UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 2)*
FIREPLACE MANUFACTURERS, INC.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
318216-10-8
(CUSIP Number)
Desa International, Inc.
P.O. Box 9004
Bowling Green, KY 42102-9004
(502) 781-9600
Attn.: E.G. Patrick, Vice President Finance and Treasurer
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 30, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box | |.
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 2 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Desa International, Inc. 22-2940760
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 3 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Desa Holdings Corporation 61-1251518
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 4 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J.W. Childs Equity Partners, L.P.**
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
PN
** The reporting person expressly disclaims beneficial ownership with respect to
any shares covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 5 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J.W. Childs Advisors, L.P.**
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
PN
** The reporting person expressly disclaims beneficial ownership with respect to
any shares covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 6 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J.W. Childs Associates, L.P.**
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
PN
** The reporting person expressly disclaims beneficial ownership with respect to
any shares covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 7 of 15 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J.W. Childs Associates, Inc.**
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES - 0 -
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
1,922,075
9 SOLE DISPOSITIVE POWER
- 0 -
10 SHARED DISPOSITIVE POWER
1,922,075
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,922,075
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
57.8%
14 TYPE OF REPORTING PERSON*
CO
** The reporting person expressly disclaims beneficial ownership with respect to
any shares covered by this statement.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 8 of 15 Pages
Item 1. Security and issuer.
This Amendment No. 2 to Schedule 13D (this "Amendment") relates to
shares of common stock, $.01 par value per share (the "Common Stock"), of
Fireplace Manufacturers, Inc., a California corporation ("FMI" or the "Issuer").
The address of the principal executive offices of FMI is 2701 South Harbor
Boulevard, Santa Ana, CA 92704.
This Amendment amends the reporting person's Schedule 13D which was
filed on November 14, 1995, as amended October 31, 1996.
Item 2. Identity and background.
The persons filing this Amendment are Desa Holdings Corporation, a
Delaware corporation ("Desa Holdings"), Desa International, Inc., a Delaware
corporation ("Desa International"), J.W. Childs Equity Partners, L.P., a
Delaware limited partnership ("Childs"), J.W. Childs Advisors, L.P., a Delaware
limited partnership ("Advisors"), J.W. Childs Associates, L.P. ("Associates,
L.P.") and J.W. Childs Associates, Inc., a Delaware corporation ("Associates,
Inc.," and collectively with Desa Holdings, Desa International, Advisors and
Associates, L.P., the "Reporting Persons").
Desa International is a wholly-owned subsidiary of Desa Holdings and is
primarily engaged in the manufacture of consumer products. Desa Holdings is
engaged primarily in holding all of the issued and outstanding shares of common
stock of Desa International. The business address of Desa Holdings and Desa
International is 2701 Industrial Drive, P.O. Box 90004, Bowling Green, KY
47102-9004.
The name, business address and present principal occupation of each
director and executive officer of Desa Holdings and Desa International is set
forth in Schedule I hereto and is hereby incorporated by this reference.
As the result of a recapitalization of Desa Holdings on November 26,
1997, Childs became the principal stockholder of Desa Holdings, and accordingly
Childs may be deemed to be a beneficial holder of securities of which Desa
Holdings is the beneficial owner. Childs is a limited partnership of which the
sole general partner is Advisors, a limited partnership of which the sole
general partner is Associates, L.P., a limited partnership of which the sole
general partner is Associates, Inc. Childs is a private investment firm based in
Boston, Massachusetts that is primarily engaged in leveraged acquisitions,
recapitalization and other principal investing activities. John W. Childs is the
sole stockholder of Associates, Inc.
The principal business address of each of Childs, Advisors, Associates,
L.P., Associates, Inc. and Mr. Childs is One Federal Street, Boston, MA 02110.
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 9 of 15 Pages
None of the Reporting Persons, nor, to the best of each Reporting
Person's knowledge, any of the executive officers or directors of such persons,
have, during the past five (5) years, (a) been convicted in any criminal
proceeding (excluding traffic violations or similar misdemeanors) or (b) been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree of final order enjoining
future violations of or prohibiting or mandating activities subject to federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and amount of funds or other consideration.
The option to purchase Common Stock described in Item 4 below was
granted in consideration of the Letter of Intent, also described in Item 4
below.
Item 4. Purpose of transaction.
On March 20, 1998, Desa International and FMI executed a letter of
intent (the "Letter of Intent"), stating the intention of the parties thereto to
enter into a transaction (the "Merger") in which a wholly owned subsidiary of
Desa International would be merged with and into FMI. A copy of the Letter of
Intent is attached hereto as Exhibit 99.1, and is incorporated herein by this
reference. In connection with the Merger, and subject to approval by FMI
shareholders and all required regulatory approvals, FMI shareholders would
receive an aggregate of $23,750,000, or $7.14 per share of Common Stock based on
3,326,775 shares of Common Stock outstanding on March 19, 1998 (other that those
held by Desa International). Such per share price is subject to adjustment for
any change in the number of outstanding shares of Common Stock prior to the
Closing (as defined in the Letter of Intent). FMI and Desa International have
entered into negotiations to prepare a definitive Merger Agreement and a
definitive Voting and Option Agreement.
The Letter of Intent contains an option pursuant to which certain
shareholders of FMI have granted Desa International the right to purchase
1,657,775 shares of Common Stock, on the same per share price terms as stated in
the preceding paragraph, at any time on or before 5:00 P.M. (Central time) on
April 22, 1998.
Except as set forth in this Item 4, none of the Reporting Persons nor,
to the best of each Reporting Person's knowledge, none of the executive officers
or directors of such Reporting Persons, as applicable, has any plans or
proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in securities of the issuer.
(a) As of the close of business on March 20, 1998, the Reporting
Persons may be deemed to beneficially own in the aggregate 1,922,075 shares of
Common Stock, representing
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 10 of 15 Pages
approximately 57.8% of the outstanding shares of Common Stock, based upon
information contained in the most recently available filing of the Issuer.
Childs is the record holder of a majority of the outstanding shares of
the common stock, $0.01 par value, of Desa Holdings. In addition, pursuant to a
stockholders agreement among the stockholders of Desa Holdings, Childs
effectively has the right to designate a majority of the total number of
directors of Desa Holdings.
Associates, Inc. is the sole general partner of Associates, L.P., and
therefore may be deemed to control Associates, L.P. and indirectly, through
Associates, L.P., Advisors, Childs and Desa Holdings, control Desa
International. Based upon the foregoing relationships and stock ownership and
pursuant to the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder, Childs, Advisors, Associates, L.P. and Associates, Inc.
each may be deemed to have indirect shared voting and dispositive power with
respect to 1,922,075 shares of Common Stock, representing approximately 57.8% of
the outstanding shares of Common Stock, owned of record by Desa International.
The reporting persons each expressly disclaim the existence of any group; and
Childs, Advisors, Associates, L.P. and Associates, Inc. each expressly disclaim
beneficial ownership of any shares of Common Stock covered by this statement.
(b) The responses of the Reporting Persons set forth above in items 7
through 11 of the cover pages of this Schedule 13D which relate to shares of
Common Stock beneficially owned by the Reporting Persons are incorporated herein
by reference.
To the knowledge of the Reporting Persons, and except as otherwise
disclosed in this Amendment, none of the executive officers or directors of the
Reporting Persons is the beneficial owner of any shares of Common Stock, and no
transaction in the common Stock has been effected by such individual during the
past sixty (60) days.
Item 6. Contracts, arrangements, understandings or relationships with respect to
securities of the issuer.
The Letter of Intent contains an option pursuant to which certain
shareholders of FMI have granted Desa International the right to purchase
1,657,775 shares of Common Stock, on the same per share price terms as stated in
the preceding paragraph, at any time on or before 5:00 P.M. (Central time) on
April 22, 1998.
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 11 of 15 Pages
Item 7. Material to be filed as exhibits.
Exhibit No. Description
99.1 Letter of Intent, dated March 19, 1998, by and among
Desa International, FMI and the signatory parties
thereto.
99.2 Joint Filing Agreement, dated March 27, 1998, by and
among Desa International, Desa Holdings, Childs,
Advisors, Associates L.P. and Associates, Inc.
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 12 of 15 Pages
SIGNATURES
After reasonable inquiry and to the best of their knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: March 27, 1998 DESA HOLDINGS CORPORATION
By: /s/ Robert H. Elman
Name: Robert H. Elman
Title: Chief Executive Officer
DESA INTERNATIONAL, INC.
By: /s/ Robert H. Elman
Name: Robert H. Elman
Title: Chief Executive Officer
J.W. CHILDS EQUITY PARTNERS, L.P.
By: J.W. CHILDS ADVISORS, L.P.
its general partner
By: J.W. CHILDS ASSOCIATES, L.P.
its general partner
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ADVISORS, L.P.
By: J.W. CHILDS ASSOCIATES, L.P.
its general partner
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 13 of 15 Pages
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ASSOCIATES, L.P.
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ASSOCIATES INC.
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 14 of 15 Pages
SCHEDULE 1
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth, as to each of the executive officers and
directors of the Reporting Persons, his or her name, business address, and
present principal occupation or employment and the name and address of any
corporation or other organization in which such employment is conducted.
1. Executive Officers of Desa Holdings Corporation and Desa International, Inc.
The following are the executive officers of Desa Holdings Corporation
and Desa International, Inc. Each of the named persons serves in the office set
forth opposite his name for both companies. The business address for each of the
following persons is Desa International, Inc., P.O. Box 90004, 2701 Industrial
Drive, Bowling Green, KY 42102-9004. Each of the following persons is a citizen
of the United States of America.
Robert H. Elman Chairman, Chief Executive Officer
Terry G. Scariot President, Chief Operating Officer
John M. Kelly Executive Vice President
Edward G. Patrick Vice President Finance & Treasurer
2. Directors of Desa Holdings Corporation and Desa International, Inc.
The following are the directors of Desa Holdings Corporation and Desa
International, Inc. Each of the named persons serves as a director of both
companies. Each of the following persons is a citizen of the United States of
America.
Robert H. Elman
Desa International, Inc.
P.O. Box 90004
2701 Industrial Drive
Bowling Green, KY 42102-9004
Principal Employment: Desa Holdings Corporation and
Desa International, Inc.
Terry G. Scariot
Desa International, Inc.
P.O. Box 90004
2701 Industrial Drive
Bowling Green, KY 42102-9004
Principal Employment: Desa Holdings Corporation and
Desa International, Inc.
-14-
<PAGE>
SCHEDULE 13D/A
CUSIP No. 318216-10-8 Page 15 of 15 Pages
John W. Childs
J.W. Childs Equity Partners, L.P.
One Federal Street
Boston, MA 02110
Principal Employment: J.W. Childs Equity Partners, L.P.
Raymond B. Rudy
J.W. Childs Equity Partners, L.P.
One Federal Street
Boston, MA 02110
Principal Employment: J.W. Childs Equity Partners, L.P.
Adam L. Suttin
J.W. Childs Equity Partners, L.P.
One Federal Street
Boston, MA 02110
Principal Employment: J.W. Childs Equity Partners, L.P.
Michael Greene
UBS Capital LLC
Union Bank of Switzerland
299 Park Avenue
New York, NY 10171
Principal Employment: UBS Capital LLC
-15-
EXHIBIT 99.1
March 19, 1998
Mr. Willard V. Harris, Jr.
Chairman of the Board
Fireplace Manufacturers, Inc.
2701 South Harbor Boulevard
Santa Ana, CA 92704
Dear Bill:
This letter confirms our proposal concerning the acquisition, in a
cash-for-stock merger, of Fireplace Manufacturers, Inc., a California
corporation (together with its subsidiaries, the "Company").
1. The Merger. The transaction that we propose contemplates the merger
of the Company with a Delaware subsidiary (the "Buyer") to be formed by us (the
"Merger") for the purpose of effecting the Merger. In the Merger each share of
the Company's common stock, $.01 par value per share (the "Common Stock"), of
record will be exchanged for $7.14 per share, provided that the aggregate
consideration for all shares of Common Stock shall not exceed $23,750,000A (the
"Purchase Price"). The Purchase Price will be reduced by the amount of the
Company's indebtedness for borrowed money.
2. Voting and Option Agreement. An integral component of our proposal
is the Buyer's entering into a voting and option agreement (the "Voting and
Option Agreement") with the stockholder group consisting of Benjamin C. Harris,
Willard V. Harris, Jr., Willard P. Harris, John D. Hornsby and James L. Behrens
(the "Controlling Interests"). The Voting and Option Agreement will provide that
the Controlling Interests will vote all their shares of Company Common Stock
"for" the Merger and "against" any competing transaction. In addition, the
Voting and Option Agreement will provide to Buyer an option (the "Option") to
acquire the Controlling Interests' holding of Company Common Stock in the event
that (a) the Company breaches or terminates the Merger Agreement other than on
account of a breach by Buyer, or (b) any of the Controlling Interests breaches
or seeks to terminate the Voting and Option Agreement. The Option will terminate
automatically if it is not exercised by the later of 120 days after the date of
such Voting and Option Agreement and Buyer's receipt of requisite governmental
approvals under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and in any event it will terminate if not exercised within 180 days
after the date of the Voting and Option Agreement.
- --------
A The per share price as stated herein is based on the Company's representation
that there are on the date hereof, and will be at the Closing (as defined
below), 3,326,775 shares of Common Stock outstanding. Any change in the number
of shares of Common Stock outstanding will proportionately change such per share
price.
<PAGE>
March 19, 1998
Page 2
3. Option. For good and valuable consideration, each of the Controlling
Interests hereby grants to DESA International, Inc. ("DESA") the unconditional
and irrevocable option (the "LOI option") to purchase from him all, but not less
than all Company Common Stock beneficially owned by him on the date hereof (the
number of shares of which is set forth opposite each of the Controlling
Interests' names on the signature pages hereto), as provided below. The purchase
price for Company Common stock hereunder shall be the same per share price
($7.14 per share) as set forth in paragraph 1 hereof (subject to adjustment as
provided therein). DESA may exercise all but not less than all of the LOI Option
at any time on or before 5:00 p.m. (Central time) on April 22, 1998, after which
time it shall terminate automatically. To exercise the LOI Option, DESA shall
send to the Controlling Interests a written notice (addressed c/o the Company)
specifying a place and time for the closing of such purchase. Such closing shall
occur not more than thirty (30) days after the date of such notice (which period
may be extended by DESA for an additional thirty (30) days if such purchase is
subject to the notification requirements of the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and requisite approvals thereunder have not
been obtained in such initial 30-day period). At the closing, DESA shall pay the
Controlling Interests the purchase price specified above for Company Common
Stock purchased hereunder in immediately available funds by wire transfer to
bank accounts designated by them. At the closing, each of the Controlling
Interests shall deliver to DESA, free and clear of all liens and encumbrances, a
certificate or certificates representing all of the shares of Company Common
Stock held by him together with stock powers duly executed, with signatures
guaranteed. Upon such Closing, the Controlling Interests named in Section 9(j)
hereof and DESA shall enter into non-competition agreements against payment of
the full amounts provided therefor under Section 9(j) hereof. DESA agrees that
it will, if it does exercise the LOI Option, within 180 days after the closing
thereof to either commence a tender offer or enter into a merger agreement,
subject to reasonable and customary terms and conditions, providing that the
remaining Company shareholders will receive therein the same per share price
used to purchase Company Common Stock under the LOI Option.
4. Financing. Our proposal is not subject to any financing contingency.
5. Agreements. Upon your acceptance of this proposal letter, we are
prepared immediately to begin negotiation of definitive transaction documents,
including a Merger Agreement and a Voting and Option Agreement, which will
provide customary provisions for a transaction of this nature.
6. Closing. We would expect that the closing ("Closing") of the Merger
would occur promptly after satisfaction of all closing conditions, including
approval by the Company's stockholders and any required regulatory approvals,
such as under the Hart-Scott-Rodino Antitrust Improvements Act, if applicable.
<PAGE>
March 19, 1998
Page 3
7. Financial Statements; Conduct of Business. Our proposal assumes that
the audited financial statements of the Company of March 31, 1997 and the
aunaudited interim financial statements of December 31, 1997 have been prepared
in accordance with generally accepted accounting principles consistently applied
and fairly, fully and accurately present the financial position of the Company
at their respective dates and its results of operations for the periods then
ended and that since March 31, 1997, the Company has not suffered any material
adverse change in its business, properties, assets, results or operations,
financial condition, or prospects, and that, except as otherwise disclosed to
Buyer in writing, it has conducted its business only in the ordinary course of
business, including, without limitation, (i) not granting any executive salary
adjustment or bonus other than pursuant to the compensation plans or agreements
existing on the date hereof, (ii) maintaining its working capital (including
cash required to fund its day-to-day operations) in the ordinary course
consistent with past operations, (iii) not selling or disposing of any assets
outside of the ordinary course of business consistent with past practice, (iv)
not accelerating receivable delaying payables, or liquidating inventory, except
in the ordinary course of business consistent with past practice, (v) not
issuing or selling any additional shares of its capital stock or any securities
convertible into shares of such capital stock, (vi) not splitting,
reclassifying, combining or redeeming any shares of such capital stock, and
(vii) not paying any dividends or making any distributions in respect of any
shares of any class of such capital stock.
8. Access to Information. At all times prior to the Closing, Buyer will
have reasonable access to the Company's officers and employees and to its books,
documents, contracts and all other records.
9. Conditions. In addition to the matters hereinabove, the consummation
of the Merger will be subject to, and where applicable, the Merger Agreement
will contain, the following conditions:
a. There shall have been no material adverse changes in the
business, properties, assets, results of operations, financial condition, or
prospects of the Company from March 31, 1997 (except as disclosed in the
Company's filings with the Securities and Exchange Commission between that date
and the date hereof) through the Closing.
b. Prior to the Closing, the Company shall conduct its
business in the ordinary and usual course consistent with past practice as
outlined in paragraph 7 above, and senior management shall have continued in the
employment of the company.
c. All of the representations and warranties of the Company in
the Merger Agreement shall be true and correct in all material respects at the
Closing.
<PAGE>
March 19, 1998
Page 4
d. There shall be no pending or threatened litigation or
proceeding which seeks to restrain or prohibit the Merger or challenge its
legality or which, in the judgement of the Buyer, makes it inadvisable to
proceed with the Merger.
e. The holders of no more than 10% of the outstanding Common
Stock of record shall assert dissenters' appraisal rights under California law
in connection with the Merger.
f. All required third-party or governmental consents, licenses
or approvals shall have been obtained and all necessary filings shall have been
made and, where necessary, become effective.
g. The Controlling Interests shall have cooperated fully with
the Buyer as provided in the Voting and Option Agreement in causing the Company
to bring to pass the transactions to which the Company is to be a party as
contemplated herein.
h. All contractual provisions whereby an obligation of the
Company to pay severance to any person may be triggered in whole or in part by a
change of control transaction such as the Merger shall be terminated.
i. All outstanding options and other securities convertible or
exchangeable into Company Common Stock shall have ben canceled.
j. Upon Closing or exercise of the LOI Option, Willard V.
Harris, Jr., Willard P. Harris and John D. Hornsby shall have entered into three
year non-competition agreements with the Buyer, each providing for one-time
payments of $1,000,000 at the time of signing, James L. Behrens shall have
entered into a three year non-competition agreement with the Buyer providing for
a one time, payment of $250,000 at the time of signing, and Willard P. Harris
and John D. Hornsby shall have entered into employment agreements with the
Company, all such agreements to be in form and substance reasonable satisfactory
to the Buyer and to become effective at the closing of the Merger.
10. Due Diligence. Our proposal is subject to satisfactory completion
of business, financial, legal and accounting due diligence, as well as
satisfactory completion of "Phase I" environmental reviews. Upon the acceptance
of this proposal, we can begin our due diligence immediately.
<PAGE>
March 19, 1998
Page 5
11. Good Faith. The parties hereto will negotiate in good faith toward
agreement as to the terms of the various transactions referred to or
contemplated herein. In recognition of the time which will be expended and the
expenses which will be incurred by Buyer in connection with the transaction
contemplated hereby, the Company and the Controlling Interests agree that until
the expiration of this proposal letter, they will not, and will direct their
agents and representatives not to, solicit, negotiate or enter into any
inquiries, proposals or agreements with respect to any direct or indirect sale,
disposition, pledge, encumbrance or redemption of any securities of the Company,
the direct or indirect sale or disposition of all or any substantial portion of
the assets or business of the Company, or any merger, reorganization,
consolidation or recapitalization or other similar transaction involving the
Company except as explicitly provided herein. Additionally, the Company and the
Controlling Interests will not discuss or disclose either this proposal letter
or other confidential information pertaining to the Company (except as may be
required by law) with any third party without our prior written approval. The
Controlling Interests and the Company will advise such third parties from whom
it has previously solicited acquisition bids of the existence of this letter,
and as long as this letter is in effect the Company and the Controlling
Interests shall cease all further discussions with such parties concerning any
of the sort of transactions enumerated above. Finally, until after 5:00 p.m.
(Central time) on April 22, 1998, the Company agrees that it will not issue or
sell any additional shares of its capital stock.
12. Publicity. Except as may be required by applicable law, the parties
agree that they will consult with each other concerning any proposed press
release or public announcement pertaining to the transactions contemplated
hereby and shall endeavor to agree on the text of such release or the making of
such public announcement. The foregoing shall not restrict in any way the method
and timing of any arty's compliance with securities or other laws applicable to
it, even if the same require a unilateral public disclosure of the matters
addressed in this letter. Any party making any public disclosure of the matters
addressed herein shall give the other parties prompt notice thereof, in advance
of public disclosure if practicable and legally permissible.
13. Expenses. If the transactions contemplated by this letter are not
consummated, each of the parties will bear its own expenses for legal,
accounting and other professional fees incurred in connection therewith.
<PAGE>
March 19, 1998
Page 6
14. Duration of Proposal. The proposal set forth in this letter will
expire if this letter is not countersigned on behalf of the Controlling
Interests and the Company by 5:00 p.m. (Central time) on the fifth business day
after the date of this letter, and thereafter, it will terminate if the Merger
Agreement is not signed by or on behalf of the Company and the Controlling
Interests, respectively, by 5:00 p.m. (Central time) on April 22, 1998. The
provisions of paragraph 13 shall survive any such termination.
15. Effect of this Letter. Except with respect to the obligations set
forth in paragraph 3, 11, 12 and 13, this letter is not intended to be a
contract. The parties hereto shall not be legally obligated by any of the terms
hereof, other than as set forth in such aforesaid paragraphs, unless and until
the Agreement is executed and delivered by all applicable parties. If the
Agreement is so executed, the obligations of the parties under this proposal
letter shall terminate unless expressly reaffirmed in the Agreement.
If you have any questions regarding the foregoing proposal, please call
me at 502-745- 7877.
Sincerely,
/s/ Robert H. Elman
Robert H. Elman
Chairman
<PAGE>
March 19, 1998
Page 7
Accepted and agreed:
FIREPLACE MANUFACTURERS INCORPORATED
By /s/ Willard V. Harris, Jr.
Title: Chairman of the Board
CONTROLLING INTERESTS:
/s/ Benjamin C. Harris 259,250
Benjamin C. Harris Common Stock Beneficially Owned
/s/ Willard V. Harris, Jr. 399,780
Willard V. Harris, Jr. Common Stock Beneficially Owned
/s/ Willard P. Harris 416,725
Willard P. Harris Common Stock Beneficially Owned
/s/ John D. Hornsby 480,748
John D. Hornsby Common Stock Beneficially Owned
/s/ James L. Behrens 101,252
James L. Behrens Common Stock Beneficially Owned
JOINT FILING AGREEMENT
The undersigned, and each of them, do hereby agree and consent to the
filing of a single statement on behalf of all of them on Schedule 13D and
amendments thereto, in accordance with the provisions of Rule 13d-1(f)(1) of the
Securities Exchange Act of 1934.
Dated: March 27, 1998 DESA HOLDINGS CORPORATION
By: /s/ Robert H. Elman
Name: Robert H. Elman
Title: Chief Executive Officer
DESA INTERNATIONAL, INC.
By: /s/ Robert H. Elman
Name: Robert H. Elman
Title: Chief Executive Officer
J.W. CHILDS EQUITY PARTNERS, L.P.
By: J.W. CHILDS ADVISORS, L.P.
its general partner
By: J.W. CHILDS ASSOCIATES, L.P.
its general partner
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ADVISORS, L.P.
By: J.W. CHILDS ASSOCIATES, L.P.
its general partner
<PAGE>
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ASSOCIATES, L.P.
By: J.W. CHILDS ASSOCIATES INC.
its general partner
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
J.W. CHILDS ASSOCIATES INC.
By: /s/ Adam L. Suttin
Name: Adam L. Suttin
Title: Vice President
