<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
AMENDMENT NO. 1
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
PLASTI-LINE, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
PLASTI-LINE, INC.
PL HOLDING CORP.
PL ACQUISITION CORP.
JAMES R. MARTIN
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.001 PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
727540106
--------------------------------------------
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C>
JAMES R. MARTIN JAMES R. MARTIN
PLASTI-LINE, INC. 623 E. EMORY ROAD
PL HOLDING CORP. KNOXVILLE, TENNESSEE 37950
PL ACQUISTION CORP. (423) 938-1511
623 E. EMORY ROAD
KNOXVILLE, TENNESSEE 37950
(423) 938-1511
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FLING STATEMENT)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
SUSAN J. WILSON, ESQ. BOB F. THOMPSON, ESQ.
ALSTON & BIRD LLP BASS, BERRY & SIMS PLC
ONE ATLANTIC CENTER 2700 FIRST AMERICAN CENTER
1201 WEST PEACHTREE STREET NASHVILLE, TENNESSEE 37238-2700
ATLANTA, GEORGIA 30309-3424 (615) 742-6200
(404) 881-7000
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. [X]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- --------------------------------------------------------------------------------
<S> <C>
$56,055,463 $11,215
================================================================================
</TABLE>
[X] 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.
<PAGE> 2
Amount previously paid: $11,215 Filing party: Plasti-Line, Inc.
Form or Registration no.: Schedule 14A Date filed: November 5, 1997
*For purposes of calculation of the filing fee only. This transaction relates to
the proposed merger (the "Merger") of PL Acquisition Corp. with and into
Plasti-Line, Inc. (the "Company"). The "Transaction Valuation" amount referenced
above is based upon the purchase of 3,865,894 shares of Common Stock, par value
$.001 per share (the "Common Stock"), of the Company at $14.50, the cash price
per share of Common Stock to be paid in the Merger. In accordance with Rule
0-11(c)(1) under the Securities Exchange Act of 1934, the filing fee is
determined by multiplying the amount calculated pursuant to the preceding
sentence by 1/50th of one percent.
This Rule 13E-3 Transaction Statement (the "Statement") of
Plasti-Line, Inc., a Tennessee corporation (the "Company"), PL Holding Corp., a
Tennessee corporation ("Parent"), PL Acquisition Corp., a Tennessee corporation
and wholly owned subsidiary of Parent ("Merger Sub"), and James R. Martin
("Martin) relates to an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of November 3, 1997, among the Company, Parent, Merger Sub and Martin,
pursuant to which, among other things, (a) Merger Sub will be merged with and
into the Company (the "Merger" or the "Transaction"), with the Company being the
surviving corporation (the "Surviving Corporation"), (b) each outstanding share
of Common Stock (except those shares of Common Stock held by the Company as
treasury stock or owned by Parent or its affiliates) will be converted into the
right to receive $14.50 without interest, (c) each outstanding share of Common
Stock held by Parent or its affiliates will be canceled without consideration
and (d) each outstanding share of Merger Sub common stock will be converted into
one share of common stock of the Surviving Corporation. The Merger Agreement and
the Merger have already been approved by the board of directors of each of the
corporations that are parties to the Merger Agreement and are subject to the
approval of the shareholders of the Company at a Special Meeting of Shareholders
to be held on ________, 1998. This Statement is intended to satisfy the
reporting requirements of Section 13(e) of the Securities Exchange Act of 1933,
as amended (the "Act"). A copy of the Merger Agreement is filed by the Company
as Exhibit A to the Company's Proxy Statement (the "Proxy Statement") and
incorporated by reference in Item 17(c) to this Statement.
The cross-reference sheet below is being supplied pursuant to
General Instruction F to the Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Proxy Statement, including all exhibits
thereto, is hereby expressly incorporated herein by reference and the responses
to each item in this Statement are qualified in their entirety by the
information contained in the Proxy Statement and the exhibits thereto.
<PAGE> 3
CROSS REFERENCE SHEET
SCHEDULE 13E-3 ITEM: LOCATION IN THE PROXY STATEMENT:
Item 1(a) *
Item 1(b) "INTRODUCTION" and "MARKET PRICES FOR THE
COMMON STOCK"
Item 1(c) "MARKET PRICES FOR THE COMMON STOCK"
Item 1(d) "DIVIDENDS"
Item 1(e) **
Item 1(f) "PURCHASES OF COMMON STOCK BY CERTAIN
PERSONS"
Item 2(a)--(d) and (g) "INTRODUCTION", ""BUSINESS OF THE COMPANY",
"CERTAIN INFORMATION CONCERNING PARENT AND
MERGER SUB" and "DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY, PARENT, MERGER SUB
AND THE SURVIVING CORPORATION"
Item 2(e)--(f) *
Item 3(a)(1) "SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships"
Item 3(a)(2) "INTRODUCTION--Proposal to be Considered at
the Special Meeting,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--THE MERGER AGREEMENT," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "THE
MERGER AGREEMENT" and EXHIBIT A--"MERGER
AGREEMENT"
Item 3(b) "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "INTRODUCTION--Voting
Rights; Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special
Meeting; Quorum; Vote Required,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of
the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships," "CERTAIN INFORMATION
CONCERNING PARENT AND MERGER SUB" and
"SECURITY OWNERSHIP OF THE COMPANY"
Item 4(a) "INTRODUCTION--Proposal to be Considered at
the Special Meeting,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--THE MERGER AGREEMENT," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "THE
MERGER AGREEMENT" and EXHIBIT A--"MERGER
AGREEMENT"
<PAGE> 4
Item 4(b) "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "SUMMARY--GENERAL--
Structure of the Merger," "SUMMARY--
GENERAL--Certain Effects of the Merger,"
"SUMMARY--GENERAL--Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of
the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships," "THE MERGER
AGREEMENT--General," "THE MERGER AGREEMENT--
Consideration to be Received by Shareholders
of the Company," "CERTAIN INFORMATION
CONCERNING PARENT AND MERGER SUB," "SECURITY
OWNERSHIP OF THE COMPANY" and EXHIBIT A--
"MERGER AGREEMENT"
Item 5(a)--(g) "SUMMARY--GENERAL--Plans for the Company
After the Merger," "SUMMARY--GENERAL--
Certain Effects of the Merger," "SUMMARY--
SOURCE OF FUNDS FOR THE MERGER," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Plans for the Company After the
Merger," "SPECIAL FACTORS--Purpose and
Structure of the Merger; Certain Effects of
the Merger," "THE MERGER AGREEMENT--The
Surviving Corporation," "DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY, PARENT,
MERGER SUB AND THE SURVIVING CORPORATION--
Information Concerning Directors and
Executive Officers of the Surviving
Corporation" and EXHIBIT A--"MERGER
AGREEMENT"
Item 6(a)--(c) "SOURCE OF FUNDS FOR THE MERGER"
Item 6(d) **
Item 7(a) and (c) "SUMMARY--GENERAL--Certain Effects of the
Merger," "SPECIAL FACTORS--Background of the
Merger" and "SPECIAL FACTORS--Purpose and
Structure of the Merger; Certain Effects of
the Merger"
Item 7(b) "SPECIAL FACTORS--Background of the Merger"
and "SPECIAL FACTORS--Purpose and Structure
of the Merger; Certain Effects of the
Merger"
Item 7(d) "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "SUMMARY--GENERAL--
Structure of the Merger," "SUMMARY-GENERAL--
Plans for the Company After the Merger,"
"SUMMARY--GENERAL--Certain Effects of the
Merger," "SUMMARY--GENERAL--Conflicts of
Interest," "SUMMARY--GENERAL--Federal Income
Tax Consequences," "SPECIAL FACTORS--
Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--
Conflicts of Interest; Certain
Relationships," "SPECIAL FACTORS--Certain
Federal Income Tax Consequences of the
Merger," "THE MERGER AGREEMENT--General,"
"THE MERGER AGREEMENT--The Surviving
Corporation," "THE MERGER AGREEMENT--
Consideration to be Received by Shareholders
of the Company," "SOURCE OF FUNDS FOR THE
MERGER," "SECURITY OWNERSHIP OF THE
COMPANY," "DIRECTORS AND OFFICERS OF THE
COMPANY, PARENT, MERGER SUB AND THE
SURVIVING CORPORATION--Information
Concerning Directors and Executive Officers
of the Surviving Corporation" and EXHIBIT
A--"MERGER AGREEMENT"
Item 8(a)-(b) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of the Company's
Board of Directors" and "SPECIAL FACTORS--
Recommendations of the Special Committee,
the Board, Parent, Merger Sub and Martin"
<PAGE> 5
Item 8(c) "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of
the Special Meeting; Quorum; Vote Required,"
"SUMMARY--THE MERGER AGREEMENT--Conditions
to Consummation of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "THE
MERGER AGREEMENT--Conditions to Consummation
of the Merger" and EXHIBIT A--"MERGER
AGREEMENT"
Item 8(d) "SUMMARY--GENERAL--Opinion of Financial
Advisor to Special Committee," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Special Committee's
Financial Advisor" and EXHIBIT C--"OPINION
OF J.C BRADFORD & CO."
Item 8(e) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of Company's Board
of Directors," "SPECIAL FACTORS--Background
of the Merger" and "SPECIAL FACTORS--
Recommendations of the Special Committee,
the Board, Parent, Merger Sub and Martin"
Item 8(f) **
Item 9(a)-(c) "SUMMARY--GENERAL--Opinion of Financial
Advisor to Special Committee," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Special Committee's
Financial Advisor" and EXHIBIT C--"OPINION
OF J.C. BRADFORD & CO."
Item 10(a) "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "INTRODUCTION--Voting
Rights; Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special
Meeting; Quorum; Vote Required," "SUMMARY--
GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of
the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships," "CERTAIN INFORMATION
CONCERNING PARENT AND MERGER SUB" and
"SECURITY OWNERSHIP OF THE COMPANY"
Item 10(b) "PURCHASES OF COMMON STOCK BY CERTAIN
PERSONS"
Item 11 "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "INTRODUCTION--Voting
Rights; Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special
Meeting; Quorum; Vote Required," "SUMMARY--
GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Plans for the Company
After the Merger," "SUMMARY--GENERAL--
Conflicts of Interest," "SPECIAL FACTORS--
Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--
Conflicts of Interest; Certain
Relationships," "CERTAIN INFORMATION
CONCERNING PARENT AND MERGER SUB" and
"SECURITY OWNERSHIP OF THE COMPANY"
<PAGE> 6
Item 12(a) "INTRODUCTION--Proposal to be Considered at
the Special Meeting," "INTRODUCTION--Voting
Rights; Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special
Meeting; Quorum; Vote Required," "SUMMARY--
GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of
the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships," "THE MERGER
AGREEMENT--Consideration to be Received by
Shareholders of the Company," "CERTAIN
INFORMATION CONCERNING PARENT AND MERGER
SUB," "SECURITY OWNERSHIP OF THE COMPANY"
and EXHIBIT A--"MERGER AGREEMENT"
Item 12(b) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of Company's Board
of Directors," "SPECIAL FACTORS--
Recommendations of the Special Committee,
the Board, Parent, Merger Sub and Martin"
and "SECURITY OWNERSHIP OF THE COMPANY"
Item 13(a) "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--THE MERGER
AGREEMENT--Dissenters' Rights," "SPECIAL
FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger,"
"DISSENTERS' RIGHTS" and EXHIBIT B--"CHAPTER
23 OF THE TENNESSEE BUSINESS CORPORATION
ACT"
Item 13(b)-(c) **
Item 14(a) "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "SELECTED HISTORICAL FINANCIAL
INFORMATION OF THE COMPANY," "INDEPENDENT
AUDITORS" and "INDEX TO FINANCIAL
STATEMENTS"
Item 14(b) **
Item 15(a) "SUMMARY--GENERAL--Plans for the Company
After the Merger" and "SPECIAL FACTORS--
Plans for the Company After the Merger"
Item 16 "INTRODUCTION--Proxies"
Item 17 *
- ---------------------------------------
* Information is contained in this Statement
** Not applicable
<PAGE> 7
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity securities which is the
subject of the Rule 13e-3 transaction is the Company. The address of the
Company's principal executive offices is 623 E. Emory Road, Knoxville, Tennessee
37849.
(b) The information set forth in "INTRODUCTION" and "MARKET
PRICES FOR THE COMMON STOCK" in the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "MARKET PRICES FOR THE COMMON
STOCK" in the Proxy Statement is incorporated herein by reference.
(d) The information set forth in "DIVIDENDS" in the Proxy
Statement is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in "PURCHASE OF COMMON STOCK BY
CERTAIN PERSONS" in the Proxy Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This statement is being filed by the Company,
the issuer of the class of equity securities which is the subject of the Rule
13e-3 transaction, by Parent, by Merger Sub and by James R. Martin. The
information set forth in "INTRODUCTION," "BUSINESS OF THE COMPANY," "CERTAIN
INFORMATION CONCERNING PARENT AND MERGER SUB" and "DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY,PARENT, MERGER SUB AND THE SURVIVING CORPORATION" in
the Proxy Statement is incorporated herein by reference.
(e)-(f) None of the Company, Parent, Merger Sub, Martin or, to
the best of their knowledge, any of the persons listed under "DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY, PARENT, MERGER SUB AND THE SURVIVING
CORPORATION" in the Proxy Statement, has during the last five years (i) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been 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 violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in "SPECIAL
FACTORS--Conflicts of Interest; Certain Relationships" of the Proxy Statement is
incorporated herein by reference.
(a)(2) The information set forth in "INTRODUCTION--Proposal to
be Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the
Merger," "SUMMARY--THE MERGER AGREEMENT," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Purpose and Structure of the Merger; Certain Effects
of the Merger," "THE MERGER AGREEMENT" and EXHIBIT A--"MERGER AGREEMENT" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Conflicts of Interest," "SPECIAL FACTORS--Background of the Merger, "SPECIAL
<PAGE> 8
FACTORS--Purpose and Structure of the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest; Certain Relationships," "CERTAIN
INFORMATION CONCERNING PARENT AND MERGER SUB" and "SECURITY OWNERSHIP OF THE
COMPANY" of the Proxy Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--THE MERGER AGREEMENT," "SPECIAL FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "THE MERGER AGREEMENT" and EXHIBIT A--
"MERGER AGREEMENT" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Certain Effects of the Merger," "SUMMARY--GENERAL--Conflicts
of Interest", "SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--
Purpose and Structure of the Merger; Certain Effects of the Merger," "SPECIAL
FACTORS--Conflicts of Interest; Certain Relationships," "THE MERGER AGREEMENT--
General," "THE MERGER AGREEMENT--Consideration to be Received by Shareholders of
the Company," "CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB," "SECURITY
OWNERSHIP OF THE COMPANY" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy
Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth in "SUMMARY--GENERAL--
Certain Effects of the Merger," "SUMMARY--GENERAL--Plans for the Company After
the Merger," "SUMMARY--THE MERGER AGREEMENT--Source Of Funds," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Purpose and Structure of
the Merger; Certain Effects of the Merger," "SPECIAL FACTORS--Plans for the
Company After the Merger," "THE MERGER AGREEMENT--The Surviving Corporation,"
"DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PARENT, MERGER SUB AND THE
SURVIVING CORPORATION--Information Concerning Directors and Executive Officers
of the Surviving Corporation" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy
Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in "THE MERGER AGREEMENT--
Expenses" and "SOURCE OF FUNDS OF THE MERGER" of the Proxy Statement is
incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) and (c) The information set forth in "SUMMARY--GENERAL--
Certain Effects of the Merger," "SPECIAL FACTORS--Background of the Merger" and
"SPECIAL FACTORS--Purpose and Structure of the Merger; Certain Effects of the
Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS--Background
of the Merger" and "SPECIAL FACTORS--Purpose and Structure of the Merger;
Certain Effects of the Merger" of the Proxy Statement is incorporated herein by
reference.
<PAGE> 9
(d) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Plans for the Company After the Merger," "SUMMARY--GENERAL--
Certain Effects of the Merger," "SUMMARY--GENERAL--Conflicts of Interest,"
"SUMMARY--GENERAL--Federal Income Tax Consequences," "SPECIAL FACTORS--
Background of the Merger," "SPECIAL FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--Conflicts of Interest; Certain
Relationships," "SPECIAL FACTORS--Certain Federal Income Tax Consequences of the
Merger," "THE MERGER AGREEMENT--General," "THE MERGER AGREEMENT--The Surviving
Corporation," "THE MERGER AGREEMENT--Consideration to be Received by
Shareholders of the Company," "SOURCE OF FUNDS FOR THE MERGER," "SECURITY
OWNERSHIP OF THE COMPANY," "DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY,
PARENT, MERGER SUB AND THE SURVIVING CORPORATION--Information Concerning
Directors and Executive Officers of the Surviving Corporation" and EXHIBIT A--
"MERGER AGREEMENT" of the Proxy Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)--(b) The information set forth in "SUMMARY--GENERAL--
Determination of Special Committee; Recommendation of the Company's Board of
Directors" and "SPECIAL FACTORS--Recommendations of the Special Committee, the
Board, Parent, Merger Sub and Martin" of the Proxy Statement is incorporated
herein by reference.
(c) The information set forth in "INTRODUCTION--Voting Rights;
Vote Required for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required," "SUMMARY--THE MERGER AGREEMENT--Conditions to
Consummation of the Merger," "SPECIAL FACTORS--Purpose and Structure of the
Merger; Certain Effects of the Merger," "THE MERGER AGREEMENT--Conditions to
Consummation of the Merger" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy
Statement is incorporated herein by reference.
(d) The information set forth in "SUMMARY--GENERAL--Opinion of
Financial Advisor to Special Committee," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Opinion of Special Committee's Financial Advisor" and
EXHIBIT C--"OPINION OF J.C. BRADFORD & CO." of the Proxy Statement is
incorporated herein by reference.
(e) The information set forth in "SUMMARY--GENERAL--
Determination of Special Committee; Recommendation of Company's Board of
Directors," "SPECIAL FACTORS--Background of the Merger" and "SPECIAL FACTORS--
Recommendations of the Special Committee, the Board, Parent, Merger Sub and
Martin" of the Proxy Statement is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)--(c) The information set forth in "SUMMARY--GENERAL--
Opinion of Financial Advisor to Special Committee," "SUMMARY--GENERAL--Materials
Prepared by Parent's Advisor," "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Opinion of Special Committee's Financial Advisor,"
"SPECIAL FACTORS--Material Prepared by Parent's Advisor," EXHIBIT
C--"OPINION OF J.C. BRADFORD & CO." and EXHIBIT D--"FORM OF TAX OPINION OF
ALSTON & BIRD LLP" of the Proxy Statement is incorporated herein by reference.
<PAGE> 10
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Conflicts of Interest," "SPECIAL FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest; Certain Relationships," "CERTAIN
INFORMATION CONCERNING PARENT AND MERGER SUB" and "SECURITY OWNERSHIP OF THE
COMPANY" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "PURCHASES OF COMMON STOCK BY
CERTAIN PERSONS" of the Proxy Statement is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--Plans
for the Company After the Merger," "SUMMARY--GENERAL--Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--Purpose and
Structure of the Merger; Certain Effects of the Merger," "SPECIAL FACTORS--Plans
for the Company After the Merger," "SPECIAL FACTORS--Conflicts of Interest;
Certain Relationships," "CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB"
and "SECURITY OWNERSHIP OF THE COMPANY" of the Proxy Statement is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Conflicts of Interest," "SPECIAL FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger; Certain Effects of the Merger,"
"SPECIAL FACTORS--Conflicts of Interest; Certain Relationships," "THE MERGER
AGREEMENT--Consideration to be Received by Shareholders of the Company,"
"CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB," "SECURITY OWNERSHIP OF
THE COMPANY" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "SUMMARY--GENERAL--
Determination of Special Committee; Recommendation of Company's Board of
Directors," "SPECIAL FACTORS--Recommendations of the Special Committee, the
Board, Parent, Merger Sub and Martin" and "SECURITY OWNERSHIP OF THE
COMPANY" of the Proxy Statement is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Voting Rights;
Vote Required for Approval," "SUMMARY--THE MERGER AGREEMENT--Dissenters'
Rights," "SPECIAL FACTORS--Purpose and Structure of the Merger; Certain Effects
of the Merger," "DISSENTERS' RIGHTS" and EXHIBIT B--"CHAPTER 23 OF THE TENNESSEE
BUSINESS CORPORATION ACT" of the Proxy Statement is incorporated herein by
reference.
(b)--(c) Not applicable.
<PAGE> 11
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE," "SELECTED HISTORICAL FINANCIAL INFORMATION OF THE
COMPANY," "INDEPENDENT AUDITORS" AND "INDEX TO FINANCIAL STATEMENTS" of the
Proxy Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in "SUMMARY--GENERAL--Plans for
the Company After the Merger" and "SPECIAL FACTORS--Plans for the Company After
the Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION--Proxies" of
the Proxy Statement is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Proxy Statement is
incorporated herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Commitment Letter with Key Corporate Capital, Inc.
dated October 31, 1997.*
(a)(2) Commitment Letter with KeyCorp Real Estate Capital
Markets, Inc. dated November 3, 1997.*
(a)(3) Commitment Letter with KeyCorp Real Estate Capital
Markets, Inc. dated November 3, 1997.*
(a)(4) Commitment Letter with RSTW Partners III, L.P. dated
November 5, 1997.*
(b)(1) Opinion of J.C. Bradford & Co. (attached as Exhibit C
to the Proxy Statement).
(b)(2) J.C. Bradford & Co. Presentation to the Board of
Directors of the Company, dated October 31, 1997.*
(b)(3) William Blair & Company, L.L.C. Presentation to the
Board of Directors of the Company, dated September 8,
1997.
(c) Agreement and Plan of Merger dated as of November 3,
1997 among the Company, Parent, Merger Sub and Martin
(attached as Exhibit A to the Proxy Statement).
(d)(1) Preliminary Proxy Statement dated December __, 1997.
(d)(2) Notice of Special Meeting of Shareholders (included
in Proxy Statement).
(d)(3) Proxy Card.*
<PAGE> 12
(d)(4) Press Release issued by the Company on July 30,
1997.*
(d)(5) Press Release issued by the Company on November 4,
1997.*
(d)(6) Chairman's Letter to Shareholders (included in Proxy
Statement).
(e) Text of Chapter 23 of the Tennessee Business
Corporation Act (attached as Exhibit B to the Proxy
Statement).
(f) Not Applicable.
- ------------------
* Previously filed
<PAGE> 13
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete and
correct.
PLASTI-LINE, INC.
By: /s/ JAMES R. MARTIN
----------------------------------------
Name: James R. Martin
Title: Chairman of the Board and
Chief Executive Officer
December 16, 1997
<PAGE> 14
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete and
correct.
PL HOLDING CORP.
By: /s/ JAMES R. MARTIN
----------------------------------------
Name: James R. Martin
Title: Chairman of the Board and
President
December 16, 1997
<PAGE> 15
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete and
correct.
PL ACQUISITION CORP.
By: /s/ JAMES R. MARTIN
----------------------------------------
Name: James R. Martin
Title: Chairman of the Board and
President
December 16, 1997
<PAGE> 16
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete
and correct.
By:/s/ James R. Martin
------------------------
Name: James R. Martin
December 16, 1997
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
(a)(1) Commitment Letter with Key Corporate Capital, Inc. dated
October 31, 1997.*
(a)(2) Commitment Letter with KeyCorp Real Estate Capital Markets,
Inc. dated November 3, 1997.*
(a)(3) Commitment Letter with KeyCorp Real Estate Capital Markets,
Inc. dated November 3, 1997.*
(a)(4) Commitment Letter with RSTW Partners III, L.P. dated November
5, 1997.*
(b)(1) Opinion of J.C. Bradford & Co. (attached as Exhibit C to the
Proxy Statement).
(b)(2) J.C. Bradford & Co. Presentation to the Board of Directors of
the Company, dated October 31, 1997.*
(b)(3) William Blair & Company, L.L.C. Presentation to the Board of
Directors of the Company, dated September 8, 1997.
(c)(1) Agreement and Plan of Merger dated as of November 3, 1997
among the Company, Parent, Merger Sub and Martin (attached as
Exhibit A to the Proxy Statement).
(d)(1) Preliminary Proxy Statement dated December ___, 1997.
(d)(2) Notice of Special Meeting of Shareholders (included in Proxy
Statement).
(d)(3) Proxy Card.*
(d)(4) Press Release issued by the Company on July 30, 1997.*
(d)(5) Press Release issued by the Company on November 3, 1997.*
(d)(6) Chairman's letter to Shareholders (included in Proxy
Statement).
(e) Text of Chapter 23 of the Tennessee Business Corporation
Act (attached as Exhibit B to the Proxy Statement).
- ------------------
*Previously Filed.
<PAGE> 1
CORPORATE FINANCE
--
PROJECT VOLUNTEER
MATERIALS FOR DISCUSSION
SEPTEMBER 8, 1997
WILLIAM BLAIR & COMPANY
LIMITED LIABILITY COMPANY
<PAGE> 2
Table of Contents
I. Valuation Summary
II. Summary of Individual Valuation Analyses
III. Summary Historical Trading Data
IV. Valuation Summary
Appendix
A. Comparable M&A Analysis Detail
B. Comparable Company Analysis Detail
C. Discounted Cash Flow Analysis Detail
D. Historical Trading Data Detail
<PAGE> 3
<TABLE>
<CAPTION>
VALUATION SUMMARY
- ----------------------------------------------------------------------------------------------------------------------------------
IMPLIED VALUE RANGE PER SHARE
------------------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Comparable M&A Analysis - Majority Owner $42,989,825 - $49,310,927 $11.27 - $12.93
Comparable M&A Analysis - Related Industries $45,520,795 - $59,419,851 $11.94 - $15.58
Comparable M&A Analysis - Mergerstat Data $48,948,978 - $52,039,680 $12.83 - $13.65
Comparable Public Company Analysis $46,330,833 - $65,413,033 $12.15 - $17.15
Discounted Cash Flow Analysis $37,677,831 - $64,726,050 $ 9.88 - $16.97
-------------------------------------------------------------------------------------------------------
RANGE OF RANGES $37,677,831 - $65,413,033 $ 9.88 - $17.15
MEAN $51,545,432 $13.52
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
RANGE OF MEANS $44,293,653 - $58,181,908 $11.61 - $15.26
MEAN $51,237,780 $13.43
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
VALUATION SUMMARY
[graph depicting comparable and discount cash flow analyses valuation summaries]
<PAGE> 5
<TABLE>
<CAPTION>
VALUATION SUMMARY: COMPARABLE MERGER & ACQUISITION ANALYSIS - MAJORITY OWNER
- -----------------------------------------------------------------------------------------------------------------------------------
IMPLIED
COMPARABLE IMPLIED EQUITY
COMPANY VOLUNTEER EQUITY VALUE
PREMIUMS (1) DATA VALUE PER SHARE
-------------- ------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C>
Premium vs. 1 Week Prior to Announcement 12.-%23.5% $10.13 (2) $43,463 - $47,713 $11.40 - $12.51
Premium vs. 4 Weeks Prior to Announcement 7.-%28.6% $10.38 (3) $42,517 - $50,909 $11.15 - $13.35
---------------------------------------------------
MEAN $42,990 - $49,311 $11.27 - $12.93
---------------------------------------------------
</TABLE>
(1) Premium range is top of second quartile to bottom of third quartile
(2) The closing bid for Volunteer's stock on July 23, 1997
(3) The closing bid for Volunteer's stock on July 2, 1997
<PAGE> 6
<TABLE>
<CAPTION>
VALUATION SUMMARY: COMPARABLE MERGER & ACQUISITION ANALYSIS - RELATED INDUSTRIES
- -------------------------------------------------------------------------------------------------------------------
MEDIAN
COMPARABLE LESS
COMPANY MULTIPLES VOLUNTEER IMPLIED NET
PREMIUMS (1) DATA TOTAL VALUE DEBT
----------------- ----------- ---------------------- ------
<S> <C> <C> <C> <C>
Total Value/ LTM Revenue 0.5 - 0.6 $130,825 $ 65,413 - $78,495 $4,542
Total Value / LTM EBITDA 5.1 - 6.3 $ 9,298 $ 47,420 - $58,577 $4,542
Equity Value/ LTM Net Income 9.5 - 16.5 $ 3,658
Premium vs. 1 Week Prior to Announcement 16.9% - 36.2% $ 10.13 (2)
Premium vs. 4 Weeks Prior to Announcement 11.0% - 41.8% $ 10.38 (3)
<CAPTION>
IMPLIED
IMPLIED EQUITY
EQUITY VALUE
VALUE PER SHARE
------- ---------
<S> <C> <C>
Total Value/ LTM Revenue $60,871 - $73,953 $ 15.96 - $ 19.39
Total Value / LTM EBITDA $42,878 - $54,035 $ 11.24 - $ 14.17
Equity Value/ LTM Net Income $34,751 - $60,357 $ 9.11 - $ 15.83
Premium vs. 1 Week Prior to Announcement $45,163 - $52,619 $ 11.84 - $ 13.80
Premium vs. 4 Weeks Prior to Announcement $43,942 - $56,135 $ 11.52 - $ 14.72
-----------------------------------------------------------------
MEAN $45,521 - $59,420 $ 11.94 - $ 15.58
------------------------------------------------------------------
</TABLE>
(1) Premium range is top of second quartile to bottom of third quartile
(2) The closing bid for Volunteer's stock on July 23, 1997
(3) The closing bid for Volunteer's stock on July 2, 1997
<PAGE> 7
VALUATION SUMMARY:COMPARABLE MERGER & ACQUISITION ANALYSIS-MERGERSTAT
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
IMPLIED
PREMIUM TO PRICE VOLUNTEER IMPLIED VALUE
1 WEEK PRIOR TO ANN. DATE CALENDAR YEAR 1996 FIRST HALF OF 1997 DATA (1) VALUE PER SHARE
- ----------------------------- -------------------- --------------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
All mergers(median) 27.3% $10.13 $49,181 $12.90
All cash mergers(median) 26.7% $10.13 $48,949 $12.83
All miscellaneous manufacturing
mergers(mean) 34.7% $10.13 $52,040 $13.65
All mergers(median) 28.0% $10.13 $49,459 $12.97
All cash mergers(median) 27.4% $10.13 $49,235 $12.91
All miscellaneous manufacturing mergers NA
Range $48,949 - $52,040 $12.83 - $13.65
Mean of Range $50,494 $13.24
</TABLE>
(1) The closing bid for Volunteer's stock on July 23, 1997
<PAGE> 8
<TABLE>
<CAPTION>
VALUATION SUMMARY: COMPARABLE PUBLIC COMPANY ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
VOLUNTEER IMPLIED VOLUNTEER
TOTAL VALUE LESS VOLUNTEER EQUITY
COMPARABLE VOLUNTEER BASED ON COMPARABLE NET EQUITY VALUE
COMPANY MULTIPLE DATA MULTIPLES DEBT VALUE PER SHARE
----------------- ---------- ------------------- ------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
LTM P/E 10.0 - 16.0 $3,658 $36,580 - $58,528 $ 9.59 - $15.35
Calendar 1997 P/E 10.5 - 14.5 $4,873 $51,167 - $70,659 $13.42 - $18.53
Total Value/ LTM EBITDA 6.0 - 7.7 $9,298 $55,788 - $71,595 $4,542 $51,246 - $67,053 $13.44 - $17.58
----------------------------------------------
MEAN $46,331 - $65,413 $12.15 - $17.15
----------------------------------------------
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SUMMARY OF HISTORICAL ACTUAL VS. BUDGETED FINANCIAL RESULTS
- --------------------------------------------------------------------------------------------------------------------
1994 1995 1996
BUDGET ACTUAL VAR BUDGET ACTUAL VAR BUDGET ACTUAL VAR
------ ------ --- ------ ------ --- ------ ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenue $101,891 $78,162 -23.3% $97,697 $103,818 6.3% $123,404 $ 131,179 6.3%
Cost of Sales 82,015 62,936 78,722 85,114 101,206 107,956
-------- ------- ------- -------- -------- ---------
Gross Profit 19,876 15,226 -23.4% 18,975 18,704 -1.4% 22,198 23,223 4.6%
% of Total Rev 19.5% 19.5% 0.0% 19.4% 18.0% -1.4% 18.0% 17.7% -0.3%
SG&A 14,125 13,350 14,459 15,461 16,238 16,701
-------- ------- ------- ------- -------- ---------
Oper Profit 5,751 1,876 -67.4% 4,516 3,243 -28.2% 5,960 6,522 9.4%
% of Total Rev 5.6% 2.4% -3.2% 4.6% 3.1% -1.5% 4.8% 5.0% 0.1%
Pre-Tax 6,426 (5,236) -181.5% 4,502 2,202 -51.1% 4,922 4,930 0.2%
Net Income 3,835 (4,837) -226.1% 2,701 1,397 -48.3% 2,953 3,148 6.6%
EPS $ 0.73 $ 0.38 -47.9% $ 0.78 $ 0.83 6.4%
<CAPTION>
YEAR-TO-DATE YEAR-TO-DATE
JUNE 30, 1997 AUGUST 31, 1997
BUDGET ACTUAL VAR BUDGET ACTUAL VAR
------ ------ --- ------ ------ ---
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $74,548 $62,098 -16.7% $104,035 $ 80,204 -22.9%
Cost of Sales 61,113 50,956 85,200 66,256
------- ------- -------- --------
Gross Profit 13,435 11,142 -17.1% 18,834 13,948 -25.9%
% of Total Rev 18.0% 17.9% -0.1% 18.1% 17.4% -0.7%
SG&A 8,976 8,250 12,596 10,812
------- ------- -------- --------
Oper Profit 4,459 2,892 -35.1% 6,238 3,136 -49.7%
% of Total Rev 6.0% 4.7% -1.3% 6.0% 3.9% -2.1%
Pre-Tax 3,883 2,742 -29.4% 5,390 3,068 -43.1%
Net Income 2,311 1,645 -28.8% 3,234 1,841 -43.1%
EPS $ 0.61 $ 0.43 -29.5% $ 0.84 $ 0.48 -42.9%
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
COMPARISON OF YEAR-TO-DATE RESULTS VS. 1997 FORECAST
- --------------------------------------------------------------------------------------------------------------------------
PERFORMANCE ACTUAL
YTD REQUIRED FOR % OF TOTAL RESULTS FOR
PERFORMANCE 1997 LAST FOUR FORECAST % OF LAST FOUR % OF
THROUGH FULL YEAR MONTHS OF 1997 YET TO YEAR MONTHS OF TOTAL 1996
AUGUST, 1997 FORECAST TO MEET FORECAST DELIVER REMAINING 1996 RESULTS
------------- ------------ ---------------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue $80,204 $ 142,000 $61,796 43.5% 33.3% $46,951 35.8%
Cost of goods sold 66,256
-------
Gross Profit 13,948
SG&A 10,812
-------
Operating income $ 3,136 $ 8,848 $ 5,712 64.6% 33.3% $ 2,316 35.5%
Pre-tax income 3,068
Net income $ 1,841 $ 4,873 $ 3,032 62.2% 33.3% $ 1,522 48.3%
======= ========== ======= =======
Gross Profit Margin 17.4% 18.9%
SG&A/Rev 13.5% 14.0%
Operating Margin 3.9% 6.2% 9.2% 4.9%
Net Income Margin 2.3% 3.2%
<CAPTION>
REQUIRED
YR-OVER-YR ACTUAL
IMPROVEMENT YR-OVER-YR
IN PERFORMANCE COMPARISON
FOR LAST 4 MONTHS FOR FIRST
TO MEET FORECAST EIGHT MONTHS
---------------- ------------
<S> <C> <C>
Total revenue 31.6% - 3.7%
Cost of goods sold
Gross Profit
SG&A
Operating income 146.6% -17.9%
Pre-tax income
Net income 99.2% 13.2%
Gross Profit Margin
SG&A/Rev
Operating Margin
Net Income Margin
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
VALUATION SUMMARY: DISCOUNTED CASH FLOW ANALYSIS
- --------------------------------------------------------------------------------------------------------
IMPLIED VOLUNTEER IMPLIED VOLUNTEER
EQUITY VALUE EQUITY VALUE PER SHARE
-------------------------------------- ------------------------
<S> <C> <C> <C>
Management's Forecast $51,672,315 - $64,726,050 $13.55 - $16.97
Adjusted Budget $37,677,831 - $46,774,259 $ 9.88 - $12.26
---------------------------------------------- ------------------------
RANGE $37,677,831 - $64,726,050 $ 9.88 - $16.97
---------------------------------------------- ------------------------
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
TRADING SUMMARY SINCE FROM JULY 1, 1987 TO JULY 25, 1997(1)
- ------------------------------------------------------------------------------------------------------------------------
OF TOTAL
OF TOTAL SHARES TRADED
GREATER BUT CUMULATIVE SINCE 7/1/87, % TRADED
THAN OR LESS SHARES SHARES % TRADED IN AT OR BELOW HIGH
EQUAL TO THAN TRADED TRADED THIS RANGE END OF THIS RANGE
- ----------- ---------- ---------------- ------------------ ----------------------- -----------------------
<S> <C> <C> <C> <C> <C>
$ 3.00 $ 4.00 6,800 6,800 0.1% 0.1%
4.00 5.00 243,100 249,900 3.2% 3.3%
5.00 6.00 1,076,700 1,326,600 14.3% 17.6%
6.00 7.00 566,400 1,893,000 7.5% 25.1%
7.00 7.50 1,013,000 2,906,000 13.4% 38.5%
8.00 9.00 1,297,200 4,203,200 17.2% 55.7%
9.00 10.00 528,100 4,731,300 7.0% 62.7%
10.00 10.50 546,700 5,278,000 7.2% 69.9%
10.50 11.00 853,600 6,131,600 11.3% 81.2%
11.00 11.50 403,300 6,534,900 5.3% 86.5%
11.50 12.00 280,700 6,815,600 3.7% 90.3%
12.00 12.50 272,900 7,088,500 3.6% 93.9%
12.50 13.00 154,800 7,243,300 2.1% 95.9%
13.00 13.50 307,600 7,550,900 4.1% 100.0%
13.50 14.00 (3) -- 7,550,900 0.0% 100.0%
14.00 14.50 (3) -- 7,550,900 0.0% 100.0%
14.50 15.00 (3) -- 7,550,900 0.0% 100.0%
=========
7,550,900
</TABLE>
<TABLE>
<CAPTION>
% OF TOTAL COMMON % OF TOTAL COMMON
COMMON SHARES SHARES CURRENTLY
CURRENTLY OUTSTANDING TRADED
OUTSTANDING TRADED AT OR BELOW THE
IN THIS RANGE SINCE HIGH END OF THIS RANGE
7/1/87 (2) SINCE 7/1/87
-------------------------- -----------------------
<S> <C>
0.2% 0.2%
6.4% 6.6%
28.2% 34.8%
14.9% 49.6%
26.6% 76.2%
34.0% 110.2%
13.8% 124.1%
14.3% 138.4%
22.4% 160.8%
10.6% 171.3%
7.4% 178.7%
7.2% 185.9%
4.1% 189.9%
8.1% 198.0%
0.0% 198.0%
0.0% 198.0%
0.0% 198.0%
</TABLE>
(1) Source is Factset, which reports data as follows: all trades on a given day
are reported as if they occurred at the average of the highest and lowest price
of the day.
(2) Based on 3,813,797 shares outstanding. (The number of shares outstanding as
of May 14, 1997.)
(3) Based on daily trading data from Factset, there were 3 days in the last
year on which there was at least 1 trade at or above $13.50. Specifically, the
highest trades on October 8, 9, and 14 were $14.50, $14.50 and $13.50,
respectively. The number of shares that traded at these prices is unavailable
data.
<PAGE> 13
<TABLE>
<CAPTION>
VALUATION SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
TOTAL
TOTAL TOTAL EQUITY VALUE/
VALUE/ VALUE/ VALUE/ PROJECTED
TOTAL LTM LTM LTM 1997
SHARE PRICE EQUITY VALUE NET DEBT VALUE REVENUE EBITDA NET INCOME OPER. INCOME
----------- ------------ -------- ----- ------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$12.00 $45,765,564 $4,542,000 $50,307,564 .38 5.4 13.8 5.7
$12.25 $46,719,013 $4,542,000 $51,261,013 .39 5.5 14.0 5.8
$12.50 $47,672,463 $4,542,000 $52,214,463 .40 5.6 14.3 5.9
$12.75 $48,625,912 $4,542,000 $53,167,912 .41 5.7 14.5 6.0
$13.00 $49,579,361 $4,542,000 $54,121,361 .41 5.8 14.8 6.1
$13.25 $50,532,810 $4,542,000 $55,074,810 .42 5.9 15.1 6.2
- -----------------------------------------------------------------------------------------------------------------------------
$13.50 $51,486,260 $4,542,000 $56,028,260 .43 6.0 15.3 6.3
- -----------------------------------------------------------------------------------------------------------------------------
$13.75 $52,439,709 $4,542,000 $56,981,709 .44 6.1 15.6 6.4
$14.00 $53,393,158 $4,542,000 $57,935,158 .44 6.2 15.8 6.5
$14.25 $54,346,607 $4,542,000 $58,888,607 .45 6.3 16.1 6.7
$14.50 $55,300,057 $4,542,000 $59,842,057 .46 6.4 16.4 6.8
$14.75 $56,253,506 $4,542,000 $60,795,506 .46 6.5 16.6 6.9
$15.00 $57,206,955 $4,542,000 $61,748,955 .47 6.6 16.9 7.0
<CAPTION>
PREMIUM PREMIUM PREMIUM
TO PRICE TO PRICE TO PRICE
1 DAY 1 WEEK 4 WEEKS
PRIOR TO PRIOR TO PRIOR TO
ANNOUNCE ANNOUNCE ANNOUNCE
SHARE PRICE DATE DATE DATE
----------- ---- ---- ----
<S> <C> <C> <C>
$12.00 24.7% 18.5% 15.7%
$12.25 27.3% 21.0% 18.1%
$12.50 29.9% 23.5% 20.5%
$12.75 32.5% 25.9% 22.9%
$13.00 35.1% 28.4% 25.3%
$13.25 37.7% 30.9% 27.7%
- -------------------------------------------------------------------
$13.50 40.3% 33.3% 30.1%
- -------------------------------------------------------------------
$13.75 42.9% 35.8% 32.5%
$14.00 45.5% 38.3% 34.9%
$14.25 48.1% 40.7% 37.3%
$14.50 50.6% 43.2% 39.8%
$14.75 53.2% 45.7% 42.2%
$15.00 55.8% 48.1% 44.6%
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Acquisitions Since 7/1/93 of Companies in Related Industries
- ------------------------------------------------------------------------------------------------------------------------------------
Total Value $25-$250 million
Total
Date Value
Announced Target Name Target Business Description Acquiror Name ($mil)
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 201.7
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 145.1
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 164.9
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 106.4
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 209.3
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc 40.5
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 80.3
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 49.0
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 174.2
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 60.1
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 42.8
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 80.7
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 38.3
03/16/95 Amdura Corp Mnfr hardware FKI PLC 82.1
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 79.6
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 202.1
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 80.2
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 66.7
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 46.3
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 95.8
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc 82.5
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 126.6
All Companies in Run
----------------------------------------------
Mean 102.5
Median 81.4
----------------------------------------------
More Comparable Companies in Run (1)
----------------------------------------------
Mean 83.2
Median 64.3
----------------------------------------------
<CAPTION>
Equity
Date Value
Announced Target Name Target Business Description Acquiror Name ($mil)
===============================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 123.7
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 136.6
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 168.7
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 48.7
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 58.2
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc 36.1
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 48.0
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 36.7
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 143.6
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 37.7
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 13.1
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 62.8
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 36.8
03/16/95 Amdura Corp Mnfr hardware FKI PLC 58.2
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 47.3
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 159.7
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 53.4
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 29.8
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 52.2
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 98.1
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc 22.8
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 54.6
All Companies in Run
--------------------------------------
Mean 69.4
Median 52.8
--------------------------------------
More Comparable Companies in Run (1)
--------------------------------------
Mean 52.6
Median 49.8
--------------------------------------
<CAPTION>
Target
LTM
Date Sales
Announced Target Name Target Business Description Acquiror Name ($mil)
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 159.0
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 303.1
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 124.8
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 161.9
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 417.7
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc -
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 51.5
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 74.2
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 196.1
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 167.3
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 107.5
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 41.7
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 66.9
03/16/95 Amdura Corp Mnfr hardware FKI PLC 136.0
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 120.5
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 352.7
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 161.2
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 96.1
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 59.5
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 82.3
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc 143.0
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 235.1
All Companies in Run
----------------------------------------------
Mean 155.1
Median 136.0
----------------------------------------------
More Comparable Companies in Run (1)
----------------------------------------------
Mean 153.3
Median 114.0
----------------------------------------------
<CAPTION>
Total
Value/
Date Target
Announced Target Name Target Business Description Acquiror Name LTM Sales
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 1.27
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 0.48
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 1.32
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 0.66
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 0.50
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc np
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 1.56
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 0.66
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 0.89
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 0.36
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 0.40
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 1.93
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 0.57
03/16/95 Amdura Corp Mnfr hardware FKI PLC 0.60
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 0.66
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 0.57
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 0.50
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 0.69
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 0.78
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 1.16
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc 0.58
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 0.54
All Companies in Run
-------------------------------------------
Mean 0.79
Median 0.66
-------------------------------------------
More Comparable Companies in Run (1)
-------------------------------------------
Mean 0.58
Median 0.59
-------------------------------------------
<CAPTION>
Total
Value/
Date Target LTM
Announced Target Name Target Business Description Acquiror Name EBITDA
==================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 7.3
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 4.6
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 8.4
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp nm
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd nmf
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc np
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp nmf
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 5.2
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 6.3
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 6.1
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 6.3
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 8.2
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 5.1
03/16/95 Amdura Corp Mnfr hardware FKI PLC 8.4
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 5.5
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 8.3
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 12.2
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 6.4
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 5.8
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 13.1
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc 4.5
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 6.9
All Companies in Run
---------------------------------------------
Mean 7.2
Median 6.4
---------------------------------------------
More Comparable Companies in Run (1)
---------------------------------------------
Mean 6.0
Median 5.6
---------------------------------------------
<CAPTION>
Value/
Target
Date LTM Net
Announced Target Name Target Business Description Acquiror Name Income
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 15.8 %
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 8.6
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 17.6
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp nm
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd nm
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc np
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 14.8
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 6.1
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 9.6
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 7.2
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 33.2
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 15.9
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 16.5
03/16/95 Amdura Corp Mnfr hardware FKI PLC 63.4
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 9.5
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 8.9
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc np
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc nm
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 14.2
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co 31.3
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc nm
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 27.2
All Companies in Run
---------------------------------------------
Mean 18.7
Median 15.3
---------------------------------------------
More Comparable Companies in Run (1)
---------------------------------------------
Mean 22.2
Median 14.2
---------------------------------------------
<CAPTION>
Premium
1 week
Date prior to
Announced Target Name Target Business Description Acquiror Name ann. date
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 16.9 %
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 25.0
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 30.3
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 6.1
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 38.2
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc 53.0
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 31.6
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 8.0
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 36.8
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 24.6
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 28.5
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 36.2
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 24.2
03/16/95 Amdura Corp Mnfr hardware FKI PLC 15.0
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 6.0
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 34.9
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 44.0
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 4.1
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 17.7
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 44.7
All Companies in Run
-----------------------------------------------
Mean 26.3 %
Median 26.8 %
-----------------------------------------------
More Comparable Companies in Run (1)
-----------------------------------------------
Mean 19.7 %
Median 17.7 %
-----------------------------------------------
<CAPTION>
Premium
4 weeks
Date prior to
Announced Target Name Target Business Description Acquiror Name ann. date
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 30.4
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp 9.9
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp 20.6
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp 11.1
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd 41.8
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc 80.0
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp 32.5
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) 5.0
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp 35.1
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) 22.6
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc 41.3
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc 59.2
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group 36.7
03/16/95 Amdura Corp Mnfr hardware FKI PLC 2.2
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 4.8
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp 80.9
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc 44.0
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc 10.9
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp 17.7
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp 44.7
All Companies in Run
---------------------------------------------
Mean 31.6 %
Median 31.5 %
---------------------------------------------
More Comparable Companies in Run (1)
---------------------------------------------
Mean 21.4 %
Median 17.7 %
---------------------------------------------
<CAPTION>
Acquiror
Date Includes
Announced Target Name Target Business Description Acquiror Name Mgmt
====================================================================================================================================
<S> <C> <C> <C> <C>
04/10/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) No
11/18/96 Sudbury Inc Mnfr automotive parts Intermet Corp No
06/14/96 Brenco Inc Ball and roller bearings Varlen Corp No
06/10/96 Bailey Corp Manufacture rubber products Vemco Acquisition Corp No
05/15/96 Carlisle Plastics Inc Mnfr,whl plastic prods,resins Tyco International Ltd No
03/13/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc No
12/07/95 Rauch Industries Inc Manufacture glass products Syratech Corp No
11/08/95 Dolco Packaging Corp Mnfr packaging,shipping prods Packaging Acq(MST Part,MST Of) No
09/26/95 Larizza Industries Inc Mnfr vehicle components Collins & Aikman Corp No
09/18/95 Bliss & Laughlin Industries Mnfr steel and steel products BRW (Veritas Capital Corp) No
08/29/95 American Consumer Products Inc Mnfr consumer hardware prods Vista 2000 Inc No
08/14/95 Wedco Technology Inc Mnfr plastic products ICO Inc No
06/20/95 Marietta Corp Mnfr,wholesale toiletries Investor Group No
03/16/95 Amdura Corp Mnfr hardware FKI PLC No
03/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd No
11/08/94 Trico Products Corp Mnfr motor vehicle parts Stant Corp No
10/26/94 RB&W Corp Mnfr,wholesale fasteners Park-Ohio Industries Inc No
09/27/94 Revell-Monogram Inc Manufacture games and toys Hallmark Cards Inc No
07/01/94 Lincoln Foodservice Products Mnfr food service equipment Welbilt Corp No
01/03/94 Mark Controls Corp Mnfr valves,bldg control sys Crane Co No
09/10/93 Dyneer Corp Mnfr industrial tires Titan Wheel International Inc No
08/02/93 American Steel & Wire Corp Mnfr steel products Birmingham Steel Corp No
</TABLE>
(1) The companies that were used to generate these numbers were: Carlisle
Plastics, Inc., Dolco Packaging Corp., American Consumer Products, Inc.,
Marietta Corp., Amdura Corp., Ropak Corp., and Lincoln Food Service
Products.
<PAGE> 15
<TABLE>
<CAPTION>
Acquisitions of Manufacturers Since 7/1/93 in which the Acquiror Owned 50% or More of the Target Pre-Transaction
- --------------------------------------------------------------------------------------------------------------------------------
Total Value Greater than $25 million
Total
Date Value
Announced Target Name Target Business Description Acquiror Name ($mil)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 980.3
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA np
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 437.2
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp np
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 401.6
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 906.1
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 79.6
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 357.6
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 1,707.1
-----------------------------------------
Mean 695.6
Median 437.2
-----------------------------------------
<CAPTION>
Equity
Date Value
Announced Target Name Target Business Description Acquiror Name ($mil)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 778.5
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA 70.6
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 364.0
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp np
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 389.7
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 954.1
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 47.3
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 77.8
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 1,035.3
-----------------------------------------
Mean 464.7
Median 376.9
-----------------------------------------
<CAPTION>
Target
LTM
Date Sales
Announced Target Name Target Business Description Acquiror Name ($mil)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 296.2
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA na
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 597.5
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp na
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 4.7
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 475.1
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 120.5
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 763.5
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 968.4
-----------------------------------------
Mean 460.8
Median 475.1
-----------------------------------------
<CAPTION>
Total
Value/
Date Target
Announced Target Name Target Business Description Acquiror Name LTM Sales
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 3.3
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA np
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 0.7
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp np
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 86.1
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 1.9
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 0.7
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 0.5
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 1.8
-----------------------------------------
Mean 13.6
Median 1.8
-----------------------------------------
<CAPTION>
Total
Value/
Date Target
Announced Target Name Target Business Description Acquiror Name EBITDA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 12.2
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA np
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 9.0
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp np
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG nm
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 8.2
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 5.5
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 16.3
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 15.7
-----------------------------------------
Mean 11.1
Median 10.6
-----------------------------------------
<CAPTION>
Equity
Value/
Date LTM Net
Announced Target Name Target Business Description Acquiror Name Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 6.5
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA np
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 115.5
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp np
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG nm
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 18.5
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 9.5
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC nm
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus nm
-----------------------------------------
Mean 37.5
Median 14.0
-----------------------------------------
<CAPTION>
Premium
1 week
Date prior to
Announced Target Name Target Business Description Acquiror Name ann. date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 23.5%
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA 3.6
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 29.0
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp na
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 69.6
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 12.5
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 6.0
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 21.5
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 15.5
-----------------------------------------
Mean 22.6%
Median 18.5%
-----------------------------------------
<CAPTION>
Premium
4 weeks
Date prior to
Announced Target Name Target Business Description Acquiror Name ann. date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/21/97 Mafco Consolidated Grp(Mafco) Mnfr cosmetics,beauty products Mafco Holdings Inc 27.6%
11/6/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA 0.0
10/10/96 WCI Steel Inc(Renco Group Inc) Manufacture steel Renco Group Inc 77.8
7/26/96 American Safety Closure Corp Mnfr plastic bottle caps Seda Specialty Packaging Corp na
5/27/96 SyStemix Inc(Novartis AG) Mnfr,dvlp cellular processes Novartis AG 59.2
5/19/95 Bic Corp(BIC SA) Mnfr writing instruments BIC SA 28.6
3/15/95 Ropak Corp Manufacture plastic containers LinPac Mouldings Ltd 4.8
5/5/94 General Cable(Cie Gen de Eaux) Mnfr copper,building wire Wassall PLC 11.6
1/7/94 Holnam Inc(Holdernam Inc) Manufacture cement;holding co Holderbank Financiere Glarus 7.4
-----------------------------------------
Mean 27.1%
Median 19.6%
-----------------------------------------
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Summary Market Statistics
Priced as of 9/04/97
=====================================================================================================================
Price / Earnings Ratio
Stock Price ---------------------------------------
------------------------------- Most EPS
52 Week Recent CAGR
Low High 9/4/97 FY LTM Cal. 97E. Cal. 98E. Last 3 yrs.
--------- ------- ------- ------ ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DAKTRONICS INC $ 3.50 -- $ 6.63 $ 5.25 15.0x 15.0x 10.5x NA NMF
FALCON PRODUCTS INC 12.75 -- 16.00 14.00 16.3 16.3 14.7 12.0 19.5%
HMG WORLDWIDE CORP 0.88 -- 1.88 1.50 NMF NMF NA NA NMF
LANCER CORP/TX 8.33 -- 17.63 16.38 17.4 16.4 17.6 16.2 33.3%
LSI INDS INC 9.50 -- 17.75 15.25 15.6 16.2 14.1 11.3 62.1%
SPECIALTY EQUIPMENT COS INC 10.25 -- 15.25 15.88 10.0 9.7 NA NA NMF
STANDEX INTERNATIONAL CORP 24.50 -- 32.13 32.00 14.5 16.3 14.9 13.1 14.3%
TRANS-INDUSTRIES INC 4.63 -- 9.50 9.38 16.8 13.0 NA NA NMF
ZIMMERMAN SIGN CO 2.25 -- 4.50 3.58 5.8 10.2 NA NA -10.0%
- --------------------------------------------------------------------------------------------------------------------
Average 13.9x 14.1x 14.4x 13.1 32.3%
Median 15.3 15.6 14.7 12.5 26.4%
- --------------------------------------------------------------------------------------------------------------------
VOLUNTEER (2) $ 7.50 -- $14.50 $9.63 11.6x 10.9x 7.7x 7.0 2.5%
<CAPTION>
Cal. 97E P/E / Total Value /
Long Term Long-Term Mkt Prc / ----------------------------
EPS Growth EPS Growth Book Value LTM LTM Oper LTM LTM
Rate Rate Per Share Sales Income EBITDA Sales(MM)
-------- --------- ----------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
DAKTRONICS INC NA NA 1.0x 0.4x 11.0x 6.0x $ 62.6
FALCON PRODUCTS INC 20.0% 59.8% 1.9 1.1 10.1 7.7 118.1
HMG WORLDWIDE CORP NA NA 2.2 0.4 NMF NMF 43.9
LANCER CORP/TX NA NA 3.5 1.5 14.7 12.1 115.7
LSI INDS INC 25.0% 45.2% 2.3 0.9 9.4 7.7 143.1
SPECIALTY EQUIPMENT COS IN NA NA -4.6 1.0 6.9 6.2 405.2
STANDEX INTERNATIONAL CORP 10.0% 130.6% 3.0 1.0 10.3 8.3 560.7
TRANS-INDUSTRIES INC NA NA 3.5 1.1 9.1 7.6 32.7
ZIMMERMAN SIGN CO NA NA -0.7 0.8 8.9 7.6 43.1
- ------------------------------------------------------------------------------------------------------------------------
Average 18.3% 78.5% 1.4x 0.9x 10.1x 7.9x $169.5
Median 20.0% 59.8% 2.2 1.0 9.7 7.7 115.7
- ------------------------------------------------------------------------------------------------------------------------
VOLUNTEER 17.0%(1) 41.0% 1.3x 0.3x 6.3x 4.7x $129.6
<CAPTION>
MKT LTM
Cap. (MM) ENDED
--------- -----
<S> <C> <C>
DAKTRONICS INC $ 22.6 04/97
FALCON PRODUCTS INC 135.8 05/97
HMG WORLDWIDE CORP 13.0 06/97
LANCER CORP/TX 145.7 06/97
LSI INDS INC 137.6 03/97
SPECIALTY EQUIPMENT COS IN 287.4 04/97
STANDEX INTERNATIONAL CORP 425.2 03/97
TRANS-INDUSTRIES INC 28.8 06/97
ZIMMERMAN SIGN CO 6.6 06/97
- ---------------------------------------------------------
Average $133.6
Median 135.8
- ---------------------------------------------------------
VOLUNTEER $ 36.7 03/97
LTM = Latest Twelve Months. CAGR = Compounded Annual Growth Rate. NA = Not Available. NMF = Not Meaningful
(1) Average projected growth rate for next three years based on managment's target case projections.
(2) Volunteer is the closing bid price on the day before the announcement.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Summary Operating Statistics
- --------------------------------------------------------------------------------------------------------------------------
Gross Profit as a Operating Income as a Net Income as a
% of Sales % of Sales % of Sales 3 YR CAGR
--------------------- ----------------------- -------------------- ---------------------
LTM 4 YR Avg LTM 4 YR Avg LTM 4 YR Avg Sales Net Inc
------- ----------- ----------- ---------- -------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DAKTRONICS INC 25.2% 25.2% 4.0% 3.5% 2.4% 2.3% 15.1% -8.6%
FALCON PRODUCTS INC 31.0% 32.9% 11.4% 12.3% 7.2% 7.7% 20.8% 23.8%
HMG WORLDWIDE CORP 20.0% 22.6% -8.1% -7.1% -9.0% -8.4% 30.8% 118.9%
LANCER CORP/TX 24.5% 20.9% 9.9% 7.7% 5.6% 4.7% 21.8% 38.2%
LSI INDS INC 33.7% 32.4% 9.3% 7.1% 6.0% 4.1% 28.2% 59.5%
SPECIALTY EQUIPMENT COS INC 30.2% 31.2% 15.1% 2.4% 8.7% -5.5% 7.7% NMF
STANDEX INTERNATIONAL CORP 34.5% 34.6% 9.3% 9.6% 4.7% 5.3% 3.7% 8.6%
TRANS-INDUSTRIES INC 36.5% 29.8% 11.7% 5.1% 6.8% 1.2% 5.4% NMF
ZIMMERMAN SIGN CO 21.9% 21.7% 8.6% 9.3% 1.5% 4.7% 7.7% -8.2%
- -----------------------------------------------------------------------------------------------------------------------
Average 28.6% 27.9% 7.9% 5.6% 3.8% 1.8% 15.7% 33.1%
Median 30.2% 29.8% 9.3% 7.1% 5.6% 4.1% 15.1% 23.8%
- -----------------------------------------------------------------------------------------------------------------------
VOLUNTEER 18.0% 18.3% 5.1% 4.2% 2.6% 1.5% 12.9% 3.3%
</TABLE>
<TABLE>
<CAPTION>
Return on
Return on Average Common Equity / Total Debt / Net Debt /
Average Assets Common Equity Capitalization Capitalization Net Capitalization
--------------- ------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
DAKTRONICS INC 4.0% 7.2% 81.0% 19.0% 18.6%
FALCON PRODUCTS INC 10.5% 13.3% 98.1% 1.9% -0.3%
HMG WORLDWIDE CORP -18.0% -72.5% 32.5% 67.5% 47.2%
LANCER CORP/TX 8.2% 16.8% 62.4% 37.6% 34.9%
LSI INDS INC 9.5% 16.1% 97.5% 2.5% -27.5%
SPECIALTY EQUIPMENT COS INC 19.1% -38.2% -68.4% 168.4% 189.5%
STANDEX INTERNATIONAL CORP 9.1% 23.0% 54.6% 45.4% 43.8%
TRANS-INDUSTRIES INC 9.4% 28.7% 55.8% 44.2% 43.2%
ZIMMERMAN SIGN CO 4.2% -195.8% -51.1% 151.1% 151.1%
- -------------------------------------------------------------------------------------------------------------------
Average 6.2% -22.4% 40.3% 59.7% 55.6%
Median 9.1% 13.3% 55.8% 44.2% 43.2%
- -------------------------------------------------------------------------------------------------------------------
VOLUNTEER 4.4% 12.3% 84.7% 15.3% 15.3%
</TABLE>
LTM = Latest Twelve Months, CAGR = Compounded Annual Growth Rate, NA = Not
Available, NMF = Not Meaningful
<PAGE> 18
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Company Name VOLUNTEER DAKTRONICS INC FALCON PRODUCTS INC HMG WORLDWIDE CORP LANCER CORP/TX
--------------------- --------------- ------------------- -------------------- ----------------
Fiscal Year End 12/96 04/97 10/96 12/96 12/96
Interim Period End 03/97 04/97 05/97 06/97 06/97
Ticker Symbol --
(Exchange) (OTC) DAKT (OTC) FCP (NYSE) HMGC (OTC) LAN (AMEX)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales
LTM $129,590 $62,640 $118,105 $43,856 $115,721
Most Recent FY 131,179 12/96 62,640 04/97 111,040 10/96 45,552 12/96 102,308 12/96
FY - 1 103,818 12/95 52,507 04/96 90,036 10/95 47,641 12/95 75,912 12/95
FY - 2 78,162 12/94 41,947 04/95 77,834 10/94 55,578 12/94 70,900 12/94
FY - 3 91,113 12/93 41,102 04/94 62,957 10/93 20,375 12/93 56,661 12/93
Gross Profit
LTM 23,288 18.0% 15,782 25.2% 36,624 31.0% 8,772 20.0% 28,337 24.5%
Most Recent FY 23,223 17.7% 15,782 25.2% 35,585 32.0% 7,963 17.5% 24,554 24.0%
FY - 1 18,704 18.0% 11,210 21.3% 30,877 34.3% 9,162 19.2% 16,075 21.2%
FY - 2 15,102 19.3% 11,212 26.7% 25,899 33.3% 14,431 26.0% 14,193 20.0%
FY - 3 16,680 18.3% 11,300 27.5% 20,184 32.1% 5,620 27.6% 10,482 18.5%
Operating Income
LTM 6,622 5.1% 2,501 4.0% 13,458 11.4% (3,566) -8.1% 11,472 9.9%
Most Recent FY 6,522 5.0% 2,501 4.0% 13,417 12.1% (5,040) -11.1% 10,120 9.9%
FY - 1 3,725 (1) 3.6% (319) -0.6% 11,818 13.1% (6,834)(1) -14.3% 6,195 8.2%
FY - 2 1,753 (2) 2.2% 1,210 2.9% 9,655 12.4% (795) -1.4% 4,954 7.0%
FY - 3 5,327 5.8% 3,220 7.8% 7,253 11.5% (290) -1.4% 3,325 5.9%
Pre-Tax Income
LTM 5,296 4.1% 2,493 4.0% 13,696 11.6% (3,924) -8.9% 10,176 8.8%
Most Recent FY 4,929 3.8% 2,493 4.0% 13,601 12.2% (5,523) -12.1% 9,148 8.9%
FY - 1 2,685 (1) 2.6% (365) -0.7% 11,915 13.2% (6,929)(1) -14.5% 6,703 8.8%
FY - 2 1,041 (2) 1.3% 1,527 3.6% 9,804 12.6% (950) -1.7% 4,552 6.4%
FY - 3 4,643 5.1% 3,181 7.7% 7,030 11.2% (479) -2.4% 3,590 6.3%
Net Income
LTM 3,353 2.6% 1,508 2.4% 8,492 7.2% (3,935) -9.0% 6,458 5.6%
Most Recent FY 3,148 2.4% 1,508 2.4% 8,433 7.6% (5,535) -12.2% 5,733 5.6%
FY - 1 1,687 (1) 1.6% (215) -0.4% 7,457 8.3% (8,213)(1) -17.2% 4,091 5.4%
FY - 2 (995)(2) -1.3% 967 2.3% 6,176 7.9% (963) -1.7% 2,951 4.2%
FY - 3 2,854 3.1% 1,976 4.8% 4,447 7.1% (528) -2.6% 2,174 3.8%
EBITDA
LTM $8,965 6.9% $4,579 7.3% $17,537 14.8% ($2,683) -6.1% $13,920 12.0%
Most Recent FY 8,784 6.7% 4,579 7.3% 17,407 15.7% (4,184) -9.2% 12,565 12.3%
FY - 1 5,435 5.2% 1,511 2.9% 15,224 16.9% (5,551) -11.7% 8,347 11.0%
FY - 2 3,628 4.6% 2,781 6.6% 12,423 16.0% 461 0.8% 6,798 9.6%
FY - 3 6,969 7.6% 4,707 11.5% 9,414 15.0% 154 0.8% 4,938 8.7%
3 YR CAGR
Revenues 12.9% 15.1% 20.8% 30.8% 21.8%
Operating Income 7.0% -8.1% 22.8% 159.0% 44.9%
Net Income 3.3% -8.6% 23.8% 118.9% 38.2%
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Company Name VOLUNTEER DAKTRONICS INC FALCON PRODUCTS INC
------------------- ------------------- --------------------
Balance Sheet Date 03/97 04/97 05/97
<S> <C> <C> <C> <C> <C> <C>
Assets :
Cash & Equivalents 10 0.0% 118 0.3% 1,542 1.8%
Other Current Assets 44,941 75.0% 23,551 63.4% 43,714 51.5%
Net Plant 13,248 22.1% 7,447 20.1% 26,363 31.1%
Other Assets 1,700 2.8% 6,020 16.2% 13,190 15.6%
------- ----- ------- ------ ------- -----
Total Assets 59,899 100.0% 37,136 100.0% 84,809 100.0%
Liabilities & Equity :
Current Debt 745 1.2% 3,388 9.1% 947 1.1%
Other Current Liabilities 25,699 42.9% 9,358 25.2% 10,687 12.6%
Long Term Debt 4,297 7.2% 1,706 4.6% 389 0.5%
Other Liabilities 1,273 2.1% 934 2.5% 2,928 3.5%
Preferred Equity 0 0.0% 0 0.0% 0 0.0%
Common Equity 27,885 46.6% 21,750 58.6% 69,858 82.4%
------- ----- ------- ------ ------- -----
Total Liabilities & Equity 59,899 100.0% 37,136 100.0% 84,809 100.0%
Total Debt / Capitalization (a) 15.3% 19.0% 1.9%
Common Equity / Capitalization (b) 84.7% 81.0% 98.1%
Net Debt / Net Capitalization (c) 15.3% 18.6% -0.3%
Return on Avg. Assets (d) 4.4% 4.0% 10.5%
Return on Avg. Common Equity (e) 12.3% 7.2% 13.3%
Stock Price on 9/04/97 $9.63 $5.25 $14.00
LTM Price Range $7.50 -- $14.50 $3.50 -- $6.63 $12.75 -- $16.00
Shares Outstanding 3,814 4,306 9,701
Market Capitalization $36,708 $22,607 $135,814
Earnings Per Share EPS P/E EPS P/E EPS P/E
------- ----- ------- ------ ------- -----
Cal. 98 Est. $1.38 (3) 7.0 x NA NA $1.17 12.0 x
Cal. 97 Est. 1.25 (3) 7.7 0.50 10.5 0.95 14.7
LTM 0.88 10.9 03/97 0.35 15.0 04/97 0.86 16.3 05/97
Most Recent FY 0.83 11.6 12/96 0.35 15.0 04/97 0.86 16.3 10/96
Est. Long Term E.P.S. Growth Rate 17.0% NA 20.0%
Cal. 97E P/E / Est. E.P.S. Grwth Rate 41.0% NA 59.8%
Total Value / (f)
LTM Sales 0.32 0.44 1.15
LTM Operating Income 6.30 11.03 10.08
LTM EBITDA 4.66 6.02 7.73
Book Value Per Share $7.31 $5.05 $7.20
Market Value/ Book Value Per Share 1.32 1.04 1.94
Dividend $0.00 $0.00 $0.14
Dividend Yield 0.0% 0.0% 1.1%
Analyst MBG MBG MBG
<CAPTION>
Company Name HMG WORLDWIDE CORP LANCER CORP/TX
------------------- --------------------
Balance Sheet Date 06/97 06/97
<S> <C> <C> <C> <C>
Assets :
Cash & Equivalents 6,913 22.3% 2,735 2.5%
Other Current Assets 13,573 43.8% 66,954 60.9%
Net Plant 3,370 10.9% 30,503 27.8%
Other Assets 7,159 23.1% 9,722 8.8%
------ ----- ------- -----
Total Assets 31,015 100.0% 109,915 100.0%
Liabilities & Equity :
Current Debt 12,120 39.1% 3,270 3.0%
Other Current Liabilities 10,878 35.1% 38,250 34.8%
Long Term Debt 0 0.0% 22,104 20.1%
Other Liabilities 2,186 7.0% 4,131 3.8%
Preferred Equity 0 0.0% 0 0.0%
Common Equity 5,831 18.8% 42,159 38.4%
------ ----- ------- -----
Total Liabilities & Equity 31,015 100.0% 109,915 100.0%
Total Debt / Capitalization (a) 67.5% 37.6%
Common Equity / Capitalization (b) 32.5% 62.4%
Net Debt / Net Capitalization (c) 47.2% 34.9%
Return on Avg. Assets (d) -18.0% 8.2%
Return on Avg. Common Equity (e) -72.5% 16.8%
Stock Price on 9/04/97 $1.50 $16.38
LTM Price Range $0.88 -- $1.88 $8.33 -- $17.63
Shares Outstanding 8,664 8,896
Market Capitalization $12,996 $145,713
Earnings Per Share EPS P/E EPS P/E
------ ----- ------- -----
Cal. 98 Est. NA NA $1.01 16.2 x
Cal. 97 Est. NA NA 0.93 17.6
LTM (0.53) NMF 06/97 1.00 16.4 06/97
Most Recent FY (0.73) NMF 12/96 0.94 17.4 12/96
Est. Long Term E.P.S. Growth Rate NA NA
Cal. 97E P/E / Est. E.P.S. Grwth Rate NA NA
Total Value / (f)
LTM Sales 0.42 1.45
LTM Operating Income NMF 14.67
LTM EBITDA NMF 12.09
Book Value Per Share $0.67 $4.74
Market Value/ Book Value Per Share 2.23 3.46
Dividend $0.00 $0.00
Dividend Yield 0.0% 0.0%
Analyst MBG PESC
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Company Name LSI INDS INC SPECIALTY EQUIPMENT COS INC STANDEX INTERNATIONAL CORP
----------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year End 06/96 01/97 06/96
Interim Period End 03/97 04/97 03/97
Ticker Symbol -- (Exchange) LYTS (OTC) SPEQ (OTC) SXI (NYSE)
Net Sales
LTM $143,055 $405,167 $560,735
Most Recent FY 152,733 06/96 401,230 01/97 564,437 06/96
FY - 1 119,927 06/95 392,512 01/96 570,400 06/95
FY - 2 93,535 06/94 371,730 01/95 530,629 06/94
FY - 3 72,563 06/93 320,873 01/94 506,312 06/93
Gross Profit
LTM 48,156 33.7% 122,399 30.2% 193,522 34.5%
Most Recent FY 48,512 31.8% 122,110 30.4% 196,696 34.8%
FY - 1 39,771 33.2% 123,747 31.5% 203,281 35.6%
FY - 2 31,105 33.3% 119,273 32.1% 184,138 34.7%
FY - 3 22,774 31.4% 98,981 30.8% 168,309 33.2%
Operating Income
LTM 13,265 9.3% 61,064 15.1% 51,900 9.3%
Most Recent FY 13,411 8.8% 60,723 15.1% 58,051 10.3%
FY - 1 10,262 8.6% 39,379 10.0% 60,744 (1) 10.6%
FY - 2 7,140 7.6% (18,311) -4.9% 47,681 (1) 9.0%
FY - 3 2,618 3.6% (34,219) -10.7% 43,047 8.5%
Pre-Tax Income
LTM 13,572 9.5% 43,213 10.7% 42,333 7.5%
Most Recent FY 13,005 8.5% 42,009 10.5% 48,124 8.5%
FY - 1 9,643 8.0% 18,369 4.7% 52,377 (1) 9.2%
FY - 2 6,651 7.1% (41,308) -11.1% 42,174 (1) 7.9%
FY - 3 2,596 3.6% (51,336) -16.0% 37,450 7.4%
Net Income
LTM 8,558 6.0% 35,258 8.7% 26,503 4.7%
Most Recent FY 6,770 4.4% 34,122 8.5% 30,714 5.4%
FY - 1 6,174 5.1% 8,911 2.3% 35,064 (1) 6.1%
FY - 2 4,190 4.5% (53,996) -14.5% 26,860 (1) 5.1%
FY - 3 1,669 2.3% (58,420) -18.2% 24,011 4.7%
EBITDA
LTM $16,131 11.3% $68,035 16.8% $ 64,757 11.5%
Most Recent FY 15,867 10.4% 67,642 16.9% 70,548 12.5%
FY - 1 12,336 10.3% 66,102 16.8% 73,100 12.8%
FY - 2 8,934 9.6% 60,629 16.3% 60,159 11.3%
FY - 3 4,349 6.0% 45,537 14.2% 55,917 11.0%
3 YR CAGR
Revenues 28.2% 7.7% 3.7%
Operating Income 72.4% NMF 10.5%
Net Income 59.5% NMF 8.6%
<CAPTION>
Company Name TRANS-INDUSTRIES INC ZIMMERMAN SIGN CO
--------------------------- ----------------------
<S> <C> <C> <C> <C>
Fiscal Year End 12/96 12/96
Interim Period End 06/97 06/97
Ticker Symbol -- (Exchange) TRNI (OTC) ZSCO (OTC US)
Net Sales
LTM $32,683 $43,104
Most Recent FY 29,920 12/96 41,275 12/96
FY - 1 24,934 12/95 41,667 12/95
FY - 2 23,202 12/94 36,427 12/94
FY - 3 25,572 12/93 33,001 12/93
Gross Profit
LTM 11,923 36.5% 9,425 21.9%
Most Recent FY 10,912 36.5% 8,860 21.5%
FY - 1 7,825 31.4% 9,137 21.9%
FY - 2 6,587 28.4% 8,200 22.5%
FY - 3 5,880 23.0% 6,858 20.8%
Operating Income
LTM 3,838 11.7% 3,705 8.6%
Most Recent FY 3,258 10.9% 3,833 9.3%
FY - 1 1,887 7.6% 4,382 10.5%
FY - 2 457 2.0% 3,576 9.8%
FY - 3 18 0.1% 2,537 7.7%
Pre-Tax Income
LTM 3,365 10.3% 1,048 2.4%
Most Recent FY 2,574 8.6% 1,730 4.2%
FY - 1 1,101 4.4% 3,601 8.6%
FY - 2 (451) -1.9% 3,143 8.6%
FY - 3 (653) -2.6% 2,246 6.8%
Net Income
LTM 2,235 6.8% 647 1.5%
Most Recent FY 1,723 5.8% 1,142 2.8%
FY - 1 824 3.3% 2,377 5.7%
FY - 2 (481) -2.1% 2,074 5.7%
FY - 3 (588) -2.3% 1,478 4.5%
EBITDA
LTM $ 4,583 14.0% $ 4,346 10.1%
Most Recent FY 3,932 13.1% 4,359 10.6%
FY - 1 2,594 10.4% 4,818 11.6%
FY - 2 1,244 5.4% 3,926 10.8%
FY - 3 857 3.4% 2,887 8.7%
3 YR CAGR
Revenues 5.4% 7.7%
Operating Income 466.6% 14.7%
Net Income NMF -8.2%
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
COMPARABLE COMPANIES FOR VOLUNTEER
Company Name LSI INDS INC SPECIALTY EQUIPMENT COS INC STANDEX INTERNATIONAL CORP
----------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Date 03/97 04/97 03/97
Assets :
Cash & Equivalents 14,306 18.0% 21,855 11.1% 7,412 2.2%
Other Current Assets 44,039 55.3% 131,574 66.6% 197,511 58.3%
Net Plant 19,978 25.1% 33,794 17.1% 85,854 25.4%
Other Assets 1,303 1.6% 10,328 5.2% 47,861 14.1%
---------- ------ ------------ ------- ------------ -------
Total Assets 79,626 100.0% 197,551 100.0% 338,638 100.0%
Liabilities & Equity :
Current Debt 317 0.4% 141 0.1% 2,308 0.7%
Other Current Liabilities 16,824 21.1% 102,777 52.0% 63,770 18.8%
Long Term Debt 1,226 1.5% 155,440 78.7% 115,083 34.0%
Other Liabilities 2,110 2.6% 2,362 1.2% 16,197 4.8%
Preferred Equity 0 0.0% 0 0.0% 0 0.0%
Common Equity 59,149 74.3% (63,169) -32.0% 141,280 41.7%
---------- ------ ------------- ------- ------------ -------
Total Liabilities & Equity 79,626 100.0% 197,551 100.0% 338,638 100.0%
Total Debt / Capitalization (a) 2.5% 168.4% 45.4%
Common Equity / Capitalization (b) 97.5% -68.4% 54.6%
Net Debt / Net Capitalization (c) -27.5% 189.5% 43.8%
Return on Avg. Assets (d) 9.5% 19.1% 9.1%
Return on Avg. Common Equity (e) 16.1% -38.2% 23.0%
Stock Price on 9/04/97 $ 15.25 $ 15.88 $ 32.00
LTM Price Range $ 9.50 -- $17.75 $ 10.25 -- $15.25 $ 24.50 -- $32.13
Shares Outstanding 9,021 18,101 13,288
Market Capitalization $137,577 $287,446 $425,219
Earnings Per Share EPS P/E EPS P/E EPS P/E
---------- ------ ------------- ------- ------------ -------
Cal. 98 Est. $1.35 11.3 x NA NA $ 2.45 13.1 x
Cal. 97 Est. 1.08 14.1 NA NA 2.15 14.9
LTM 0.94 16.2 03/97 1.64 9.7 04/97 1.96 16.3 06/97
Most Recent FY 0.98 15.6 06/96 1.59 10.0 01/97 2.21 14.5 12/96
Est. Long Term E.P.S. Growth Rate 25.0% NA 10.0%
Cal. 97E P/E / Est. E.P.S. Grwth Rate 45.2% NA 130.6%
Total Value / (f)
LTM Sales 0.87 1.04 0.95
LTM Operating Income 9.41 6.90 10.31
LTM EBITDA 7.74 6.19 8.26
Book Value Per Share $6.56 $(3.49) $10.63
Market Value/ Book Value Per Share 2.33 -4.55 3.01
Dividend $0.00 $ 0.00 $ 0.76
Dividend Yield 0.0% 0.0% 2.5%
Analyst MBG SJG TJN
<CAPTION>
Company Name TRANS-INDUSTRIES INC ZIMMERMAN SIGN CO
------------------------- --------------------------
<S> <C> <C> <C> <C>
Balance Sheet Date 06/97 06/97
Assets :
Cash & Equivalents 241 1.3% 11 0.0%
Other Current Assets 13,339 70.8% 23,906 86.9%
Net Plant 4,686 24.9% 3,015 11.0%
Other Assets 576 3.1% 565 2.1%
----------- ----- ------------- -----
Total Assets 18,843 100.0% 27,496 100.0%
Liabilities & Equity :
Current Debt 2,607 13.8% 1,518 5.5%
Other Current Liabilities 3,740 19.8% 10,021 36.4%
Long Term Debt 3,869 20.5% 24,883 90.5%
Other Liabilities 443 2.4% 0 0.0%
Preferred Equity 0 0.0% 0 0.0%
Common Equity 8,184 43.4% (8,926) -32.5%
----------- ----- ------------- -----
Total Liabilities & Equity 18,843 100.0% 27,496 100.0%
Total Debt / Capitalization (a) 44.2% 151.1%
Common Equity / Capitalization (b) 55.8% -51.1%
Net Debt / Net Capitalization (c) 43.2% 151.1%
Return on Avg. Assets (d) 9.4% 4.2%
Return on Avg. Common Equity (e) 28.7% -195.8%
Stock Price on 9/04/97 $ 9.38 $ 3.58
LTM Price Range $ 4.63 -- $9.50 $ 2.25 -- $4.50
Shares Outstanding 3,072 1,855
Market Capitalization $28,815 $6,640
Earnings Per Share EPS P/E EPS P/E
----------- ----- ------------- -----
Cal. 98 Est. NA NA NA NA
Cal. 97 Est. NA NA NA NA
LTM 0.72 13.0 06/97 0.35 10.2 06/97
Most Recent FY 0.56 16.8 12/96 0.62 5.8 12/96
Est. Long Term E.P.S. Growth Rate NA NA
Cal. 97E P/E / Est. E.P.S. Grwth Rate NA NA
Total Value / (f)
LTM Sales 1.07 0.77
LTM Operating Income 9.13 8.91
LTM EBITDA 7.65 7.60
Book Value Per Share $2.66 $(4.81)
Market Value/ Book Value Per Share 3.52 -0.74
Dividend $0.00 $ 0.00
Dividend Yield 0.0% 0.0%
Analyst MBG MBG
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
PROJECT VOLUNTEER DCF: MANAGEMENT'S FORECAST
- -----------------------------------------------------------------------------------------------------------------------------------
($000s) 5 Year Exit
Projected
Historical ---------------------------------------------------------- Terminal
1996 1997 1998 1999 2000 2001 2002 Year
-------- ------ --------- -------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenue $131,179 $142,000 $157,140 $163,020 $174,000 $186,180 $199,213
Annual Revenue Growth 8.2% 10.7% 3.7% 6.7% 7.0% 7.0%
Operating Income 6,522 8,848 9,922 10,885 12,629 14,768 16,870 87,005
Operating Margin 5.0% 6.2% 6.3% 6.7% 7.3% 7.9% 8.5%
Income Taxes @ 40.0% 2,609 3,539 3,969 4,354 5,052 5,907 6,748
-------- -------- -------- ------- ------- -------
Debt-Free Net Income $ 5,309 $ 5,953 $ 6,531 $ 7,577 $ 8,861 $ 10,122
======== ======== ======== ======== ======== ========
Capital Expenditures (5,178) (2,100) (2,100) (2,100) (2,100) (2,100)
Depreciation & Amortization 2,100 2,200 2,200 2,200 2,200 2,200 Discount Rate 14%
Additions to Working Capital (1,948) (2,725) (1,058) (1,976) (2,192) (2,346) Exit Multiple 5.5
-------- -------- -------- -------- -------- --------
Debt-Free Cash Flow $ 283 $ 3,328 $ 5,573 $ 5,701 $ 6,768 $ 7,876 Total Value 62,500
======== ======== ======== ======== ======== ======== Net Debt 4,542
Equity Value 57,958
Stub Period (1) 0.50 1.00 1.00 1.00 1.00 0.50 1.00
Years (2) 0.25 1.00 2.00 3.00 4.00 4.75 5.00
Valuation Factor 0.97 0.88 0.77 0.67 0.59 0.54 0.52
Present Value of Cash Flow $ 137 $ 2,919 $ 4,288 $ 3,848 $ 4,007 $ 2,113 $45,187
======== ======== ======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Discount Rate
12.0% 13.0% 14.0% 15.0% 16.0%
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4.5x 54,060 51,847 49,743 47,740 45,833
------ ------ ------
Terminal 5.0x 58,548 56,140 53,850 51,672 49,599
Multiple 5.5x 63,036 60,433 57,958 55,605 53,365
6.0x 67,524 64,726 62,066 59,537 57,131
------ ------ ------
6.5x 72,012 69,019 66,174 63,470 60,897
<CAPTION>
Discount Rate
12.0% 13.0% 14.0% 15.0% 16.0%
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4.5x 14.17 13.59 13.04 12.52 12.02
----- ----- -----
Terminal 5.0x 15.35 14.72 14.12 13.55 13.01
Multiple 5.5x 16.53 15.85 15.20 14.58 13.99
6.0x 17.71 16.97 16.27 15.61 14.98
----- ----- -----
6.5x 18.88 18.10 17.35 16.64 15.97
</TABLE>
(1) ASSUMES VALUATION DATE AS OF JUNE 30, 1997
(2) MIDPERIOD ASSUMPTION APPLIED.
<PAGE> 23
<TABLE>
<CAPTION>
TRADING SUMMARY SINCE JULY 1, 1992 TO JULY 25, 1997 (1)
- -----------------------------------------------------------------------------------------------------------------------------------
OF TOTAL % OF TOTAL COMMON % OF TOTAL COMMON
OF TOTAL SHARES TRADED COMMON SHARES SHARES CURRENTLY
SHARES TRADED SINCE 7/1/92, CURRENTLY OUTSTANDING TRADED
GREATER BUT CUMULATIVE SINCE 7/1/92, % TRADED OUTSTANDING TRADED AT OR BELOW THE
THAN OR LESS SHARES SHARES % TRADED IN AT OR BELOW HIGH IN THIS RANGE SINCE HIGH END OF THIS RANGE
EQUAL TO THAN TRADED TRADED THIS RANGE END OF THIS RANGE 7/1/92 (2) SINCE 7/1/92
- --------- -------- ------------ ------------ ---------------- ------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$4.00 $5.00 127,500 127,500 3.0% 3.0% 3.3% 3.3%
5.00 6.00 354,300 481,800 8.2% 11.2% 9.3% 12.6%
6.00 7.00 251,100 732,900 5.8% 17.0% 6.6% 19.2%
7.00 8.00 486,800 1,219,700 11.3% 28.3% 12.8% 32.0%
8.00 9.00 949,800 2,169,500 22.0% 50.3% 24.9% 56.9%
9.00 10.00 435,000 2,604,500 10.1% 60.4% 11.4% 68.3%
10.00 10.50 330,400 2,934,900 7.7% 68.0% 8.7% 77.0%
10.50 11.00 628,100 3,563,000 14.6% 82.6% 16.5% 93.4%
11.00 11.50 257,600 3,820,600 6.0% 88.5% 6.8% 100.2%
11.50 12.00 141,000 3,961,600 3.3% 91.8% 3.7% 103.9%
12.00 12.50 91,800 4,053,400 2.1% 93.9% 2.4% 106.3%
12.50 13.00 79,800 4,133,200 1.8% 95.8% 2.1% 108.4%
13.00 13.50 182,200 4,315,400 4.2% 100.0% 4.8% 113.2%
13.50 14.00 (3) -- 4,315,400 0.0% 100.0% 0.0% 113.2%
14.00 14.50 (3) -- 4,315,400 0.0% 100.0% 0.0% 113.2%
14.50 15.00 (3) -- 4,315,400 0.0% 100.0% 0.0% 113.2%
---------
4,315,400
</TABLE>
(1) Source is Factset, which reports data as follows: all trades on a given day
are reported as if they occurred at the average of the highest and lowest price
of the day.
(2) Based on 3,813,797 shares outstanding. (The number of shares outstanding as
of May 14, 1997.)
(3) Based on daily trading data from Factset, there were 3 days in the last year
on which there was at least 1 trade at or above $13.50. Specifically, the
highest trades on October 8, 9, and 14 were $14.50, $14.50 and $13.50,
respectively. The number of shares that traded at these prices is unavailable
data.
<PAGE> 24
<TABLE>
<CAPTION>
TRADING SUMMARY SINCE JULY 1, 1996 TO JULY 25, 1997 (1)
- -----------------------------------------------------------------------------------------------------------------------------------
OF TOTAL % OF TOTAL COMMON % OF TOTAL COMMON
OF TOTAL SHARES TRADED COMMON SHARES SHARES CURRENTLY
SHARES TRADED SINCE 7/1/96, CURRENTLY OUTSTANDING TRADED
GREATER BUT CUMULATIVE SINCE 7/1/96, % TRADED IN OUTSTANDING TRADED AT OR BELOW THE
THAN OR LESS SHARES SHARES % TRADED AT OR BELOW HIGH IN THIS RANGE SINCE HIGH END OF THIS RANGE
EQUAL TO THAN TRADED TRADED THIS RANGE END OF THIS RANGE 7/1/96 (2) SINCE 7/1/96
- --------- -------- -------- --------------- -------------- ------------------ -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$7.00 $8.00 3,600 3,600 0.3% 0.3% 0.1% 0.1%
8.00 9.00 68,600 72,200 6.4% 6.8% 1.8% 1.9%
9.00 10.00 227,000 299,200 21.3% 28.1% 6.0% 7.8%
10.00 10.50 200,400 499,600 18.8% 46.9% 5.3% 13.1%
10.50 11.00 107,900 607,500 10.1% 57.0% 2.8% 15.9%
11.00 11.50 110,300 717,800 10.3% 67.3% 2.9% 18.8%
11.50 12.00 16,000 733,800 1.5% 68.8% 0.4% 19.2%
12.00 12.50 70,100 803,900 6.6% 75.4% 1.8% 21.1%
12.50 13.00 79,800 883,700 7.5% 82.9% 2.1% 23.2%
13.00 13.50 182,200 1,065,900 17.1% 100.0% 4.8% 27.9%
13.50 14.00 (3) -- 1,065,900 0.0% 100.0% 0.0% 27.9%
14.00 14.50 (3) -- 1,065,900 0.0% 100.0% 0.0% 27.9%
---------
1,065,900
</TABLE>
(1) Source is Factset, which reports data as follows: all trades on a given day
are reported as if they were exchanged at the average of the highest and lowest
price of the day.
(2) Based on 3,813,797 shares outstanding. (The number of shares outstanding as
of May 14, 1997.)
(3) Based on daily trading data from Factset, there were 3 days in the last year
on which there was at least 1 trade at or above $13.50. Specifically, the
highest trades on October 8, 9, and 14 were $14.50, $14.50 and $13.50,
respectively. The number of shares that traded at these prices is unavailable
data.
<PAGE> 25
VOLUNTEER STOCK PRICE/VOLUME CHART
Daily Closings for One Year Prior to Announcement
[CHART]
<PAGE> 26
INDEXED STOCK PRICE PERFORMANCE
VOLUNTEER VS. NASDAQ COMPOSITE
FOR ONE YEAR PRIOR TO ANNOUNCEMENT
[CHART]
<PAGE> 27
VOLUNTEER STOCK PRICE/VOLUME CHART
Daily Closings for Five Years Prior to Announcement
[CHART]
<PAGE> 28
INDEXED STOCK PRICE PERFORMANCE
VOLUNTEER VS. NASDAQ COMPOSITE
FOR FIVE YEARS PRIOR TO ANNOUNCEMENT
[CHART]
<PAGE> 29
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
7/25/97 0 11.125 10.125 10.625
7/24/97 0 11.125 10.125 10.625
7/23/97 6500 10.625 10.125 10.625
7/22/97 2200 10.625 10.125 10.625
7/21/97 0 11.000 10.125 10.563
7/18/97 2300 11.000 10.125 11.000
7/17/97 3000 11.000 11.000 11.000
7/16/97 0 11.000 10.125 10.563
7/15/97 0 11.000 10.125 10.563
7/14/97 0 11.125 10.250 10.688
7/11/97 23800 10.875 10.375 10.844
7/10/97 4300 11.000 10.375 11.000
7/9/97 1000 11.375 11.000 11.000
7/8/97 1400 10.500 10.125 10.125
7/7/97 900 10.375 10.250 10.375
7/3/97 4100 11.125 10.250 10.500
7/2/97 6300 11.125 10.375 11.125
7/1/97 1200 11.125 10.375 11.125
6/30/97 2900 11.125 10.625 11.125
6/27/97 500 10.625 10.625 10.625
6/26/97 6200 10.125 9.875 9.875
6/25/97 3600 10.000 9.875 10.000
6/24/97 6100 10.250 10.125 10.125
6/23/97 10200 10.750 10.000 10.000
6/20/97 500 10.500 10.500 10.500
6/19/97 1000 10.500 10.500 10.500
6/18/97 2900 10.500 10.125 10.125
6/17/97 200 10.125 10.125 10.125
6/16/97 700 10.000 10.000 10.000
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
6/13/97 3000 10.000 10.000 10.000
6/12/97 200 10.000 10.000 10.000
6/11/97 0 10.750 9.875 10.313
6/10/97 0 10.500 9.750 10.125
6/9/97 0 10.500 9.625 10.063
6/6/97 14000 10.500 9.750 9.750
6/5/97 11000 10.000 9.500 9.750
6/4/97 1500 10.250 9.500 9.500
6/3/97 1000 10.000 10.000 10.000
6/2/97 8500 10.625 10.000 10.625
5/30/97 100 10.625 10.625 10.625
5/29/97 6400 10.250 10.000 10.250
5/28/97 0 10.625 10.125 10.375
5/27/97 36300 10.750 10.125 10.500
5/23/97 2400 10.750 10.500 10.500
5/22/97 0 10.750 10.125 10.438
5/21/97 2000 10.125 10.125 10.125
5/20/97 4300 10.750 10.125 10.250
5/19/97 2300 10.750 10.000 10.750
5/16/97 800 10.750 10.000 10.750
5/15/97 2500 10.750 10.500 10.750
5/14/97 1600 10.000 9.875 10.000
5/13/97 29800 10.250 9.875 9.875
5/12/97 900 9.000 9.000 9.000
5/9/97 1000 9.500 9.500 9.500
5/8/97 0 9.500 8.875 9.188
5/7/97 0 9.500 8.875 9.188
5/6/97 200 8.875 8.875 8.875
5/5/97 400 9.250 8.875 9.250
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
5/2/97 100 9.500 9.500 9.500
5/1/97 100 8.750 8.750 8.750
4/30/97 100 9.500 9.500 9.500
4/29/97 500 9.000 9.000 9.000
4/28/97 600 9.125 9.000 9.125
4/25/97 0 9.500 9.000 9.250
4/24/97 7000 9.500 9.250 9.500
4/23/97 0 10.000 9.250 9.625
4/22/97 400 10.000 10.000 10.000
4/21/97 0 10.000 9.250 9.625
4/18/97 1000 10.000 10.000 10.000
4/17/97 1500 9.750 9.250 9.750
4/16/97 12000 9.750 9.500 9.750
4/15/97 4600 9.750 9.000 9.750
4/14/97 1500 9.500 9.250 9.500
4/11/97 3200 9.750 9.250 9.750
4/10/97 11600 10.250 9.750 9.750
4/9/97 4400 9.750 9.250 9.250
4/8/97 17700 9.750 9.000 9.000
4/7/97 0 9.500 8.500 9.000
4/4/97 0 9.500 8.500 9.000
4/3/97 0 9.500 8.500 9.000
4/2/97 0 9.500 8.500 9.000
4/1/97 0 9.500 8.500 9.000
3/31/97 0 9.500 8.500 9.000
3/27/97 900 9.000 9.000 9.000
3/26/97 400 9.500 9.250 9.250
3/25/97 3800 9.125 9.000 9.125
3/24/97 2100 9.000 8.750 9.000
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
3/21/97 200 8.500 8.500 8.500
3/20/97 1000 8.750 8.750 8.750
3/19/97 900 8.750 8.375 8.375
3/18/97 0 9.250 8.250 8.750
3/17/97 3200 8.500 8.000 8.375
3/14/97 2900 8.500 8.375 8.375
3/13/97 1000 8.250 8.250 8.250
3/12/97 400 8.250 8.250 8.250
3/11/97 0 9.000 8.250 8.625
3/10/97 300 8.250 8.250 8.250
3/7/97 0 9.000 8.500 8.750
3/6/97 2000 9.250 9.250 9.250
3/5/97 2400 8.875 8.750 8.750
3/4/97 2800 9.500 8.750 9.000
3/3/97 6600 9.000 9.000 9.000
2/28/97 12400 10.000 9.000 10.000
2/27/97 1300 10.125 9.500 9.500
2/26/97 7200 10.250 9.250 9.250
2/25/97 15700 10.125 8.500 9.750
2/24/97 1400 8.875 8.250 8.875
2/21/97 9900 8.625 7.750 8.625
2/20/97 13200 8.500 7.500 7.750
2/19/97 11900 10.250 8.250 9.000
2/18/97 100 9.750 9.750 9.750
2/14/97 1000 10.000 10.000 10.000
2/13/97 1000 10.000 10.000 10.000
2/12/97 0 10.750 10.000 10.375
2/11/97 600 10.750 10.750 10.750
2/10/97 3800 10.500 10.000 10.500
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
2/7/97 800 11.000 10.250 10.250
2/6/97 1500 11.000 10.250 10.250
2/5/97 500 10.250 10.250 10.250
2/4/97 2600 10.250 10.250 10.250
2/3/97 1200 10.625 10.625 10.625
1/31/97 600 10.250 10.250 10.250
1/30/97 1500 11.000 10.250 10.875
1/29/97 3000 10.250 10.250 10.250
1/28/97 2100 10.500 10.500 10.500
1/27/97 1000 10.500 10.500 10.500
1/24/97 700 11.250 10.500 11.250
1/23/97 600 10.500 10.500 10.500
1/22/97 1300 11.500 11.375 11.375
1/21/97 0 11.500 10.750 11.125
1/20/97 1500 11.500 11.500 11.500
1/17/97 0 11.500 10.750 11.125
1/16/97 0 11.500 10.750 11.125
1/15/97 3700 11.000 11.000 11.000
1/14/97 2500 10.875 10.375 10.875
1/13/97 500 10.500 10.000 10.500
1/10/97 0 11.000 10.000 10.500
1/9/97 700 10.750 10.750 10.750
1/8/97 3000 10.250 10.250 10.250
1/7/97 2700 10.750 10.250 10.750
1/6/97 2700 10.750 10.250 10.250
1/3/97 1000 11.000 11.000 11.000
1/2/97 600 11.000 11.000 11.000
12/31/96 4100 11.750 11.000 11.750
12/30/96 6600 11.750 11.000 11.625
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
12/27/96 100 10.750 10.750 10.750
12/26/96 0 11.750 10.750 11.250
12/24/96 0 11.750 10.750 11.250
12/23/96 0 11.750 10.750 11.250
12/20/96 0 11.750 10.750 11.250
12/19/96 600 11.750 11.750 11.750
12/18/96 0 11.750 10.750 11.250
12/17/96 5200 11.750 10.750 11.750
12/16/96 0 11.750 10.750 11.250
12/13/96 2300 11.250 11.250 11.250
12/12/96 100 10.750 10.750 10.750
12/11/96 300 10.750 10.750 10.750
12/10/96 2600 11.250 10.750 11.250
12/9/96 300 10.750 10.500 10.750
12/6/96 7800 11.500 10.500 11.250
12/5/96 6400 12.250 11.250 11.500
12/4/96 32900 12.250 10.375 12.000
12/3/96 2200 10.750 10.250 10.250
12/2/96 300 10.750 10.750 10.750
11/29/96 600 10.750 9.750 10.375
11/27/96 300 9.750 9.750 9.750
11/26/96 3300 10.750 9.250 9.750
11/25/96 2100 10.000 9.250 10.000
11/22/96 400 10.000 10.000 10.000
11/21/96 2100 10.000 10.000 10.000
11/20/96 9200 10.500 9.250 9.500
11/19/96 1100 10.750 10.000 10.750
11/18/96 3700 10.750 10.000 10.250
11/15/96 4900 10.000 10.000 10.000
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
11/14/96 200 10.000 10.000 10.000
11/13/96 1900 10.500 10.000 10.000
11/12/96 2400 10.000 9.500 10.000
11/11/96 8700 9.500 9.000 9.250
11/8/96 3200 9.438 9.250 9.250
11/7/96 1600 10.000 9.750 10.000
11/6/96 2500 10.500 10.000 10.000
11/5/96 4300 9.750 9.250 9.750
11/4/96 7500 9.625 9.250 9.250
11/1/96 100 9.250 9.250 9.250
10/31/96 9500 10.500 9.250 10.000
10/30/96 3100 10.125 10.000 10.000
10/29/96 0 11.000 10.000 10.500
10/28/96 2000 11.000 10.000 10.000
10/25/96 23300 11.250 10.000 10.750
10/24/96 6300 11.750 11.000 11.500
10/23/96 5400 12.500 11.750 12.000
10/22/96 4500 12.750 12.000 12.000
10/21/96 24900 12.750 11.875 12.750
10/18/96 7500 12.250 11.250 11.750
10/17/96 9200 13.000 12.000 12.250
10/16/96 2000 13.000 12.250 12.750
10/15/96 7500 13.250 12.250 12.250
10/14/96 19500 13.500 12.500 12.500
10/11/96 24300 13.250 12.750 12.750
10/10/96 35300 12.750 11.250 12.750
10/9/96 61100 14.500 11.250 11.750
10/8/96 138400 14.500 12.000 14.500
10/7/96 34900 12.500 10.250 12.000
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
10/4/96 2900 10.750 10.250 10.250
10/3/96 5000 10.500 10.250 10.500
10/2/96 8200 11.125 10.125 10.500
10/1/96 4400 10.250 10.000 10.250
9/30/96 200 9.250 9.250 9.250
9/27/96 0 10.000 9.250 9.625
9/26/96 500 9.750 9.750 9.750
9/25/96 0 9.750 9.000 9.375
9/24/96 100 9.250 9.250 9.250
9/23/96 400 9.250 9.250 9.250
9/20/96 0 10.000 9.250 9.625
9/19/96 0 10.000 9.250 9.625
9/18/96 0 10.000 9.250 9.625
9/17/96 0 10.000 9.250 9.625
9/16/96 0 10.000 9.250 9.625
9/13/96 2400 10.000 9.250 10.000
9/12/96 1000 10.000 10.000 10.000
9/11/96 0 10.000 9.250 9.625
9/10/96 2300 9.625 9.250 9.250
9/9/96 6000 10.000 9.500 10.000
9/6/96 0 9.500 9.000 9.250
9/5/96 3200 9.500 9.000 9.500
9/4/96 3300 9.000 9.000 9.000
9/3/96 1200 8.500 8.375 8.375
8/30/96 300 8.500 8.500 8.500
8/29/96 0 8.500 8.000 8.250
8/28/96 1000 8.500 8.500 8.500
8/27/96 400 8.000 8.000 8.000
8/26/96 0 8.500 8.000 8.250
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
8/23/96 100 8.500 8.500 8.500
8/22/96 0 8.500 8.000 8.250
8/21/96 0 8.500 8.000 8.250
8/20/96 1300 8.500 8.000 8.500
8/19/96 0 8.500 8.000 8.250
8/16/96 0 8.500 8.000 8.250
8/15/96 500 8.000 8.000 8.000
8/14/96 2100 8.250 8.000 8.250
8/13/96 2000 8.000 8.000 8.000
8/12/96 0 8.250 8.000 8.125
8/9/96 0 8.250 8.000 8.125
8/8/96 3400 8.000 8.000 8.000
8/7/96 200 7.750 7.750 7.750
8/6/96 0 8.250 7.750 8.000
8/5/96 0 8.250 7.750 8.000
8/2/96 100 8.250 8.250 8.250
8/1/96 0 8.250 7.750 8.000
7/31/96 8000 8.250 8.000 8.000
7/30/96 0 8.250 7.500 7.875
7/29/96 0 8.250 7.500 7.875
7/26/96 0 8.250 7.500 7.875
7/25/96 0 8.250 7.500 7.875
7/24/96 3400 8.250 7.500 8.250
7/23/96 0 8.750 8.000 8.375
7/22/96 0 8.750 8.000 8.375
7/19/96 0 8.750 8.000 8.375
7/18/96 3200 9.250 8.750 8.750
7/17/96 1300 9.250 9.125 9.125
7/16/96 7400 9.750 9.000 9.500
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
TRADING DATA SINCE JULY, 1 1996
- --------------------------------------------------------------------------------
HIGH LOW LAST
TRADE FOR TRADE FOR TRADE FOR
DATE VOLUME DAY (A) DAY (B) DAY (C)
- --------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
7/15/96 1400 9.750 9.000 9.000
7/12/96 500 9.750 9.750 9.750
7/11/96 4900 9.750 8.750 9.750
7/10/96 2700 9.750 8.625 9.125
7/9/96 0 9.000 8.500 8.750
7/8/96 0 9.000 8.500 8.750
7/5/96 9000 8.625 8.500 8.625
7/3/96 0 9.000 8.500 8.750
7/2/96 0 9.000 8.500 8.750
7/1/96 0 9.000 8.500 8.750
</TABLE>
(a) On days with no volume, figures are the high ask.
(b) On days with no volume, figures are low bid.
(c) On days with no volume, figures are midpoint of (a) and (b).
<PAGE> 1
PLASTI-LINE, INC.
623 E. EMORY ROAD
KNOXVILLE, TENNESSEE 37849
, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
(including any adjournment or postponement thereof, the "Special Meeting") of
Plasti-Line, Inc. (the "Company") to be held at the principal executive offices
of the Company, 623 E. Emory Road, Knoxville, Tennessee, on the day of
, 1998, at 10:00 a.m. local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 3, 1997, among the Company, PL Holding Corp.
("Parent"), PL Acquisition Corp., a wholly owned subsidiary of Parent ("Merger
Sub"), and James R. Martin, Chairman of the Board and Chief Executive Officer of
the Company and beneficial owner of approximately 47% of the outstanding voting
power of the Company's common stock ("Martin"). Pursuant to the Merger
Agreement, Merger Sub will be merged with and into the Company (the "Merger"),
with the Company being the surviving corporation and becoming a wholly owned
subsidiary of Parent. Merger Sub was organized by Parent solely to facilitate
the Merger.
Pursuant to the terms of the Merger Agreement, all shareholders of the
Company, other than Parent and those shareholders who perfect their dissenters'
rights under applicable Tennessee law, will be entitled to receive $14.50 per
share in cash in exchange for each share of the Company's common stock, par
value $.001 per share (the "Common Stock"), held by them at the effective time
of the Merger (the "Effective Time"). The receipt of cash for Common Stock
pursuant to the Merger will be a taxable transaction for federal income tax
purposes and also may be a taxable transaction under applicable state, local,
foreign and other tax laws. See "SPECIAL FACTORS -- Certain Federal Income Tax
Consequences." Shareholders seeking to perfect their dissenters' rights must
submit written notice of such intent to demand payment for their shares of
Common Stock prior to the vote at the Special Meeting.
Following the Merger, all of the capital stock of the Company will be
beneficially owned by Parent. The present holders of Common Stock (other than
Parent) will no longer have any equity interest in the Company.
Parent expects to enter into an agreement with certain members of the
Company's management, including Martin (the "Management Group"), who currently
beneficially own an aggregate of approximately 48.7% of the total issued and
outstanding shares of the Common Stock. Pursuant to such agreement, each member
of the Management Group will agree to transfer to Parent immediately prior to
the Effective Time, all of such person's shares of Common Stock, if any, along
with certain cash and promissory notes, and each member of the Management Group
will receive shares of Parent's common stock. At the Effective Time, the
Management Group will own in the aggregate 100% of Parent's total issued and
outstanding common stock, and Parent will own approximately 48.7% of the total
issued and outstanding Common Stock. See "SPECIAL FACTORS -- Conflicts of
Interest; Certain Relationships" in the accompanying Proxy Statement.
The Company's Board of Directors appointed a Special Committee on July 18,
1997, consisting of three directors of the Company who are not employees of the
Company, its subsidiaries or affiliates (the "Special Committee"). The Special
Committee has, among other things, reviewed and considered the proposed Merger
and negotiated its terms with Martin and Parent. In connection therewith, the
Special Committee retained J.C. Bradford & Co., L.L.C. to act as its financial
advisor. THE COMPANY'S BOARD OF DIRECTORS (WITH MARTIN ABSTAINING), ACTING ON
THE RECOMMENDATION OF THE SPECIAL COMMITTEE, HAS APPROVED THE MERGER AS BEING IN
THE BEST INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY OTHER THAN
THE MANAGEMENT GROUP (THE "PUBLIC SHAREHOLDERS"). ACCORDINGLY, THE COMPANY'S
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT. See "SPECIAL FACTORS -- Recommendations of the
<PAGE> 2
Special Committee, the Board, Parent, Merger Sub and Martin" and "-- Conflicts
of Interest; Certain Relationships" in the accompanying Proxy Statement.
Attached is a Notice of Special Meeting of Shareholders and a Proxy
Statement containing a discussion of the Merger. We urge you to read this
material carefully. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE
ENCLOSED PREPAID ENVELOPE AS SOON AS POSSIBLE. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
YOUR VOTE IS IMPORTANT FOR THE APPROVAL OF THE MERGER. A MAJORITY OF THE
SHARES OF COMMON STOCK HELD BY ALL SHAREHOLDERS, AS WELL AS A MAJORITY OF THE
SHARES HELD BY THE PUBLIC SHAREHOLDERS, MUST BE PRESENT AT THE SPECIAL MEETING,
IN PERSON OR BY PROXY, IN ORDER FOR A QUORUM TO BE PRESENT. IF A QUORUM IS
PRESENT, TWO VOTING REQUIREMENTS MUST BE SATISFIED IN ORDER FOR THE MERGER
AGREEMENT TO BE APPROVED. FIRST, TENNESSEE LAW REQUIRES THE AFFIRMATIVE APPROVAL
OF THE MERGER AGREEMENT BY A MAJORITY OF ALL SHARES OF COMMON STOCK ENTITLED TO
VOTE AT THE SPECIAL MEETING. THE MEMBERS OF THE MANAGEMENT GROUP, WHO (INCLUDING
MARTIN) BENEFICIALLY OWN AN AGGREGATE OF 48.7% OF THE COMMON STOCK, AND ALL
DIRECTORS OF THE COMPANY, WHO (EXCLUDING MARTIN) BENEFICIALLY OWN AN AGGREGATE
OF 8.5% OF THE COMMON STOCK, HAVE AGREED OR WILL AGREE TO VOTE THEIR SHARES IN
FAVOR OF THE MERGER AGREEMENT, THUS ASSURING THAT THIS VOTE WILL BE OBTAINED.
HOWEVER, PURSUANT TO THE MERGER AGREEMENT, THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE SHARES OF COMMON STOCK HELD BY THE PUBLIC SHAREHOLDERS IS ALSO REQUIRED.
YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Sincerely,
James R. Martin
Chairman of the Board and
Chief Executive Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
2
<PAGE> 3
PLASTI-LINE, INC.
623 E. EMORY ROAD
KNOXVILLE, TENNESSEE 37849
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1998
TO THE SHAREHOLDERS OF PLASTI-LINE, INC.:
A Special Meeting of Shareholders (the "Special Meeting") of Plasti-Line,
Inc. (the "Company"), will be held at the principal executive offices of the
Company, 623 E. Emory Road, Knoxville, Tennessee, on the day of , 1998, at
10:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of November 3, 1997 (the "Merger
Agreement"), among the Company, PL Holding Corp. ("Parent"), PL Acquisition
Corp., a wholly owned subsidiary of Parent ("Merger Sub"), and James R.
Martin, Chairman of the Board and Chief Executive Officer of the Company
and beneficial owner of approximately 47% of the outstanding voting power
of the Company's common stock ("Martin"), pursuant to which, among other
things, (a) Merger Sub will be merged with and into the Company (the
"Merger") with the Company being the surviving corporation (the "Surviving
Corporation") and pursuant to which the separate existence of Merger Sub
will cease, (b) each outstanding share of the Company's common stock, par
value $.001 per share (the "Common Stock"), except Common Stock held by the
Company as treasury stock or beneficially owned by Parent or by persons who
perfect their dissenters' rights under applicable Tennessee law, will be
converted into the right to receive $14.50 in cash, without interest, (c)
each outstanding share of Common Stock beneficially owned by Parent or held
by the Company as treasury stock will be canceled without consideration,
and (d) each outstanding share of Merger Sub common stock will be converted
into one share of common stock of the Surviving Corporation.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is included as Exhibit A to the accompanying
Proxy Statement. Only shareholders of record of Common Stock at the close of
business on , 1997 (the "Record Date") will be entitled to notice of
and to vote at the Special Meeting (the "Voting Shares"). The Special Meeting
may be adjourned from time to time without notice other than announcement at the
Special Meeting, and any business for which notice of the Special Meeting is
hereby given may be transacted at any such adjournment. A complete list of
shareholders entitled to vote at the meeting will be available for inspection by
shareholders at the offices of the Company immediately prior to the Special
Meeting.
Parent expects to enter into an agreement with certain members of the
Company's management, including Martin (the "Management Group"), who currently
beneficially own an aggregate of approximately 48.7% of the total issued and
outstanding shares of the Common Stock. Pursuant to such agreement, each member
of the Management Group will agree to transfer to Parent immediately prior to
the Effective Time, all of such person's shares of Common Stock, if any, along
with certain cash and promissory notes, and each member of the Management Group
will receive shares of Parent's common stock. At the Effective Time, the
Management Group will own in the aggregate 100% of Parent's total issued and
outstanding common stock, and Parent will own approximately 48.7% of the total
issued and outstanding Common Stock. See "SPECIAL FACTORS -- Conflicts of
Interest; Certain Relationships."
The presence at the Special Meeting, in person or by proxy, of a majority
of the Voting Shares held by all shareholders of the Company, as well as a
majority of the Voting Shares held by the shareholders of the Company other than
the Management Group (the "Public Shareholders"), are necessary for a quorum to
exist at the Special Meeting. If a quorum is present, then two voting
requirements must be satisfied in order for the Merger Agreement to be approved.
First, pursuant to the Tennessee Business Corporation Act (the "TBCA"), approval
of the Merger Agreement requires the affirmative vote of the holders of a
majority of the
<PAGE> 4
outstanding Voting Shares. The members of the Management Group, who (including
Martin) as of the Record Date beneficially owned an aggregate of 48.7% of the
Common Stock, and all directors of the Company, who (excluding Martin) as of the
Record Date beneficially owned an aggregate of 8.5% of the Common Stock, have
agreed or will agree to vote their shares in favor of the Merger Agreement, thus
assuring that this vote will be obtained. However, as a second vote requirement,
the Merger Agreement requires the affirmative vote of a majority of the shares
of Common Stock held by the Public Shareholders.
If the Merger is consummated, holders of Common Stock who do not vote in
favor of the Merger Agreement and who perfect their statutory dissenters' rights
under Chapter 23 of the TBCA will have the right to seek payment for their
shares of Common Stock. Section 48-23-102 of the TBCA provides that no
dissenters' rights are available with respect to the merger of a corporation
whose securities are "national market system securities," which includes
securities traded on the Nasdaq National Market. The Common Stock is currently
traded on the Nasdaq National Market; however, pursuant to the Merger Agreement,
the Company has agreed to terminate such listing effective one business day
prior to the effective time of the Merger. See "DISSENTERS' RIGHTS" in the
accompanying Proxy Statement for a statement of the rights of dissenting
shareholders and a description of the procedures required to be followed by
shareholders to obtain appraisal of their Common Stock. A copy of Chapter 23 of
the TBCA is included as Exhibit B to the accompanying Proxy Statement.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
By order of the Board of Directors,
MARK J. DEUSCHLE,
Secretary
Knoxville, Tennessee
, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING IN PERSON,
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THE COMPANY'S BOARD OF DIRECTORS (WITH MARTIN ABSTAINING), ACTING ON THE
RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS (CONSISTING OF
THREE DIRECTORS OF THE COMPANY WHO ARE NOT EMPLOYEES OF THE COMPANY), RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT. IN ADDITION TO THE VOTE
REQUIRED BY THE TBCA, THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
VOTING SHARES HELD BY THE PUBLIC SHAREHOLDERS IS NECESSARY TO APPROVE THE MERGER
AGREEMENT AND THE MERGER.
2
<PAGE> 5
PLASTI-LINE, INC.
623 E. EMORY ROAD
KNOXVILLE, TENNESSEE 37849
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
---------------------
INTRODUCTION
This Proxy Statement is being furnished to the holders of common stock, par
value $.001 per share (the "Common Stock"), of Plasti-Line, Inc., a Tennessee
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at a special meeting of the
shareholders of the Company (including any adjournment or postponement thereof,
the "Special Meeting") to be held at the principal executive offices of the
Company, 623 E. Emory Road, Knoxville, Tennessee, on , ,
1998, at 10:00 a.m. local time. This Proxy Statement and the attached Notice of
Special Meeting of Shareholders and the proxy card are first being mailed to
shareholders of the Company on or about , 1997.
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will consider and
vote upon a proposal to approve and adopt an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of November 3, 1997, among the Company, PL Holding
Corp., a Tennessee corporation ("Parent"), PL Acquisition Corp., a Tennessee
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and James R.
Martin, Chairman of the Board and Chief Executive Officer of the Company and
beneficial owner of approximately 47% of the outstanding voting power of the
Company's Common Stock ("Martin"). Merger Sub was organized by Parent solely to
facilitate the proposed transaction.
The Merger Agreement provides, subject to approval of the shareholders at
the Special Meeting, for the merger of Merger Sub with and into the Company (the
"Merger"), with the Company being the surviving corporation (the "Surviving
Corporation"). Following the Merger, the Company will be a direct wholly owned
subsidiary of Parent. Pursuant to the Merger, (i) each outstanding share of
Common Stock (other than shares held by the Company as treasury stock or shares
beneficially owned by Parent or by shareholders who do not vote in favor of the
Merger Agreement and who perfect their dissenters' rights under Chapter 23 of
the Tennessee Business Corporation Act ("TBCA")) will receive $14.50 per share
in cash, without interest (the "Merger Consideration"), (ii) each outstanding
share of Common Stock beneficially owned by Parent or held by the Company as
treasury stock will be canceled without consideration, and (iii) each
outstanding share of Merger Sub common stock, par value $.001 per share, will be
converted into one share of common stock of the Surviving Corporation. As a
result of the Merger, current shareholders of the Company (other than Parent)
will no longer have any equity interest in the Company. A copy of the Merger
Agreement is included as Exhibit A to this Proxy Statement.
THE COMPANY'S BOARD OF DIRECTORS (WITH MARTIN ABSTAINING), ACTING ON THE
RECOMMENDATION OF THE SPECIAL COMMITTEE, RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Parent expects to enter into an agreement (the "Shareholder Agreement")
with certain members of the Company's management, including Martin (the
"Management Group"), who currently own an aggregate of approximately 48.7% of
the total issued and outstanding shares of the Common Stock. Pursuant to the
Shareholder Agreement, each member of the Management Group will agree to
transfer to Parent, immediately prior to the effective time of the Merger (the
"Effective Time"), all of such person's shares of Common Stock, if any, along
with certain cash and promissory notes, and each member of the Member Group will
receive shares of Parent's common stock. At the Effective Time, the Management
Group will not own any
<PAGE> 6
shares of Common Stock. At such time, the Management Group will own in the
aggregate 100% of Parent's total issued and outstanding common stock, and Parent
will own approximately 48.7% of the total issued and outstanding Common Stock.
See "SPECIAL FACTORS -- Conflicts of Interest; Certain Relationships."
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board of Directors of the Company has fixed the close of business on
, 1997 (the "Record Date") as the date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting.
Accordingly, only holders of record of Common Stock at the close of business on
that date will be entitled to notice of and to vote at the Special Meeting (the
"Voting Shares"). At the close of business on the Record Date, there were
shares of Common Stock (held by shareholders of record)
outstanding and entitled to vote at the Special Meeting.
Each holder of record of Voting Shares on the Record Date is entitled to
cast one vote per share in person or by proxy at the Special Meeting and any
adjournment or postponement thereof. The presence, in person or by proxy, at the
Special Meeting of the holders of a majority of (i) the Voting Shares entitled
to vote and held by all shareholders of the Company, and (ii) the Voting Shares
entitled to vote and held by shareholders of the Company other than the
Management Group (the "Public Shareholders"), are necessary for a quorum to
exist at the Special Meeting. Abstentions and broker non-votes (which occur when
shares held by brokers or nominees for beneficial owners are voted on some
matters but not on others) will be counted as shares present for purposes of
determining the presence of a quorum.
Pursuant to the TBCA, the Merger Agreement must be approved by the holders
of at least a majority of the outstanding Voting Shares. Pursuant to the
Shareholder Agreement, each member of the Management Group will agree to vote
all of his Voting Shares in favor of the Merger Agreement, representing an
aggregate of approximately 48.7% of the total outstanding Voting Shares. In
addition, all of the directors of the Company have agreed to vote their Voting
Shares in favor of the Merger Agreement, representing (excluding Martin's Voting
Shares which have been counted in the shares held by the Management Group), an
aggregate of approximately 8.5% of the total Voting Shares. This assures that
the approval required pursuant to the TBCA will be obtained.
However, pursuant to the terms of the Merger Agreement, the affirmative
vote of a majority of the Voting Shares held by the Public Shareholders is also
required to approve the Merger Agreement. See "THE MERGER
AGREEMENT -- Conditions to Consummation of the Merger."
Holders of Common Stock who do not want to accept the Merger Consideration
of $14.50 per share, who do not vote in favor of (or who abstain from voting on)
the Merger Agreement, and who perfect their dissenters' rights by complying with
the provisions of Chapter 23 of the TBCA, will have the right to receive cash
payment for the "fair value" of their Common Stock. Section 48-23-102 of the
TBCA provides that no dissenters' rights are available with respect to the
merger of a corporation whose securities are "national market system
securities," which includes securities traded on the Nasdaq National Market. The
Common Stock is currently traded on the Nasdaq National Market; however,
pursuant to the Merger Agreement, the Company has agreed to terminate such
listing effective one business day prior to the Effective Time, so that the
Company's shareholders will be entitled to dissenters' rights in connection with
the Merger. Any shareholder contemplating the exercise of dissenters' rights
should carefully review Chapter 23 of the TBCA, particularly the procedural
steps required to perfect dissenters' rights, a description of which is provided
herein under "DISSENTERS' RIGHTS." A shareholder who fails to comply with such
procedural requirements will forfeit such holder's dissenters' rights and, upon
consummation of the Merger, such holder's shares of Common Stock will be
converted into the right to receive the Merger Consideration of $14.50 per share
in cash without interest. See "DISSENTERS' RIGHTS" and Exhibit B -- "Chapter 23
of the Tennessee Business Corporation Act."
2
<PAGE> 7
PROXIES
All Voting Shares represented by properly executed proxies received prior
to or at the Special Meeting and not revoked will be voted in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
such proxies will be voted FOR the proposal to approve and adopt the Merger
Agreement, and in the discretion of the persons named in the proxy on such other
matters as may properly be presented at the Special Meeting. For purposes of
determining whether a proposal has received sufficient votes for adoption,
abstentions and broker non-votes will have no effect on the vote for the Merger
Agreement.
A shareholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of the Company a signed notice of revocation or a
later dated and signed proxy or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, directors, officers and regular employees of
the Company may solicit proxies by telephone, telegram or by personal
interviews. Such persons will receive no additional compensation for such
services. The Company has retained Morrow & Co. Inc. to assist in the
solicitation of proxies at a cost of approximately $7,000. The Company will
reimburse brokers, fiduciaries, custodians and other nominees for their charges
and expenses in forwarding proxy material to the beneficial owners of Voting
Shares held of record by such persons.
This Proxy Statement and the accompanying Notice of Special Meeting are
first being mailed to shareholders on or about , 1997.
The date of this Proxy Statement is , 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Schedule 13E-3 Transaction Statement (including any amendments
thereto, the "Schedule 13E-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the Merger. This Proxy Statement
does not contain all the information set forth in the Schedule 13E-3 and the
exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission.
The Schedule 13E-3 and the respective exhibits thereto, as well as such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; and at the Commission's Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants such as the Company that file electronically with the Commission.
The address of such site is http://www.sec.gov. The Common Stock is traded on
the Nasdaq National Market and certain of the Company's reports, proxy materials
and other information are available at the offices of the Nasdaq National
Market, 1735 K Street, N.W., Washington, D.C. 20006.
3
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................ 1
Proposal to be Considered at the Special Meeting.......... 1
Voting Rights; Votes Required for Approval................ 2
Proxies................................................... 3
AVAILABLE INFORMATION....................................... 3
SUMMARY..................................................... 6
SPECIAL FACTORS............................................. 14
Background of the Merger.................................. 14
Recommendations of the Special Committee, the Board,
Parent, Merger Sub and Martin.......................... 20
Opinion of the Special Committee's Financial Advisor...... 23
Material Prepared by Parent's Advisor..................... 27
Purpose and Structure of the Merger; Certain Effects of
the Merger............................................. 29
Plans for the Company After the Merger.................... 31
Conflicts of Interest; Certain Relationships.............. 31
Certain Federal Income Tax Consequences of the Merger..... 33
Accounting Treatment of the Merger........................ 34
Certain Litigation........................................ 34
Regulatory Approvals...................................... 34
THE MERGER AGREEMENT........................................ 35
General................................................... 35
Effective Time of the Merger.............................. 35
The Surviving Corporation................................. 35
Consideration to be Received by Shareholders of the
Company................................................ 35
Options and Restricted Shares............................. 36
Representations and Warranties............................ 36
Covenants................................................. 37
Other Potential Bidders................................... 38
Voting of Shares.......................................... 38
Conditions to Consummation of the Merger.................. 38
Termination............................................... 39
Expenses.................................................. 39
Amendments................................................ 39
DISSENTERS' RIGHTS.......................................... 40
SOURCE OF FUNDS FOR THE MERGER.............................. 41
Source of Funds........................................... 41
Estimated Fees and Expenses............................... 45
BUSINESS OF THE COMPANY..................................... 46
General................................................... 46
Products.................................................. 46
Customers................................................. 47
Marketing................................................. 47
Production and Raw Materials.............................. 47
Competition............................................... 48
Employees................................................. 48
Product Backlog........................................... 48
Seasonality............................................... 48
SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY.... 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 50
MARKET PRICES FOR THE COMMON STOCK.......................... 53
DIVIDENDS................................................... 53
</TABLE>
4
<PAGE> 9
CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB........ 53
Parent.................................................... 53
Merger Sub................................................ 54
General................................................... 54
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PARENT,
MERGER SUB AND THE SURVIVING CORPORATION.................. 54
Information Concerning Directors and Executive Officers of
the Company............................................ 54
Information Concerning Directors and Executive Officers of
Parent and Merger Sub.................................. 55
Information Concerning Directors and Executive Officers of
the Surviving Corporation.............................. 56
SECURITY OWNERSHIP OF THE COMPANY........................... 56
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS................ 57
TRANSACTION OF OTHER BUSINESS............................... 59
INDEPENDENT AUDITORS........................................ 59
SHAREHOLDER PROPOSALS....................................... 60
INDEX TO FINANCIAL STATEMENTS............................... F-1
EXHIBIT A: AGREEMENT AND PLAN OF MERGER
EXHIBIT B: CHAPTER 23 OF THE TENNESSEE BUSINESS CORPORATION
ACT
EXHIBIT C: OPINION OF J.C. BRADFORD & CO., L.L.C.
EXHIBIT D: TAX OPINION OF ALSTON & BIRD LLP
5
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. The following summary is not intended to be a complete
description of the matters covered in this Proxy Statement and is subject to and
qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement, including the Exhibits hereto.
Shareholders are urged to read carefully the entire Proxy Statement, including
the Exhibits.
GENERAL
Time, Place and Date of the
Special Meeting.......... The Special Meeting of shareholders of the Company
will be held at the principal executive offices
of the Company, 623 E. Emory Road, Knoxville,
Tennessee, on , , 1998,
at 10:00 a.m. local time.
Record Date................ Any holders of record of Common Stock at the close
of business on , 1997 are entitled to
notice of and to vote at the Special Meeting. On
such Record Date, there were shares of
Common Stock outstanding, with each such Voting
Share entitled to cast one vote with respect to
the Merger Agreement at the Special Meeting. See
"INTRODUCTION -- Voting Rights; Votes Required
for Approval."
Purpose of the Special
Meeting; Quorum; Vote
Required................. At the Special Meeting, shareholders will consider
and vote upon a proposal to approve and adopt the
Merger Agreement, a copy of which is included as
Exhibit A to this Proxy Statement. See
"INTRODUCTION -- Proposal to be Considered at the
Special Meeting." The presence at the Special
Meeting, in person or by proxy, of a majority of
the Voting Shares held by all shareholders of the
Company, as well as a majority of the Voting
Shares held by the Public Shareholders, is
necessary for a quorum to exist at the Special
Meeting. If a quorum is present, then two voting
requirements must be satisfied in order for the
Merger Agreement to be approved. First, pursuant
to the TBCA, approval of the Merger Agreement
requires the affirmative vote of the holders of a
majority of the outstanding Voting Shares. The
Management Group, who (including Martin) as of
the Record Date beneficially owned an aggregate
of approximately 48.7% of the Voting Shares, and
all directors of the Company, who (excluding
Martin) as of the Record Date beneficially owned
an aggregate of 8.5% of the Voting Shares, have
agreed or will agree to vote their shares in
favor of the Merger Agreement, thus assuring that
this vote will be obtained. However, as a second
vote requirement, the Merger Agreement requires
the affirmative vote of a majority of the Voting
Shares held by the Public Shareholders. See
"INTRODUCTION -- Voting Rights; Votes Required
for Approval" and "THE MERGER
AGREEMENT -- Conditions to Consummation of the
Merger."
Structure of the Merger.... Pursuant to the Merger Agreement, Merger Sub will
merge with and into the Company, with the Company
being the Surviving Corporation and becoming a
wholly owned subsidiary of Parent. Each
outstanding share of Common Stock (except those
shares of Common Stock held by the Company as
treasury stock or beneficially owned by Parent or
by shareholders who perfect their dissenters'
rights under the TBCA)
6
<PAGE> 11
will be converted into the right to receive
$14.50 in cash, without interest. Each
outstanding share of Common Stock beneficially
owned by Parent or held by the Company as
treasury stock will be canceled without
consideration. Each outstanding share of common
stock, par value $.001 per share, of Merger Sub
will be converted into one share of common stock
of the Surviving Corporation. See "SPECIAL
FACTORS -- Purpose and Structure of the Merger;
Certain Effects of the Merger," "-- Conflicts of
Interest; Certain Relationships," and "THE MERGER
AGREEMENT."
Plans for the Company After
the Merger............... After the Merger, the Company will become a wholly
owned subsidiary of Parent. Except as indicated
in this Proxy with respect to the Merger, Parent
does not have any present plans regarding any
extraordinary corporate transaction, such as a
merger, reorganization, sale of substantially all
the assets, or liquidation, involving the Company
or any of its subsidiaries. Upon consummation of
the Merger, Parent intends to continue to review
the Company and its assets, businesses,
operations, properties, policies, corporate
structure, capitalization and management and
consider if any changes would be desirable in
light of the circumstances then existing. The
Board of Directors of Parent has not formulated
any specific plans in the event the Merger is not
consummated. See "SPECIAL FACTORS -- Plans for
the Company After the Merger."
Surrender of Stock
Certificates............. Promptly after the Effective Time, each Public
Shareholder (other than those Public Shareholders
as to which dissenters' rights have been
perfected) will be mailed a transmittal letter
(with instructions) to use in effecting the
surrender and cancellation of certificates or
other documents evidencing Common Stock in
exchange for the Merger Consideration. The
Company shall not be obligated to deliver the
consideration to which any former holder of such
Common Stock is entitled until such holder
surrenders such holder's certificate or
certificates or other documents representing such
holder's shares for exchange. The certificate or
certificates or other documents so surrendered
shall be duly endorsed by the Paying Agent, as
such term is defined in the Merger Agreement, may
require. See "THE MERGER
AGREEMENT -- Consideration to be Received by
Shareholders of the Company." Failure by a Public
Shareholder to respond to the instructions set
forth in the transmittal letter within twelve
months after the Effective Time may result in
such Public Shareholder not receiving the Merger
Consideration. For a more detailed description of
the rights of the parties to the Merger Agreement
to any amount of the Merger Consideration which
remains unclaimed, see Exhibit A -- "The Merger
Agreement."
Certain Effects of the
Merger................... As a result of the Merger, the entire equity
interest in the Company will be beneficially
owned by Parent. Therefore, following the Merger,
the present holders of Common Stock (other than
Parent) will no longer have an equity interest in
the Company. Instead, each such holder of Common
Stock will have only the right to receive the
Merger Consideration for each share of Common
Stock held or to seek dissenters" rights as
described under the caption "DISSENTERS' RIGHTS."
To cause dissenters' rights to be available to
the Public
7
<PAGE> 12
Shareholders under the TBCA, the Company has
agreed to terminate its listing on the Nasdaq
National Market effective one business day prior
to the Effective Time. In addition, if the Merger
is consummated, Parent intends to apply to the
Commission for the deregistration of the Common
Stock under the Exchange Act and, upon
deregistration, the Company will be relieved of
its obligation to file reports, proxy statements
and other information with the Commission. See
"SPECIAL FACTORS -- Purpose and Structure of the
Merger, Certain Effects of the Merger."
Following the Merger, the sole director of Merger
Sub will be the sole director of the Surviving
Corporation. The officers of the Company will
continue to serve as officers of the Surviving
Corporation. See "DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY, PARENT, MERGER SUB AND
THE SURVIVING CORPORATION -- Information
Concerning Directors and Executive Officers of
the Surviving Corporation."
Opinion of Financial
Advisor to Special
Committee................ J.C. Bradford & Co., L.L.C. ("J.C. Bradford"), a
nationally recognized investment banking firm,
has delivered its written opinion to the Special
Committee of the Company's Board of Directors to
the effect that, as of such date, the Merger
Consideration is fair to the Public Shareholders
from a financial point of view. In conducting its
analysis and delivering its opinions, J.C.
Bradford considered such financial and other
factors as it deemed appropriate and feasible
under the circumstances including, among other
things, (i) the Merger Agreement; (ii) the
historical and current financial position and
results of operations of the Company; (iii)
certain internal financial analyses and forecasts
of the Company for the years beginning January 1,
1997 and ending December 31, 2002, prepared for
the Company by its senior management; (iv)
certain financial and securities data of certain
other companies, the securities of which are
publicly traded and that J.C. Bradford believed
to be comparable to the Company; (v) prices and
premiums paid in certain other acquisitions and
transactions that J.C. Bradford believed to be
relevant; (vi) historical and current price and
trading activity for the Common Stock; and (vii)
such other financial studies, analyses and
investigations as J.C. Bradford deemed
appropriate for purposes of its opinion. J.C.
Bradford also held discussions with members of
the senior management of the Company regarding
the past and current business operations,
financial condition and future prospects of the
Company. The full text of J.C. Bradford's written
opinion, which sets forth the assumptions made,
procedures followed, matters considered and
limits of its review undertaken in connection
with the opinion, is included as Exhibit C and is
incorporated by reference herein. HOLDERS OF
COMMON STOCK ARE URGED TO AND SHOULD READ SUCH
OPINION IN ITS ENTIRETY. For additional
information relating to the opinion of J.C.
Bradford, see "SPECIAL FACTORS -- Opinion of the
Special Committee's Financial Advisor."
Material Prepared by
Parent's Advisor......... William Blair & Company, L.L.C. ("William Blair"),
a nationally recognized investment banking and
financial advisory firm, provided
8
<PAGE> 13
Parent and Martin with certain advisory services
related to the Merger. William Blair assisted
Parent and Martin in structuring the Merger,
attempting to place financing for such
transaction and participating in negotiations
relating to the Merger. William Blair's services
did not include providing a valuation of the
Company or providing a fairness opinion related
to the Merger. In conducting its analysis and
delivering its advice, William Blair considered
such financial and other factors as it deemed
appropriate and feasible under the circumstances
including, among other things, (i) the Merger
Agreement and drafts of this Proxy Statement;
(ii) the Company's annual reports to
shareholders, annual reports on Form 10-K and
quarterly reports on Form 10-Q; (iii) certain
internal financial forecasts of the Company for
the years ending December 31, 1997 through
December 31, 2002, prepared for the Company by
its senior management; (iv) the Company's
historical financial performance relative to
internal budgets; (v) historical trading activity
for the Company's Common Stock; (vi) recent
comparable mergers and acquisitions; and (vii)
valuations of comparable companies. William Blair
also held discussions with members of the senior
management of the Company regarding the past and
current business operations, financial condition
and future prospects of the Company. For
additional information relating to the materials
prepared by William Blair, see "SPECIAL
FACTORS -- Materials Prepared by Martin's
Advisor."
Determination of Special
Committee; Recommendation
of Company's Board
of Directors............. A special committee of the Board of Directors,
consisting of three directors of the Company who
are not employed by or affiliated with the
Company (except in their capacity as directors),
Parent, Merger Sub, Martin or any of their
subsidiaries or affiliates (other than the
Company), and who do not hold and will not
acquire any equity interest in Parent or Merger
Sub (the "Special Committee"), has determined,
based in part upon the opinion of J.C. Bradford,
that the Merger and Merger Consideration are fair
to, and in the best interests of, the Public
Shareholders and has recommended approval of the
Merger Agreement by the Board of Directors and
shareholders of the Company. After considering
the recommendation of the Special Committee, the
Board of Directors (with Martin abstaining) has
approved the Merger Agreement and recommends that
shareholders vote FOR the proposal to approve and
adopt the Merger Agreement. The Board of
Directors' recommendation is based upon the
following factors, among others: (i) the
analyses, conclusions and recommendations of the
Special Committee; (ii) the opinion of J.C.
Bradford; and (iii) the fact that the Merger
Consideration was the result of arms' length
negotiations between the Special Committee and
members of the Board of Directors of Parent and
their respective legal and financial advisors.
See "SPECIAL FACTORS -- Background of the
Merger," "-- Recommendations of the Special
Committee, the Board, Parent, Merger Sub and
Martin" and "-- Conflicts of Interest; Certain
Relationships."
Conflicts of Interest...... Martin, who is the Chairman of the Board and Chief
Executive Officer of the Company, beneficially
owns approximately 47% of the Common
9
<PAGE> 14
Stock. The other members of the Management Group
beneficially own an aggregate of approximately
1.7% of the Common Stock. Pursuant to the
Shareholder Agreement, the members of the
Management Group will agree to transfer to
Parent, immediately prior to the Effective Time,
all of their shares of Common Stock, if any,
along with certain cash and promissory notes, and
each member of the Management Group will receive
shares of Parent's common stock. At the Effective
Time, the Management Group will not own any
shares of Common Stock, but will own in the
aggregate 100% of Parent's common stock. See
"SPECIAL FACTORS -- Conflicts of Interest;
Certain Relationships."
The directors of the Company (excluding Martin)
beneficially own an aggregate of approximately
8.5% of the outstanding Common Stock. If the
Merger is consummated, such persons will be
entitled to receive the Merger Consideration for
their shares. See "SPECIAL FACTORS -- Conflicts
of Interest; Certain Relationships."
In accordance with the terms of the Merger
Agreement, the sole director of the Surviving
Corporation will be Martin, currently the sole
director of Merger Sub. See "DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY, PARENT, MERGER
SUB AND THE SURVIVING CORPORATION -- Information
Concerning Directors and Executive Officers of
the Surviving Corporation."
Parent has agreed that all rights to
indemnification arising at or prior to the
effectiveness of the Merger in favor of the
directors or officers of the Company (including
the members of the Special Committee) as provided
in the Company's Charter and Bylaws, as in effect
on the date of the Merger Agreement, and in
contractual indemnification agreements and
director and officer liability insurance
currently in effect and covering directors and
officers of the Company, will, for a period of
six years survive the Merger and continue in full
force and effect. See "SPECIAL
FACTORS -- Conflicts of Interest; Certain
Relationships" and "THE MERGER AGREEMENT --
Covenants."
Federal Income Tax
Consequences............. The Company has received an opinion of Alston &
Bird LLP, tax counsel to the Company, to the
effect that the receipt of cash for Common Stock
pursuant to the Merger will be a taxable
transaction for federal income tax purposes under
the Internal Revenue Code of 1986, as amended
(the "Code"). A copy of such opinion is attached
hereto as Exhibit D. See "SPECIAL
FACTORS -- Certain Federal Income Tax
Consequences."
THE MERGER AGREEMENT
Effective Time of the
Merger................... The Merger will become effective upon the filing of
a certificate of merger with the Secretary of
State of the State of Tennessee or at such later
time as is agreed to by the parties to the Merger
Agreement and specified in such certificate of
merger. The filing will occur after all
conditions to the Merger contained in the Merger
Agreement have been satisfied or waived. The
Company and Parent anticipate that the Merger
will be consummated as promptly as practicable
following the
10
<PAGE> 15
Special Meeting. See "THE MERGER
AGREEMENT -- General" and "-- Effective Time of
the Merger."
Conditions to Consummation
of the Merger............ The respective obligations of the Company, on the
one hand, and Parent and Merger Sub, on the other
hand, to consummate the Merger are subject to the
satisfaction or waiver at or prior to the
Effective Time of the following conditions, among
others: (i) approval and adoption of the Merger
Agreement by a majority of the outstanding Voting
Shares at the Special Meeting; (ii) approval and
adoption of the Merger Agreement by a majority of
Voting Shares held by the Public Shareholders;
(iii) the absence of any statute, rule,
injunction or similar order prohibiting or
restricting the consummation of the Merger; (iv)
the receipt of all other required authorizations,
consents and approvals of governmental
authorities; (v) the material compliance by all
parties with their obligations under the Merger
Agreement; (vi) the material truth and
correctness of all representations and warranties
of the parties to the Merger Agreement; and (vii)
J.C. Bradford shall not have withdrawn its
written fairness opinion. The obligations of
Parent and Merger Sub are further subject to: (i)
there not having occurred any material adverse
change in the business, condition (financial or
otherwise) or results of operations of the
Company, and (ii) Parent having obtained proper
financing for the Merger. See "THE MERGER
AGREEMENT -- Conditions to Consummation of the
Merger."
Termination of the
Merger................... The Merger Agreement may be terminated and the
Merger abandoned at any time prior to the
Effective Time, notwithstanding approval of the
Merger Agreement by the shareholders of the
Company: (i) by mutual written consent of the
Parent and the Company (such determination to be
made on behalf of the Company by the Special
Committee); (ii) by either Parent or the Company
(such determination to be made on behalf of the
Company by the Special Committee) if the Merger
has not been consummated by January 30, 1998, so
long as the failure to consummate the Merger is
not the result of the terminating party's having
failed to fulfill a covenant or obligation under
the Merger Agreement; (iii) by either Parent or
the Company, if there shall be any law that makes
consummation of the Merger illegal or if any
judgment or injunction enjoining Parent or the
Company from consummating the Merger is entered
and becomes final and nonappealable; (iv) by
either Parent or the Company if the Merger
Agreement fails to receive the requisite
shareholder approval; or (v) by Parent or the
Company if the Board of Directors of the Company
withdraws, modifies or changes its recommendation
of the Merger Agreement or the Merger in a manner
adverse to Parent or Merger Sub or resolves to do
any of the foregoing or the Board of Directors of
the Company recommends to the shareholders of the
Company any Competing Transaction, as defined
herein under "THE MERGER AGREEMENT -- Other
Potential Bidders," or resolves to do so. See
"THE MERGER AGREEMENT -- Termination."
Expenses................... All fees, costs and expenses incurred by all
parties in connection with the Merger Agreement
and the transactions contemplated thereby shall
be paid by the Company if the Merger is
consummated. If the Merger is
11
<PAGE> 16
not consummated, Parent shall pay the first
$100,000 of its expenses and the Company shall
pay any additional expenses incurred by Parent in
connection with the Merger Agreement and the
transactions contemplated thereby, provided that
the Company has retained the right to negotiate
directly any of Parent's expenses with the third
parties that must be paid by the Company. Parent
has agreed not to take any action to change the
Lenders (as that term is defined below) so as to
increase materially the expenses payable by the
Company without the prior consent of the Company.
See "THE MERGER AGREEMENT -- Expenses."
Amendments to the Merger
Agreement................ The Merger Agreement may not be amended prior to
the Effective Time except by action of the
Company, Parent, Merger Sub and Martin set forth
in a written instrument signed on behalf of each
of the parties; provided that any such amendment
by the Company must be approved by the Board of
Directors of the Company, acting on the
recommendation of the Special Committee. After
approval of the Merger Agreement by the
shareholders of the Company at the Special
Meeting and without the further approval of such
shareholders, no amendment to the Merger
Agreement may be made which will change (i) the
Merger Consideration or (ii) any other terms and
conditions of the Merger Agreement if any of such
changes would adversely affect the shareholders
of the Company. See "THE MERGER
AGREEMENT -- Amendments."
Dissenters' Rights......... Holders of Common Stock entitled to vote on
approval of the Merger Agreement who do not wish
to accept the Merger Consideration of $14.50 per
share will have the right to dissent from the
Merger and, upon consummation of the Merger and
the satisfaction of certain specified procedures
and conditions, to receive the "fair value" of
such holders' shares of Common Stock in
accordance with the applicable provisions of the
TBCA. Shareholders seeking to perfect such rights
must submit written notice of such intent to
demand payment for their shares of Common Stock
prior to the vote at the Special Meeting. The
procedures to be followed by dissenting
shareholders are summarized under "DISSENTERS'
RIGHTS"and the applicable provisions of the TBCA
are reproduced as Exhibit -- "Chapter 23 of the
Tennessee Business Corporation Act."
Source of Funds............ It is estimated that the total funds required to
pay the Merger Consideration of $14.50 per share
to all Public Shareholders, consummate the other
transactions contemplated by the Merger
Agreement, refinance certain of the Company's
current indebtedness, fund the Surviving
Corporation's working capital needs after the
Merger, and pay all related fees, costs and
expenses will be approximately $88 million.
Approximately $10.5 million of such funds will be
obtained from the Management Group as equity
contributions made to Parent. The remaining $77.5
million will be obtained by means of borrowings
including (i) an aggregate of up to $57.5 million
in credit facilities obtained from Key Corporate
Capital, Inc. ("KCCI") or a syndicate of lenders
arranged thereby, (ii) term loans in the
aggregate amount of up to $10 million obtained
from KeyCorp Real Estate Capital Markets, Inc.
("KeyCorp") and secured by certain parcels of the
Com-
12
<PAGE> 17
pany's real property, and (iii) an aggregate of
$10 million of subordinated term loans obtained
from RSTW Partners III, L.P. ("RSTW") (KCCI,
KeyCorp and RSTW are collectively the "Lenders").
All of such borrowings will become effective at
the Effective Time, and will not become effective
if the Merger is not consummated for any reason.
The terms of and the documentation for such
borrowings have not yet been finalized and are
still being negotiated. Accordingly, the
description of the material terms and conditions
of the intended borrowings contained in "SOURCE
OF FUNDS FOR THE MERGER" herein is preliminary
and necessarily incomplete. In any event, the
final documentation for such borrowings might
contain terms that are more or less onerous than
currently contemplated. See "SOURCE OF FUNDS FOR
THE MERGER."
13
<PAGE> 18
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Company was initially founded in 1944 as a privately owned company. In
1980, Martin and other officers acquired the business presently conducted by the
Company in a leveraged buy-out and, in 1986, the Company conducted an initial
public offering. Following such public offering, Martin was the Company's
largest shareholder and, as of the Record Date, he continued to be the largest
shareholder, beneficially owning approximately 47% of the Common Stock.
On May 21, 1997, the Board of Directors of the Company held a special
meeting by telephone, at which all directors were present. At this meeting,
which Martin had requested, Martin informed the Board that he was interested in
recapitalizing the Company for the purpose of increasing shareholder value.
Martin said that he was interested in creating a transaction whereby a newly
formed holding company would purchase 100% of the Common Stock in a leveraged
purchase and the Company would then be privately held. Martin told the Board
that it was his intent to retain his equity interest in the Company by owning
equity of the newly formed holding company, and that he would expect management
of the Company as a group to own at least 50% of the holding company's equity.
Martin requested the Board's approval to begin preliminary discussions with
potential financiers and investors, and the Board approved such discussions and
agreed to permit them to perform due diligence with respect to the Company,
subject to appropriate confidentiality agreements being executed.
Following this May 21, 1997 Board meeting, Martin engaged in discussions
with potential financiers and investors. On or about July 9, 1997, Martin began
negotiating with William Blair for Parent to engage William Blair to assist in
negotiating the potential transaction with the Board and to assist in obtaining
the necessary financing for any such transaction, and a letter agreement was
executed with William Blair on July 27, 1997. William Blair was not engaged to
render any opinion as to the fairness of any offer that might be made by Martin
or to provide a valuation analysis.
In the meanwhile, at a regular quarterly Board of Directors meeting held on
July 18, 1997 at which all directors were present, Martin expressed to the Board
of Directors of the Company his continued interest in obtaining total ownership
of the Company. Martin also indicated that he had no interest in selling his
shares of Common Stock to a third party. So that it could respond to Martin's
initiatives, the Board formed the Special Committee, comprised of James F.
Smith, Jr., as Chairman, James A. Haslam III and H. Mitchell Watson, Jr. The
Special Committee's stated purpose was to evaluate, make recommendations
regarding and negotiate any proposed direct or indirect acquisition by Martin.
At this meeting, Martin told the Board that he would like to use the law firm of
Alston & Bird LLP ("Alston & Bird") to advise him in connection with any
proposed transaction, and the Board approved such representation, waiving any
potential or actual conflict of interest that might arise as a result of Alston
& Bird having represented the Company since 1990.
Shortly after its formation, the Special Committee retained Bass, Berry &
Sims PLC ("BBS") as its legal counsel, and also began negotiating with J.C.
Bradford regarding J.C. Bradford's retention as the Special Committee's
independent financial advisor. J.C. Bradford acted as the Special Committee's
financial advisor, and was formally engaged as such on August 25, 1997.
14
<PAGE> 19
At a special meeting of the Board of Directors held on July 30, 1997,
Martin offered to purchase the outstanding Common Stock of the Company for
$13.50 per share (the "Initial Proposal") by delivering to the Board the
following letter:
July 30, 1997
Special Committee
Board of Directors
Plasti-Line, Inc.
Gentlemen:
Through an acquisition corporation to be formed by me, and
subject to a definitive agreement, I intend to acquire all of the
outstanding shares of common stock (the "Shares") of Plasti-Line, Inc.
("Plasti-Line").
In connection with such proposed transaction, I have engaged
William Blair & Company ("Blair") to serve as my investment banker and
have obtained their advice as to the value of the Shares. Having
obtained that advice, I am willing to pay $13.50 per Share, which I
believe is a full and fair price that will provide the public
shareholders of Plasti-Line a premium in excess of 40% over the
current bid price of the Shares. In addition, Blair has advised me
that if it had been engaged by the Special Committee of the Board of
Directors, it would be able to give a fairness opinion to the Special
Committee at such price.
I want to confirm my ability and desire to carry out this
proposal. Blair has advised me that it is highly confident of its
ability to obtain the necessary funds on my behalf to complete the
proposed acquisition of the Shares. I want also to advise you that I
am not willing to sell my Shares to a third party.
I intend to include certain key management employees of
Plasti-Line as equity participants in the newly-formed acquisition
corporation, but I have not yet discussed my proposal with any
management employees other than Mark Deuschle.
Please note, that this proposal is subject to my obtaining the
necessary funds and entering into a definitive agreement with
Plasti-Line pursuant to negotiations with you, including provisions
dealing with the costs of proceeding with this proposal and other
customary terms. I am willing to discuss with you the relative
advantages of proceeding with a tender offer followed by a merger or
with an initial merger.
I understand that you are engaging independent lawyers to
represent you and the public shareholders and an investment banker to
assist you in the negotiations and to provide a fairness opinion with
respect to the proposed transaction. We are prepared to meet with your
advisors as soon as possible to provide them with any information they
may need. Thank you for your consideration of this proposal. I ask
that you respond as soon as possible so that we can proceed with this
transaction.
Sincerely,
James R. Martin
Following delivery of this letter, the Board discussed with representatives
of William Blair, by telephone, the anticipated capital structure of the entity
that would acquire the Company. The representatives of William Blair stated that
they were highly confident that the transaction described in Martin's July 30
letter could be financed.
15
<PAGE> 20
Immediately following the July 30 meeting, the Company and Martin then
issued the following press release:
PLASTI-LINE TO BEGIN GOING-PRIVATE DISCUSSIONS
Knoxville, Tennessee
July 30, 1997
PLASTI-LINE, INC. ("SIGN") announced today that its Board of
Directors has received a merger proposal from James R. Martin,
Chairman of the Board and Chief Executive Officer of Plasti-Line.
Under the terms of this proposal, Mr. Martin intends to form a new
corporation, which may include as shareholders certain key management
personnel of Plasti-Line, which intends to acquire all of the
outstanding common stock of Plasti-Line not owned by such corporation
at a price of $13.50 per share in cash.
The Board of Directors of Plasti-Line has authorized a special
committee of independent directors to negotiate with the proposed
acquiring corporation and to determine whether to approve any such
acquisition on behalf of the Board. Plasti-Line said that there can be
no assurance at this time as to whether or not any transaction will
occur or as to the timing or terms of any transaction.
Mr. Martin, who currently beneficially owns 46.4% of
Plasti-Line's outstanding common stock, including shares issuable upon
the exercise of certain stock options, has stated to the Board that he
has no current intent to sell his shares of Plasti-Line common stock
to a third party.
Plasti-Line designs, markets, produces and installs interior and
exterior brand identity and point of purchase marketing products and
systems for retailers and manufacturers.
In response to Martin's offer, on August 7, 1997, the Special Committee met
with representatives of BBS and J.C. Bradford. The Special Committee reviewed
and discussed with such representatives alternative transactions that could be
used by Martin to acquire the entire equity interest in the Company. The Special
Committee also reviewed and discussed at this time the alternative of not
entering into any transaction with Martin and having the Company remain public.
The Special Committee also discussed with representatives of BBS the fiduciary
duties and legal standards applicable to the Special Committee. The Special
Committee was advised that its purpose was to negotiate at arm's length with
Martin in order to protect the interests of the Public Shareholders, and that it
was under no obligation to reach any agreement with Martin unless it determined
that such an agreement was in the best interests of the Public Shareholders. The
Special Committee believed, however, that taking the Company private and
pursuing an offer from Martin was in the best interests of the Company's
shareholders due to several factors that could have a negative effect on the
value of the Common Stock, including (i) the fact that public companies (like
the Company) that are considered small-cap companies without significant growth
potential often fail to realize a satisfactory increase in the price of their
publicly traded stock, (ii) the low volume of trading in the Company's stock
that results primarily from Martin owning such a large block of shares, (iii)
the fact that the Company's current line of business is generally not perceived
to be an exciting growth industry by analysts, and (iv) the periodic past
failures of the Company to meet forecasted financial goals for example, (a) in
1994, the Company achieved only approximately 33% of its budgeted operating
income and reported a loss, (b) in 1995, the Company achieved only approximately
72% of its budgeted operating income and approximately 49% of its budgeted
pretax income, and (c) in the first nine months of 1997, the Company achieved
only 57% of its original budgeted operating income and 64% of its original
budgeted pretax income. J.C. Bradford discussed the progress of its preliminary
analyses of the Company and Martin's Initial Proposal. Following the meeting, on
August 7 and 8, 1997, representatives of J.C. Bradford and BBS met with, and
received information from, various officers of the Company as part of their
review of the Company and its business.
On August 18, 1997, the Special Committee met again, and representatives of
J.C. Bradford made a presentation with respect to the Initial Proposal and the
$13.50 per share to be received by the Company's shareholders under such
proposal. J.C. Bradford compared the $13.50 offer from Martin to implied per
share
16
<PAGE> 21
valuations derived from a variety of preliminary analyses it conducted based on
different assumptions regarding the Company's forecast. These analyses included
comparable company analysis, discounted cash flow analysis, leveraged buyout
analysis and acquisition premiums analysis. See "SPECIAL FACTORS -- Opinion of
the Special Committee's Financial Advisor." The Special Committee also discussed
conversations that it had held with certain Public Shareholders, including
Kennedy Capital Management, Inc. ("Kennedy Capital") and PaineWebber, each of
whom had initiated contact with the Special Committee to express disapproval of
the $13.50 per share price offered by Martin. The Special Committee then
concluded that the $13.50 per share price as proposed by Martin was not a fair
or adequate price, and that representatives of J.C. Bradford should convey this
conclusion to representatives of William Blair.
Following the Special Committee's meeting on August 18, 1997,
representatives of J.C. Bradford told representatives of William Blair that the
Special Committee had concluded that $13.50 per share was not a fair or adequate
price. They also discussed whether a transaction could reasonably be financed at
a price greater than $13.50 per share and when commitment letters relating to
such financing might be available.
On August 19, 1997, Martin received a letter from Charles W. Schweizer on
behalf of Kennedy Capital which, acting on its own and not at the request of
Martin, the Company, Parent or the Special Committee, had obtained an
independent valuation of the Company from Holt Value Associates, L.P. ("Holt").
Mr. Schweizer's letter stated that this report had been prepared using only
publicly available information and that it indicated a valuation of the
Company's stock between $13.75 and $22.76 per share, with the best estimate of
$17.71 per share. Mr. Schweizer also stated that Kennedy Capital intended to
share this valuation with selected institutional investors and, in that regard,
wanted the Company to provide Kennedy Capital with a list of the names and
addresses of the Company's shareholders. Alston & Bird on behalf of the Company
responded to Mr. Schweizer in a letter dated August 22, 1997 stating that the
Special Committee had been formed to negotiate on behalf of the public
shareholders of the Company and that a copy of his request had been delivered to
the Special Committee.
On August 22, 1997, the Special Committee met with representatives of J.C.
Bradford and BBS to review J.C. Bradford's August 18 discussions with William
Blair, the letter from Charles Schweizer which was forwarded to BBS on August
22, 1997, and various other matters. Representatives of J.C. Bradford had
contacted Holt to discuss its report, and Holt confirmed that the report had
been prepared using a proprietary valuation model and assumptions made by Holt
with no input from the Company. Representatives of J.C. Bradford and BBS then
discussed with the Special Committee the fact that, in light of these
discussions with Holt, J.C. Bradford did not intend to rely on or incorporate
the Holt report in its analysis. Also on August 22, 1997, Alston & Bird provided
BBS with a draft merger agreement with respect to a proposed merger transaction.
Following this August 22 meeting, Martin orally expressed to Mr. Smith an
unwillingness to raise the price above $13.50. The Special Committee then met
again and, after conferring with representatives of J.C. Bradford and BBS,
remained unwilling to recommend any transaction that valued the Company at a
price of $13.50 per share, and the Special Committee concluded that it would be
inappropriate to respond with a specific price counteroffer. Mr. Smith then
conveyed to Martin that $13.50 was still unacceptable. Mr. Smith also told
Martin that if Martin did not raise his offer above $13.50, the Special
Committee would formally disapprove the Initial Proposal. In response, Martin
suggested that a meeting between himself, the Special Committee and each of
their financial and legal advisors take place before such a formal action.
On September 8, 1997, Martin, the Special Committee (with Mr. Watson, who
was out of the country, being absent), and each of their financial and legal
advisors met in Nashville, Tennessee with the main purpose of determining
whether the negotiations should continue. William Blair first discussed the
material it prepared to assist Martin in his negotiation and then J.C. Bradford
gave an overview of its analysis. There was also a discussion of the status of
Martin's and William Blair's efforts to obtain financing for the transaction.
Following these discussions, the Special Committee reiterated its unwillingness
to approve any transaction that valued the Company's stock at $13.50 per share.
The Special Committee also expressed its conclusion that it should disapprove
formally the Initial Proposal and issue a press release announcing such
disapproval if Martin was still unwilling to raise his offer above $13.50 per
share. Martin then responded by offering $14.00
17
<PAGE> 22
per share. The Special Committee requested the opportunity to discuss this new
offer with the full Committee, including Mr. Watson, and the meeting was
adjourned.
After updating Mr. Watson on the events of the September 8, 1997 meeting,
the Special Committee met with representatives of J.C. Bradford and BBS by
telephone on September 9, 1997 to discuss Martin's most recent offer of $14.00
per share. J.C. Bradford informed the Special Committee that it did not believe
it could give a fairness opinion at $14.00 per share, and the Special Committee
concluded that $14.00 per share was neither fair nor adequate. The Special
Committee also concluded that it should convey to Martin (i) that it believed a
price of $15.50 per share would be both fair and adequate and at such a price it
would not require that the transaction be approved by a majority of the Public
Shareholders, and (ii) that the Special Committee would consider proposals below
$15.50 per share, so long as they were fair, but approval of any such price
would require that the transaction be approved by a majority of the Public
Shareholders.
At a meeting on September 13, 1997 between the Special Committee (minus Mr.
Watson), a representative of BBS and Martin, Messrs. Smith and Haslam conveyed
to Martin the Special Committee's response as described above. Martin then
orally proposed an offer of $14.50 per share and stated that he was unwilling to
consider any price higher than $14.50 per share.
On September 16, 1997, the Special Committee met with its financial and
legal advisors to consider Martin's offer of $14.50 per share. Representatives
of J.C. Bradford informed the Special Committee that they believed they could
give a fairness opinion at that price, subject to their review of the Company's
recent operating results. The Special Committee then determined that it would
consider recommending that the Company's Board of Directors approve a
transaction at $14.50 per share, provided that approval of the transaction by a
majority of the Public Shareholders was a condition to the Company's obligation
to consummate the transaction, and provided further that the other outstanding
issues relating to the merger agreement, particularly in connection with the
payment of expenses, could be resolved satisfactorily.
Also on September 16, 1997, representatives of BBS forwarded to Alston &
Bird their comments to the proposed draft merger agreement. The principal issues
arising out of these comments were (i) whether the agreement should be approved
by a majority of the Public Shareholders; (ii) whether Martin's obtaining
financing should be a condition to closing the merger and whether the Company
should enter into the merger agreement prior to Martin's having obtained a
binding commitment for financing; (iii) whether the Company should pay Martin's
expenses or a portion thereof if the transaction does not close; and (iv) the
amount that the Company would be obligated to pay to continue director liability
insurance coverage.
Between September 16 and 24, 1997, BBS, Alston & Bird, Mr. Smith and Martin
attempted to resolve the remaining issues relating to the merger agreement,
particularly as they related to the payment of Martin's expenses if no
transaction were consummated. Martin expressed an unwillingness to bear the risk
that he would have to pay the expenses if the transaction were not consummated
subsequent to execution of a definitive merger agreement by the parties.
On September 24, 1997, the Special Committee, along with representatives of
BBS and J.C. Bradford, met with the other members of the Board of Directors of
the Company (except for Messrs. Hanes and Martin). Representatives of BBS
summarized the status of the negotiations with Martin and the remaining issues,
with particular emphasis on the question regarding payment of expenses. The
Special Committee and those members of the Board present expressed a willingness
to accept $14.50 per share and also determined to propose to Martin that each
party pay its own expenses in connection with the transaction, provided that (i)
in the event the merger agreement were terminated due to breach by one party,
such breaching party would pay the non-breaching party's expenses and (ii) if
the Company were to terminate the merger agreement because the Board withdrew
its approval of the transaction, the Company would pay all of Martin's expenses.
On that same day, September 24, 1997, Mr. Smith and a representative of BBS met
with Martin and Mark Deuschle, the Company's Vice President -- Finance, to
convey the Special Committee's current position on the $14.50 per share price
and the proposal relating to expenses described in the preceding sentence.
Martin reiterated his unwillingness to bear the risk that he would have to pay
the expenses if the transaction was not consummated subsequent to execution of a
definitive merger agreement. The next day, September 25, 1997, Martin proposed
18
<PAGE> 23
at a regularly scheduled quarterly meeting of the full Board, that he would pay
the first $100,000 of his expenses if the Merger were not consummated, and the
Company would pay the rest.
On October 13, 1997, BBS forwarded to Alston & Bird comments to a revised
draft of the merger agreement. On October 14, 1997, representatives of Alston &
Bird reiterated to representatives of BBS Martin's willingness to pay the first
$100,000 of his expenses if the merger agreement were executed but not
consummated. On October 15, 1997, the Special Committee met with representatives
of BBS and J.C. Bradford to discuss the expenses issue and the status of
Martin's and William Blair's efforts to obtain financing for the transaction at
$14.50 per share. Prior to such meeting, representatives of Alston & Bird had
conveyed Martin's desire that the transaction go to the full Board for approval
as soon as possible. The Special Committee determined that it was unwilling to
make a recommendation regarding the transaction to the Board until Martin had
obtained more definitive commitment letters from potential lenders. In addition,
the Special Committee determined that it would be willing to approve the
Company's payment of all reasonable transaction expenses incurred by Martin
exceeding $100,000, in the event the transaction is not consummated for any
reason, if (i) the Board received copies of written commitment letters from
Martin's lenders such that the Board would be better able to determine the risk
of the transaction not closing, (ii) the Board received a more definitive
schedule than had been previously provided to the Board showing the expenses
that would be borne by the Company if the transaction does not close, and (iii)
the Board retained the right to negotiate directly any of such expenses with the
third parties expected to seek payment therefor. Following this determination by
the Special Committee, the full Board convened by telephone, and the Special
Committee, together with its advisors, summarized the current status of
negotiations for the Board. The Board informally approved the Special
Committee's proposed resolution of the expenses issue. The Special Committee
then telephoned Martin to convey this latest proposal on expenses, which Martin
accepted.
On October 24, 1997, Martin forwarded to BBS and the Special Committee
copies of the commitment letters from KCCI and KeyCorp, and the proposal from
RSTW, relating to the financing of the Transaction. Following the review of such
letters and proposal, on October 31, 1997, the Special Committee met with
representatives of BBS and discussed the status of the negotiations, including
obtaining the financing. Immediately following that meeting, on October 31, the
Special Committee met with the full Board of Directors of the Company. At that
meeting, the Special Committee and the Board received a presentation from J.C.
Bradford that, as of the date of such presentation and based upon and subject to
a certain matters stated in such presentation, the Merger Consideration was fair
from a financial point of view to the Public Shareholders. After further
discussion, the Special Committee concluded, based to a significant degree on
the opinion of J.C. Bradford and the other factors described below under
"-- Recommendations of the Special Committee, the Board, Parent, Merger Sub and
Martin" that the terms of the Merger were fair to, and in the best interest of,
the Public Shareholders and recommended that the Company's Board of Directors
(i) approve and adopt the Merger Agreement in the form presented to the Special
Committee; (ii) determine that the Merger is fair to and in the best interest of
the Public Shareholders; and (iii) recommend that the Shareholders approve the
Merger Agreement. The Board of Directors took such actions, and each of the
Directors agreed to vote their shares in favor of the Merger, subject to receipt
of the final commitment letter from RSTW relating to the financing. The Board
instructed representatives of BBS to review such letter upon receipt and notify
Mr. Smith as to whether such letter is substantially the same as the RSTW
proposal delivered to the Special Committee on October 24. The Board authorized
Mr. Smith to execute and deliver the Merger Agreement on behalf of the Company
upon such notification from BBS. The form of RSTW letter was received on
November 3, 1997, BBS concluded that it was substantially the same as the
previously delivered proposal, and Mr. Smith executed and delivered the Merger
Agreement on November 3, 1997.
19
<PAGE> 24
Following the taking of such actions, on November 4, 1997, the Company and
Parent issued the following joint press release:
PLASTI-LINE SPECIAL COMMITTEE
ACCEPTS $14.50 PER SHARE OFFER AND
ENTERS INTO MERGER AGREEMENT
Knoxville, Tennessee
November 4, 1997
PLASTI-LINE, INC. ("SIGN") announced today that it has entered
into a definitive Agreement and Plan of Merger (the "Merger
Agreement") with PL Holding Corp., PL Acquisition Corp. (a wholly
owned subsidiary of PL Holding Corp.), and James R. Martin, Chairman
of the Board and Chief Executive Officer of Plasti-Line. Mr. Martin,
who beneficially owns approximately 47% of Plasti-Line's outstanding
common stock, formed PL Holding Corp. for the purposes of this
transaction. Certain other members of Plasti-Line's management will
become stockholders of PL Holding Corp., along with Mr. Martin, on or
before closing. The Merger Agreement is expected to result in the
purchase by PL Holding Corp. of the shares of Plasti-Line common stock
not currently owned by Mr. Martin or such management group. At the
time of the merger, PL Acquisition Corp. will be merged into
Plasti-Line, and Plasti-Line will become a wholly owned subsidiary of
PL Holding Corp.
A special committee of independent directors of the Board of
Plasti-Line has negotiated with Mr. Martin, who acted on behalf of PL
Holding Corp. They have agreed that the merger price for the
Plasti-Line common stock will be $14.50 in cash per share
Negotiations regarding the merger began in July 1997. The merger
is subject to approval of the definitive Merger Agreement by a
majority of the owners of the Plasti-Line shares not owned by Mr.
Martin, the management group or their affiliates. The merger is also
subject to PL Holding Corp. obtaining the financing necessary to pay
the merger price and consummate the other transactions involved in the
merger.
Plasti-Line designs, markets, produces and installs interior and
exterior brand identity and point of purchase marketing products and
systems for retailers and manufacturers.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE, THE BOARD, PARENT, MERGER SUB AND
MARTIN
The Special Committee. The Company's Board of Directors created the
Special Committee, which consists of three of the Company's directors who are
not employed by or affiliated with the Company, Parent, Merger Sub, Martin or
any of their subsidiaries of affiliates (except in their capacity as directors
of the Company), to act solely on behalf of the Public Shareholders for purposes
of negotiating the Merger. The Special Committee retained BBS as its independent
legal counsel and J.C. Bradford as its independent financial advisor, to assist
it in negotiating and determining the fairness of the Merger on behalf of the
Public Shareholders. At a meeting of the Special Committee on October 31, 1997,
the Special Committee approved the Merger price of $14.50 in cash per share.
Also on October 31, 1997, following a presentation by J.C. Bradford to the full
Board of Directors as to its opinion that the offered price of $14.50 per share,
on the terms set forth in the Merger Agreement, was fair to the Public
Shareholders from a financial point of view, the Special Committee concluded the
Merger and the Merger Consideration are fair to, and in the best interests of,
the Public Shareholders and recommended to the Board of Directors that it
approve the Merger Agreement. Based in part on the recommendation of the Special
Committee and considering the written fairness opinion received from J.C.
Bradford, the Board of Directors of the Company (with Martin abstaining):
(i) determined that the Merger is fair to, and in the best interests
of, the Public Shareholders;
20
<PAGE> 25
(ii) approved and adopted the Merger Agreement and the transactions
contemplated thereby and authorized the execution, delivery and performance
thereof by the Company; and
(iii) resolved to recommend that the shareholders of the Company
approve the Merger Agreement and the transactions contemplated thereby.
The Board of the Directors of the Company believes that the terms of the
Merger Agreement are fair to, and in the best interests of, the Company and the
Public Shareholders. In reaching its conclusion, the Board of Directors of the
Company adopted the recommendation of the Special Committee as set forth below.
See "-- Conflicts of Interest; Certain Relationships."
The Special Committee, in reaching its conclusion that the Merger is fair
to, and in the best interests of, the Public Shareholders, and in determining to
recommend approval of the Merger Agreement and the Merger to the Board of
Directors of the Company, considered a number of factors, including, without
limitation:
1. The oral and written presentations of J.C. Bradford to the Special
Committee and the full Board of Directors of the Company on October 31,
1997, and the written opinion of J.C. Bradford dated November 3, 1997 to
the effect that, as of the date of such opinion and based upon and subject
to certain matters stated in such opinion, the Merger Consideration was
fair, from a financial point of view, to the Public Shareholders. See
"-- Opinion of the Special Committee's Financial Advisor." The opinion of
J.C. Bradford is attached hereto as Exhibit C. The Special Committee has
accepted the analysis of J.C. Bradford as set forth in its opinion dated
November 3, 1997 and accompanying presentation materials. The shareholders
of the Company are urged to read such opinion carefully in its entirety.
2. The Special Committee's conclusion that the Merger Consideration
represented the highest price that Parent would be willing to pay in
acquiring the Common Stock held by the Public Shareholders. This
determination was the result of the Special Committee's substantial
negotiations with Parent in an attempt to obtain the highest possible
price.
3. The terms of the Merger Agreement, including without limitation,
the amount and form of consideration; the nature of the parties'
representations, warranties, covenants and agreements; and the conditions
to the obligations of Parent and the Company. In this regard, the Special
Committee considered significant the requirement that the Merger Agreement
be approved by a majority of the shares held by the Public Shareholders as
a condition to the Company's obligation to consummate the Merger. The
Special Committee also viewed favorably the fact that the Merger Agreement
contained a limited number of representations and warranties by the Company
and a limited number of conditions to consummation of the Merger, thus
making consummation of the transaction more likely than one in the which
the agreement imposed more significant conditions to consummation. The
Special Committee also considered favorable to its determination the fact
that the Merger Agreement could be terminated without making any payment to
Parent (other than payment for fees and expenses) if the Special Committee
withdrew its recommendation of the Merger Agreement or the Merger.
4. The possibility that, in the absence of a Merger Agreement, Parent
could increase its ownership of the Common Stock in a transaction not
approved by the Company or the Special Committee.
5. The fact that the Merger Consideration represented (i) a 36.5%
premium over the last reported sales price ($10.625) of the Common Stock on
July 29, 1997, the day immediately preceding the public announcement of
negotiations between Parent and the Company with respect to a possible
merger of the Company with a subsidiary of Parent; (ii) a 36.5% premium
over the last reported sales price ($10.625) of the Common Stock on July
22, 1997, the day one week preceding the announcement of the negotiations;
and (iii) a 75.8% premium over the last reported sales price ($8.25) of the
Common Stock on July 24, 1996, the last day that the Common Stock traded
one year prior to the announcement of the negotiations. The Special
Committee also noted that the Merger Consideration represented a 20.8%
premium over the last reported sales price ($12.00) of the Common Stock on
November 3, 1997, the last business day immediately preceding the
announcement of the $14.50 price agreed to by the Special Committee and
Parent.
21
<PAGE> 26
6. The Special Committee's knowledge of the business, financial
condition, results of operations and prospects of the Company. The members
of the Special Committee were generally familiar with and knowledgeable
about the Company's affairs, including the present and possible future
economic and competitive environment in which the Company operates its sign
design and production business. The Special Committee also noted that the
Company's status as a publicly held company imposed additional regulatory
burdens and expenses on the Company, as well as potential liability
associated with public disclosure requirements applicable to publicly held
companies generally.
7. The historical trading prices of the Common Stock and the limited
trading volume and market for the Common Stock, resulting in limited
liquidity for the Public Shareholders. Also, the Board considered that
Martin had indicated that he had no interest in selling his shares of
Common Stock to a third party, and that, since the public announcement of
Martin's offer on July 30, 1997, no third party had expressed any interest
in acquiring, or making an offer to acquire, the Company. The Board also
considered the periodic past failures of the Company to meet forecasted
financial goals.
8. The requirement of the Merger Agreement that the Company terminate
its listing on the Nasdaq National Market effective one business day prior
the Effective Time, so that dissenters' rights will be available to the
Public Shareholders who do not vote in favor of the Merger Agreement and
who perfect such rights under the applicable provisions of the TBCA. See
"DISSENTERS' RIGHTS."
In view of the number and disparate nature of the factors considered by the
Special Committee, the Special Committee did not assign relative weights to the
factors considered in reaching its conclusions. The Special Committee did,
however, rely significantly on the presentations and opinion of J.C. Bradford
described in paragraph 1 above.
The members of the Special Committee (as well as the other directors of the
Company) are indemnified by the Company under the Company's Charter and the
applicable provisions of the TBCA, with respect to their actions in connection
with the Merger, including securities violations, to the extent that applicable
law does not otherwise prohibit such indemnification. In addition, the members
of the Special Committee and the other directors are exculpated from certain
liabilities under the Company's Charter, with respect to their actions in
connection with the Merger, and they are covered by directors liability
insurance maintained by the Company. As compensation for service on the Special
Committee, each member of the Special Committee will receive from the Company
$300 for each meeting of the Special Committee attended by such member. Such
compensation is in addition to the compensation payable to all directors of the
Company, including the directors comprising the Special Committee.
The Board of Directors. The Board of Directors of the Company (with Martin
abstaining) has concluded that the Merger and the Merger Consideration are fair
to the Public Shareholders and recommends that the shareholders vote in favor of
the Merger Agreement based upon the following factors: (i) the conclusions of
the Special Committee; (ii) the opinion of the Special Committee's financial
advisor, J.C. Bradford, to the effect that the $14.50 per share of Common Stock
to be received in the Merger is fair from a financial point of view to the
Public Shareholders; and (iii) the factors referred to above as having been
taken into account by the Special Committee, which the Board of Directors adopts
as its own (see "-- Background of the Merger" and "-- Opinion of the Special
Committee's Financial Advisor"). In view of the wide variety of factors
considered in connection with its evaluation of the Merger and the Merger
Consideration, the Board of Directors did not find it practicable to assign
relative weights to the factors considered in reaching its decision and,
therefore, the Board of Directors did not quantify or otherwise attach relative
weights to the specific factors considered by the Board.
The Board of Directors also believes that the proposed Merger is
procedurally fair to the Public Shareholders, based on several factors. First,
the Board of Directors formed a Special Committee comprised of directors who are
not employed by the Company and who are not otherwise affiliated with Martin or
the other members of the Management Group. This Special Committee conducted all
negotiations with Martin regarding the Merger and the consideration to be paid
to the Public Shareholders. Second, the Special Committee engaged its own
independent legal counsel, BBS, to provide legal advice to the Special Committee
in connection with the Merger. Third, the Special Committee engaged an
independent financial advisor,
22
<PAGE> 27
J.C. Bradford, to render an opinion regarding the fairness of the Merger
Consideration and, fourth, J.C. Bradford did in fact render such an opinion that
the Merger Consideration is fair, from a financial point of view, to the Public
Shareholders. Fifth, recognizing that the interests of Parent and the Management
Group in the Merger may not be the same as the interests of the Public
Shareholders, the Special Committee required that the approval of a majority of
the Public Shareholders be obtained as a condition to consummation of the
Merger. Sixth, Public Shareholders who do not want to accept the Merger
Consideration may have dissenters' rights under the TBCA. The Merger Agreement
requires the Company to terminate its listing on the Nasdaq National Market one
business day prior to the Effective Time, so that such dissenters' rights will
be available to those Public Shareholders who perfect such rights. See
"-- Conflicts of Interest; Certain Relationships" and "-- Opinion of the Special
Committee's Financial Advisor."
Parent, Merger Sub and Martin. The Board of Directors of Parent, the Board
of Directors of Merger Sub and Martin have each concluded that the Merger and
the Merger Consideration are fair to the Public Shareholders and each recommends
that the shareholders vote in favor of the Merger based upon the following
factors: (i) the conclusions and recommendations of the Special Committee and
the Company's Board of Directors; (ii) the fact that the Merger Consideration
and the other terms and conditions of the Merger Agreement were the result of
arms' length good faith negotiations between the Special Committee and its
advisors and the representatives of Parent, Martin and their advisors; (iii) the
fact that J. C. Bradford issued a fairness opinion to the Special Committee to
the effect that the Merger is fair from a financial point of view to the Public
Shareholders; (iv) the advice of William Blair and (v) the other factors
referred to above as having been taken into account by the Special Committee and
the Company's Board of Directors, which the Board of Directors of Parent, the
Board of Directors of Merger Sub and Martin each adopt as their own. See
"-- Background of the Merger" and "-- Material Prepared by Parent's Advisor."
In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Merger Consideration, neither Parent's Board of
Directors, Merger Sub's Board of Directors nor Martin found it practicable to
assign relative weights to the factors considered in reaching its respective
decision and, therefore, the members of such Boards and Martin did not quantify
or otherwise attach relative weights to the specific factors considered by the
Special Committee, the Company's Board of Directors, Merger Sub's Board of
Directors and Martin. See "-- Conflicts of Interest; Certain Relationships."
Parent engaged William Blair to provide advice regarding, and to assist it
and Martin in negotiating, the Merger Agreement, and to assist Parent and Martin
in obtaining the financing necessary to consummate the transactions contemplated
by the Merger Agreement and the Shareholder Agreement. William Blair was not
engaged to, and did not, render any opinion as to the fairness of the Merger
Consideration. If the Merger is consummated, William Blair will be paid a fee of
$1.05 million. In addition, if Parent obtains equity and debt financing upon
terms at least as favorable as those agreed upon by Parent and William Blair in
the engagement agreement, William Blair will be paid an additional fee of
$250,000. Regardless of whether the Merger is consummated, William Blair will be
reimbursed for all out-of-pocket expenses. All amounts owed to William Blair
will be paid by the Company pursuant to its agreement to pay all expenses of the
transaction.
OPINION OF THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR
J.C. Bradford was retained by the Special Committee to deliver its opinion
regarding whether the Merger Consideration was, as of the date of such opinion,
fair to the Public Shareholders from a financial point of view. J.C. Bradford is
a nationally recognized investment banking firm that engages in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwriting, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. J.C. Bradford was selected as the Special Committee's financial
advisor based upon such expertise.
On October 31, 1997, J.C. Bradford delivered its oral opinion to the
Special Committee to the effect that, as of such date, the Merger Consideration
was fair to the Public Shareholders from a financial point of view. J.C.
Bradford subsequently confirmed its oral opinion by delivery of its written
opinion dated November 3, 1997. That opinion was reaffirmed as of the date of
this Proxy Statement. J.C. Bradford's opinion is directed only to the fairness
from a financial point of view of the Merger Consideration to be received by the
Public
23
<PAGE> 28
Shareholders in the Merger and does not constitute a recommendation to any
shareholder as to how such Shareholder should vote. J.C. Bradford conducted
valuation analyses of the Common Stock and evaluated the Merger Consideration,
but was not asked to and did not recommend a specific per share price to be paid
by Parent for the Common Stock. J.C. Bradford's opinion does not address the
likely tax consequences of the Merger to any Public Shareholder. In addition,
J.C. Bradford was not asked to consider and its opinion does not address the
relative merits of the proposed Merger as compared to any alternative business
strategies that might exist for the Company or the effect of any other
transactions in which the Company might engage. J.C. Bradford did not make an
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries or affiliates. The summary of the opinion of J.C.
Bradford set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion. The full text of J.C. Bradford's
written opinion, which sets forth the assumptions made, procedures followed,
matters considered and limits of its review undertaken in connection with the
opinion, is included as Exhibit C and is incorporated by reference herein.
Shareholders are urged to and should read such opinion in its entirety.
A copy of the full text of the written materials used in connection with
J.C. Bradford's October 31, 1997 presentation has been filed as an exhibit to
the Schedule 13E-3 filed with the Commission with respect to the Merger (the
"Schedule 13E-3"), may be inspected and copied, and obtained by mail, from the
Commission as set forth in "Available Information," and will be made available
for inspection and copying at the principal executive offices of the Company
during regular business hours by any interested Shareholder of the Company or
his or her representative who has been so designated in writing.
In conducting its analysis and arriving at its opinions, J.C. Bradford
considered such financial and other information as it deemed appropriate and
feasible under the circumstances including, among other things, (i) the Merger
Agreement, (ii) the historical and current financial position and results of
operations of the Company, (iii) certain internal financial analyses and
forecasts of the Company for the fiscal years beginning January 1, 1997 and
ending December 31, 2002, prepared for the Company by its senior management;
(iv) certain financial and securities data of certain other companies, the
securities of which are publicly traded and that J.C. Bradford believed to be
comparable to the Company; (v) prices and premiums paid in certain other
acquisitions and transactions that J.C. Bradford believed to be relevant; (vi)
historical and current price and trading activity for the Common Stock; and
(vii) such other financial studies, analyses and investigations as J.C. Bradford
deemed appropriate for purposes of its opinion. J.C. Bradford also held
discussions with members of the senior management of the Company regarding the
past and current business operations, financial condition, and future prospects
of the Company. In addition, J.C. Bradford took into account its assessment of
general economic, market and financial conditions and its experience in other
transactions as well as its experience in securities valuation and its knowledge
of the industries in which the Company operates generally. With the permission
of the Special Committee, J.C. Bradford assumed that financing for the Merger
had been irrevocably obtained on terms reviewed by J.C. Bradford, prior to the
date of its opinion, in commitment letters from lenders, and that the Merger
Agreement had been executed and delivered by the parties thereto, prior to the
date of its opinion, on terms substantially similar to those contained in the
most recent draft thereof supplied to and reviewed by J.C. Bradford.
J.C. Bradford's opinion is necessarily based upon general economic, market,
financial and other conditions as they existed on the date thereof and the
information made available to J.C. Bradford and conditions as they existed and
could be evaluated on the date thereof. For purposes of the opinion, J.C.
Bradford relied upon the accuracy and completeness of all the financial and
other information received by it and did not assume responsibility for, nor
undertake an independent verification of, such information. J.C. Bradford
assumed that the internal operating data and financial analyses and forecasts
provided by the Company had a reasonable basis and reflected the best currently
available estimates and judgments of the Company's senior management as to the
recent and likely future performance of the Company. J.C. Bradford relied upon
the assurances of the Company's management that they were not aware of any
information or fact that would make the information provided to J.C. Bradford
incomplete or misleading. J.C. Bradford was not authorized by the Special
Committee, the Company or the Parent to solicit, and did not solicit, other
entities for purposes of a possible business combination. No limitations were
imposed by the Special Committee, the Company or the Parent on the scope of J.C.
Bradford's investigation or the procedures to be followed in
24
<PAGE> 29
rendering its opinion. Events occurring after the date of such opinion could
materially affect the assumptions used in preparing the opinion and J.C.
Bradford has no duty or obligation to update or amend its opinion, or otherwise
advise the special Committee or any other party or person, of the occurrence of
any such events.
In preparing its report to the Special Committee, J.C. Bradford performed a
variety of financial and comparative analyses and considered a variety of
factors, including (i) comparable company analysis; (ii) discounted cash flow
analysis; (iii) leveraged buyout analysis; (iv) premium analysis; and (v) stock
trading analysis. The summary of J.C. Bradford's analyses set forth below does
not purport to be a complete description of the analyses underlying J.C.
Bradford's opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, J.C. Bradford did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, J.C. Bradford believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
could create a misleading or incomplete view of the processes underlying such
analyses and its opinion. With respect to the comparable company analysis and
acquisitions premium analysis summarized below, no company or single acquisition
utilized as a comparison is identical to the Company or the Merger and such
analyses necessarily involve complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the acquisition or public trading values of the
companies concerned. In performing its analyses, J.C. Bradford made numerous
assumptions with respect to industry performance, general business, economic,
market, and financial conditions, and other matters. The analyses performed by
J.C. Bradford are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or their
respective advisors, none of the Company, Parent, J.C. Bradford or any other
person assumes responsibility if future results are materially different from
those forecast.
The following is a summary of the report presented by J.C. Bradford to the
Special Committee on October 31, 1997:
(a) Comparable Company Analysis. Using publicly available
information, J.C. Bradford reviewed selected financial data, including
revenues, historical and projected earnings and earnings before interest,
depreciation, and taxes ("EBITDA") for several publicly traded companies
engaged in businesses with characteristics similar to the Company's
including one signage-related manufacturing company (the "Comparable
Company Group"). The Comparable Company Group included Daktronics, Inc.,
EAC Industries, Inc., Falcon Products, Inc., HMG Worldwide Corporation,
Holophane Corporation, La-Man Corporation, Lancer Corporation, LSI
Industries Inc., Marlton Technologies, Inc., Specialty Equipment Companies,
Inc., Standex International Corporation, Trans-Industries, Inc., Trans-Lux
Corporation and Zimmerman Sign Company. J.C. Bradford calculated the
current market price of each company as a multiple of estimated 1997
earnings ("1997 P/E"), which ranged from 12.6x to 19.8x; current market
price as a multiple of estimated 1998 earnings ("1998 P/E"), which ranged
from 9.6x to 16.7x; current market price as a multiple of book value ("Book
Value Multiple"), which ranged, excluding the high and the low, from 0.8x
to 3.8x; total firm value (defined as equity market value plus net debt) as
a multiple of last twelve months ("LTM") revenues ("Revenue Multiple"),
which ranged, excluding the high and the low, from 0.4x to 1.3x; and total
firm value as a multiple of LTM EBITDA ("EBITDA Multiple"), which ranged,
excluding the high and the low, from 4.7x to 16.1x. J.C. Bradford compared
the Comparable Company Group multiples to the corresponding multiples in
the Merger, including 11.7x 1997 P/E, 10.7x 1998 P/E, 2.0x Book Value
Multiple, 0.5x Revenue Multiple, and 6.7x EBITDA Multiple.
(b) Discounted Cash Flow Analysis. Using discounted cash flow
analysis, based on information obtained from the senior management of the
Company, J.C. Bradford discounted to present value the future cash flows
that the Company is projected to generate through 2002, under various
circumstances, assuming the Company performed in accordance with the
earnings forecast of management. Specifically,
25
<PAGE> 30
although no assurance can be given that any of the following amounts will
be achieved, management estimated that revenues will total $157.1 million,
$163.0 million, $174.0 million, $186.2 million and $199.2 million in each
of 1998, 1999, 2000, 2001 and 2002, respectively. Management also estimated
that EBITDA will total $12.1 million, $13.1 million, $14.8 million, $17.0
million and $19.1 million in each of 1998, 1999, 2000, 2001 and 2002,
respectively. Finally, management estimated that pretax income will total
$8.8 million, $9.9 million, $12.0 million, $14.6 million and $17.0 million
in each of 1998, 1999, 2000, 2001 and 2002, respectively. J.C. Bradford
calculated terminal values for the Company (i.e., the values at the 2002
year-end) by applying multiples of EBITDA and earnings in the year 2002.
The cash flow streams and terminal values were then discounted to present
values using different discount rates, ranging from 16% to 24%, which were
chosen to reflect different assumptions regarding the Company's cost of
capital and the periodic, past failures of the Company to meet forecasted
financial goals. Based on the above described analysis, the implied value
per share ranged from $7.49 to $19.26 as compared to the closing stock
price of the Common Stock on July 29, 1997 (the date before the public
announcement of the proposed Merger) ($10.625) and to the value to be
received per share in the Merger ($14.50).
(c) Leveraged Buyout Analysis. J.C. Bradford utilized the projections
provided by senior management to analyze the value of the Company as a
stand alone entity in a leveraged transaction. Based on the structure of
the proposed recapitalization and the proposed offer of $14.50 per share of
Common Stock in the Merger, J.C. Bradford calculated the five-year internal
rates of return ("IRRs") to the subordinated debt holders and the equity
investors, and analyzed the total indebtedness to be incurred as a result
of the transaction. J.C. Bradford calculated terminal values for the
Company (i.e., the values at the 2002 year end) by applying multiples of
EBITDA in the year 2002. J.C. Bradford noted that, based on the foregoing,
the subordinated debt holders are projected to achieve an IRR of between
19.8% and 27.9% over the five-year period, and that the equity investors
are projected to achieve an IRR of between 26.0% and 50.8% over the
five-year period. J.C. Bradford also noted that upon completion of the
transaction, the Company's total indebtedness to LTM EBITDA ratio will be
approximately 5.8x. In the opinion of J.C. Bradford, in leveraged buyout
acquisition transactions generally, equity investors target internal rates
of return of 35% to 45%, and mezzanine debt lenders target internal rates
of return of 20% to 25%. Based upon its experience in leveraged
transactions, J.C. Bradford noted that the return levels projected above
are consistent with those generally targeted in such transactions.
(d) Premium Analysis. For the time period occurring since January
1995, J.C. Bradford prepared an analysis of the premiums paid in 305
completed cash acquisitions of public companies where 100% of the target's
shares were controlled by the acquiror following the acquisition. J.C.
Bradford considered, among other factors, the type of consideration used in
the acquisition and the premiums paid based on the closing price of the
target's shares at one day, one week and four weeks prior to the
announcement of such acquisition. For all cash acquisitions where 100% of
the target's shares were controlled by the acquiror following the
acquisition, J.C. Bradford calculated the low premiums for the middle
quartiles of 11.6%, 15.7% and 18.9% at one day, one week, and four weeks
prior to the announcement, respectively. These premiums, based upon the
announcement date of July 30, 1997, imply per share equity values for the
Company of $11.86, $12.30, and $12.63, respectively. J.C. Bradford
calculated the high premiums for the middle quartiles of 42.9%, 50.0% and
56.01% at one day, one week and four weeks prior to the announcement,
respectively. These premiums, based upon the announcement date of July 30,
1997, imply per share equity values for the Company of $15.18, $15.94 and
$16.57, respectively.
(e) Stock Trading Analysis. J.C. Bradford reviewed and analyzed the
historical trading volume and prices at which the Common Stock has traded
since January 1, 1996. J.C. Bradford noted that trading activity was
limited and that the trading market was relatively illiquid. J.C. Bradford
also noted that the highest traded price was $14.50, which occurred in
October 1996, and the lowest traded price was $6.50, which occurred in
February 1996.
Pursuant to the terms of an engagement letter dated August 25, 1997, the
Company agreed to pay J.C. Bradford a non-refundable retainer of $50,000 and
$175,000 at the time of delivery of its opinion. The fees payable to J.C.
Bradford were not contingent upon the consummation of the Merger. In addition,
the Company has agreed to reimburse J.C. Bradford for its reasonable and direct
out-of-pocket expenses,
26
<PAGE> 31
including the fees and disbursements of its counsel and to indemnify J.C.
Bradford and certain related persons against certain liabilities relating to or
arising out of its engagement, including certain liabilities under the federal
securities laws. In the ordinary course of its business, J.C. Bradford has
traded, and may in the future trade, securities of the Company for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
MATERIAL PREPARED BY PARENT'S ADVISOR
Parent retained William Blair to provide it and Martin with certain
advisory services related to a possible going private transaction. Such services
included structuring and attempting to place financing for the possible
transaction and participating in negotiations relating to a possible
transaction. Such services did not include providing a valuation of the Company
or providing a fairness opinion, and William Blair has not provided and does not
contemplate providing such a valuation or fairness opinion, written or oral, to
Parent, Martin, the Special Committee or the Public Shareholders.
William Blair prepared certain material in order to assist Parent and
Martin in their negotiations with the Special Committee. In order to prepare
such material, William Blair considered, among other things, (i) the Company's
annual reports to shareholders and annual reports on Form 10-K for the four
years ended December 31, 1996; (ii) the Company's quarterly reports to
shareholders and quarterly reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997; (iii) financial forecasts for the fiscal years ending
December 31, 1997 through December 31, 2002 prepared for the Company by its
senior management; (iv) the Company's historical financial performance relative
to internal budgets; (v) historical trading activity for the Company's Common
Stock; (vi) recent comparable mergers and acquisitions; and (vii) valuations of
comparable companies. In addition, William Blair held discussions with certain
members of the Company's senior management regarding the past and current
business operations, financial condition and future prospects of the Company.
William Blair relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of preparing its material. William Blair has not made
an independent evaluation or appraisal of the assets and liabilities of the
Company, and William Blair has not been furnished with any such evaluation or
appraisal. William Blair's material was based upon the economic and market
conditions existing on the dates of its preparation. The material prepared by
William Blair was provided to assist Parent and Martin in their negotiations
with the Special Committee and does not constitute a recommendation as to how
any holder of the Company's Common Stock should vote with respect to the Merger.
Martin asked William Blair to attend the meeting with the Special Committee
on September 8, 1997. The main purpose of such meeting was to determine whether
the negotiations should continue. At such meeting, William Blair was asked to
describe the material that it had prepared to assist Parent and Martin in their
negotiations. A summary of such material is as follows.
(a) Comparable Mergers and Acquisitions: Majority Owner. Using publicly
available data, William Blair reviewed selected mergers and acquisitions from
July 1, 1993 through July 29, 1997 involving manufacturing companies which were
taken private by a shareholder who owned more than 50% of the company prior to
the respective transaction. These included transactions in which the following
companies were taken private: Mafco Consolidated Group, Inc., Union Switch &
Signal Inc., WCI Steel, Inc., American Safety Closure Corporation, SyStemix,
Inc., BIC Corporation, Ropak Corporation, General Cable Corporation, and Holnam
Inc. William Blair noted at the meeting on September 8, 1997 that none of these
transactions were directly comparable to the Company. William Blair reviewed for
each transaction the premium paid relative to the public market stock price both
one week prior to the announcement of the transaction and four weeks prior to
the announcement of the transaction. These ratios as applied to the Company's
public market stock price implied a mean range of value for the Company's Common
Stock of $11.27 to $12.93.
(b) Comparable Mergers and Acquisitions: Related Industries. Using
publicly available data, William Blair reviewed mergers and acquisitions from
July 1, 1993 through July 29, 1997 and selected the transactions
27
<PAGE> 32
involving manufacturing companies that it deemed to be similar in some respects
to the Company. These companies included ERO, Inc., Sudbury, Inc., Brenco,
Incorporated, Bailey Corporation, Carlisle Plastics, Inc., DeSoto, Inc., Rauch
Industries, Inc., Dolco Packaging Corporation, Larizza Industries, Inc., Bliss &
Laughlin Industries, Inc., American Consumer Products, Inc., Wedco Technology,
Inc., Marietta Corporation, Amdura Corporation, Ropak Corporation, Trico
Products Corporation, RB&W Corporation, Revell-Monogram, Inc., Lincoln
Foodservice Products, Inc., Mark Controls Corporation, Dyneer Corporation and
American Steel & Wire Corporation. William Blair noted at the meeting on
September 8, 1997 that none of these companies were directly comparable to the
Company. William Blair considered several financial ratios, including total
value as a multiple of the last twelve months' revenue, total value as a
multiple of the last twelve months' EBITDA, equity value as a multiple of the
last twelve months' net income, the premium paid relative to the public stock
market price one week prior to announcement of the transaction, and the premium
paid relative to the public stock market price four weeks prior to announcement
of the transaction. These ratios as applied to the Company's data implied a
range of value for the Company's Common Stock of $11.94 to $15.58.
(c) Comparable Mergers and Acquisitions: Premiums Paid. Using publicly
available data, William Blair reviewed premiums paid relative to the public
market stock price one week before the transaction announcement for all mergers
in 1996 and all mergers between January 1, 1997 and June 30, 1997. This premiums
paid data was obtained from a proprietary database compiled by a commercial data
collection company that specializes in public securities market data. William
Blair noted at the meeting on September 8, 1997 that none of these transactions
were directly comparable to the Company. The premiums paid in these transactions
as applied to the Company's public market stock price one week before the
announcement of the transaction implied a value for the Company's Common Stock
of $13.24.
(d) Comparable Public Companies. William Blair compared selected
historical operating information, stock market data and financial ratios for the
Company to selected historical operating information, stock market data and
financial ratios for certain other publicly traded companies that William Blair
deemed to be similar in certain respects to the Company. Such companies were
Daktronics, Inc., Falcon Products, Inc., HMG Worldwide Corporation, Lancer
Corporation, LSI Industries, Inc., Specialty Equipment Companies, Inc., Standex
International Corporation, Trans-Industries, Inc. and Zimmerman Sign Company.
William Blair noted at the meeting on September 8, 1997 that none of these
companies were directly comparable to the Company. William Blair considered
several financial ratios, including public market stock price as a multiple of
the last twelve months' earnings per share, public market stock price as a
multiple of projected 1997 earnings per share and total value as a multiple of
the last twelve months' EBITDA. These ratios as applied to the Company's data
implied a range of value for the Company's Common Stock of $12.15 to $17.15.
(e) Discounted Cash Flow Analysis. William Blair performed a series of
discounted cash flow analyses of the Company. Such analyses took into account
both the projections provided by the Company's management and projections
developed by William Blair based on its review of the Company's historical
performance relative to management projections and discussions with management.
Such analyses used a range of discount rates from 13% to 15% and implied a range
of value for the Company's Common Stock of $9.88 to $16.97.
(f) Historical Trading. William Blair reviewed the historical trading
prices for the Company's Common Stock from July 1, 1987 to July 25, 1997.
William Blair noted that the Stock had never traded above $14.50 and had traded
at or above $13.50 on only three days during that ten year period.
The summary set forth above does not purport to be a complete description
of the material prepared or the analysis performed by William Blair. The
preparation of such material is a complex process and is not necessarily
susceptible to partial analysis or summary description. Selecting portions of
the material or of the summary set forth above, without considering the material
as a whole, could create an incomplete view of the processes underlying William
Blair's material. No company or transaction used in the material summarized
above is directly comparable to the Company or the contemplated Merger. The
material was prepared solely for purposes of William Blair's engagement to
assist Parent and Martin in their negotiations and does not purport to be an
appraisal or necessarily reflect the prices at which businesses or securities
actually may be
28
<PAGE> 33
sold. The material prepared by William Blair was not and should not be construed
as a valuation of the Company or an expression of any opinion as to the fairness
of the Merger as to any party or with respect to any possible transaction
involving the Company. Material based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such material. Because future results are
subject to uncertainty, being based upon numerous factors or events beyond the
control of the Company and William Blair, neither the Company nor William Blair
assumes responsibility if future results are materially different from those
forecast.
Parent retained William Blair based upon William Blair's experience and
expertise. William Blair is a nationally recognized investment banking and
financial advisory firm. William Blair, as part of its investment banking
business, is continuously engaged in the arranging of debt financing, the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwriting, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
Pursuant to a letter agreement dated July 27, 1997, William Blair will
receive a fee of $1,050,000 if the Merger is consummated. In addition, if Parent
obtains equity and debt financing upon terms at least as favorable as those
agreed upon by Parent and William Blair in the engagement letter, William Blair
will be paid an additional fee of $250,000. Regardless of whether the Merger is
consummated, William Blair will be reimbursed for all out-of-pocket expenses.
All amounts owed to William Blair will be paid by the Company pursuant to its
agreement to pay all expenses of the transaction.
PURPOSE AND STRUCTURE OF THE MERGER; CERTAIN EFFECTS OF THE MERGER
The Company was initially founded in 1944 as a privately owned company. In
1980, Martin and other officers acquired the business presently conducted by the
Company in a leveraged buy-out and, in 1986, the Company conducted an initial
public offering. Following such public offering, Martin was the Company's
largest shareholder and, as of the Record Date, he continued to be the largest
shareholder, beneficially owning approximately 47% of the Common Stock.
Throughout the Company's history as a publicly held entity, the Board of
Directors has believed that a key component to the Company's success was to
maximize shareholder value. In connection with this goal, it is believed that
the Merger will enable the Company's shareholders to achieve such objective.
The Merger has been structured so as to enable Parent to acquire the entire
equity interest in the Company not already beneficially owned by Parent
(pursuant to the Shareholder Agreements) while maximizing shareholder value for
the Company's Public Shareholders. The Merger will terminate all equity
interests in the Company of the Company's current shareholders, other than
Parent. Accordingly, the Company's Public Shareholders will share in neither
future earnings and growth of the Company nor the risks associated with
achieving such earnings and growth following the Merger, and the Company's
shareholders who are members of the Management Group will share in such
earnings, growth and risks only indirectly to the extent they continue to own
shares of the common stock of Parent. The Merger will enable the Company's
Public Shareholders to receive a cash payment of $14.50 per share of Common
Stock pursuant to a transaction which has been determined by the Boards of
Directors of the Company and Parent, as discussed above, to be fair to such
Public Shareholders, or to seek dissenters' rights as described under
"DISSENTERS' RIGHTS." The Merger Consideration was the result of arms' length
negotiations between representatives of Parent and the Special Committee and
their respective advisors following a proposal by Parent. See "-- Opinion of the
Special Committee's Financial Advisor." Following the Merger, Parent will be the
sole direct beneficiary of any future earnings and growth of the Company and
will have the ability to benefit from any corporate opportunities that may be
pursued by the Company in the future.
Pursuant to the Merger Agreement, upon consummation of the Merger, Merger
Sub will merge into the Company, with the Company being the Surviving
Corporation. Each outstanding share of Common Stock (except those shares of
Common Stock held by the Company as treasury shares or beneficially owned by
Parent or by shareholders who perfect their dissenters' rights under the TBCA)
will be converted into the right to receive $14.50 in cash, without interest.
Each outstanding share of Common Stock beneficially owned by Parent or held by
the Company as treasury shares will be canceled without consideration. Each
outstanding share of Merger Sub common stock (all of which shares are
beneficially owned by Parent) will be converted into one share of common stock
of the Surviving Corporation.
29
<PAGE> 34
Pursuant to the TBCA, approval of the Merger Agreement and the transactions
contemplated thereby requires the approval of the Board of Directors of each of
the Company, Parent and Merger Sub, and all of such Boards have granted such
approvals. Also pursuant to the TBCA, approval of the Merger Agreement requires
the affirmative vote of the holders of a majority of the outstanding Voting
Shares. As of the Record Date, the Management Group beneficially owned an
aggregate of 1,835,527 Voting Shares (representing approximately 48.7% of the
Voting Shares outstanding) and, pursuant to the Shareholder Agreement, they will
agree to vote all of such shares in favor of the Merger Agreement. In addition,
the directors of the Company (excluding Martin) beneficially owned as of the
Record Date an aggregate of 321,820 Voting Shares (representing approximately
8.5% of the Voting Shares outstanding), and they have agreed to vote all of such
shares in favor of the Merger Agreement. As a result, it is assured that the
approval required pursuant to the TBCA will be satisfied. However, pursuant to
the Merger Agreement, approval also requires the affirmative vote of a majority
of the outstanding Voting Shares held by the Public Shareholders. See
"INTRODUCTION -- Voting Rights; Vote Required for Approval."
Holders of Common Stock who do not want to accept the Merger Consideration
of $14.50 per share, who do not vote in favor of (or who abstain from voting on)
the Merger Agreement, and who perfect their dissenters' rights by complying with
the provisions of Chapter 23 of the TBCA, will have the right to receive cash
payment for the "fair value" of their Common Stock. Section 48-23-102 of the
TBCA provides that no dissenters' rights are available with respect to the
merger of a corporation whose securities are "national market system
securities," which includes securities traded on the Nasdaq National Market. The
Common Stock is currently traded on the Nasdaq National Market; however,
pursuant to the Merger Agreement, the Company has agreed to terminate such
listing effective one business day prior to the Effective Time, so that the
Company's shareholders will be entitled to dissenters' rights in connection with
the Merger. Any shareholder contemplating the exercise of dissenters' rights
should carefully review Chapter 23 of the TBCA, particularly the procedural
steps required to perfect dissenters' rights, a description of which is provided
herein under "DISSENTERS' RIGHTS." A shareholder who fails to comply with such
procedural requirements will forfeit such holder's dissenters' rights and, upon
consummation of the Merger, such holder's shares of Common Stock will be
converted into the right to receive the Merger Consideration of $14.50 per share
in cash. See "DISSENTERS' RIGHTS" and Exhibit B -- "Chapter 23 of the Tennessee
Business Corporation Act."
Upon consummation of the Merger, each share of Common Stock, other than
shares held by the Company as treasury shares or beneficially owned by Parent or
by shareholders who perfect their dissenters' rights under the TBCA, will be
converted into the right to receive the Merger Consideration. As a result, the
present holders of the Common Stock, including officers and directors of the
Company who are beneficial owners of Common Stock, will cease to have any direct
ownership interest in the Company. The Company will, as a result of the Merger,
become a wholly owned subsidiary of Parent, and there will cease to be any
public market for the Common Stock. Upon such event, the Surviving Corporation
is expected to apply to the Commission for the deregistration of the Common
Stock under the Exchange Act and, upon deregistration, the Company will be
relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and its officers, directors and beneficial
owners of more than 10% of the Common Stock will be relieved of the reporting
requirements and restrictions on insider trading under Section 16 of the
Exchange Act. Further, the Company will no longer be subject to the periodic
reporting requirements of the Exchange Act and, therefore, will not be required
to file, among other things, quarterly reports on Form 10-Q and annual reports
on Form 10-K and the Company will not be subject to Rule 13e-3 under the
Exchange Act. Accordingly, substantially less information will be required to be
made publicly available about the Company than is currently the case.
Immediately after the Merger, all of the then outstanding Common Stock will
be beneficially owned by Parent. See "-- Purpose and Structure of the Merger;
Certain Effects of the Merger" which describes certain other effects of the
Merger. The Merger will be a taxable transaction to the holders of the Common
Stock who receive Merger Consideration or cash pursuant to the exercise of
dissenters' rights for federal income tax purposes and may be taxable for state,
local, foreign and other tax purposes. See "-- Certain Federal Income Tax
Consequences of the Merger."
30
<PAGE> 35
PLANS FOR THE COMPANY AFTER THE MERGER
Pursuant to the terms of the Merger Agreement, the sole director of Merger
Sub at the Effective Time of the Merger shall be the sole director of the
Surviving Corporation, and the officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation after the Merger. See
"DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PARENT, MERGER SUB AND THE
SURVIVING CORPORATION -- Information Concerning Directors and Executive Officers
of the Surviving Corporation." The Merger Agreement also provides that the
Charter of the Company and the bylaws of the Merger Sub shall remain as the
Charter and bylaws, respectfully, of the Surviving Corporation.
Except as indicated in this Proxy with respect to the Merger, Parent does
not have any present plan 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 assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or any other
material changes in the Company's corporate structure or business or the
composition of the Board of Directors or management. Upon consummation of the
Merger, Parent intends to continue to review the Company and its assets,
businesses, operations, properties, policies, corporate structure,
capitalization and management and consider if any changes would be desirable in
light of the circumstances then existing.
CONFLICTS OF INTEREST; CERTAIN RELATIONSHIPS
Ownership of Parent and Merger Sub; Shareholder Agreement. Parent owns
100% of the common stock of Merger Sub, which was organized by Parent solely for
the purpose of enabling Parent to acquire, pursuant to the Merger Agreement, the
entire equity interest in the Company. On the date of this Proxy Statement,
Martin is the sole shareholder of Parent, having paid $100 for one share of
Parent's common stock. However, Parent expects to enter into a Shareholder
Agreement with each of the members of the Company's management listed below, who
beneficially owns the number of shares of Common Stock indicated below:
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMMON STOCK PERCENTAGE OF COMMON
BENEFICIALLY OWNED AS OF STOCK BENEFICIALLY OWNED
NAME OF MANAGEMENT GROUP MEMBER THE RECORD DATE(1) AS OF THE RECORD DATE(2)
- ------------------------------- ------------------------ ------------------------
<S> <C> <C>
James R. Martin............................. 1,766,169 47.16%
Dennis C. Alexander......................... 4,250 --
Thomas B. Alford............................ 1,750 --
Raleigh L. Bacon............................ 500 --
F. Joseph Brang............................. 13,383 --
Cecilia D. Calcaterra....................... 500 --
Edward J. Davis............................. 875 --
Mark J. Deuschle............................ 23,500 --
James A. Levyne............................. 0 --
Doug Malo................................... 0 --
Ralph A. Price, Jr.......................... 0 --
Stuart W. Ries.............................. 0 --
Craig C. Rohde.............................. 2,250 --
James J. Stamps............................. 3,750 --
Thomas S. Tobin............................. 500 --
Kathryn C. Wood............................. 14,600 --
------------ ------
Total............................. 1,832,027 48.61%
============ ======
</TABLE>
- ---------------
(1) Includes options to purchase an aggregate of 48,875 shares of Common Stock
which are immediately exercisable, as follows: Martin -- 25,000;
Alexander -- 2,250; Alford -- 1,750; Bacon -- 500; Calcaterra -- 500;
Davis -- 875; Rohde -- 1,750; Stamps -- 3,750; and Tobin -- 500. See
"-- Options and Restricted Shares" and "THE MERGER AGREEMENT -- Options and
Restricted Shares."
(2) Percentages less than 1% not shown.
31
<PAGE> 36
Pursuant to the Shareholder Agreement, the members of the Management Group
who own shares of Common Stock that were issued and outstanding as of the Record
Date will each agree to transfer to Parent, immediately prior to the Effective
Time, such shares of Common Stock as full or partial consideration for receipt
of shares of Parent's common stock. The members of the Management Group who own
no such issued and outstanding shares of Common Stock, or who own a relatively
small number of such shares of Common Stock, will also pay cash or a combination
of cash and promissory notes to complete the consideration owed to Parent.
Martin will transfer to Parent shares of Common Stock beneficially owned by him
having an aggregate value of approximately $22.5 million, in consideration of
approximately 89% of Parent's common stock and approximately $13 million in
cash. The other members of the Management Group will transfer to Parent a
combination of Common Stock, cash and promissory notes having an aggregate value
of approximately $1 million, in consideration of approximately 11% of Parent's
common stock. RSTW, one of Parent's lenders, will receive a warrant exercisable
for up to 15% of Parent's common stock. See "SOURCES OF FUNDS." At the Effective
Time, Parent will have total equity of approximately $10.5 million. Each share
of Company Common Stock that will be contributed to Parent has been valued at
$14.50 per share, and each share of Parent common stock that will be issued to
the Management Group has been valued at $2.625.
Certain members of the Management Group hold options to purchase shares of
Common Stock which are either already vested or will vest at the Effective Time
pursuant to the terms of the Company's 1991 Incentive Program (the "Incentive
Program"). See "--Options and Restricted Shares" and "THE MERGER
AGREEMENT -- Options and Restricted Shares." Pursuant to the Shareholder
Agreement, each member of the Management Group will agree not to exercise such
options and instead, pursuant to the terms of the Merger Agreement, each such
person will receive from the Company at the Effective Time an amount of cash for
each option equal to the difference between $14.50 and the applicable option
exercise price. See "THE MERGER AGREEMENT -- Options and Restricted Shares."
Because Martin will be the controlling shareholder of Parent, the
Shareholder Agreement will not place any restrictions on Martin, including with
respect to subsequent disposition of his shares of Parent stock. The Shareholder
Agreement will restrict all other members of the Management Group on an
identical basis and will grant to Parent customary rights of first refusal and
call rights to purchase such person's shares of Parent stock. It will also
provide for such person to be able to put the stock to Parent in certain
circumstances.
As a result of the transactions contemplated by the Shareholder Agreement,
at the Effective Time the Management Group will own in the aggregate 100% of
Parent's total issued and outstanding common stock, and Parent will own
approximately 48.7% of the total issued and outstanding Common Stock. At the
Effective Time, Martin will own approximately 89% of Parent's issued and
outstanding common stock, and the other members of the Management Group will
own, in the aggregate, approximately 11%. Following the Merger, the Management
Group will continue to share in the future earnings and growth of the Company,
and the risks associated with achieving such earnings and growth, indirectly to
the extent they continue to own shares of Parent's common stock.
Options and Restricted Shares. As of the date hereof, Martin owns options
to purchase 25,000 shares of common Stock issuable pursuant to options that are
immediately exercisable. Certain other members of the Management Group own in
the aggregate options to purchase 27,375 shares of Common Stock issuable
pursuant to options that are immediately exercisable, and options to purchase
45,625 shares of Common Stock pursuant to options that are not currently
exercisable but that will be vested immediately prior to the Effective Time
pursuant to the terms of the Incentive Program. Pursuant to the terms of the
Merger Agreement, each such person will receive from the Company at the
Effective Time an amount of cash for each option equal to the difference between
$14.50 and the applicable option exercise price. See "THE MERGER
AGREEMENT -- Options and Restricted Shares."
Also, as of the date hereof, three members of the Management Group own
shares of Common Stock issued as restricted stock awards pursuant to the
Incentive Program. Mr. Brang owns 8,383 shares of such restricted stock, Mr.
Deuschle owns 9,000 shares, and Ms. Wood owns 8,100 shares. Pursuant to the
terms of the Incentive Program and the applicable restricted stock award
agreements, it is expected that such shares will vest fully at or before the
Effective Time.
32
<PAGE> 37
Indemnification of Directors and Officers. Parent has agreed that all
rights to indemnification arising at or prior to the effectiveness of the Merger
in favor of the directors or officers of the Company (including the members of
the Special Committee) as provided in the Company's Charter and bylaws, as in
effect on the date of the Merger Agreement, and in contractual indemnification
agreements and director and officer liability insurance currently in effect and
covering directors and officers of the Company, will, for a period of six years
survive the Merger and continue in full force and effect. See "THE MERGER
AGREEMENT -- Covenants."
Fees to Members of the Special Committee. As compensation for service on
the Special Committee, each member of the Special Committee will receive from
the Company $300 for each meeting of the Special Committee attended by such
member. Such compensation is in addition to the compensation payable to all
directors of the Company, including the directors comprising the Special
Committee.
Other. The Company pays service charges to First American National Bank of
Knoxville, Tennessee, which is a subsidiary of First American Corporation, of
which Mr. Smith and Martin are directors. In fiscal 1996, the Company paid
approximately $22,000 in service charges, and for the first nine months of 1997
the Company paid approximately $5,700.
Also, beginning in May 1997, the Company engaged Donald F. Johnstone, a
member of the Company's Board of Directors, to provide consulting services
relating to the Company's strategic marketing issues. Mr. Johnstone performs the
services on an as-requested basis at the rate of $2,000 per day and, since May
1997, Mr. Johnstone has earned approximately $60,000 for such services.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Alston & Bird, tax counsel to the Company, the Merger
will be treated as a sale of the Common Stock by the Public Shareholders and
will be a taxable event for federal income tax purposes under the Code. In
addition, in the opinion of such tax counsel, a shareholder will recognize a
gain or loss equal to the difference between the tax basis for the Common Stock
held by such shareholder and the amount of cash received in exchange therefor,
and such gain or loss will be a capital gain or loss if the shares of Common
Stock are capital assets in the hands of the shareholder. The complete text of
the tax opinion of Alston & Bird is attached hereto as Exhibit D (the "Tax
Opinion").
The shareholders of the Company should be aware that the recently enacted
Taxpayer Relief Act of 1997 (the "1997 Act") contains significant changes to the
taxation of capital gains of individuals, trusts and estates. For gains realized
after July 28, 1997, and subject to certain exceptions, the maximum rate of tax
on net capital gains on individuals, trusts and estates from the sale or
exchange of assets held for more than 18 months has been reduced to 20% (as
compared with a maximum rate of 39.6% on ordinary income). For 15% bracket
taxpayers, the maximum rate on net capital gains is reduced to 10%. The maximum
rate of capital gains tax for capital assets held more than one year but not
more than 18 months remains at 28%. The taxation of capital gains of
corporations was not changed by the 1997 Act and, therefore, corporations
generally are subject to tax at a maximum rate of 35% on both capital gains and
ordinary income. The distinction between capital gain and ordinary income may be
relevant for certain other purposes, including the taxpayer's ability to utilize
capital loss carryovers to offset any gain recognized.
The foregoing discussion is based on current law. The foregoing discussion
does not purport to consider all aspects of U.S. federal income taxation that
may be relevant to particular shareholders, some of whom may be subject to
special rules not discussed (e.g., tax-exempt entities), and the foregoing
discussion may not be applicable to shareholders who acquired their Common Stock
pursuant to the exercise of options or other compensation arrangements or who
are not citizens or residents of the U.S. In addition, neither the Tax Opinion
nor the foregoing discussion considers the effect of any applicable foreign,
state, local or other tax laws.
The Tax Opinion is based on current law, certain assumptions set forth
therein, certain representations from the Company and certain other information,
data, documentation and materials. Neither this description
33
<PAGE> 38
nor the Tax Opinion is binding on the IRS and no ruling from the IRS has been
sought or will be sought with respect to such tax consequences.
THE TAX OPINION AND FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IS BASED ON EXISTING TAX LAW AS OF THE DATE OF THIS
PROXY STATEMENT, WHICH MAY DIFFER ON THE DATE OF THE CONSUMMATION OF THE MERGER
OR AT THE EFFECTIVE TIME. EACH SHAREHOLDER IS URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
SUCH SHAREHOLDER OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a "purchase" as that term is used under
generally accepted accounting principles for accounting and financial reporting
purposes. Under this method of accounting, the purchase price will be allocated
to assets acquired and liabilities assumed based on their estimated fair values
at the Effective Time.
CERTAIN LITIGATION
The Company is party to various legal and administrative proceedings, all
of which management believes constitute ordinary routine litigation incident to
the business conducted by the Company, or are not material in amount.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained, nor
any regulatory requirements complied with, in connection with consummation of
the Merger by any party to the Merger Agreement, except for the requirements of
the TBCA in connection with shareholder approvals and consummation of the
Merger, and the requirements of federal securities law.
34
<PAGE> 39
THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides for the merger of Merger Sub into the
Company. The Company will be the Surviving Corporation of the Merger and, as a
result of the Merger, Parent will own all of the Surviving Corporation's common
stock. In the Merger, the shareholders of the Company will receive the Merger
Consideration described below. See "SPECIAL FACTORS -- Purpose and Structure of
the Merger; Certain Effects of the Merger."
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger will occur upon the filing of a
certificate of merger with the Secretary of State of the State of Tennessee as
required by the TBCA or at such later time as is agreed by the parties to the
Merger Agreement and specified in the certificate of merger. It is anticipated
that the certificate of merger will be filed as promptly as practicable after
approval of the Merger Agreement by the Public Shareholders of the Company at
the Special Meeting. Such filing will be made, however, only upon satisfaction
or waiver of all conditions to the Merger contained in the Merger Agreement. The
following discussion of the Merger Agreement is qualified in its entirety by
reference to the complete text of the Merger Agreement, which is included in
this Proxy Statement as Exhibit A and is incorporated herein by reference.
THE SURVIVING CORPORATION
The Merger Agreement provides that, at the Effective Time, the persons
identified herein under "DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY,
PARENT, MERGER SUB AND THE SURVIVING CORPORATION -- Information Concerning
Directors and Executive Officers of the Surviving Corporation" will become
officers and directors of the Surviving Corporation, and the Surviving
Corporation will adopt as its charter the Charter of the Company and as its
bylaws the bylaws of Merger Sub.
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS OF THE COMPANY
As a result of the Merger, each outstanding share of Common Stock (except
shares held by the Company as treasury stock or beneficially owned by Parent or
by shareholders who perfect their dissenters' rights under the TBCA) will be
converted into the right to receive the Merger Consideration of $14.50 in cash,
without interest. Each share of Common Stock owned by Parent or held by the
Company as treasury stock will be canceled without consideration.
Each of the outstanding shares of common stock, par value $.001 per share,
of Merger Sub will automatically be converted into one share of common stock,
par value $.001 per share, of the Surviving Corporation.
If the Merger is consummated, instructions with regard to the surrender of
certificates formerly representing shares of Common Stock, together with the
letter of transmittal to be used for that purpose, will be mailed to
shareholders as soon as practicable after the Effective Time. The Paying Agent
(as defined in the Merger Agreement), as soon as practicable following receipt
from a shareholder of a duly executed letter of transmittal, together with
certificates formerly representing Common Stock and any other items required by
the letter of transmittal, shall pay to such shareholder the Merger
Consideration. If payment is to be made to a person other than the person in
whose name the certificate surrendered is registered, it will be a condition of
payment that the certificate so surrendered be properly endorsed or otherwise in
proper form for transfer and that the person requesting such payment pay to the
Paying Agent any transfer or other taxes required by reason of such payment or
establish to the satisfaction of the Paying Agent that such taxes have been paid
or are not applicable.
SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES FOR COMMON STOCK AT
THE PRESENT TIME.
35
<PAGE> 40
If the Merger is consummated, after the Effective Time a holder of a
certificate formerly representing Common Stock shall cease to have any rights as
a shareholder of the Company, and such holder's sole right will be to receive
the Merger Consideration to which such holder is entitled, or in the case of a
shareholder exercising dissenters' rights under Chapter 23 of the TBCA, the
"fair value" of such shareholder's shares determined in accordance with the
provisions of the TBCA.
In no event will holders of Common Stock be entitled to receive any
interest on the Merger Consideration to be distributed to them in connection
with the Merger.
Any funds remaining with the Paying Agent twelve months following the
Effective Time shall be delivered to Parent within one week after the end of
such twelve-month period, without further action or request, and any holder who
has not exchanged Common Stock for the Merger Consideration prior to that time
shall thereafter look only to Parent for payment of the Merger Consideration in
respect of such holder's Common Stock. Notwithstanding the foregoing, neither
Parent nor the Surviving Corporation shall be liable to any holder of Common
Stock for any amount paid to a public official pursuant to applicable abandoned
property laws. Any amounts remaining unclaimed by holders of Common Stock two
years after the Effective Time (or such earlier date immediately prior to such
time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of Parent free and clear of any claims or interest of any person
previously entitled thereto.
No transfer of shares outstanding immediately prior to the Effective Time
will be made on the stock transfer books of the Surviving Corporation after the
Effective Time. Certificates formerly representing Common Stock presented to the
Surviving Corporation after the Effective Time will be canceled in exchange for
the Merger Consideration.
OPTIONS AND RESTRICTED SHARES
The Company and Parent have agreed to take all steps necessary such that
each holder of an outstanding exercisable option to purchase Common Stock (an
"Option"), that was granted pursuant to the Incentive Program, shall receive
from Parent an amount in cash determined by multiplying (i) the excess, if any,
of the Merger Consideration over the applicable exercise price per share of the
Option by (ii) the number of shares of Common Stock such holder could have
purchased had such holder exercised such Option in full immediately prior to the
Effective Time, and each such Option shall thereafter be canceled. In addition,
the Company shall take all steps necessary to acquire at the Effective Time for
nominal consideration the restricted shares of Common Stock held by certain
officers of the Company pursuant to restrictive agreements that provided for
vesting of such shares upon the Company's achieving sales of $200 million and
profits of $20 million. See "SPECIAL FACTORS -- Conflicts of Interest; Certain
Relationships."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
Company, Parent and Merger Sub relating to, among other things, the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions and, generally, apply only to facts and circumstances
existing as of the date of the Merger Agreement): (i) due incorporation,
corporate existence, good standing and similar corporate matters with respect to
each of the Company, Parent and Merger Sub; (ii) corporate power and authority
to enter into, and the valid and binding execution and delivery of, the Merger
Agreement by each such party; (iii) the absence of any governmental
authorization, consent or approval required to consummate the Merger, except as
disclosed; (iv) the Merger Agreement and the Merger not resulting in
contraventions or conflicts with respect to the charter or bylaws and violations
of laws, regulations, judgments, injunctions, orders or decrees relating to the
Company and its subsidiaries, Parent or Merger Sub; and (v) the accuracy of
information supplied by the Company and Parent included in this Proxy Statement
and the Schedule 13E-3.
In addition, Parent has made certain representations and warranties to the
Company relating to the following matters: (i) Parent's having obtained written
commitments from the Lenders, pursuant to which the Lenders have committed to
provide sufficient funds to consummate the transactions contemplated by the
36
<PAGE> 41
Merger Agreement; (ii) the solvency of the Company immediately following the
Effective Time; and (iii) the absence of any investment banking, brokerage,
finder's or other similar fee or commission due by or on behalf of Parent in
connection with the Merger (except for fees payable to Blair, as described under
"SPECIAL FACTORS -- Background of the Merger").
COVENANTS
The Company has agreed in the Merger Agreement that, until consummation of
the Merger, the Company and its subsidiaries will conduct their businesses in
the ordinary course consistent with past practice (except for acts in connection
with the Merger) and will use their best efforts to preserve their business
organization and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, the Company has agreed that, without the consent of
Parent, the Company will not, and except for clause (i), will not permit any of
its subsidiaries to: (i) amend its Charter or bylaws; (ii) issue, sell, transfer
or pledge any capital stock or securities convertible into capital stock; (iii)
split, combine or reclassify the Common Stock or any other capital stock; (iv)
declare or pay any dividends; (v) transfer, lease, license, sell, mortgage or
otherwise dispose of or encumber any assets other than in the ordinary course of
business; (vi) redeem or purchase any of its capital stock; (vii) grant any
increase in the compensation payable to any executive officer; (viii) adopt or
amend or otherwise increase, or accelerate the payment or vesting of amounts
payable under, any bonus, profit sharing, compensation, severance, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan,
arrangement or agreement; (ix) enter into any employment or severance agreement
with or, except in accordance with the Company's existing written policies,
grant any severance pay to, any officer, director or employee; (x) permit any
insurance policy naming it as beneficiary or loss payee to be canceled or
terminated, except in the ordinary course of business and consistent with past
practices; (xi) enter into any contract relating to the purchase of assets other
than in the ordinary course of business and consistent with past practices;
(xii) change any accounting or tax methods except as required by generally
accepted accounting principles or applicable law; (xii) incur or assume
long-term debt or, except in the ordinary course of business, any short-term
debt; (xiv) make loans to or guarantee the obligations of any other person; or
(xv) agree or commit to do any of the foregoing.
The Company has agreed to give Parent and its authorized representatives
full access to the offices, properties, books and records of the Company and its
subsidiaries and will furnish to Parent and its authorized representatives such
financial and operating data and other information as Parent and its authorized
representatives may reasonably request and will instruct the Company's
employees, counsel, financial advisors and auditors to cooperate with Parent in
its investigation of the business of the Company and its subsidiaries.
Each of Parent, Merger Sub, the Company and Martin have agreed to use its
or his best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate the
transactions contemplated by the Merger Agreement. Specifically, and without
limiting the generality of the foregoing, the Company has agreed that it and its
subsidiaries will assist Parent and Merger Sub in obtaining financing necessary
or desirable to complete the transactions contemplated by the Merger Agreement,
including, without limitation, executing on or after the Effective Time such
loan agreements, notes, guarantees, security agreements, certificates or other
documents as may be reasonably requested by Parent, Merger Sub or their lenders.
Notwithstanding Martin's agreement to use his best efforts to consummate the
Merger, the Merger Agreement provides that Martin and the other shareholders of
Parent shall not be required to provide in the aggregate more than $10 million
of equity for Parent.
Parent and the Company have agreed to cooperate (i) in determining whether
any action by or in respect of, or filing with, any governmental body, agency or
official, or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the Merger and the transactions contemplated by the Merger
Agreement and (ii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with this Proxy Statement or the Schedule 13E-3 and seeking to
obtain timely any such actions, consents, approvals or waivers.
37
<PAGE> 42
Parent and the Company have agreed to consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger Agreement and the transactions contemplated thereby.
Parent has agreed that for six years after the Effective Time, Parent will
or will cause the Surviving Corporation to indemnify and hold harmless the
present and former officers and directors of the Company in respect of acts or
omissions occurring at or prior to the Effective Time to the extent provided
under the Company's Charter and bylaws in effect on the date of the Merger
Agreement. Parent has further agreed that for such six years after the Effective
Time, Parent will use all commercially reasonable efforts to provide, or to
cause the Surviving Corporation to provide, officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective Time
covering each such person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date of the
Merger Agreement, provided that if such coverage is not obtainable at a cost
less than or equal to two times the amount per annum the Company paid in its
last full fiscal year, Parent will or will cause the Surviving Corporation to
purchase such lesser amount of coverage, on terms as similar in coverage as
practicable to such coverage in effect on the date of the Merger Agreement, as
may be obtained having a cost per annum not to exceed two times the amount per
annum the Company paid in its last full fiscal year.
OTHER POTENTIAL BIDDERS
The Merger Agreement provides that the Company shall, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, received prior to or after the date of the Merger
Agreement, to any corporation, partnership, person or other entity or group
pursuant to appropriate confidentiality agreements, and may participate in
discussions and negotiate with any such entity or group concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction involving
the Company or any subsidiary or division of the Company (any such transaction
being referred to herein as a "Competing Transaction"), only if the Special
Committee determines after consultation with counsel that such action is
necessary in light of its fiduciary obligations to the Public Shareholders. In
addition, the Company shall direct its officers and other appropriate personnel
to cooperate with and be reasonably available to consult with any such entity or
group. Except as set forth above, the Company has agreed that it will not
solicit, participate in or initiate discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other entity or
group (other than Parent or Merger Sub) concerning any merger, sale of assets,
sale of shares of capital stock or similar transaction involving the Company or
any subsidiary or division of the Company.
VOTING OF SHARES
Pursuant to the Merger Agreement, Martin and Parent agreed to vote all
shares of Common Stock beneficially owned by each of them in favor of the Merger
Agreement. In addition, all directors of the Company have agreed with the
Company that they will vote all shares beneficially by each of them in favor of
the Merger Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the Company, on the one hand, and Parent and
Merger Sub, on the other hand, to consummate the Merger are subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions, among others: (i) approval and adoption of the Merger Agreement by
the holders of a majority of the outstanding Voting Shares at the Special
Meeting, (ii) approval and adoption of the Merger Agreement by a majority of the
Voting Shares held by the Public Shareholders; (iii) the absence of any statute,
rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) enacted, issued, promulgated, enforced or
entered prohibiting the consummation of the Merger, (iv) the receipt of all
other required authorizations, consents and approvals of governmental
authorities; (v) the performance of and compliance with, in all material
respects, all agreements and obligations contained in the Merger Agreement and
required to be performed or complied with at or prior to the Effective Time by
38
<PAGE> 43
the respective parties to the Merger Agreement; (vi) the material truth and
correctness of all representations and warranties of the parties to the Merger
Agreement; and (vii) J.C. Bradford shall have reaffirmed in writing its fairness
opinion as of the date of mailing of this Proxy Statement and again at the time
of the Special Meeting and shall not have withdrawn its written fairness
opinion.
The obligations of Parent and Merger Sub to consummate the Merger are
further subject to the satisfaction or waiver of certain conditions including,
among others: (i) there not having occurred any material adverse change in the
business, condition (financial or otherwise) or results of operations of the
Company, and (ii) Parent shall have obtained equity and debt funds necessary to
finance the transactions contemplated by the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, notwithstanding approval of the Merger Agreement by
the shareholders of the Company: (i) by mutual written consent of Parent and the
Company (such determination to be made on behalf of the Company by the Special
Committee); (ii) by either Parent or the Company (such determination to be made
on behalf of the Company by the Special Committee) if the Merger has not been
consummated by January 30, 1998, so long as the failure to consummate the Merger
is not the result of the terminating party's having failed to fulfill a covenant
or obligation under the Merger Agreement; (iii) by either Parent or the Company
(such determination to be made on behalf of the Company by the Special
Committee), if there shall be any law or regulation that makes consummation of
the Merger illegal or otherwise prohibited or if any judgment, injunction, order
or decree enjoining Parent or the Company from consummating the Merger is
entered and becomes final and nonappealable; (iv) by either the Company or
Parent if the Merger Agreement fails to receive the requisite vote for approval
by a majority of the Voting Shares held by the Public Shareholders; or (v) by
Parent or the Company if the Board of Directors of the Company or the Special
Committee withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in a manner adverse to Parent or Merger Sub or resolves
to do any of the foregoing or the Board of Directors of the Company recommends
to the shareholders of the Company any Competing Transaction or resolves to do
so.
EXPENSES
The Merger Agreement provides that all fees, costs and expenses incurred by
all parties in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the Company if the Merger is consummated.
If the Merger is not consummated, Parent shall pay the first $100,000 of its
expenses and the Company shall pay any additional expenses incurred by Parent in
connection with the Merger Agreement and the transactions contemplated thereby,
provided that the Company has retained the right to negotiate directly any of
Parent's expenses with the third parties that must be paid by the Company.
Parent has agreed not to take any action to change the Lenders so as to increase
materially the expenses payable by the Company without the prior consent of the
Company.
AMENDMENTS
The Merger Agreement may not be amended prior to the Effective Time except
by action of the Company, Parent, Merger Sub and Martin set forth in a written
instrument signed on behalf of each of the parties; provided that any such
amendment by the Company must be approved by the Board of Directors of the
Company, acting on the recommendation of the Special Committee. After approval
of the Merger Agreement by the shareholders of the Company at the Special
Meeting and without the further approval of such shareholders, no amendment to
the Merger Agreement may be made which will change (i) the Merger Consideration
or (ii) any of the other terms and conditions of the Merger Agreement if such
change would adversely affect the shareholders of the Company.
39
<PAGE> 44
DISSENTERS' RIGHTS
Holders of Common Stock who do not want to accept the Merger Consideration
of $14.50 per share, who do not vote in favor of (or who abstain from voting on)
the Merger Agreement, and who perfect their dissenters' rights by complying with
the provisions of Chapter 23 of the TBCA, will have the right to receive cash
payment for the "fair value" of their Common Stock.
Section 48-23-102 of the TBCA provides that no dissenters' rights are
available with respect to the merger of a corporation whose securities are
"national market system securities," which includes securities traded on the
Nasdaq National Market. The Common Stock is currently traded on the Nasdaq
National Market; however, pursuant to the Merger Agreement, the Company has
agreed to terminate such listing effective one business day prior to the
Effective Time, so that the Company's shareholders will be entitled to
dissenters' rights in connection with the Merger.
In order to be eligible to exercise the right to dissent, a shareholder
must file with the Company a written objection to the Merger, stating that he
intends to dissent if the Merger is effected. Such statement must be filed
before the vote is taken at the Special Meeting, and it must be addressed as
follows: Plasti-Line, Inc., 623 E. Emory Road, Knoxville, Tennessee 37849,
Attention: Corporate Secretary. It is not necessary for a dissenting shareholder
to vote against the Merger to preserve dissenters' rights; however, such rights
will be lost if the shareholder votes in favor of the Merger.
If the Merger is approved, the Company will deliver a written notice to
dissenting shareholders (a "Company Notice") no later than ten days after
approval of the Merger, unless the Merger is terminated and abandoned. The
Company Notice will set forth where the dissenting shareholders' payment demands
must be sent and where and when stock certificates must be deposited. The
Company Notice will also supply a form for dissenting shareholders to use in
demanding payment. A dissenting shareholder must deliver his payment demand to
the Company no later than the date set forth in the Company Notice, which may
not be fewer than one nor more than two months after the written notice is
delivered (the "Demand Period"). Merely abstaining from or voting against the
Merger will not satisfy the two requirements that the shareholder (i) object in
writing to the Merger and (ii) file a written demand for payment within the
Demand Period. Failure of a shareholder to take the required action during the
Demand Period binds such shareholder to the terms of the Merger and precludes
exercise of dissenters' rights.
Within the Demand Period, a dissenting shareholder must submit his stock
certificates representing his shares of Common Stock to the Company in
accordance with the terms of the Company Notice. As soon as practicable after
the Merger is effected, or upon receipt of a dissenting shareholder's payment
demand, whichever is later, the Company shall pay each dissenting shareholder
the fair value of his shares, plus accrued interest.
If a dissenting shareholder believes that the amount paid by the Company is
less than the fair value of this shares or that interest due was incorrectly
calculated, the dissenting shareholder must, within one month after the Company
has made payment to the dissenting shareholder, demand payment of his estimate
of the fair value. If a demand for payment remains unsettled, the Company must
commence a suit in a court having equity jurisdiction located in Knox County,
Tennessee, within two months after receiving the dissenting shareholder's
payment demand. The court shall determine the dissenting shareholder's right to
receive payment or the fair value of his shares or both. The costs and expenses
of such proceedings shall be assessed against the Company unless the court shall
find the actions of a dissenting shareholder who is party to the suit to be
arbitrary, vexatious or not in good faith. If the Company fails to bring such a
suit within such time, it shall pay each dissenting shareholder whose demand
remains unsettled the amount demanded.
Section 48-23-101 of the TBCA provides that the "fair value" of shares
shall be determined immediately before the effectuation of the Merger,
"excluding any appreciation or depreciation of shares in anticipation of such
corporate action." The value so determined could be more or less than the value
of the Merger consideration into which shares of the Common Stock are to be
converted pursuant to the Merger. Any dissenting shareholder who perfects such
holder's rights to be paid for the fair value of such holder's shares
40
<PAGE> 45
will recognize taxable gain or loss upon receipt of cash for such shares for
federal income tax purposes. See "SPECIAL FACTORS -- Certain Federal Income Tax
Consequences of the Merger."
Any shareholder contemplating the exercise of dissenters' rights should
carefully review Chapter 23 of the TBCA, a copy of which is included herein as
Exhibit B. A shareholder who fails to comply with all requirements of such
Chapter 23 will forfeit such holder's dissenters' rights and, upon consummation
of the Merger, such holder's shares of Common Stock will be converted into the
right to receive the Merger Consideration of $14.50 per share in cash, without
interest.
IN VIEW OF THE COMPLEXITIES OF CHAPTER 23 OF THE TBCA, THE MATERIAL
PROVISIONS OF WHICH ARE BRIEFLY SUMMARIZED ABOVE, SHAREHOLDERS OF THE COMPANY
WHO CONSIDER PURSUING DISSENTERS' RIGHTS ARE URGED TO CONSULT WITH LEGAL
COUNSEL.
SOURCE OF FUNDS FOR THE MERGER
SOURCE OF FUNDS
The total funds required to pay the Merger Consideration of $14.50 per
share to all Public Shareholders, consummate the other transactions contemplated
by the Merger Agreement, refinance certain of the Company's current
indebtedness, fund the Surviving Corporation's working capital needs after the
Merger, and pay all related fees, costs and expenses is estimated to be
approximately $88 million. Approximately $10.5 million of such funds will be
obtained from the Management Group as equity contributions made to Parent. The
remaining $77.5 million will be obtained by means of borrowings as described
below. All of such equity contributions and borrowings will become effective
immediately prior to or at the Effective Time, and will not become effective if
the Merger is not consummated for any reason. The terms of and the documentation
for the intended borrowings have not yet been finalized and are still being
negotiated. Accordingly, the description below of such borrowings is preliminary
and necessarily incomplete. In any event, the final documentation for such
borrowings might contain terms that are more or less restrictive than currently
contemplated.
Equity Contributions. Parent expects to enter into a Shareholder Agreement
with each member of the Management Group pursuant to which each such person will
agree to contribute to Parent, immediately prior to the Effective Time, certain
shares of Common Stock beneficially owned by such person, along with, in some
instances cash and promissory notes payable to Parent. The net aggregate amount
of all such contributions to be made pursuant to the Shareholder Agreement is
approximately $10.5 million, of which no more than $500,000 will be in the form
of promissory notes. In exchange for such equity contributions to Parent, the
Management Group will receive in the aggregate 100% of Parent's issued and
outstanding common stock. More specifically, Martin will transfer to Parent
shares of Common Stock having an aggregate value (based on $14.50 per share) of
approximately $22.5 million, and he will receive from Parent shares of common
stock representing approximately 89% of Parent's equity and approximately $13
million in cash. The other members of the Management Group will contribute a
combination of Common Stock, cash and promissory notes having an aggregate value
of $1 million and receive in the aggregate common stock representing
approximately 11% of Parent's equity. See "SPECIAL FACTORS -- Conflicts of
Interest; Certain Relationships."
Senior Debt. Merger Sub and the Company have executed a commitment letter
dated October 31, 1997 (the "KCCI Commitment") with Key Corporate Capital, Inc.
("KCCI"), pursuant to which KCCI has committed to provide funding to Parent, the
Company and the Company's subsidiaries in the aggregate amount of up to $57.5
million (the "Senior Debt"), subject to certain conditions. This aggregate
amount may be increased by up to $2 million if the Real Estate Loans are less
than $10 million in the aggregate. See "-- Real Estate Loans" below. KCCI
intends to syndicate the Senior Debt, and will act as syndication agent. At the
Effective Time, the Company will be required to pay KCCI a closing fee based on
the total amount of the Senior Debt. The Company has already made a
nonrefundable payment of approximately half the fee, and the balance will be due
at the Effective Time. If the Company or Blair provides institutions that agree
to participate in the syndication, the closing fee will be reduced. In addition,
the Company will reimburse KCCI for all reasonable out-of-pocket expenses
incurred by KCCI in connection with the Senior Debt and, during the term of the
Senior Debt, the Company will pay KCCI a monthly agent's servicing fee.
41
<PAGE> 46
Other material terms and conditions of the Senior Debt are as follows:
1. Revolving Credit Facility. At the Effective Time, KCCI will make
available to the Company and its subsidiaries, American Sign & Marketing,
Inc. ("American Sign") and Plasti-Line Columbia, Inc. ("Columbia")
(together, the "Subsidiaries"), a $29.5 million revolving credit facility
that will mature 59 months after the Effective Time (the "Revolving Credit
Facility"). In the event that the aggregate principal amount of the Real
Estate Loans (as defined below) is less than $10 million, the amount of the
Revolving Credit Facility will be increased by the lesser of $2 million or
the difference between $10 million and the amount of the Real Estate Loans.
The borrowing availability of the Company and each Subsidiary under the
Revolving Credit Facility will generally be limited to an amount determined
under a formula that takes into account the amount of such company's
accounts receivable, inventories and other factors. The annual interest
rate on the Revolving Credit Facility will be either (i) KCCI's prime rate
plus a basis point spread, or (ii) LIBOR plus a basis point spread. These
spreads are subject to adjustment based upon the Company's achieving (or
failing to achieve) certain financial ratios. Initially, the spread will be
225 basis points for all but $3 million of the Revolving Credit Facility.
On such $3 million, which will be available only for certain acquisitions,
the initial spread will be 300 basis points. The Revolving Credit Facility
will be subject to a 0.5% per annum commitment fee on the average unused
portion of the commitment, which percentage is subject to adjustment in
certain circumstances.
2. Operating Companies Term Loan. At the Effective Time, KCCI will
loan to the Company and the Subsidiaries $20 million in the form of a term
loan, maturing 7 years from the Effective Time (the "Operating Companies
Term Loan"). This loan will amortize in quarterly principal payments, as
indicated below, plus interest:
<TABLE>
<CAPTION>
ANNUAL PAYMENT QUARTERLY PAYMENT
YEAR AMOUNT AMOUNT
- ---- -------------- -----------------
<S> <C> <C>
1...................................................... None None
2...................................................... $ 500,000 $ 125,000
3...................................................... 2,375,000 593,750
4...................................................... 3,250,000 812,500
5...................................................... 4,500,000 1,125,000
6...................................................... 4,500,000 1,125,000
7...................................................... 4,875,000 1,218,750
-----------
Total........................................ $20,000,000
===========
</TABLE>
The annual interest rate on the Operating Companies Term Loan will be
either (i) KCCI's prime rate plus a basis point spread or (ii) LIBOR plus a
basis point spread. These spreads are subject to adjustment based upon the
Company's achieving (or failing to achieve) certain financial ratios and,
initially, the spread will be 275 basis points.
3. IRB Letter of Credit. At the Effective Time, KCCI will provide a
letter of credit for the account of Columbia (the "IRB Letter of Credit")
in connection with certain industrial revenue bonds that Columbia has
issued to finance certain real property developments. The IRB Letter of
Credit will be a direct pay standby letter of credit in the amount of $5
million plus an amount designed to cover a portion of the interest on the
bonds, and it will mature 59 months from the Effective Time. There will be
an annual fee paid in quarterly installments for such IRB Letter of Credit
equal to 275 basis points per annum, subject to adjustment based upon the
Company's achieving (or failing to achieve) certain financial ratios.
4. Parent Term Loan. At the Effective Time, KCCI will loan to Parent
$3 million in the form of a term loan, maturing 2 years from the Effective
Time (the "Parent Term Loan"). This loan will amortize in quarterly
principal payments of $375,000 each, plus interest. The annual interest
rate on the Parent Term Loan will be either (i) KCCI's prime rate plus a
basis point spread or (ii) LIBOR plus a basis
42
<PAGE> 47
point spread. These spreads are subject to adjustment based upon Parent's
achieving (or failing to achieve) certain financial ratios and, initially,
these spreads will be 50 basis points added to prime rate, and 275 basis
points added to LIBOR.
All of the Senior Debt will be secured by a first lien on all tangible and
intangible assets of the Company and the Subsidiaries (including, without
limitation, intellectual property rights and the stock of the Subsidiaries that
is owned by the Company, but not including the real property that secures the
Real Estate Loans). In addition, the Parent Term Loan will be secured by all
tangible and intangible assets of Parent, including, without limitation, the
stock of the Company that is owned by Parent.
KCCI's commitment to fund the Senior Debt is conditioned upon, among other
things, (i) consummation of the Merger no later than January 30, 1998, unless
that date is extended in KCCI's discretion, (ii) the execution of documents
(which will contain financial and other restrictive covenants) satisfactory to
KCCI, and (iii) the contribution by the Management Group of at least $10 million
to Parent.
Real Estate Loans. The Company and American Sign have executed two
commitment letters dated November 3, 1997 (the "KeyCorp Commitments") with
KeyCorp Real Estate Capital Markets, Inc. ("KeyCorp"), pursuant to which KeyCorp
has committed to loan to newly formed subsidiaries of the Company the aggregate
sum of up to $10 million (the "Real Estate Loans") at the Effective Time,
subject to certain conditions. The aggregate amount will be divided into two
term loans, one in the principal amount of up to $6.5 million secured by a
mortgage on the Company's real property located in Knoxville, Tennessee (the
"Knoxville Property"), and one in the principal amount of up to $3.5 million
secured by a mortgage on the Company's real property located in Florence,
Kentucky (the "Florence Property"). The actual amount of each Real Estate Loan
will be the lesser of (i) an amount such that the debt service coverage ratio at
funding is a minimum of 1.25x; or (ii) 75% of the appraised value of the
Knoxville Property and the Florence Property, respectively. Each Real Estate
Loan will bear interest at an annual rate of 300 basis points over the 10-year
U.S. Treasury rate fixed as of the Effective Time. Principal and interest will
be paid in level payments sufficient to amortize each loan in 25 years, subject
to a balloon payment at the end of 10 years equal to the remaining principal
plus accrued interest. The Real Estate Loans may not be prepaid during the first
5 years of their terms; thereafter, they may be prepaid subject to a prepayment
fee equal to the greater of 1% of the original principal amount or a yield
maintenance premium which is a function of changes in the applicable U.S.
Treasury rate. No prepayment fee will apply during the final three months of the
term of each loan.
The Company has paid KeyCorp nonrefundable commitment and application fees,
and the Company will reimburse KeyCorp for any additional out-of-pocket fees in
connection with the Real Estate Loans. The Company will also pay KeyCorp at the
Effective Time an additional fee equal to 0.5% of the principal amount of the
Real Estate Loans actually funded. Before funding the Real Estate Loans, the
Company will form two new subsidiaries and transfer to one such subsidiary title
to the Knoxville Property, and to the other such subsidiary title to the
Florence Property. These subsidiaries will be the borrowers for purposes of the
Real Estate Loans. Each such subsidiary will enter into a lease with the
Company, pursuant to which the Company will lease the Knoxville Property and the
Florence Property, respectively, for 25 years at rental rates that are 5% above
market rents, as determined by an independent appraisal, with increases at least
every 5 years based on the Consumer Price Index.
Subordinated Debt. Parent and the Company have executed a commitment
letter dated November 5, 1997 (the "RSTW Commitment") with RSTW Partners III,
L.P. ("RSTW"), pursuant to which RSTW committed to lend $10 million to Parent
(the "Subordinated Debt") in the form of a senior subordinated loan and a junior
subordinated loan, subject to certain conditions. Material terms and conditions
of the Subordinated Debt are described below.
1. Senior Subordinated Loan. At the Effective Time, RSTW will lend
Parent $6 million. This loan will bear interest at the rate of 12.5% per
annum and will have a term of 8 years. During the first 6 years, interest
only will be payable on a quarterly basis. In years 7 and 8 of the term,
interest payments will continue to be due quarterly and the principal will
be due in eight equal quarterly installments.
43
<PAGE> 48
2. Junior Subordinated Loan. At the Effective Time, RSTW will lend
Parent $4 million. This loan will bear interest at the rate of 12.5% per
annum and will have a term of 8 years. Interest will be payable quarterly.
During the first 5 years of the term, Parent will pay accrued interest by
delivering to RSTW notes payable (the "PIK Notes"), and thereafter interest
will be paid in cash. The PIK Notes will be due and payable at the end of
the fifth year of the term; principal payments will be due in equal
quarterly installments of $500,000 each during years 7 and 8.
The Company intends to provide RSTW with a guaranty of Parent's
obligations, such guaranty to be subordinated to the interests of the Senior
Lenders.
Although the RSTW Commitment provides that at the Effective Time, RSTW will
receive shares constituting 15% of Parent's total issued and outstanding common
stock, the Parent, the Company and RSTW have agreed that in lieu of such common
stock, RSTW will receive a warrant that will be exercisable for such number of
shares of common stock of the Parent. The exercise price and other terms of the
warrant shall be agreed upon by the parties, but it is expected that the warrant
will be transferable and the holder of the warrant will, upon the exercise
thereof, be entitled to customary registration rights.
Parent has agreed that RSTW may have two representatives attend and observe
all meetings of Parent's Board of Directors and all committees thereof, until
all Subordinated Debt is repaid or RSTW's equity position is liquidated,
whichever occurs later. RSTW will also have the right, but not the obligation,
to appoint one member of Parent's Board in lieu of one of the representatives
described above. Parent will reimburse RSTW for all out-of-pocket expenses
incurred by such representatives in attending such meetings. It is anticipated
that Parent's Board will consist of not more than eight directors, and Parent
will hold Board meetings no less often than quarterly.
At the Effective Time, upon funding of the Subordinated Debt the Company
will pay RSTW a closing fee equal to 2% of the total amount of the Subordinated
Debt. The Company has also agreed to reimburse RSTW for all reasonable
out-of-pocket expenses incurred by it in connection with the Subordinated Debt,
and the Company has paid to RSTW a deposit against such costs. In the event that
RSTW is willing to consummate the terms of the Commitment Letter but the Company
or any of its related entities finances the Merger or a similar transaction with
any other institution (other than the loans contemplated to be made by KCCI, as
described above) within 180 days from November 5, 1997, the Company shall pay to
RSTW a break-up fee of $500,000.
RSTW's obligations under the RSTW Commitment are conditioned upon, among
other things, the Management Group's having contributed at least $10 million to
Parent, and Messrs. Martin and Deuschle entering into employment and noncompete
agreements with the Company for terms of at least two years each.
44
<PAGE> 49
ESTIMATED FEES AND EXPENSES
Estimated fees, costs and expenses incurred or to be incurred by the
Company, Parent and Merger Sub in connection with the Merger are approximately
as follows:
<TABLE>
<S> <C>
Payment of Merger Consideration(l).......................... $56,055,463
Advisory fees(2)............................................
Legal fees and expenses(3)..................................
Accounting fees and expenses................................
Securities and Exchange Commission filing fee............... 11,215
Printing and mailing expenses...............................
Paying Agent fees and expenses..............................
Proxy solicitation fees and expenses........................ 7,000
Miscellaneous expenses......................................
-----------
Total............................................. $
===========
</TABLE>
- ---------------
(1) Includes payment for all outstanding shares of Common Stock other than those
that will be owned by Parent at the Effective Time, and includes payments in
settlement of outstanding employee stock options in accordance with the
Merger Agreement.
(2) Includes the fees and estimated expenses of J.C. Bradford and Blair.
(3) Includes the estimated fees and expenses of counsel for the Company, the
Special Committee, Parent and Merger Sub.
45
<PAGE> 50
BUSINESS OF THE COMPANY
GENERAL
The Company began operations in 1944. Together with its subsidiaries,
American Sign and Columbia, the Company provides a complete range of retail
communication products and services to customers in the automotive, food
service, petroleum, financial services and other retailing markets. The
Company's expertise is the design, manufacture, installation and maintenance of
exterior, interior and on-premise signage and point-of-purchase products,
integrated by a systematized product management capability. The Company designs,
engineers and manufactures substantially all of its products in Knoxville,
Tennessee; Florence, Kentucky; Columbia, South Carolina; and Fontana,
California.
PRODUCTS
The Company's basic sign product is composed of two rigid plastic faces
that are molded and decorated to reflect the customer's name and logo. These
faces are mounted in a steel or aluminum frame and generally placed on a steel
column to permit visibility. Typically, the signs are internally illuminated to
make them visible at night. The sign faces range in size from two square feet to
245 square feet.
The Company's products are used by its customers primarily for brand
identification of their retail outlets. For high-volume customers in the
automotive, retail and food service markets and, to a lesser extent for
petroleum customers, the Company produces a full package of signs used to
identify a particular retail location with the customer's corporate image that
is known to consumers. A package may consist of many sign elements, including:
(i) road signs decorated with the customer's logo and colors and often built in
a distinctive shape; (ii) high rise signs typically used for locations adjacent
to interstate highways or in high traffic areas; (iii) menuboards with
changeable copy areas and price mechanisms that enable the Company's fast food
customers to change their menus and prices; (iv) signs typically used by
petroleum customers to provide on-site advertising of the prices of various
products; (v) specialty lighting products that provide accent or decorative
lighting, typically at fast food restaurants and gasoline stations; and (vi)
illuminated fascia signage that is mounted on buildings for decoration and
identification. For high-volume customers in the financial services market, in
addition to the basic signage products, the Company focuses on all aspects of
the customer's communication needs, from in-store merchandising kiosks to
creative ATM surround solutions.
The Company concentrates on high-volume, standardized products, but also
produces customized signage as an accommodation to its regular customers. Custom
signs typically require special fabrication techniques and tend to generate
low-volume production runs with longer lead times.
The Company provides at least a one-year limited warranty on all signs for
defects in materials and workmanship, with the Company being obligated to repair
or replace any defective product. In addition to production, the Company offers
a complete spectrum of sign services, including design, site analysis, graphic
analysis, installation and maintenance. Working with the customer or a design
consultant retained by the customer, the Company assists in developing designs
that meet the customer's goals. Upon customer request, the Company coordinates
the sign package with local ordinances and regulatory requirements, assists in
determining where to place the signs for maximum visibility and assists in
obtaining necessary permits and variances. In cases where the Company has a
contract for the installation of a sign, the Company utilizes the services of a
subcontractor in the area in which the sign is to be installed. Maintenance
service, regular cleaning, inspection and replacement of lights and other parts
when needed or on a predetermined schedule are also provided through local
subcontractors.
"Design Performance Group," the Company's retail design and merchandising
services division, offers turnkey retail design solutions with programs that
include market research, graphic and environmental design, production, and
installation.
46
<PAGE> 51
CUSTOMERS
The Company, for internal purposes, separates its business by customers
into the following groupings: automotive, food services, financial services,
petroleum, merchandising design and general retail. For its automotive,
financial services, retail and food services customers, the Company typically
provides a full range of products and services, including most or all of those
described above. For the petroleum industry, the Company typically manufactures
signs to the customer's specifications and ships them for installation by the
customer's own subcontractors. Customer commitments vary by market segment and
specific account. Commitments range from multi-year contracts with firm prices
for all products and services, to specific orders for specific quantities at
firm prices. From time to time, the Company is awarded large, one-time contracts
by customers who are changing their name or image. These programs can create
concentrated surges in volume. The Company has received approximately $23.7
million in revenues from such contracts during 1997, and the Company's current
budget estimates that it will receive approximately $35.5 million in revenues
from such contracts during 1998.
Since 1969, the Company's principal customers have been subsidiaries of
General Motors Corporation ("General Motors"). On February 25, 1997, the Company
announced the execution of a new contract for the supply of internally
illuminated outdoor signs for the General Motors dealership sign program, as
well as the administration of the sign program for over 8,000 car dealerships in
the United States. This program accounted for approximately 11% of the Company's
sales in 1996. The Company furnishes all services associated with the
manufacture and installation of signs and replacement parts ordered by General
Motors. The contract is terminable on 30 days' notice by General Motors and is
non-exclusive; however, the term of the contract extends through January 1, 2004
and the Company believes that it is currently the sole supplier for the General
Motors dealership sign program. Signs are supplied for new dealerships, as
replacements of signs at existing dealerships and in connection with moves to
new locations. The Company provides General Motors with a 10-year limited
warranty for defects in materials and workmanship, with the Company being
obligated to repair or replace any defective product. General Motors accounted
for approximately 22% of the Company's net sales in fiscal 1996. The loss of
General Motors as a customer would have a material adverse effect on the Company
if it were unable to compensate promptly for that loss by generating new
business.
In 1996, 11% of the Company's sales were to McDonald's Corporation and its
franchises. The Company is not the sole supplier to this customer.
MARKETING
Products and services are marketed on a direct basis and through sales
representatives throughout the United States. The Company's principal marketing
focus is on companies with many retail outlets requiring substantial numbers of
signs. This type of business enables the Company to maintain economic production
runs and increases the opportunity to provide a full range of services.
Marketing opportunities are generated by the construction of new
facilities, acquisition of existing locations requiring re-identification,
addition of signage at existing locations, design of a new image requiring
re-identification of all facilities and replacement of parts damaged by storms,
vandalism and accidents.
The Company maintains a research and development department that typically
has various product development projects in progress. This research and
development effort focuses on developing new products that will be distinctive
in the general marketplace. The Company does not currently have any such new
products under development that it reasonably believes will have a materially
favorable effect on the Company's net income.
PRODUCTION AND RAW MATERIALS
Production of the Company's products is a labor intensive process. The
typical sign consists of large acrylic or polycarbonate faces mounted in a metal
frame and internally illuminated. The shapes of the faces are formed using
vacuum or press forming after the face material has been heated. Letters or
logos that are not molded into the faces are either glued or silk-screened on
the faces. During the production process, signs move
47
<PAGE> 52
through the plants on an overhead monorail system. After the signs are
manufactured, they are crated and shipped from the Company's facilities
principally by commercial trucking companies.
The practice of the Company is to start producing finished goods only after
receipt of a firm order from a customer. However, for customers with long-term
programs, the Company produces finished goods in anticipation of customer needs.
Credit terms are generally net 30 days from the date of sale. Occasionally, the
Company engages the services of subcontractors for special manufacturing work to
assist during peak production periods.
The Company designs and engineers its products to customer specifications.
The Company's manufacturing operations include machining, welding, plastic
molding and fabrication, painting, assembly and packaging. The principal raw
materials and purchased components used in the Company's manufacturing process
are steel shapes and sheet, aluminum shapes and sheet, electrical components
(wire, sockets, ballasts and lamps) and acrylic and polycarbonate sheets. The
Company does not hold any material patents or trademarks.
COMPETITION
The Company defines its principal market as the volume production sign
industry. Competition varies depending on the market segment and the size of the
project. Larger projects require a more comprehensive service capability which
limits the number of competitors. Smaller, less complex projects attract a
larger number of competitors.
Most of the Company's competition is from other suppliers, rather than from
other products or means of advertising, such as billboards. When a customer
needs one of the Company's products, for example, backlit signage and
point-of-purchase products (such as menu boards for fast-food drive-through
windows), there is typically not a substitute product available to the customer.
Competition for national accounts, the principal source of the Company's
business, is intense. The Company believes it has adequate financial resources
with which to compete. In general, the Company believes that its products,
contract conditions, terms, and warranty provisions are consistent with those
prevailing in the industry. The Company believes that its principal advantage is
its ability to provide a complete range of products and services to customers on
a competitive basis.
EMPLOYEES
The Company had a total of 1,003 full-time employees as of December 29,
1996, of which approximately 51.8% were employed under union contract.
PRODUCT BACKLOG
At September 28, 1997, booked product orders amounted to approximately
$22.3 million as compared with approximately $18.5 million at September 29,
1996. Products are shipped by the Company against customer delivery schedules,
which generally call for delivery one month after the order is placed. The
Company believes that approximately 80% ($17.8 million) of such firm product
backlog at September 28, 1997, will be shipped before the end of fiscal year
1997. In addition to firm product backlog, the Company has open commitments from
a number of customers to supply products as required to meet their construction
schedules. At the time such a customer gives the Company a release to ship signs
to a particular location, the Company includes the products covered by the
release in backlog and commences production or ships the items from inventory.
SEASONALITY
The Company's sales in fiscal 1996 exhibited some limited seasonality, with
sales in the first quarter being the lowest and those in the fourth quarter the
highest. First quarter sales tend to be relatively lower because of weather
constraints which slow down customers' construction schedules and their pattern
of sign purchases. Sales normally accelerate in the second, third and fourth
quarters corresponding with accelerating construction schedules.
48
<PAGE> 53
SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY
The following table sets forth selected historical financial information
for the Company and its subsidiaries as of and for the nine months ended
September 29, 1996 and September 28, 1997 and as of and for each of the prior
five fiscal years in the period ended December 29, 1996. The following financial
information should be read in conjunction with "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" and the Consolidated
Financial Statements and related Notes included elsewhere in this Proxy
Statement. The interim unaudited information for the Company and its
subsidiaries for the nine months ended September 29, 1996 and September 28, 1997
reflect, in the opinion of management of the Company, all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the information provided for such interim periods. The results of operations
of such interim periods are not necessarily indicative of results which may be
expected for any other interim period or the for the year as a whole.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------ -----------------------------
JANUARY 3, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 29, SEPTEMBER 29, SEPTEMBER 28,
1993 1994 1995 1995 1996 1996 1997
---------- ---------- ---------- ------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............ $83,220 $90,362 $77,309 $103,247 $130,876 $96,412 $94,361
Income (loss) before
taxes and
cumulative effect
of accounting
change............. 4,006 4,643 (5,361)(2) 2,202 4,929 3,504 4,675
Income (loss) before
cumulative effect
of accounting
change............. 2,385 2,854 (4,837) 1,397 3,148 2,173 2,805
Cumulative effect of
accounting
change(1).......... (648) -- -- -- -- -- --
Net income (loss).... 1,737 2,854 (4,837) 1,397 3,148 2,173 2,805
Income (loss) per
share before
cumulative effect
of accounting
change............. .65 .77 (1.31) .38 .83 .57 .73
Cumulative effect of
accounting change.. (.18) -- -- -- -- -- --
Net income (loss) per
share.............. $ .47 $ .77 $ (1.31) $ .38 $ .83 $ .57 $ .73
BALANCE SHEET DATA:
Working capital...... $17,554 $18,713 $23,349 $ 33,112 $ 25,753 $28,755 $18,398
Total assets......... 53,424 49,522 51,450 77,150 67,244 69,515 70,576
Long-term debt less
current
maturities......... 7,960 6,536 12,004 23,575 12,220 16,218 8,791
Stockholders'
equity............. 24,084 27,081 22,353 23,891 27,202 26,170 28,178
</TABLE>
- ---------------
(1) In fiscal 1992, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes.
(2) Includes $3.9 million write-off of goodwill and $2.4 million restructuring
charge.
49
<PAGE> 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year 1996 Compared to Fiscal Year 1995
Total revenue in fiscal year 1996 increased by $27.4 million (26.4%), from
$103.8 million in 1995 to $131.2 million in 1996, due to higher sales volumes
across all business units. Fiscal year 1996 also included twelve months of
revenue for Columbia, whereas fiscal year 1995 included only two months since
Columbia was acquired in the last quarter of 1995. Contributing to the increased
volume were higher sales at "Plasti-Line East," which includes the Company's
Knoxville and Florence locations servicing primarily automotive and fast food
customers, representing a $13.5 million increase over 1995 sales for that
division. In addition, sales increased in 1996 at "Plasti-Line West," the
Company's California operations, by $2.3 million, at the Design Performance
Group by $2.1 million, and at Columbia by $9.5 million. Although the annual
sales for 1996 were higher than for 1995, sales in just the fourth quarter of
1996 were $3.8 million lower than in the fourth quarter of 1995. The primary
reason for this decline is that fourth quarter 1995 sales included $11.3 million
for a major sign re-image that was completed for one of Plasti-Line East's bank
customers.
Income before taxes and interest for 1996 was $6.5 million, as compared to
$3.2 million for 1995. The improvement in income was due to a $4.8 million
increase in gross profit, resulting from the higher sales. Gross profit as a
percentage of sales was relatively flat at 17.5% and 17.6% in 1996 and 1995,
respectively. Partially offsetting the higher gross profit in 1996 was a $1.7
million increase in selling, general and administrative expenses, caused
primarily by the increased volumes. Selling, general and administrative expenses
as a percentage of sales improved from 15.0% in 1995 to 12.8% in 1996, partially
due to the benefits of reduced costs and improved efficiency resulting from the
business re-engineering completed in 1995, as well as increased sales volumes.
Selling, general and administrative expenses in 1995 also included $1.5 million
in costs associated with the Company's business re-engineering initiative, which
was completed in the fourth quarter of 1995. Interest expense of $1.6 million in
1996 was $553,000 higher than in 1995, caused by the higher working capital
needed to support the increased sales volumes.
Fiscal Year 1995 Compared to Fiscal Year 1994
Net sales in 1995 increased by $25.9 million (33.6%) over net sales in 1994
due to higher volumes across all business units. Contributing to the increased
volume were higher sales to automotive and bank customers at Plasti-Line East
(increases of $5.8 million and $7.1 million, respectively), as well as increased
sales at Plasti-Line West ($4.7 million) and the Design Performance Group ($2.9
million). Also, Columbia was acquired in 1995, with net sales of $1.1 million.
Sales for the fourth quarter of 1995 showed a $14.3 million (59.7%) increase
over sales for the same period of 1994, due to an increase in volume at all
locations. Fourth quarter sales included $11.3 million for a major sign re-image
that was completed for one of Plasti-Line East's bank customers.
Income before taxes and interest for 1995 was $3.2 million, as compared to
$1.8 million in 1994 (excluding the goodwill write-off described below and the
provision for restructuring charges). The improvement in income was due to a
$3.6 million increase in gross profit, resulting from higher sales. Partially
offsetting the higher gross profit was a $1.6 million increase in selling,
general and administrative expenses, which was related to the increased volumes.
Selling, general and administrative expenses in each of 1995 and 1994 included
approximately $1.5 million in costs associated with the Company's business
re-engineering initiative, which was completed during the fourth quarter of
1995. Also partially offsetting the favorable impact of the gross profit
improvement was a one-time charge of $483,000 related to the curtailment of a
defined benefit pension plan. This plan, for the benefit of the union employees
of the Knoxville facility, was frozen on December 31, 1995. Future retirement
benefits for this employee group will be earned in a newly established defined
contribution plan. The impact of this curtailment was a one-time non-cash charge
for unrecognized prior service costs that otherwise would have been expensed
over future years.
50
<PAGE> 55
During 1994, the Company wrote-off approximately $4.98 million of goodwill
attributed to the Company's acquisition of American Sign in 1986. As a result of
increased competitive pressures, unsuccessful efforts to replace an aging
product line and management turnover, the Company believed that such acquisition
had not achieved the sales and earnings estimated at the time of the purchase.
The Company believed that the projected operating results of American Sign would
not support the future amortization of the remaining goodwill and accordingly
wrote off the unamortized portion of such goodwill .
Interest expense of $1.04 million in 1995 increased by $328,000 from the
prior year. Higher average interest rates, increased borrowings related to the
purchase of the Columbia assets, and higher working capital needs related to
fourth quarter volumes, were responsible for the increase.
Nine Months Ended September 28, 1997 Compared to Nine Months Ended September
29, 1996
Net sales were $94.3 million for the first nine months of 1997, compared to
$96.4 million for the first nine months of 1996. The principal reason for the
decrease was delays in new program start-ups and re-images for automotive and
retail customers, which resulted in lower sales for Plasti-Line West and with
respect to automotive and food service customers throughout the Company.
Cumulative gross profit as a percentage of sales at the end of the third
quarter of 1997 was 18.2%, which was higher than the margin of 17.1% for the
same period in 1996. The margin improvement is due to manufacturing cost
reductions as well as a favorable sales mix.
Selling, general and administrative expenses for the first nine months of
1997 were $12.0 million as compared to $11.7 million for the same period in
1996, an increase of 3.0%. Selling, general and administrative expenses as a
percentage of sales for the first nine months of 1997 were 12.7%, as compared to
12.1% during the same period of 1996. This slight increase in expenses as a
percentage of sales is primarily due to increased spending on new business
development, as well as the costs of implementing the Company's manufacturing
software at Columbia and Plasti-Line West.
Operating income for the first nine months of 1997 was $5.1 million, as
compared to $4.8 million during the same period in 1996, a 6.5% increase. The
increase was due to improved margins.
As a result of the improved margins and decreased interest expense (from
lower working capital), the Company's pre-tax income for the first nine months
of 1997 increased to $4.6 million, from $3.5 million for the first nine months
of 1996, a 33.4% increase.
Net income for the first nine months of 1997 was $2.8 million as compared
to $2.2 million for the first nine months of 1996, a 29.1% increase. Net income
per share was $0.73 for the first nine months of 1997, compared to $0.57 for the
comparable period of the preceding year.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash and cash equivalents of $4.3 million, the Company had
operating working capital at September 28, 1997 of $14.1 million, a decrease of
$11.6 million from the amount of working capital at December 31, 1996. This
reduction was primarily due to decreases in net receivables and inventories and
an increase in customer deposits.
During the first nine months of 1997, the Company completed the financing
of a new manufacturing facility in Columbia, through the issuance of $5.0
million of industrial revenue bonds. In July 1997, the Company requisitioned
$1.259 million of these bonds to finance the facility's construction, and the
balance of the bonds remains in trust.
The Company's long-term debt includes the following:
Revolving Credit Facility: The Company has available up to $20
million under this line of credit through June 30, 1998. The outstanding
balance was approximately $8.4 million and $0 as of December 31, 1996 and
September 28, 1997, respectively. The annual interest rate varies and was
8.413%
51
<PAGE> 56
and 6.902% as of December 31, 1996 and September 28, 1997, respectively.
The loan is secured by the Company's accounts receivable and inventory.
Knox County, Tennessee Industrial Revenue Bonds: The total
outstanding principal balance as of December 31, 1996 and September 28,
1997 was approximately $4 million and $4 million, respectively. The annual
interest rate on $2.15 million of this balance varies, and was 4.15% and
4.25% at December 31, 1996 and September 28, 1997, respectively. The annual
interest rate on the remaining balance is 7.65%. Interest is payable
quarterly, and $680,000 of principal is payable annually, with a balloon
payment of $2.63 million payable on November 1, 1999. The bonds are
collateralized by the Knoxville, Tennessee real property.
Florence, Kentucky Industrial Revenue Bonds: The total outstanding
principal balance as of December 31, 1996 and September 28, 1997 was
approximately $584,000 and $553,000, respectively. The annual interest rate
varies, and was 7.4% and 7.4% at December 31, 1996 and September 28, 1997,
respectively. Principal payments of $16,250 plus accrued interest are
payable quarterly through December 1, 2005. The bonds are collateralized by
the Florence, Kentucky real property.
Columbia, South Carolina Industrial Revenue Development Bonds: As
discussed above, the Company obtained this financing in July 1997 for the
development of a building on the Columbia, South Carolina property. The
principal balance is $5 million and bears interest at an annual average
coupon rate of 5.96%. Interest is payable semi-annually, and principal
payments will begin in July 2000, with the final payment being due in July
2017. The bonds are secured by the Columbia, South Carolina real property.
Cash flow provided from operations during the first nine months of 1997 was
$16.2 million, resulting primarily from income from operations and working
capital reductions. Investing activities in 1997 have used $2.9 million,
primarily for capital expenditures. Financing activities in 1997 have used $9.0
million, primarily for payments on the Company's line of credit.
The Company's only current plans for capital expenditures, not including
the Merger and the other transactions contemplated by the Merger Agreement.
relate to the acquisition of new machinery, equipment, furniture and fixtures
designed to increase productivity and factory efficiency. The Company believes
its cash generated from operations and the funds available to it under its
existing line of credit and the industrial revenue bonds are sufficient for
these operating and capital requirements.
SEASONALITY
The Company's sales exhibit limited seasonality, with sales in the first
quarter of each fiscal year generally being the lowest and fourth quarter sales
the highest. First quarter sales tend to be relatively lower because of weather
conditions that delay or extend customers' construction schedules and,
therefore, their pattern of sign purchases. Sales have normally accelerated in
the second, third and fourth quarters, corresponding with accelerating
construction schedules.
52
<PAGE> 57
MARKET PRICES FOR THE COMMON STOCK
The Company's Common Stock is listed and traded on the Nasdaq National
Market under the symbol "SIGN." The following table sets forth the high and low
bid price per share of Common Stock, as reported by the Nasdaq National Market
for the fiscal periods indicated:
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ ------- -------
<S> <C> <C>
Fiscal 1995
First Quarter............................................. $ 7.000 $ 4.750
Second Quarter............................................ 7.500 5.500
Third Quarter............................................. 9.125 7.000
Fourth Quarter............................................ 8.750 7.750
Fiscal 1996
First Quarter............................................. $ 8.750 $ 6.750
Second Quarter............................................ 9.000 8.000
Third Quarter............................................. 10.000 7.500
Fourth Quarter............................................ 14.500 9.000
Fiscal 1997
First Quarter............................................. $11.500 $ 7.500
Second Quarter............................................ 11.125 8.500
Third Quarter............................................. 13.750 10.125
</TABLE>
On July 29, 1997, the date before the public announcement that Parent and
the Special Committee were beginning merger discussions, the high and low bid
prices per share for the Common Stock were $10.625 and $10.125, respectively.
On November 3, 1997, the date before the public announcement of the
agreement in principle as to the Merger price of $14.50 per share, the high and
low bid prices per share for the Common Stock were $12.00 and $11.875,
respectively.
On , 1997, the most recent practicable date before the printing of this
Proxy Statement the high and low bid prices per share for the Common Stock were
$ and $ , respectively, and shares of Common Stock
were issued and outstanding among record holders.
HOLDERS OF COMMON STOCK ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE COMMON STOCK.
DIVIDENDS
The Company has never paid regular cash dividends on the Common Stock, and
the Board of Directors plans to continue this policy, retaining future earnings
to support growth and expansion of the Company's business. The Company has in
the past paid special one-time dividends, such as the aggregate $1.9 million
cash dividend paid to shareholders in 1996, but there can be no assurance that
the Company will pay any other such dividends in the future.
CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB
PARENT
Pursuant to the Subscription Agreements, Parent is the beneficial owner of
shares of Common Stock of the Company, all of which will be
transferred to Parent by the Management Group immediately prior to the Effective
Time. Parent is the owner of all of the issued and outstanding capital stock of
Merger Sub. As of the date of this Proxy Statement, the directors and officers
of Parent are as set forth under "DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY, PARENT, MERGER SUB AND THE SUR-
53
<PAGE> 58
VIVING CORPORATION -- Information Concerning Directors and Executive Officers of
Parent and Merger Sub." The directors of Parent have approved the Merger
Agreement.
MERGER SUB
Merger Sub, a wholly owned subsidiary of Parent, is a Tennessee corporation
organized for the sole purpose of effectuating the Merger. As of the date of
this Proxy Statement, the directors and officers of Merger Sub are as set forth
under "DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, PARENT, MERGER SUB AND
THE SURVIVING CORPORATION -- Information Concerning Directors and Executive
Officers of Parent and Merger Sub." The directors and sole shareholder of Merger
Sub have approved the Merger Agreement. Until the consummation of the Merger, it
is not anticipated that Merger Sub will have any significant assets or
liabilities (other than those arising under the Merger Agreement or in
connection with the Merger and the transactions contemplated thereby) or engage
in any activities other than those incident to its formation and capitalization
and the Merger.
GENERAL
The business address of Parent and Merger Sub is 623 E. Emory Road,
Knoxville, Tennessee 37849. The telephone number of Parent and Merger Sub is
(423) 938-1511.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY,
PARENT, MERGER SUB AND THE SURVIVING CORPORATION
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors. The following table sets forth the name of each director and a
description of his positions and offices with the Company, if any; a brief
description of his principal occupation and business experience during at least
the last five years; certain directorships presently held by him in companies
other than the Company; and certain other information including his age. Unless
otherwise indicated, the address of each director and executive officer of the
Company is that of the Company at 623 E. Emory Road, Knoxville, Tennessee 37849.
Each person listed below is a citizen of the United States.
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR NAME AGE SINCE
- ------------- --- --------
<S> <C> <C>
Howard L. Clark, Jr......................................... 53 1993
James G. Hanes, III......................................... 53 1980
James A. Haslam, III........................................ 43 1991
Donald F. Johnstone......................................... 66 1995
James R. Martin............................................. 54 1980
J. Hoyle Rymer.............................................. 52 1987
James F. Smith, Jr.......................................... 67 1983
H. Mitchell Watson, Jr...................................... 59 1994
</TABLE>
The following is a summary of the principal business associations of the
Company's directors.
HOWARD L. CLARK, JR. has been the Vice Chairman of Lehman Brothers, Inc.
since January 1993. From January 1990 to January 1993, he was Chairman and Chief
Executive Officer of Shearson Lehman Brothers Holdings, Inc. He was Executive
Vice President and Chief Financial Officer of American Express Company from
September 1985 to January 1990. Mr. Clark also serves as a director of Lehman
Brothers, Inc., Fund American Enterprises Holdings, Inc., Maytag Corporation,
and Walter Industries, Inc.
JAMES G. HANES, III is a private investor.
JAMES A. HASLAM, III has been the Chief Executive Officer and Chief
Operating Officer of Pilot Corporation since July 1996. He has been employed in
various capacities by Pilot Corporation for over 15 years. Pilot, founded in
1958 by James A. Haslam, II, is a national chain of 140 convenience stores and
54
<PAGE> 59
"Travel Centers" located in 34 states, operated from its headquarters in
Knoxville, Tennessee. Mr. Haslam also served as a director of First American
National Bank of Knoxville from 1985 to January 1996. He presently serves as a
director of First Tennessee National Corporation.
DONALD F. JOHNSTONE has been the President and Chief Executive Officer of
Whittle Communications L.P., a media-placed advertising and communications
company since March 1994. Prior to this position, for eleven years, he was
President and Chief Executive Officer of Philips Consumer Electronics Company, a
manufacturer and marketer of consumer electronics products. Mr. Johnstone also
served in sales and marketing capacities and as a division general manager for
General Electric.
JAMES R. MARTIN has been the Chairman of the Board and Chief Executive
Officer of the Company since June 1992. He was President of the Company from
1980 to June 1992 and has been the Company's principal shareholder since 1980.
He is director of First American Corporation, a bank holding company in
Nashville, Tennessee.
J. HOYLE RYMER is a director of Dorsey Trailers, Inc. Mr. Rymer is also a
director of First American Bank of Cleveland, a wholly owned subsidiary of First
American Corporation. Since July 1989, he has been the President of JHR Co., an
investment company. For the previous five years, until his retirement in October
1988, he was President of Magic Chef, a division of Maytag Corporation.
JAMES F. SMITH, JR. is a director of First American Corporation. In this
capacity, he also serves as Chairman of the Development and Executive Committees
and as a Member of the Asset Policy Committee. From 1991 through 1994, Mr. Smith
served as Chairman of the Board of First American Corporation and First American
National Bank. From February 1991 until November 1991, Mr. Smith also served as
President and Chief Executive Officer of First American Corporation and First
American National Bank. Mr. Smith also serves as a director of Pilot Corporation
and Computational Systems, Inc.
H. MITCHELL WATSON, JR. has been the President of Sigma Group of America, a
consulting company, since June 1992. From 1989 to June 1992, Mr. Watson was
President and Chief Executive Officer of Rolm Co., a joint venture between
International Business Machines, Inc. and Siemen's AG. Mr. Watson is a retired
Vice President of International Business Machines, Inc. Mr. Watson also serves
as a director of Praxair Inc. and Caliber Systems, Inc.
Executive Officers. The following sets forth the name of each executive
officer of the Company other than Mr. Martin and a description of such person's
positions and offices with the Company; a brief description of such person's
business experience during at least the last five years; and certain other
information including such person's age. Each person listed below is a citizen
of the United States.
MARK J. DEUSCHLE, age 38, has been Vice President -- Finance, Treasurer and
Chief Financial Officer of the Company since April 1993 and Secretary of the
Company since September 1994. From April 1989 to April 1993 he held various
positions in the Company's financial operations. Before joining the Company,
from 1985 to 1989 he served in various financial roles with FMC Corp., Chicago,
Illinois.
FRANCIS JOSEPH BRANG, age 57, has been Vice President -- Operations of the
Company since December 1996. Before joining the Company he held various
managerial positions with Philips Consumer Electronics Company, a manufacturer
and marketer of consumer electronics products, most recently as General Manger
of U.S. Operations.
KATHRYN COLEMAN WOOD, age 42, has been Vice President -- Human Resources of
the Company since August 1994. She was Vice President, Human Resources and
Support Services for CTI, Inc., a developer and manufacturer of medical imaging
equipment, from July 1988 to August 1994.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND MERGER SUB
Set forth below is the name of each director and executive officer of
Parent and Merger Sub and, unless disclosed elsewhere in this Proxy Statement,
the present principal occupation or employment of each such person and a brief
description of his principal occupation and business experience during at least
the last five years. Each person listed below is a citizen of the United States.
55
<PAGE> 60
Parent. The sole director of Parent is James R. Martin, whose background
is described above at "-- Information Concerning Directors and Executive
Officers of the Company." The executive officers of Parent are Martin, who
serves as Chairman of the Board and President, and Mr. Deuschle, who serves as
Vice President and Secretary.
Merger Sub. The sole director of Merger Sub is Martin. The current
executive officers of Merger Sub are Martin, who serves as Chairman of the Board
and President, and Mr. Deuschle, who serves as Vice President and Secretary.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE SURVIVING
CORPORATION
In accordance with the terms of the Merger Agreement, the directors of the
Surviving Corporation will be the current directors of Merger Sub. The officers
of the Company will continue to serve as officers of the Surviving Corporation.
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth information as of October 31, 1997, with
respect to the beneficial ownership of each person who is known by the Company
to be the beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock, each director, the Company's Chief Executive Officer,
its other four most highly compensated executive officers whose salary and bonus
for the fiscal year ended December 29, 1996, exceeded $100,000 and all of the
Company's directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT
OF STOCK PERCENT OF
BENEFICIALLY COMMON
NAME OWNED(1) STOCK(2)
- ---- ------------ ----------
<S> <C> <C>
James R. Martin (3)........................................ 1,766,169(4) 47.16%
James G. Hanes, III (5).................................... 218,650(6)(7) 5.87
James F. Smith, Jr......................................... 29,532(6) --
J. Hoyle Rymer............................................. 26,803(8) --
Mark J. Deuschle........................................... 23,500(9) --
James A. Haslam, III....................................... 20,528(6) --
Kathryn Coleman Wood....................................... 14,600(10) --
Howard L. Clark, Jr........................................ 13,303(6) --
H. Mitchell Watson, Jr..................................... 6,527(10) --
Donald F. Johnstone........................................ 5,937(11) --
F. Joseph Brang............................................ 13,383 --
All directors and executive officers as a group (11
persons)................................................. 2,138,932(12) 56.45%
SoGen International Fund, Inc./Societe Generale Asset
Management Corp.......................................... 200,000(13) 5.38%
</TABLE>
- ---------------
(1) Except as provided below, the person named has sole voting and investment
power with respect to all shares shown.
(2) Percentages less than 1% not shown.
(3) Business address of beneficial owner: P.O. Box 9043, Knoxville, Tennessee
37950-9043.
(4) Includes 167,086 shares held in Martin Children's Trust of which Mr.
Martin, as sole trustee, has sole investment and voting power. Also
includes options to purchase 25,000 shares subject to immediately
exercisable stock options. Excluded from the shares indicated as being
owned by Mr. Martin are 150,800 shares in which Mr. Martin disclaims
beneficial ownership. Of such 150,800 shares, 113,500 shares are owned by
the Martin Family Trust, 8,900 are shares owned by Julia Martin's Trust,
and 8,900 are shares owned by Justin Martin's Trust, (James G. Hanes, III
is trustee of each of the foregoing trusts), and 19,500 shares are owned in
equal parts by Mr. Martin's children, Julia A. and Justin J. Martin. Mr.
Martin does not have any voting or investment power with respect to such
150,800 shares.
56
<PAGE> 61
(5) Business address of beneficial owner: 480 Shepherd Street, Winston-Salem,
North Carolina 27103.
(6) Includes options to purchase 5,000 shares of Common Stock which are
immediately exercisable.
(7) Includes 113,500 shares held in Martin Family Trust, 8,900 shares held in
Julia Martin's Trust and 8,900 shares held in Justin Martin's Trust over
which Mr. Hanes, as sole trustee of each of the foregoing trusts, has sole
investment and voting power. Also includes 36,798 shares held indirectly
for Mr. Hanes' children.
(8) Includes options to purchase 1,500 shares of Common Stock which are
immediately exercisable.
(9) Includes options to purchase 7,500 shares of Common Stock which are
immediately exercisable.
(10) Includes options to purchase 4,500 shares of Common Stock which are
immediately exercisable.
(11) Includes options to purchase 4,000 shares of Common Stock which are
immediately exercisable.
(12) Includes options to purchase 67,000 shares of Common Stock which are
immediately exercisable.
(13) SoGen International Fund, Inc. (the "Fund") beneficially owns 200,000
shares of Common Stock. Societe Generale Asset Management Corp., in its
role as "Advisor" to the Fund, may be deemed to be a beneficial owner of
such shares. The principal business offices of the Fund and the Advisor are
located at 50 Rockefeller Plaza, New York, New York 10020. The Company has
relied solely on Schedule 13G filed on by the Fund with the Commission on
February 14, 1997 for the information above. The Company makes no
representation as to the accuracy or completeness of the information
reported regarding the Fund and the Advisor.
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS
The following table sets forth certain information concerning purchases of
Common Stock since January 1, 1995 by the directors and executive officers of
the Company. Neither the Company, its subsidiaries, Parent, Merger Sub nor
Martin have purchased Common Stock since January 1, 1995.
<TABLE>
<CAPTION>
NUMBER OF PRICE WHERE AND HOW
NAME DATE SHARES PURCHASED PER SHARE TRANSACTION EFFECTED
- ---- -------- ---------------- --------- -----------------------
<S> <C> <C> <C> <C>
F. Joseph Brang........... 12/17/96 5,000 $ 0.001 (1)
12/17/96 6,383 7.00 (1)
3/6/97 2,000 9.25 Nasdaq National Market
Howard L. Clark, Jr....... 4/24/95 269 $ 6.50 (2)
8/18/95 233 7.50 (2)
11/4/96 454 8.25 (2)
11/4/96 209 8.375 (2)
11/4/96 222 9.00 (2)
10/20/97 167 12.00 (2)
10/20/97 178 11.25 (2)
10/20/97 222 9.00 (2)
10/20/97 182 11.00 (2)
Mark J. Deuschle.......... 1/25/96 2,000 $ 5.00 (3)
12/17/96 5,000 0.001 (1)
James G. Hanes, III....... 4/24/95 192 $ 6.50 (2)
8/18/95 167 7.50 (2)
11/4/96 334 8.25 (2)
11/4/96 149 8.375 (2)
11/4/96 167 9.00 (2)
4/7/97 1,000 5.00 (4)
10/20/97 125 12.00 (2)
10/20/97 133 11.25 (2)
10/20/97 167 9.00 (2)
10/20/97 136 11.00 (2)
</TABLE>
57
<PAGE> 62
<TABLE>
<CAPTION>
NUMBER OF PRICE WHERE AND HOW
NAME DATE SHARES PURCHASED PER SHARE TRANSACTION EFFECTED
- ---- -------- ---------------- --------- -----------------------
<S> <C> <C> <C> <C>
James A. Haslam, III...... 4/24/95 192 $ 6.50 (2)
8/18/95 233 7.50 (2)
11/4/96 455 8.25 (2)
11/4/96 149 8.375 (2)
11/4/96 222 9.00 (2)
2/26/97 1,000 10.25 Nasdaq National Market
3/20/97 500 5.00 (4)
4/18/97 5,000 9.750 Nasdaq National Market
10/20/97 125 12.00 (2)
10/20/97 178 11.25 (2)
10/20/97 167 9.00 (2)
10/20/97 182 11.00 (2)
Donald F. Johnstone....... 8/18/95 167 $ 7.50 (2)
11/4/96 394 8.25 (2)
11/4/96 149 8.375 (2)
11/4/96 222 9.00 (2)
J. Hoyle Rymer............ 4/24/95 269 $ 6.50 (2)
8/18/95 233 7.50 (2)
11/4/96 454 8.25 (2)
11/4/96 209 8.375 (2)
11/4/96 222 9.00 (2)
3/25/97 2,500 5.00 (4)
3/25/97 500 5.50 (4)
3/25/97 500 8.00 (4)
3/25/97 500 6.50 (4)
3/25/97 500 8.25 (4)
10/20/97 167 12.00 (2)
10/20/97 178 11.25 (2)
10/20/97 222 9.00 (2)
10/20/97 182 11.00 (2)
James F. Smith, Jr. ...... 4/24/95 308 $ 6.50 (2)
8/18/95 433 7.50 (2)
11/4/96 727 8.25 (2)
11/4/96 388 8.375 (2)
11/4/96 306 9.00 (2)
4/7/97 1,000 5.00 (4)
10/20/97 188 12.00 (2)
10/20/97 244 11.25 (2)
10/20/97 250 9.00 (2)
10/20/97 250 11.00 (2)
</TABLE>
58
<PAGE> 63
<TABLE>
<CAPTION>
NUMBER OF PRICE WHERE AND HOW
NAME DATE SHARES PURCHASED PER SHARE TRANSACTION EFFECTED
- ---- -------- ---------------- --------- -----------------------
<S> <C> <C> <C> <C>
H. Mitchell Watson,
Jr. .................... 4/24/95 192 $ 6.50 (2)
8/18/95 233 7.50 (2)
11/4/96 394 8.25 (2)
11/4/96 209 8.375 (2)
11/4/96 222 9.00 (2)
3/14/97 800 8.50 Nasdaq National Market
3/17/97 1,200 8.50 Nasdaq National Market
10/20/97 125 12.00 (2)
10/20/97 178 11.25 (2)
10/20/97 167 9.00 (2)
10/20/97 182 11.00 (2)
Kathryn Coleman Wood...... 12/17/96 2,000 $ 0.001 (1)
</TABLE>
- ---------------
(1) Acquired pursuant to restricted stock awards granted pursuant to the terms
of the Incentive Program with respect to key employees.
(2) Acquired as compensation paid to directors pursuant to the 1995 Plasti-Line,
Inc. Equity Compensation Plan for Non-Employee Directors.
(3) Acquired through the exercise of stock options granted pursuant to the
Incentive Program with respect to key employees.
(4) Acquired through the exercise of stock options granted pursuant to the
Incentive Program with respect to non-employee directors.
TRANSACTION OF OTHER BUSINESS
The Board of Directors of the Company knows of no other matters which may
be presented at the Special Meeting, but if other matters do properly come
before the meeting, it is intended that the persons named in the proxy will
vote, pursuant to their discretionary authority, according to their best
judgment in the interest of the Company.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of December 31,
1995 and December 29, 1996, and for years ended January 1, 1995, December 31,
1995 and December 29, 1996, included herein have been audited by Coopers &
Lybrand L.L.P., independent auditors, as indicated in their report with respect
thereto.
59
<PAGE> 64
SHAREHOLDER PROPOSALS
If the Merger is not consummated for any reason, proposals of shareholders
intended to be presented at the 1998 Annual Meeting of Shareholders must be
received by the Company at its principal executive offices on or prior to
, 1998 to be eligible for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting. Shareholders should mail any
proposals by certified mail, return receipt requested.
By order of the Board of Directors,
MARK J. DEUSCHLE,
Secretary
Knoxville, Tennessee
, 1997
PLEASE COMPLETE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
60
<PAGE> 65
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 29, 1996 and
December 31, 1995...................................... F-3
Consolidated Statements of Operations for the fiscal years
ended December 29, 1996,
December 31, 1995 and January 1, 1995.................. F-4
Consolidated Statements of Stockholders' Equity for the
fiscal years ended December 29, 1996, December 31, 1995
and January 1, 1995.................................... F-5
Consolidated Statements of Cash Flows for the fiscal years
ended December 29, 1996, December 31, 1995 and January
1, 1995................................................ F-6
Notes to Consolidated Financial Statements................ F-7
UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 28,
1997 and December 29, 1996............................. F-16
Condensed Consolidated Statements of Operations for the
three months ended
September 28, 1997 and September 29, 1996 and for the
nine months ended September 28, 1997 and September 29,
1996................................................... F-17
Condensed Consolidated Statements of Cash Flows for the
nine months ended
September 28, 1997 and September 29, 1996.............. F-18
Notes to Condensed Consolidated Financial Statements...... F-19
</TABLE>
F-1
<PAGE> 66
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Plasti-Line, Inc.
We have audited the accompanying consolidated balance sheets of
Plasti-Line, Inc. and Subsidiaries as of December 29, 1996 and December 31,
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
29, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Plasti-Line,
Inc. and Subsidiaries as of December 29, 1996 and December 31, 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 29, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
February 18, 1997
F-2
<PAGE> 67
PLASTI-LINE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS, EXCEPT
PAR VALUES)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 10 $ 10
Accounts receivable, net.................................. 22,870 27,050
Inventories............................................... 27,331 31,564
Prepaid expenses.......................................... 754 1,080
Deferred income taxes..................................... 1,337 1,876
------- -------
Total current assets.............................. 52,302 61,580
Property and equipment, net............................... 13,260 13,854
Goodwill.................................................. 1,403 1,508
Other assets.............................................. 279 208
------- -------
Total assets...................................... $67,244 $77,150
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 745 $ 1,723
Accounts payable.......................................... 8,096 14,660
Accrued liabilities....................................... 6,116 5,704
Income taxes currently payable............................ 83 708
Customer deposits and deferred revenue.................... 11,509 5,673
------- -------
Total current liabilities......................... 26,549 28,468
Long-term debt............................................ 12,220 23,575
Deferred income taxes..................................... 1,196 1,123
Deferred liabilities...................................... 77 93
Commitments and contingencies (Notes 7 and 12)
Stockholders' equity
Preferred stock -- $.001 par value, 5,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock -- $.001 par value, 20,000,000 shares
authorized, issued and outstanding:
1996: 3,803,414; 1995: 3,779,157....................... 4 4
Additional paid-in-capital................................ 2,859 2,729
Notes receivable, common stock............................ (136) (169)
Retained earnings......................................... 24,475 21,327
------- -------
Total stockholders' equity........................ 27,202 23,891
------- -------
Total liabilities and stockholders' equity........ $67,244 $77,150
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE> 68
PLASTI-LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Revenue
Net sales................................................. $130,876 $103,247 $77,309
Other income.............................................. 303 571 853
-------- -------- -------
Total revenue..................................... 131,179 103,818 78,162
Cost and expenses
Cost of sales............................................. 107,956 85,114 63,060
Selling, general and administrative....................... 16,701 14,979 13,349
Interest expense, net..................................... 1,593 1,040 712
Goodwill write-off........................................ -- -- 3,986
Provision for restructuring costs......................... -- -- 2,416
Provision for pension curtailment......................... -- 483 --
-------- -------- -------
Total cost and expenses........................... 126,250 101,616 83,523
-------- -------- -------
Income (loss) before benefit (provision) for income
taxes.................................................. 4,929 2,202 (5,361)
Benefit (provision) for income taxes...................... (1,781) (805) 524
-------- -------- -------
Net income (loss)................................. $ 3,148 $ 1,397 $(4,837)
======== ======== =======
Net income (loss) per share................................. $ .83 $ .38 $ (1.31)
======== ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE> 69
PLASTI-LINE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year.............................. $ 4 $ 4 $ 4
Sales of common stock to employees and directors.......... -- -- --
------- ------- -------
Balance at end of year............................ $ 4 $ 4 $ 4
======= ======= =======
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year.............................. $ 2,729 $ 2,571 $ 2,484
Sale of common stock to employees and directors........... 130 158 87
1996: 6,000 shares
1995: 30,000 shares
1994: 11,000 shares
------- ------- -------
Balance at end of year............................ $ 2,859 $ 2,729 $ 2,571
======= ======= =======
Notes receivable, common stock
Balance at beginning of year.............................. $ (169) $ (152) $ (174)
Issuance of notes receivable, common stock................ -- (99) (28)
Payments of notes receivable, common stock................ 33 82 50
------- ------- -------
Balance at end of year............................ $ (136) $ (169) $ (152)
======= ======= =======
Retained earnings
Balance at beginning of year.............................. $21,327 $19,930 $24,767
Net income (loss)......................................... 3,148 1,397 (4,837)
------- ------- -------
Balance at end of year............................ $24,475 $21,327 $19,930
======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE> 70
PLASTI-LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 3,148 $ 1,397 $(4,837)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization............................. 2,262 1,710 1,875
Loss on disposal of fixed assets.......................... -- 82 138
Provision for losses on accounts receivable............... 332 206 121
Deferred tax provision (benefit).......................... 612 129 (694)
Goodwill write-off........................................ -- -- 3,986
Provision for restructuring costs......................... -- -- 2,416
Provision for pension curtailment......................... -- 483 --
Changes in assets and liabilities, net of acquisition:
Receivables............................................... 3,848 (10,058) (2,497)
Inventories............................................... 4,233 (9,959) (2,637)
Prepaid expenses and other assets......................... 206 161 (756)
Accounts payable.......................................... (6,564) 7,579 1,696
Accrued liabilities....................................... 412 1,202 (519)
Income taxes payable...................................... (625) 754 (473)
Deferred liabilities...................................... 5,820 313 (838)
-------- -------- -------
Net cash provided by (used in) operating activities......... 13,684 (6,001) (3,019)
-------- -------- -------
Cash flows from investing activities:
Proceeds from sales of fixed assets....................... -- 23 1
Proceeds from sales of investments........................ -- 593 400
Investment in marketable securities....................... -- -- (499)
Capital expenditures...................................... (1,514) (2,755) (2,460)
Purchase of Plasti-Line Columbia, Inc. assets............. -- (4,550) --
-------- -------- -------
Net cash used by investing activities....................... (1,514) (6,689) (2,558)
-------- -------- -------
Cash flows from financing activities:
Net borrowings (payments) under line of credit............ (11,586) 13,295 6,213
Repayments of long-term debt.............................. (747) (746) (745)
Sale of common stock...................................... 130 59 59
Payments of notes receivable, common stock................ 33 82 50
-------- -------- -------
Net cash provided by (used in) financing activities......... (12,170) 12,690 5,577
-------- -------- -------
Net increase (decrease) in cash............................. -- -- --
Cash, beginning of year..................................... 10 10 10
-------- -------- -------
Cash, end of year........................................... $ 10 $ 10 $ 10
======== ======== =======
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 1,639 $ 937 $ 799
-------- -------- -------
Income taxes paid......................................... $ 1,894 $ 53 $ 786
======== ======== =======
Non-cash transactions:
Amortization of compensation from restricted stock........ $ 54 $ 1 $ 35
Issuance of notes receivable -- common stock.............. -- (99) (28)
-------- -------- -------
Acquisition liabilities assumed........................... $ -- $ 1,630 $ --
======== ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE> 71
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Plasti-Line, Inc. (the "Company") is a publicly held company whose
principal business is designing, marketing, producing, and installing interior
and exterior brand identity and point-of-purchase marketing products and systems
for retailers and manufacturers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, American Sign & Marketing Services, Inc.
("American Sign") and Plasti-Line Columbia, Inc. ("Columbia"), formerly known as
Carter-Miot, Inc. All significant intercompany accounts and transactions have
been eliminated.
Fiscal Year
The Company's fiscal year consists of four quarters of thirteen weeks
ending on the last Sunday of the quarter. Each quarter's first two months
consist of four weeks with the last month of the quarter consisting of five
weeks.
Inventories
Inventories are stated at lower of cost or market. Cost is determined by
the last-in, first-out ("LIFO") method.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
The provision for depreciation has been calculated using the straight-line
method. The following represent the useful lives over which the assets are
depreciated:
<TABLE>
<S> <C>
Buildings and improvements.................................. 15 - 40 years
Machinery and equipment..................................... 3 - 7 years
</TABLE>
Major renewals and improvements are capitalized, while replacements,
maintenance, and repairs which do not improve or extend the life of the
respective assets are expensed currently. When depreciable assets are sold or
retired, the cost and related accumulated depreciation are removed from the
accounts, and any gain or loss is included in the earnings for the period.
Income Taxes
Income taxes are computed in accordance with Statement Financial Accounting
Standard ("SFAS") No. 109 "Accounting for Income Taxes." The statement applies
an asset and liability approach that requires the recognition of deferred tax
assets and liabilities using enacted rates in effect for the year in which the
differences are expected to reverse.
Revenue Recognition
The Company recognizes revenue and cost upon completion of sign
installation. If the Company is not installing the signage, revenue is
recognized upon shipment.
F-7
<PAGE> 72
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Per Share Data
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares and dilutive common
equivalent shares outstanding during each period. For purposes of computing
common stock equivalent shares outstanding, shares relating to options have been
calculated using the treasury stock method for the portion of each period for
which the options were outstanding and using the fair value of the Company's
common stock for each of the respective periods. The weighted average number of
common shares and dilutive common equivalent shares outstanding were 3,812,000,
3,714,000 and 3,695,000 for December 29, 1996, December 31, 1995 and January 1,
1995, respectively.
Preferred Stock
The Company's authorized preferred stock may be issued from time to time in
series having such designated preferences and rights, qualifications and
limitations as the Board of Directors may determine.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unless indicated otherwise, the book value of the Company's financial
instruments approximates fair value.
3. ACQUISITION
On November 2, 1995, the Company purchased, through Columbia, certain
operating assets of a corporation located in Columbia, South Carolina. The total
purchase price was approximately $4.55 million in cash, including estimated
professional fees and other acquisition-related costs. In addition, the Company
has paid certain obligations totaling approximately $1.63 million This
transaction has been accounted for using the purchase method of accounting, and
accordingly, the purchase price has been allocated to the separately
identifiable assets of Columbia, principally accounts receivable, inventory and
machinery and equipment. The consideration paid exceeded the underlying fair
values of the separately identifiable assets of Columbia by approximately $1.521
million. This amount has been reflected in the accompanying balance sheet as
goodwill and is being amortized using the straight-line method over 15 years.
Pro-forma unaudited results of operations for 1995 and 1994 assuming that
Columbia had been acquired at the beginning of the respective periods are as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues.................................................... $117,225 $97,616
======== =======
Net income (loss)........................................... $ 1,427 $(4,009)
======== =======
Net income (loss) per share................................. $ .39 $ (1.08)
======== =======
</TABLE>
The pro-forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated as of the above dates, nor are
they necessarily indicative of future operating results.
F-8
<PAGE> 73
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. GOODWILL
Goodwill, as of December 29, 1996, is composed of $1.403 million relating
to the 1995 purchase of Columbia, net of accumulated amortization of $118,000.
Prior to 1995, goodwill represented the excess of acquisition costs over
fair market value of net assets acquired in the purchase of American Sign in
1986. In 1994, the Company determined that projected results would not support
the future amortization of American Sign's remaining goodwill balance of $4
million. Accordingly, the Company wrote off the unamortized balance of goodwill
in the fourth quarter of 1994.
5. PROVISION FOR RESTRUCTURING COSTS
The 1994 operating results include a pre-tax charge for restructuring of
$2.4 million. This charge primarily consisted of a $1.7 million charge for
inventory and related costs associated with a fast food restaurant drive-through
order verification product ("Horizon") at the Company's American Sign
subsidiary. In addition to the Horizon provision, the restructuring charge
included $367,000 for a loss on abandonment of certain equipment in Knoxville,
$167,000 for severance and outplacement costs related to the business re-
engineering project, and $162,000 for costs relating to disposal of the
Centerville facility (Note 12).
6. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT DATA
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ACCOUNTS RECEIVABLE, NET CONSISTS OF:
Accounts receivable....................................... $ 23,144 $ 27,769
Less: allowances for doubtful accounts.................... (274) (719)
-------- --------
Total accounts receivable, net............................ $ 22,870 $ 27,050
======== ========
INVENTORIES CONSIST OF:
Raw materials............................................. $ 6,314 $ 7,330
Work-in-process........................................... 4,397 4,289
Finished goods............................................ 20,006 22,008
-------- --------
Total inventory (FIFO)............................ 30,717 33,627
LIFO reserve................................................ (3,386) (2,063)
-------- --------
Total inventory (LIFO)............................ $ 27,331 $ 31,564
======== ========
PROPERTY AND EQUIPMENT CONSISTS OF:
Land...................................................... $ 1,177 $ 1,177
Buildings and improvements................................ 12,690 12,492
Machinery and equipment................................... 18,448 17,138
-------- --------
Total property and equipment, gross............... 32,315 30,807
Less: accumulated depreciation.............................. (19,055) (16,953)
-------- --------
Total property and equipment, net ................ $ 13,260 $ 13,854
======== ========
</TABLE>
F-9
<PAGE> 74
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
KNOX COUNTY INDUSTRIAL REVENUE BONDS:
$2.15 million bearing interest at a variable rate (4.15% at
December 29, 1996 and 5.05% at December 31, 1995) and the
balance at a fixed rate of 7.65%. Interest is payable
quarterly and $680 thousand of principal payable annually
with $2.63 million payable on November 1, 1999,
collateralized by Knoxville, Tennessee real and fixed
assets...................................................... $ 3,990 $ 4,670
REVOLVING CREDIT FACILITY:
Up to the amount of $19 million expiring on June 30, 1998.
The line bears interest at a variable rate (8.413% at
December 29, 1996 and 7.935% at December 31, 1995),
collateralized by accounts receivable and inventory......... 8,391 16,000
TERM NOTE:
Up to the amount of $5 million. The line bears interest at a
variable rate (7.935% at December 31, 1995), collateralized
by accounts receivable and inventory. Expired February 29,
1996........................................................ -- 3,978
INDUSTRIAL REVENUE BONDS OF AMERICAN SIGN:
Interest payable quarterly, at a variable rate (7.4% at
December 29, 1996 and 7.9% at December 31, 1995). Principal
of $16.25 thousand payable quarterly through December 1,
2005, collateralized by Florence, Kentucky real property.... 584 650
Less current maturities..................................... (745) (1,723)
------- -------
Total long-term debt........................................ $12,220 $23,575
======= =======
</TABLE>
The Revolving Credit Facility contains various covenants including
restricting other borrowings, the payment of dividends, the sales of certain
assets and the Company's ability to acquire other businesses without written
consent. The covenants also require the Company to maintain liability to net
worth, interest coverage and cash flow ratios, as well as a minimum net worth.
Maturities of long-term debt in each of the next five years are as follows
(in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 745
1998........................................................ 9,136
1999........................................................ 2,695
2000........................................................ 65
2001........................................................ 65
Thereafter.................................................. 259
-------
$12,965
=======
</TABLE>
F-10
<PAGE> 75
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of future minimum rental payments for certain
manufacturing and data processing equipment which are required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year (in thousands of dollars):
<TABLE>
<S> <C>
1997........................................................ $ 371
1998........................................................ 371
1999........................................................ 213
2000........................................................ 73
2001........................................................ 6
------
$1,034
======
</TABLE>
Operating lease rental expense was $1.088 million, $828,000 and $658,000
for 1996, 1995 and 1994, respectively.
8. INCOME TAXES
Components of income tax provisions (benefit) are:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT TAX PROVISIONS:
Federal......................................... $1,011 $ 608 $ 136
State........................................... 158 68 34
------ ------ -----
1,169 676 170
DEFERRED INCOME TAXES RELATED TO:
Depreciation.................................... 73 161 (54)
Recognition of bad debts........................ (3) (48) (34)
Horizon write-off............................... 270 369 (640)
Financial reserves.............................. 212 (86) (129)
Maintenance revenue recognition................. (12) (1) 31
Pension liability............................... 28 (238) --
Other items..................................... 44 (28) 132
------ ------ -----
Total................................... $1,781 $ 805 $(524)
====== ====== =====
</TABLE>
F-11
<PAGE> 76
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the deferred tax assets and (liabilities)
are:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CURRENT:
Inventory valuation....................................... $ 389 $ 479
Workers' compensation and other financial reserves........ 149 232
Vacation reserve.......................................... 196 238
Deferred sales............................................ 94 126
Plant close reserve....................................... 64 64
Environmental reserve..................................... -- 36
Horizon write-off......................................... -- 271
Other financial reserves.................................. 463 420
Pension asset (liability)................................. (18) 10
------- -------
Total current..................................... $ 1,337 $ 1,876
======= =======
LONG-TERM:
Property and equipment...................................... $(1,196) $(1,123)
======= =======
</TABLE>
The differences between the U.S. federal statutory tax rate and the
Company's effective rate are:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Marginal federal tax rate........................... 34.0% 34.0% (34.0)%
State income taxes net of federal................... 3.4 2.7 (.6)
Non-deductible expenses of acquired companies....... -- -- 26.7
Other............................................... (1.3) (.1) (1.9)
---- ---- -----
Effective rate...................................... 36.1% 36.6% (9.8)%
==== ==== =====
</TABLE>
9. STOCK OPTION PLANS
The Company has a Stock Incentive Program consisting of a Key Employee Plan
and a Director Plan under which options to purchase up to 550,000 shares of
common stock may be granted. Under the terms of the Key Employee Plan, the
Company may grant options to certain employees of the Company. The option price
is equal to the published bid price of the stock on the date of the grant. The
options become exercisable ratably over four years beginning one year after the
date of the grant and expire in five to ten years. Also included in the Key
Employee Plan are shares awarded to certain key managers. These shares are
restricted for ten years from the date of the grant unless earned earlier. The
shares can be earned in years three to ten if certain earnings per share
measures are met. In addition, 15,000 restricted shares of stock were purchased
by certain key managers in 1995. These shares, purchased at $6.60 per share,
vest two years from the date of purchase. The Company has accepted notes from
these individuals in payment for this stock with interest paid monthly and
principal paid annually for ten years. The notes receivable for these shares are
shown as a reduction of Stockholders' Equity. Compensation expense of $54,000,
$1,000 and $35,000 was recognized for restricted shares awarded and purchased in
1996, 1995 and 1994 respectively.
Under the Director Plan, the Company has granted non-qualified options to
purchase shares to members of its Board of Directors. These options are priced
from $5.00 to $11.00 per share, vest as soon as the director has completed two
years of service, and expire ten years from the date of grant.
F-12
<PAGE> 77
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Activity and price information regarding the Stock Incentive Program during
the last three fiscal years is as follows:
<TABLE>
<CAPTION>
SHARES PRICE PER SHARE
------- ---------------
<S> <C> <C>
Outstanding as of January 2, 1994........................... 160,300 $4.50 - 12.00
Granted................................................... 39,000 5.25 - 8.00
Exercised................................................. (4,900) 4.50 - 5.00
Canceled.................................................. (16,350) 4.50 - 12.00
------- -------------
Outstanding as of January 1, 1995........................... 178,050 4.75 - 12.00
Granted................................................... 107,500 6.50 - 8.38
Exercised................................................. (11,250) 5.00 - 5.75
Canceled.................................................. (57,300) 5.00 - 12.00
------- -------------
Outstanding as of December 31, 1995......................... 217,000 4.75 - 14.50
Granted................................................... 52,000 8.25 - 12.00
Exercised................................................. (6,000) 5.00 - 8.00
Canceled.................................................. (25,500) 5.25 - 14.50
------- -------------
Outstanding as of December 29, 1996......................... 237,500 $4.75 - 14.50
======= =============
</TABLE>
In addition, on January 1, 1995, the Company implemented the 1995 Equity
Compensation Plan for Non-Employee Directors. Under this plan, 150,000 shares of
common stock are available for issue. In 1996, directors of the Company earned
awards of 5,621 shares of common stock which represented 50% of the value of
their director fees for the year.
10. STATEMENT 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION"
Plasti-Line, Inc. has elected to continue following Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees (APB 25) and
related Interpretations in accounting for its 1991 Stock Incentive Program (Key
Employees and Directors) rather than the alternative fair value accounting
provided for under SFAS No. 123, "Accounting for Stock-Based Compensation."
Under APB 25, because the exercise price of the Company's stock options equals
the market price of the underlying stock on the date of the grant, no
compensation expense is recognized in the accompanying financial statements.
Pro-forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
stock options under the fair value method of that Statement. The Company has
determined that the difference between historical results and such pro-forma
information is inconsequential.
11. EMPLOYEE BENEFIT PLANS
The Company maintains a profit sharing plan for salaried employees. The
Company is required to contribute at least three percent of current period net
income. Total contributions were $100,000 in 1996, $45,000 in 1995 and $0 in
1994.
Additionally, the Company maintains a savings plan available to all
salaried and certain non-union employees. Each participant may elect to defer up
to 12% of their annual compensation. The Company makes an annual contribution
equal to one quarter of the participants' contributions up to a maximum Company
contribution equal to 6% of the participant's compensation. The total
contributions were $100,000 in 1996, $75,000 in 1995 and $79,000 in 1994.
The Company also maintains a savings plan available to union employees at
the Florence location. Each participant may elect to defer up to ten percent of
their annual compensation. The Company makes quarterly contributions equal to
one half of the participant's contributions up to a maximum Company contribution
F-13
<PAGE> 78
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equal to 6% of the participant's compensation. The total contributions were
$16,000 in 1996, $15,000 in 1995 and $14,000 in 1994.
Additionally, the Company has a non-contributory defined benefit pension
plan that covers substantially all hourly employees at the Knoxville location.
Benefits are based on a fixed amount for each year of service.
In December of 1995, the Board of Directors approved an amendment to the
pension plan which resulted in the freezing of all future benefits under the
plan as of December 31, 1995. As a result, the Company recognized a curtailment
loss of $483,000 which included $467,000 of unrecognized prior service cost and
a $16,000 unrecognized transitional liability.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5% as of December 29,
1996 and 7.0% at December 31, 1995. The expected long-term rate of return on
assets was 7.5% at December 29, 1996 and 7.0% at December 31, 1995. Net pension
cost included the following components:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31, JANUARY 1,
1996 1995 1995
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................ $ -- $ 87 $ 91
Interest cost....................................... 274 262 251
Actual return on plan assets........................ (604) (1,042) 3
Net amortization and deferral....................... 257 837 (189)
----- ------- -----
Net pension cost.......................... $ (73) $ 144 $ 156
===== ======= =====
</TABLE>
The following table sets forth the pension plan's funded status and amount
recognized in the Company's balance sheet.
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $ 3,745 $3,792
Non-vested................................................ 158 221
------- ------
Accumulated and projected................................... 3,903 4,013
Plan assets at fair value, primarily listed stocks and
bonds..................................................... 5,029 4,593
------- ------
Plan assets above accumulated benefit obligation............ 1,126 580
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions........ (1,079) (607)
------- ------
Total pension asset (liability)................... $ 47 $ (27)
======= ======
</TABLE>
On January 1, 1996, the Company provided hourly workers at the Knoxville
location with a defined contribution plan, the Knoxville Union 401(k) Plan.
Under this plan the Company contributes 10 cents an hour for each hour worked up
to a maximum of 2,080 hours per year. The Company contributed $90,000 to this
plan in 1996.
12. CONTINGENCIES AND OTHER LIABILITIES
The Company has become subject to various lawsuits, claims and other legal
matters in the course of conducting business. The Company, based in part upon
opinions of counsel, believes the outcome of such lawsuits, claims and other
legal matters will not have a material impact on the Company's future
consolidated financial position, results of operations and cash flows.
F-14
<PAGE> 79
PLASTI-LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is contingently liable for a $700,000 letter of credit issued
pursuant to certain debt obligations. The Company also has irrevocable letters
of credit in the amount of $1.566 million pursuant to the Company's
self-insurance with regard to workmens' compensation. There are no outstanding
balances on these letters of credit.
Sales to one automotive customer were 22%, 19% and 16% of the Company's
sales in 1996, 1995 and 1994, respectively. Sales to a fast food customer were
11% of sales in 1996. Sales to a bank customer were 11% of sales in 1995.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's base and their
dispersion across a number of different industries, principally automotive,
petroleum, banking and fast foods.
At December 31, 1995, a long-term contract with a customer that accounted
for 11% of the Company's 1996 sales expired. The Company has since been awarded
a new long-term contract with this customer which extends through January 1,
2004.
In order to alleviate excess manufacturing capacity, the Company closed its
Centerville, Tennessee, manufacturing facility in 1992. The December 29, 1996
and December 31, 1995, balance sheets include an accrual of $392,000 and
$405,000, respectively, which reflects the remaining disposal costs of the
Centerville facility.
F-15
<PAGE> 80
PLASTI-LINE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 29,
1997 1996
------------- ------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS, EXCEPT
PAR VALUES)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 4,325 $ 10
Accounts receivable, net.................................. 18,185 22,870
Inventories............................................... 25,788 27,331
Prepaid expenses.......................................... 966 754
Deferred income taxes..................................... 1,337 1,337
------- -------
Total current assets.............................. 50,601 52,302
Property and equipment, net............................... 14,489 13,260
Goodwill.................................................. 1,327 1,403
Funds held by trustee..................................... 3,724 --
Other assets.............................................. 435 279
------- -------
Total assets...................................... $70,576 $67,244
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 745 $ 745
Accounts payable.......................................... 7,721 8,096
Accrued liabilities....................................... 6,950 6,116
Income taxes currently payable............................ 600 83
Customer deposits and deferred revenue.................... 16,187 11,509
------- -------
Total current liabilities......................... 32,203 26,549
Long-term debt, excluding current portion................. 8,791 12,220
Deferred income taxes..................................... 1,196 1,196
Deferred liabilities...................................... 208 77
Commitments and contingencies (Notes 7 and 12)
Stockholders' equity
Preferred stock -- $.001 par value, 5,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock -- $.001 par value, 20,000,000 shares
authorized, issued and outstanding: 1996: 3,803,414;
1995: 3,779,157........................................ 4 4
Additional paid-in-capital................................ 2,922 2,859
Notes receivable, common stock............................ (124) (136)
Retained earnings......................................... 25,376 24,475
------- -------
Total stockholders' equity........................ 28,178 27,202
------- -------
Total liabilities and stockholders' equity........ $70,576 $67,244
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
F-16
<PAGE> 81
PLASTI-LINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue
Net sales.................................. $32,363 $33,960 $94,361 $96,412
Cost of sales.............................. 26,254 27,797 77,212 79,929
------- ------- ------- -------
Gross profit....................... 6,009 6,163 17,149 16,483
------- ------- ------- -------
Selling, general and administrative.......... 3,989 4,074 12,019 11,666
------- ------- ------- -------
Operating income........................... 2,020 2,089 5,130 4,817
------- ------- ------- -------
Interest income.............................. (129) (3) (133) (7)
Interest expense............................. 215 419 588 1,320
------- ------- ------- -------
Income before income taxes................. 1,934 1,673 4,675 3,504
------- ------- ------- -------
Income taxes................................. 773 636 1,870 1,331
------- ------- ------- -------
Net income................................. $ 1,161 $ 1,037 $ 2,805 $ 2,173
======= ======= ======= =======
Net income per share......................... $ .30 $ .27 $ .73 $ .57
======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
F-17
<PAGE> 82
PLASTI-LINE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 2,805 $ 2,173
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................. 1,879 1,616
Loss on disposal of fixed assets.......................... 3 --
Provision for losses on accounts receivable............... 41 169
Decrease in net receivables............................... 4,644 3,525
Decrease in inventories................................... 1,543 3,088
Decrease (increase) in prepaid expenses................... (212) 132
Increase in other assets.................................. (249) (41)
Decrease in accounts payable.............................. (375) (4,324)
Increase in accrued liabilities........................... 834 691
Increase in income taxes payable.......................... 517 188
Increase in deferred liabilities.......................... 131 --
Increase in customer deposits and deferred revenue........ 4,678 1,866
------- -------
Net cash provided by investing activities......... 16,239 9,083
------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (2,925) (854)
------- -------
Net cash used by investing activities............. (2,925) (854)
------- -------
Cash flows from financing activities:
Net payments on line of credit............................ (8,391) (8,289)
Principal payments on long-term debt...................... (39) (46)
Industrial revenue bonds, net of funds held by trustee.... 1,259 --
Payment of dividends...................................... (1,906) --
Sale of common stock...................................... 65 70
Payments of notes receivable, common stock................ 13 36
------- -------
Net cash used in financing activities............. (8,999) (8,229)
------- -------
Net increase in cash and cash equivalents................... 4,315 --
Cash and cash equivalents, beginning of year.............. 10 10
------- -------
Cash and cash equivalents, end of period.................. $ 4,325 $ 10
======= =======
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 429 $ 1,344
------- -------
Income taxes paid......................................... $ 1,354 $ 1,109
======= =======
Non-cash transactions:
Amortization of compensation from restricted stock........ $ 6 $ 5
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
F-18
<PAGE> 83
PLASTI-LINE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 28, 1997, and the
condensed consolidated statements of operations and cash flows for the three
months and the nine months ended September 28, 1997 and September 29, 1996,
respectively, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in cash flows at September 28, 1997, and for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1996 Annual Report to
Stockholders. The results of operations for the period ended September 28, 1997,
are not necessarily indicative of the operating results for the full year.
2. PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiaries, American Sign & Marketing Services, Inc., Plasti-Line
Services Company, Inc. and Plasti-Line Columbia, Inc. All significant
intercompany accounts and transactions have been eliminated.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 29,
1995 1994
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $20,606 $20,006
Work-in-process............................................. 3,177 4,397
Raw materials............................................... 5,391 6,314
------- -------
29,174 30,717
Less: LIFO inventory reserve................................ (3,386) (3,386)
------- -------
Total net inventory............................... $25,788 $27,331
======= =======
</TABLE>
Inventories are stated at the lower-of-cost or market. Cost is determined
by the last-in, first-out method (LIFO). The Company reports interim LIFO
reserves based on projected year-end calculations. Historically, these interim
calculations, based on the LIFO layers which can be reasonably estimated, have
not yielded material interim differences; therefore, no adjustment has been
made.
4. EARNINGS PER SHARE
Net income per common share is based on the weighted average number of
common and common equivalent shares outstanding in each period. For purposes of
computing common equivalent shares outstanding, shares relating to options have
been calculated using the treasury stock method for the portion of each period
for which the options were outstanding and using the fair value of the Company's
stock for each of the respective periods.
The weighted average number of common and common stock equivalent shares
outstanding for the three and nine month periods ended September 28, 1997 were
3,847,000 and 3,842,000, respectively.
F-19
<PAGE> 84
EXHIBIT A
---------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF
NOVEMBER 3, 1997
AMONG
PLASTI-LINE, INC.,
PL HOLDING CORP.,
PL ACQUISITION CORP.,
AND
JAMES R. MARTIN
---------------------------------------------------------------------------
<PAGE> 85
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of November
3, 1997, by and among PLASTI-LINE, INC., a Tennessee corporation (the
"Company"), PL HOLDING CORP., a Tennessee corporation (the "Parent"), PL
ACQUISITION CORP., a Tennessee corporation and a wholly owned subsidiary of
Parent (the "Purchaser") and James R. Martin ("Martin").
WHEREAS, the Board of Directors of each of the Company, the Parent and the
Purchaser has approved, and deems its advisable and in the best interests of its
respective shareholders to consummate, the acquisition of the Company by the
Parent upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 Company Actions. The Company represents that the
disinterested members of its Board of Directors, at a meeting duly called and
held and acting, in part, on the unanimous recommendation of a Special Committee
of the Board appointed on July 18, 1997 and comprised entirely of directors who
are neither members of management of the Company nor affiliated with Martin,
Parent or the Purchaser or any Affiliate thereof (the "Special Committee"), has
(i) unanimously determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to and in the best interests of the
shareholders of the Company other than Martin, Parent or Purchaser or their
affiliates (the "Public Shareholders"), (ii) unanimously approved and adopted
this Agreement and the transactions contemplated hereby, including the Merger
(collectively, the "Transactions"), and such approval, to the extent necessary,
constitutes approval of the Transactions for purposes of Section 48-103-205 of
the Combination Act, such that Section 48-103-205 of the Combination Act will
not apply to the Transactions, and (iii) unanimously resolved to recommend
approval and adoption of this Agreement and the Transactions by the Company's
shareholders (the "Shareholders"), provided, that such recommendation may be
withdrawn, modified or amended by the Board of Directors of the Company if the
Board deems such withdrawal, modification or amendment necessary in light of its
fiduciary obligation to the Shareholders after consultation with counsel.
Section 1.2 The Merger. Subject to the terms and conditions of this
Agreement, and in accordance with Tennessee law, at the Effective Time, the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (a) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease; (b) the
Company shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Tennessee; and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in this
Section 1.2. Pursuant to the Merger, (i) the Company's Amended and Restated
Charter ("Charter") shall be amended in its entirety to read as the Charter of
the Purchaser, in effect immediately prior to the Effective Time, except that
Article FIRST thereof shall promptly be amended to read as follows: "FIRST: The
name of the corporation is Plasti-Line, Inc." and, as so amended, shall be the
Charter of the Surviving Corporation until thereafter amended as provided by
applicable Law and such Charter; and (ii) the Bylaws of the Purchaser (the
"Bylaws"), as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter amended as provided by
applicable Law, by such Charter or by such Bylaws. The Merger shall have the
effects specified in the TBCA.
Section 1.3 Effective Time. Subject to the terms and conditions of this
Agreement, the Parent, the Purchaser and the Company will cause Articles of
Merger to be executed and filed on the Closing Date (or on such other date as
the Parent and the Company may agree) with the Secretary of State of the State
of Tennessee as provided in the TBCA. The Merger shall become effective on the
date on which the Articles of Merger are duly filed with the Secretary of State
of the State of Tennessee or such time as is agreed upon by
A-2
<PAGE> 86
the parties and specified in the Articles of Merger, and such time is
hereinafter referred to as the "Effective Time."
Section 1.4 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second Business Day after satisfaction or waiver of all of the
conditions set forth in Article 6 hereof (the "Closing Date"), at the corporate
offices of the Company, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.5 Directors and Officers of the Surviving Corporation. The
directors of the Purchaser and the officers of the Company at the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with applicable law, the Charter and the
Bylaws.
ARTICLE 2
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of the Company Common Stock (the "Shares") or holders of any shares of
the Purchaser Common Stock:
(a) Purchaser Common Stock. Each issued and outstanding share of the
Purchaser Common Stock shall be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) No Effect on Parent-Owned Stock. All Shares that are owned by the
Parent shall continue to remain issued and outstanding and shall not be
converted into the right to receive the Merger Consideration.
(c) Cancellation of Treasury Stock. All Shares that are owned by the
Company as treasury stock immediately prior to the Effective Time shall be
canceled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(d) Exchange of Shares. Each issued and outstanding Share, and all
Shares subject to outstanding options that remain outstanding at the
Effective Time and not theretofore canceled as provided in Section 2.4
hereof (other than Shares held by the Parent as described in Section
2.1(b), Shares to be canceled in accordance with Section 2.1(c) and any
Shares which are held by shareholders exercising dissenters' rights
pursuant to Chapter 23 of the TBCA ("Dissenting Shareholders")) shall be
converted into the right to receive $14.50 in cash, payable to the holder
thereof, without interest (the "Merger Consideration"), upon surrender of
the certificate formerly representing such Share in the manner provided in
Section 2.2. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of such
certificate in accordance with Section 2.2, without interest, or the right,
if any, to receive payment from the Surviving Corporation of the "fair
value" of such Shares as determined in accordance with Chapter 23 of the
TBCA.
Section 2.2 Exchange of Certificates. (a) Paying Agent. At or prior to
the Effective Time, the Parent shall designate a bank reasonably acceptable to
the Company to act as agent for the holders of the Shares in connection with the
Merger (the "Paying Agent"), and the Parent shall, or shall cause the Surviving
Corporation to, make available to the Paying Agent the funds to which holders of
the Shares shall become entitled pursuant to Section 2.1(d). Such funds shall be
invested by the Paying Agent as directed by the Parent or the Surviving
Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a stock
certificate or certificates, which immediately prior to the
A-3
<PAGE> 87
Effective Time represented outstanding Shares (the "Certificates"), whose Shares
were converted pursuant to Section 2.1 into the right to receive the Merger
Consideration: (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as the Parent and the Company may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to promptly receive in exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so surrendered
shall forthwith be canceled. If payment of the Merger Consideration is to be
made to a Person other than the Person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable Law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged for the Merger Consideration as
provided in this Article 2.
(d) Termination of Fund; No Liability. At any time following twelve months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(e) Lost, Stolen or Destroyed Certificates. In the event any Certificate
for Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Parent, the posting by such Person
of a bond in customary amount as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
pursuant to Section 2.2(b).
Section 2.3 Dissenters' Rights. The Company shall notify NASDAQ National
Market System that the shares will not be listed on the National Market System
effective the day prior to the Effective Time, so that at the Effective Time
dissenting Shareholders shall be entitled to be paid the fair value of such
holder's Shares, as provided in Chapter 23 of the TBCA. The Company shall give
the Parent notice thereof and the Parent shall have the right to participate in
all negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of the Parent, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. If any Dissenting Shareholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Shareholder shall thereupon be
treated as though such Shares had been converted into the right to receive, as
of the Effective Time, the Merger Consideration pursuant to Section 2.1.
A-4
<PAGE> 88
Section 2.4 Options and Other Stock Incentive Plans. At the Effective
Time, each holder of a then outstanding, immediately exercisable option to
purchase Company Common Stock under the Company's 1991 Stock Incentive Program
shall, in settlement thereof, receive from the Company for each share of Company
Common Stock subject to such option an amount (subject to any applicable
withholding tax) in cash equal to the excess of the Merger Consideration over
the per share exercise price of such option (such amount being hereinafter
referred to as the "Option Consideration"); provided, however, that with respect
to any person subject to Section 16(a) of the Exchange Act, any such amount
shall be paid as soon as practicable after the first date payment can be made
without liability to such person under Section 16(b) of the Exchange Act. Upon
receipt of the Option Consideration, the option shall be canceled. The surrender
of an option shall be deemed a release of any and all rights the holder had or
may have had in respect of such option. The Company shall take such steps as may
be necessary to acquire on the Effective Date for a nominal consideration the
shares of Common Stock held by certain officers of the Company pursuant to
restrictive agreements and subject to vesting upon achieving sales of $200
million and profits of $20 million.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that
Section 3.1 Corporate Existence and Power. The Company and each of the
Company Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the Laws of the state of its incorporation, and has all
corporate powers and approvals required to carry on its business as now
conducted.
Section 3.2 Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the Transactions are within the Company's corporate powers and, except for
any required approval by the Shareholders and the Public Shareholders in
connection with the consummation of the Transactions, this Agreement will have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of the Company.
Section 3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
Transactions by the Company require no action by or in respect of, or filing
with, any Governmental Authority other than (i) the filing of Articles of Merger
in accordance with the TBCA; (ii) compliance with applicable requirements of the
Exchange Act; and (iii) filing under the HSR Act.
Section 3.4 Non-Contravention. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
Transactions do not and will not (i) contravene or conflict with the Charter or
Bylaws of the Company, or (ii) assuming compliance with the matters referred to
in Section 3.3, contravene or conflict with or constitute a violation of any
provision of any Law or Order binding upon or applicable to the Company or any
Company Subsidiary.
Section 3.5 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 authorized Shares of Company Common Stock and 5,000,000
authorized shares of Preferred Stock. As of the date hereof, (a) 3,720,092
Shares of Company Common Stock were issued and outstanding, (b) no Shares of
Company Common Stock were held in the treasury of the Company, (c) 144,500
Shares of Company Common Stock were reserved for future issuance pursuant to
outstanding employee stock options granted pursuant to the 1991 Stock Incentive
Program ("Option Plans"), (d) no shares of Preferred Stock were issued and
outstanding, and (e) no shares of Preferred Stock were held in the treasury of
the Company. Since August 1, 1997, the Company has not issued or granted
additional options or restricted stock under the Option Plans. All outstanding
Shares of Company Common Stock are, and all Shares that may be issued pursuant
to the exercise of outstanding options under the Option Plans will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or convertible into securities
having such rights) ("Voting Debt") of the Company outstanding. Except as set
forth in this Section, as of the date hereof there are (i) no shares of capital
stock or other voting securities of the Company authorized, issued or
A-5
<PAGE> 89
outstanding, (ii) no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of the Company Subsidiaries, obligating the Company or any of the Company
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest in,
the Company or any of the Company Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of the Company Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or commitment
and (iii) no outstanding contractual obligations of the Company or any of the
Company Subsidiaries to repurchase, redeem or otherwise acquire any Shares, or
the capital stock of the Company, or any Company Subsidiary or other Affiliate
of the Company or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any Company Subsidiary or any other
entity other than loans to Company Subsidiaries in the ordinary course of
business.
Section 3.6 Company Subsidiaries. Other than the Company Subsidiaries,
the Company does not own any equity interest in any corporation or other entity
or any marketable securities where the Company's equity interest in any entity
exceeds five percent of the outstanding equity of such entity on the date
hereof. All of the outstanding capital stock of, or other ownership interest in,
each Company Subsidiary is owned by the Company and is owned free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). There are no outstanding (i) securities of
the Company or any Company Subsidiary convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
Company Subsidiary, or (ii) options or other rights to acquire from the Company
or any Company Subsidiary, and no other obligation of the Company or, to the
knowledge of the Company, any Company Subsidiary to issue, any capital stock,
voting securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any Company Subsidiary (the items in clauses (i) and (ii) being
referred to collectively as the "Subsidiary Securities"). There are no
outstanding obligations of the Company or, to the knowledge of the Company, any
Company Subsidiary to repurchase, redeem or otherwise acquire any outstanding
Subsidiary Securities.
Section 3.7 Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC in connection with the Transactions contemplated by
this Agreement (the "Company Disclosure Documents"), including, without
limitation, the Proxy Statement will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act.
(b) At the time the Proxy Statement or any amendment or supplement thereto
is first mailed to Shareholders, at the time such Shareholders vote on adoption
of this Agreement, and at the Effective Time, the Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. At the time of the filing of any Company Disclosure
Document other than the Proxy Statement and at the time of any distribution
thereof, such Company Disclosure Document will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) The representations and warranties contained in this Section 3.7 will
not apply to statements or omissions included in any Company Disclosure
Documents (including, without limitation, the Proxy Statement) based upon
information furnished to the Company by the Parent or the Purchaser specifically
for use therein.
A-6
<PAGE> 90
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser represent and warrant to the Company that:
Section 4.1 Corporate Existence and Power. Each of the Parent and the
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Tennessee, and each has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to consummate the transactions contemplated by this
Agreement. Since the date of its incorporation, the Purchaser has not engaged in
any material activities other than in connection with or as contemplated by this
Agreement.
Section 4.2 Capitalization. The authorized capital stock of Purchaser
consists of 1,000 shares of common stock, par value $.001 per share, of which
1,000 shares are outstanding as of the Effective Time and are owned,
beneficially or of record, by Parent. All of the issued and outstanding shares
of capital stock of the Purchaser are validly issued, fully paid, nonassesable
and free of preemptive rights and all liens.
Section 4.3 Corporate Authorization. The execution, delivery and
performance by the Parent and the Purchaser of this Agreement and the
consummation by the Parent and the Purchaser of the Transactions contemplated
hereby are within the corporate powers of the Parent and the Purchaser and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of the Parent and the Purchaser.
Section 4.4 Governmental Authorization. The execution, delivery and
performance by the Parent and the Purchaser of this Agreement and the
consummation by the Parent and the Purchaser of the Transactions contemplated by
this Agreement require no action by or in respect of, or filing with, any
Governmental Authority other than (i) the filing of Articles of Merger in
accordance with the TBCA, (ii) compliance with any applicable requirements of
the Exchange Act, and (iii) filing under the HSR Act.
Section 4.5 Non-Contravention. The execution, delivery and performance by
the Parent and the Purchaser of this Agreement and the consummation by the
Parent and the Purchaser of the Transactions contemplated hereby do not and will
not (i) contravene or conflict with the charter or bylaws of the Parent or the
Purchaser, or (ii) assuming compliance with the matters referred to in Section
4.4, contravene or conflict with any material provision of Law or Order binding
upon or applicable to the Parent or the Purchaser.
Section 4.6 Disclosure Documents. The information with respect to the
Parent and its Affiliates that the Parent furnishes to the Company for use in
any Company Disclosure Document will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading (i) in the case of the Proxy Statement at the time the
Proxy Statement or any amendment or supplement thereto is first mailed to the
Shareholders, at the time the Shareholders vote on adoption of this Agreement
and at the Effective Time, and (ii) in the case of any Company Disclosure
Document other than the Proxy Statement, at the time of the filing thereof and
at the time of any distribution thereof.
Section 4.7 Finders' and Bankers' Fees. Except for William Blair & Co.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Parent or the
Purchaser who might be entitled to any fee or commission from the Parent and/or
the Purchaser in connection with the Transactions.
Section 4.8 Financing: Solvency Matters. (a) The Parent or Purchaser (as
the case may be) has engaged William Blair & Company to assist it and Company in
raising funds. Blair has obtained written commitments from Key Corporate Capital
Inc., KeyCorp Real Estate Capital Markets, Inc. (collectively the "Senior
Lenders")and RSTW Partners III, L.P. ("Subordinated Lender"), copies of which
have been provided to the Company and the Special Committee. The funds provided
by such commitments are sufficient to complete the merger contemplated
hereunder. Company and Parent shall use their reasonable business efforts to
close the loans reflected in the written commitments. Any material change in the
terms of the
A-7
<PAGE> 91
commitment or any new commitment must be approved by the Company and Parent,
which approval will not be unreasonable withheld by either party.
(b) Upon consummation of the Transactions, (i) the fair value of the
Surviving Corporation's assets will exceed the Surviving corporation's stated
liabilities and identified contingent liabilities, (ii) the Surviving
Corporation will be able to pay its debts as they become absolute and become due
in the usual course of business, and (iii) the capital remaining in the
Surviving Corporation after consummation of the Transactions will not be
unreasonably small for the business in which the Surviving corporation is
engaged and is proposed to be engaged following consummation of the
Transactions.
ARTICLE 5
COVENANTS
Section 5.1 Interim Operations of the Company. From the date hereof until
the Effective Time, the Company and the Company Subsidiaries shall conduct their
business in the ordinary course consistent with past practice and (except in
connection with the Merger) shall use all commercially reasonable efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, without the prior written consent of the
Parent:
(a) the Company will not, directly or indirectly, (i) except upon
exercise of employee stock options outstanding on the date hereof, issue,
sell, transfer or pledge or agree to sell, transfer or pledge any treasury
stock of the Company or any capital stock of any of the Company
Subsidiaries beneficially owned by it; (ii) amend its Charter or Bylaws or
similar organizational documents; or (iii) split, combine or reclassify the
outstanding Shares or Preferred Stock or any outstanding capital stock of
any of the Company Subsidiaries;
(b) neither the Company nor any of the Company Subsidiaries shall: (i)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock, other than
dividends paid by Company Subsidiaries to the Company in the ordinary
course of business; (ii) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or the Company
Subsidiaries, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of Company Options outstanding on the date hereof;
(iii) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any assets other than in the ordinary and usual course of business
and consistent with past practice, or incur or modify any indebtedness or
other liability, other than in the ordinary and usual course of business
and consistent with past practice; or (iv) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock;
(c) neither the Company nor any of the Company Subsidiaries shall: (i)
grant any increase in the compensation payable or to become payable by the
Company or any of the Company Subsidiaries to any of its executive
officers; or (ii) adopt any new, or amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become
payable under, any existing bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan, agreement or
arrangement; or (iii) enter into any employment or severance agreement with
or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to any officer, director or employee
of the Company or any of the Company Subsidiaries;
(d) neither the Company nor any of the Company Subsidiaries shall
permit any insurance policy naming it as a beneficiary or a loss payable
payee to be canceled or terminated without notice to the Parent, except in
the ordinary course of business and consistent with past practice;
A-8
<PAGE> 92
(e) neither the Company nor any of the Company Subsidiaries shall
enter into any contract or transaction relating to the purchase of assets
other than in the ordinary course of business consistent with prior
practice;
(f) neither the Company nor any of the Company Subsidiaries shall
change any of the accounting methods used by it unless required by GAAP,
neither the Company nor any of the Company Subsidiaries shall make any
material tax election except in the ordinary course of business consistent
with past practice, change any material tax election already made, adopt
any material tax accounting method except in the ordinary course of
business consistent with past practice, change any material tax accounting
method unless required by GAAP, enter into any closing agreement, settle
any tax claim or assessment or consent to any tax claim or assessment or
any waiver of the statute of limitations for any such claim or assessment;
(g) neither the Company nor any of the Company Subsidiaries shall: (i)
incur or assume any long-term debt; (ii) except in the ordinary course of
business and consistent with past practice, incur or assume any short-term
indebtedness; (iii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person; (iv) make any loans, advances or capital
contributions to, or investment in, any other Person (other than to Company
Subsidiaries or customary loans or advances to employees in accordance with
past practice); or (v) enter into any material commitment or transaction
(including, but not limited to, any borrowing, capital expenditure or
purchase, sale or lease of assets);
(h) neither the Company nor any of the Company Subsidiaries shall
settle or compromise any material claim, lawsuit, liability or obligation,
and neither the Company nor any of the Company Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligation, (x) to the extent reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and the Company Subsidiaries on a consolidated
basis, (y) incurred in the ordinary course of business and consistent with
past practice or (z) which are legally required to be paid, discharged or
satisfied;
(i) neither the Company nor any of the Company Subsidiaries will take,
or agree to commit to take, any action that would make any representation
or warranty of the Company contained herein inaccurate in any respect at,
or as of any time prior to, the Effective Time;
(j) neither the Company nor any of the Company Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Section 5.2 Access to Information. From the date hereof until the
Effective Time, the Company will give the Parent and the Purchaser, and their
respective counsel, financial advisors, prospective lenders, auditors and other
authorized representatives full access to the offices, properties, books and
records of the Company and the Company Subsidiaries, will furnish to the Parent
and the Purchaser and their respective counsel, financial advisors, prospective
lenders, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request and
will instruct the Company's employees, counsel, financial advisors and auditors
to cooperate with the Parent and the Purchaser in their investigation of the
business of the Company and the Company Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by the Company to the Parent hereunder.
Section 5.3 Other Potential Bidders. The Company shall, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, received prior to or after the date of this
Agreement, to the same extent permitted by Section 5.2 hereof, to any Person
pursuant to appropriate confidentiality agreements, and may participate in
discussions and negotiate with any such Person concerning any merger, sale of
assets, sale of shares of capital stock or similar transaction involving the
Company or any Company Subsidiary or division of the Company (any such
transaction being referred to herein as a
A-9
<PAGE> 93
"Competing Transaction"), only if the Special Committee determines, that such
action is necessary in light of the fiduciary obligations of the Board of
Directors to the Public Shareholders after consultation with counsel. In such
event, the Company shall direct its officers and other appropriate personnel to
cooperate with and be reasonably available to consult with any such Person.
Except as set forth above, the Company shall not solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
Person (other than the Parent or the Purchaser) concerning any merger, sale of
assets, sale of shares of capital stock or similar transaction involving the
Company or any Company Subsidiary or division of the Company.
Section 5.4 Notices of Certain Events. Each party shall promptly notify
the other parties of:
(a) any notice or other communication received by such party from any
Person alleging that the consent of such Person is or may be required in
connection with the Transactions;
(b) any occurrence or non-occurrence of any event that would cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective
Time;
(c) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; and
(d) any notice or other communication from any Governmental Authority
in connection with the Transactions; provided, however, that the delivery
of any notice pursuant to this Section 5.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.5 Voting of Shares. (a) In any vote of the Shareholders with
respect to this Agreement and the Transactions, Martin, the Parent and the
Purchaser shall vote or cause to be voted all of the shares of Company Common
Stock beneficially owned by each such party in favor of the approval and
adoption of this Agreement and the Transactions.
(b) All Directors of the Company have agreed with the Company that they
will also vote all shares in favor of the approval and adoption of this
Agreement and the Transactions.
Section 5.6 Director and Officer Liability. For six years from and after
the Effective Time, the Parent will or will cause the Surviving Corporation to
indemnify and hold harmless the present and former officers and directors of the
Company and the Company Subsidiaries ("Indemnified Persons") in respect of acts
or omissions occurring at or prior to the Effective Time to the fullest extent
provided under the TBCA or under the Company's Charter and Bylaws in effect on
the date hereof. For such six years from and after the Effective Time, the
Parent will use all commercially reasonable efforts to provide, or to cause the
Surviving Corporation to provide, officers' and directors' liability insurance
in respect of acts or omissions occurring at or prior to the Effective Time
covering each such Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof,
provided that if such coverage is not obtainable at an aggregate amount per
annum less than or equal to two times the aggregate amount per annum the Company
paid in its last full fiscal year, the Parent will purchase, or cause the
Surviving Corporation to purchase, such lesser amount of coverage, on terms as
similar in coverage as practicable to such coverage in effect on the date
hereof, as may be obtained having an aggregate per annum cost not to exceed two
times the aggregate amount per annum the Company paid in its last full fiscal
year, which amount has been disclosed to the Parent. Notwithstanding any
provision herein to the contrary, the covenants contained in this Section 5.6
shall survive the Effective Time and the consummation of the Transactions, are
intended to benefit the Indemnified Persons, and shall be binding on all
successors and assigns of the Parent and the Surviving Corporation.
Section 5.7 Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done all things necessary, proper or
advisable under applicable Laws to consummate the Transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, the Company
shall, and shall cause the Company Subsidiaries to, assist the Parent and the
Purchaser in obtaining financing necessary or desirable to complete the
Transactions, including, without limitation, executing on or after the Effective
Date such loan agreements,
A-10
<PAGE> 94
notes, guarantees, security agreements, certificates of representations and
warranties and other documents, and obtaining such opinions of counsel and
accountants' comfort letters, as may be reasonably requested by the Parent, the
Purchaser or their prospective lenders in connection with the receipt of the
financing necessary or desirable to complete the Transactions. Martin will use
his best efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper, or advisable under applicable laws to
consummate the Transactions contemplated by this Agreement, provided, however,
he (and the other stockholders of Parent) shall not be required to provide in
the aggregate more than $10 million of equity for the Parent. Martin shall keep
the Company informed of the progress in raising the necessary funds and shall
obtain binding commitments from reputable lenders for the necessary funds before
the Proxy Statement referred to in Section 5.11 is mailed.
Section 5.8 Certain Filings. The Company, the Parent and the Purchaser
shall cooperate with each other (a) in connection with the preparation of the
Company Disclosure Documents, (b) in determining whether any action by or in
respect of, or filing with, any Governmental Authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, and (c) in seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Company Disclosure
Documents and seeking timely to obtain any such actions, consents, approvals or
waivers.
Section 5.9 Public Announcements. The Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the Transactions and, except as may be
required by applicable Law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
Section 5.10 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or the Purchaser,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or the Purchaser, any other actions and things
they may deem desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger.
Section 5.11 Shareholders' Meeting. The Company shall, in accordance with
applicable Law:
(a) duly call, give notice of, convene and hold a special meeting of
the Shareholders (the "Special Meeting") as soon as reasonably practicable
for the purpose of considering and voting upon the approval of the
Transactions and the adoption of this Agreement, and comply with all legal
requirements applicable to such meeting;
(b) in connection with such meeting, promptly prepare and file with
the SEC a preliminary proxy or information statement, and a Schedule 13E-3
Transaction Statement required pursuant to Section 13(e) of the Exchange
Act (the "Schedule 13E-3"), relating to the Transactions and this Agreement
and use its best efforts (x) to obtain and furnish the information required
to be included by the SEC in such preliminary proxy statement and Schedule
13E-3 and, after consultation with the Parent, to respond promptly to any
comments made by the SEC with respect to the preliminary proxy or Schedule
13E-3 and cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed to the
Shareholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with the Parent
and its counsel, and (y) to obtain the necessary approvals of the
Transactions and this Agreement by the Shareholders; and
(c) include in the Proxy Statement the recommendation of the Board
that the Shareholders vote in favor of the approval of the Transactions and
the adoption of this Agreement.
A-11
<PAGE> 95
ARTICLE 6
CONDITIONS TO THE MERGER
Section 6.1 Conditions to the Obligations of Each Party. The obligations
of the Company, the Parent and the Purchaser to consummate the Transactions are
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, by each of
the parties intended to benefit therefrom, to the extent permitted by applicable
Law:
(a) this Agreement and the Transactions shall have been approved and
adopted by a majority of all Shares of the Company Common Stock entitled to
vote thereon, in accordance with Section 48-21-104 of the TBCA; and by a
majority of the shares of Company Common Stock entitled to vote thereon
held by the Public Shareholders.
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
Transactions illegal or otherwise prohibiting consummation of the
Transactions;
(c) all actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Transactions shall
have been obtained, other than the filing of the requisite Articles of
Merger with the Secretary of State of Tennessee;
(d) at the time of mailing of the Proxy Statement, at the time of the
Special Meeting, and at the Effective Time, J. C. Bradford & Co. shall have
reaffirmed in writing the fairness opinion previously prepared and
delivered by it to the Special Committee and shall not have withdrawn such
opinion; and
Section 6.2 Additional Conditions to the Obligations of the Parent and the
Purchaser. The obligations of the Parent and the Purchaser to consummate the
Merger are also subject to the satisfaction at or prior to the Effective Time of
the following further conditions, any or all of which may be waived, in whole or
in part, by each of the parties intended to benefit therefrom, to the extent
permitted by applicable Law:
(a) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained
in this Agreement and in any certificate delivered by the Company pursuant
hereto shall be true and correct in all respects, except where the breach
or inaccuracy thereof would not, individually or in the aggregate, have a
Material Adverse Effect, at and as of the Effective Time as if made at and
as of such time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct
as of such date, and the Parent shall have received a certificate signed by
the principal financial officer of the Company to the foregoing effect;
(b) no Material Adverse Effect shall have occurred;
(c) the Parent shall have received or be satisfied that it will
receive all consents and approvals contemplated by Section 3.3 and any
other consents of third parties necessary in connection with the
consummation of the Merger if the failure to obtain any such consent would
have a Material Adverse Effect;
(d) the Parent and the Purchaser shall have obtained equity and debt
funds necessary to finance the Transactions, either through direct
obligations or through obligations entered into by the Company; and
(e) the Parent shall have received all documents it may reasonably
request relating to the existence of the Company and the authority of the
Company to enter into this Agreement, all in form and substance reasonably
satisfactory to the Parent.
Section 6.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are also subject to the
satisfaction at or prior to the Effective Time of
A-12
<PAGE> 96
the following further conditions, any or all of which may be waived, in whole or
in part, by the Company to the extent permitted by applicable Law:
(a) the Parent and the Purchaser shall have performed in all material
respects all of their respective obligations hereunder required to be
performed by them at or prior to the Effective Time, the representations
and warranties of the Parent and the Purchaser contained in this Agreement
and in any certificate delivered by the Parent or the Purchaser pursuant
hereto shall be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time, except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, and the
Company shall have received a certificate signed by the President or any
Vice President of each of the Parent and the Purchaser to the foregoing
effect;
(b) the Company shall have received all documents it may reasonably
request relating to the existence of the Parent or the Purchaser and the
authority of the Parent or the Purchaser to enter into this Agreement, all
in form and substance reasonably satisfactory to the Company.
ARTICLE 7
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Shareholders):
(a) by mutual written consent of the Company (such determination to be
made on behalf of the Company by the Special Committee in its sole
discretion) and the Parent;
(b) by either the Parent or the Company (such determination to be made
on behalf of the Company by the Special Committee in its sole discretion),
if the Merger has not been consummated by January 30, 1998; provided,
however, that the right to terminate this Agreement under this Section
7.1(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 Parent or the Company (such determination to be made
on behalf of the Company by the Special Committee in its sole discretion),
if there shall be any Law that makes consummation of the Transactions
illegal or otherwise prohibited or if any Order enjoining the Parent or the
Company from consummating the Transactions is entered and such Order shall
become final and nonappealable;
(d) by either the Parent or the Company if this Agreement and the
Transactions shall fail to be approved and adopted by the required vote of
the Shareholders and the Public Shareholders of the Company at the Special
Meeting called for such purpose, as set forth in Section 6.1(a) above;
(e) by either the Parent or the Company (such determination to be made
on behalf of the Company by the Special Committee in its sole discretion),
if, consistent with the terms of this Agreement, the Board of Directors of
the Company withdraws, modifies or changes its recommendation of this
Agreement or the Transactions in a manner adverse to the Parent or the
Purchaser or shall have resolved to do any of the foregoing or the Board of
Directors of the Company shall have recommended to the Shareholders of the
Company any Competing Transaction or resolved to do so.
Section 7.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 7.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in Section 8.6 shall survive the termination hereof; provided,
however, that, except as specifically provided herein, nothing herein shall
relieve any party hereto of liability for any breach of this Agreement.
A-13
<PAGE> 97
ARTICLE 8
MISCELLANEOUS
Section 8.1 Definitions. As used herein, the following terms have the
following respective meanings (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such given Person.
"Agreement" means this Agreement and Plan of Merger, as the same may be
supplemented, modified or amended from time to time.
"Combination Act" means the Tennessee Business Combination Act, as amended.
"Company Common Stock" means the common stock, $.001 par value per share,
of the Company.
"Company Subsidiaries" means American Sign & Marketing Services, Inc. and
Plasti-Line Columbia, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Expenses" means all reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants and commitment fees and other financing fees and
expenses) incurred by the Parent, the Purchaser or the Company or on behalf of
any such party in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement and Schedule 13E-3, the
solicitation of the shareholder approvals and all other matters related to the
consummation of the transactions contemplated hereby.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Authority" means any federal, state, county, local, foreign
or other governmental or public agency, instrumentality, commission, authority,
board or body, and any court, arbitrator, mediator or tribunal.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and all regulations promulgated thereunder.
"Law" means any code, law, ordinance, regulation, rule or statute of any
Governmental Authority.
"Lien" means any security interest, lien, mortgage, deed to secure debt,
deed of trust, pledge, charge, conditional sale or other title retention
agreement, or other encumbrance of any kind.
"Material Adverse Effect" means any matter that would reasonably be
expected to affect materially and adversely the business, condition (financial
or otherwise) or results of operations of the Company and the Company
Subsidiaries considered as a whole.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or other Governmental Authority.
"Person" means an individual, a corporation, a partnership, an association,
a trust, a limited liability company or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
"Preferred Stock" means the preferred stock, $.001 par value per share, of
the Company.
"Purchaser Common Stock" means the common stock, $.001 par value per share,
of the Purchaser.
"SEC" means the Securities and Exchange Commission.
A-14
<PAGE> 98
"Surviving Corporation" means the Company as the surviving corporation
resulting from the Merger.
"TBCA" means the Tennessee Business Corporation Act, as amended.
The following terms are defined in the following Sections of this
Agreement:
<TABLE>
<CAPTION>
TERM SECTION
- -------------------------------- -----------------
<S> <C>
"Bylaws" 1.2
"Certificates" 2.2(b)
"Charter" 1.2
"Closing" 1.4
"Closing Date" 1.4
"Company" Opening Paragraph
"Company Disclosure Documents" 3.9(a)
"Company 10-K" 3.7
"Company 10-Qs" 3.8
"Competing Transaction" 5.3
"Dissenting Shareholders" 2.1(d)
"Effective Time" 1.3
"Merger" 1.2
"Merger Consideration" 2.1(d)
"Parent" Opening Paragraph
"Paying Agent" 2.2(a)
"Proxy Statement" 1.6(b)
"Purchaser" Opening Paragraph
"Schedule 13E-3" 1.6(b)
"Share" 2.1
"Shareholders" 1.1
"Special Committee" 1.1
"Special Meeting" 1.6(a)
"Subsidiary Securities" 3.6
"Surviving Corporation" 1.2
"Transactions" 1.1
"Voting Debt" 3.5
</TABLE>
Section 8.2 Notices. Unless otherwise specifically provided herein, any
notice, demand, request or other communication herein requested or permitted to
be given shall be in writing and may be personally served, sent by overnight
courier service, or sent by telecopy with a confirming copy sent by United
States first-class mail, each with any postage or delivery charge prepaid. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section) shall be as follows:
If to the Company: Plasti-Line, Inc.
c/o James F. Smith, Jr.
5508 Heathrow Drive
Knoxville, Tennessee 37919
Telephone: (423) 588-2878
Telecopy: (423) 584-4971
With a copy (which shall
not constitute notice) to: Bass, Berry & Sims, L.L.P.
2700 First American Center
Nashville Tennessee 37238-2700
Attn: Bob F. Thompson
Telephone: (615) 742-6200
Telecopy: (615) 742-6293
A-15
<PAGE> 99
If to the Parent or the
Purchaser: PL Acquisition Corp.
P.O. Box 59043
Knoxville, Tennessee 37950-9043
Attn: James Martin
Telephone: (423) 947-8464
Telecopy: (423) 947-8565
With a copy (which shall
not constitute notice) to: Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309
Attn: B. Harvey Hill, Jr.
Telephone: (404) 881-7446
Telecopy: (404) 881-777
Any notice provided hereunder shall be deemed to have been given on the
date delivered in person, or on the next business day after deposit with an
overnight courier service, or on the date received by telecopy transmissions.
Section 8.3 Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate delivered
pursuant hereto shall not survive the Effective Time or the termination of this
Agreement. Nothing in this Section 8.3 shall relieve any party for any breach of
any representation, warranty or agreement in this Agreement occurring prior to
termination, except that the Agreements in Article 2 and Section 5.6 hereof and
this Section 8.3 shall survive the Effective Time indefinitely and those set
forth in Section 8.6 hereof shall survive termination indefinitely.
Section 8.4 Enforcement of Agreement. Until the Effective Time, the
Special Committee shall continue in existence and shall have the right to cause
the Company to take any action necessary to enforce the rights of the Company
and the obligations of Martin, the Parent and the Purchaser under this
Agreement.
Section 8.5 Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed by all parties hereto, or in the
case of a waiver, by the party against whom the waiver is to be effective;
provided that any such amendment and any such waiver by the Company shall have
been approved by the Board of Directors of the Company, acting on the
recommendation of the Special Committee; and provided, further, that after the
adoption of this Agreement by the Shareholders and the Public Shareholders, no
such amendment or waiver shall, without the further approval of such
Shareholders and such Public Shareholders, alter or change (i) the amount or
kind of consideration to be received in exchange for any shares of capital stock
of the Company or (ii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.6 Expenses. All reasonable Expenses incurred by all parties in
connection with this Agreement and the consummation of the Transactions shall be
paid by the Company if the transaction is consummated. If the transaction is not
consummated, Parent shall pay its expenses related to the transaction of up to
$100,000 and the Company shall pay all other expenses, provided that Company
shall retain its rights, if any, under Section 7.2. Parent will not take any
action to change the Senior Lenders or Subordinated Lender so as to materially
increase the expenses payable by the Company without the prior consent of the
Company. The Company retains the right to negotiate directly any of the expenses
with the third parties that must be paid by the Company pursuant to this Section
8.6.
A-16
<PAGE> 100
Section 8.7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that the Parent may
transfer or assign, in whole or from time to time in part, to one or more of its
Affiliates, its rights under this Agreement, but any such transfer or assignment
will not relieve the Parent of its obligations under this Agreement or prejudice
the rights of shareholders to receive the Merger Consideration for Shares
properly surrendered in accordance with Section 2.2. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement, and their respective successors and assigns.
Section 8.8 Governing Law. Regardless of the place or places where this
Agreement may be executed, delivered or consummated, this Agreement shall be
governed by and construed in accordance with the Laws of the State of Tennessee,
without regard to any applicable conflicts of Laws.
Section 8.9 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 8.10 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 8.11 Interpretations. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
Section 8.12 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts hereof
signed by all of the other parties hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
<TABLE>
<S> <C>
PLASTI-LINE, INC.
Attest:
By: /s/ JAMES F. SMITH, JR.
/s/ MARK J. DEUSCHLE --------------------------------------------
- -------------------------------------------- James F. Smith, Jr.
Mark J. Deuschle, Secretary Chairman of the Special Committee
of the Board of Directors
PL HOLDING CORP.
Attest:
By: /s/ JAMES R. MARTIN
/s/ MARK J. DEUSCHLE, --------------------------------------------
- -------------------------------------------- James R. Martin
Mark J. Deuschle, Secretary Chairman of the Board
and President
</TABLE>
A-17
<PAGE> 101
EXHIBIT B
CHAPTER 23 OF THE TENNESSEE BUSINESS CORPORATION ACT
RELATING TO DISSENTING SHAREHOLDERS
TITLE 48, CHAPTER 23.
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. DEFINITIONS
As used in this chapter, unless the context otherwise requires:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 48-23-102 and who exercises that right when
and in the manner required by part 2 of this chapter;
(4) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date
of payment, at the average auction rate paid on United States treasury
bills with a maturity of six (6) months (or the closest maturity thereto)
as of the auction date for such treasury bills closest to such effective
date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
48-23-102. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If shareholder approval is required for the merger by Section
48-21-104 or the charter and the shareholder is entitled to vote on the
merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Section 48-21-105;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;
B-1
<PAGE> 102
(4) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share, if the fractional share is to be acquired for cash
under Section 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the effectuation
of the transaction which would otherwise give rise to dissenters' rights, is
listed on an exchange registered under Section 6 of the Securities Exchange Act
of 1934, as amended, or is a "national market system security," as defined in
rules promulgated pursuant to the Securities Exchange Act of 1934, as amended.
48-23-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
(1) person and notifies the corporation in writing of the name and address of
each person on whose behalf the record shareholder asserts dissenters' rights.
The rights of a partial dissenter under this subsection are determined as if the
shares as to which the partial dissenter dissents and the partial dissenter's
other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of
any one (1) or more classes held on the beneficial shareholder's behalf only if
the beneficial shareholder:
(1) Submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) Does so with respect to all shares of the same class of which the
person is the beneficial shareholder or over which the person has power to
direct the vote.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under Section
48-23-102 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
B-2
<PAGE> 103
(b) If corporate action creating dissenters' rights under Section 48-23-102
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Section 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will
not invalidate the corporate action.
48-23-202. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under Section
48-23-102 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must:
(1) Deliver to the corporation, before the vote is taken, written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated; and
(2) Not vote the shareholder's shares in favor of the proposed action.
No such written notice of intent to demand payment is required of any
shareholder to whom the corporation failed to provide the notice required
by Section 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for the shareholder's shares under this chapter.
48-23-203. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under Section
48-23-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the principal terms
of the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person asserting dissenters'
rights acquired beneficial ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than one (1) nor more than two (2)
months after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has
not previously sent a copy of this chapter to the shareholder pursuant to
Section 48-23-201.
48-23-204. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in Section 48-23-203
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to Section 48-23-203(b)(3), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (a) retains all other rights of a
shareholder until these rights are canceled or modified by the effectuation of
the proposed corporate action.
B-3
<PAGE> 104
(c) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto.
48-23-205. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is effectuated or the restrictions released under Section 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.
48-23-206. PAYMENT
(a) Except as provided in Section 48-23-208, as soon as the proposed
corporate action is effectuated, or upon receipt of a payment demand, whichever
is later, the corporation shall pay each dissenter who complied with Section
48-23-204 the amount the corporation estimates to be the fair value of each
dissenter's shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Section 48-23-209; and
(5) A copy of this chapter if the corporation has not previously sent
a copy of this chapter to the shareholder pursuant to Section 48-23-201 or
Section 48-23-203.
48-23-207. FAILURE TO TAKE ACTION
(a) If the corporation does not effectuate the proposed action that gave
rise to the dissenters' rights within two (2) months after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions imposed
on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under Section 48-23-203 and repeat the payment demand
procedure.
48-23-208. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by Section
48-23-206 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the principal terms of
the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of the
dissenter's demand. The corporation
B-4
<PAGE> 105
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenter's right to demand payment under Section 48-23-209.
48-23-209. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate (less any payment under
Section 48-23-206), or reject the corporation's offer under Section 48-23-208
and demand payment of the fair value of the dissenter's shares and interest due,
if:
(1) The dissenter believes that the amount paid under Section
48-23-206 or offered under Section 48-23-208 is less than the fair value of
the dissenter's shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 48-23-206
within two (2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after
the date set for demanding payment.
(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (a) within one (1) month after the corporation made
or offered payment for the dissenter's shares.
PART 3. JUDICIAL APPRAISAL OF SHARES
48-23-301. COURT ACTION
(a) If a demand for payment under Section 48-23-209 remains unsettled, the
corporation shall commence a proceeding within two (2) months after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the two-month period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office (or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus accrued interest, exceeds the amount paid by
the corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 48-23-208.
B-5
<PAGE> 106
48-23-302. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under Section 48-23-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable against:
(1) The corporation and in favor of any or all dissenters if the court
finds the corporation did not substantially comply with the requirements of
part 2 of this chapter; or
(2) Either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
B-6
<PAGE> 107
EXHIBIT C
November 3, 1997
Special Committee of the Board of Directors
Plasti-Line, Inc.
623 E. Emory Road
Knoxville, Tennessee 37950
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the Public Shareholders of the outstanding common stock, par value
$0.001 per share (the "Common Stock") of Plasti-Line, Inc. (the "Company"), of
the Merger Consideration proposed to be received by such holders pursuant to the
Agreement and Plan of Merger, (the "Merger Agreement"), dated as of November 3,
1997 among the Company, PL Holding Corp., a Tennessee corporation ("Parent"), PL
Acquisition Corp., a Tennessee corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and James R. Martin, Chairman of the Board and Chief
Executive Officer of the Company and beneficial owner of approximately 47% of
the outstanding voting power of the Company's Common Stock ("Martin").
Capitalized terms used herein, if not otherwise defined herein, shall have the
respective meanings set forth in the Merger Agreement.
The Merger Agreement provides for the merger of Merger Sub with and into
the Company (the "Merger"), with the Company being the surviving corporation
(the "Surviving Corporation"). Following the Merger, the Company will be a
direct wholly owned subsidiary of Parent. Pursuant to the Merger, (i) each
outstanding share of Common Stock (other than shares held by the Company as
treasury stock or shares beneficially owned by Parent or by shareholders who do
not vote in favor of the Merger Agreement and who perfect their dissenters'
rights under Chapter 23 of the Tennessee Business Corporation Act ("TBCA")),
will receive $14.50 per share in cash, without interest (the "Merger
Consideration"), (ii) each outstanding share of Common Stock beneficially, owned
by Parent or held by the Company as treasury stock will be canceled without
consideration, and (iii) each outstanding share of Merger Sub common stock, par
value $.001 per share, will be converted into one share of common stock of the
Surviving Corporation. As a result of the Merger, current shareholders of the
Company (other than Parent) will no longer have any equity interest in the
Company. The terms and conditions of the Merger are more fully set forth in the
Merger Agreement.
J.C. Bradford & Co., L.L.C., as part of its investment banking business,
engages in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes. We have acted as financial advisor to the Special Committee
of the Board of Directors of the Company in connection with the proposed Merger
and will receive a fee from the Company for our services.
In conducting our analysis and arriving at our opinion, we have considered
such financial and other information as we deemed appropriate including, among
other things, the following: (i) the Merger Agreement; (ii) the historical and
current financial position and results of operations of the Company; (iii)
certain internal financial analyses and forecasts of the Company for the fiscal
years beginning January 1, 1997 and ending December 31, 2002, prepared for the
Company by its senior management; (iv) certain financial and securities data of
certain other companies, the securities of which are publicly traded and that we
believed to be comparable to the Company; (v) prices and premiums paid in
certain other acquisitions and transactions that we believed to be relevant;
(vi) historical and current price and trading activity for the Common Stock; and
(vii) such other financial studies, analyses and investigations as we deemed
appropriate for purposes of our opinion. We also have held discussions with
members of the senior management of the Company regarding the past and current
business operations, financial condition and future prospects of the Company.
With your permission, we have assumed that financing for the Merger has been
irrevocably obtained on terms previously reviewed by us in commitment letters
from lenders, and that the Merger Agreement has been executed and delivered by
the parties thereto on terms substantially similar to those contained in the
most recent draft of the Merger Agreement supplied to and reviewed by us.
C-1
<PAGE> 108
We have taken into account our assessment of general economic, market and
financial and other conditions and our experience in other transactions, as well
as our experience in securities valuation and our knowledge of the industries in
which the Company operates generally. Our opinion is necessarily based upon the
information made available to us and conditions as they currently exist and can
be evaluated as of the date hereof. We have relied upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of our opinion and have not assumed any responsibility for, nor
undertaken an independent verification of, such information. With respect to the
internal operating data and financial analyses and forecasts supplied to us, we
have assumed that such data, analyses and forecasts were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's senior management as to the recent and likely future performance of
the Company. Accordingly, we express no opinion with respect to such analyses or
forecasts or the assumptions on which they are based.
We were not asked to consider and our opinion does not address the relative
merits of the proposed Merger as compared to any alternative business strategies
that might exist for the Company or the effect of any other transactions in
which the Company might engage, which alternatives we were asked not to
consider. Furthermore, we were not asked to propose, nor did we propose, the
consideration to be received by the Public Shareholders in the Merger, nor have
we made an independent evaluation or appraisal of the assets and liabilities of
the Company or any of its subsidiaries or affiliates.
The Company is entitled to reproduce this opinion, in whole but not in
part, in the Merger documents, the Schedule 13E-3 and Proxy Statement as
required by applicable law or appropriate; provided, that any excerpt from or
reference to this opinion (including any summary thereof) in such documents must
be approved by us in advance in writing. Notwithstanding the foregoing, this
opinion does not constitute a recommendation to any holder of Common Stock to
vote in favor of the Merger.
Based upon and subject to the foregoing, and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration to be received by the Public Shareholders in the Merger is
fair to such holders from a financial point of view.
Very truly yours,
J. C. BRADFORD & CO., L.L.C.
By: /s/ D. BRECK WALKER
------------------------------------
D. Breck Walker
Managing Director
C-2
<PAGE> 109
EXHIBIT D
[ALSTON & BIRD LETTERHEAD TO COME]
November 4, 1997
Board of Directors
Plasti-Line, Inc.
623 E. Emory Road
Knoxville, Tennessee 37849
Re: Tax Opinion Regarding the Agreement and Plan of Merger Among Plasti-Line,
Inc., PL Holding Corp., PL Acquisition Corp., and James R. Martin
Dear Gentlemen:
We have acted as tax counsel for Plasti-Line, Inc. ("Plasti-Line") in
connection with that certain Agreement and Plan of Merger dated as of November
3, 1997 ("Agreement") among Plasti-Line, PL Holding Corp., PL Acquisition Corp.
("Merger Sub"), and James R. Martin, which provides for the merger ("Merger") of
Merger Sub with and into Plasti-Line. In our capacity as counsel to Plasti-Line,
our opinion has been requested with respect to certain of the federal income tax
consequences of the Merger.
In rendering this opinion, we have examined (i) the Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury Regulations, (ii) the legislative
history of applicable sections of the Code, and (iii) appropriate Internal
Revenue Service and court decisional authority. In addition, we have relied upon
certain assumptions as more fully described below. All terms used herein without
definition shall have the respective meanings specified in the Agreement and,
unless otherwise specified, all section references herein are to the Code.
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such documents
as we have deemed appropriate, including:
(1) The Agreement;
(2) Preliminary Proxy Materials of Plasti-Line relating to a Special
Meeting of Plasti-Line's shareholders, whereby such shareholders will vote
upon a proposal to approve and adopt the Agreement and related transaction
(the "Proxy Materials"); and
(3) Such additional documents as we have considered relevant.
In our examination of the documents, we have assumed with your consent that
all documents submitted to us as photocopies faithfully reproduce the originals
thereof, that such originals are authentic, that all such documents have been or
will be duly executed to the extent required, and that all statements set forth
in such documents are accurate.
We have also obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various officers
and representatives of Plasti-Line and PL Holding Corp.
As we understand the transaction, pursuant to the Agreement, Merger Sub
will merge into Plasti-Line. Pursuant to the Merger, each outstanding share of
Plasti-Line common stock, $.001 par value per share ("Common Stock"), other than
shares beneficially owned by PL Holding Corp. or shares owned by Plasti-Line as
treasury stock (the "Public Shares"), will receive $14.50 per share in cash,
without interest, with the exception of any Public Shares held by shareholders
who perfect their dissenters' rights in accordance with Tennessee law. After the
Merger, Plasti-Line will be the surviving corporation and will be a wholly owned
D-1
<PAGE> 110
subsidiary of PL Holding Corp. As a result of the Merger, the holders of the
Public Shares (the "Public Shareholders") will no longer have any equity
interest in Plasti-Line.
OPINION
Based upon and subject to the foregoing, it is our opinion that:
1. The Merger, in which the Public Shareholders will receive cash for
their Common Stock, will be treated as a sale of the Common Stock by the
Public Shareholders and will be a taxable event for federal income tax
purposes. Rev. Rul. 73-427, 1973-2 C.B. 301; Rev. Rul. 79-273, 1979-2 C.B.
125.
2. The Public Shareholders will recognize a capital gain or a capital
loss assuming the Common Stock is a capital asset in the hands of the
Public Shareholders. I.R.C. Section 1001.
3. Assuming the Common Stock is a capital asset, the amount of capital
gain or loss recognized by each Public Shareholder will be equal to the
difference between the amount of cash received pursuant to the Merger and
the tax basis of the Common Stock held by such Public Shareholder. I.R.C.
Section 1001.
4. Any capital gain or loss will be a long-term capital gain or loss
assuming that the Public Shareholder has held the Common Stock for more
than 12 months. I.R.C. Section 1222. The maximum rate of capital gains tax
for corporations is 35%. The maximum rate of tax on net capital gains of
individuals, trusts, and estates, however, will depend upon the length of
the period that the Common Stock was held. If the Common Stock was held for
more than 18 months, the maximum rate of capital gains tax is 20% (for
fifteen percent bracket taxpayers, such maximum rate is reduced to 10%).
I.R.C. Section 1, as amended. If the Common Stock was held for more than
one year but not more than 18 months, the maximum rate of capital gains tax
remains at 28%. I.R.C. Section 1, as amended.
5. The description of tax consequences of the Merger contained in the
Proxy Materials is an accurate description of the material federal income
tax consequences thereof.
CONCLUSION
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed are true on the date hereof and
will be true on the date on which the Merger is consummated. Our opinions cannot
be relied upon if any of the facts pertinent to the federal income tax treatment
of the Merger stated in such documents or in such additional information is, or
later becomes, inaccurate, or if any of the statements set out herein are, or
later become, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the Merger.
We hereby consent to the use of this opinion and to the references made to
the firm under the captions "Summary -- Federal Income Tax Consequences" and
"Special Factors -- Certain Federal Income Tax Consequences of the Merger" in
the Proxy Materials.
Very truly yours,
Alston & Bird LLP
By: /s/ PINNEY L. ALLEN
------------------------------------
Pinney L. Allen
D-2
