGE> 4
Please issue the check for the purchase price of the Common Shares
purchased, and return any Class B Shares which are not converted, in the name(s)
of the undersigned. Please mail the check for the purchase price of any Common
Shares purchased and return any certificates for Class B Shares not converted
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s).
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION OF CLASS B SHARES REQUESTED TO BE CONVERTED*
- --------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES REQUESTED TO BE CONVERTED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- --------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARE SHARES SHARES
CERTIFICATE REPRESENTED BY REQUESTED TO BE
NUMBER(S) CERTIFICATE(S) CONVERTED**
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------------------------------------
* All Common Shares issued upon conversion pursuant to this Conversion and Tender Request will be tendered
pursuant to the Offer.
** Unless otherwise indicated, it will be assumed that all Class B Shares represented by any certificates
delivered to the Company c/o the Depositary are being requested to be converted. See Instruction 4.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 5
SIGN HERE
(Complete Substitute Form W-9 below)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
- -----------------------------------------------------------
(See Substitute Form W-9)
Dated:
- -------------------------------------------------------------------------------,
1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
- ---------------------------------------------------------------------------
Dated:
- -------------------------------------------------------------------------------,
1997
- --------------------------------------------------------------------------------
4
<PAGE> 6
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: SUNTRUST BANK ATLANTA
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT
FORMW-9 AND CERTIFY BY SIGNING AND DATING BELOW. TIN:
Social Security Number
or Employer
Identification Number
-------------------------------------------------------------------------------------------
Department of the PART II--For Payees exempt from backup withholding, see the enclosed Guidelines for
Treasury, Internal Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
Revenue Service instructed therein.
PAYOR'S REQUEST FOR -----------------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION Certification--Under penalties of perjury, I certify that:
NUMBER ("TIN") AND
CERTIFICATION (1) The number shown on this form is my correct TIN (or I am waiting for a number
to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding or (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividend, or (c) the IRS has notified me that I am no longer
subject
to backup withholding.
-----------------------------------------------------------------------------------------
SIGNATURE DATE: ________________
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have
mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social
Security Administration Officer or (2) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments
pursuant to the Offer made to me thereafter will be withheld until I provide a number.
Signature: _ Date:
- --------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE CONVERSION AND TENDER REQUEST
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on a Conversion and Tender Request (the "Request") must be guaranteed by a firm
that is a bank, broker, dealer, credit union, savings association or other
entity which is a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program, the Stock Exchange Medallion Program, or by any other bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing constituting
an "Eligible Institution"), unless the Class B Shares tendered thereby are
tendered (i) by a registered holder of the Class B Shares or (ii) for the
account of an Eligible Institution. See Instruction 5. If the certificates are
registered in the name of a person or persons other than the signer of this
Request, then the tendered certificates must be endorsed or accompanied by duly
executed stock powers, in either case signed exactly as the name or names of the
registered owner or owners appear on the certificates or stock powers, with the
signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. Delivery of Request and Class B Shares. Certificates for all Class B
Shares, as well as a properly completed and duly executed Request (or a manually
signed facsimile thereof), and any other documents required by this Request,
must be received by the Depositary at one of its addresses set forth on the
front page of this Request by the Expiration Date.
THE METHOD OF DELIVERY OF CLASS B SHARES, THE REQUEST AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
executing this Request (or a manually signed facsimile thereof), the tendering
stockholder waives any right to receive any notice of the acceptance for payment
of the Common Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Class B Shares should be listed on a
separate schedule attached hereto.
4. Partial Tenders. If fewer than all the Class B Shares represented by any
certificate delivered to the Depositary are to be converted, fill in the number
of Class B Shares which are to be converted in the box entitled "Number of
Shares Requested to be Converted." In such case, a new certificate for the
remainder of the Class B Shares represented by the old certificate will be sent
to the person(s) signing this Request as promptly as practicable following the
expiration or termination of the Offer. All Class B Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
for conversion unless otherwise indicated.
5. Signatures on Request; Stock Powers and Endorsements. If this Request is
signed by the registered holder(s) of the Class B Shares tendered hereby, the
signature(s) must correspond with the name(s) as written on the face of the
certificates without alteration, enlargement or any change whatsoever.
If any of the Class B Shares tendered hereby are held of record by two or
more persons, all such persons must sign this Request.
If any of the Class B Shares tendered hereby are registered in different
names on different certificates, it will be necessary to complete, sign and
submit as many separate Requests as there are different registrations of
certificates.
If this Request is signed by the registered holder(s) of the Class B Shares
tendered hereby, no endorsements of certificates or separate stock powers are
required.
6
<PAGE> 8
If this Request is signed by a person other than the registered holder(s)
of the Class B Shares tendered hereby, the certificate must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on the certificates for such Class
B Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Request or any certificate or stock power is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and proper evidence satisfactory to the Offeror
of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes with
respect to the sale and transfer of any Common Shares to it or its order
pursuant to the Offer.
It will not be necessary for transfer tax stamps to be affixed to the
certificates listed in this Request.
7. Substitute Form W-9. The tendering stockholder is required to provide
the Depositary with such stockholder's correct TIN on Substitute Form W-9, which
is provided herewith, unless an exemption applies. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
a $50 penalty and to 31% federal income tax backup withholding on the payment of
the purchase price for the Common Shares.
8. Foreign Holders. Foreign holders must submit a completed IRS Form W-8 to
avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Request.
9. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offer to Purchase and this Request may be obtained from
the Information Agent or the Dealer Manager at their respective addresses or
telephone numbers set forth below.
10. Waiver of Conditions. The conditions of the Offer may be waived by the
Offeror (subject to certain limitations in the Merger Agreement), in whole or in
part, at any time or from time to time, in the Offeror's sole discretion.
IMPORTANT: THIS REQUEST OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH THE CLASS B SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Common Shares
are accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9. If such stockholder is an
individual, the TIN is such stockholder's Social Security Number. If the
Depositary is not provided with the correct TIN, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such stockholder with respect to Common Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
7
<PAGE> 9
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a stockholder with respect to Common Shares purchased pursuant to the Offer,
the stockholder is required to notify the Depositary of such stockholder's
correct TIN by completing the form certifying that the TIN provided on the
Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Common
Shares to be received upon conversion of the Class B Shares. If the Common
Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report.
8
<PAGE> 10
The Information Agent for the Offer is:
MORROW & CO., INC.
909 3rd Avenue
20th Floor
New York, New York 10022
(212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms, please call: (800) 662-5200
The Dealer Manager for the Offer is:
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
(212) 816-2592
9
