<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
VARITRONIC SYSTEMS, INC.
------------------------
(NAME OF SUBJECT COMPANY)
VSI ACQUISITION CO.
BRADY USA, INC.
W.H. BRADY CO.
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(BIDDERS)
COMMON STOCK, PAR VALUE $.01 PER SHARE
------------------------
(TITLES OF CLASS OF SECURITIES)
922247-10-1
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(CUSIP NUMBER OF CLASS OF SECURITIES)
DONALD P. DELUCA
W. H. BRADY CO.
6555 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53223
(414) 358-6600
------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
Copy to:
CONRAD G. GOODKIND, ESQ.
QUARLES & BRADY
411 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(414) 277-5000
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CALCULATION OF FILING FEE
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TRANSACTION VALUATION AMOUNT OF FILING FEE
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$43,977,413 $8,796*
</TABLE>
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* For purposes of calculating fee only. This amount assumes the purchase of
2,512,995 shares of Common Stock, par value $.01, of the Subject Company
(consisting of 2,319,495 shares currently outstanding plus an additional
193,500 shares issuable upon exercise of options) at $17.50 in cash per
share. The amount of the filing fee, calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, equals 1/50 of one percentum
of the value of the shares to be purchased.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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AMOUNT PREVIOUSLY PAID: NOT APPLICABLE FILING PARTY:
FORM OF REGISTRATION NO.: DATE FILED:
</TABLE>
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<PAGE> 2
Cusip No. 104674-10-6
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of above Person
VSI Acquisition Co.
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2 Check the Appropriate Box if a Member of a Group*
(a)/X/
(b)/ /
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3 SEC Use Only
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4 Sources of Funds*
WC (from Parent)
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5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f) / /
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6 Citizenship or Place of Organization
Minnesota
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7 Aggregate Amount Beneficially Owned by Each Reporting Person
-0-
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8 Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares* / /
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9 Percent of Class Represented by Amount in Row (7)
0%
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10 Type of Reporting Person*
CO
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* See Instructions Before Filling Out!
2
<PAGE> 3
Cusip No. 104674-10-6
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of above Person
Brady USA, Inc.
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2 Check the Appropriate Box if a Member of a Group*
(a)/X/
(b)/ /
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3 SEC Use Only
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4 Sources of Funds*
WC (from Parent)
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5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f) / /
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6 Citizenship or Place of Organization
Wisconsin
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7 Aggregate Amount Beneficially Owned by Each Reporting Person
-0-
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8 Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares* / /
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9 Percent of Class Represented by Amount in Row (7)
0%
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10 Type of Reporting Person*
CO
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* See instructions before filling out!
3
<PAGE> 4
Cusip No. 104674-10-6
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of above Person
W.H. Brady Co.
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2 Check the Appropriate Box if a Member of a Group*
(a)/X/
(b)/ /
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3 SEC Use Only
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4 Sources of Funds*
WC
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5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f) / /
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6 Citizenship or Place of Organization
Wisconsin
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7 Aggregate Amount Beneficially Owned by Each Reporting Person
-0-
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8 Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares* / /
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9 Percent of Class Represented by Amount in Row (7)
0%
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10 Type of Reporting Person*
CO
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* See Instructions Before Filling Out!
4
<PAGE> 5
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Varitronic Systems, Inc., a
Minnesota corporation (the "Company"). The address of the principal executive
offices of the Company is set forth in Section 8 ("Certain Information
Concerning the Company") of the Offer to Purchase, dated February 29, 1996 (the
"Offer to Purchase"), a copy of which is filed as Exhibit (a)(1) hereto and is
incorporated by reference.
(b) This Statement relates to a tender offer by VSI Acquisition Co., a
Minnesota corporation (the "Offeror") and a wholly-owned subsidiary of Brady
USA, Inc., a Wisconsin corporation ("BUSA") which is a wholly-owned subsidiary
of W. H. Brady Co., a Wisconsin corporation ("Brady"), to purchase all
outstanding shares of common stock, par value $.01 per share (the "Shares"), of
the Company, at a purchase price of $17.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal, a copy of which is filed as Exhibit
(a)(2) hereto and is incorporated herein by reference. The Offer to Purchase and
Letter of Transmittal together constitute the "Offer." The information set forth
in the Introduction of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(f) The information set forth in the Introduction and Section 9
("Certain Information Concerning the Parent, BUSA and the Offeror") of the Offer
to Purchase is incorporated herein by reference. During the past five years,
neither the Offeror, BUSA, Brady, nor any of the persons enumerated in General
Instructions to Schedule 14D-1 has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction,
and, as a result of such proceeding, was or is subject to a judgment, decree or
final order enjoining further violation of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
(g) The information set forth in Schedule I of the Offer to Purchase is
incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a)-(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Parent, BUSA and the Offeror"), Section 11
("Background of the Offer") and Section 12 ("Purpose of the Offer and the
Merger; Plans for the Company") of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(c) The information set forth in the Introduction and Section 10
("Source and Amount of Funds") of the Offer to Purchase is incorporated herein
by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(e) The information set forth in the Introduction and Section 12
("Purpose of the Offer and the Merger; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 ("Effect of the Offer on
Market for Shares, Nasdaq Listing and Registration Under the Exchange Act") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a)-(b) The information contained in Items 7 and 9 of the cover pages
hereto is incorporated herein by reference. The information set forth in the
Introduction and Section 9 ("Certain Information Concerning the Parent, BUSA and
the Offeror") of the Offer to Purchase is incorporated herein by reference.
5
<PAGE> 6
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Parent, BUSA and the Offeror") and Section 17 ("Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in Section 9 ("Certain Information Concerning the
Parent, BUSA and the Offeror") of the Offer to Purchase is incorporated herein
by reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a holder of Common Stock of the Company whether to sell, tender
or hold securities being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION
(a) Not applicable.
(b)-(c) The information set forth in Section 16 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on Market
for Shares, Nasdaq Listing and Registration Under the Exchange Act"), Section 10
("Source and Amount of Funds") and Section 16 ("Certain Regulatory and Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(e) Not applicable.
(f) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), and are incorporated herein by reference in their entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, dated February 29, 1996.
(a)(2) Letter of Transmittal, dated February 29, 1996.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release, dated February 27, 1996.
(a)(8) Summary Advertisement, dated February 29, 1996
(b) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of February 27, 1996, among
the Company, VSI Acquisition Co., BUSA, and Brady.
(c)(2) Engagement Letter, dated February 27, 1996, by and among Robert W.
Baird & Co. Incorporated and Brady.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
(g) Not Applicable.
6
<PAGE> 7
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: February 28, 1996
VSI ACQUISITION CO.
By: /s/ DONALD P. DELUCA
------------------------------------
BRADY USA, INC.
By: /s/ DONALD P. DELUCA
------------------------------------
W. H. BRADY CO.
By: /s/ DONALD P. DELUCA
------------------------------------
7
<PAGE> 8
EXHIBIT INDEX
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PAGE
EXHIBIT NO. NUMBER
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(a)(1) Offer to Purchase, dated February 29, 1996.
(a)(2) Letter of Transmittal, dated February 29, 1996.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release, dated February 27, 1996.
(a)(8) Summary Advertisement, dated February 29, 1996.
(b) Not Applicable.
(c)(1) Agreement and Plan of Merger, dated as of February 27, 1996, among the
Company, VSI Acquisition Co., BUSA, and Brady.
(c)(2) Engagement Letter, dated February 27, 1996 by and among Robert W. Baird &
Co. Incorporated and Brady.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
</TABLE>
8
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
AT
$17.50 NET PER SHARE
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY
OF
W. H. BRADY CO.
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
MILWAUKEE TIME (CENTRAL TIME), ON THURSDAY, MARCH 28, 1996,
UNLESS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK OF VARITRONIC SYSTEMS, INC. WHICH, WHEN ADDED TO THE NUMBER OF
SHARES OF COMMON STOCK THEN OWNED BY W. H. BRADY CO. AND ITS AFFILIATES, WILL
REPRESENT AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS
(EXCLUDING ANY UNEXERCISED PORTION OF THE OPTION ISSUED TO W.H. BRADY CO.). THE
OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER, DATED AS FEBRUARY 27, 1996, AMONG W. H. BRADY CO., BRADY USA, INC., VSI
ACQUISITION CO., AND VARITRONIC SYSTEMS, INC. THE BOARD OF DIRECTORS OF
VARITRONIC SYSTEMS, INC. HAS APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT; HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE VARITRONIC SYSTEMS, INC. SHAREHOLDERS; AND
RECOMMENDS THAT THE HOLDERS OF COMMON STOCK ACCEPT THE OFFER AND TENDER ALL OF
THEIR SHARES IN THE OFFER.
-------------------------
IMPORTANT
Any shareholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of Transmittal
with the Shares and all other required documents to the Depositary of this
Offer, Firstar Trust Company, or follow the procedure for book-entry transfer
set forth in Section 3 herein or (ii) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
the shareholder. A shareholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such person
if he or she desires to tender the Shares.
Any shareholder who desires to tender Shares and cannot deliver such Shares
and all other required documents to the Depositary by the expiration of the
Offer must tender such Shares pursuant to the guaranteed delivery procedure set
forth in Section 3 herein.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to Robert W. Baird & Co.
Incorporated, the Dealer Manager for this Offer, or Georgeson & Company Inc.,
the Information Agent, at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase.
-------------------------
The Dealer Manager for the Offer is:
ROBERT W. BAIRD & CO.
INCORPORATED
February 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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INTRODUCTION............................................................................. 1
1. Terms of the Offer................................................................ 2
2. Acceptance for Payment and Payment for Shares..................................... 4
3. Procedure for Tendering Shares.................................................... 5
4. Withdrawal Rights................................................................. 7
5. Certain Federal Income Tax Consequences........................................... 7
6. Price Range of Shares; Dividends.................................................. 8
7. Effect of the Offer on Market for Shares, Nasdaq Listing and Registration Under
the
Exchange Act...................................................................... 8
8. Certain Information Concerning the Company........................................ 9
9. Certain Information Concerning the Parent, BUSA and the Offeror................... 11
10. Source and Amount of Funds........................................................ 12
11. Background of the Offer........................................................... 13
12. Purpose of the Offer and the Merger; Plans for the Company........................ 14
13. The Merger Agreement.............................................................. 14
14. Dividends and Distributions....................................................... 19
15. Certain Conditions to Offeror's Obligations....................................... 20
16. Certain Regulatory and Legal Matters.............................................. 21
17. Fees and Expenses................................................................. 22
18. Miscellaneous..................................................................... 23
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT, BUSA, AND THE
OFFEROR........................................................................... I-1
</TABLE>
i
<PAGE> 3
To The Holders of Common Stock
of Varitronic Systems, Inc.
INTRODUCTION
VSI Acquisition Co., a Minnesota corporation (the "Offeror") and an
indirect wholly-owned subsidiary of W.H. Brady Co., a Wisconsin corporation (the
"Parent"), hereby offers to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of Varitronic Systems, Inc., a Minnesota
corporation (the "Company"), at a purchase price of $17.50 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which together constitute the "Offer").
Those shareholders who tender shares will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer.
The Offeror will pay all charges and expenses of Robert W. Baird & Co.
Incorporated (the "Dealer Manager"), Firstar Trust Company (the "Depositary")
and Georgeson & Company Inc. (the "Information Agent") in connection with the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER, THE MERGER
(AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT (AS HEREINAFTER DEFINED); HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS; AND RECOMMENDS THAT THE HOLDERS OF
SHARES ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES WHICH, WHEN ADDED TO THE NUMBER OF SHARES THEN OWNED BY THE
PARENT AND ITS AFFILIATES, INCLUDING ANY SHARES ACQUIRED PURSUANT TO THE OPTION
DESCRIBED BELOW, WILL REPRESENT NOT LESS THAN TWO-THIRDS OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS, EXCLUDING ANY UNEXERCISED PORTION OF THE
OPTION ISSUED TO THE PARENT (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT
TO OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF THIS OFFER TO PURCHASE.
Brown, Gibbons, Lang & Co., L.P., the Company's financial advisor, has
delivered to the Company's Board of Directors its written opinion that, as of
the date of such opinion, the consideration to be received by the holders of the
Shares pursuant to the Offer and the Merger is fair to such holders from a
financial point of view. A copy of such opinion is contained in the Company's
Statement on Schedule 14D-9 which is also being distributed to the Company's
shareholders.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of February 27, 1996 (the "Merger Agreement"), among the Offeror, Brady USA,
Inc., a Wisconsin corporation ("BUSA") of which the Offeror is a wholly-owned
subsidiary, the Parent, of which BUSA is a wholly-owned subsidiary, and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement, all in
accordance with the relevant provisions of the Minnesota Business Corporation
Act ("MBCA"), the Offeror will be merged with and into the Company (the
"Merger"). See Section 12 herein. Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will be an indirect wholly-owned subsidiary of the Parent. At the effective
time of the Merger (the "Effective Time"), each issued and outstanding Share
(other than Shares owned by the Company, the Parent, or any subsidiary of
either, including the Offeror and BUSA, or Shares with respect to which
appraisal rights are properly exercised under the MBCA ("Dissenting Shares")),
will be converted into and represent the right to receive $17.50 (or any higher
price that may be paid for each Share pursuant to the Offer) in cash, without
interest thereon (the "Offer Price"). See Section 5 herein for a description of
certain tax consequences of the Offer and the Merger.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, the Parent will be entitled to designate for election to
the Board of Directors of the Company a number of directors (rounded up to the
next whole number) that will give the Parent representation on such Board equal
1
<PAGE> 4
to the product of (i) the total number of directors on such Board and (ii) the
percentage that the aggregate number of Shares beneficially owned by the Parent
bears to the total number of outstanding Shares. The Company has agreed, upon
the request by the Parent, to promptly increase the size of the Board of
Directors of the Company and/or use its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable the Parent's
designees to be elected to the Board and to cause the Parent's designees to be
so elected.
The Company has advised the Offeror that as of February 26, 1996, there
were (i) 2,319,495 Shares issued and outstanding, (ii) outstanding employee
stock options to purchase an aggregate of 193,500 Shares, all of which had
exercise prices of less than $17.50 per Share and (iii) an option granted to the
Parent, pursuant to the Merger Agreement, to purchase a number of newly issued
shares equal to 19.9% of the common stock outstanding as of the date of the
Merger Agreement (the "Option"). See Section 13. As of the date hereof, neither
the Offeror nor the Parent beneficially owns any Shares, exclusive of the
Option. If the Offeror acquires at least 1,675,330 Shares in the Offer (assuming
no exercise of the Option), it will own two-thirds of the outstanding Shares on
a fully diluted basis (excluding the Option). Accordingly, the Minimum Condition
would be satisfied and the Offeror would have sufficient voting power to approve
the Merger without the affirmative vote of any other shareholder. In the event
the Offeror acquires at least 90% of the then outstanding Shares through the
Offer or otherwise, the Offeror would be able to effect the Merger pursuant to
the short form merger provisions of the MBCA, without prior notice to, or any
action by, any other holder of Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), 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 herein. The term "Expiration Date" means 12:00
Midnight, Milwaukee time (Central Time), on Thursday, March 28, 1996, unless the
Offeror shall have extended the period of time that the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 Midnight, Milwaukee time (Central Time).
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15 HEREIN. The
Offeror reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the United States Securities and Exchange
Commission (the "Commission"), subject to the limitations set forth in the
Merger Agreement and described below, to waive any condition to the Offer,
provided that the Minimum Condition may be reduced or waived only with the
consent of the Company. Shares issued to the Parent upon the exercise of the
Option may be counted toward satisfaction of the Minimum Condition. If the
Minimum Condition or any of the other conditions set forth in Section 15 have
not been satisfied by 12:00 Midnight, Milwaukee time (Central Time), on
Thursday, March 28, 1996 (or any other time then set as the Expiration Date),
the Offeror may, subject to the terms of the Merger Agreement as described
below, elect to (i) extend the Offer and, subject to applicable withdrawal
rights, retain all tendered Shares until the expiration of the Offer, as
extended, (ii) subject to complying with applicable rules and regulations of the
Commission, accept for payment all Shares so tendered and not extend the Offer
or (iii) terminate the Offer and not accept for payment any Shares and return
all tendered Shares to
2
<PAGE> 5
tendering shareholders. Under the terms of the Merger Agreement, the Offeror
reserves the right to waive any condition to the Offer, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; provided, however, that the Offeror may not change the
form of consideration to be paid in the Offer, decrease the price per Share
payable in the Offer, reduce the maximum number of Shares to be purchased in the
Offer or impose any condition to the Offer in addition to those set forth in the
Merger Agreement or amend any other term of the Offer in a manner materially
adverse to the holders of Shares; and provided further that the Offeror may not
unilaterally waive the Minimum Condition or the condition relating to the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), each of which conditions may be waived by the Offeror only with
the prior written consent of the Company. Notwithstanding the foregoing, the
Offeror may, without the consent of the Company, extend the Offer (i) if, at the
then scheduled Expiration Date of the Offer any of the conditions to the Offer
shall not have been satisfied or waived, until such conditions are satisfied or
waived, (ii) for any period required by any rule, regulation, interpretation or
position of the Commission or the Commission staff applicable to the Offer and
(iii) for any reason on one or more occasions for an aggregate period of not
more than 20 business days (for all such extensions) beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
this sentence if, as of the initial (or any subsequent) expiration date, there
shall not have been tendered and not withdrawn at least 90% of the fully diluted
outstanding Shares (excluding the unexercised portion of the Option).
Subject to the limitations set forth in the Merger Agreement and described
above, the Offeror reserves the right (but will not be obligated), at any time
or from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that the Offeror will exercise its right to extend the Offer.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and not
to accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, upon the occurrence of any of the events described in the
conditions set forth in Section 15, by giving oral or written notice of such
delay or termination to the Depositary and (ii) at any time or from time to
time, to amend the Offer in any respect. The Offeror's right to delay payment
for any Shares or not to pay for any Shares theretofore accepted for payment is
subject to the applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), relating to the Offeror's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 10:00 a.m.,
Eastern time, on the next business day after the previous scheduled Expiration
Date in accordance with the public announcement requirements of Rules 14d-4(c)
and 14e-1(d) under the Exchange Act. Without limiting the obligation of the
Offeror under such rules or the manner in which the Offeror may choose to make
any public announcement, the Offeror currently intends to make announcements by
issuing a press release to the Dow Jones News Service and making any appropriate
filing with the Commission.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a reduction of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if, and to
the extent, required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the Offer or the information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in percentage of securities sought, a minimum ten
business day period is generally required to allow for adequate dissemination to
shareholders and for investor response.
3
<PAGE> 6
The Company has provided the Offeror with the Company's list of
shareholders and security position listings for the purpose of disseminating the
Offer to holders of Shares. This Offer to Purchase and the Letter of Transmittal
are being mailed to record holders of the Shares and furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the list of shareholders or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (i) the
Expiration Date and (ii) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions set forth in Section
15 herein. Subject to compliance with Rule 14e-1(c) under the Exchange Act, the
Offeror expressly reserves the right to delay payment for Shares in order to
comply in whole or in part with any applicable law. See Sections 1, 16 and 18
herein. In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facilities"),
pursuant to the procedures set forth in Section 3, (ii) a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
with all required signature guarantees or, in the case of a book-entry transfer,
an Agent's Message (as defined below) and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering shareholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering shareholders. If, for any reason whatsoever, acceptance for
payment of any Shares tendered pursuant to the Offer is delayed, or the Offeror
is unable to accept for payment Shares tendered pursuant to the Offer, then,
without prejudice to the Offeror's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that the tendering shareholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will
interest be paid by the Offeror because of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering shareholder (or, in
the case of Shares delivered by book-entry transfer to a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being
paid for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all shareholders whose Shares are purchased
pursuant to the Offer.
4
<PAGE> 7
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
shareholder must comply with the guaranteed delivery procedures set forth below.
In addition, either (i) certificates representing such Shares must be received
by the Depositary or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date or (ii)
the guaranteed delivery procedures set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO A DEPOSITARY FOR
THIS OFFER.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the guaranteed delivery procedures described below
must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
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 Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then the certificates for the tendered Shares 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, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a
5
<PAGE> 8
manually signed facsimile thereof), and any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three (3) Nasdaq National Market trading days after the
date of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases by made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS OR
HER CORRECT TAX IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT HE OR SHE IS NOT
SUBJECT TO BACKUP FEDERAL WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE THE INSTRUCTIONS SET FORTH IN THE
LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including timeliness and receipt) and acceptance for
payment of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer,
subject to the limitations set forth in the Merger Agreement, or any defect or
irregularity in the tender of any Shares. The Offeror's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. The Offeror, BUSA, the
Parent, the Dealer Manager, the Information Agent, the Depositary or any other
person will not be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Offeror as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Offeror (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after February 27,
1996). All such proxies shall be considered coupled with an interest in the
tendered Shares. This appointment is effective when, and only to the extent
that, the Offeror accepts for payment the Shares deposited with the Depositary.
Upon acceptance for payment, all prior proxies given by the shareholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of the Offeror will, with respect to the Shares and other securities
or rights, be empowered to exercise all voting and other rights of such
shareholder as they in their sole judgment deem proper in respect of any annual
or special meeting of the Company's shareholders, or any adjournment or
postponement thereof. The Offeror reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Offeror's payment
for such Shares, the Offeror must be able to exercise full voting and other
rights with respect to such Shares and the other securities or rights issued or
issuable in respect of such Shares, including voting at any meeting of
shareholders (whether annual or special and whether or not adjourned) in respect
of such Shares.
6
<PAGE> 9
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after April 25, 1996. If the purchase of or payment for Shares is delayed for
any reason or if the Offeror is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Offeror's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of the Offeror and
may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as set forth in this Section 4, subject to Rule
14e-1(c) under the Exchange Act, which provides that no person who makes a
tender offer shall fail to pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing such Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares. All questions as to the form and validity (including
timeliness and receipt) of notices of withdrawal will be determined by the
Offeror, in its sole discretion, and its determination will be final and binding
on all parties. The Offeror, BUSA, the Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will not be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3
herein.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to the right to receive cash in the
Merger (including pursuant to the exercise of appraisal rights). The discussion
applies only to holders of Shares in whose hands Shares are capital assets and
may not apply to Shares received pursuant to the exercise of employee stock
options or otherwise as compensation, or to holders of Shares who are in special
tax situations (such as insurance companies, tax-exempt organizations or
non-U.S. persons).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH SHAREHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME
TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares sold pursuant to the Offer or converted into the right to receive cash in
the Merger and the amount of cash received therefor. Gain or loss must be
determined separately for Shares acquired in different transactions which are
sold pursuant to the Offer or are converted into the right to receive cash in
the
7
<PAGE> 10
Merger. Such gain or loss will be capital gain or loss (other than, with respect
to the exercise of appraisal rights, amounts, if any, which are or are deemed to
be interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be long-term gain or loss if, on the date of sale (or,
if applicable, the date of the Merger), the Shares were held for more than one
year.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the shareholder (i) fails to furnish his or her TIN, (ii) furnishes an incorrect
TIN, (iii) fails to properly include a reportable interest or dividend payment
on his or her federal income tax return or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalty of perjury, that
the TIN provided is his or her correct number and that he or she is not subject
to backup withholding. Backup withholding is not an additional tax, but merely
an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include reportable payments in income. Each shareholder should consult with his
or her own tax advisor as to his or her qualification for exemption from backup
withholding and the procedure for obtaining such exemption. Tendering
shareholders may be able to prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are principally traded on the Nasdaq National Market. The Shares
are traded under the symbol "VRSY". The following table sets forth for the
periods indicated the high and low sales prices per Share as furnished by the
Nasdaq National Market. These prices reflect prices between dealers, without
retail markups, markdowns or commissions, and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED JULY 31, 1994
First Quarter.......................................... $13.750 $ 8.250
Second Quarter......................................... 15.000 9.750
Third Quarter.......................................... 10.750 8.000
Fourth Quarter......................................... 10.000 7.484
FISCAL YEAR ENDED JULY 31, 1995
First Quarter.......................................... $ 9.000 $ 7.750
Second Quarter......................................... 9.500 7.750
Third Quarter.......................................... 13.500 9.000
Fourth Quarter......................................... 13.000 8.750
FISCAL YEAR ENDED JULY 31, 1996
First Quarter.......................................... $ 9.500 $ 8.250
Second Quarter......................................... 12.750 8.750
Third Quarter (Through February 27, 1996).............. 16.500 12.750
</TABLE>
On February 27, 1996, the last full day of trading prior to the
commencement of the Offer, the closing price per Share as furnished by the
Nasdaq National Market was $16.500. Holders of Shares are urged to obtain
current market quotations for the Shares.
The Company has not paid dividends on the Shares. Under the terms of the
Merger Agreement, the Company is prohibited from paying any dividends on its
capital stock, including the Shares.
7. EFFECT OF THE OFFER ON MARKET FOR SHARES, NASDAQ LISTING AND REGISTRATION
UNDER THE EXCHANGE ACT.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by shareholders other than the
Offeror.
8
<PAGE> 11
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the Nasdaq
National Market. If the Shares no longer meet such standards, the Nasdaq
National Market might cease to provide quotations, but quotations might still be
available from other sources. The Offeror cannot predict whether the Nasdaq
National Market standards will be met after the Offer.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Shares. It is the intention of the
Offeror to seek to cause an application for such termination to be made as soon
after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to shareholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; and the officers, directors and 10% or more
shareholders of the Company would no longer be subject to the "short-swing"
insider trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 promulgated under the Securities Act of 1933, as
amended, and the Shares would no longer meet the standards for continued
inclusion in Nasdaq National Market.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Minnesota corporation with its principal executive offices
located at 300 Interchange North, 300 Highway 169 South, Minneapolis, Minnesota,
55426. Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither the Offeror nor the Parent nor BUSA has any knowledge
that would indicate that statements contained herein based upon such documents
are untrue, neither the Offeror, BUSA, the Parent nor the Dealer Manager or
Information Agent assumes any responsibility for the accuracy or completeness of
the information concerning the Company, furnished by the Company, or contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of any
such information but which are unknown to the Offeror, BUSA and the Parent.
The Company develops, manufacturers and markets consumer lettering,
labeling, signage and presentation systems which enhance the quality,
professionalism and effectiveness of a wide range of communications. The
lettering and labeling systems generate professional quality type-on-tape in a
variety of colors and in sizes ranging from one-half to four inches. The
PosterPrinter machine, targeted for the presentation market, enlarges
standard-sized originals to poster or banner-sized documents. In addition, a
PosterPrinter machine sold with a computer interface allows the end user to
print computer generated originals from a personal computer using specific
application software. The Company recently introduced VintageColor(TM), a wide-
format, graphics printing system which produces output in 24 or 36 inch widths
up to 100 feet long. The Company also offers a broad line of consumable supplies
and accessories which are used with all of its products. The Company has
manufacturing facilities located in the Minneapolis, Minnesota metropolitan
area.
9
<PAGE> 12
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's Annual Report on Form 10-K for the year ended July 31, 1995, and the
Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1995.
More comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection and
copies thereof should be obtainable in the manner set forth below.
VARITRONIC SYSTEMS, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31, YEAR ENDED JULY 31,
------------------ -----------------------------
1995 1994 1995 1994 1993
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................... $13,256 $11,858 $49,525 $44,819 $45,423
Gross profit................................. 4,518 4,420 16,068 17,461 17,874
Income from operations....................... 1,001 919 931 2,580 3,612
Net income................................... 635 574 543 1,690 2,621
Net income per Share......................... $.27 $.25 $.23 $.65 $.94
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
------------------
1995 1994
OCTOBER 31, ------- -------
1995
-----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital.............................................. $17,862 $17,366 $14,466
Property and Equipment....................................... 4,339 4,514 4,264
Total Assets................................................. 26,207 27,565 25,940
Long-Term Debt............................................... 3,050 3,300 --
Shareholders Equity.......................................... 19,150 18,580 18,731
</TABLE>
On February 20, 1996, the Company issued a press release reporting the
following unaudited results of operations for the quarter and six months ended
January 31, 1996 and containing information for the comparable prior periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................... $12,248 $12,128 $25,504 $23,986
Net income.............................................. 866 702 1,501 1,275
Net income per Share.................................... $.37 $.30 $.65 $.55
</TABLE>
In connection with the February 7, 1996 meeting of representatives of the
Parent and the Company, described at Section 11 herein, and for the purposes of
supporting the Company's belief that an offer of more than $14.00 per share was
appropriate, representatives of the Company submitted summary Company forecasts
and financial projections for fiscal years 1996 through 2000. These summary
financial forecasts reflect an increase in sales from $51.5 million for fiscal
year 1995 to $75.6 million for fiscal year 2000, and an increase in net income
from $1.5 million to $8.0 million. The assumptions, if any, underlying the
forecasts were not disclosed.
10
<PAGE> 13
The Company has advised the Offeror that it does not as a matter of course
disclose its internal forecasts. The forecasts were not prepared with a view to
public disclosure or compliance with published guidelines of the Commission or
the American Institute of Certified Public Accountants for prospective financial
information. Certain information from the forecasts is included herein solely
because the forecasts were furnished to Parent by representatives of the
Company. Accordingly, the inclusion of such information in this Offer should not
be regarded as an indication that the Parent, the Offeror, BUSA, the Company or
their respective financial advisors or their respective officers and directors
consider such information to be accurate or reliable, and none of such persons
assumes any responsibility for the accuracy therefor. The forecasts cover a
period of five fiscal years. The forecasted sales and earnings for the Company
are far greater than the Company's historical rate of growth during the five
preceding fiscal years, during which the Company's sales increased from $39.2
million to $49.5 million and net income decreased from $2.9 million to $0.5
million. Moreover, any forecasts as to future sales and earnings are inherently
subject to numerous risks and uncertainties, including general economic
conditions, competition, technological advances, costs of raw materials and
products, availability of continued sources of supply and availability of key
management.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interests of such
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Northeast Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048 and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
9. CERTAIN INFORMATION CONCERNING THE PARENT, BUSA AND THE OFFEROR.
The Offeror is a newly incorporated Minnesota corporation and a
wholly-owned subsidiary of BUSA, which is a wholly-owned subsidiary of the
Parent, which is a Wisconsin corporation. To date, the Offeror has not conducted
any business other than that incident to its formation, the execution and
delivery of the Merger Agreement and the commencement of the Offer. Accordingly,
no meaningful financial information with respect to the Offeror is available.
BUSA is a Wisconsin corporation and a wholly-owned subsidiary of the
Parent. BUSA, which is a Wisconsin corporation, was incorporated in 1991 to act
as the domestic arm of the Parent's operations. Financial information on BUSA is
included in the summary consolidated financial data of the Parent set forth
below.
The principal executive offices of the Offeror, BUSA and the Parent are
located at 6555 West Good Hope Road, Milwaukee, Wisconsin 53223. The Parent
develops, manufactures and sells a broad range of stock and customized products
employing its knowledge of surface chemistry, principally in adhesives, coatings
and graphics technologies. The Parent's products include over 20,000 stock items
and a wide variety of custom items, which are used primarily to identify, inform
or instruct, including pressure-sensitive identification, labeling and marking
systems for electrical wires and pipes; self-bonding nameplates, safety and
instructional signs and specialized tapes used in audio, video and computer
applications. The Parent's products are sold by direct sales force and mail
order sales, and are used in a variety of industrial, commercial, governmental,
public utility, medical equipment, computer and consumer product markets,
including original equipment manufacturers. The Parent and its subsidiaries
operate 12 manufacturing facilities in the United States and six foreign
countries. Domestic and international operations are conducted through its
Identification Systems and Specialty Tapes Group, Signmark Group and Seton
Group. Domestic operations are located in Connecticut and Wisconsin.
International operations are located in Australia, Belgium, Canada, England,
France, Germany, Hong Kong, Italy, Japan, Korea, New Zealand, Singapore, Spain
and Sweden.
11
<PAGE> 14
The Parent and its subsidiaries purchased approximately $12,270,000,
$8,311,000 and $8,039,000 in products from the Company for the fiscal years
ended July 31, 1995, July 31, 1994 and July 31, 1993, respectively.
Set forth below is certain summary consolidated financial data with respect
to the Parent excerpted or derived from financial information contained in the
Parent's Annual Report on Form 10-K for the fiscal year ended July 31, 1995, and
the Parent's Quarterly Report on Form 10-Q for the quarter ended January 31,
1996 (which are incorporated by reference herein). More comprehensive financial
information is included in such reports and other documents filed with the
Commission and the following summary is qualified in its entirety by reference
to such reports and such other documents and all financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below.
W. H. BRADY CO.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, YEAR ENDED JULY 31,
-------------------- -----------------------------------
1996 1995 1995 1994 1993
-------- -------- ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............................ $167,043 $147,896 $ 314,362 $255,841 $242,970
Income from operations.................. 16,304 17,523 40,585 29,475 25,324
Net income.............................. 12,210 11,033 27,911 18,540 16,856
Net income per Share, Class A
Nonvoting............................ $.55 $.50 $3.83 $2.55 $2.33
<CAPTION>
JANUARY 31, JULY 31,
1996 1995 1994
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................ $ 126,554 $129,938 $100,023
Total assets................................................... 242,132 230,005 202,509
Long-term debt................................................. 1,944 1,903 1,855
Total shareholders' equity..................................... 176,825 170,823 145,129
</TABLE>
The Parent is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports and other information with
the Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in Section 8.
Except pursuant to the Option and as otherwise described in this Offer to
Purchase, neither of the Offeror, BUSA, the Parent, nor, to the best knowledge
of the Parent and its subsidiaries, any of the persons listed in Schedule I to
this Offer to Purchase owns or has any right to acquire any Shares and none of
them has effected any transaction in the Shares during the past 60 days.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares outstanding at February 26, 1996 and all Shares covered by
options outstanding at February 26, 1996 (excluding the Option) which were
exercisable at such date or the exercise of which has been accelerated to
immediately prior to the closing of the Offer are tendered pursuant to the
Offer, the aggregate purchase price and estimated fees and expenses will be
approximately $46,000,000. The Offeror will obtain all such funds from the
Parent, which currently has these funds in available cash. This Offer is not
subject to a financing condition.
12
<PAGE> 15
11. BACKGROUND OF THE OFFER.
On July 6, 1995, in the course of a meeting between Scott F. Drill, the
Company's Chairman of the Board, President and Chief Executive Officer, and
Katherine M. Hudson, the Parent's President and Chief Executive Officer, the two
discussed potential synergies that would result from the Parent and the Company
combining their operations. The Parent is the largest customer of the Company.
On December 11, 1995, Katherine M. Hudson and Parent's Vice President, Donald P.
DeLuca, met with Scott F. Drill and the Company's Vice President of Finance,
Norbert F. Nicpon, and the Company's Vice President of Corporate Development,
Deborah L. Moore, and discussed synergies from a combination of the respective
companies. No understandings or agreements were reached during these
discussions.
On December 22, 1995, Ms. Hudson wrote to Mr. Drill requesting the
opportunity to meet with the Company's board of directors during the first week
of January 1996 to discuss a potential business combination of the Parent and
the Company. Although this letter did not extend an offer to the Company, it
expressed the opinion that a price of $13.50 per Share would be fair to the
Company's shareholders. By letter dated December 27, 1995, Mr. Drill advised Ms.
Hudson that her letter would be brought to the attention of the Company's board
of directors after January 3, 1996 and that a response would be forthcoming
during the week of January 8, 1996.
On January 5, 1996, BUSA, in a matter unrelated to the Offer, commenced an
arbitration action against the Company challenging the Company's November 1995
notice of termination of the Company's distributor agreement with BUSA. BUSA
sought both equitable and monetary relief. BUSA also requested interim
injunctive relief in federal court. On January 30, 1996, the Company commenced
separate litigation against BUSA in federal court alleging, among other things,
violations of federal anti-trust law, tortious interference, deceptive trade
practices and business defamation.
On January 12, 1996, the Company informed the Parent that it had retained
the investment banking firm of Brown, Gibbons, Lang & Company, L.P. to explore
methods of maximizing the Company's long and short-term value. Discussions
continued between representatives of the Company and the Parent during January
1996. On January 29, 1996, the Parent addressed a letter to the Company's board
of directors again requesting an opportunity to discuss a potential business
combination at an increased price of $14.00 per Share. The Parent also issued a
January 29, 1996 press release announcing its request for an opportunity to
discuss a potential business combination with the Company. Pursuant to a January
30, 1996, letter from the Company, representatives of the Company and the Parent
met on February 7, 1996, and discussed potential advantages of a business
combination.
On February 9, 1996, the Parent delivered a letter to the Company's board
of directors by which it offered to purchase the Company for $16.00 per Share,
subject to certain conditions. On February 13, 1996, the Company's board of
directors responded that it considered the $16.00 price to be fair, subject to
certain conditions. The Company formed a special committee to consider the
Parent's February 9, 1996 offer. On February 23, 1996, Scott F. Drill announced
that he and a group, including current executive officers of the Company (the
"Drill Group"), intended to submit a competing offer to purchase the Company.
On February 26, 1996, a special committee of the Company's board of
directors met to consider (i) the Drill Group's offer of $17.50 per Share,
subject to certain financing and other conditions and (ii) the Parent's February
9, 1996 offer of $16.00 per Share. On February 26, 1996, after meeting with the
special committee, the Parent offered to purchase the Company for $17.50 per
Share, subject to certain conditions and subject to approval from its board of
directors. On February 26, 1996, a special committee of the Company's board of
directors approved a proposed cash tender offer for the Company's Shares by the
Offeror, BUSA and the Parent in conformance with MBCA Section 302A.671 and
approved the Merger Agreement subject to a successful completion of the Offer.
See Section 13. On February 27, 1996, the Parent's board of directors approved
the $17.50 per Share offer. On February 27, 1996, the Parent and the Company
jointly announced, among other things, that they had entered into the Merger
Agreement and that the Offer would commence within three business days.
13
<PAGE> 16
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
the Parent to acquire control of, and the entire equity interest in, the
Company. Upon consummation of the Merger, the Company will become an indirect,
wholly-owned subsidiary of the Parent. The Offer is being made pursuant to the
Merger Agreement.
Under the Company's Articles, the approval of the Board of Directors of the
Company and the affirmative vote of the holders of two-thirds of the outstanding
Shares are required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Board of Directors
of the Company, including a special committee of disinterested directors, has
approved the Offer, the Merger and the Merger Agreement, and, unless the Merger
is consummated pursuant to the short form merger provisions under the MBCA
described below, the only remaining required corporate action of the Company is
the approval and adoption of the Merger Agreement by the affirmative vote of the
holders of at least two-thirds of the Shares. If the Minimum Condition is
satisfied, including satisfaction as a result of the exercise, in whole or in
part, of the Option held by the Parent for a number of newly issued shares equal
to 19.9% of the Company's outstanding common stock, the Offeror will have
sufficient voting power to cause the approval and adoption of the Merger
Agreement and the transactions contemplated thereby without the affirmative vote
of any other shareholder. See Section 13 for a discussion of the Option.
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a meeting of its shareholders as promptly as practicable
after the consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby, if
such action is required by the MBCA. The Parent has agreed that all Shares owned
by the Parent or the Offeror (including any Shares acquired pursuant to the
exercise of the Option) will be voted in favor of the Merger Agreement.
The Parent intends to undertake an operations review of the Company's
operations and to study how operations of the two companies can best be
optimized. The Parent will continue to evaluate the Company's other business and
operations and will take such actions as a result of such review as are
appropriate under the circumstances.
Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of consolidated assets of the Company and its subsidiaries or
any material change in the Company's capitalization or dividend policy or any
other material changes in the Company's corporate structure or business.
13. THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement, a copy
of which has been filed as an exhibit to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Merger Agreement.
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, the Parent, BUSA, the Offeror and the Company are required to use all
reasonable efforts to take all action as may be necessary or appropriate in
order to effectuate the Offer and the Merger as promptly as possible and to
carry out the transactions provided for or contemplated by the Merger Agreement.
Company Actions. Pursuant to the Merger Agreement, the Company has agreed
that, subject to the fiduciary duties of the Board of Directors of the Company
under applicable law as determined by the Board of Directors of the Company in
good faith after consultation with the Company's outside counsel, it will file
with the Commission and mail to its shareholders, a Solicitation/Recommendation
Statement on Schedule 14D-9 containing the recommendation of the Board of
Directors that the Company's shareholders accept the Offer and approve the
Merger and the Merger Agreement.
14
<PAGE> 17
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the MBCA, the
Offeror shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Offeror shall
cease and the Company shall continue as the Surviving Corporation and shall
succeed to and assume all the rights and obligations of the Offeror in
accordance with the MBCA and the Merger Agreement. The Articles of Incorporation
of the Company shall become the Articles of Incorporation of the Surviving
Corporation, at least a majority of the directors of the Surviving Corporation
shall be nominees of Parent, and the officers of the Company shall be the
officers of the Surviving Corporation, in each case until their successors are
chosen.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be canceled and extinguished and
each Share (other than Shares owned by the Company, the Parent, or any
subsidiary of either, including the Offeror, and any Dissenting Shares) shall,
by virtue of the Merger and without any action on the part of the Offeror, the
Company or the holders of the Shares, be converted into and represent the right
to receive an amount equal to the Offer Price. Each share of common stock of the
Offeror issued and outstanding immediately prior to the Effective Time shall, at
the Effective Time, by virtue of the Merger and without any action on the part
of the Offeror, the Company or the holders of Shares, be converted into and
shall thereafter evidence one validly issued and outstanding share of common
stock of the Surviving Corporation.
Dissenting Shares. Shares which are held by holders who have properly
exercised appraisal rights with respect thereto in accordance with Sections
302A.471 and 302A.473 of the MBCA will not be exchangeable for the right to
receive an amount equal to the Offer Price in cash, and instead holders of such
Shares will be entitled to receive payment of the appraised value of such stock,
unless such holders fail to perfect or withdraw or lose their right to appraisal
and payment under the MBCA.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to the Offeror, including, but not
limited to, representations and warranties relating to: the Company's
organization, qualification and capitalization; its authority to enter into the
Merger Agreement and carry out related transactions; filings made by the Company
with the Commission under the Securities Act of 1933, as amended or the Exchange
Act (including financial statements included in the documents filed by the
Company under these Acts); required consents and approvals; compliance with
applicable laws, the Company's intellectual property and the absence of certain
changes or events which would have a Material Adverse Effect on the Company.
"Material Adverse Effect" is defined as a material adverse effect on the
operations of the Company and its subsidiaries taken as a whole.
The Offeror, BUSA and the Parent have also made customary representations
and warranties to the Company, including, but not limited to, representations
and warranties relating the Offeror's, BUSA's, and the Parent's organization and
qualification, authority to enter into the Merger Agreement, required consents
and approvals and the availability of sufficient funds to consummate the Offer
and the Merger.
Covenants Relating to the Conduct of Business. The Company has agreed that
it will, and will cause its subsidiaries to, carry on their respective
businesses in, and not enter into any material transaction other than in
accordance with, the usual and ordinary course of business. The Company has
agreed that, except as contemplated by the Merger Agreement or as disclosed by
the Company to the Parent prior to the execution of the Merger Agreement, it
shall not, and shall not permit any of its subsidiaries to, without the prior
consent of the Parent:
(i) issue, sell, pledge or encumber, or authorize or propose the
issuance, sale, pledge or encumbrance of (a) any shares of capital stock of
any class (including the shares of Common Stock), or securities convertible
into any such shares, or any rights, warrants or options to acquire any
such shares or other convertible securities, or grant or accelerate any
right to convert or exchange any securities of the Company or any of its
subsidiaries for such shares, other than shares of Common Stock issuable
upon exercise of currently outstanding options, or (b) any other securities
in respect of, in lieu of or in substitution for shares of Common Stock
outstanding on the date of the Merger Agreement;
15
<PAGE> 18
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
the shares of Common Stock);
(iii) split, combine or reclassify any shares of its capital stock or
declare or pay any dividend or distribution on any shares of capital stock
of the Company;
(iv) except pursuant to agreements or arrangements in effect on the
date of the Merger Agreement which have been disclosed to the Offeror,
authorize capital expenditures in excess of $500,000 in the aggregate, make
any acquisition or disposition of a material amount of assets (other than
inventory) or securities, enter into or amend or terminate any contract,
material to the business of the Company and its subsidiaries taken as a
whole, or release or relinquish any contact rights or claims, material to
the business of the Company and its subsidiaries taken as a whole;
(v) pledge or encumber any material assets of the Company except in
the ordinary course of business;
(vi) incur any long-term debt for borrowed money or short-term debt
for borrowed money in an aggregate amount in excess of $100,000 except for
debt incurred in the ordinary course of business (including, without
limitation, to fund working capital needs);
(vii) propose or adopt any amendments to the Articles of Incorporation
or By-Laws of the Company;
(viii) adopt a plan of complete or partial liquidation or resolutions
providing for the complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its subsidiaries;
(ix) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except wholly owned subsidiaries of the
Company in the ordinary course of business and consistent with past
practice;
(x) make any loans, advances or capital contributions to, or
investments in, any other person (other than loans or advances to
subsidiaries and customer loans or advances to employees in accordance with
past practices);
(xi) except as required by applicable laws, adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, severance, termination, employment or other employee benefit
plan, agreement, trust, fund, policy or other arrangement for the benefit
or welfare of any employee or director or former employee or director or,
except as required by applicable laws, increase the compensation or fringe
benefits of any employee or pay any employee or pay any benefit not
required by any existing plan, arrangement or agreement;
(xii) make any tax election or settle or compromise any federal,
state, local or foreign income tax liability, except in the ordinary course
of business and consistent with past practice; or
(xiii) agree in writing or otherwise to take any of the foregoing
actions.
No Solicitation. The Merger Agreement provides that neither the Company nor
any of its subsidiaries, nor any of their respective directors, officers,
employees, representatives, agents or affiliates, will directly or indirectly
encourage, solicit, initiate or, except as is required in the exercise of
fiduciary duties of the Company's directors and officers to its shareholders,
upon advice of counsel to the Company, participate in any discussions or
negotiations with, or knowingly provide any information to, any corporation,
partnership, person or other entity or group (other than the Parent, BUSA, or
the Offeror or any affiliate or agents) concerning any merger, sale of
substantial assets or shares of capital stock or similar transactions involving
the Company or any material subsidiary or division of the Company, provided,
however, that nothing contained in the Merger Agreement will prohibit the
Company or its Board of Directors from (i) taking and disclosing to the
Company's shareholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act,
(ii) making such disclosure to the Company's shareholders which, in the judgment
of the Board of Directors with the advice of counsel, may be required
16
<PAGE> 19
under applicable law or (iii) providing information to, or participating in
discussions or negotiations with, any party that the Board of Directors believes
in good faith would be capable of effecting an acquisition of the Company on
terms that are superior, from a financial point of view, to the Offer and the
Merger. The Merger Agreement requires the Company promptly to communicate to
Offeror if it is furnishing information to or engaging in negotiations with any
third party with respect to the acquisition of the Company or any of its assets
or subsidiaries.
Options. Options to purchase Shares are outstanding under stock option
plans of the Company (the "Company Stock Option Plans") and pursuant to the
Merger Agreement, the Company has granted the Parent the Option (providing for
the purchase of a number of newly issued Shares equal to 19.9% of the
outstanding shares of the Company for $17.50 per share). See below. As of the
date of the Merger Agreement, options for a total of 193,500 Shares (the
"Company Stock Options") were outstanding under the Company Stock Option Plans
and pursuant to an agreement with an officer. The Merger Agreement provides that
at the Effective Time each Company Stock Option shall be canceled for a payment
of $17.50 per Share minus the exercise price thereof.
Indemnification. From and after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company, in each case to the
full extent permitted under the MBCA.
Employee Benefits. Under the Merger Agreement, the Offeror agreed to honor
and to cause the Surviving Corporation to honor and perform its obligations
under certain benefit plans, programs, policies and agreements and certain
compensation agreements, but only to the extent consistent with the terms and
conditions in effect on December 1, 1995 of any such plan, program policy or
agreement (or model thereof) provided to the Offeror.
The Merger Agreement provides that if any salaried or non-union hourly
employee of the Company or any of its subsidiaries is or becomes a participant
in any written employee benefit plan or program of the Offeror or any member of
its controlled group within the meaning of the Section 414(b) or (c) of the
Code, such employee shall be credited under such plan or program with all
service prior to the Effective Time with the Company and its subsidiaries (and
any predecessor employer) to the extent credit was given by the Company and its
subsidiaries for purposes of eligibility and vesting under such plan or program.
The Parent, BUSA and the Offeror have acknowledged in the Merger Agreement
that consummation of the Offer will constitute a change of control of the
Company (to the extent such concept is relevant) for purposes of certain
employment, severance or benefit agreements and plans.
The Parent, BUSA and the Offeror have agreed in the Merger Agreement to the
amendment of certain specified compensation and benefit plans and programs to
permit the acceleration of payment thereunder on or after the later of the date
of the acquisition of Shares pursuant to the Offer or five business days after
the participant's termination of employment for any reason (other than his or
her retirement at or after age 65, death or disability); provided however, that
such termination occurs within two years after such acquisition of Shares and
that no payments shall be accelerated or made to the extent they could
constitute non-deductible excess parachute payments within the meaning of
Section 280G(1) and (2)(A) of the Code.
Employee Stock Purchase Plan. The Employee Stock Purchase Plan (the "Plan")
is a payroll deduction plan pursuant to which the deductions of all
participating employees are accumulated for twelve-month periods, at the end of
which the Company issues and sells Shares to the participants. The Company has
advised the Parent that the current twelve-month period began on October 1,
1995. The Merger Agreement provides that at the Effective Time the Plan will
terminate and that each participant will receive an amount equal to the sum of
(a) the balance of the participant's account under the Plan, plus (b)(i) the
excess of $17.50 per Share over the purchase price per Share applicable to
purchases under the Plan, multiplied by (ii) the number of Shares that could
have been purchased from the balance of the participant's account under the
Plan.
Board Representation. The Merger Agreement provides that promptly upon the
purchase of Shares pursuant to the Offer, the Parent shall be entitled to
designate such number of members of the Board of
17
<PAGE> 20
Directors of the Company, rounded up to the next whole number but in no event
more than one less than the total number of directors, as will give the Parent,
subject to compliance with the provisions of Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
(i) the total number of directors on such Board and (ii) the percentage that the
aggregate number of Shares owned by the Parent bears to the total number of
outstanding Shares. The Company has agreed, upon the request of the Parent and
upon the purchase of Shares pursuant to the Offer, to promptly increase the size
of the Board of Directors of the Company and/or use its reasonable best efforts
to secure the resignations of such number of directors as is necessary to enable
the Parent's designees to be elected the Board of Directors and shall cause the
Parent's designees to be so elected. The Company has agreed to take, at its
expense, all actions required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder to effect any such election, including the mailing
to its shareholders the information required to be disclosed pursuant thereto.
The Parent will supply to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
Following the election of designees of the Parent as described above and
prior to the Effective Time, any amendment to the Merger Agreement or the
Articles of Incorporation or Bylaws of the Company, any termination of the
Merger Agreement, or any action with respect to the various rights granted to
the Company under the Merger Agreement shall require the concurrence of a
majority of the Company's directors then in office who are not designees of
Parent.
Conditions Precedent. The respective obligations of each party to effect
the Merger are subject to the fulfillment at, or prior to, the Effective Time of
the following conditions: (a) if required by applicable law, the Merger
Agreement and the Merger shall have been approved by the requisite vote of the
holders of two-thirds of the outstanding Shares; (b) no governmental entity or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree or
injunction which prohibits or has the effect of prohibiting the consummation of
the Merger; (c) any waiting period applicable to the consummation of the Merger
under the HSR Act having expired or been terminated and (d) the Offeror shall
have accepted and paid for Shares tendered pursuant to the Offer, including
satisfaction of the Minimum Condition.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of the Company, but prior to the Effective Time: (i)
by mutual written consent duly authorized by the Board of Directors of the
Company (excluding any representative of the Offeror or an affiliate of the
Offeror); (ii) by either the Offeror or the Company if the Effective Time shall
not have occurred on or before December 31, 1996; (iii) by either the Offeror or
the Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining, or otherwise prohibiting the
Merger and such order, decree, ruling or other action has become final and
non-appealable; (iv) by the Offeror, if (a) due to an occurrence or circumstance
that would result in a failure to satisfy any of the conditions set forth in
Section 15 of the Offer to Purchase, the Offeror shall have (1) failed to
commence the offer within twenty days following the date of the Merger
Agreement, (2) terminated the Offer or the Offer shall have expired without the
purchase of shares thereunder at any time after the latest date, if any, to
which the offer shall have been extended pursuant to the Merger Agreement or (3)
failed to pay for Shares pursuant to the offer by the fortieth business day
following such commencement, unless such failure to commence, terminate or
failure to pay for Shares shall have been caused by or resulted from the failure
of the Offeror or an affiliate to perform in any material respect its material
covenants and agreements contained in the Merger Agreement; or (b) prior to the
purchase of Shares pursuant to the Offer, the board of directors of the Company
shall have withdrawn or modified in a manner adverse to the Offeror its approval
or recommendation of the Offer, the Merger Agreement or the Merger, or shall
have recommended another Offer, or shall have resolved to do any of the
foregoing; provided, however, that the Offeror shall have no right to terminate
the Merger Agreement and abandon the Merger if the Company withdraws or modifies
its recommendation of the Offer, the Merger Agreement, or the Merger, by reason
of taking and disclosing to the Company's shareholders a position contemplated
by Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to
another proposal, and if within ten days of taking and disclosing to its
18
<PAGE> 21
shareholders the aforementioned position, the Company publicly reconfirms its
recommendation of the Offer, the Merger Agreement or the Merger and takes and
discloses to the Company's shareholders a recommendation to reject such other
proposal as contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act;
or (v) by the Company, if (a) due to an occurrence or circumstance that would
result in a failure to satisfy any of the conditions set forth in Section 15 of
this Offer to Purchase or otherwise, the Offeror shall have (1) failed to
commence the Offer as provided in the Merger Agreement within twenty days
following the date of the Merger Agreement, (2) terminated the Offer or the
Offer shall have expired without the purchase of Shares thereunder at any time
after the latest date, if any, to which the Offer shall have been extended in
accordance with the terms of the Merger Agreement or (3) failed to pay for
Shares pursuant to the Offer by the fortieth business day following such
announcement, unless such failure to commence, terminate or failure to pay for
Shares shall have been caused by or resulted from the occurrence or existence of
the condition described in paragraph (iv) of Section 15 of this Offer to
Purchase or (b) prior to the purchase of Shares pursuant to the Offer, (1) a
corporation, partnership, person or other entity or group shall have made a bona
fide proposal that the Board of Directors of the Company believes, in good
faith, after consultation with its legal and financial advisors, it is more
favorable to the Company and its shareholders than the Offer and the Merger, (2)
the Offeror does not make, within ten days of the Offeror receiving notice of
such third party proposal containing all of the terms, provisions, and
conditions thereof, an offer which the Board of Directors believes, in good
faith after consultation with its legal and financial advisors, is at least as
favorable to the Company's shareholders as such third party proposal.
Fees and Expenses. The Company has agreed in the Merger Agreement to pay
the Offeror the sum of $1 million and all actual, documented out-of-pocket
expenses relating to the Offer and the Merger in an amount up to $750,000 if the
Merger Agreement or the transactions contemplated thereby are terminated or
abandoned (unless at such time the Parent, BUSA or the Offeror shall be in
breach in any material respect of any of its material obligations or material
representations and warranties thereunder) and prior to or contemporaneously
with such termination or abandonment, any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act) other
than the Offeror or any of its subsidiaries or affiliates (collectively,
"Person"), shall have acquired or beneficially owns (as defined in Rule 13d-3
promulgated under the Exchange Act) at least 33.34% of the then outstanding
Shares.
Stock Option. The Company has granted the Parent an Option to purchase a
number of newly issued shares of Common Stock equal to 19.9% of its outstanding
shares of Common Stock at a price of $17.50 per share. The Option is intended to
increase the likelihood that the Offer and Merger will be consummated in
accordance with the terms of the Merger Agreement. Consequently, certain aspects
of the Option may have the effect of discouraging persons who might now, or
prior to the Effective Time may, be interested in acquiring all or a significant
interest in, other otherwise effecting a business combination with the Company
or from considering or proposing such a transaction, even if such persons were
prepared to offer to pay consideration which had a higher value than $17.50 per
share. The Option may be exercised, in whole or in part, at any time. The Option
will terminate upon the earlier of (i) the Effective Time or (ii) December 31,
1996. The Company may exercise the Option in order to meet the Minimum
Condition. Notwithstanding the foregoing, the Option cannot be exercised if the
Parent is in material breach of any of its material representations or
warranties or in material breach of its covenants or agreements.
Except as provided in the preceding paragraphs, the Merger Agreement
provides that whether or not the Merger is consummated, each party thereto shall
pay its own expenses incident to preparing for, entering into and carrying out
the Merger Agreement and the consummation of the Offer and the Merger.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, prior to the Effective Time (i) declare
or pay any dividend (whether in cash, stock or property) or make any other
distribution with respect to any shares of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) repurchase or otherwise acquire any
shares of capital stock of the Company; or issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, any shares of its
19
<PAGE> 22
capital stock of any class of securities convertible into, or subscriptions,
rights, warrants or options to acquire, or enter into other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities other than the issuance of Shares pursuant to the
exercise of the Option or outstanding under the Company Stock Options.
15. CERTAIN CONDITIONS TO OFFEROR'S OBLIGATIONS.
Notwithstanding any other term of the Offer or of the Merger Agreement, the
Offeror is not required to accept for payment or pay for, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c) of
the Exchange Act, any Shares not theretofore accepted for payment or paid for
and may terminate or amend the Offer as to such Shares unless (i) there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer a number of Shares at least equal to the Minimum Condition and (ii) any
waiting period under the HSR Act applicable to the purchase of the Shares
pursuant to the Offer has expired or been terminated. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the Offeror
is not 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 or
amend the Offer if at any time on or after the date of the Merger Agreement and
before the acceptance of such Shares for payment or the payment therefor, any of
the following conditions exist or shall occur and remain in effect:
(i) there shall have occurred (a) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
(b) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (c) a commencement of a war, armed
hostilities or other national or international calamity directly or
indirectly involving the United States, (d) any material limitation
(whether or not mandatory) by any governmental authority on, or any other
event which might materially and adversely affect, the extension of credit
by lending institutions or (e) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(ii) there shall have been any statute, rule or regulation enacted,
promulgated, entered or enforced or deemed applicable, or any decree, order
or injunction entered or enforced by any government or governmental
authority in the United States or by any court in the United States that
(a) restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (b) prohibits or restricts the ownership or
operation by the Offeror (or any of its affiliates or subsidiaries) of any
portion of its or the Company's business or assets which is material to the
business of all such entities taken as a whole or (c) imposes material
limitations on the ability of the Offeror effectively to acquire or to hold
or to exercise full rights of ownership of the shares of Common Stock,
including, without limitation, the right to vote the shares of Common Stock
purchased by the Offeror on all matters properly presented to the
shareholders of the Company; provided, however, that the Offeror and the
Parent shall have used their best efforts to have any such decree, order or
injunction vacated or reversed, including, without limitation, by
proffering their willingness to accept an order embodying any arrangement
required to be made by the Offeror or the Parent or BUSA pursuant to the
Merger Agreement (and notwithstanding anything in this subsection (ii) to
the contrary, no terms, conditions or provisions of an order embodying such
an arrangement shall constitute a basis for the Offeror asserting
nonfulfillment of the conditions contained in this subsection (ii)); or
(iii) the Merger Agreement shall have been terminated in accordance
with its terms; or
(iv) the Company shall have breached or failed to perform any of its
covenants or agreements which breach or failure to perform is material to
the obligations of the Company under the Merger Agreement taken as a whole
or any of the representations and warranties of the Company set forth in
the Merger Agreement shall not have been true in any respect which is
material to the Company and its subsidiaries taken as a whole, in each
case, when made or a material adverse change in the financial condition or
results of operations of the Company and its subsidiaries taken as a whole,
provided that the aggregate effect under this condition shall be in excess
of $500,000; or
20
<PAGE> 23
(v) the Board of Directors of the Company shall have publicly
withdrawn or modified in any material respect adverse to the Offeror its
recommendation of the Offer; provided, however, the Offeror shall have no
right to terminate the Offer or not accept for payment or pay for any
shares of Common Stock if the Company withdraws or modifies its
recommendation of the Offer and the Merger, by reason of taking and
disclosing to the Company's shareholders a position contemplated by Rule
14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to
another proposal, and if within ten days of taking and disclosing to its
shareholders the aforementioned position, the Company publicly reconfirms
its recommendation of the Offer and Merger and takes and discloses to the
Company's shareholders a recommendation to reject such other proposal as
contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(vi) the Offeror and the Company shall have agreed that the Offeror
shall terminate the Offer.
The foregoing conditions are for the sole benefit of the Parent, BUSA and
the Offeror and may be asserted by the Parent regardless of the circumstances
giving rise to any such condition and may be waived by the Parent, in whole or
in part, at any time and from time to time, in the sole discretion of the
Parent. The failure by the Parent, BUSA, or the Offeror at any time to exercise
any of the foregoing rights will not be deemed a waiver of any right, the waiver
of such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering shareholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to the Offeror's right to decline to purchase Shares if any of
the conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of if any such approvals
were not obtained or other action taken.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-day waiting period following the filing by the Parent of a
Notification and Report Form with respect to the Offer, unless the Parent
receives a request for additional information or documentary material from the
Department of Justice, Antitrust Division (the "Antitrust Division") or the
Federal Trade Commission ("FTC") or unless early termination of the waiting
period is granted. The Offeror made such a filing on February 29, 1996 and,
accordingly, the initial waiting period will expire on March 15, 1996. If,
within the initial 15-day waiting period, either the Antitrust Division or the
FTC requests additional information or material from the Parent concerning the
Offer, the waiting period will be extended to the tenth calendar day after the
date of substantial compliance by the Parent with such request. Complying with a
request for additional information or material can take a significant amount of
time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition of
the Company. At any time before or after the Offeror's acquisition of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as either deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Offeror or the divestiture of substantial assets of the Company
or its subsidiaries or the Parent or its subsidiaries. Private parties may also
bring legal action under the antitrust laws
21
<PAGE> 24
under certain circumstances. There can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or, if such a challenge is made, of
the result thereof.
If any applicable waiting period under the HSR Act has not expired or been
terminated prior to the Expiration Date, the Offeror will not be obligated to
proceed with the Offer or the purchase of any Shares not theretofore purchased
pursuant to the Offer. See Section 15.
State Takeover Laws. Section 302A.671 of the MBCA provides that, unless the
acquisition of certain new percentages of voting control of the Company (in
excess of 20%, 33 1/3% or 50%) by an existing shareholder or other person is
approved by the holders of a majority of the outstanding voting stock other than
shares held by the acquirer (if already a shareholder) and officers and
directors who are also employees of the Company, the shares acquired above any
such new percentage level of voting control will not be entitled to voting
rights. In addition, if the statutory requirements are not satisfied, the
Company may redeem the shares so acquired by the acquirer at their market value.
Section 302A.671 generally does not apply to a cash offer to purchase all shares
of voting stock of the issuing corporation if such offer has been approved by a
majority vote of disinterested directors of the issuing corporation. As set
forth above, the Company's Board and a majority of its disinterested directors
have approved the Offer and Merger. Such approval occurred prior to the time the
Parent, BUSA, or the Offeror became an "interested stockholder." As a result,
the provisions of Section 302A.671 will not be applicable to the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects in such states. In Edgar v. MITE Corp., in 1982, the Supreme
Court of the United States (the "U.S. Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of
America, the U.S. Supreme Court held that the State of Indiana could, as a
matter of corporate law and, in particular, with respect to those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquirer from voting on the affairs of a target corporation without
the prior approval of the remaining shareholders. The state law before the U.S.
Supreme Court was by its terms applicable only to corporations that had a
substantial number of shareholders in the state and were incorporated there.
The Company, directly or through subsidiaries, conducts business in certain
states of the United States which have enacted takeover laws. The Offeror does
not know whether any of these laws will, by their terms, apply to the Offer or
the Merger and has not complied with any such laws. Should any person seek to
apply any state takeover law, the Offeror will take such action as then appears
desirable, which may include challenging the validity or applicability of any
such statute in appropriate court proceedings. In the event it is asserted that
one or more state takeover laws is applicable to the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Offeror might be required to file certain information
with, or receive approvals from, the relevant state authorities. In addition, if
enjoined, the Offeror might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer and
the Merger. In such case, the Offeror may not be obligated to accept for payment
any Shares tendered. See Sections 15 and 18 herein.
17. FEES AND EXPENSES.
Neither the Offeror, BUSA nor the Parent, nor any officer, director,
stockholder, agent or other representative of the Offeror, BUSA or the Parent,
will pay any fees or commissions to any broker, dealer or other person (other
than the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies and other nominees will,
upon request, be reimbursed by the Offeror for customary mailing and handling
expenses incurred by them in forwarding materials to their customers.
Robert W. Baird & Co. Incorporated ("Baird") is acting as Dealer Manager in
connection with the Offer and has provided certain financial advisory services
to the Parent and the Offeror in connection with the
22
<PAGE> 25
proposed acquisition of the Company. Parent has agreed to pay Baird a
transaction fee of $425,000. The transaction fee to Baird is payable upon the
acquisition of at least two-thirds of the outstanding Shares. In addition, the
Offeror has agreed to reimburse Baird for reasonable out-of-pocket expenses
incurred by Baird in connection with the Offer, including fees of third parties
such as its legal counsel, and to indemnify Baird against certain liabilities
relating to services provided by Baird in connection with the Offer and the
Merger.
The Offeror has retained Firstar Trust Company as Depositary and Georgeson
& Company Inc. as Information Agent in connection with the Offer. The
Information Agent and the Depositary will receive reasonable and customary
compensation for its services hereunder and reimbursement for its reasonable
out-of-pocket expenses. The Depositary will also be indemnified by the Offeror
against certain liabilities in connection with the Offer and the Merger.
18. 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 this Offer to
Purchase or in the 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.
The Offeror, BUSA and the Parent have filed with the Commission the
Schedule 14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1
promulgated thereunder, furnishing certain information with respect to the
Offer. Such Schedule 14D-1 and any amendments thereto, including 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 (except that they will not
be available at the regional offices of the Commission).
VSI ACQUISITION CO.
BRADY USA, INC.
W.H. BRADY CO.
February 27, 1996
23
<PAGE> 26
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
THE PARENT, BUSA, AND THE OFFEROR
1. Directors and Executive Officers of the Parent. The following table sets
forth the name, business address and present principal occupation or employment
and material occupations, positions, offices or employments for the past five
years of each member of the Board of Directors and each executive officer of the
Parent. Unless otherwise indicated, the business address of each such person is
c/o W.H. Brady Co., Inc., 6555 West Good Hope Road, Milwaukee, Wisconsin 53223.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with the Parent. Each person listed is a citizen of
the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT
- ------------------------------ ---------------------- ----------------------------------------
<S> <C> <C>
Katherine M. Hudson........... President, Chief President, Chief Executive Officer and
Executive Officer and Director of the Company; prior to
Director joining Parent in 1994, she was a Vice
President at Eastman Kodak Company and
General Manager of its Professional
Printing and Imaging Division
Donald P. DeLuca.............. Senior Vice President, Senior Vice President, Treasurer, and
Treasurer, Assistant Assistant Secretary; prior to holding
Secretary and Director his current positions, he served as Vice
President-Finance and Chief Financial
Officer of the Parent
Mary T. Arnold................ Vice President Vice President, Research and Development
Richard L. Fisk............... Vice President Vice President, Seton Group
David R. Hawke................ Vice President Vice President, Signmark Group
Peter J. Lettenberger......... Secretary and Director Attorney, Partner of Quarles & Brady,
outside counsel for the Parent, BUSA and
Offeror
David W. Schroeder............ Vice President Vice President, ISST Group
James M. Sweet................ Vice President Vice President, Human Resources
William H. Brady, III......... Director Private Investor
Elizabeth B. Lurie............ Director President, W.H. Brady Foundation
Robert C. Buchanan............ Director President and CEO, Fox Valley Company
Roger D. Pierce............... Director President, Valuation Research
Corporation
Richard A. Bemis.............. Director President and CEO, Bemis Manufacturing
Company
Frank W. Harris............... Director Professor, University of Akron
Gary E. Nei................... Director Chairman, B&B Publishing
</TABLE>
2. Directors and Executive Officers of BUSA. The table below identifies
each director and executive officer of BUSA. Information about each person
identified is given in the foregoing table with respect to the Parent.
<TABLE>
<CAPTION>
NAME OFFICE
- ------------------------------------- ---------------------------------------
<S> <C>
Katherine M. Hudson.................. Director and President
Donald P. DeLuca..................... Director and Senior Vice President and
Treasurer
Peter J. Lettenberger................ Director and Secretary
</TABLE>
I-1
<PAGE> 27
3. Directors and Executive Officers of the Offeror. The table below
identifies each director and executive officer of the Offeror. Information about
each person identified is given in the foregoing table with respect to the
Parent.
<TABLE>
<CAPTION>
NAME OFFICE
- ------------------------------------- ---------------------------------------
<S> <C>
Katherine M. Hudson.................. Director and President
Donald P. DeLuca..................... Director and Senior Vice President and
Treasurer
Peter J. Lettenberger................ Director and Secretary
</TABLE>
I-2
<PAGE> 28
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
Firstar Trust Company Firstar Trust Company Firstar Trust Company
Box 2077 615 E. Michigan St. 615 E. Michigan Street
Milwaukee, WI 53201 4th Floor 4th Floor
Milwaukee, WI 53201 Milwaukee, WI 53202
</TABLE>
or
Firstar Trust Company
c/o IBJ Schroder Bank & Trust Company
Subcellar 1
One State Street
New York, New York 10004
Facsimile for Eligible Institutions: (414) 276-4226
To confirm fax only: (414) 287-3905
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at the respective
telephone numbers and locations listed below. Shareholders 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:
(LOGO)Wall Street Plaza
New York, New York 10005
Bankers and Brokers call collect:
(212) 440-9800
All Others Call Toll-Free:
1-800-223-2064
The Dealer Manager for the Offer is:
ROBERT W. BAIRD & CO.
INCORPORATED
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(800) 792-2473
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 29, 1996
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF W.H. BRADY CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
MILWAUKEE TIME (CENTRAL TIME), ON THURSDAY, MARCH 28, 1996, UNLESS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand: By Hand: By Overnight Courier:
<S> <C> <C> <C>
Firstar Trust Company Firstar Trust Company Firstar Trust Company Firstar Trust Company
Box 2077 615 E. Michigan Street c/o IBJ Schroder Bank 615 E. Michigan Street
Milwaukee, WI 53201 4th Floor & Trust Company Milwaukee, WI 53202
Milwaukee, WI 53202 Subcellar 1, One State
Street
New York, NY 10004
Facsimile For Eligible Institutions:
(414) 276-4226
To Confirm Fax Only:
(414) 287-3905
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED. IN ORDER TO TENDER SHARES YOU MUST SIGN THIS LETTER OF TRANSMITTAL
IN THE APPROPRIATE SPACE PROVIDED BELOW AND, IF NECESSARY, COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF CERTIFICATES ARE TO BE
FORWARDED HEREWITH OR IF DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE
ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE DEPOSITORY TRUST COMPANY ("DTC")
(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 DEPOSITARY. SEE SECTION 3
OF THE OFFER TO PURCHASE.
SHAREHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER THEIR CERTIFICATES OR DELIVER CONFIRMATION OF THE BOOK-ENTRY TRANSFER OF
THEIR SHARES INTO THE DEPOSITARY'S ACCOUNT AT A BOOK-ENTRY TRANSFER FACILITY
("BOOK-ENTRY CONFIRMATION") AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) MUST TENDER
THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET FORTH IN SECTION
3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2.
The Dealer Manager for the Offer is:
ROBERT W. BAIRD & CO.
INCORPORATED
<PAGE> 2
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
SHARE(S) TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) (ATTACH ADDITIONAL SIGNED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) SCHEDULE IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL NUMBER OF
SHARES
CERTIFICATE REPRESENTED BY
NUMBER(S)* CERTIFICATE(S)*
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders who tender by book-entry transfer, if applicable.
** Unless otherwise indicated, it will be assumed that all shares evidenced by any certificates delivered to the
Depositary are being tendered.
See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S))
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF SHARES
TENDERED**
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders who tender by book-entry transfer, if applica
** Unless otherwise indicated, it will be assumed that all shares evidenced by any cer
Depositary are being tendered.
See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of the Tendering Institution
-----------------------------------------------
/ / DTC
Account Number Transaction Code Number
---------------------- --------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE DEPOSITARY PRIOR TO THE DATE HEREOF
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s) and Tendering Shareholder
------------------------
Window Ticket Number (if any)
---------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------------------
Name of Institution Which Guaranteed Delivery
-----------------------------------
If delivery is by book-entry transfer, check box:
/ / DTC
Account Number Transaction Code Number
----------------------- --------------
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
The undersigned hereby tenders to VSI Acquisition Co., a Minnesota
corporation (the "Offeror") and an indirect wholly-owned subsidiary of W.H.
Brady Co., a Wisconsin corporation ("Brady"), the shares of common stock, par
value $.01 per share (the "Shares"), of Varitronic Systems, Inc., a Minnesota
corporation (the "Company"), pursuant to the Offeror's offer to purchase all of
the outstanding Shares at a purchase price of $17.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offeror's Offer to Purchase, dated February 29, 1996 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and this Letter of Transmittal (which
together constitute the "Offer").
Upon the terms and subject to the conditions of the Offer, and subject to
acceptance for payment of the Shares tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Offeror, all right,
title and interest in and to all of the Shares that are being tendered hereby
and any and all non-cash dividends, distributions, rights, other shares or other
securities issued or issuable in respect thereof on or after February 27, 1996
(collectively, the "Distributions"). The undersigned hereby irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and
Distributions 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 Distributions, or transfer ownership of such
Shares and Distributions on the account books maintained by a Book-Entry
Transfer Facility together with all accompanying evidences of transfer and
authenticity to or upon the order of the Offeror upon receipt by the Depositary,
as the undersigned's agent, of the purchase price, (b) present such Shares and
Distributions for transfer on the Company's books and
<PAGE> 3
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares and Distributions, all in accordance with the terms of
the Offer.
The name(s) and address(es) of the registered owner(s) should be printed,
if not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificates and the number of Shares
that the undersigned wishes to tender should be indicated in the appropriate
boxes.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares and any Distributions, 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 claim. The undersigned will, upon request, 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 tendered
Shares and any Distributions.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints Katherine M. Hudson, Donald P.
DeLuca and Peter J. Lettenberger, and each of them, or any of them, or any other
designees of the Offeror, as the attorneys and proxies of the undersigned, with
full power of substitution, to vote in such manner as each such attorney and
proxy or his or her substitute shall in his or her sole discretion deem proper,
and otherwise to act (including pursuant to written consent) with respect to all
of the Shares and Distributions tendered hereby which have been purchased by the
Offeror prior to the time of such vote or action, which the undersigned is
entitled to vote at any meeting (whether annual or special and whether or not
adjourned) of the Company's shareholders, or consent in lieu of any such
meeting, or otherwise and with respect to any and all rights. This appointment
is effective upon the purchase of such Shares and Distributions by the Offeror
in accordance with the terms of the Offer. This proxy is irrevocable and is
granted in consideration of the purchase of such Shares and Distributions. Such
purchase shall revoke all prior proxies given by the undersigned at any time
with respect to such Shares and no subsequent proxies may be given (and if given
will be deemed not to be effective) by the undersigned with respect thereto. In
order for Shares to be deemed validly tendered, immediately upon the Offeror's
acceptance for payment of such Shares, the Offeror must be able to exercise full
voting rights with respect to such Shares and Distributions, including voting at
any meeting.
A tender of Shares pursuant to any one of the procedures set forth in
Section 3 of the Offer to Purchase will constitute the tendering shareholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
shareholder's representation and warranty that (i) such shareholder owns the
Shares being tendered within the meaning of Rule 10b-4 promulgated under the
Securities Exchange Act of 1934 and (ii) the tender of such Shares complies with
Rule 10b-4. The Offeror's acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement between the tendering shareholder
and the Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Shares not
tendered or not accepted for payment in the name of the registered holder
appearing under "Description of Shares Tendered," Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the check for the
purchase price and/or return any Shares not tendered or not accepted for payment
(and accompanying documents, as appropriate) to the address of the registered
holder appearing under "Description of Shares Tendered." In the event that both
the Special Delivery Instructions and Special Payment Instructions are
completed, please issue the check for the purchase price and/or return any
Shares not so tendered or accepted for payment in the name(s) of, and deliver
said check and/or return such Shares to, the person or persons 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 thereof if the Offeror does not accept for payment any of the
Shares so tendered.
<PAGE> 4
- ---------------------------------------------------------------
- ---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 3, 5 AND 6)
To be completed ONLY if
certificates for Shares not tendered
or not purchased and/or the check for
the purchase price of Shares purchased
are to be issued in the name of
someone other than the undersigned, or
if Shares delivered by book-entry
transfer which are not purchased are
to be returned by credit to an account
maintained at the Book-Entry Transfer
Facility, other than the account
indicated herein.
Issue check and/or certificates to:
Name:
--------------------------------
(PLEASE PRINT)
Address:
-----------------------------
--------------------------------------
--------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY
NO.
(SEE SUBSTITUTE FORM W-9 INCLUDED
HEREIN.)
/ / Credit unpurchased Shares
delivered by book-entry transfer
to the Book-Entry Transfer
Facility account set forth below:
/ / DTC
--------------------------------------
(DTC ACCOUNT NUMBER)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 5 AND 6)
To be completed ONLY if
certificates for Shares not tendered
or not purchased and/or the check for
the purchase price of Shares purchased
are to be sent to someone other than
the undersigned or to the undersigned
at an address other than that shown
under "Description of Shares
Tendered."
Send check and/or certificates to:
Name:
-----------------------------------
(PLEASE PRINT)
Address:
------------------------------
--------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------
TAX IDENTIFICATION NUMBER OR SOCIAL
SECURITY NO.
(SEE SUBSTITUTE FORM W-9 INCLUDED
HEREIN.)
<PAGE> 5
- --------------------------------------------------------------------------------
SHAREHOLDER SIGN HERE IN ORDER TO TENDER SHARES
(Also Complete Substitute Form W-9 included herein)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
Dated:
------------------------- , 1996
Must be signed by the registered holder(s) exactly as name(s) appears on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted
herewith. If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a fiduciary
or representative capacity, please set forth full title. See Instructions 1
and 5.
Name(s):
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Please Type or Print)
Capacity (full title):
--------------------------------------------------------
(See Instruction 5)
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number:
-----------------------------------------------
Tax Identification or Social Security Number:
---------------------------------
SIGNATURE(S) GUARANTEE BY ELIGIBLE INSTRUCTION
(If Required -- See Instructions 1 and 5)
Authorized Signature(s):
------------------------------------------------------
Name(s):
----------------------------------------------------------------------
(Please Type or Print)
Title:
------------------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number:
-----------------------------------------------
Dated:
-------------------------------- , 1996
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS FORM PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) which term, for purposes of this document, shall include
any participant in any of the Book-Entry Transfer Facility systems whose name
appears on a security position listing as the owner of Shares tendered herewith
and payment is to be made directly to such registered holder unless such holder
has completed either the box entitled ("Special Delivery Instructions" or the
box entitled "Special Payment Instructions" included herein) or (ii) if such
Shares are tendered for the account of a member firm of any registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution"). In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Certificates or Book-Entry
Confirmations. The Letter of Transmittal is to be used either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares, or any Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein on or prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase). Shareholders whose certificates
are not immediately available or who cannot deliver their certificates and all
other required documents to the Depositary on or prior to the Expiration Date or
who cannot complete the procedure for book-entry transfer on a timely basis may
tender their Shares by properly completing and duly executing the Notice of
Guaranteed Delivery pursuant to the Guaranteed Delivery Procedure set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Offeror, must be received by the Depositary on or prior to the
Expiration Date and (iii) the certificates for all physically tendered Shares or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and all other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq National Market trading days after receipt by the
Depositary of such Notice of Guaranteed Delivery, all as provided in Section 3
of the Offer to Purchase. If certificates for Shares are forwarded separately to
the Depositary, a properly completed and duly executed Letter of Transmittal
must accompany each such delivery.
3. Stock Transfer Taxes. Except as set forth in this Instruction 3, no
stock transfer tax stamps or funds to cover such stamps need accompany this
instrument. Any stock transfer taxes applicable to the transfer and sale to the
Offeror will be paid by or on behalf of the Offeror. If payment of the purchase
price is to be made to an assignee of the registered holder, or if deposited
share certificates are not registered in the name of the person signing this
Letter of Transmittal, the amount of any stock transfer taxes on account of the
transfer to such assignee or such person will be deducted from the purchase
price if evidence of the payment of such tax, or exemption therefrom, is not
submitted.
4. Signatures (not applicable to shareholders who tender by book-entry
transfer). If this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, the signature must correspond exactly with the
name(s) as written on the face(s) of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required. If, however, the certificates for Shares not
tendered are to be issued to a person other than the registered owner(s), then
endorsement of certificate(s) transmitted hereby or separate stock powers are
required.
5. Guarantee by Eligible Institution. If this Letter of Transmittal or any
certificate or stock power is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, partners of a partnership, officers of
corporations or other acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Offeror of their authority so to act must be submitted.
If this Letter of Transmittal is signed by a person other than the
registered owner of the certificates listed and transmitted hereby, the
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered owner(s) appear on
the certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
<PAGE> 7
No signature guarantee is required for certificates or stock powers by this
Instruction 5 if (i) this Letter of Transmittal is signed by the registered
holder of Shares tendered herewith and payment is to be made directly to such
registered holder or (ii) such Shares are tendered for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution.
6. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or certificates for unpurchased Shares are to be returned to, a
person other than the signer of this Letter of Transmittal or if a check is to
be sent and/or such certificates are to be returned to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
7. Method of Delivery of Letter of Transmittal and Certificates. The method
of delivery of this Letter of Transmittal, the share certificates and any other
required documents is at the option and risk of the tendering shareholder and,
except as otherwise provided in Instruction 2 above, the delivery will be deemed
made only when actually received by the Depositary. If such delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
For those shareholders who desire to tender by mail, an envelope addressed to
the Depositary is enclosed.
8. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted.
9. Inadequate Space. If the space provided on the front page of this Letter
of Transmittal is inadequate, the certificate numbers and/or the number of
Shares should be listed on a separate signed schedule to be affixed hereto.
10. Waiver of Conditions. The conditions of the Offer may be waived by the
Offeror, in whole or in part, at any time and from time to time in the Offeror's
sole discretion, in the case of any Shares tendered.
11. Requests for Assistance or Additional Copies. Questions and requests
for assistance or additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to Georgeson &
Company Inc. (the "Information Agent") or the Dealer Manager as set forth below.
12. Substitute Form W-9. The tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided below, and to indicate that the
shareholder is not subject to backup withholding by checking the box in Part 2
of the form. Failure to provide the information on the form may subject the
tendering shareholder to thirty-one percent federal income tax withholding on
the payment of the purchase price. The box in Part 3 of the form may be checked
if the tendering shareholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future. If the box in Part 3
is checked and the Depositary is not provided with a TIN within 60 days, the
Depositary will withhold thirty-one percent (31%) on all payments of the
purchase price thereafter until a TIN is provided to the Depositary.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof), together
with certificates or confirmation of book-entry transfer and all other required
documents, must be received by the Depositary, or the Notice of Guaranteed
Delivery must be received by the Depositary, on or prior to the Expiration Date.
IMPORTANT TAX INFORMATION
Under the federal tax law, a shareholder whose tendered Shares are accepted
for payment is required to provide the Depositary (as payor) with his correct
TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN
is his social security number. If the Depositary is provided with an incorrect
TIN, the shareholder may be subject to a $500 penalty imposed by the Internal
Revenue Service. In addition, payments that are made to such shareholder with
respect to Shares purchased pursuant to the Offer may be subject to backup
withholding.
Exempt shareholders (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 shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary.) See the enclosed Guidelines for Certificate of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold
thirty-one percent (31%) of any such payments made to the shareholder. 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
withholding results in an overpayment of taxes, a refund may be obtained.
<PAGE> 8
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of his or her correct taxpayer identification
number by completing the form below certifying that the taxpayer identification
number provided on Substitute Form W-9 is correct (or that such shareholder is
awaiting a taxpayer identification number) and that (i) the shareholder has not
been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of a failure to report all interest or dividends
or (ii) the Internal Revenue Service has notified the shareholder that he or she
is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder 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> 9
PAYOR'S NAME: FIRSTAR TRUST COMPANY
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SUBSTITUTE Social Security Number
FORM W-9 PART 1--PLEASE PROVIDE YOUR TIN IN OR
THE BOX AT RIGHT AND CERTIFY BY -------------------------------
PAYORS REQUEST FOR SIGNING AND DATING BELOW. Employer Identification
TAXPAYER IDENTIFICATION Number
-----------------------------------------------------------------------
PART 2--CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING
UNDER THE PROVISIONS OF SECTION 3406(A)(1)(C) OF THE INTERNAL REVENUE CODE
NUMBER (TIN) BECAUSE (1) YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE OR (2) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING. / /
-----------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES
OF PERJURY, I CERTIFY THAT THE PART 3--AWAITING TIN
INFORMATION PROVIDED ON THIS FORM
IS TRUE, CORRECT AND COMPLETE. / /
SIGNATURE
----------------------
DATE
---------------------------
ADDRESS
------------------------
</TABLE>
- --------------------------------------------------------------------------------
SEE GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF THIRTY-ONE PERCENT (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 CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, thirty-one
percent (31%) of all reportable payments made to me thereafter will be withheld
until I provide a number.
SIGNATURE DATE
---------------------------------------- -------------------
The Information Agent for the Offer is:
(LOGO)Wall Street Plaza
New York, New York 10005
Bankers and Brokers call collect:
(212) 440-9800
All Others Call Toll-Free:
1-800-223-2064
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR THE
TENDER OF SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
As set forth in Section 3 of the Offer to Purchase by VSI Acquisition Co.,
dated February 29, 1996, this form, or one substantially equivalent hereto, must
be used to accept the Offer (as defined below) if certificates for shares of
common stock, par value $.01 per share (the "Shares") of Varitronic Systems,
Inc., a Minnesota corporation, are not available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). Such form
may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Depositary. See Section 3 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRSTAR TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
Firstar Trust Company
Firstar Trust Company 615 E. Michigan Street, 4th Firstar Trust Company
Box 2077 Floor 615 E. Michigan Street
Milwaukee, Wisconsin 53201 Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
</TABLE>
or
Firstar Trust Company
c/o IBJ Schroder Bank & Trust Company
Subcellar 1
One State Street
New York, New York 10004
Facsimile for Eligible Institutions:
(414) 276-4226
To confirm fax only:
(414) 287-3905
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS INSTRUMENT IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE
ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE
INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR
IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX IN THE LETTER OF
TRANSMITTAL.
THE ELIGIBLE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL OR AN
AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) AND CERTIFICATES FOR
SHARES TO THE DEPOSITARY WITHIN THE TIME PERIOD SHOWN HEREIN. FAILURE TO DO SO
COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to VSI Acquisition Co., a Minnesota
corporation and wholly-owned subsidiary of Brady USA, Inc., a Wisconsin
corporation and wholly-owned subsidiary of W.H. Brady Co., upon the terms and
subject to the conditions set forth in its Offer to Purchase and the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, Shares of Varitronic Systems, Inc. pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Number of Shares: Name(s) of Record Holder(s):
----------------------------- ----------------------------------------------
Certificate No(s). for Shares (If Available): ----------------------------------------------
---------------------------------------------- Please Type or Print
---------------------------------------------- ----------------------------------------------
---------------------------------------------- Address(es)
----------------------------------------------
If Shares will be tendered by book-entry Area Code and Telephone No.
transfer, check box: ----------------------------------------------
/ / The Depository Trust Company Signature(s)
Account No. ----------------------------------------------
------------------------------------------ Dated: --------------- , 1996
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
The undersigned, a member firm of a registered national securities
exchange, or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby (i) guarantees that either the certificates representing the
Shares tendered hereby or confirmation of the book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company, together with the
Letter of Transmittal properly completed and duly executed, or manually signed
facsimile thereof, and any other required documents, will be received by the
Depositary at one of its addresses set forth above, within three Nasdaq National
Market trading days after the date hereof, (ii) represents that such tender
complies with Rule 10b-4 under the Securities Exchange Act of 1934 and (iii)
represents that the shareholder on whose behalf this tender is being made is
deemed to own the Shares being tendered within the meaning of Rule 10b-4 under
the Securities Exchange Act of 1934.
- ------------------------------------------------------
(Firm)
- ------------------------------------------------------
(Authorized Signature)
- ------------------------------------------------------
(Name) Please Print
- ------------------------------------------------------
(Title)
- ------------------------------------------------------
(Address)
- ------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1996
------------------------------------------
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. CERTIFICATES SHOULD BE SENT
WITH THE LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
AT
$17.50 NET PER SHARE
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
W.H. BRADY CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, MILWAUKEE TIME (CENTRAL TIME),
ON THURSDAY, MARCH 28, 1996, UNLESS EXTENDED
February 29, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:
We are enclosing the material listed below relating to the offer by VSI
Acquisition Co., a Minnesota corporation (the "Purchaser") and a wholly-owned
subsidiary of Brady USA, Inc. ("BUSA"), a Wisconsin corporation and a
wholly-owned subsidiary of W.H. Brady Co., a Wisconsin corporation ("Brady"), to
purchase all outstanding shares of common stock, par value $.01 (the "Shares"),
of Varitronic Systems, Inc., a Minnesota corporation (the "Company"), at $17.50
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated February 29,
1996 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer").
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. Please furnish copies of the enclosed materials to those
of your clients for whom you hold Shares registered in your name.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. Offer to Purchase;
2. A BLUE Letter of Transmittal to be used by holders of Shares
pursuant to the Offer;
3. A GOLD Notice of Guaranteed Delivery to be used to accept the Offer
if certificates for Shares are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis;
4. A GREEN form letter which may be sent to your clients for whose
accounts you hold Shares registered in your name (or in the name of your
nominee), with space provided for obtaining such clients' instructions with
regard to the Offer;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number of Substitute Form W-9 providing information
relating to backup federal income tax withholding;
6. A return envelope addressed to Firstar Trust Company, the
Depositary; and
<PAGE> 2
7. Letter from Varitronic Systems, Inc., with Schedule 14D-9 attached.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, MILWAUKEE TIME (CENTRAL
TIME), ON THURSDAY, MARCH 28, 1996, UNLESS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER
OF SHARES WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY THE
PURCHASER AND ITS AFFILIATES, WILL CONSTITUTE AT LEAST TWO-THIRDS OUTSTANDING ON
A FULLY DILUTED BASIS (EXCLUDING ANY UNEXERCISED PORTION OF THE OPTION ISSUED TO
BRADY). THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE SECTION 15 OF THE
OFFER TO PURCHASE.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager and the Depositary, as described
in the Offer) in connection with the solicitation of tenders of Shares pursuant
to the Offer. However, the Purchaser will reimburse brokers, dealers, commercial
banks, trust companies and other nominees for their reasonable and necessary
costs incurred in forwarding the Offer to Purchase and the related documents to
the beneficial owners of Shares held by them as nominee or in a fiduciary
capacity. The Purchaser will pay any transfer taxes applicable to the purchase
of Shares pursuant to the Offer, except as otherwise provided in Instruction 3
of the Letter of Transmittal.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to tender such Shares on or prior to the Expiration Date of the Offer,
such Shares may be tendered pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers as set forth on the back cover of the enclosed Offer to
Purchase.
Very truly yours,
ROBERT W. BAIRD & CO.
INCORPORATED
------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, BRADY, BUSA, THE DEALER
MANAGER, THE INFORMATION AGENT, THE DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
AT
$17.50 NET PER SHARE
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
W.H. BRADY CO.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, MILWAUKEE TIME (CENTRAL TIME),
ON THURSDAY, MARCH 28, 1996, UNLESS EXTENDED
February 29, 1996
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated February 29,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any supplements or amendments, collectively constitute the
"Offer") relating to an offer by VSI Acquisition Co., a Minnesota corporation
(the "Offeror") and a wholly-owned subsidiary of Brady USA, Inc., a Wisconsin
corporation ("BUSA") and a wholly-owned subsidiary of W.H. Brady Co., a
Wisconsin corporation ("Brady"), to purchase all of the outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Varitronic Systems,
Inc., a Minnesota corporation (the "Company"), at a purchase price of $17.50 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of February 27, 1996
(the "Merger Agreement"), by and among the Company, Brady, BUSA and the
Purchaser. We are the holder of record of Shares held by us for your account.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $17.50 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The offer and withdrawal rights will expire at 12:00 Midnight,
Milwaukee time (Central time), on Thursday, March 28, 1996, unless the
Offer is extended.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the Expiration Date
(as defined in the Offer to Purchase) a number of Shares which when added
to the number of Shares of Common Stock owned by Brady and its affiliates
will represent at least two-thirds of the outstanding Shares of the Company
(excluding any unexercised portion of the option issued to Brady). The
Offer is also subject to other terms and conditions. See the Introduction
and Section 15 of the Offer to Purchase.
<PAGE> 2
5. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 3 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. However, federal income-tax backup withholding at a rate of 31% may
be required, unless an exemption is provided or unless required taxpayer
identification information is provided. See Instruction 11 of the Letter of
Transmittal.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto and is being
made to all holders of Shares. The Purchaser is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to a state statute or regulation. If the Purchaser becomes aware of a valid
state statute or regulation prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, the Purchaser will make a good faith
effort to comply with such state statute or regulation or seek to have such
statute or regulation declared inapplicable to the Offer. If, after such good
faith effort, the Purchaser cannot comply with such state statute or regulation,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares in such state. In any State where the securities, blue
sky or other laws require the Offer to be made by licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by Robert W. Baird &
Co. Incorporated or one or more registered brokers or dealers that are licensed
under the laws of such State.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form contained in this letter. An envelope to return your
instructions to us is enclosed. If you authorize a tender of your Shares, all
such Shares will be tendered unless otherwise specified in such instruction.
PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE
TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
Holders of Shares who cannot deliver their Certificates and all other
required documents to Firstar Trust Company as depositary (the "Depositary"), or
complete the procedures for book-entry transfer, prior to the Expiration Date
must tender their Shares according to the guaranteed delivery Procedures set
forth in Section 3 of the Offer to Purchase.
Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (a) Share Certificates or
timely confirmation of the book-entry transfer of such Shares into the account
maintained by the Depositary at The Depository Trust Company (the "Book-Entry
Transfer Facilities"), pursuant to the procedure set forth in Section 3 of the
Offer to Purchase and (b) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed with any required signature guarantees, or
an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of book-entry transfer of such Shares into the Depositary's
account.
<PAGE> 3
INSTRUCTIONS
WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated February 29, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal (which together constitute the "Offer") pursuant
to an offer by VSI Acquisition Co., a Minnesota corporation (the "Offeror") and
a wholly-owned subsidiary of Brady USA, Inc., a Wisconsin corporation and a
wholly-owned subsidiary of W.H. Brady Co., a Wisconsin corporation, to purchase
all outstanding shares of common stock, par value $.01 per share (the "Shares")
of Varitronic Systems, Inc., a Minnesota corporation, at a purchase price of
$17.50 per share, net to seller in cash.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal furnished to the undersigned.
NUMBER OF SHARES TO BE TENDERED:
--------------- SHARES*
Dated:
--------------------------------------- , 1996
------------------------------------------------------
Signature(s)
------------------------------------------------------
Name of Holder
(Please Print or Type)
- ------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------
<S> <C>
1. An individual's The individual
account
2. Two or more The actual owner of the
individuals account or, if combined
(joint account) funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor
account) is the only contributor,
the minor(1)
6. Account in the name of The ward, minor or
guardian or committee incompetent person(3)
for a designated ward,
minor or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under state
law
8. Sole proprietorship The owner(4)
account
- -------------------------------------------------------
<CAPTION>
- -------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------
<S> <C>
9. A valid trust, estate The legal entity (do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a state or
local government,
school district, or
prison) that receives
agricultural program
payments
- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5 (Application for a Social Security Number Card) or Form
SS-4 (Application for Employer Identification Number) from your local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1) of the Code.
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441
of the Code.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Section 6041, 6041(a), 6045 and 6050A of the Code.
PRIVACY ACT NOTICE
Section 5109 of the Code requires most recipients of dividend, interest or
other payments to give taxpayer identification numbers to payers who must report
the payments to the Internal Revenue Service. The Internal Revenue Service uses
the numbers for identification purposes. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividend and certain other payments
to a payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail
to properly include any portion of an includible payment for interest, dividends
or patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX ADVISOR OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
[BRADY LETTERHEAD]
FOR: W.H. BRADY CO.
VARITRONIC SYSTEMS, INC.
For more information contact:
Donald P. DeLuca (414) 438-6810
FOR IMMEDIATE RELEASE
W.H. BRADY CO. REACHES MERGER AGREEMENT WITH VARITRONIC SYSTEMS, INC.
MILWAUKEE, Wis. (February 27, 1996)-- W.H. Brady Co. (Nasdaq: BRCOA) and
Varitronic Systems, Inc. (Nasdaq: VRSY) today jointly announced that they have
entered into a definitive merger agreement providing for the acquisition by
W.H. Brady Co. of all of the outstanding common stock of Varitronic for $17.50
per common share in cash.
In accordance with the merger agreement, which has been approved by the
boards of directors of both companies, an indirect subsidiary of W.H. Brady Co.
will commence a tender offer within three business days for all of the
outstanding Varitronic shares at $17.50 per common share in cash. Any shares
not acquired in the tender offer will be acquired at $17.50 per common share in
cash in a subsequent merger.
Brady and Varitronic stated that the tender offer will be made only
pursuant to definitive offering documents. Robert W. Baird & Co. Incorporated
is advising W.H. Brady Co. and Baird will act as dealer manager in connection
wit the offer. Brown, Gibbons, Lang & Co., L.P. has acted as financial advisor
to Varitronic Systems, Inc.
"We are extremely pleased that Varitronic will join the W.H. Brady Co.
family," said Katherine M. Hudson, W.H. Brady Co. president and chief executive
officer.
Donald J. Kramer, a Varitronic director, stated, "The agreement
announced today marks the beginning of another stage in the company's history
and serves the best economic interests of Varitronic's shareholders."
Varitronic, headquartered in Minneapolis, develops, manufactures and
markets supply-consuming lettering, labeling, signage and presentation systems
which enhance the quality, professionalism and effectiveness of a wide range of
communications. It also offers a broad range of consumable supplies and
accessories which are used with all of its products. Its manufacturing
facilities are located in the Minneapolis area.
W.H. Brady Co. is an international manufacturer of industrial
identification products and coated materials. It employs 2,100 people
worldwide and markets more than 30,000 industrial identification,
telecommunication, governmental, public utility, computer and data-storage
markets. In fiscal 1995 it reported $314 million in sales and $28 million in
net income. Its headquarters are at 6555 West Good Hope Road, Milwaukee. In
addition to having several U.S. operations, Brady has operations in Canada,
Belgium, France, England, Germany, Sweden, Scotland, Italy, Australia,
Singapore, Japan, Hong Kong, South Korea and New Zealand.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is being made solely by the Offer to Purchase,
dated February 29, 1996 and, the related Letter of Transmittal and is being
made to all holders of Shares. The Offeror is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to a state statute or regulation. If the Offeror becomes aware of any state
where the making of the Offer is not in compliance with any valid applicable
law, the Offeror will make a good faith effort to comply with such law or seek
to have such statute or regulation declared inapplicable to this Offer. If,
after such good faith effort, the Offeror cannot comply with such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares residing in such state. In any state where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer is being made on behalf of the Offeror (as defined
below) by Robert W. Baird & Co. Incorporated or by one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VARITRONIC SYSTEMS, INC.
AT
$17.50 NET PER SHARE
BY
VSI ACQUISITION CO.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
W. H. BRADY CO.
VSI Acquisition Co., a Minnesota corporation (the "Offeror") and a wholly-owned
subsidiary of Brady USA, Inc., a Wisconsin corporation ("BUSA") which is a
wholly-owned subsidiary of W.H. Brady Co., a Wisconsin corporation ("Brady") is
offering to purchase all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of Varitronic Systems, Inc., a Minnesota corporation (the
"Company"), at a purchase price of $17.50 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated February 29, 1996 ("Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
MILWAUKEE TIME (CENTRAL TIME), ON THURSDAY, MARCH 28, 1996,
UNLESS EXTENDED
The Board of Directors of the Company has approved the Merger Agreement (as
defined below) and determined that the Offer and the Merger are fair to and in
the best interests of holders of Shares and recommends that holders of Shares
accept the Offer and tender their Shares.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, when added to the Shares then beneficially owned by the Offeror
and its affiliates, will constitute at least two-thirds of the Shares
outstanding on a fully diluted basis excluding any unexercised portion of the
option issued to Brady. The Offer is also subject to other conditions. See
Section 15 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 27, 1996 (the "Merger Agreement"), among the Offeror, BUSA, Brady
and the Company. 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 with and into the Company (the "Merger")
and each outstanding Share (other than those held by the Offeror or any of its
affiliates, those held in the treasury of the Company and those held by
shareholders who properly exercise their appraisal rights under Minnesota law)
will be converted at the effective time of the Merger (the "Effective Time")
into the right to receive $17.50 in cash or such higher price per Share as may
be paid in the Offer. The purpose of the Offer, the Merger Agreement and the
Merger is for the Offeror to acquire control of, and the entire equity interest
in, the Company.
The Offeror reserves the right, at any time or from time to time, to extend
the period of time, subject to the limitations contained in the Merger Agreement
and applicable law or regulation, during which the Offer is open by giving oral
or written notice of such extension to the Depositary (as defined in the Offer
to Purchase) and by making a public announcement thereof.
<PAGE> 2
For purposes of the Offer, the Offeror shall be deemed to have accepted for
payment tendered Shares as, if and when the Offeror gives oral or written notice
to the Depositary of the Offeror's acceptance of such Shares for payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of certificates for such Shares or timely
confirmation of the book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility (as defined in the Offer to Purchase)
pursuant to the procedures set forth in Section 3 of the Offer to Purchase and
the Letter of Transmittal or (facsimile thereof), properly completed and duly
executed, with any required signatures and any other documents required by the
Letter of Transmittal. The Offeror expressly reserves the right, subject to the
terms and conditions contained in the Merger Agreement, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary and by making a
public announcement thereof.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the expiration of the Offer, and, unless theretofore
accepted for payment by the Offeror pursuant to the Offer, may also be
withdrawn at any time after Thursday, April 25, 1996. The Offer will expire at
12:00 midnight, Milwaukee time (Central time), on Thursday, March 28, 1996,
unless and until the Offeror, in accordance with the terms and conditions of
the Merger Agreement, shall have extended the period of time during which the
Offer is open, in which event the Offer shall expire on the latest time and
date to which the Offer is so extended by the Offeror. For a withdrawal to be
effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder, if different from the name of the person who tendered such Shares. If
certificates evidencing Shares have been delivered or otherwise identified to
the Depositary, then prior to the release of such certificates the tendering
shareholder must also submit the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in the Offer to Purchase), as described in Section 3 of the Offer to Purchase,
except in the case of Shares tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedures for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, the
notice of withdrawal must specify the name and number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares.
The information required to be disclosed by Rule 14d-6(e)(1) and of the
Rules and Regulations under the Securities Exchange Act of 1934 is contained in
the Offer to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials are being mailed to record holders of Shares and are being
furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the Company's shareholder 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.
The Offer to Purchase and the related Letter or Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance, as well as for copies of the Offer
to Purchase, the Letter of Transmittal and other tender offer materials, may be
directed to the Dealer Manager as set forth below, and copies will be furnished
promptly, at the Offeror's expense. No fees or commissions will be payable to
brokers, dealers or other persons (other than the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.
ROBERT W. BAIRD & CO.
INCORPORATED
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(800) 792-2473
February 29, 1996
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AMONG
W. H. BRADY CO.
BRADY USA, INC.
VSI ACQUISITION CO.
AND
VARITRONIC SYSTEMS, INC.
DATED AS OF FEBRUARY 27, 1996
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 27, 1996,
among W. H. BRADY CO., a Wisconsin corporation (the "Purchaser"), VSI
ACQUISITION CO., a Minnesota corporation (the "Sub") and a wholly-owned
subsidiary of BRADY USA, INC., a Wisconsin corporation ("BUSA"), which is
wholly-owned by the Purchaser, and VARITRONIC SYSTEMS, INC., a Minnesota
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Purchaser,
BUSA, the Sub and the Company have each determined that it is advisable and in
the best interest of each such respective Company and its stockholders, on the
terms and subject to the conditions of this Agreement, (a) for the Sub to
commence a cash tender offer to purchase all outstanding shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock") and (b)
following the consummation of the cash tender offer, to merge the Sub into the
Company; and
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving that Offer (as hereafter defined) and the Merger (as
hereafter defined) and recommending that the holders of the Common Stock accept
the Offer;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.01 hereof, as promptly as
practicable (but in any event within five business days of the date of this
Agreement), the Purchaser and BUSA shall cause the Sub to commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) an offer to purchase all outstanding shares of Common
Stock at a price of $17.50 per share, net to the seller in cash which shall
remain open for at least twenty (20) business days (the "Offer") and, subject
to the conditions of the Offer, shall use its best efforts to consummate the
Offer. The obligations of the Purchaser, BUSA and the Sub to consummate the
Offer, to accept for payment and to pay for any shares of Common Stock tendered
shall be subject only to those conditions set forth in Exhibit A hereto.
<PAGE> 3
(b) Neither the Purchaser, BUSA nor the Sub will,
without the prior written consent of the Board of Directors of the Company,
decrease the amount or change the form of the consideration payable in the
Offer, decrease the number of shares of Common Stock sought pursuant to the
Offer, change the conditions to the Offer, impose additional conditions or
terms to the Offer, amend or waive the condition that there be validly tendered
and not properly withdrawn prior to the expiration of the Offer a number of
shares of Common Stock which when added to the number of shares of Common Stock
owned by the Purchaser and its affiliates constitutes at least a two-thirds of
the then outstanding shares of Common Stock on a fully diluted basis, or amend
any term of the Offer in any manner adverse to holders of shares of Common
Stock. Assuming the prior satisfaction or waiver of the conditions to the
Offer, the Purchaser covenants and agrees to accept for payment and pay for, in
accordance with the terms of the Offer, shares of Common Stock tendered
pursuant to the Offer as soon as permitted to do so under applicable law,
provided that the Purchaser, BUSA, and the Sub shall have the right, upon
consultation with the Company, to extend the Offer (if without such extension
the Purchaser would be unable to consummate the Offer) to a date not later than
the 30th business day following the commencement of the Offer or for such
longer period as may be required by law.
(c) Notwithstanding anything to the contrary in this
Agreement, the Purchaser, BUSA, and the Sub further agree that, subject to the
terms and conditions of this Agreement, in the event that the conditions to the
Offer set forth in paragraphs (a) or (b) of Exhibit A hereto shall occur or
exist (and shall not have been waived), the Sub shall, at the Company's
request, extend the Offer to a date not later than the 40th business day
following the commencement of the Offer; provided, however, if the conditions
set forth in paragraph (d) shall not have been satisfied solely due to the
Company's breach of the condition described therein, the Purchaser, BUSA, and
the Sub shall, if reasonably requested by the Company, extend the Offer for
five business days to enable the Company to cure such breach.
(d) As soon as practicable on or before the date of
commencement of the Offer, but not later than three (3) business days after the
Execution of this Agreement, the Purchaser, BUSA, and the Sub shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain the offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's common stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Purchaser, BUSA, or
the Sub with respect to information supplied by
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<PAGE> 4
the Company in writing for inclusion in the Offer Documents. The Purchaser,
BUSA, the 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 it
shall have become false or misleading in any material respect and the
Purchaser, BUSA, and the Sub each further agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and
disseminated to the Company's common stockholders, in each case as and to the
extent required by applicable federal securities laws. The Purchaser, BUSA,
and the Sub agree to provide the Company and its counsel in writing with any
comments the Purchaser, BUSA, the 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.
SECTION 1.02 Company Actions. The Company hereby consents to
the Offer and represents that (a) its Board of Directors or a duly authorized
committee thereof (at a meeting duly called and held) has (i) determined that
the Offer and the Merger (as hereinafter defined) taken together, are fair to
the common stockholders of the Company and (ii) resolved, subject to its
fiduciary duties under applicable laws as advised by counsel, to recommend
acceptance of the Offer and approval and adoption of this Agreement by the
common stockholders of the Company, and (b) Brown, Gibbons, Lang & Company,
L.P. has advised the Company's Board of Directors that the $17.50 per share of
Common Stock cash consideration to be received by the Company's common
stockholders in the Offer and the Merger, taken together, is fair to such
stockholders from a financial point of view (other than the Purchaser and its
affiliates). The Company hereby agrees to file with the SEC as soon as
practicable after the commencement of the Offer a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") containing the recommendations described in the
first sentence of this Section 1.02. The Company, the Purchaser, BUSA, and the
Sub each agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and disseminated to the Company's common stockholders in each case and
to the extent required by applicable federal securities laws. The Company
agrees to provide the Purchaser, BUSA, and the Sub and their counsel, in
writing, with 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. Notwithstanding anything contained in this Section 1.02, if the
Board of Directors of the Company determines in the exercise of its fiduciary
duties to withdraw, modify or amend its recommendation, such withdrawal,
modification or amendment shall not constitute a breach of this Agreement. The
Company hereby consents to the inclusion in the Offer of the recommendation
referred to in the first sentence of this Section 1.02. In connection with the
Offer, the Company will promptly furnish the Purchaser with mailing labels,
security position listings and any available listing or
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<PAGE> 5
computer file containing the names and addresses of the record holders of the
shares of Common Stock as of a recent date and will furnish the Purchaser with
such information and assistance as the Purchaser or its agents may reasonably
request in communicating the Offer to the common stockholders of the Company.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the documents constituting the Offer and any other
documents necessary to consummate the Merger, the Purchaser, BUSA, and the Sub
and each of their affiliates and associates shall hold in confidence the
information contained in any of such labels, listings and files, will use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated, will deliver to the Company the information and all
copies of such information then in their possession and in the possession of
their legal, accounting and financial advisors.
SECTION 1.03 Directors. (a) Promptly upon the purchase by the
Purchaser or any of its affiliates of such number of shares of Common Stock
which, when added to the number of shares of Common Stock beneficially owned by
the Purchaser and its affiliates, represents at least two-thirds of the
outstanding shares of Common Stock and from time to time thereafter, the
Purchaser shall be entitled to designate such number of directors, rounded up
to the next whole number but in no event more than one less than the total
number of directors, on the Board of Directors of the Company as will give the
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
the number of directors on the Board of Directors of the Company and the
percentage that such number of shares of Common Stock so owned bears to the
number of shares of Common Stock outstanding, and the Company shall, upon
request by the Purchaser, promptly, at the Company's election, either increase
the size of the Board of Directors of the Company or exercise its best efforts
to secure the resignations of such number of directors as is necessary to
enable the Purchaser's designees to be elected to the Board of Directors of the
Company and shall cause the Purchaser's designees to be so elected.
(b) The Company's obligations to appoint designees to
its Board of Directors shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03 and shall include in the Schedule 14D-9
such information with respect to the Company and its officers and directors as
is required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 1.03. The Purchaser will supply to the Company, in writing, and
be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
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<PAGE> 6
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the
Minnesota Business Corporations Act (the "Minnesota Law"), the Sub shall be
merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Article VII hereof. Following the Merger, the Company shall continue
as the surviving corporation (the "Surviving Corporation"), and the separate
corporate existence of the Sub shall cease.
SECTION 2.02 Effective Time. The Merger shall be consummated
by filing with the Minnesota Secretary of State a certificate of merger or
certificate of ownership and merger in such form as is required by, and
executed in accordance with, the relevant provisions of the Minnesota Law (the
time of such filing or such other time as may be set forth in the certificate
of merger or certificate of ownership and merger being the "Effective Time").
SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the Minnesota Law. As of the Effective Time, the Company
shall be a wholly-owned subsidiary of the Purchaser.
SECTION 2.04 Articles of Incorporation and By-Laws. The
Articles of Incorporation and the By-Laws of the Company shall be the Articles
of Incorporation and By-Laws of the Surviving Corporation.
SECTION 2.05 Directors and Officers. The directors of the Sub
at the Effective Time shall become the directors of the Surviving Corporation
until their successors are duly elected and qualified. The officers of the
Company at the Effective Time shall become the officers of the Surviving
Corporation until their successors are duly appointed and qualified.
SECTION 2.06 Conversion of Shares. (a) Each share of Common
Stock issued and outstanding immediately prior to the Effective Time (other
than shares of Common Stock owned by the Purchaser or any affiliate of the
Purchaser or held in the treasury of the Company, and Dissenting Shares, as
defined in Section 3.01 hereof) shall, as of the Effective Time, and by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive $17.50 net to the holder in cash or any
higher price paid per share of Common Stock pursuant to the Offer (the "Merger
Consideration"), payable to the holder thereof, without interest thereon, upon
the surrender of the certificate formerly representing such share of Common
Stock. At and after the Effective Time, each holder of a certificate or
certificates that represented issued and outstanding shares of Common Stock
immediately prior to the Effective Time shall cease to have any rights as a
stockholder of the Company, except for the
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<PAGE> 7
right to surrender such certificate or certificates in exchange for the Merger
Consideration or to perfect the right to receive payment for such shares
pursuant to Section 302A.471 of the Minnesota Law and Section 3.01 hereof if
such holder has validly exercised and not withdrawn such right to receive
payment for such shares.
(b) Each share of Common Stock held by the Purchaser
or any of its affiliates or held in the Company's treasury or by a subsidiary
of the Company shall, as of the Effective Time, and by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
and be canceled and be retired without payment of any consideration therefor.
(c) The Purchaser, BUSA, and the Sub acknowledge that
each share of Common Stock outstanding immediately prior to the date hereof
which was awarded as restricted stock pursuant to the Stock Option Plans (as
defined in Section 2.07 hereof) as of the date of acquisition of shares of
Common Stock pursuant to the Offer, will become fully vested and free of any
and all restrictions to which such shares of Common Stock are otherwise
subject.
SECTION 2.07 Stock Options. Prior to the purchase of shares of
Common Stock pursuant to the Offer, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Option Plans) shall adopt
such resolutions or take such other actions as are necessary to adjust the
terms of all outstanding stock options to purchase Common Stock ("Options")
heretofore granted to employees and directors under any stock option plan,
program or arrangement of the Company (all such stock option plans, employee
stock purchase plans, programs and arrangements shall be collectively referred
to as the "Stock Option Plans") to provide for the cancellation of such Options
as set forth in this Section 2.07. As of the date of the acquisition of shares
of Common Stock pursuant to the Offer, each Option then outstanding, whether or
not then fully exercisable, shall be canceled in exchange for a payment from
the Company (subject to any applicable withholding taxes) equal to the product
of (x) the total number of shares of Common Stock subject to such Option and
(y) the excess of the consideration paid in the Offer over the exercise price
per share of Common Stock subject to such Option, payable in cash on the date
of acquisition of the shares of Common Stock pursuant to the Offer. The
Purchaser shall make available to the Company on the date of payment for the
shares of Common Stock pursuant to the Offer, in the form of a loan payable on
the earlier of (i) the Effective Time, and (ii) May 31, 1996, bearing interest
per annum at the prime rate of the Firstar Bank Milwaukee, N.A., cash (except
for cash payments to be made pursuant to the penultimate sentence of this
Section 2.07) in an aggregate amount necessary to make the payments pursuant to
the preceding sentence. Except as provided herein, or as otherwise agreed to
by the parties (i) the Stock Option Plans shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any subsidiary, shall be deleted as of the Effective Time, and
(ii) the Company shall ensure
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<PAGE> 8
that following the Effective Time no holder of an Option or any participant in
any Stock Option Plan or other plans, programs or arrangements shall have any
right thereunder to acquire equity securities of the Company, the Surviving
Corporation or any subsidiary thereof. Notwithstanding any provision of this
Section 2.07 to the contrary, any Option granted to an officer of the Company
listed on Schedule 2.07 within six months and one day of the date such Option
would otherwise be canceled pursuant to this Section 2.07 shall be canceled and
the payments provided for in this Section 2.07 shall be made six months and one
day following the date of such grant. At the Effective Time, pursuant to an
escrow agreement to be entered into by the parties hereto, the Purchaser shall
deposit or cause to be deposited with an escrow agent reasonably acceptable to
the Company, to be selected by the Purchaser, cash in an aggregate amount
necessary to make the payments pursuant to the preceding sentence. Except as
may be set forth on Schedule 2.07(b), or as contemplated by Section 7.01(a)
hereof, no consent of any stockholder of the Company is or may be required in
connection with the transactions contemplated by this Section 2.07.
SECTION 2.08 Conversion of Sub Common Stock. Each share of
common stock, par value $.01 per share, of the Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
SECTION 2.09 Stockholders' Meeting. If approval by the
Company's stockholders is required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in
accordance with applicable law:
(a) duly call, give notice of, convene and hold an
annual or special meeting (the "Stockholders' Meeting") of its stockholders as
soon as practicable following the expiration of the Offer for the purpose of
considering and taking action on this Agreement;
(b) subject to its fiduciary duties under applicable
laws as advised by counsel, include in the Proxy Statement (as hereinafter
defined) the recommendation of the Board of Directors that stockholders of the
Company vote in favor of the approval and adoption of this Agreement; and
(c) use its best efforts (i) to obtain and furnish the
information required to be included by it in the Proxy Statement, and, after
consultation with the Purchaser, respond promptly to any comments made by the
SEC with respect to the Proxy Statement and any preliminary version thereof and
cause the Proxy Statement to be mailed to its stockholders at the earliest
practicable time following the expiration of the Offer, and (ii) subject to
fiduciary duties of the Board of Directors under applicable law as advised by
counsel, to obtain the necessary approvals of the Merger and this Agreement by
its stockholders. The Purchaser agrees that, at the Stockholders' Meeting, all
of the shares of Common Stock
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<PAGE> 9
acquired pursuant to the Offer or otherwise by the Purchaser, the Sub or any
other affiliate of the Purchaser will be voted in favor of the Merger and this
Agreement.
SECTION 2.10 Merger Without Meeting of Stockholders.
Notwithstanding the foregoing, if, following the completion of the Offer, the
Merger may be consummated under Minnesota Law without a vote of the Company's
stockholders, the parties hereto agree to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after
the acquisition of shares of Common Stock pursuant to the Offer, but in no
event later than thirty days thereafter.
SECTION 2.11 Closing. Upon the terms and subject to the
conditions hereof, as soon as practicable after consummation of the Offer, and
if required by law, after the vote of the stockholders of the Company in favor
of the adoption of this Agreement has been obtained, the Company (or the
Purchaser or the Sub, if appropriate) shall execute in the manner required by
the Minnesota Law and deliver to the Secretary of State of the State of
Minnesota the duly executed certificate of merger or certificate of ownership
and merger, and the parties shall take all such other and further actions as
may be required by law to make the Merger effective. Prior to the filing
referred to in this Section, a closing (the "Closing") will be held at the
offices of the Company (or such other place as the parties may agree) for the
purpose of confirming all the foregoing.
ARTICLE III.
DISSENTING SHARES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, in the event that appraisal rights are
available in connection with the Merger pursuant to the Minnesota Law, shares
of Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who did not vote in favor of
the Merger and comply with all of the relevant provisions of Section 302A.473
of the Minnesota Law (the "Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the Merger Consideration, unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal under the Minnesota Law. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's shares of Common Stock shall thereupon be deemed
to have been converted into and to have become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration without any
interest thereon.
SECTION 3.02 Exchange of Certificates. (a) The Purchaser
shall deposit or cause to be deposited in trust with an exchange agent
reasonably acceptable to the Company to be selected by the Purchaser (the
"Exchange Agent") at the Effective Time cash
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<PAGE> 10
in an aggregate amount necessary to make the payments pursuant to Section 2.06
hereof to holders (other than the Purchaser, BUSA, or the Sub or any of their
respective affiliates) of shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time (such amounts being
hereinafter referred to as the "Exchange Fund"), and to make the appropriate
cash payments, if any, to holders of Dissenting Shares. The Exchange Agent
shall, pursuant to irrevocable instructions, make the payments provided for in
the preceding sentence out of the Exchange Fund. The Exchange Agent shall
invest portions of the Exchange Fund as the Purchaser directs, provided that
all such investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations receiving the highest rating
from either Moody's Investors Services, Inc. or Standard & Poor's Corporation,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $50 million. The
Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement. If for any reason (including, without limitation, losses
sustained by such investments) the Exchange Fund is inadequate to pay the
amount holders of Common Stock shall be entitled to hereunder, the Surviving
Corporation shall be liable for the payment thereof.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Common Stock (the
"Certificates") a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificate
or payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be paid in exchange therefor
cash in an amount equal to the product of the number of shares of Common Stock
formerly represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that 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 the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.02, each Certificate (other than Certificates
representing shares of Common Stock owned by the Purchaser or any affiliate of
the Purchaser, and Dissenting Shares) shall represent for all purposes the
right to receive the Merger Consideration in
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<PAGE> 11
cash multiplied by the number of shares of Common Stock evidenced by such
Certificate, without any interest thereon.
(c) After the Effective Time, there shall be no
transfers of shares of Common Stock which were outstanding immediately prior to
the Effective Time on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for cash as provided in this
Article III. As of the Effective Time, the stock ledger of the Company shall
be closed.
(d) Any portion of the Exchange Fund (including the
proceeds of any investments thereof) that remains unclaimed by the stockholders
of the Company for six months after the Effective Time shall be repaid to the
Surviving Corporation. Any stockholders of the Company who have not
theretofore complied with Section 3.01 hereof shall thereafter look only to the
Surviving Corporation for payment of their claim for the Merger Consideration,
without any interest thereon.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser and the Sub
as follows:
SECTION 4.01 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has all requisite corporate power and
authority to carry on its business as it is now being conducted. The Company
is duly qualified as a foreign corporation and is 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 necessary,
except where the failure to be in good standing or so qualified would not have
a Material Adverse Effect.
SECTION 4.02 Capitalization. The authorized capital stock of
the Company consists of 10,000,000 shares of Common Stock, par value $.01 per
share, of which, as of February 26, 1996, 2,319,495 shares were issued and
outstanding and (b) 1,000,000 shares of Preferred Stock, par value $.01, none
of which are outstanding. All of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid and nonassessable and free of preemptive rights. As of February 26, 1996,
193,500 shares of Common Stock were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of all outstanding
Options and the employee Stock purchase plan. Except as set forth above and
for the Option provided in Section 9.09(d) and Exhibit B, there are not as of
the date hereof, and at the Effective Time there will not be,
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any outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character obligating the Company to
issue any additional shares of Common Stock or any other shares of capital
stock of the Company or any other securities convertible into or evidencing the
right to subscribe for any such shares.
SECTION 4.03 Corporate Power and Authority. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by the Board of Directors 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 (other than, with respect to the
Merger, if required, the approval and adoption of this Agreement by the
Company's stockholders). This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of each of the Purchaser, BUSA, and the Sub, this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms.
SECTION 4.04 Reports. (a) Since January 1, 1995, the Company
has filed all required forms, reports and documents with the SEC required to be
filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which have complied as of their respective
filing dates in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, and the rules promulgated thereunder (collectively, the "SEC Reports").
None of the SEC Reports, including without limitation any financial statements
or schedules included therein, at the time filed, contained any untrue
statement of a material fact or omitted 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.
(b) The consolidated balance sheets and the related
consolidated statements of net earnings and of changes in financial position
(including the related notes thereto) of the Company included in the SEC
Reports fairly present the consolidated financial position of the Company and
its subsidiaries as of their respective dates, and the results of consolidated
operations and changes in consolidated financial position for the periods
presented therein, all in conformity with generally accepted accounting
principles applied on a consistent basis (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments), except as
otherwise noted therein, and except that the quarterly financial statements do
not contain all of the footnote disclosures required by generally accepted
accounting principles.
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SECTION 4.05 Offer Documents; Proxy Statement; Other
Information. The Schedule 14D-9 and if required for the consummation of the
Merger under applicable law, a Proxy Statement will comply in all material
respects with the applicable federal securities laws, except that no
representation is made by the Company with respect to information supplied by
the Purchaser or any affiliate of the Purchaser, in writing, for inclusion in
the Schedule 14D-9 or the Proxy Statement or any amendments or supplements
thereto. The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with
the SEC, shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by the Purchaser or the Sub in writing for
inclusion in the Schedule 14D-9. None of the information relating to the
Company and its subsidiaries supplied in writing by the Company for inclusion
in the Offer Documents or the Proxy Statement, including any amendments or
supplements to either of the foregoing, or any schedules required to be filed
with the SEC in connection therewith, will, at the respective times the Offer
Documents or Proxy Statement or any amendments or supplements thereto are filed
with the SEC or mailed to the stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The letter to stockholders, notice of meeting, proxy statement and
form of proxy, or the information statement, as the case may be, to be
distributed to stockholders in connection with the Merger, are collectively
referred to herein as the "Proxy Statement".
SECTION 4.06 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in a breach of any provision of the certificate of incorporation or
by-laws of the Company; (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) in connection with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) pursuant to the applicable requirements of the Securities Act and
the Exchange Act, (C) the filing of the certificate of merger or certificate of
ownership and merger pursuant to the Minnesota Law, (D) pursuant to any
applicable state securities, "Blue Sky" or takeover laws, including Chapter 80B
of the Minnesota Statutes (E) any consents, approvals, authorizations or
permits, filings or notifications required to be given or made to any foreign
jurisdiction, or (F) except where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect or a material adverse effect on
the consummation of the transactions contemplated hereby; or (iii)
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<PAGE> 14
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, except for violations which would not in the
aggregate have a Material Adverse Effect or a material adverse effect on the
consummation of the transactions contemplated hereby.
SECTION 4.07 Brokerage Fees and Commissions. Except for those
fees and expenses payable to Brown, Gibbons, Lang & Company, L.P., the Company
hereby represents and warrants to the Purchaser with respect to the Company,
that no person or entity is entitled to receive from the Company, or any of its
subsidiaries any investment banking, brokerage or finder's fee in connection
with this Agreement or the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company.
SECTION 4.08 Events Subsequent to August 1, 1995. Except as
described on Schedule 4.08, or related to transactions involving the Purchaser
or the Purchaser's affiliates since August 1, 1995, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without limiting the
foregoing, since that date:
(i) The Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, for more than
$200,000 in the aggregate, other than for a fair consideration in the
ordinary course of business;
(ii) the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either requiring payment by the Company of more
than $250,000 or other than in the ordinary course of business
(except for the renewal of the lease for the Company's corporate
headquarters and product purchase orders and agreements in the ordinary
course of business and in amounts and on terms consistent with past
practices);
(iii) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $500,000 to which the Company is a party
or by which it is bound;
(iv) the Company has not imposed any security interest
upon any of its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$500,000 or outside the ordinary course of business;
(vi) the Company has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized
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<PAGE> 15
lease obligation involving more than $250,000 in the aggregate (other
than agreements with Norwest Equipment Finance);
(vii) the Company has not granted any license or
sublicense of any rights under or with respect to any intellectual
property;
(viii) the Company has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the ordinary course of business;
(ix) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the ordinary course of business, except as disclosed on Schedule 6.08;
(x) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees outside the ordinary course of business, except
as disclosed on Schedule 6.08.
SECTION 4.09 Intellectual Property. The Company owns or has
the right to use pursuant to license, sublicense, agreement, or permission all
intellectual property necessary for the operation of the business of the
Company as presently conducted (excluding property for which the loss of
ownership or right to use would result in a loss of not more than $100,000
annually) and there is no pending or threatened challenge to the Company's
ownership or right to use any of the foregoing.
SECTION 4.10 Litigation. Except litigation relating to the
Purchaser and BUSA or as disclosed on Schedule 4.10, there is no action, order,
writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation (collectively, "Actions") pending or threatened and the Company
does not have any knowledge of an event that reasonably can be expected to
result in pending or threatened material litigation.
SECTION 4.11 Contracts. Except as disclosed on Schedule 4.11
all contracts involving more than $100,000 to which the Company is a party are
valid and binding and in full force and effect and there are no defaults
thereunder or events which with notice or the passage of time would constitute
a default by the Company or by any other party thereto, except for such
defaults and events as to which requisite waivers or consents have been
obtained; and neither the execution of this Agreement nor the effectuation of
this plan of merger will constitute a default under or breach of any such
contract.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND SUB
The Purchaser and the Sub represent and warrant to the Company
as follows:
Section 5.01 Organization and Qualification. Each of the
Purchaser, BUSA, and the 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
it is now being conducted. Each of the Purchaser, BUSA, and the Sub is duly
qualified as a foreign corporation and is 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 necessary, except where the
failure to be in good standing or so qualified would not in the aggregate have
a material adverse effect on the financial condition or results of operations
of the Purchaser and its subsidiaries taken as a whole. The Sub is a
corporation wholly owned by BUSA that was recently formed for the purpose of
engaging in the transactions described in this Agreement and has not engaged in
any activity other than those incidents to the foregoing.
SECTION 5.02 Corporate Power and Authority. Each of the
Purchaser, BUSA, and the Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by the Purchaser, BUSA, and
the Sub of this Agreement and the consummation by the Purchaser, BUSA, and the
Sub of the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of the Purchaser, BUSA, and the Sub, and the
stockholder of the Sub, and no other corporate proceedings on the part of the
Purchaser, BUSA, or the Sub are necessary to authorize this Agreement, or
commence the Offer or to consummate the transactions so contemplated by this
Agreement (including the Offer). This Agreement has been duly and validly
executed and delivered by each of the Purchaser, BUSA, and the Sub and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, this Agreement constitutes the legal, valid and binding obligation of
each of the Purchaser, BUSA, and the Sub, enforceable against each of the
Purchaser, BUSA, and the Sub in accordance with its terms.
SECTION 5.03 Offer Documents; Proxy Statement. The Offer
Documents and the Offer will comply in all material respects with applicable
federal securities laws, except that no representation is made by the Purchaser
with respect to information supplied by the Company, in writing, or inclusion
in the Offer Documents or any amendments or supplements thereto. None of the
information supplied by the Purchaser and its affiliates, in writing, for
inclusion in the Proxy Statement or any amendments or supplements thereto will,
at the respective times the Proxy Statement or any
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<PAGE> 17
amendments or supplements thereto are filed with the SEC, at the time that the
Proxy Statement or any amendment or supplement thereto is mailed to the
Company's stockholders, or, at the time of the Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 5.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser and the Sub nor the
consummation by the Purchaser or the Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or by-laws (or other similar governing
documents) of the Purchaser, BUSA, or the Sub; (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
applicable requirements of the HSR Act, (B) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, (C) the filing of the
certificate of merger or certificate of ownership and merger pursuant to the
Minnesota Law, (D) pursuant to any applicable state securities, "Blue Sky" or
takeover laws, (E) any consents, approvals, authorizations or permits, filings
or notifications required to be given or made to any foreign jurisdiction, or
(F) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate have
any material adverse effect on the financial condition or results of operations
of the Purchaser and its subsidiaries taken as a whole or a material adverse
effect on the consummation of the transactions contemplated hereby; or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser, except for violations which would not have in the
aggregate any material adverse effect on the financial condition or results of
operations of the Purchaser and its subsidiaries taken as a whole or a material
adverse effect on the consummation of the transactions contemplated hereby.
SECTION 5.05 Financing. The Purchaser, BUSA, and the Sub have
and will have immediately prior to the consummation of the Offer, and at the
Closing, sufficient funds necessary to timely consummate the Offer and the
Merger and the other transactions contemplated hereby including the payment of
related fees and expenses.
SECTION 5.06 Financial Statements. The Purchaser has delivered
to the Company copies of the audited consolidated and unaudited consolidating
balance sheets of W. H. Brady Co., a Wisconsin corporation, as of July 31, 1995
and 1994 and the related audited consolidated statements of income,
stockholders' equity and cash flows for the fiscal years then ended (including
the related notes thereto) (the "Brady Financial Statements"). The Brady
Financial Statements fairly present the consolidated financial position of
Brady as of their respective dates, and the results of
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consolidated operations and changes in consolidated financial position for the
periods therein, all in conformity with generally accepted accounting
principles.
SECTION 5.07 Conduct of Business. Since January 31, 1996,
Brady and its subsidiaries have conducted, and from the date of this Agreement
until the Effective Time each of Brady and its subsidiaries will conduct, their
operations in the ordinary and usual course of business and consistent with
past practice (and Brady will not pay any extraordinary dividends or make any
other extraordinary payments or transfers to any affiliate that is not a
subsidiary), except for transactions contemplated by this Agreement and the
financing thereof.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or as set forth in Schedule 6.01, during the
period from the date of this Agreement to the Effective Time, the Company and
its subsidiaries will each conduct its operations according to its ordinary and
usual course of business and consistent with past practice. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement or as set forth in Schedule 6.01, prior to the Effective Time,
neither the Company nor any of it subsidiaries, as the case may be, will,
without the prior written consent of the Purchaser, (i) issue, sell, pledge or
encumber, or authorize or propose the issuance, sale, pledge or encumbrance of
(A) any shares of capital stock of any class (including the shares of Common
Stock), or securities convertible into any such shares, or any rights, warrants
or options to acquire any such shares or other convertible securities, or grant
or accelerate any right to convert or exchange any securities of the Company or
any of its subsidiaries for such shares, other than shares of Common Stock
issuable upon exercise of currently outstanding Options, or (B) any other
securities in respect of, in lieu of or in substitution for shares of Common
Stock outstanding on the date hereof; (ii) redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any of its
outstanding securities (including the shares of Common Stock); (iii) split,
combine or reclassify any shares of its capital stock or declare or pay any
dividend or distribution on any shares of capital stock of the Company; (iv)
except pursuant to agreements or arrangements in effect on the date hereof
which have been disclosed to the Purchaser, authorize any capital expenditure
in excess of $500,000 in the aggregate, make any acquisition or disposition of
a material amount of assets (other than inventory) or securities, enter into or
amend or terminate any contract, material to the business of the Company and
its subsidiaries taken as a whole, or release or relinquish any contact rights
or claims, material to the business of the Company and its subsidiaries taken
as a whole; (v) pledge or encumber any material assets of the Company except in
the ordinary course of business; (vi) incur any
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long-term debt for borrowed money or short-term debt for borrowed money in an
aggregate amount in excess of $100,000.00 except for debt incurred in the
ordinary course of business (including, without limitation, to fund working
capital needs; (vii) propose or adopt any amendments to the Articles of
Incorporation or By-Laws of the Company; (viii) adopt a plan of complete or
partial liquidation or resolutions providing for the complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries; (ix) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except wholly owned subsidiaries of the Company in the
ordinary course of business and consistent with past practice; (x) make any
loans, advances or capital contributions to, or investments in, any other
person (other than loans or advances to subsidiaries and customer loans or
advances to employees in accordance with past practices); (xi) except as
required by applicable laws, adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
severance, termination, employment or other employee benefit plan, agreement,
trust, fund, policy or other arrangement for the benefit or welfare of any
employee or director or former employee or director or, except as required by
applicable laws, increase the compensation or fringe benefits of any employee
or pay any employee or pay any benefit not required by any existing plan,
arrangement or agreement; (xii) make any tax election or settle or compromise
any federal, state, local or foreign income tax liability, except in the
ordinary course of business and consistent with past practice; or (xiii) agree
in writing or otherwise to take any of the foregoing actions. Following the
date of this Agreement, the Company will review its financing documents to
determine if the consent of any third party is required in connection with the
transactions contemplated hereby. If following such review, the Company
becomes actually aware that any such consent is required, it will so notify the
Purchaser, and the parties hereto shall use their respective best efforts to
secure such consent; provided, however, that for this purpose "best efforts"
shall not require the Company or the Purchaser to make any payment in order to
secure any such consents.
SECTION 6.02 No Solicitation. Neither the Company nor any of
its subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, shall, directly or indirectly,
encourage, solicit, initiate or, except as is required in the exercise of the
fiduciary duties of the Company's directors and officers under applicable laws
upon advice of counsel to the Company, participate in any way in discussions or
negotiations with, or knowingly provide any information to, any corporation,
partnership, person or other entity or group (other than the Purchaser or any
affiliate or an associate of the Purchaser) concerning any merger, sale of
substantially all the assets, sale of shares of capital stock or similar
transactions involving the Company or any material subsidiary or division of
the Company; provided, however, that nothing contained in this Section 6.02
shall prohibit the Company or its Board of Directors from (i)
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taking and disclosing to the Company's stockholders a position with respect to
a tender offer by a third party pursuant to Rules 14d-9 and 14e- 2(a)
promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders which, in the judgment of the Board of Directors with
the advice of counsel, may be required under applicable law or (iii) providing
information to, or participating in discussions or negotiations with, any party
that has actually made, and which the Board of Directors believes in good faith
would be capable of effecting an acquisition of the Company on terms that are
superior, from a financial point of view, to the Offer and the Merger. The
Company will promptly communicate to the Purchaser if it is furnishing
information to or engaging in negotiations with any third party with respect to
the acquisition of the Company or any of its assets or subsidiaries.
SECTION 6.03 Access to Information. (a) Between the date of
this Agreement and the Effective Time, the Company will, upon reasonable notice
to Raymond F. Good or his designee, allow the Purchaser and its authorized
representatives reasonable access in a manner reasonably acceptable to Mr. Good
or his designee during regular business hours to its plants, offices,
warehouses, other facilities and books and records concerning (i) any change
to, termination of, or refusal to extend any agreement with any distributor or
supplier since August 1, 1995, (ii) any change in the Company's right to use,
or ownership of, its intellectual property, or (iii) its inventory. The
Company will also make its employees available for interviews with the
Purchaser, with Company personnel present for reasonable purposes in a manner
reasonably acceptable to Mr. Good or his designee.
(b) Except as otherwise required by law, Purchaser or its
agents will not, and will cause its authorized representatives not to, disclose
any information to third parties obtained pursuant to this Section 6.03 except
its attorneys, financial advisors and lenders and then only for purposes
related to the consummation of the transactions contemplated by this Agreement.
Upon any termination of this Agreement, Purchaser will collect and deliver to
the Company all documents obtained by it or any of its authorized
representatives then in their possession and any copies thereof.
SECTION 6.04 Notification of Certain Matters. Each of the
Company and the Purchaser shall give prompt notice to the other party of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
SECTION 6.05 Best Efforts. Subject to the terms and conditions
herein provided, and with respect to the Company, to the fiduciary duties of
the Board of Directors of the Company under applicable laws, each of the
parties hereto agrees to (i) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act with respect
to the Offer and Merger and (ii) use its best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, in the case of the
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Purchaser, BUSA, and the Sub, the filings required under Minnesota Statutes
Chapter 80B, as amended, with respect to the Offer and Merger. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
SECTION 6.06 Indemnification and Insurance. (a) The Surviving
Corporation and the Purchaser agree that the Surviving Corporation will at all
times exercise the powers granted to it by its Articles of Incorporation, its
By-laws, and by applicable law to indemnify to the fullest extent possible
present or former directors, officers, employees and agents of the Company
against claims made against them arising from their service in such capacities.
The Surviving Corporation and the Purchaser agree that until six years from the
Effective Time, the Articles of Incorporation and By-laws of the Surviving
Corporation shall not be amended to reduce or limit the rights of indemnity
afforded to the present and former directors and officers of the Company, or
the ability of the Surviving Corporation to indemnify them, nor to hinder,
delay or make more difficult the exercise of such rights of indemnity or the
ability to indemnify.
(b) The Purchaser will honor and guarantee the
Surviving Corporation's performance of all contracts, agreements and
commitments of the Company or any of its subsidiaries which indemnify any
current or former employee or current or former director of the Company or any
of its subsidiaries, as disclosed on Schedule 6.06(b).
(c) Should any claim or claims be asserted or made
against any present or former director, officer, employee or agent of the
Company, arising from his services as such, within six years from the Effective
Time, the provisions of this Section 6.06 respecting the Articles of
Incorporation and the By-laws of the Surviving Corporation shall continue in
effect until the final disposition of all such claims.
(d) Any indemnified party wishing to claim
indemnification under this Section, upon learning of any such action, suit,
claim, proceeding or investigation, shall promptly notify the Purchaser and the
Surviving Corporation thereof and the Purchaser and the Surviving Corporation
shall cooperate in the defense of any such matter; provided, however, that any
failure so to notify the Purchaser and the Surviving Corporation of any
obligation to indemnify such indemnified party or of any other obligation
imposed by this Section shall not affect such obligations unless such failure
to so notify materially prejudices the rights of the Purchaser and the
Surviving Corporation to defend any such action, suit, claim, proceeding or
investigation. The indemnified parties as a group shall retain only one
counsel in each jurisdiction to represent them with respect to any single
action; provided, however, in the event that there is, under applicable
standards of professional conduct, a conflict between the positions of any two
or more indemnified parties, the Purchaser and such indemnified
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<PAGE> 22
parties may retain, at the expense of the Purchaser and the Surviving
Corporation, as the case may be, such number of additional counsel as are
necessary to eliminate all conflicts of the type referred to above.
(e) In the event any claim is made against present or
former directors, officers or employees of the Company that is covered or
potentially covered by insurance, the Surviving Corporation and the Purchaser
shall do nothing that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final disposition of that
claim.
SECTION 6.07 Company Indebtedness. Prior to the Effective
Time, the Company shall cooperate with the Purchaser in taking such actions as
are reasonably appropriate or necessary in connection with the redemption,
prepayment, modification, satisfaction or elimination of any outstanding
long-term indebtedness of the Company or any of its subsidiaries with respect
to which a consent is required to be obtained to effectuate the Merger and the
transactions contemplated by this Agreement and has not been so obtained
(provided that prior to consummation of the Merger, the Company shall not be
required to actually redeem, prepay, modify, satisfy or eliminate any such
outstanding long-term indebtedness, make any payment or undertake any
obligation in order to secure any such consents or take any steps which would
irrevocably lead to any of the foregoing).
SECTION 6.08 Benefit Plans. (a) Schedule 6.08(a) includes all
employee benefit plans, programs, policies and agreements which provide
compensation or other benefits upon a termination of employment, voluntary or
involuntary, for the 17 highest paid employees of the Company or its
subsidiaries or which include a "change of control" provision, and a complete
and correct copy (or model form) of each such plan, program, policy and
agreement has been provided to Purchaser. Schedule 6.08(a) also sets forth the
annual compensation and average annual compensation, as the case may be, as of
the date of this Agreement for purposes of calculating the amount payable for
each of the 17 highest paid employees of the Company or its subsidiaries and
any other employee covered by a change of control provision under any of the
plans, programs, policies and agreements listed on Schedule 6.08(a).
(b) The Purchaser will honor and cause the Surviving
Corporation to honor and perform its obligations under each of the plans,
programs, policies and agreements set forth on Schedule 6.08(b), but only to
the extent consistent with the terms and conditions of any such plan, program,
policy or agreement (or model form thereof) disclosed to the Purchaser. The
Company believes the method of calculation provided to the Purchaser under
certain of such plans, programs, policies or agreements is correct and proper.
(c) If any salaried or non-union hourly employee of
the Company or any of its subsidiaries is or becomes a participant in any
written employee benefit plan or program of the Purchaser or
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any member of its controlled group within the meaning of Section 414(b) or (c)
of the Internal Revenue Code of 1986, as amended (the "Code"), such employee
shall be credited under such plan or program with all service prior to the
Effective Time with the Company and its subsidiaries (and any predecessor
employer) to the extent credit was given by the Company and its subsidiaries
for purposes of eligibility for all purposes and vesting under such plan or
program.
(d) The Purchaser and the Sub acknowledge that
consummation of the Offer will constitute a change of control of the Company
(to the extent such concept is relevant) for purposes of any and all of the
agreements and plans specified on Schedule 6.08(a).
(e) The Purchaser and the Sub agree to the amendment
of the compensation and benefit plans and programs set forth below in this
Section 6.08(e) to permit the acceleration of payment thereunder on or after
the later of the date of the acquisition of shares of Common Stock pursuant to
the Offer or five business days after the participant's termination of
employment for any reason (other than his or her retirement at or after age 65,
death or disability); provided, however, that such termination occurs within
two years after such acquisition of Common Stock and that no payments shall be
accelerated or made to the extent they could constitute non-deductible excess
parachute payments within the meaning of Section 280G(b)(1) and (2)(A) of the
Code. The Company has not entered into, adopted or amended after July 31, 1995
any employee benefit plan, program, policy or agreement, or any other agreement
or arrangement with respect to any employee or director of the Company or any
of its subsidiaries, except as listed on Schedule 6.08.
SECTION 6.09 Extension of Acquisition Options. The Company
will use its best efforts to obtain an extension of the options to purchase the
companies identified on Schedule 6.01 to a date subsequent to the Effective
Time. If the Company is unable to obtain such extensions, it will consult with
Purchaser before exercising either of those acquisition options set forth on
Schedule 6.01.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, at or prior to the
Effective Time, of the following conditions:
(a) this Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company owning at least
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<PAGE> 24
two-thirds of the Company's outstanding Common Stock in accordance with
applicable law, if such vote is required by applicable law;
(b) no statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered, promulgated or enforced
by any United States court or governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
however, that the parties shall use their best efforts to have any such order,
decree or injunction vacated or reversed;
(c) any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated; and
(d) the Sub shall have purchased all shares of Common
Stock validly tendered and not withdrawn pursuant to the Offer; provided,
however, that this condition shall not be applicable to the obligations of the
Purchaser, BUSA or the Sub in violation of the terms of this Agreement or the
Offer if the Sub fails to purchase shares of Common Stock tendered pursuant to
the Offer.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the stockholders of the Company, but prior to the Effective
Time:
(a) by mutual written consent duly authorized by the
Boards of Directors of the Company (excluding any representative of the
Purchaser or an affiliate of the Purchaser), the Purchaser and the Sub;
(b) by either the Purchaser or the Company, if the
Effective Time shall not have occurred on or before December 31, 1996 (provided
that the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Effective
Time to occur on or before such date);
(c) by either the Purchaser or the Company, if any
court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling, or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
non-appealable; provided, however, that the parties shall use their best
efforts to have any such order, decree, ruling or injunction vacated or
reversed;
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<PAGE> 25
(d) by the Purchaser, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions
set forth in Exhibit A hereto, the Sub shall have (A) failed to commence the
Offer as provided in Section 1.01 hereof within 20 days following the date of
this Agreement; (B) terminated the Offer or the Offer shall have expired
without the purchase of shares of Common Stock thereunder at any time after the
latest date, if any, to which the Offer shall have been extended pursuant to
Section 1.01(c) hereof or (C) failed to pay for shares of Common Stock pursuant
to the Offer by the 40th business day following such commencement, unless such
failure to commence, termination or failure to pay for shares of Common Stock
shall have been caused by or resulted from the failure of the Sub or the
Purchaser to perform in any respect its material covenants and agreements
contained in this Agreement or Offer; or (ii) prior to the purchase of shares
of Common Stock pursuant to the Offer, the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger, or shall
have recommended another offer, or shall have resolved to do any of the
foregoing; provided, however, the Purchaser shall have no right to terminate
this Agreement and abandon the Merger if the Company withdraws or modifies its
recommendation of the Offer, this Agreement or the Merger, by reason of taking
and disclosing to the Company's stockholders a position contemplated by Rule
14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to another
proposal, and if within ten days of taking and disclosing to its stockholders
the aforementioned position, the Company publicly reconfirms its recommendation
of the Offer, this Agreement or the Merger and takes and discloses to the
Company's stockholders a recommendation to reject such other proposal as
contemplated by Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(e) by the Company, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions
set forth in Exhibit A hereto or otherwise, the Sub shall have (A) failed to
commence the Offer as provided in Section 1.01 hereof within 20 days following
the date of this Agreement, (B) terminated the Offer or the Offer shall have
expired without the purchase of shares of Common Stock thereunder at any time
after the latest date, if any, to which the Offer shall have been extended
pursuant to Section 1.01(c) hereof or (C) failed to pay for shares of Common
Stock pursuant to the Offer by the 40th business day following such
commencement, unless such failure to commence, termination or failure to pay
for shares of Common Stock shall have been caused by or resulted from the
occurrence or existence of the condition described in paragraph (D) of Exhibit
A hereto, or (ii) prior to the purchase of shares of Common Stock pursuant to
the Offer, (A) a corporation, partnership, person or other entity or group
shall have made a bona fide proposal that the Board of Directors of the Company
believes, in good faith after consultation with its legal and financial
advisors, is more favorable to the Company and its stockholders than the Offer
and the Merger, (B) the Sub does not make, within ten days of the Sub receiving
notice of such third party proposal, an offer which the
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<PAGE> 26
Board of Directors believes, in good faith after consultation with its legal
and financial advisors, is at least as favorable to the Company's stockholders
as such third party proposal, it being understood that the Company shall remain
obligated to pay the fees to the Purchaser pursuant to Section 9.09 hereof.
SECTION 8.02 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.01 hereof,
this Agreement, except for the provisions of this Section 8.02 and Sections
6.03(b) and 9.09 hereof, shall forthwith become void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Nothing in this Section 8.02 shall relieve any party to this
Agreement of liability for breach of this Agreement.
SECTION 8.03 Amendment. To the extent permitted by applicable
law, this Agreement may be amended by action taken by or on behalf of the
Boards of the Company (excluding any representative of the Purchaser or an
affiliate of the Purchaser), the Purchaser and the Sub at any time before or
after adoption of this Agreement by the stockholders of the Company; provided,
however, that, after any such stockholder approval, no amendment shall be made
which decreases the Merger Consideration or which adversely affects the rights
of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken by or on behalf of the
respective Boards of Directors of the Company (excluding any representatives or
directors appointed by or elected on behalf of the Purchaser or an affiliate of
the Purchaser), the Purchaser or the Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties.
The representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
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<PAGE> 27
SECTION 9.02 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof except the Confidentiality Agreement, dated February 2,
1996, between the Company and the Purchaser and (b) shall not be assigned by
operation of law or otherwise, provided that the Purchaser or the Sub may
assign any of their rights and obligations to any wholly-owned, direct or
indirect subsidiary of the Purchaser, but no such assignment shall relieve the
Purchaser or the Sub of its obligations hereunder. It is understood and agreed
that either the Purchaser, or any wholly-owned subsidiary of the Purchaser, may
purchase shares of Common Stock under the Offer.
SECTION 9.03 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 9.04 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by cable, telegram, telecopier
or telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to the Purchaser, BUSA or the Sub:
W.H. Brady Co.
6555 W. Good Hope Road
P.O. Box 571
Milwaukee, WI 53201
Attention: Mr. Donald P. DeLuca
with a copy to:
Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Conrad G. Goodkind, Esq.
if to the Company:
Varitronic Systems, Inc.
300 Interchange North
300 Highway 169 South
Minneapolis, Minnesota 56421
Attention: Mr. Scott F. Drill
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<PAGE> 28
with a copy to:
Best & Flanagan
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: James C. Diracles, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota
regardless of the laws that might otherwise govern under principles of
conflicts of laws applicable thereto.
SECTION 9.06 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement except for all of Articles II and III and Section 6.06.
SECTION 9.08 Counterparts. This Agreement may be executed in
counterparts, manually or by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.09. Expenses. (a) All costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses. Notwithstanding the foregoing, the
Purchaser shall cause the Surviving Corporation to pay any and all taxes on the
transfer of real property to the Purchaser or the Surviving Corporation imposed
by any governmental authority. The Purchaser and the Surviving Corporation
shall indemnify and hold the stockholders of the Company harmless from and
against any and all liabilities arising out of or related to the payment of
such taxes.
(b) The Purchaser acknowledges and agrees that the
Company has disclosed that it is indebted for fees and expenses (including fees
and expenses of its counsel and investment advisors) incurred by it in
connection with the transactions contemplated by this Agreement as set forth in
Schedule 9.09. To the best knowledge of the Company, the fees and expenses
listed in Schedule 9.09 represent the only significant fees and expenses
incurred by the Company in connection with the transactions contemplated by
this Agreement. It is understood that certain of such fees and expenses may be
paid by the Company prior to the
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<PAGE> 29
execution of this Agreement, and the Purchaser agrees to refrain from taking
any action which would interfere with the payment of the foregoing fees and
expenses by the Company.
(c) If this agreement or the transactions contemplated
hereby are terminated or abandoned (unless at such time the Purchaser or the
Sub shall be in breach in any material respect of any of its obligations or
representations and warranties hereunder) and prior to or contemporaneously
with such termination or abandonment, any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act)
other than the Purchaser or any of its subsidiaries or affiliates
(collectively, "Person"), shall have acquired or beneficially owns (and failed
to tender such shares) (as defined in Rule 13d-3 promulgated under the Exchange
Act) at least 33.34% of the then outstanding shares of Common Stock, then the
Company shall promptly (and in any event within 2 days of receipt by the
Company of written notice from the Purchaser) pay the Purchaser the sum of (x)
one million dollars and (y) all actual, documented out-of-pocket expenses
relating to the Offer and the Merger in an amount up to seven hundred and fifty
thousand dollars.
(d) The Company grants to the Sub an irrevocable
option (the "Option") as set forth in Exhibit B to purchase the number of
shares of Common Stock of the Company equal to 19.9% of those outstanding as of
the date hereof at a purchase price of $17.50 per share on the terms and
conditions of Exhibit B hereto.
SECTION 9.10 Certain Definitions. For purposes of this
Agreement:
(a) "Subsidiary" shall mean, when used with reference to
an entity, any corporation, a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity.
(b) "Material Adverse Effect" shall mean any material
adverse change in the financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
SECTION 9.11 Performance by Sub. The Purchaser hereby agrees
to cause the Sub to comply with its obligations hereunder and under the Offer
and to cause the Sub to consummate the Merger as contemplated herein.
SECTION 9.12 Publicity. So long as this Agreement is in
effect, each of the Purchaser and the Sub, on the one hand, and the Company, on
the other hand, promptly shall consult and cooperate with the other prior to
issuing any press release or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national
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<PAGE> 30
securities exchange and except to allow internal communications with employees.
- 29 -
<PAGE> 31
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
W.H. BRADY CO.
By:/s/ Katherine M. Hudson
------------------------------
Katherine M. Hudson
Chief Executive Officer
BRADY USA, INC.
By:/s/ Katherine M. Hudson
------------------------------
Katherine M. Hudson
President
VSI ACQUISITION CO.
By:/s/ Katherine M. Hudson
------------------------------
Katherine M. Hudson
President
VARITRONIC SYSTEMS, INC.
By:/s/ Anton J. Christianson
------------------------------
Anton J. Christianson
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<PAGE> 32
EXHIBIT A
The capitalized terms used in this Exhibit A have the meanings
set forth in the attached Agreement, except that the term "Merger Agreement"
shall be deemed to refer to the attached Agreement.
Notwithstanding any other provisions of the Offer, the Purchaser
shall not be required to accept for payment, purchase or pay for any shares of
Common Stock tendered, and may terminate or, subject to the terms of the Merger
Agreement, amend the Offer and may postpone the acceptance for payment of and
payment for shares of Common Stock, if (A) on or prior to the time at which the
Offer shall have expired (i) the number of shares of Common Stock validly
tendered and not withdrawn immediately prior to the expiration of the Offer,
when added to the shares of Common Stock then beneficially owned by the
Purchaser and its affiliates, shall not constitute two-thirds of the shares of
Common Stock outstanding on a fully diluted basis or (ii) any applicable
waiting periods under the HSR Act shall not have expired or been terminated, or
(B) at any time on or after February 28, 1996 and before the time of acceptance
for payment for any such shares of Common Stock any of the following conditions
exist or shall occur and remain in effect:
(a) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) a commencement of a war, armed
hostilities or other national or international calamity directly
or indirectly involving the United States, (iv) any material
limitation (whether or not mandatory) by any governmental
authority on, or any other event which might materially and
adversely affect the extension of credit by lending
institutions, or (v) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(b) there shall have been any statute, rule or
regulation enacted, promulgated, entered or enforced or deemed
applicable, or any decree, order or injunction entered or
enforced by any government or governmental authority in the
United States or by any court in the United States that (i)
restrains or prohibits the making or consummation of the Offer
or the consummation of the Merger, (ii) prohibits or restricts
the ownership or operation by the Purchaser (or any of its
affiliates or subsidiaries) of any portion of its or the
Company's business or assets which is material to the business
of all such entities taken as a whole or (iii) imposes material
limitations on the ability of the Purchaser effectively to
acquire or to hold or to exercise full
A-1
<PAGE> 33
rights of ownership of the shares of Common Stock, including,
without limitation, the right to vote the shares of Common Stock
purchased by the Purchaser on all matters properly presented to
the stockholders of the Company; provided, however, that the
Purchaser and the Sub shall have used their best efforts to have
any such decree, order or injunction vacated or reversed,
including, without limitation, by proffering their willingness
to accept an order embodying any arrangement required to be made
by the Purchaser or the Sub pursuant to Section 6.05(iii) of the
Merger Agreement (and notwithstanding anything in this
subsection (b) to the contrary, no terms, conditions or
provisions of an order embodying such an arrangement shall
constitute a basis for the Purchaser asserting nonfulfillment of
the conditions contained in this subsection (b)); or
(c) the Merger Agreement shall have been terminated in
accordance with its terms; or
(d) (i) the Company shall have breached or failed to
perform any of its covenants or agreements which breach or
failure to perform is material to the obligations of the Company
under the Merger Agreement taken as a whole, (ii) any of the
representations and warranties of the Company set forth in the
Merger Agreement shall not have been true in any respect which
is material to the Company and its subsidiaries taken as a
whole, in each case, when made or (iii) a Material Adverse
Effect has occurred, provided that the aggregate effect under
(i), (ii), and (iii) shall be in excess of $500,000; or
(e) the Board of Directors of the Company shall have
publicly withdrawn or modified in any material respect adverse
to the Purchaser its recommendation of the Offer; provided,
however, the Purchaser shall have no right to terminate the
Offer or not accept for payment or pay for any shares of Common
Stock if the Company withdraws or modifies its recommendation of
the Offer and the Merger, by reason of taking and disclosing to
the Company's stockholders a position contemplated by Rule 14e-
2(a)(2) or (3) promulgated under the Exchange Act with respect
to another proposal, and if within ten days of taking and
disclosing to its stockholders the aforementioned position, the
Company publicly reconfirms its recommendation of the Offer and
Merger and takes and discloses to the Company's stockholders a
recommendation to reject such other proposal as contemplated by
Rule 14e-2(a)(1) promulgated under the Exchange Act; or
(f) the Purchaser and the Company shall have agreed
that the Purchaser shall terminate the Offer,
A-2
<PAGE> 34
which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payments.
Subject to the terms and provisions of the Merger Agreement the
foregoing conditions are for the sole benefit of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to any
such condition and may be waived by the Purchaser in whole or in part, at any
time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
A-3
<PAGE> 35
EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of February 27, 1996 by and among W.H. Brady
Co., a Wisconsin corporation ("Brady"), and Varitronic Systems, Inc., a
Minnesota corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company, Brady, Brady USA, Inc., a Wisconsin corporation and VSI Acquisition
Co., a Minnesota corporation ("Sub"), are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, upon the terms and subject to the conditions
thereof, for the merger of the Company with and into the Sub (the "Merger").
WHEREAS, as a condition to Brady's willingness to enter into the Merger
Agreement, Brady has requested that the Company agree, and the Company has so
agreed, to grant to Brady an option with respect to certain shares of the
Company's common stock, par value $.01 ("Common Stock"), on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, to induce Brady to enter into the Merger Agreement, and in
consideration of the mutual covenants and agreements set forth herein and in
the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Brady an irrevocable
option (the "Company Option") to purchase the number of shares of Common Stock
equal to 19.9% of shares of Common Stock outstanding as of the date hereof,
subject to adjustment as provided in Section 11 (such shares being referred to
herein as the "Company Shares"), of the Company (the "Company Common Stock") in
the manner set forth below at a price (the "Exercise Price") per Company Share
of $17.50 payable in cash. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be exercised by
Brady, in whole or in part, at any time or from time to time until the Company
Option expires. In the event Brady wishes to exercise the Company Option,
Brady shall deliver to the Company a written notice (an "Exercise Notice")
specifying the total number of Company Shares it wishes to purchase. Each
closing of a purchase of Company Shares (a "Closing") shall occur at a place,
on a date and at a time designated by Brady in an Exercise Notice delivered at
least two business days prior to the date of
<PAGE> 36
the Closing. The Company Option shall terminate upon the earlier of the Merger
pursuant to the Merger Agreement or December 31, 1996. Notwithstanding the
foregoing, the Company Option may not be exercised if Brady is in material
breach of any of its material representations or warranties, or in material
breach of any of its covenants or agreements, contained in this Agreement or in
the Merger Agreement. Upon the giving by Brady to the Company of the Exercise
Notice and the tender of the applicable aggregate Exercise Price, Brady shall
be deemed to be the holder of record of the Company Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Company Shares shall not
then be actually delivered to Brady.
3. Conditions to Closing. The obligation of the Company to issue
the Company Shares to Brady hereunder is subject to the conditions, which may
be waived by the Company in its sole discretion, that (i) all waiting periods,
if any, under the HSR Act, applicable to the issuance of the Company Shares
hereunder shall have been terminated; (ii) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with,
any federal state or local administrative agency or commission or other federal
state or local governmental authority, if any, required in connection with the
issuance of the Company Shares hereunder shall have been obtained or made, as
the case may be, and (iii) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will deliver to Brady
or its designee a single certificate in definitive form representing the number
of the Company Shares designated by Brady in its Exercise Notice, such
certificate to be registered in the name of Brady and to bear the legend set
forth in Section 12, and (b) Brady will deliver to the Company the aggregate
purchase price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. The Company
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 4 in the name of
Brady or its designee.
5. Representations and Warranties of the Company. The Company
represents and warrants to Brady that (a) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the corporate power and authority to enter into this
Agreement, and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other
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<PAGE> 37
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or any of the transactions contemplated hereby, (c) this
Agreement has been duly executed and delivered by the Company, constitutes a
valid and binding obligation of the Company and, assuming this Agreement
constitutes a valid and binding obligation of Brady, is enforceable against the
Company in accordance with its terms, (d) the Company has taken all necessary
corporate action to authorize and reserve for issuance and to permit it to
issue, upon exercise of the Company Option, and at all times from the date
hereof through the expiration of the Company Option will have reserved,
authorized and unissued Company Shares equal to the number of Shares equal to
19.9% of the outstanding Shares of Common Stock dated hereof, such amount being
subject to adjustment as provided in Section 11, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, (e) upon delivery of the Company
Shares to Brady upon the exercise of the Company Option, Brady will acquire the
Company Shares free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever, (f) the execution and delivery of
this Agreement by the Company does not, and the consummation by the Company of
the transactions contemplated hereby will not, violate, conflict with, or
result in a breach of any provision of, or constitute a default (with or
without notice or lapse of time, or both) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination, cancellation, or acceleration of any obligation or the loss of a
material benefit under or the creation of a lien, pledge, security interest or
other encumbrance on assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation") of
the Company or any of its subsidiaries.
6. Representations and Warranties of Brady. Brady represents and
warrants to the Company that (a) Brady is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wisconsin and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Brady and the consummation by Brady of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Brady and no other corporate proceedings on the part of Brady are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Brady and constitutes a
valid and binding obligation of Brady, and, assuming this Agreement constitutes
a valid and binding obligation of Company, is enforceable against Brady in
accordance with its terms.
7. Brady Put. At the request of Brady by written notice, the
Company shall repurchase from Brady the number of
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<PAGE> 38
Shares specified in the put notice (the "Put") at $17.50 per share, provided
that the Put is limited to Company Shares acquired by Brady pursuant to the
Company Option. Payment shall be made by the Company to Brady in two business
days.
8. Voting of Shares. Brady shall vote any shares of capital stock
acquired by such party pursuant to this Agreement, or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act")) as it sees fit.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date,
Brady shall not, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Company Shares
acquired pursuant to this Agreement, other than (i) pursuant to Section 7, (ii)
in accordance with Section 9(b) or Section 10 or (iii) an assignment to an
affiliate of Brady or to carry out the Merger or the Offer pursuant to the
Merger Agreement.
(b) Permitted Sales. Brady shall be permitted to sell any
Company Shares beneficially owned by it pursuant to the Option if such sale is
made pursuant to a tender offer, exchange offer, merger, or similar
transaction.
10. Registration Rights. Brady may by written notice (the
"Registration Notice") to the Company request the Company to register under the
Securities Act all or any part of the Company Shares beneficially owned by
Brady (the "Registrable Securities") pursuant to a bona fide firm commitment
underwritten public offering (a "Permitted Offering"). The Registration Notice
shall include a certificate executed by Brady and its proposed managing
underwriter (the "Manager"), stating that (i) they have a good faith intention
to commence promptly a Permitted Offering and (ii) the Manager in good faith
belies that, based on the then prevailing market conditions, it will be able to
sell the Registrable Securities at a per share price equal to at least 80% of
the then fair market value of such shares. The Company (and/or any person
designated by the Company) shall thereupon have the option exercisable by
written notice delivered to Brady within 10 business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of
the Registrable Securities proposed to be so sold for cash at a price (the
"Option Price") of $17.50 per Share. Any such purchase of Registrable
Securities by the Company (or its designee) hereunder shall take place at a
closing to be held at the principal executive offices of the Company or at the
offices of its counsel at any reasonable date and time designated by the
Company and/or such designee in such notice within 20 business days after
delivery of such notice. Any payment for the shares to be purchased shall be
made by delivery at the
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<PAGE> 39
time of such closing of the Option Price in immediately available funds.
If the Company does not elect to exercise its rights pursuant to this Section
10 with respect to all Registrable Securities, it shall use its best efforts to
effect, as promptly as practicable, the registration under the Securities Act
of the unpurchased Registrable Securities proposed to be so sold; provided,
however, that (i) neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder and (ii) the Company will not
be required to file any such registration statement during any period of time
(not to exceed 40 days after such request in the case of clause (A) below or 90
days in the case of clauses (B) and (C) below) when (A) the Company is in
possession of material non-public information which it reasonably believes
would be determined to be disclosed at such time and, in the opinion of counsel
to the Company, such information would have to be disclosed if a registration
statement were filed at that time; (B) the Company is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Company determines, in its
reasonable judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving the Company or any of its
affiliates. The Company shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue-Sky laws of such jurisdictions as Brady
may reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Company shall not be
required to qualify to do business in, or consent to general service of process
in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to the
condition that Brady shall provide the Company with such information with
respect to such holder's Registrable Securities, the plans for the distribution
thereof and such other information with respect to such holder as, in the
reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all material facts required
to be disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall be effected at the
Company's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to Brady, and the Company shall provide to the
underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the
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<PAGE> 40
parties agree (i) to indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form and substance
customary for transactions of such type with the Manager and the other
underwriters participating in such offering and (iii) to take all further
actions which shall be reasonably necessary to effect such registration and
sale (including, if the Manager deems it necessary, participating in road-show
presentations).
The Company shall be entitled to include (at its expense) additional shares
of its common stock in a registration effected pursuant to this Section 10 only
if and to the extent the Manager determines that such inclusion will not
adversely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization. Without limitation
to any restriction on the Company contained in this Agreement or in the Merger
Agreement, in the event of any change in Company Common Stock by reason of
stock dividends, splitups, mergers (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, or the sale of Common Stock or
the grant of any option to anyone other than Brady, the type and number of
shares or securities subject to the Company Option, and the purchase price per
share provided in Section 1, shall be adjusted appropriately to restore to
Brady its rights hereunder, including the right to purchase from the Company
(or its successors) shares of Company Common Stock representing 19.9% of the
outstanding Company Common Stock for the aggregate Exercise Price calculated as
of the date of this Agreement as provided in Section 1.
12. Restrictive Legends. Each certificate representing shares of
Company Common Stock issued to Brady pursuant to the Option, shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF FEBRUARY 27, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Brady shall have delivered
to the Company a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such legend is not required for
purposes of the Securities Act; and (ii) the reference
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<PAGE> 41
to the provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such reference.
In addition, such certificates shall bear any other legend as may be required
by law. Certificates representing shares sold in a registered public offering
pursuant to Section 10 shall not be required to bear the legend set forth in
this Section 12.
13. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation
of law, or with the written consent of the other party. Nothing contained in
this Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement. Any Shares sold
by Brady in compliance with the provisions of Section 10 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement.
14. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate or
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
15. Entire Agreement. This Agreement, the Confidentiality Agreement
and the Merger Agreement (including the exhibits and schedules thereto)
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
16. Further Assurances. Each party will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary or in order to consummate the transactions contemplated hereby.
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<PAGE> 42
17. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law,
the intent of the parties hereto with respect to such provision and the
economic effects thereof. If for any reason any such court or regulatory
agency determines that Brady is not permitted to acquire the full number of
shares of Company Common Stock provided in Section 1 hereof (as the same may be
adjusted), it is the express intention of the Company to allow Brady to acquire
or to require the Company to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
18. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (i) delivered personally, or (ii)
sent by reputable overnight courier service, or (iii) telecopies (which is
confirmed), or (iv) five days after being 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):
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<PAGE> 43
A. If to Brady, to:
W.H. Brady Co.
6555 West Good Hope Road
Milwaukee, WI 53223
Attention: Donald P. DeLuca
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202-4497
Attention: Conrad G. Goodkind, Esq.
B. If to the Company, to:
Varitronic Systems, Inc.
300 Interchange North
300 Highway 169 South
Minneapolis, MN 55926
Attention: Raymond F. Good
with a copy to:
Best & Flanagan
4000 First Bank Place
601 Second Avenue South
Minneapolis, MN 44502-2371
Attention: James C. Diracles, Esq.
19. Governing Law; Choice of Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota
applicable to agreements made and to be performed within such State.
20. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. 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 descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of
which, taken together, shall constitute one and the same instrument.
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<PAGE> 44
22. Expenses. Except as otherwise expressly provided herein or in
the Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
23. Amendments; Waiver. This Agreement may be amended by the
parties hereto and the terms and conditions hereof may be waived only by an
instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
24. Extension of Time Periods. The time periods for exercise of
certain rights under the Agreement shall be extended to the extent necessary to
avoid any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
25. Replacement of Company Option. Upon receipt by the Company of
evidence reasonably satisfactory to it on the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, the Company will execute and deliver a new
Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
W.H. BRADY CO.
By: /s/ Katherine M. Hudson
---------------------------
Name: Katherine M. Hudson
---------------------
Title: President
--------------------
VARITRONIC SYSTEMS, INC.
By: /s/ Anton J. Christianson
--------------------------
Anton J. Christianson
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<PAGE> 1
February 27, 1996
W.H. Brady Co.
6555 West Good Hope Road
Milwaukee, WI 53223
Attention: Katherine M. Hudson
President, Chief Executive Officer
Dear Kathy:
On behalf of Robert W. Baird & Co. Incorporated ("Baird") we wish to thank you
for the opportunity to represent W.H. Brady Co. (the "Company") in connection
with the proposed Acquisition (as defined below) of Varitronic Systems, Inc.
("Varitronics"). This letter confirms the agreement between Baird and the
Company under which Baird is engaged as exclusive financial advisor to the
Company.
1. Baird accepts this engagement and agrees to:
(a) provide financial analysis as is required to
advise the Company with respect to the form and structure of
and consideration to be paid in the Acquisition and undertake
such investment banking services as the Company may reasonably
request;
(b) counsel the Company as to strategy and tactics
for negotiating with Varitronics and, if needed, participate
in those negotiations; and
(c) prepare and deliver to the Board of Directors of
the Company an opinion as to whether the consideration
proposed in connection with the Acquisition is fair to the
Company from a financial point of view.
If Baird is asked to provide other services not specifically
contemplated above, the Company and Baird shall enter into a
separate agreement covering such additional services to be rendered
and the fee payable by the Company.
2. It is understood that Baird's engagement hereunder commenced
on December 1, 1995 and shall expire on August 31, 1996 unless
extended by mutual written agreement, but may be terminated earlier
by either the Company or Baird at any
<PAGE> 2
Katherine M. Hudson
February 27, 1996
Page 2
time upon 30 days' written notice from one party to the other.
Notwithstanding expiration or termination of Baird's engagement,
the provisions of this letter concerning confidentiality,
indemnification and the Company's obligations to pay Baird's fees
and reimburse Baird's expenses shall survive and remain in effect.
3. For the purposes of this letter:
(a) The "Company" shall mean the Company, its
affiliates, its and their subsidiaries, and any entity formed
for purposes of effecting any Acquisition.
(b) An "Acquisition" means any transaction or a
series of transactions which results, directly or indirectly,
in the transfer of control to the Company of, or a controlling
interest in, Varitronics or any of its material businesses or
any material part of its assets (a "Business"), including
without limitation: (i) any merger, consolidation,
reorganization, recapitalization or other business combination
pursuant to which Varitronics or a Business is combined with
that of the Company; (ii) the acquisition by the Company (or a
"group", as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, that includes the Company)
of beneficial ownership of any class of capital stock of
Varitronics constituting two-thirds or more of the outstanding
shares of such class of capital stock (or rights to acquire
the same); or (iii) a lease of a material part of the assets
of Varitronics or a Business, with or without a purchase
option, or the formation of a joint venture or partnership, or
similar transaction with Varitronics or a Business.
(c) "Transaction Date" means the date of the closing
of an Acquisition.
4. Baird shall be entitled to the following compensation for its
services hereunder:
(a) if an Acquisition is consummated:
(i) during the term of Baird's engagement
under this letter; or
(ii) during the 12 months following
termination or expiration of Baird's engagement
(provided, however, that this clause (ii) shall not
apply in the event that Baird shall have terminated this
letter or refused to agree to an extension pursuant to
paragraph 2); or
<PAGE> 3
Katherine M. Hudson
February 27, 1996
Page 3
(iii) within 18 months following the termination or
expiration of Baird's engagement, which Acquisition is
contemplated by an agreement in principle or a
definitive agreement to effect an Acquisition entered
into during the term of Baird's engagement or the 12
months following termination or expiration of Baird's
engagement (provided, however, that this clause (iii)
shall not apply in the event that Baird shall have
terminated this letter or refused to agree to an
extension pursuant to paragraph 2);
then the Company shall pay to Baird in cash on the
Transaction Date, a transaction fee (the "Transaction Fee")
of $425,000.
(b) If Baird is requested to provide any fairness
opinion in connection with any Acquisition, then Baird shall
be entitled to receive an additional fee for the preparation
and delivery of the opinion in the amount of $125,000 payable
upon delivery (whether verbally or in writing) of such opinion
and regardless of the conclusions reached or whether any
Acquisition is consummated. The amount paid or payable
pursuant to this subparagraph (b) will be creditable against
the Transaction Fee paid or payable.
5. In addition to the fees payable to Baird, the Company shall
reimburse Baird and its affiliates, upon request, for its and their
reasonable out-of-pocket expenses incurred in connection with
Baird's engagement. Out-of-pocket expenses may include, but are not
limited to, transportation, lodging, meals, document services, data
base services, facsimile charges, courier charges, word processing
requirements and fees and expenses of third parties such as legal
counsel.
6. The Company shall furnish all information reasonably
requested by Baird for the purpose of rendering services hereunder
(the "Information"). The Company recognizes and confirms that Baird
(i) will use and rely on the Information and on other information
available from generally recognized public sources in performing the
services contemplated by this letter without any obligation to
independently verify the Information or such other information; (ii)
will not assume responsibility for the accuracy or completeness of
the Information or such other information; and (iii) will not make
an appraisal of any of the assets or liabilities of the Company,
Varitronics, a Business or any other entity.
Baird agrees as provided in this letter to keep all non-public
Information provided to it by the Company confidential, except as
required by law. Notwithstanding
<PAGE> 4
Katherine M. Hudson
February 27, 1996
Page 4
anything to the contrary in this letter, Baird may disclose
non-public Information to its agents and advisors, who shall also
be bound by the terms of this paragraph 6, whenever Baird
determines that such disclosure is necessary or appropriate to
provide the services contemplated in this letter. Except as
required by law, any information or advice rendered by Baird
pursuant to this engagement shall be treated as confidential by the
Company and any party to whom the Company discloses such
information or advice, and shall not be disclosed publicly in any
manner without the prior written consent of Baird. Without prior
consultation with Baird, the Company shall not make any legally
required disclosure of such information or advice nor make any
legally required public announcement or filing in which Baird's
name appears.
7. The Company hereby agrees to indemnify, hold harmless and
reimburse Baird as follows:
(a) The Company agrees to indemnify, hold harmless
and reimburse Baird, its affiliates and their respective
directors, officers, partners, employees, agents and
controlling persons (each an "Indemnified Party") promptly
upon demand for expenses (including, without limitation, fees
and expenses of legal counsel incurred by an Indemnified Party
in any action or proceeding between an Indemnified Party and
the Company or between an Indemnified Party and any third
party or otherwise) as they are incurred in connection with
the investigation of, preparation for or defense of any
pending or threatened claim, or any litigation, proceeding or
other action in respect of or related to the engagement of
Baird hereunder. The Company also agrees (in connection with
the foregoing) to indemnify and hold harmless each Indemnified
Party to the full extent lawful from and against any and all
losses, claims, damages, liabilities and expenses, joint or
several, to which any Indemnified Party may become subject
including any amount paid in settlement of any litigation or
other action (commenced or threatened), to which the Company
shall have consented in writing (such consent not to be
unreasonably withheld), whether or not any Indemnified Party
is a party and whether or not liability resulted; provided,
however, that the Company shall not be liable pursuant to this
paragraph in respect of any loss, claim, damage, liability or
expense to the extent that a court having competent
jurisdiction shall have determined by final judgment (not
subject to further appeal) that such loss, claim, damage,
liability or expense resulted primarily and directly from the
willful misfeasance or gross negligence of such Indemnified
Party.
<PAGE> 5
Katherine M. Hudson
February 27, 1996
Page 5
(b) If indemnification is to be sought hereunder by an
Indemnified Party, then such Indemnified Party shall notify
the Company of the commencement of any litigation, proceeding
or other action in respect thereof; provided, however, that
the failure to notify the Company shall not relieve the
Company from any liability or obligation that it may have
under this paragraph or otherwise to such Indemnified Party.
Following such notification, the Company may elect in writing
to assume the defense of such litigation, proceeding or other
action (and the costs related thereto) and, upon such
election, the Company shall not be liable for any legal costs
subsequently incurred by such Indemnified Party (other than
costs of investigation or the production of documents or
witnesses) unless (i) the Company has failed to provide legal
counsel reasonably satisfactory to such Indemnified Party in
a timely manner or (ii) such Indemnified Party shall have
concluded that (A) the representation of such Indemnified
Party by legal counsel selected by the Company would be
inappropriate due to actual or potential conflicts of
interest or (B) there may be legal defenses available to such
Indemnified Party that are different from or additional to
those available to the Company or any other Indemnified Party
represented by such legal counsel. Nothing set forth herein
shall preclude any Indemnified Party from retaining its own
counsel at its own expense. The Company agrees that it will
not, without the prior written consent of Baird, settle any
pending or threatened claim or proceeding related to or
arising out of matters covered by this paragraph 7 (whether
or not Baird is a party to such claim or proceeding) unless
such settlement includes a provision unconditionally
releasing Baird and all other Indemnified Parties from and
holding them harmless against all liability in respect of
claims by any releasing party related to or arising out of
such matters or any transaction or conduct in connection
therewith.
(c) If the indemnification provisions set forth above
are held unenforceable or are otherwise insufficient or
unavailable to fully hold an Indemnified Party harmless from
and against the expenses and other amounts provided for in
this letter, then the Company shall nonetheless contribute to
any such expenses or amounts paid or payable by such
Indemnified Party in a proportion that appropriately reflects
the relative benefits received by the Company, on the one
hand, and Baird, on the other hand, in connection with the
matters to which such expenses or other amounts relate. If
the foregoing allocation according to respective benefits is
not permitted by applicable
<PAGE> 6
Katherine M. Hudson
February 27, 1996
Page 6
law, then amounts shall be contributed by the Company to the
Indemnified Party in such proportion as appropriately
reflects not only the relative benefits referred to above,
but also so reflects the relative fault of the Company, on
the one hand, and Baird, on the other hand, as well as other
equitable factors and considerations as may be applicable in
the circumstances.
(d) If multiple claims are asserted against an
Indemnified Party in any litigation or other proceeding,
including an arbitration, and indemnification as to at least
one of such claims is permitted under applicable law and
provided for under this agreement, the Company agrees that any
judgment or award shall be conclusively deemed to be based on
claims as to which indemnification is permitted and provided
for, except to the extent the judgment or award expressly
states that the judgment or award, or any portion thereof, is
based solely on a claim or claims as to which indemnification
is not available.
(e) In connection with Baird's engagement hereunder,
Baird may also be engaged to act for the Company in one or
more additional capacities, and the terms of any such
additional engagement may or may not be embodied in one or
more separate written agreements. The provisions of this
paragraph 7 shall (i) apply to the original engagement, any
such additional engagement, and any modification of the
original engagement or such additional engagement, (ii) remain
in full force and effect whether or not any of the
transactions contemplated by this engagement or such
additional engagement are consummated, (iii) survive the
expiration or termination of the period of Baird's engagement,
and (iv) be in addition to any liability that the Company
might otherwise have to any Indemnified Party. It is further
agreed that no Indemnified Party (including Baird) shall be
liable to the Company or any affiliate of the Company in
connection with any matter relating to the engagement of Baird
hereunder, except to the extent that a court having competent
jurisdiction shall have determined by final judgment (not
subject to further appeal) that such liability resulted solely
from the willful misfeasance or gross negligence of such
Indemnified Party. In no event shall the collective share of
the liability of Baird and the other Indemnified Parties
hereunder be in excess of the fees (exclusive of expense
reimbursement) actually paid to Baird hereunder.
8. If an Acquisition is effected and the Company is not the
surviving entity after such Acquisition, the Company shall cause the
surviving entity to assume and honor the
<PAGE> 7
Katherine M. Hudson
February 27, 1996
Page 7
obligations and liabilities of the Company under this letter,
including without limitation the Company's obligations and
liabilities pursuant to provisions concerning indemnification,
contribution and the Company's obligations to pay Baird's fees and
to reimburse Baird's expenses.
9. The Company acknowledges that Baird is a full service
securities firm and as such Baird and its affiliates may from time
to time hold long or short positions or effect transactions, for its
own account or the accounts of customers, in securities of the
Company, Varitronics or other parties that may be involved in
transactions with the Company.
10. The Company and Baird agree and acknowledge that (i) this
letter is solely for the benefit of the parties to this letter, (ii)
Baird shall owe no duty to any person or entity other than the
Company, and (iii) no other person or entity, including without
limitation the Company's shareholders and the Company and its
shareholders' respective employees, officers, directors, trustees,
affiliates and agents, shall be deemed a third party beneficiary of
this letter or have any rights with respect to Baird's engagement.
11. This letter may not be amended or modified except in writing
executed by the Company and Baird. This letter may be executed in
counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument. This letter
shall be governed by and construed in accordance with the internal
laws of the State of Wisconsin without reference to principles of
conflicts of law.
<PAGE> 8
Katherine M. Hudson
February 27, 1996
Page 8
Please confirm that the foregoing is in accordance with the Company's
understanding by signing and returning to Baird the enclosed duplicate of this
letter.
Sincerely yours,
ROBERT W. BAIRD & CO. INCORPORATED
By: ____________________________________
Its: ____________________________________
Accepted and agreed to as of
the date first written above
W.H. BRADY CO.
By: _____________________________
Its: _____________________________
