<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
------------------------------------
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
HUFFMAN KOOS INC.
(Name of Subject Company)
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
(Bidders)
------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
------------------------------------
000443221
(CUSIP Number of Class of Securities)
------------------------------------
MICHAEL H. SOLOMON
BREUNER'S HOME FURNISHINGS CORPORATION
7069 CONSOLIDATED WAY
SAN DIEGO, CALIFORNIA 92121
(619) 549-8030
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Bidders)
COPIES TO:
EDWARD R. MANDELL, ESQ.
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 704-6000
CALCULATION OF FILING FEE
TRANSACTION VALUE*: $36,922,500 AMOUNT OF FILING FEE: $7,384.50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* For purposes of calculating fee only. This amount assumes the purchase of
3,938,400 Common Shares at $9.375 per share. The amount of the filing fee
calculated in accordance with Rule 0-11 of the Securities Exchange Act of
1934, as amended, equals 1/50 of one percent of the transaction value.
/ / 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.
<TABLE>
<S> <C>
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
</TABLE>
<PAGE> 2
-------------------
CUSIP No. 000443221
-------------------
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS: HK Acquisition Company, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
- -----------------------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) / /
(b) /X/
- -----------------------------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------------------------
(4) SOURCES OF FUNDS
BK & AF
- -----------------------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
/ /
- -----------------------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- -----------------------------------------------------------------------------------------------
(8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
- -----------------------------------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- -----------------------------------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
-------------------
CUSIP No. 000443221
-------------------
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS: Breuner's Home Furnishings Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
- -----------------------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) / /
(b) /X/
- -----------------------------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------------------------
(4) SOURCES OF FUNDS
BK & AF
- -----------------------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
/ /
- -----------------------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- -----------------------------------------------------------------------------------------------
(8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
- -----------------------------------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- -----------------------------------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
- ---------------------
CUSIP No. 000443221
- ---------------------
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS: Kidd, Kamm Investments, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
- -----------------------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) / /
(b) /X/
- -----------------------------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------------------------
(4) SOURCES OF FUNDS
BK & AF
- -----------------------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f)
/ /
- -----------------------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- -----------------------------------------------------------------------------------------------
(8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
/ /
- -----------------------------------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- -----------------------------------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
CUSIP No. 000443221
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the tender offer by HK Acquisition Company, Inc., a Delaware corporation (the
"Purchaser") and a subsidiary of Breuner's Home Furnishings Corporation, a
Delaware corporation (the "Parent"), to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of Huffman Koos Inc., a
Delaware corporation (the "Company"), at $9.375 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated September 25, 1995 (the "Offer to Purchase"), a copy of which is
filed herewith as Exhibit (a)(1), and in the related Letter of Transmittal, a
copy of which is filed herewith as Exhibit (a)(2) (which together constitute the
"Offer"). Kidd, Kamm Equity Partners, L.P., a Delaware limited partnership
("KKEP"), is the beneficial owner of approximately 90% of the Common Stock of
the Parent and, therefore, may be deemed to control the Purchaser. The general
partner of KKEP is Kidd, Kamm Investments, L.P., a Delaware limited partnership
("Investments"). The general partner of Investments is Kidd, Kamm Investments,
Inc., a Delaware corporation ("Kidd, Kamm").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Huffman Koos Inc., a Delaware
corporation, and the address of its principal executive offices is Route 4
and Main Street, River Edge, New Jersey 07661.
(b) The information set forth in the "Introduction" and Section 1.
"Terms of the Offer" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6. "Price Range of Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) The information set forth in the "Introduction", Section
9. "Certain Information Concerning the Parent and the Purchaser" and
Schedule I of the Offer to Purchase is incorporated herein by reference.
(e)-(f) None of the Parent, the Purchaser or Kidd, Kamm or, to the
best knowledge of the Parent, the Purchaser or Kidd, Kamm, any of the
executive officers and directors of such entities, 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 future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violations of
such laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Introduction", Section 9.
"Certain Information Concerning the Parent and the Purchaser", Section 11.
"Background of the Offer; The Merger Agreement; The Stockholders Agreement;
Confidentiality Agreement; No-Solicitation Agreement", Section 12. "Purpose
of the Offer; the Merger; Plans for the Company" and Section 13.
"Conditions to the Offer" of the Offer to Purchase is incorporated herein
by reference. Except as set forth therein, since the commencement of the
Company's third full fiscal year preceding the date of this Statement there
have been no contracts, transactions or negotiations required to be set
forth in this item.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in the "Introduction" and in Section
10. "Source and Amount of Funds" of the Offer to Purchase is incorporated
herein by reference.
<PAGE> 6
CUSIP No. 000443221
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction", Section 12.
"Purpose of the Offer; The Merger; Plans for the Company" and Section 11.
"Background of the Offer; The Merger Agreement; The Stockholders Agreement;
Confidentiality Agreement; Non-Solicitation Agreement" of the Offer to
Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7. "Possible Effect of
the Offer on the Market for Shares; NASDAQ/NMS Quotation; Exchange Act
Registration" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction", Section 9.
"Certain Information Concerning the Parent and the Purchaser", Section 11.
"Background of the Offer; The Merger Agreement; The Stockholders Agreement;
Confidentiality Agreement; Non-Solicitation Agreement" and Schedule I of
the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "Introduction", Section 9. "Certain
Information Concerning the Parent and the Purchaser", Section 10. "Source
and Amount of Funds", Section 11. "Background of the Offer; The Merger
Agreement; The Stockholders Agreement; Confidentiality Agreement;
Non-Solicitation Agreement", Section 13. "Conditions to the Offer" and
Section 15. "Fees and Expenses" of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and in Section 15.
"Fees and Expenses" of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
This item is inapplicable since such information is not material to a
decision by a stockholder of the Company to sell, tender or hold securities
being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the "Introduction", Section 11.
"Background of the Offer; The Merger Agreement; The Stockholders Agreement;
Confidentiality Agreement; Non-Solicitation Agreement" and Section 12.
"Purpose of the Offer; The Merger; Plans for the Company" of the Offer to
Purchase is incorporated herein by reference.
(b)-(d) The information set forth in Section 7. "Possible Effect of
the Offer on the Market for Shares; NASDAQ/NMS Quotation: Exchange Act
Registration" and Section 14. "Certain Legal Matters" of the Offer to
Purchase is incorporated herein by reference.
(e) Not applicable.
(f) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively, which are incorporated herein by reference
in their entirety.
<PAGE> 7
CUSIP No. 000443221
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated September 25, 1995 (the "Offer to
Purchase").
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from Jefferies & Company, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Form of Summary Advertisement, dated September 25, 1995.
(a)(7) Form of Joint Press Release, dated September 19, 1995.
(b)(1) Commitment Letter, dated September 11, 1995 from Nomura Holding
America Inc.
(c)(1) Agreement and Plan of Merger dated as of September 18, 1995
among the Parent, the Purchaser and the Company (Included as
Exhibit A to the Offer to Purchase).
(c)(2) Stockholders Agreement dated as of September 18, 1995 between
the Parent, the Purchaser and the persons designated therein as
the Majority Stockholders (Included as Exhibit B to the Offer to
Purchase).
(c)(3) Confidentiality Agreement dated April 25, 1995 between the
Company and Kidd, Kamm & Company.
(c)(4) Non-Solicitation Agreement dated July 28, 1995 between the
Company and Arnold's Acquisition Corporation ("Arnold's").
(c)(5) Memorandum of Understanding dated September 7, 1995 from
Arnold's to Fred Bark.
(c)(6) Letter of Understanding dated September 7, 1995 from Arnold's to
Joseph Albanese.
(c)(7) Letter of Understanding dated September 7, 1995 from Arnold's to
John Alecci.
(c)(8) Letter of Understanding dated September 7, 1995 from Arnold's to
Timothy Costello.
(c)(9) Letter of Understanding dated September 7, 1995 from Arnold's to
Jack DiSanza.
(c)(10) Letter of Understanding dated September 7, 1995 from Arnold's to
Al Melchiano.
<PAGE> 8
CUSIP No. 000443221
SIGNATURES
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.
Dated: September 25, 1995
HK ACQUISITION COMPANY, INC.
By: /s/ MICHAEL H. SOLOMON
-------------------------------------------
Name: Michael H. Solomon
Title: Chairman
BREUNER'S HOME FURNISHINGS CORPORATION
By: /s/ MICHAEL H. SOLOMON
-------------------------------------------
Name: Michael H. Solomon
Title: Chairman and Chief Executive Officer
KIDD, KAMM EQUITY PARTNERS, L.P.
By: Kidd, Kamm Investments, L.P.
(its general partner)
By: Kidd, Kamm Investments, Inc.
(its general partner)
By: /s/ KURT L. KAMM
-------------------------------------------
Name: Kurt L. Kamm
Title: President
<PAGE> 9
CUSIP No. 000443221
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
(a)(1) Offer to Purchase dated September 25, 1995 (the "Offer
to Purchase").
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from Jefferies & Company, Inc. to Brokers,
Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Form of Summary Advertisement, dated September 25,
1995.
(a)(7) Form of Joint Press Release, dated September 19, 1995.
(b)(1) Commitment Letter, dated September 11, 1995 from Nomura
Holding America Inc.
(c)(1) Agreement and Plan of Merger dated as of September 18,
1995 among the Parent, the Purchaser and the Company
(Included as Exhibit A to the Offer to Purchase).
(c)(2) Stockholders Agreement dated as of September 18, 1995
between the Parent, the Purchaser and the persons
designated therein as the Majority Stockholders
(Included as Exhibit B to the Offer to Purchase).
(c)(3) Confidentiality Agreement dated April 25, 1995 between
the Company and Kidd, Kamm & Company.
(c)(4) Non-Solicitation Agreement dated July 28, 1995 between
the Company and Arnold's Acquisition Corporation
("Arnold's").
(c)(5) Memorandum of Understanding dated September 7, 1995
from Arnold's to Fred Bark.
(c)(6) Letter of Understanding dated September 7, 1995 from
Arnold's to Joseph Albanese.
(c)(7) Letter of Understanding dated September 7, 1995 from
Arnold's to John Alecci.
(c)(8) Letter of Understanding dated September 7, 1995 from
Arnold's to Timothy Costello.
(c)(9) Letter of Understanding dated September 7, 1995 from
Arnold's to Jack DiSanza.
(c)(10) Letter of Understanding dated September 7, 1995 from
Arnold's to Al Melchiano.
</TABLE>
<PAGE> 1
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
AT
$9.375 NET PER SHARE
BY
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, OCTOBER 23, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST 90% OF THE OUTSTANDING SHARES OF HUFFMAN KOOS INC.
AND (2) FUNDS NECESSARY TO PURCHASE THE SHARES OF HUFFMAN KOOS INC. PURSUANT TO
THE OFFER AND THE MERGER DESCRIBED HEREIN AND TO PAY ALL RELATED FEES AND
EXPENSES BEING AVAILABLE TO THE PURCHASER ON TERMS CONTEMPLATED BY THE EXISTING
COMMITMENT LETTER DESCRIBED HEREIN OR OTHERWISE ON TERMS NOT MATERIALLY MORE
ADVERSE TO HK ACQUISITION COMPANY, INC.
THE BOARD OF DIRECTORS OF HUFFMAN KOOS INC. HAS UNANIMOUSLY DETERMINED THAT
EACH OF THE OFFER AND THE MERGER REFERRED TO HEREIN IS FAIR TO AND IN THE BEST
INTERESTS OF HUFFMAN KOOS INC. AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND
RECOMMENDS THAT THE STOCKHOLDERS OF HUFFMAN KOOS INC. ACCEPT THE OFFER AND
TENDER THEIR SHARES IN THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (i) complete and sign the enclosed
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have his signature thereon guaranteed
if required by Instruction 1 of the Letter of Transmittal and mail or deliver it
and any other required documents to the Depositary named herein and either
deliver the certificate(s) for such Shares to the Depositary along with the
Letter of Transmittal or tender such Shares pursuant to the procedure for
book-entry transfer set forth in Section 3, or (ii) request his broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him. A stockholder who has Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
Any stockholder desiring to accept the Offer whose certificates for such
Shares are not immediately available, or who cannot comply with the procedures
for book-entry transfer on a timely basis, may tender such Shares by following
the procedure for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may be directed to the Information Agent or the Dealer
Manager or to brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
September 25, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Introduction............................................................................ 1
The Offer............................................................................... 3
1. Terms of the Offer................................................................ 3
2. Acceptance for Payment and Payment for Shares..................................... 4
3. Procedures for Tendering Shares................................................... 5
4. Withdrawal Rights................................................................. 7
5. Certain Tax Consequences.......................................................... 8
6. Price Range of Shares; Dividends.................................................. 9
7. Possible Effect of the Offer on the Market for Shares;
NASDAQ/NMS Quotation; Exchange Act Registration................................... 9
8. Certain Information Concerning the Company........................................ 10
9. Certain Information Concerning the Parent and the Purchaser....................... 14
10. Source and Amount of Funds........................................................ 14
11. Background of the Offer; The Merger Agreement; The Stockholders Agreement;
Confidentiality Agreement; Non-Solicitation Agreement............................. 16
12. Purpose of the Offer; The Merger; Plans for the Company........................... 27
13. Conditions to the Offer........................................................... 29
14. Certain Legal Matters............................................................. 29
15. Fees and Expenses................................................................. 31
16. Miscellaneous..................................................................... 32
Schedule I -- Certain Information Concerning the Parent and the Purchaser............... S-1
Exhibit A -- Agreement and Plan of Merger............................................... A-1
Exhibit B -- Stockholders Agreement..................................................... B-1
</TABLE>
i
<PAGE> 3
To the Holders of Common Stock of
HUFFMAN KOOS INC.:
INTRODUCTION
HK Acquisition Company, Inc., a Delaware corporation (the "Purchaser"), and
a wholly owned subsidiary of Breuner's Home Furnishings Corporation, a Delaware
corporation (the "Parent"), hereby offers to purchase all outstanding shares of
common stock ("Common Stock"), par value $.01 per share (the "Shares"), of
Huffman Koos Inc., a Delaware corporation (the "Company"), at $9.375 per Share,
net to the seller in cash and without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"). Kidd, Kamm Equity
Partners, L.P., a Delaware limited partnership ("KKEP"), is the beneficial owner
of approximately 90% of the Common Stock of the Parent and, therefore, may be
deemed to control the Purchaser. The general partner of KKEP is Kidd, Kamm
Investments, L.P., a Delaware limited partnership ("Investments"). The general
partner of Investments is Kidd, Kamm Investments, Inc., a Delaware corporation
("Kidd, Kamm"). Tendering stockholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 7 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by the Purchaser pursuant
to the Offer. The Purchaser will pay all charges and expenses of Jefferies &
Company, Inc. which is acting as the Dealer Manager (the "Dealer Manager"),
First Chicago Trust Company of New York which is acting as the Depositary (the
"Depositary"), and Georgeson & Company Inc., which is acting as the Information
Agent (the "Information Agent"), in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES IN THE OFFER.
THE CHICAGO CORPORATION, THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO
THE BOARD ITS WRITTEN OPINION TO THE EFFECT THAT THE CONSIDERATION TO BE
RECEIVED BY THE HOLDERS OF SHARES IN EACH OF THE OFFER AND THE MERGER IS FAIR,
FROM A FINANCIAL POINT OF VIEW, TO STOCKHOLDERS OF THE COMPANY AS OF SEPTEMBER
18, 1995. SUCH OPINION IS SET FORTH IN FULL AS AN EXHIBIT TO THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 FILED BY THE COMPANY
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
September 18, 1995 (the "Merger Agreement"), by and among the Company, the
Purchaser and the Parent. The Merger Agreement provides, among other things, for
the making of the Offer by the Purchaser, and further provides that, subject to
certain conditions and upon the terms of the Merger Agreement, the Purchaser
will merge with and into the Company (the "Merger"). As a result of the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"): (i)
each Share issued and outstanding immediately prior to the Effective Time (other
than any Shares held by a holder who, in connection with the Merger, has
properly demanded and perfected the right for appraisal of such Shares in
accordance with the Delaware General Corporation Law ("GCL")) will be converted
automatically into the right to receive the amount in cash (the "Merger
Consideration") payable to the holder thereof, without interest and less any
required withholding taxes, upon surrender of the certificate formerly
representing such Share; (ii) each Share held in the treasury of the Company or
owned by the Parent, the Purchaser or any subsidiary of the Parent or the
Purchaser, immediately prior to the Effective Time will be canceled and cease to
exist without any conversion thereof and no payment or distribution will be made
with respect thereto; and (iii) each share of common stock, par value $.01 per
share, of the Purchaser issued and outstanding immediately prior to the
Effective Time will, upon surrender of the certificate formerly representing
such share, be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
<PAGE> 4
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST 90% OF THE OUTSTANDING SHARES (THE "MINIMUM
CONDITION") AND (II) FUNDS NECESSARY TO PURCHASE THE SHARES PURSUANT TO THE
OFFER AND THE MERGER AND TO PAY ALL RELATED FEES AND EXPENSES BEING AVAILABLE TO
THE PURCHASER ON TERMS CONTEMPLATED BY THE EXISTING COMMITMENT LETTER OR
OTHERWISE ON TERMS NOT MATERIALLY MORE ADVERSE TO THE PURCHASER (THE "FINANCING
CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS CONTAINED IN THE
MERGER AGREEMENT, INCLUDING CERTAIN CONDITIONS RELATING TO THE HSR ACT (AS
DEFINED BELOW). SEE SECTION 13, WHICH SETS FORTH IN FULL THE CONDITIONS OF THE
OFFER.
In connection with the Merger Agreement, the Purchaser and the Parent have
entered into the Stockholders Agreement, dated September 18, 1995 (the
"Stockholders Agreement"), with Jupiter Industries, Inc. ("Jupiter") and Sussex
Group, Ltd. ("Sussex" and, together with Jupiter, the "Majority Stockholders"),
who collectively are the holders of 2,200,000 Shares (the "Majority Shares")
representing 55.9% of the Shares outstanding as of the date of the Stockholders
Agreement. Pursuant to the Stockholders Agreement, the Majority Stockholders
have, among other things, (i) agreed to tender pursuant to the Offer all Shares
owned by them and any Shares acquired after the date of the Stockholders
Agreement within ten business days after the commencement of the Offer, (ii)
granted to the Purchaser options to purchase all of the Shares owned by the
Majority Stockholders and any Shares acquired by them after the date of the
Stockholders Agreement, upon the terms and subject to the conditions of the
Stockholders Agreement, at the cash purchase price of $9.375 per Share, (iii)
agreed that at any meeting of the Company's stockholders or in connection with
any written consent of the Company's stockholders, to vote (or cause to be
voted) the Shares currently owned by them and any additional Shares that either
of them may acquire (A) in favor of the acquisition of the Company by the
Purchaser or any other merger or other transaction pursuant to which the
Purchaser or an affiliate or designee thereof would acquire the Company (the
"Acquisition"), the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement, (B) against any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Merger
Agreement or the Stockholders Agreement and (C) against any action or agreement
(other than the Merger Agreement) that is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, discourage or materially
and adversely affect the Acquisition or any of the other transactions to be
consummated pursuant to the Merger Agreement and (iv) granted to and appointed
the Purchaser and the Chairman of the Board, the President, the Secretary and
the Chief Financial Officer of the Purchaser and any individual who succeeds to
any such office of the Purchaser, and any other designee of the Purchaser as its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares owned by such Majority Stockholder and any Shares acquired after the
date of the Stockholders Agreement at any regular or a special meeting of
stockholders with respect to the Shares or to take actions by written consent
with respect to such Shares, in respect of the matters set forth in clause (iii)
above.
The Company has represented to the Parent and the Purchaser that, as of the
date of the Stockholders Agreement, the authorized capital stock of the Company
consisted of 10,000,000 Shares, of which there were 3,938,400 Shares issued and
outstanding. Based on this information and assuming that the number of
outstanding Shares does not change, the Minimum Condition would be satisfied if
a minimum of 3,544,560 Shares are purchased by the Purchaser pursuant to the
Offer.
IF THE MINIMUM CONDITION IS SATISFIED, UPON PURCHASE OF THE TENDERED SHARES
THE PURCHASER WILL OWN 90% OR MORE OF THE OUTSTANDING SHARES. ACCORDINGLY, THE
"SHORT FORM" MERGER PROVISIONS OF THE GCL WOULD PERMIT THE MERGER TO OCCUR
WITHOUT A VOTE OF THE STOCKHOLDERS OF THE COMPANY. IF A "SHORT FORM" MERGER IS
AVAILABLE UNDER THE GCL, THE PURCHASER EXPECTS TO CONSUMMATE A "SHORT FORM"
MERGER OF THE PURCHASER WITH AND INTO THE COMPANY PROMPTLY AFTER COMPLETION OF
THE OFFER. SEE SECTION 12.
IF THE MINIMUM CONDITION IS NOT SATISFIED, THE PURCHASER INTENDS TO
CONSUMMATE A "LONG FORM" MERGER IN ACCORDANCE WITH THE "LONG FORM" MERGER
PROVISIONS OF THE GCL WHICH REQUIRES THAT A MAJORITY OF THE OUTSTANDING STOCK OF
A CORPORATION BE VOTED FOR THE ADOPTION OF A MERGER AGREEMENT. IN THE EVENT THE
PURCHASER PURSUES A "LONG FORM" MERGER, IT WILL BE REQUIRED TO SEEK FUNDING FOR
SUCH MERGER OTHER THAN UNDER THE EXISTING COMMITMENT LETTER. SEE SECTION 10.
2
<PAGE> 5
The Merger Agreement and the Stockholders Agreement are summarized in
Section 11 and attached as Exhibits A and B, respectively, to this Offer to
Purchase.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any extension or amendment), the Purchaser will accept for payment (and
thereby purchase) any and all Shares that are validly tendered on or prior to
the Expiration Date (as defined below) and not withdrawn in accordance with the
procedures set forth in Section 4. The term "Expiration Date" means 12:00
Midnight, New York City time, on Monday, October 23, 1995, unless and until the
Purchaser shall, in its sole discretion, have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" will refer to
the latest time and date at which the Offer, as so extended by the Purchaser,
will expire.
The Offer is conditioned upon, among other things, (i) satisfaction of the
Minimum Condition, (ii) satisfaction of the Financing Condition, (iii)
expiration or termination of any waiting period applicable to the Purchaser's
acquisition of Shares pursuant to the Offer under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and (iv) certain
other conditions described in Section 13.
Subject to the provisions of the Merger Agreement, if by the Expiration
Date any or all of such conditions have not been satisfied, the Purchaser
reserves the right (but shall not be obligated) to (i) terminate the Offer and
return all tendered Shares to tendering stockholders, (ii) waive or reduce the
Minimum Condition or waive any or all of the other conditions to the Offer and,
subject to compliance with applicable rules and regulations of the Commission,
purchase all Shares validly tendered or (iii) extend the Offer and, subject to
the terms of the Offer (including the rights of stockholders to withdraw their
Shares), retain the Shares which have been tendered, until the termination of
the Offer, as extended or (iv) amend the Offer.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 13 shall have occurred or shall have been determined by the
Purchaser to have occurred, to increase the amount payable in the Offer or to
make any other changes in the terms and conditions of the Offer; provided that,
unless previously approved by the Company in writing, no change may be made that
(x) decreases the amount payable in the Offer, (y) changes the form of
consideration to be paid in the Offer or (z) imposes additional conditions to
the Offer or broadens the scope of those conditions; and further provided that
the Purchaser will have the right in its sole discretion to extend the Offer for
up to a maximum of five additional business days if after 20 business days the
Minimum Condition shall not have been met. The Purchaser may also extend the
Offer for such additional number of trading days as may be reasonably necessary
to allow Shares tendered under a "Notice of Guaranteed Delivery" to be delivered
and if the Parent or the Purchaser determines, upon the advice of outside legal
counsel, that any supplement or amendment to the Tender Offer Statement on
Schedule 14D-1 (of which this Offer to Purchase and the related Letter of
Transmittal are parts, together with any supplements or amendments thereto) is
required to be circulated to the Company's stockholders, then the Parent or the
Purchaser will have the right to extend the Offer for such additional number of
days as may be necessary under applicable law as determined by the Parent and
the Purchaser, on the advice of counsel. See Section 12. The rights reserved by
the Purchaser in this paragraph are in addition to the Purchaser's rights to
terminate the Offer pursuant to Section 13.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including a waiver of the Minimum Condition or the Financing Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required to comply with the Commission's interpretation of
Rules 14d-4(c) and 14d-6(d) under
3
<PAGE> 6
the Securities Exchange Act of 1934, (the "Exchange Act"), which prescribes that
the minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances, including the relative materiality of
the change in terms or information, and that, with respect to a change in price
or a change in percentage of securities sought (other than an increase in the
number of Shares sought not in excess of 2% of the outstanding Shares), a
minimum ten business-day period may be required to allow for adequate
dissemination to stockholders and investor response. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, delay in payment, amendment or termination will
be followed as promptly as practicable by public announcement thereof. In the
case of an extension, the announcement will be issued no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under
the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change), and without limiting the obligation of
the Purchaser under these Rules or the manner in which the Purchaser may choose
to make any public announcement, the Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares and
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any extension or amendment), the Purchaser
will purchase, by accepting for payment and paying for, all Shares validly
tendered prior to the Expiration Date (and not properly withdrawn in accordance
with Section 4) as soon as is practicable after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions to the
Offer set forth in Section 13, including the expiration or termination of the
waiting period under the HSR Act. In addition, the Purchaser reserves the right,
in its sole discretion and subject to applicable law, to delay the acceptance
for payment or payment for Shares in order to comply with any applicable law. In
all cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of (a) certificates for such
Shares, or timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Depositary's account at The Depository
Trust Company, the Midwest Securities Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility"), pursuant to
the procedures set forth in Section 3, (b) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and (c) any other
documents required by the Letter of Transmittal. See Section 3 for a description
of the procedures for tendering Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment pursuant to the Offer, and thereby purchased, validly tendered
Shares, if, as and when the Purchaser gives oral notice (promptly confirmed in
writing) or written notice to the Depositary of the Purchaser's acceptance of
such Shares for payment pursuant to the Offer. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting such payments to tendering stockholders. Accordingly, payment may
be made to tendering stockholders at different times if delivery of the Shares
and other required documents occur at different times. UNDER NO CIRCUMSTANCES
WILL INTEREST ON THE PURCHASE PRICE OF SHARES BE PAID BY THE PURCHASER,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
4
<PAGE> 7
If, for any reason whatsoever, acceptance for payment of or payment for any
Shares tendered pursuant to the Offer is delayed, or the Purchaser extends the
Offer or is unable to accept for payment or pay for the Shares tendered pursuant
to the Offer for any reason, then, without prejudice to the Purchaser's rights
set forth herein, the Depositary may, nevertheless, on behalf of the Purchaser
and subject to the Exchange Act and the rules promulgated thereunder, retain
tendered Shares and such Shares may not be withdrawn except to the extent that
the tendering stockholder is entitled to withdrawal rights as described in
Section 4. The Purchaser confirms that its reservation of the right to delay
payment for Shares which it has accepted for payment is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that a tender
offeror pay the consideration offered or return the tendered shares promptly
after the termination or withdrawal of its tender offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for Shares not purchased or tendered will be returned, without
expense, to the tendering stockholder (or, in the case of Shares tendered by
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
If prior to the Expiration Date, the Purchaser varies the terms of the
Offer by increasing the consideration to be paid per Share, the Purchaser will
pay such increased consideration for all Shares purchased pursuant to the Offer,
whether or not such Shares have been tendered prior to such increase.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender. Except as set forth below, for a stockholder validly to
tender Shares pursuant to the Offer (a) a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, along with any required signature
guarantees and any other required documents, must be received by the Depositary
at any of its addresses set forth on the back cover of this Offer to Purchase on
or prior to the Expiration Date and either (i) certificates for tendered Shares
must be received by the Depositary or (ii) Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case on or prior to the
Expiration Date, or (b) the guaranteed delivery procedures described below must
be complied with.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days of the date of this Offer to Purchase. Any financial
institution that is a participant in a Book-Entry Transfer Facility's system may
make book-entry delivery of Shares by causing such Book-Entry Transfer Facility
to transfer such Shares into the Depositary's account at a Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, along with any required signature guarantees and any other
required documents, must in any case be transmitted to and received by the
Depositary at any of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Except as otherwise provided below, signatures on
all Letters of Transmittal must be guaranteed by a recognized member of a
Medallion Signature Guarantee Program (the foregoing being referred to as an
"Eligible Institution"). Signatures on the Letter of Transmittal need not be
guaranteed (i) if the Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith (which term includes any participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of the Shares) and such holder has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of an Eligible Institution. See Instructions 1 and 5 of the
Letters of Transmittal.
5
<PAGE> 8
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal or if payment is to be made to, or
certificates for unpurchased Shares are to be issued or returned to, a person
other than the registered owner, then the tendered certificates must be endorsed
or accompanied by duly executed stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear(s) on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as described above. See Instructions 1 and 5 of the
Letters of Transmittal. If certificates for Shares are forwarded separately to
the Depositary, a Letter of Transmittal (or a facsimile thereof) properly
completed and duly executed must accompany each such delivery.
Guaranteed Delivery. Stockholders whose certificates for Shares are not
immediately available or who cannot deliver their certificates evidencing such
Shares and other required documents to the Depositary or complete the procedure
for book-entry transfer on or prior to the Expiration Date, may nevertheless
tender their Shares by properly completing and duly executing an appropriate
Notice of Guaranteed Delivery if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) an appropriate Notice of Guaranteed Delivery, substantially in
the form provided by the Purchaser herewith, properly completed and duly
executed, must be received by the Depositary as provided below on or prior
to the Expiration Date; and
(iii) the certificates for all tendered Shares, or a Book-Entry
Confirmation with respect to all tendered Shares, together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantee, and all other documents required by
the Letter of Transmittal, must be received by the Depositary within three
Nasdaq National Market trading days after the date of execution of the
Notice of Guaranteed Delivery.
A Notice of Guaranteed Delivery may be delivered by and or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, the payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation with respect to such Shares, (ii) a Letter of Transmittal (or a
facsimile thereof) properly completed and duly executed and (iii) any other
documents required by such Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations are actually received by the Depositary.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF
TRANSMITTAL, AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THE LETTER OF TRANSMITTAL,
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Appointment. By executing a Letter of Transmittal as set forth above, a
tendering stockholder irrevocably appoints designees of the Purchaser as the
attorneys-in-fact and proxies of such stockholder, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of this Offer to Purchase). All such proxies shall be considered
coupled with an interest in the tendered Shares. Such proxies are irrevocable
and are granted in consideration of, and are effective upon, the Purchaser's
oral or written notice to the Depositary of its acceptance for payment of such
Shares. Upon acceptance of the Shares for payment, all prior proxies given by
the stockholder with respect to the Shares or other Shares will, without further
action, be revoked, and no subsequent proxies may be given (and if given, will
not be deemed effective) with respect thereto. The designees of the Purchaser
will, with respect to the Shares and other Shares for which the appointment is
effective, be empowered to exercise all voting and other
6
<PAGE> 9
rights of such stockholder as they, in their sole discretion, may deem proper at
any annual, special or adjourned meeting of the Company's stockholders, by
written consent or otherwise. The Purchaser reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able to
exercise full voting and other rights of a record and beneficial holder with
respect to such Shares (including but not limited to voting at any annual,
special or adjourned meeting of the Company's stockholders, by written consent
or otherwise).
Backup Federal Income Tax Withholding. To prevent backup federal income
tax withholding with respect to the purchase price of Shares purchased pursuant
to the Offer, a tendering stockholder must provide the Depositary with the
stockholder's correct taxpayer identification number ("TIN") and certify that
such stockholder is not subject to backup federal income tax withholding by
completing the Form W-9 included in the Letter of Transmittal. Foreign
stockholders must submit a statement on Form W-8, signed under penalties of
perjury, attesting to that person's exempt status.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, which determination will be
final and binding. The Purchaser reserves the absolute right to reject any or
all tenders of any Shares determined by it not to be in proper form or if the
acceptance of or payment for such Shares may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive or
amend any of the conditions of the Offer that it is legally permitted to waive
for any defect or irregularity in any tender with respect to any particular
Shares. The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
No tender will be deemed to have been validly made until all defects or
irregularities with respect thereto have been cured or waived. None of the
Parent, the Purchaser, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders of any Shares or will incur any liability for
failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares are irrevocable. Tenders of Shares pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may be withdrawn at
any time after November 24, 1995. If the Purchaser is delayed in its purchase of
or payment for Shares or is unable to purchase or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights,
tendered Shares may be retained by the Depositary on behalf of the Purchaser,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4 or
under the Exchange Act and the rules promulgated thereunder.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
any of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and (if
certificates for Shares have been tendered) the name of the registered holder(s)
of the Shares as set forth in the certificates, if different from that of the
person who tendered such Shares. If certificates for Shares have been delivered
or otherwise identified to the Depositary, then, prior to the physical release
of such certificates, the tendering stockholder must also furnish to the
Depositary the serial numbers of the particular certificates evidencing the
Shares to be withdrawn and a signed notice of withdrawal, along with
signature(s) guaranteed by an Eligible Institution, except in the case of Shares
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. A withdrawal of tenders of Shares may not be rescinded and any
Shares properly withdrawn will not be deemed to be validly
7
<PAGE> 10
tendered for purposes of the Offer. However, withdrawn Shares may be retendered
by repeating one of the procedures described in Section 3 at any time on or
prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the Parent,
the Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN TAX CONSEQUENCES. The following is a general summary of certain
tax consequences of a sale of Shares pursuant to the Offer or the Merger, based
on the tax laws in effect on the date hereof, which are subject to change
retroactively as well as prospectively. This summary does not purport to cover
all tax considerations that may be relevant to stockholders. In addition,
certain stockholders (e.g. tax-exempt organizations, dealers, persons who
acquired their Shares pursuant to the exercise of a stock option, foreign
persons, financial institutions and insurance companies) may be subject to
special rules not discussed below.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also be a taxable transaction
under applicable state, local and other tax laws. For federal income tax
purposes, a tendering stockholder will generally recognize capital gain or loss
equal to the difference between the amount of cash received by the stockholder
pursuant to the Offer (or to be received pursuant to the Merger) and the
aggregate tax basis in the Shares tendered by the stockholder and purchased
pursuant to the Offer (or canceled pursuant to the Merger). Gain or loss will be
calculated separately for each block of Shares. Such gain or loss will be
long-term capital gain or loss if the tendering stockholder's holding period for
the Shares exceeds one year. Under present law, long-term capital gains
recognized by a tendering individual stockholder will generally be taxed at a
maximum federal marginal tax rate of 28%, and long-term capital gains recognized
by a tendering corporate stockholder will be taxed at a maximum federal marginal
tax rate of 35%.
To prevent federal backup withholding equal to 31% of the gross payment for
the Shares purchased pursuant to the Offer or the Merger, each tendering
stockholder who does not otherwise establish an exemption (e.g. as a corporation
or certain foreign individuals) must provide its TIN and certify that such
number is correct (or that it is awaiting a TIN). Backup withholding is not an
additional tax; rather, the amount of the backup withholding can be credited
against the stockholder's federal income tax liability. In addition, a
stockholder that does not furnish its TIN may be subject to a penalty. Each
stockholder should complete and sign the Form W-9 included as part of the Letter
of Transmittal so as to provide the information and certification necessary to
avoid backup withholding.
Because the Company owns or leases property in New York State, the New York
State Real Estate Transfer Tax and the New York State Tax on Gains Derived from
Certain Real Property Transfers may apply to the sale of Shares by a stockholder
pursuant to the Offer or the Merger. In addition, certain other jurisdictions
may impose taxes on the gain or proceeds from the sale of Shares pursuant to the
Offer or the Merger that are attributable to real property of the Company in
such jurisdictions. Although stockholders whose Shares are acquired pursuant to
the Offer or the Merger would be primarily responsible for paying the above
taxes (the "Transfer Taxes"), if any are owing, the Purchaser will pay any such
Transfer Taxes. By tendering Shares, a stockholder is authorizing the Purchaser
to complete, execute and file any necessary tax forms on his behalf or otherwise
represent him before the relevant taxing authorities with respect to Transfer
Taxes in connection with the Offer and the Merger. The payment of the Transfer
Taxes may be treated as additional consideration received by a stockholder for
Shares sold pursuant to the Offer and the Merger, but, in such case, should also
be treated as an additional expenses incurred by the stockholder in connection
with such sale. Accordingly, the payment of Transfer Taxes should have no effect
on the amount of a stockholder's gain or loss, for federal income tax purposes,
in connection with the Offer and the Merger.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY. THE TAX
CONSEQUENCES TO ANY PARTICULAR STOCKHOLDER MAY DIFFER DEPENDING UPON THAT
STOCKHOLDER'S OWN CIRCUMSTANCES AND TAX POSITION. FURTHERMORE, THIS SUMMARY DOES
NOT DISCUSS ALL TAX ASPECTS THAT MAY BE RELEVANT. EACH STOCK-
8
<PAGE> 11
HOLDER SHOULD CONSULT WITH AND RELY ON ITS OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO IT, INCLUDING THE APPLICABILITY
AND EFFECT OF FEDERAL AND ANY STATE, LOCAL OR FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded on the
over-the-counter market under the National Association of Securities Dealers
Automated Quotation System ("NASDAQ")/National Market System (the "NASDAQ/NMS"),
under the symbol "HUFK". The following table sets forth, for the Company's
fiscal quarters indicated, the high and low sales prices for the Shares reported
on the NASDAQ/NMS:
<TABLE>
<CAPTION>
PRICE RANGE
------------
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year 1994:
First Quarter....................................................... 9 1/2 5 1/4
Second Quarter...................................................... 8 4 1/4
Third Quarter....................................................... 8 5 1/2
Fourth Quarter...................................................... 9 6
Fiscal Year 1995:
First Quarter....................................................... 8 3/4 6 1/4
Second Quarter...................................................... 8 1/2 6 1/2
Third Quarter....................................................... 8 1/2 5 3/4
Fourth Quarter...................................................... 8 5/8 6 1/2
Fiscal Year 1996:
First Quarter....................................................... 7 3/4 6 1/4
Second Quarter...................................................... 7 1/2 6 1/4
Third Quarter (through September 22, 1995).......................... 9 3/8 6 7/8
</TABLE>
According to the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1995 (the "Company 10-K"), since its initial public offering
on November 13, 1986, the Company has not paid any dividends. According to the
Company 10-K, the Company's ability to pay dividends is limited by restrictions
in its debt agreement. The Merger Agreement also prohibits the Company from
paying dividends.
On September 18, 1995, the last full day of trading prior to the date on
which the Company announced that it had executed the Merger Agreement, the
closing sales price per Share as quoted on the NASDAQ/NMS was $8. On September
22, 1995, the last full day of trading prior to the commencement of the Offer,
such reported sales price per Share was $8 7/8.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. POSSIBLE EFFECT OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ/NMS
QUOTATION; EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the
Offer will substantially reduce the number of Shares that might otherwise trade
publicly and the number of holders of Shares and could adversely affect the
liquidity and market value of the remaining Shares held by the public. It is
currently the intention of the Purchaser and the Parent to effect the Merger as
soon as practicable after consummation of the Offer, thereby eliminating public
trading in the Shares. However, if the purchase of the Shares pursuant to the
Offer is consummated, but the Merger is delayed or does not take place, the
following matters could have an effect on the Shares.
If at least 90% of the Shares are purchased pursuant to the Offer, it is
unlikely that the Common Stock will meet the requirements for continued
inclusion in the NASDAQ/NMS. It is the current intention of the Parent to seek
the delisting of the Common Stock from the NASDAQ/NMS if the requirements for
listing are no longer satisfied after the consummation of the Offer.
9
<PAGE> 12
If the listing of the Common Stock is discontinued and the Merger is not
effected promptly thereafter, it is possible that the Common Stock would trade
on another securities exchange or in the over-the-counter market and that price
quotations for the Common Stock would be reported by such exchange or other
sources. The extent of the public market for the Common Stock and availability
of such quotations would, however, likely be very limited.
The Shares of Common Stock are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Common Stock. If at least 90%
of the Shares are purchased pursuant to the Offer, it is likely that the Common
Stock would no longer constitute "margin securities" for the purposes of the
Federal Reserve Board's margin regulations and therefore could no longer be used
as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon the application of the
Company to the Commission if, after completion of the Offer, there are fewer
than 300 holders of record of the Shares. As of September 20, 1995 there were
approximately 125 holders of record of the Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and would render
inapplicable certain provisions of the Exchange Act, including requirements that
the Company furnish stockholders with proxy materials regarding stockholders'
meetings, requirements of Rule 13e-3 under the Exchange Act with respect to
"going private" transactions, requirements that the Company's officers,
directors and 10% stockholders file certain reports concerning ownership of the
Shares and requirements that any profit made by these officers, directors and
10% stockholders through purchases and sales of the Shares within any six-month
period be paid to the Company. If the Company were no longer required to make
such periodic filings because of the deregistration of the Shares under the
Exchange Act, affiliates and holders of restricted Shares might be deprived of
their ability to dispose of their Shares pursuant to Rule 144 or Rule 144A under
the Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were to be terminated, then the Shares would no longer be "margin
securities" or be eligible for listing on NASDAQ. Regardless of whether the
Merger is consummated, the Purchaser intends to seek to cause the Company to
terminate registration of the Shares under the Exchange Act as soon as
practicable after the consummation of the Offer.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware
corporation with its principal executive offices located at Route 4 and Main
Street, River Edge, New Jersey 07661.
According to the Company 10-K, the Company is a full service, specialty
retailer targeting middle and upper-middle income customers by offering
high-quality, name-brand furniture at competitive prices. The Company currently
operates twelve furniture stores and a clearance center. Each store carries a
complete range of furniture styles, including traditional, country, colonial,
oriental and contemporary, and offers customers special order services. Retail
selling space per store ranges from 33,000 to 107,000 square feet and aggregates
719,000 square feet. The Company also operates a 385,000 square foot,
multi-tiered, "high cube" warehouse distribution center which includes a
clearance center. The clearance center features discontinued merchandise,
partial sets and other merchandise previously held for sale at the Company's
retail locations, as well as factory closed-out merchandise.
Certain Financial Information. The selected financial information of the
Company set forth below has been taken from the audited financial statements
included in the Company 10-K, the unaudited financial statements included in the
Company's Quarterly Reports on Form 10-Q for the six-month periods ended July
31, 1995 and July 31, 1994 and other information provided by the Company. Such
summary is qualified in its entirety by reference to such reports and other
documents and all of the financial information and related notes contained or
incorporated by reference therein. Such reports and other documents may be
inspected and copies may be obtained from the offices of the Commission and the
NASD in the manner set forth below.
10
<PAGE> 13
HUFFMAN KOOS INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS ENDED
ENDED JULY 31, JANUARY 31,
-------------------- ---------------------------------
1995 1994 1995 1994 1993
-------- -------- --------- -------- --------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 53,831 $ 54,765 $ 119,090 $ 99,374 $ 91,458
------- ------- -------- ------- -------
Expenses:
Cost of sales, including buying and
occupancy costs.................... 36,553 36,978 79,744 66,135 61,346
Selling, general and administrative... 16,715 16,274 34,125 28,788 26,760
------- ------- -------- ------- -------
Total expenses.......................... 53,268 53,252 113,869 94,923 88,106
------- ------- -------- ------- -------
Operating income........................ 563 1,513 5,221 4,451 3,352
Interest expense........................ 100 163 229 330 415
------- ------- -------- ------- -------
Income before income tax expense and
extraordinary item.................... 463 1,350 4,992 4,121 2,937
Provision for income taxes.............. 185 -- 646 88 1,091
------- ------- -------- ------- -------
Income before extraordinary Item........ 278 1,350 4,346 4,033 1,846
Extraordinary item:
Tax benefit of net operating loss
carry forward...................... -- -- -- -- 1,048
------- ------- -------- ------- -------
Net income.............................. $ 278 $ 1,350 $ 4,346 $ 4,033 $ 2,894
======= ======= ======== ======= =======
Earnings per common share:
Net income before extraordinary
item............................... $ .07 $ .34 $ 1.11 $ 1.02 $ .46
Extraordinary item.................... -- -- -- -- .26
------- ------- -------- ------- -------
Net income............................ $ .07 $ .34 $ 1.11 $ 1.02 $ .72
======= ======= ======== ======= =======
</TABLE>
11
<PAGE> 14
HUFFMAN KOOS INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
-----------------------------------------------
JULY 31, JULY 31, JAN. 31, JAN. 31,
1995 1994 1995 1994
-------- -------- -------- --------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 524 $ 497 $ 1,630 $ 1,289
Accounts receivable, net.......................... 20,182 21,482 23,728 22,479
Merchandise inventories........................... 19,916 18,090 19,325 18,000
Other current assets.............................. 1,116 1,074 656 717
------- ------- ------- -------
Total current assets...................... 41,738 41,143 45,339 42,485
Land, buildings and equipment, at cost, less
accumulated depreciation and amortization......... 5,767 5,054 5,566 4,843
Leased property under capital leases, net of
accumulated amortization.......................... 161 197 179 215
Leasehold rights, net of accumulated amortization... 573 742 658 790
Deferred income taxes............................... 625 532 625 --
Other assets........................................ 568 -- 551 534
------- ------- ------- -------
$ 49,432 $ 47,668 $ 52,918 $ 48,867
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................. $ 500 $ 875 $ 875 $ 1,018
Accounts payable.................................. 7,285 6,936 10,193 7,362
Accrued liabilities............................... 4,911 4,915 5,335 5,713
Undelivered sales liability....................... 7,836 7,995 8,983 9,587
Income taxes payable.............................. 7 3 7 88
Deferred income taxes............................. 1,305 -- 1,120 --
------- ------- ------- -------
Total current liabilities................. 21,844 20,724 26,513 23,768
Notes payable to bank............................... 958 3,098 -- 2,169
Mortgage payable.................................... 1,500 1,625 1,562 1,687
Term loan........................................... -- 375 -- 750
Stockholders' equity
Common stock, $.01 par value, 10,000,000 shares
authorized, 3,938,400, 3,923,600, 3,925,400 and
3,921,000 shares outstanding (net of treasury
stock), respectively........................... 40 40 40 40
Additional paid-in capital........................ 17,190 17,180 17,181 17,177
Retained earnings................................. 8,395 5,121 8,117 3,771
Treasury stock at cost (90,000 shares)............ (495) (495) (495) (495)
------- ------- ------- -------
Total stockholders' equity................ 25,130 21,846 24,843 20,493
------- ------- ------- -------
$ 49,432 $ 47,668 $ 52,918 $ 48,867
======= ======= ======= =======
</TABLE>
12
<PAGE> 15
The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is obligated to file reports and other information
with the Commission relating to its business, financial condition and other
matters. Certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Shares, any material interests of such persons in
transactions with the Company, and other matters, is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected at the public reference room at the Commission's office at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should
be available for inspection and copying at the following regional offices of the
Commission: Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661; and at Suite 1300, Seven World Trade Center, New York, New York
10048. Copies may be obtained by mail, upon payment of the Commission's
customary charges, by writing to its principal office at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such
materials should be available for inspection at the NASD, 1735 K Street, N.W.,
Washington, DC 20006.
Except as described below, the information concerning the Company contained
in this Offer to Purchase has been taken from or is based upon publicly
available documents and records on file with the Commission and other public
sources. The Purchaser has no knowledge that would indicate that any statements
contained herein based on such documents and records are untrue, and the
Purchaser assumes no responsibility for the accuracy or completeness of the
information concerning the Company, furnished by the Company or contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or which may affect the significance or accuracy of any
such information but which are unknown to the Purchaser.
Certain Projections. The Company does not as a matter of course make
public any forecasts as to its future financial performance. The Company has
provided the Parent and the Purchaser with certain information, including
projections (the "Projections") and other non-public information, concerning the
Company.
THE PROJECTIONS WERE PREPARED SOLELY FOR INTERNAL PLANNING PURPOSES AND NOT
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF
THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND WERE NOT PREPARED WITH THE ASSISTANCE OF, OR REVIEWED
BY, INDEPENDENT ACCOUNTANTS. SUCH PROJECTIONS ARE INCLUDED BY THE PURCHASER AND
THE PARENT IN THIS OFFER TO PURCHASE SOLELY BECAUSE SUCH INFORMATION WAS
FURNISHED TO THE PURCHASER AND THE PARENT. NONE OF THE PURCHASER, THE PARENT,
THE COMPANY, THE DEALER MANAGER OR ANY PARTY TO WHOM THE PROJECTIONS WERE
PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY
OR COMPLETENESS OF THE PROJECTIONS. WHILE PRESENTED WITH NUMERICAL SPECIFICITY,
THE PROJECTIONS ARE BASED ON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESS
OF THE COMPANY, INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS
AND OTHER MATTERS WHICH ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND, THEREFORE,
SUCH PROJECTIONS ARE INHERENTLY IMPRECISE AND THERE CAN BE NO ASSURANCE THAT
THEY WILL BE REALIZED. ACTUAL FUTURE RESULTS MAY VARY MATERIALLY FROM THOSE
SHOWN IN THE PROJECTIONS. NONE OF THE PURCHASER, THE PARENT OR THE COMPANY IS
UNDER ANY OBLIGATION OR HAS ANY INTENTION TO UPDATE THE PROJECTIONS AT ANY
FUTURE TIME.
PROJECTED RESULTS FROM OPERATIONS:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JANUARY 31,
------------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total Net Revenue........... $127,712 $146,062 $154,186 $186,248 $215,307
Gross Profit................ 53,231 62,279 64,925 78,044 90,789
Operating Income............ 5,961 8,755 7,130 9,616 12,236
Net Income.................. 3,408 5,180 4,201 5,676 7,233
</TABLE>
13
<PAGE> 16
9. CERTAIN INFORMATION CONCERNING THE PARENT AND THE PURCHASER. The
Purchaser is a newly incorporated Delaware corporation and a wholly owned
subsidiary of the Parent. To date, the Purchaser has not conducted any business
other than in connection with the Offer. Until immediately prior to the time the
Purchaser purchases Shares pursuant to the Offer, it is not anticipated that
Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and the
transactions contemplated by the Offer.
The Parent is a newly incorporated Delaware corporation that owns the
majority of the outstanding capital stock of Arnold's Acquisition Corp.
("Arnold's"). Arnold's is a Delaware corporation, incorporated on April 25,
1994, for the purpose of acquiring a chain of three furniture stores operating
in the San Diego, California area under the name "Arnold's Home Furnishings". In
December 1994, Arnold's acquired a chain of nine furniture stores operating in
the San Francisco area under the name "Breuner's". Arnold's is a full service,
specialty retailer targeting middle and upper-middle income customers by
offering high-quality, name-brand furniture at competitive prices. To date,
Kidd, Kamm has invested a total of approximately $17 million in Arnold's.
As privately held companies, neither the Purchaser nor the Parent is
subject to the information filing requirements of the Exchange Act.
The name, citizenship, business address, principal occupation or employment
and five-year employment history of each of the directors and executive officers
of the Purchaser and the Parent, as well as the controlling stockholder of the
Purchaser, are set forth in Schedule I hereto. The principal executive offices
of the Parent and the Purchaser are at 7069 Consolidated Way, San Diego,
California 92121.
Except as described in this Offer to Purchase, none of the Purchaser or the
Parent (collectively, the "Corporate Entities") or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I or any associate or
majority-owned subsidiary of the Corporate Entities or any of the persons so
listed, beneficially owns any equity security of the Company, and neither of the
Corporate Entities nor, to the best knowledge of the Corporate Entities, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contracts, transactions or negotiations between any of the Corporate Entities,
any of their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand, that
are required to be disclosed pursuant to the rules and regulations of the
Commission and (2) neither of the Corporate Entities nor, to the best knowledge
of the Corporate Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
During the last five years, none of the Corporate Entities or, to the best
knowledge of the Corporate Entities, any of the persons listed in Schedule I (1)
has been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors) or (2) was 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 future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
10. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to acquire 100% of the outstanding Shares pursuant to
the Offer, the Stockholders Agreement and the Merger Agreement, to pay related
fees and expenses and to refinance certain existing indebtedness of the Company
will be approximately $43.6 million. The Purchaser expects to obtain such funds
from the proceeds of the sale of certain notes of the Purchaser to Nomura
Holding America Inc. ("Nomura") and from a $3.6 million capital contribution by
the Parent (the "Capital Contribution") which will be part of a $5 million
capital contribution to the Parent from Kidd, Kamm, which, together with the $17
million investment in Arnold's referenced above, will bring Kidd, Kamm's total
investment in the furniture businesses indirectly owned and operated by the
Parent to approximately $22 million.
14
<PAGE> 17
The Purchaser has received a commitment letter (together with the term
sheet attached thereto, the "Commitment Letter") from Nomura pursuant to which,
subject to certain terms and conditions described below, Nomura has committed to
purchase from the Purchaser up to $40 million aggregate principal amount of the
Purchaser's Senior Secured Guaranteed Term Notes due 1996 (the "Term Notes") and
up to $5 million aggregate principal amount of the Purchaser's Senior Secured
Guaranteed Revolving Notes due 1996 (the "Revolver" and together with the Term
Notes, the "Notes"). Upon completion of the Merger, the Surviving Corporation
will assume all of the Purchaser's obligations under the Notes. The Parent and
Arnold's will irrevocably and unconditionally guarantee all of the Surviving
Corporation's obligations under the Notes, including timely payment of
principal, interest and any other amounts due thereunder.
The proceeds of the Notes, together with the Capital Contribution, will be
used by the Purchaser to acquire 100% of the outstanding Shares pursuant to the
Offer, the Stockholders Agreement and the Merger Agreement, to pay related fees
and expenses, to refinance certain existing indebtedness of the Company
following the Merger and for other working capital and general corporate
purposes as set forth in the Commitment Letter.
The Notes will mature on the six-month anniversary of the closing of the
purchase and sale of the Notes. The maturity date of the Notes may be extended
up to three times, for a period of six months per extension, at the option of
the Surviving Corporation by payment of a fee of $125,000 for each extension.
The final maturity date of the Notes may not be later than the two-year
anniversary of the closing of the purchase and sale of the Notes. The Notes will
initially bear interest at a rate per annum equal to 11.25%; provided, however,
that for each six-month extension beyond the initial maturity date, the interest
rate will be increased by an incremental 50 basis points. Interest will be
payable monthly on the first business day of each month, commencing on the first
day of the calendar month following closing of the purchase of the Notes.
Nomura will be entitled to receive a commitment fee of $250,000, a
structuring fee of $650,000 and a funding fee of 1.50% of the principal amount
of Notes purchased, each payable upon the closing of the purchase of the Notes.
In addition, Nomura will be entitled to receive a fee of $500,000 in the event
the Merger Agreement is terminated pursuant to the provisions of the Merger
Agreement relating to a superior proposal, as defined below, and additional fees
upon the occurrence of certain other events, as set forth in the Commitment
Letter.
It is anticipated that the Note documentation will contain representations
and warranties, affirmative, negative and financial covenants and events of
default customary for financings of this type. In particular, it is anticipated
that the negative covenants contained in the Note documentation will include
limitations on (a) liens, (b) additional indebtedness, (c) creation of
additional subsidiaries, (d) investments, (e) transactions with affiliates, (f)
use of proceeds, (g) capital expenditures, (h) amendments to certain documents,
(i) consolidations, mergers and sales of assets, and (j) the repurchase,
retirement or redemption of, or the payment of dividends on, capital stock.
The commitment of Nomura to purchase the Notes is subject to the
negotiation and execution of mutually acceptable definitive documentation. In
the absence of the execution and delivery of such definitive documentation and
the closing of the initial purchase of Notes, Nomura's commitment expires on
November 22, 1995, unless extended by Nomura. Pursuant to the Commitment Letter,
the obligation of Nomura to purchase the Notes will be conditioned upon, among
other things, (a) the acquisition by the Purchaser of a sufficient number of
Shares in order to consummate, immediately upon consummation of the Offer, the
Merger pursuant to Section 253 of the GCL (previously referred to herein as the
Minimum Condition) and such laws of other jurisdictions as may be applicable and
that will not require a vote of stockholders, (b) the Capital Contribution
having been made on terms satisfactory to Nomura in all respects, (c) aggregate
consideration (including assumed indebtedness) and expenses payable by the
Purchaser in connection with the transactions contemplated by the Merger
Agreement (including the Merger) not exceeding $43.6 million, unless such
amounts in excess of $43.6 million are funded completely by additional equity
investments in the Purchaser by the Parent on terms satisfactory to Nomura in
all respects, (d) Nomura having obtained a perfected first priority security
interest in all of the issued stock of the Surviving Corporation and Arnold's
held by the Parent and the Shares purchased by the Purchaser in the Offer and in
substantially all of the Surviving
15
<PAGE> 18
Corporation's and the Parent's tangible and intangible assets including, without
limitation, mortgages or leasehold mortgages and landlord waivers with respect
to all of the Company's real property and receipt of acceptable title insurance
thereon; provided in the event that the Company after exhausting its best
efforts is not able to obtain prior to funding of the initial purchase of Notes
and consummation of the Merger such leasehold mortgages and landlord waivers
with respect to the Company's real property, Nomura in its reasonable discretion
(and taking into consideration the value of such real property and the inventory
located thereon and the practicalities of obtaining such leasehold mortgages and
landlord waivers) will consider either waiving the requirement that the Company
obtain such leasehold mortgages and landlord waivers or extending to a date
certain after such consummation the period for obtaining such leasehold
mortgages and landlord waivers, (e) the sources and uses of funds for the
transactions contemplated by the Merger Agreement being as set forth in the
Commitment Letter, including the purchase by the Purchaser of all of the Shares
at a price not to exceed $9.375 per share, (f) receipt of the fees described
above, (g) all other documentation and financing and terms, manner and timing
thereof being satisfactory in all respects to Nomura and its counsel, and (h)
the absence of any material adverse change in the financial condition, business,
prospects or results of operations of the Purchaser, the Company, Arnold's or
the Parent from January 31, 1995 to the date of the purchase of any Notes.
The foregoing summary of certain provisions of the Commitment Letter does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Commitment Letter, a copy of which is filed as an exhibit to
the Purchaser's Tender Offer Statement on Schedule 14D-1 relating to the Offer
and is incorporated herein by reference.
11. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDERS
AGREEMENT; CONFIDENTIALITY AGREEMENT; NON-SOLICITATION AGREEMENT.
Background of the Offer. The Company has informed the Parent that in
October 1994 the Board began to discuss possible strategic alternatives
available to the Company that might enhance stockholder value. Thereafter, the
Company engaged The Chicago Corporation (the "Financial Advisor") to explore all
possibilities, including the sale of the Company. On or about April 21, 1995,
James Derks, Vice President of the Financial Advisor, acting at the direction of
the Company, called Steven Dollinger of Kidd, Kamm & Company ("KKC") about a
possible acquisition of the Company. KKC is a financial advisor to Arnold's and
an affiliate of KKEP. Mr. Derks was familiar with KKEP's involvement in the
furniture industry through its investment in Arnold's and believed that KKEP
might be interested in a possible transaction with the Company. Mr. Dollinger
responded that KKEP would be interested in exploring the possibility of a
transaction with the Company. In furtherance thereof, on April 25, 1995, Mr.
Derks sent to Mr. Dollinger the Confidentiality Agreement described below which
Mr. Dollinger signed on behalf of KKC and returned. On the following day, April
26, 1995, Mr. Dollinger received a confidential descriptive memorandum from the
Financial Advisor (the "Memorandum"). The Memorandum included an overview of the
Company's business and financial condition and of the retail furniture industry.
The Memorandum also described the Company's business, growth opportunities and a
financial overview. Over the next several days KKEP reviewed the Memorandum.
Shortly thereafter, KKEP sent the Memorandum to Michael H. Solomon, chief
executive of Arnold's. Mr. Solomon had independently become aware that the
Company was a potential acquisition subject when he had seen a press release,
dated April 19, 1995, stating that the Company had retained the Financial
Advisor. At the end of April 1995, Mr. Solomon met with representatives of KKEP
at its offices to determine whether or not there was any interest in pursuing
the Company as an acquisition subject. Since Mr. Solomon and his management team
were involved in a turnaround of the recently acquired Breuner's stores, which
placed heavy demands upon their time, it was decided that, even though KKEP was
interested in possibly making an offer for the Company, it would be better to
stay focused on the existing operations of Breuner's. Accordingly, KKEP decided
not to pursue an acquisition of the Company at that time. On May 22, 1995, Mr.
Dollinger called Mr. Derks and so advised him. Mr. Dollinger indicated, however,
that KKEP might be interested in such a transaction in the future.
16
<PAGE> 19
During the week of July 10, 1995, after management of Arnold's had become
more comfortable with the progress of Breuner's, it decided to reconsider a
possible transaction with the Company. Accordingly, Mr. Solomon orally advised
Fred Berk, President and Chief Executive Officer of the Company, that he was
going to discuss with the Financial Advisor the possibility of acquiring the
Company. Mr. Solomon also expressed to the principals of KKEP his belief that
there were positive strategic synergies between the business of Arnold's and the
business of the Company and he recommended that the Arnold's management team
continue discussions about the acquisition of the Company. At about this time,
Mr. Dollinger called Mr. Derks and told him that Arnold's would like to
reconsider a possible acquisition of the Company. Mr. Derks replied that he
would discuss this with his colleagues and get back to him. Later that week, Mr.
Derks informed Mr. Dollinger that there was another party interested in
acquiring the Company and advised him that if Arnold's was interested in making
an offer for the Company, it would have to act expeditiously. The Financial
Advisor sent a letter to Mr. Dollinger, dated July 13, 1995, requesting a
written proposal from Arnold's no later than July 21, 1995. On July 21, 1995,
Arnold's submitted to the Financial Advisor a non-binding, preliminary
indication of interest to explore further the possible acquisition of the
Company at a price of $9.00 per share. The Financial Advisor then informed KKEP
that the Board would be meeting soon to consider all proposals and if Arnold's
would like to perform some preliminary due diligence, that could be arranged. On
July 25, 1995, Steven Dollinger, Terry Theodore, Ronald Schechter and Michael
Solomon met with Fred Berk, John Alecci, Joseph Albanese, John Walsh, Al
Melchiano and Jack Disanza, who are the President and Chief Executive Officer,
Vice President -- MIS, Vice President -- Chief Financial Officer, Controller and
Chief Accounting Officer, Vice President -- Marketing and Advertising and Vice
President -- Store Operations, respectively, of the Company as well as Mr. Derks
from the Financial Advisor. These parties discussed the future of the Company's
business, the synergies that the various parties saw between the business of the
Company and Arnold's and the various parties' visions for the future of the
retail furniture business. On July 26, 1995, KKEP and Arnold's had internal
discussions concerning their meetings with the Company. At about this time,
Arnold's retained Jefferies & Company, Inc. to help in structuring various
financing options for the potential purchase of the Company. On July 28, 1995,
the Company and Arnold's entered into a non-solicitation agreement which granted
Arnold's the exclusive right, subject to certain conditions, until September 5,
1995, to conduct the final phase of its due diligence investigation and to
negotiate a definitive agreement providing for the acquisition of the Company.
On July 28, 1995, Mr. Theodore, Mr. Dollinger and Mr. Solomon met with Nick Toor
and David St. Jean of Jefferies, at which time the parties discussed various
structures that could be utilized to finance the acquisition of the Company. On
August 1, 1995, Arnold's sent a letter to the Company increasing its offer to
$9.50 per share.
Commencing on August 1, 1995, representatives of the Company and KKEP met
on several occasions with representatives of Nomura to ascertain whether Nomura
would provide financing for this acquisition.
On August 23, 1995, counsel for the Purchaser delivered to counsel for the
Company the Purchaser's initial drafts of the Merger Agreement, pursuant to
which the Purchaser would offer to purchase all of the outstanding Shares at a
price of $9.50 per share less a pro rata amount of the fees and expenses of the
Financial Advisor, and the Stockholders Agreement, pursuant to which the
Majority Stockholders would agree to vote their Shares in favor of the Merger,
grant a proxy for that purpose to the Purchaser and grant an option to the
Purchaser to purchase their Shares at a price of $9.50 per share less a pro rata
amount of the fees and expenses of the Financial Advisor. On August 29, 1995, an
executed proposal letter was received from Nomura setting forth the terms upon
which Nomura would be willing to consider entering into a commitment letter to
provide financing for the proposed transaction.
On or about August 31, 1995, counsel for the Company and a representative
of the Financial Advisor met with representatives of KKEP and counsel for the
Purchaser to discuss the initial drafts of the Merger Agreement and the
Stockholders Agreement. At this meeting counsel for the Purchaser provided to
the Financial Advisor's representative and counsel for the Company a copy of the
proposal letter from Nomura. Also at this meeting, the KKEP representatives
expressed concern that a purchase price of $9.50 per share was no longer
warranted in light of the recent operating results of the Company, but indicated
that the Purchaser would be willing to acquire the Company for a purchase price
of $9.25 per share.
17
<PAGE> 20
On September 8, 1995, the Company, representatives of KKEP and their
respective advisors held discussions concerning a price range that would be
acceptable to all parties. On the same day, KKEP contacted a representative of
the Company and indicated that the Parent was prepared to acquire the Company at
a price of $9.375 per Share.
From September 4 through September 15, the parties finalized the terms of
the Merger Agreement and the Stockholders Agreement. On September 18, 1995 the
boards of directors of the Company, the Purchaser and the Parent approved the
Stockholders Agreement and the Merger Agreement and the consummation of the
transactions contemplated thereby, and the Merger Agreement and the Stockholders
Agreement were thereupon executed by the parties thereto. On September 19, 1995,
the Parent and the Company issued a joint press release announcing the execution
of the Merger Agreement.
The Merger Agreement. The following summary of certain provisions of the
Merger Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the provisions of the Merger
Agreement which is attached hereto as Exhibit A.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer as soon as practicable, but in no event later than the fifth business
day after the date of initial announcement of the Merger Agreement and the
Offer. The obligation of the Purchaser to commence the Offer and to accept for
payment, purchase and pay for Shares tendered pursuant to the Offer are subject
to the satisfaction of the conditions set forth in the Merger Agreement and
listed below in Section 13.
The Merger Agreement provides that, without the prior written consent of
the Company, no change in the Offer may be made that (x) decreases the price per
Share payable in the Offer, (y) changes the form of consideration payable in the
Offer or (z) imposes conditions to the Offer in addition to those set forth in
Section 13 of this Offer to Purchase.
The Merger Agreement also provides that (i) the Purchaser will have the
right in its sole discretion to extend the Offer for up to a maximum of five
additional business days if after 20 business days the Minimum Condition shall
not have been satisfied, (ii) the Purchaser may extend the Offer for such
additional number of trading days as may be reasonably necessary to allow Shares
tendered under a "Notice of Guaranteed Delivery" to be delivered and (iii) if
the Parent or the Purchaser determines, upon the advice of outside legal
counsel, that any supplement or amendment to the Tender Offer Statement on
Schedule 14D-1 (of which this Offer to Purchase and the related Letter of
Transmittal are parts, together with any supplements or amendments thereto) is
required to be circulated to the offerees, then the Parent or the Purchaser will
have the right to extend the Offer for such additional number of days as may be
necessary under applicable law as determined by the Parent and the Purchaser, on
the advice of counsel.
The Merger Agreement provides that the Board will not (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Parent or
the Purchaser, its approval or recommendation of the Offer, the Merger Agreement
or the Merger, provided, however, that to the extent required by the fiduciary
obligations of the Board, as determined in good faith by a majority of the
"disinterested" members thereof based on the advice of outside counsel, in the
case of a "superior proposal" (as defined below), the Board will have the right
to withdraw such approval or recommendation; or (y) approve or recommend, or
propose to approve or recommend, any takeover proposal. If any of the foregoing
actions are taken by the Board, the Parent or the Purchaser will have and the
Company will have (subject to certain limitations) the right to terminate the
Merger Agreement. For purposes of the Merger Agreement, "superior proposal"
means a bona fide proposal made by a third party to acquire the Company pursuant
to a tender or exchange offer, a merger, a sale of all or substantially all its
assets or otherwise on terms which a majority of the disinterested members of
the Board determines in its good faith judgment to be more favorable to the
Company's stockholders than the Offer and the Merger (based on the written
opinion, with only customary qualifications, of the Company's financial advisor
that the value of the consideration provided for in such proposal exceeds the
value of the consideration provided for in the Offer and the Merger) and for
which financing, to the extent required, is then committed or which, in the good
faith judgment of a majority of such disinterested members (based on the written
advice of the Company's financial advisor), is reasonably capable of being
obtained by such third
18
<PAGE> 21
party. For purposes of the Merger Agreement, "disinterested" means disinterested
with respect to the Parent and the Purchaser.
The Merger. The Merger Agreement provides that at such time as the
certificate of merger is filed with the Secretary of State of Delaware or at
such later time as is specified in the certificate of merger (the time the
Merger becomes effective being referred to herein as the "Effective Time"), the
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will continue as the surviving corporation after the Merger (the "Surviving
Corporation").
The Merger Agreement provides that the directors of the Purchaser,
immediately prior to the Effective Time, will be the initial directors of the
Surviving Corporation, and the officers of the Purchaser, immediately prior to
the Effective Time, will be the initial officers of the Surviving Corporation.
The Merger Agreement also provides that the certificate of incorporation of the
Company, as in effect immediately prior to the Effective Time, will be the
certificate of incorporation of the Surviving Corporation; provided, however,
that it will be amended to provide that the authorized capital stock of the
Surviving Corporation will consist solely of 1,000 shares of common stock, par
value $.01 per share. The Merger Agreement also provides that the by-laws of the
Company, as in effect immediately prior to the Effective Time, will be the
by-laws of the Surviving Corporation.
Designation of Directors. The Merger Agreement provides that, promptly
upon the purchase by the Purchaser of the Shares pursuant to the Offer or the
Majority Shares pursuant to the Stockholders Agreement (unless as a result of
such purchase the Purchaser owns at least 90% of the Shares then outstanding)
and from time to time thereafter, the Purchaser will be entitled to designate up
to such number of directors, rounded up to the next whole number, on the Board
as will give the Purchaser representation on the Board equal to the product of
the number of directors on the Board and the ratio that the combined voting
power of the Shares so purchased bears to the total combined voting power of all
outstanding Shares on a fully-diluted basis, and, upon request by the Purchaser,
the Company will use its best efforts either, at the Company's election, to
increase promptly the size of the Board or to secure promptly the resignation of
such number of directors as is necessary to enable the Purchaser's designees to
be elected to the Board and to cause the Purchaser's designees to be so elected.
At such times, the Company will use its best efforts to cause persons designated
by the Purchaser to constitute the same percentage of each committee of the
Board as of the Board. Notwithstanding the foregoing, the Company will use its
best efforts to ensure that two of the members of the Board as of the date of
the Merger Agreement will remain members of the Board until the Effective Time,
and the Parent and the Purchaser will not remove such members and, if necessary,
shall vote to keep such members on the Board.
Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of the Purchaser or the Company: (i) each
Share issued and outstanding immediately prior to the Effective Time (other than
any Shares held by a holder who, in connection with the Merger, has properly
demanded and perfected the right for appraisal of such Shares in accordance with
the GCL) will be converted automatically into the right to receive the amount in
cash payable to the holder thereof, without interest and less any required
withholding taxes, upon surrender of the certificate formerly representing such
Share; (ii) each Share held in the treasury of the Company or owned by the
Parent, the Purchaser or any subsidiary of the Parent or the Purchaser,
immediately prior to the Effective Time will be canceled and cease to exist
without any conversion thereof and no payment or distribution will be made with
respect thereto; and (iii) each share of common stock, par value $.01 per share,
of the Purchaser issued and outstanding immediately prior to the Effective Time
will, upon surrender of the certificate formerly representing such Shares, be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, par value $.01 per share, of the Surviving Corporation.
Dissenting Shares. Under the GCL, no appraisal rights are available to
stockholders who tender their Shares. Stockholders who do not tender their
Shares pursuant to the Offer will have the right to dissent and to seek an
appraisal pursuant to Section 262 of the GCL. If a holder of Shares who has not
tendered those Shares pursuant to the Offer follows the procedures set forth in
Section 262 of the GCL, he will be entitled to
19
<PAGE> 22
the fair value of his Shares as of the date prior to the date on which the vote
on the Merger is taken, as appraised and determined by a court of competent
jurisdiction, and to receive payment in cash of such fair value of his Shares as
so determined. Any such judicial determination of "fair value" could be based
upon any method of valuation generally accepted in the investment community. The
"fair value" of the Shares so determined could be more or less than the amount
to be paid pursuant to the Offer and the Merger. Each stockholder who has
elected not to tender his Shares pursuant to the Offer will, in connection with
the Merger, receive notification of his appraisal rights and the procedures that
he must follow, together with a copy of Section 262 of the GCL. In addition to
appraisal rights, stockholders may have other rights and remedies under federal
securities laws, Delaware law or the laws of the states in which they reside
relating to the assertion of any possible claim regarding the Offer and the
Merger. In this connection, stockholders are advised to discuss the Offer and
the Merger with their financial advisors and attorneys for a more complete
discussion of their rights.
Employee Stock Options. The Company will (i) take all necessary action to
provide that immediately prior to the Effective Time each outstanding stock
option (each, an "Option") granted under the Company's 1986 Stock Option Plan,
as amended (the "Option Plan"), will be canceled and each holder of a canceled
Option will be entitled to receive from the Company, as of such date, in
cancellation and settlement of such Option, whether or not such Option was
exercisable at the time of such cancellation, only an amount equal to the
excess, if any, of $9.375, or any greater amount per Share paid pursuant to the
Offer over the per Share exercise price of such Option, multiplied by the number
of Shares covered by such Option (the "Option Settlement Amount"), reduced by
any applicable withholding taxes or other amounts required by law to be paid or
withheld by the Company, and (ii) pay to each person who formerly held such
Option the Option Settlement Amount, reduced by such taxes or other amounts;
provided, however, that with respect to any person subject to Section 16(a) of
the Exchange Act, any such amount to be paid will be paid as soon as practicable
after the first date payment can be made without liability for such person under
Section 16(b) of the Exchange Act. Such Options and any rights granted in
connection with any such Options will be canceled upon the payment of the Option
Settlement Amount. At the Effective Time, any such Options with respect to which
the holder thereof has not consented, if necessary, to cancellation in exchange
for the receipt of the Option Settlement Amount will be converted into, and
thereafter represent only the right to receive, the Option Settlement Amount.
Company Stockholders' Meeting; Proxy Statement. In the event that the
Minimum Condition is not satisfied the Parent and the Purchaser, on the one
hand, and the Company, on the other, may, subject to the satisfaction of certain
conditions set forth in the Merger Agreement, complete the Merger through a
long-form merger. In that event, the Company, after the consummation, expiration
or termination of the Offer, acting through its Board, shall in accordance with
applicable law, duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders Meeting") for the purposes of
considering and taking action upon the Merger Agreement and the transactions
contemplated thereby.
The Merger Agreement provides that, in the event the Minimum Condition is
not satisfied, the Company, subject to its fiduciary duties as determined in
good faith by a majority of its Board, based as to legal matters on the opinion
of legal counsel, shall include in any proxy or similar materials distributed to
the Company's stockholders in connection with the Merger, including any
amendments or supplements thereto (the "Proxy Statement"), the recommendation of
the Board that the stockholders of the Company vote in favor of the approval and
adoption of the Merger Agreement and the written opinion of the Company's
financial advisor that based upon and subject to matters set forth in the
opinion and based upon such other matters as the financial advisor considers
relevant, the consideration to be received by the holders of the Shares pursuant
to the Merger is fair to such holders from a financial point of view as of the
date of the opinion. The Company, pursuant to the Merger Agreement, shall use
its reasonable efforts to have the Proxy Statement reviewed and cleared by the
Commission and shall cause the Proxy Statement and any related materials to be
mailed to its stockholders at the earliest practicable time following the
expiration or termination of the Offer.
20
<PAGE> 23
The Merger Agreement also provides that at the Stockholders Meeting the
Parent and the Purchaser shall vote all shares owned by them in favor of
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. The representations of the
Company relate to: (i) organization and good standing; (ii) authority relative
to the Merger Agreement; consents and approvals; (iii) capitalization; (iv)
effect of the Merger Agreement; (v) contracts and commitments; (vi) SEC reports
and financial statements; (vii) absence of liabilities; (viii) absence of
certain changes or events; (ix) tax and other returns; (x) employment
arrangements; (xi) property; (xii) patents and trademarks; (xiii) absence of
litigation; (xiv) proxy statement; (xv) brokers' and finders' fees; (xvi)
insurance; (xvii) pension, retirement and profit sharing plans; (xviii)
environmental compliance; and (xix) inventories. The representations of the
Parent and the Purchaser relate to: (i) organization and good standing; (ii)
authority relative to the Merger Agreement; (iii) proxy statement; (iv)
Financing Condition; (v) absence of litigation; and (vi) brokers' and finders'
fees.
Conduct of Business of the Company. The Company has agreed that during the
period from the date of the Merger Agreement to the Effective Time, it will
operate in all respects in the ordinary course and in a manner consistent with
past practices. The Company has also agreed that it will not, without the prior
written consent of the Parent or the Purchaser, take any of the following
actions:
(i) amend or propose to amend its certificate of incorporation or
by-laws or create any subsidiary;
(ii) authorize for issuance, issue (other than issuances of Shares
pursuant to the exercise of Options), sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options, warrants or
stock appreciation rights);
(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, warrants, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire any of its securities;
(iv) (A) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company,
except for the renewal of the Company's revolving line of credit; (B)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except in the ordinary course of business consistent with past
practice and in amounts not material to the Company; (C) make any loans,
advances or capital contributions to or investments in any other person
(other than customary loans or advances to employees in the ordinary course
of business consistent with past practice and in amounts not material to
the maker of such loan or advance); (D) pledge or otherwise encumber shares
of capital stock of the Company or (E) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material lien thereupon;
(v) except as may be contemplated by the Merger Agreement, enter into,
adopt or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or any
other employee benefit agreement, trust, plan, fund or other arrangement
for the benefit or welfare of any director, officer or employee in any
manner, or (except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, and
as required under existing agreements or in the ordinary course of business
generally consistent with past practice) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement in effect as of the
date of the Merger Agreement (including, without limitation, the granting
of stock appreciation rights or
21
<PAGE> 24
performance units) or pay or agree to pay any management fee or other
payment to any of the Majority Sellers or any of their affiliates;
(vi) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice, or enter into
any commitment or transaction outside the ordinary course of business
consistent with past practice or waive any rights that may exist under any
confidentiality agreement to which the Company may be a party;
(vii) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
methods, principles or practices used by it;
(viii) revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts
receivable, other than in the ordinary course of business;
(ix) (A) acquire (by merger, consolidation or acquisition of stock or
assets or otherwise), any corporation, partnership or other business
organization or division thereof or any equity interest therein; (B) enter
into any contract or agreement other than in the ordinary course of
business consistent with past practice; (C) authorize any new capital
expenditure or expenditures which individually is in excess of $100,000 or,
in the aggregate, are in excess of $500,000; provided, that none of the
foregoing shall limit any capital expenditure already included in the
Company's 1995 capital expenditure budget previously provided to the Parent
or the Purchaser or (D) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited by the Merger Agreement;
(x) make any tax election or settle or compromise any income tax
liability of the Company;
(xi) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the financial statements (or the notes thereto) of the Company or
incurred in the ordinary course of business consistent with past practice;
(xii) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated by the Merger Agreement; or
(xiii) take, or agree in writing or otherwise to take, any of the
foregoing actions.
In addition, the Company has agreed to use all commercially reasonable
efforts to continue its current business relationships (including all rights of
exclusivity with respect to any products) with all significant vendors and
suppliers.
Pursuant to the Merger Agreement the Company has agreed that it will cause
its officers, directors and employees, and will use its best efforts to cause
its representatives, advisors, attorneys, accountants and agents (i) to
immediately cease any existing discussions or negotiations with any corporation,
partnership, person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) or other entity or group other than the
Parent and the Purchaser, any affiliate or associate of the Parent and the
Purchaser or any designees of the Parent and the Purchaser (each, a "Third
Party") conducted with respect to a tender offer or exchange offer for any
Shares, any acquisition of more than 25% of the assets of, or more than 25% of
the equity interest in, the Company or any merger, consolidation or other
business combination with the Company (each, a "Business Combination") and (ii)
not to, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any Third Party
concerning any Business Combination; provided, that the Company will not be
prohibited from (x) furnishing information and access, in each case only in
response to unsolicited requests therefor, to any Third Party pursuant to
confidentiality agreements or (y) participating in discussions and negotiating
with such entity or group concerning any Business Combination involving the
Company or any division of the Company, in the case of either (x) or (y), where
such Third Party has submitted an unsolicited bona fide written proposal to the
Board relating to any such Business Combination and the Board by a majority vote
determines in its good faith judgment, after consulting legal counsel, that
failing to take such action would be inconsistent with the
22
<PAGE> 25
Board's fiduciary duty to the Company's stockholders under applicable law. The
Board has also agreed to provide a copy of any such written proposal to the
Parent or the Purchaser immediately after receipt thereof and thereafter keep
the Parent and the Purchaser promptly advised of any amended proposal with
respect thereto. The Company, however, will not be prohibited from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or from making any disclosure to the Company's stockholders if,
in the good faith judgment of the Board, based on the recommendation of outside
legal counsel, failure to do so would be inconsistent with applicable laws;
provided that the Company does not, except as permitted, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger or
approve or recommend, or propose to approve or recommend, a takeover proposal.
The Company also agreed that it will cause all necessary documents to be
prepared and submitted to (i) the New York State Department of Taxation and
Finance required under the New York Real Estate Transfer Tax and New York Tax on
Gains Derived from Certain Real Property Transfers and (ii) any other relevant
tax authorities to which transfer taxes are required to be paid.
Conditions to the Merger. The respective obligations of each party to the
Merger Agreement to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(i) the Merger Agreement will have been adopted by the requisite
affirmative vote of the stockholders of the Company, or the Purchaser will
have acquired sufficient Shares in the Offer to effect a short form merger;
(ii) no statute, rule, regulation, executive order, decree, court
order, ruling or preliminary or permanent injunction will have been
enacted, entered, promulgated or enforced by any local, state or federal
court or governmental authority in the United States that prohibits,
restrains, enjoins or materially restricts the consummation of the Merger;
(iii) any waiting period applicable to the consummation of the Merger
under the HSR Act will have terminated or expired, and
(iv) the Financing Condition will have been satisfied; provided,
however, that this condition will be deemed to have been waived if the
Parent or the Purchaser purchases any Shares pursuant to the Offer.
The obligations of the Parent and the Purchaser to effect the Merger are
also subject to the satisfaction of the following additional conditions, all of
which will be deemed to have been waived if the Parent or the Purchaser
purchases any Shares pursuant to the Offer:
(i) there will not have occurred or been threatened any event or
series of events or any condition or circumstance arisen that, individually
or in the aggregate, has or is reasonably likely to have a material adverse
effect on the Company;
(ii) the representations and warranties of the Company contained in
the Merger Agreement will be true and correct in all material respects on
and as of the date of consummation of the Merger as though made on and as
of that date, except (i) for changes occurring after the date of the Merger
Agreement that are specifically permitted by the Merger Agreement and (ii)
those representations and warranties that address matters only as of a
particular date will remain true and correct as of that date; and the
Parent and the Purchaser will have been furnished with a certificate of the
Company to that effect executed by its Chairman in form and substance
satisfactory to the Parent and the Company; and
(iii) the Company will have performed and complied in all material
respects with all obligations, covenants, agreements and conditions
required by the Merger Agreement to be performed or complied with by it
prior to or on the date of consummation of the Merger, and the Parent and
the Purchaser will have been furnished with a certificate of the Company to
that effect executed by its Chairman in form and substance satisfactory to
the Parent and the Purchaser.
23
<PAGE> 26
The obligations of the Company to effect the Merger are also subject to the
satisfaction of the following additional conditions, all of which will be deemed
to have been satisfied if the Parent or the Purchaser has purchased any Shares
pursuant to the Offer:
(i) the representations and warranties of the Parent and the Purchaser
contained in the Merger Agreement will be true and correct in all material
respects on and as of the date of consummation of the Merger as though made
on and as of that date, except (i) for changes occurring after the date of
the Merger Agreement that are specifically permitted by the Merger
Agreement and (ii) those representations and warranties that address
matters only as of a particular date will remain true and correct as of
that date; and the Company will have been furnished with a certificate of
each of the Parent and the Purchaser to that effect executed by their
respective Chairmen in form and substance satisfactory to the Company; and
(ii) the Parent and the Purchaser will have performed and complied in
all material respects with all obligations, covenants, agreements and
conditions required by the Merger Agreement to be performed or complied
with by them prior to or on the date of consummation of the Merger, and the
Company will have been furnished with a certificate of the Parent and the
Purchaser to that effect executed by their respective Chairmen in form and
substance satisfactory to the Company.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, and the Offer may be
abandoned at any time prior to acceptance for payment of the tendered Shares:
(i) by mutual written consent of the Parent, the Purchaser and the
Company;
(ii) by the Parent, the Purchaser or the Company if any statute, rule,
regulation, executive order, decree, court order, ruling or preliminary or
permanent injunction will have been enacted, entered, promulgated or
enforced by any local, state or federal court or governmental authority in
the United States that prohibits, restrains, enjoins or materially
restricts the consummation of the Merger or that would make the acquisition
or holding by the Parent or the Purchaser of the Shares or shares of common
stock of the Surviving Corporation illegal; provided, that prior to
invoking this provision in respect of any such injunction, the party
seeking to invoke this provision will use all commercially reasonable
efforts to have any such injunction vacated;
(iii) by the Parent, the Purchaser or the Company, if the Board shall
have withdrawn or modified, or proposed to withdraw or modify, in a manner
adverse to the Parent or the Purchaser, its approval or recommendation of
the Offer, the Merger Agreement or the Merger; provided, however, that the
Company may not exercise this right until after one business day following
the expiration or termination of the Offer (as it may have been extended)
and may then exercise this right if and only if the Purchaser has not then
purchased enough Shares to satisfy the Minimum Condition;
(iv) by the Parent and the Purchaser, on the one hand, or the Company,
on the other hand, if the Minimum Condition is satisfied and, due to an
occurrence or circumstance that would result in failure to satisfy any of
the other conditions to the Offer, the Purchaser will have failed to pay
for Shares pursuant to the Offer after one business day following the
expiration or termination of the Offer (or such later day to which the
Offer is extended), except that this right may not be exercised by a party
in the event that such failure has been caused by or results from the
failure of that party to perform in any material respect any of its
respective covenants or agreements contained in the Merger Agreement;
(v) by the Parent and the Purchaser, on the one hand, or the Company,
on the other hand, if the Commitment Letter is no longer in full force and
effect and, within ten business days thereafter, the Parent fails to
deliver to the Company reasonable evidence that it has obtained a financing
commitment (on terms not materially more adverse than the terms and
conditions of the Commitment Letter) to enable it to consummate the long
form merger; or
(vi) by either the Parent or the Company if the Merger has not been
consummated on or before March 1, 1996, except that this provision may not
be exercised by a party in the event such failure has
24
<PAGE> 27
been caused by or results from the failure of that party to perform in any
material respect any of its respective covenants or agreements contained in
the Merger Agreement.
Officers' and Directors' Insurance; Indemnification. The Merger Agreement
provides that for six years from the Effective Time, the Parent and the
Surviving Corporation will use all reasonable efforts to cause to be maintained
in effect the Company's current directors' and officers' insurance and
indemnification policy or an equivalent policy or policies (so long as no lapse
in coverage occurs as a result of such substitution) relating to actions,
alleged actions, omissions and alleged omissions occurring on or prior to the
Effective Time (the "D&O Insurance"), on terms no less favorable than those of
such current policy in terms of coverage and amounts so long as the annual
premium therefor is not in excess of 150% of the last annual premium paid prior
to the date of the Merger Agreement (the "Maximum Premium"); provided, however,
that if the existing D&O Insurance expires, is terminated or canceled during
such six-year period, the Company or the Surviving Corporation, as the case may
be, will use reasonable efforts to obtain as much D&O Insurance as can be
obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium.
The Merger Agreement also provides that after the Effective Time, the
Parent and the Surviving Corporation will indemnify and hold harmless the
present and former directors and officers of the Company (and those persons
becoming directors or officers of the Company prior to the Effective Time)
(collectively, together with their respective heirs and representatives, the
"Indemnified Parties") to the maximum extent permitted under Delaware law as
from time to time in effect and (subject to any limitations in effect from time
to time under Delaware law) under the Company's certificate of incorporation and
by-laws as in effect on the date of the Merger Agreement from all claims by any
person or persons, with respect to acts, omissions or other matters whether
occurring prior to, on or at the Effective Time, relating to (A) the fact that
he is or was a director, officer, employee or agent of the Company or any of its
subsidiaries or (B) acts, omissions and other matters arising from or relating
to the Merger Agreement, the Stockholders Agreement or the transactions
contemplated thereby, and (subject to any limitations in effect from time to
time under Delaware law) will advance expenses to such directors and officers
promptly upon receipt of written request therefor and delivery of the
undertaking required by section 145(e) of the GCL (or any successor provision),
and such indemnification will (to the maximum extent permitted by applicable
law) be mandatory rather than permissive; provided, that such indemnification
obligations will continue in full force and effect for the later of a period of
seven years from the Effective Time or the expiration of the applicable statute
of limitations.
The Merger Agreement provides that if the Surviving Corporation or any of
its successors or assigns (i) reorganizes or consolidates with or merges into
any other person and is not the resulting, continuing or surviving corporation
or entity of such consolidation or merger or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision will be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in the foregoing two paragraphs. The Merger Agreement also provides that
the obligations of the Parent and Surviving Corporation set forth in the
foregoing two paragraphs shall not be terminated or modified in such a manner as
to adversely affect any Indemnified Party without the consent of each
Indemnified Party.
Fees and Expenses. The Merger Agreement provides for payment of the
following fees and expenses:
(i) The Company will pay to the Parent a fee of $1,500,000 (the
"Termination Fee"), payable in immediately available funds, plus an amount
equal to the Expenses (as defined below), but not more than $1,850,000 of
such Expenses, within one business day after termination of the Merger
Agreement by the Parent, the Purchaser or the Company, pursuant to the
termination provisions of the Merger Agreement, if the Board has withdrawn
or modified or proposed to withdraw or modify, in a manner adverse to the
Parent or the Purchaser, its approval or recommendation of the Offer, the
Merger Agreement or the Merger pursuant to the provisions of the Merger
Agreement relating to a superior proposal.
(ii) "Expenses" will mean all reasonable out-of-pocket fees and
expenses incurred or paid by or on behalf of the Parent, the Purchaser or
any of their affiliates in connection with the Offer, the Merger or the
consummation of any of the transactions contemplated by the Merger
Agreement, including all fees
25
<PAGE> 28
and expenses of counsel, investment banking firms, lending institutions,
accountants, experts and consultants; the $500,000 cash fee payable
pursuant to the Commitment Letter will be deemed to be a reasonable
Expense.
(iii) Except as otherwise provided in the Merger Agreement, each party
will bear its own costs and expenses.
(iv) The Company will not pay any legal, accounting and other costs,
fees and expenses incurred by or on behalf of any of the stockholders of
the Company in connection with the transactions contemplated by the Merger
Agreement.
Stockholders Agreement. The following summary of certain provisions of the
Stockholders Agreement, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the provisions of the Stockholders
Agreement which is attached hereto as Exhibit B.
Pursuant to the Stockholders Agreement, the Majority Stockholders have,
among other things, (i) agreed to tender pursuant to the Offer all Shares owned
by them and any Shares acquired after the date of the Stockholders Agreement
within ten business days after the commencement of the Offer, (ii) granted to
the Purchaser options to purchase all of the Shares owned by the Majority
Stockholders and any Shares acquired by them after the date of the Stockholders
Agreement, upon the terms and subject to the conditions of the Stockholders
Agreement, at the cash purchase price of $9.375 per Share, (iii) agreed that at
any meeting of the Company's stockholders or in connection with any written
consent of the Company's stockholders, to vote (or cause to be voted) the Shares
currently owned by them and any additional Shares that either of them may
acquire (A) in favor of the acquisition of the Company by the Purchaser or any
other merger or other transaction pursuant to which the Purchaser or an
affiliate or designee thereof would acquire the Company (the "Acquisition"), the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Merger
Agreement, (B) against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or the
Stockholders Agreement and (C) against any action or agreement (other than the
Merger Agreement) that is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, discourage or materially and adversely affect
the Acquisition or any of the other transactions to be consummated pursuant to
the Merger Agreement and (iv) granted to and appointed the Purchaser and the
Chairman of the Board, the President, the Secretary and the Chief Financial
Officer of the Purchaser and any individual who succeeds to any such office of
the Purchaser, and any other designee of the Purchaser as its irrevocable proxy
and attorney-in-fact (with full power of substitution) to vote the Shares owned
by such Majority Stockholders and any Shares acquired after the date of the
Stockholders Agreement at any regular or a special meeting of stockholders with
respect to the Shares or to take actions by written consent with respect to such
Shares, in respect of the matters set forth in clause (iii) above.
The Stockholders Agreement provides that each of the Majority Stockholders
in their capacities as stockholders shall not, and shall cause every investment
banker, financial advisor, attorney, accountant and other representative
retained by it not to solicit, encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any proposal or agree to or endorse any proposal in connection with an
acquisition of all or substantially all of the outstanding capital stock or all
or substantially all of the assets of the Company. If a Majority Stockholder
receives or becomes aware of any such proposal, then such Majority Stockholder
shall promptly inform the Purchaser of the terms and conditions of such proposal
and the identity of the person making it. The Stockholders Agreement further
provides that each Majority Stockholder shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
to which it, or any of its stockholders, directors, officers, attorneys or other
agents or representatives on its behalf, is a party in its capacity as a
stockholder of the Company, conducted theretofore with respect to any of the
foregoing.
The Stockholders Agreement also provides that neither of the Majority
Stockholders shall, except as contemplated by the Merger Agreement, (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of,
26
<PAGE> 29
enforce or permit the execution of the provisions of any redemption agreement
with the Company or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
pledge, encumbrance, assignment or other disposition of, any of the Shares, or
any interest therein, (ii) grant any proxies or powers of attorney, deposit any
Shares into a voting trust or enter into a voting agreement with respect to any
Shares or (iii) take any action that would make any representation or warranty
of such Majority Stockholder contained therein untrue or incorrect to any
material extent or have the effect of preventing or disabling such Majority
Stockholder from performing its obligations under that Agreement.
Confidentiality Agreement. On April 25, 1995, KKC entered into the
Confidentiality Agreement with The Chicago Corporation ("Chicago Corporation").
Under the Confidentiality Agreement, KKC agreed to use information furnished by
the Company that was not generally available to the public (collectively, the
"Evaluation Material") exclusively for the purpose of evaluating a possible
business combination with the Company. In addition, KKC agreed not to disclose
any of the Evaluation Material other than under certain circumstances. Under the
Confidentiality Agreement, KKC agreed that without the prior written consent of
the Company for a period of two years from the date of the Confidentiality
Agreement it would not (i) acquire or make any proposal to acquire any assets,
businesses or securities of the Company, (ii) seek or propose to influence or
control the management or policies of the Company or (iii) enter into any
discussions, negotiations, arrangements or understanding with any third party
with respect to any of the foregoing.
Non-Solicitation Agreement. On July 28, 1995, Arnold's entered into a
non-solicitation agreement with the Company (the "Non-Solicitation Agreement").
Under the Non-Solicitation Agreement, the Company agreed that, subject to the
fiduciary duties of the Board under applicable law, during the period from July
28, 1995 through September 5, 1995 (the "Exclusivity Period"), it would not
directly or indirectly through any officer, director, employee, agent, advisor,
or otherwise (i) solicit, initiate or encourage submission of proposals or
offers from any corporation, partnership, person or group relating to any
acquisition, purchase or option to purchase any stock of the Company, or any of
the assets of, or any equity interest in, the Company or any merger,
consolidation or other form of business combination or joint venture with the
Company or (ii) furnish to any person or entity any information with respect to
any of the foregoing without Arnold's prior written consent.
The Company also agreed, pursuant to the Non-Solicitation Agreement, that
if it or any of its employees, directors or representatives prior to the
expiration of the Exclusivity Period, either (a) received an unsolicited
proposal for the purchase of assets, equity interest or any proposed merger or
other form of business combination (an "Acquisition Proposal") (other than from
Arnold's, one of Arnold's affiliates or Arnold's authorized representatives)
which it did not reject or (b) solicited or initiated any discussion for an
Acquisition Proposal (regardless of whether it resulted in any acquisition),
then in either case the Company would pay to Arnold's an amount equal to all
documented out-of-pocket expenses (including, without limitation, fees and
expenses of counsel, accountants and financial advisors and fees and expenses
paid to financing sources) not in excess of $350,000 in the aggregate incurred
by Arnold's in connection with its "due diligence" investigation and attempted
financing of an offer for the Company. The parties extended the Exclusivity
Period to September 11, 1995 on August 31, 1995, further extended the
Exclusivity Period to September 14, 1995 on September 11, 1995 and extended the
Exclusivity Period finally to September 19, 1995 on September 14, 1995.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
Purpose of the Offer. The purpose of the Offer is for the Parent to
acquire control of, and the entire equity interest in, the Company. The purpose
of the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer. The acquisition of the publicly-held Shares has been
structured as a cash tender offer followed by a cash merger in order to provide
a prompt and orderly transfer of ownership of the Company from the public
stockholders of the Company to the Parent and to enable the stockholders of the
Company to promptly receive the cash payments they are entitled to receive for
all of their Shares pursuant to the Offer and the Merger.
27
<PAGE> 30
The Merger. As promptly as practicable following consummation of the Offer
and after satisfaction or waiver of all conditions to the Merger set forth in
the Merger Agreement, including the Minimum Condition and the Financing
Condition, the Purchaser intends to propose and seek to effect the Merger (in
accordance with the "short form" merger provisions of the GCL), pursuant to
which each outstanding Share (other than Shares held by the Parent, any direct
or indirect subsidiary of the Parent, the Company or any subsidiary of the
Company and Shares, if any, held by stockholders who perfect their rights as
objecting stockholders under the GCL) would be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant to the
Offer. If the Purchaser does not purchase Shares pursuant to the Offer, due
solely to the failure of the Minimum Condition to have been satisfied, then the
parties to the Merger Agreement intend to consummate the Merger in accordance
with the "long form" merger provisions of the GCL. The Merger, including the
timing thereof and the consideration to be paid therein, is subject to the
provisions of the GCL discussed below.
Plans for the Company. The Parent has no present plans to replace the
existing management of the Company or the operating personnel of the Company
following consummation of the Merger. Upon completion of the Offer and the
Merger, the Parent intends that the Company's current management will continue
to manage the Company as an ongoing business in the same general manner as it is
now being conducted.
The Parent has, in a memorandum of understanding to Fred Berk (the "Berk
Memorandum") and letters of understanding (the "Letters of Understanding") to
Joseph Albanese, John DiSanza, Timothy Costello, John Alecci and Al Melchiano
(the "Executives"), subject to the consummation of the Merger, offered to
continue the employment of Messrs. Berk, Albanese, DiSanza, Costello, Alecci and
Melchiano. The Berk Memorandum provides that Mr. Berk will be elected to the
board of directors of the Parent and appointed President and Chief Operating
Officer of the Parent and will continue to serve as President and Chief
Executive Officer of the Surviving Corporation. The Berk Memorandum also
provides that Mr. Berk's base salary shall be $325,000 per annum (the "Berk Base
Salary"). In addition, Mr. Berk will be eligible to earn an annual bonus of up
to 75% of the Berk Base Salary for achieving the Surviving Corporation's annual
earnings before interest, taxes, depreciation and amortization ("EBITDA")
target. Further, Mr. Berk will be eligible to earn an additional 1% of the Berk
Base Salary for each 1% by which the Surviving Corporation's actual annual
EBITDA exceeds its annual EBITDA target. Mr. Berk will also be eligible to
participate in the Parent's management stock option plan (the "Parent Management
Stock Option Plan"). The Parent Management Stock Option Plan will be effected
shortly after consummation of the Merger, and the Board of Directors of the
Parent has authorized up to 5% of the stock of the Parent for inclusion in the
Parent Management Stock Option Plan.
The Letters of Understanding provide that Messrs. Albanese, DiSanza,
Costello, Alecci and Melchiano (the "Executives") will serve the Surviving
Corporation in their respective capacities as Vice President-Chief Financial
Officer, Vice President-Store Operations, Vice President-Warehouse Distribution,
Vice President-MIS and Vice President-Marketing & Advertising of the Company.
Each Letter of Understanding provides for a term of one year with automatic one
year extensions unless the Surviving Corporation provides written notice of its
intention not to renew a Letter of Understanding at least 60 days prior to the
end of the applicable year (the "Employment Period"). During the Employment
Period, each Executive's base salary will be $115,000 per annum, except for Mr.
Alecci, whose base salary will be $107,000 and Mr. Melchiano, whose base salary
will be $122,000 (the "Base Salary"). In addition, each Executive will be
eligible to earn an annual bonus of up to 50% of the Base Salary for achieving
the Surviving Corporation's annual EBITDA target. Further, each Executive will
be eligible to earn an additional 1% of the Base Salary for each 1% by which the
Surviving Corporation's actual annual EBITDA exceeds its annual EBITDA target.
Each Executive will also be eligible to participate in the Parent Management
Stock Option Plan.
The Parent intends to strengthen the Company and promote its expansion.
Except as noted in this Offer to Purchase, neither of the Parent or the
Purchaser, nor, to the best knowledge of the Parent or the Purchaser,
28
<PAGE> 31
any of the persons listed on Schedule I hereto, has any present plans or
proposals that would result in an extraordinary corporate transaction, such as a
merger, reorganization, liquidation, relocation of any operations of the Company
or sale or transfer of assets involving the Company. However, upon completion of
such review, the Parent may propose or develop additional or new plans or
proposals or may propose the acquisition or disposition of assets or other
changes in the Company's business, corporate structure, capitalization or
management it considers to be in the best interests of the Company.
Whether or not the Offer is consummated, the Parent and the Purchaser
reserve the right, subject to the Merger Agreement and applicable legal
restrictions, to sell or otherwise dispose of any or all Shares acquired
pursuant to the Offer, or otherwise. Such transactions may be effected on terms
and at prices then determined by the Parent or the Purchaser which may vary from
the prices to be paid for Shares pursuant to the Offer.
13. CONDITIONS TO THE OFFER. Notwithstanding any other provision of the
Offer, but subject to Rule 14e-1(c) under the Exchange Act, the Purchaser will
not be required to accept for payment or pay for, and may delay the acceptance
for payment of, or the payment for, any Shares, and may terminate the Offer and
not accept for payment or pay for any Shares, unless all of the following
conditions shall have been satisfied: (i) the Minimum Condition and the
Financing Condition shall have been satisfied; (ii) no statute, rule,
regulation, executive order, decree, court order, ruling or preliminary or
permanent injunction shall have been enacted, entered, promulgated or enforced
by any local, state or federal court or governmental authority in the United
States that prohibits, restrains, enjoins or materially restricts the Offer or
the consummation of the Offer or the Merger; (iii) any waiting period applicable
to the consummation of the Offer or the Merger under the HSR Act shall have
terminated or expired; (iv) there shall not have occurred or been threatened any
event or series of events or any condition or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
material adverse effect on the Company; (v) the representations and warranties
of the Company contained in the Merger Agreement will be true and correct in any
material respects on and as of the date of consummation of the Offer as though
made on and as of that date, except for changes occurring after the date of the
Merger Agreement that are specifically permitted by the Merger Agreement and
those representations and warranties that address matters only as of a
particular date will remain true and correct as of that date; and the Parent and
the Purchaser will have been furnished with a certificate of the Company to that
effect executed by its Chairman in form and substance satisfactory to the Parent
and the Purchaser; and (vi) the Company will have performed and complied in all
material respects with all obligations, covenants, agreements and conditions
required by the Merger Agreement to be performed or complied with by it prior to
or on the date of consummation of the Merger, and the Parent and the Purchaser
will have been furnished with a certificate of the Company to that effect
executed by its Chairman in form and substance satisfactory to Parent and the
Purchaser.
See Section 14 for a discussion of certain legal matters.
14. CERTAIN LEGAL MATTERS. Based on an examination of publicly available
information, except as indicated in this Section 14, the Parent, the Purchaser
and the Company are not aware of any license or regulatory permit that appears
to be material to the business of the Company, taken as a whole, that might be
adversely affected by the acquisition of Shares by the Purchaser pursuant to the
Offer or by the Merger or, except as set forth below, of any approval or other
action by any governmental, administrative or regulatory agency or authority,
domestic or foreign, that would be required prior to the acquisition of Shares
by the Purchaser pursuant to the Offer or prior to the Merger. Should any such
approval or other action be required, the Parent and the Purchaser currently
contemplate that it will be sought. If needed, however, there can be no
assurance that any such approval or other action would be obtained, or if
obtained, that it will be obtained without substantial conditions or that
adverse consequences might not result to the Company's business or that certain
parts of the Company's business might not have to be disposed of in the event
that such approvals were not obtained or any other actions were not taken.
Although the Purchaser does not currently intend to delay the acceptance for
payment of Shares tendered pursuant to the Offer, the Purchaser's obligation
under the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in this
Section 14. See also Section 13.
29
<PAGE> 32
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been filed
with the Antitrust Division of the Justice Department (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by the Purchaser pursuant to the Offer is subject to these
HSR Act requirements. KKEP, as the ultimate parent of the Purchaser for purposes
of the HSR Act, is responsible for the HSR Act filing on behalf of the
Purchaser.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchases may not be made until the expiration of a
15-calendar day waiting period following the date on which KKEP's HSR Act filing
is made. The filing under the HSR Act was made by KKEP on September 20, 1995.
Accordingly, the waiting period under the HSR Act will expire at 11:59 P.M., New
York City time, on October 5, 1995, unless early termination of the waiting
period is granted by the FTC and the Antitrust Division, or unless KKEP receives
a request from them, prior to the expiration of the waiting period, for
additional information or documentary material. KKEP has requested early
termination of the waiting period applicable to the Offer. There can be no
assurance, however, that the FTC and the Antitrust Division will grant early
termination. If either the FTC or the Antitrust Division were to request
additional information or documentary material from KKEP, pursuant to the HSR
Act, then the waiting period would not expire until 11:59 P.M., New York City
time, on the tenth calendar day after the date of substantial compliance by KKEP
with such request. Thereafter, the waiting period could be extended only by
court order. If the acquisition of Shares is delayed pursuant to a request by
the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the purchase of and payment for Shares will be
deferred until allowable, in compliance with the provisions of the HSR Act.
Although the Company is also required to file, under the HSR Act, certain
information and documentary material with the Antitrust Division and the FTC in
connection with the Offer, neither the Company's failure to make such filings
nor a request to the Company from the Antitrust Division or the FTC for
additional information or documentary material will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the HSR Act
waiting periods, before or after the Purchaser's purchase of Shares, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the acquisition of Shares pursuant to the Offer or seeking divestiture of
Shares acquired by the Purchaser or divestiture of substantial assets of the
Parent or the Company. Private parties may also bring legal action under the
antitrust laws under certain circumstances. Based upon an examination of
publicly available information relating to the businesses in which the Parent
and its subsidiaries and the Company and its subsidiaries are involved, the
Parent and the Purchaser believe that the Offer will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if a challenge is made, what the result
will be. See Section 13 for certain conditions to the Offer that could become
applicable in the event of such a challenge.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. The Company
conducts business in a number of states throughout the United States, some of
which have enacted such laws. The Purchaser does not know whether any of these
laws will, by their terms, apply to the Offer or the Merger. To the extent that
certain provisions of these laws purport to apply to the Offer or the Merger,
the Purchaser believes that there are reasonable bases for contesting such laws.
In Edgar v. MITE Corporation, the Supreme Court of the United States held that
the Illinois Business Takeover Statute, which made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and was, therefore, unconstitutional. In CTS Corporation v. Dynamics Corporation
of America, the Supreme Court held that as a matter of corporate law, and in
particular, those laws concerning corporate governance, a state may
constitutionally disqualify a potential acquiror of "control shares" of a
corporation incorporated in such state and meeting certain other jurisdictional
requirements from exercising voting power with respect to those shares without
the approval of a majority of the disinterested stockholders.
30
<PAGE> 33
The Company is incorporated under the laws of the State of Delaware and is
governed by the GCL. Section 203 of the GCL prohibits a publicly held Delaware
corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) prior to the date at which the stockholder became an
interested stockholder, the board of directors approved either the business
combination or the transaction in which the person becomes an interested
stockholder; (ii) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of the
transaction in which the stockholder becomes an interested stockholder; or (iii)
the business combination is approved by the board of directors and by at least
66 2/3% of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder) at a meeting of stockholders (and not by
written consent) held on or subsequent to the date such stockholder becomes an
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other transactions
resulting in a financial benefit to the interested stockholder.
At a special meeting held on September 18, 1995, the Board approved the
Merger Agreement, the Stockholders Agreement and the consummation of the
transactions contemplated thereby for purposes of Section 203 of the GCL. The
Company has represented to the Parent and the Purchaser in the Merger Agreement
that its Board has taken all actions appropriate and necessary to approve the
Merger Agreement, the Stockholders Agreement and the transactions contemplated
thereby for purposes of, and to thereby exempt such agreements and transactions
from, the restrictions of Section 203 of the GCL.
The Purchaser has not complied with any other state takeover laws and,
except as noted above, does not believe that any such laws are applicable.
Should any government official or third party seek to apply any state takeover
law to the Offer, the Purchaser will take such action as then appears desirable,
which may include contesting the validity of such statute in appropriate court
proceedings.
If it is asserted that one or more state takeover laws applies to the Offer
or the Merger and it is not determined by an appropriate court that such laws do
not apply or are invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer. In such case, the Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 13 for certain
conditions to the Offer that would become applicable in such event.
Rule 13e-3 Transactions. The Merger will comply with any applicable
federal law. The Commission has adopted Rule 13e-3 under the Exchange Act which
is applicable to certain "going private" transactions. The Purchaser believes
that Rule 13e-3 will not be applicable to the Merger unless it is consummated
more than one year after termination of the Offer or provides for the payment of
consideration with respect to the Shares to be acquired in the Merger that is
less than that paid pursuant to the Offer. If applicable, Rule 13e-3 would
require, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the Merger and the
consideration offered to minority stockholders be filed with the Commission and
distributed to minority stockholders prior to the consummation of the Merger.
15. FEES AND EXPENSES. Jefferies & Company, Inc. has been engaged by the
Parent to act as the financial advisor to the Purchaser in connection with the
acquisition of the Company and is acting as Dealer Manager in connection with
the Offer. The Parent has agreed to pay Jefferies & Company, Inc. $250,000 for
acting as the Dealer Manager in connection with the Offer. The Parent has also
agreed to reimburse the Dealer Manager for its out-of-pocket expenses incurred
as financial advisor and Dealer Manager, including attorneys' fees and expenses,
and to indemnify the Dealer Manager and its affiliates against certain claims
and liabilities to which it may become subject in connection with the rendering
of services, including liabilities under federal securities laws.
31
<PAGE> 34
The Parent has retained Georgeson & Company Inc. to act as the Information
Agent and First Chicago Trust Company of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers, commercial banks, trust companies and other nominees to
forward the Offer material to beneficial owners. The Information Agent will not
solicit tenders of Shares. The Information Agent and the Depositary each will
receive reasonable customary compensation for their services, will be reimbursed
for certain reasonable out-of-pocket expenses incurred by them and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under federal securities laws.
Neither the Purchaser nor the Parent will pay any fees or commissions to
any broker or other person (other than the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and
trust companies will be reimbursed by the Purchaser for reasonable expenses
incurred by them in forwarding material to their customers.
16. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. However, the Purchaser may, in its
discretion, take such action as it may deem necessary to make the Offer in any
such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by the Dealer Manager or one or more registered brokers
or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Parent, the Purchaser and Kidd, Kamm have filed with the Commission the
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may
be inspected and copies may be obtained at the same places and in the same
manner as set forth in Section 8 (except that they will not be available at the
regional offices of the Commission).
HK ACQUISITION COMPANY, INC.
September 25, 1995
32
<PAGE> 35
SCHEDULE I
DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN STOCKHOLDERS
OF
BREUNER'S HOME FURNISHINGS CORPORATION
HK ACQUISITION COMPANY, INC.
AND
KIDD, KAMM INVESTMENTS, INC.
1. DIRECTORS AND EXECUTIVE OFFICERS OF BREUNER'S HOME FURNISHINGS
CORPORATION. The name, business address, present principal occupation and
employment history of each director and executive officer of Breuner's Home
Furnishings Corporation and certain other information are set below. Unless
otherwise indicated below, the address of each director and executive officer is
7069 Consolidated Way, San Diego, California 92121. To the best of Parent's
knowledge, none of its directors or officers beneficially owns any equity
securities, or rights to acquire any equity securities, of the Company or has
been involved in any transactions with the Company or its affiliates required to
be disclosed pursuant to the rules and regulations of the Commission. All
directors and officers listed below are citizens of the United States.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD WITH
BREUNER'S
HOME FURNISHINGS CORPORATION PRINCIPAL OCCUPATION
NAME (AGE) (YEAR ELECTED A DIRECTOR) AND BUSINESS EXPERIENCE
- ------------------------- ---------------------------------- ---------------------------------
<S> <C> <C>
Kurt L. Kamm (52) Vice Chairman and Director (1995) Co-Founder, Officer and
c/o Kidd, Kamm Equity Controlling Stockholder, Kidd,
Partners, L.P. Kamm & Company (1987-Present)
9454 Wilshire Boulevard
Beverly Hills, CA 90212
Michael H. Solomon (47) Chairman, Chief Executive Officer Chairman and Chief Executive
and Director (1995) Officer, Arnold's Acquisition
Corporation (1994-Present),
President and Chief Executive
Officer, Stylus, Inc. (1990-1994)
Ronald B. Schechter (39) Vice President, Chief Financial Vice President of Finance and
Officer and Director (1995) Operations, Arnold's Acquisition
Corporation (1994-Present), Vice
President and Chief Financial
Officer, Stylus, Inc. (1990-1994)
Terry M. Theodore (32) Secretary and Director (1995) Partner, Kidd, Kamm & Company
(1989-Present)
Ronald Cohen (59) Director (1995) Executive Vice President of
Sales, Arnold's Acquisition
Corporation (January
1995-Present), President and
Chief Executive Officer, The
Final Touch, Inc. (1991-1994),
Independent Consultant
(1990-1991), Chief Executive
Officer, Aaron Brothers Art Marts
(1988-1990)
William E. Myers, Jr.(35) Director (1995) Founder and Principal, W.E. Myers
& Company (1989-Present)
</TABLE>
2. CONTROLLING STOCKHOLDER OF BREUNER'S HOME FURNISHINGS
CORPORATION. Kidd, Kamm Equity Partners, L.P., a Delaware limited partnership
with an address at 9454 Wilshire Boulevard, Beverly Hills, CA 90212, is the
beneficial holder of approximately 90% of the Common Stock of Breuner's Home
Furnishings Corporation. To the best of Parent's knowledge, such stockholder has
not been involved in any transaction with the Company or its affiliates required
to be disclosed pursuant to the rules and regulations of the Commission.
S-1
<PAGE> 36
William J. Kidd and Mr. Kamm are officers of and, together with Carla G.
Kidd (age 48) and Judy L. Kamm (age 51), are the sole stockholders of and
control Kidd, Kamm Investments, Inc., which is the indirect beneficial holder of
the sole general partnership interest in Kidd, Kamm Equity Partners, L.P. For
further information regarding Mr. Kamm and Mr. Kidd, see Section 1 above and
Section 4 below, respectively. The addresses of Mrs. Kidd and Mrs. Kamm are the
same as those set forth for Mr. Kidd and Mr. Kamm, respectively. Neither Mrs.
Kidd nor Mrs. Kamm holds a position or office with the Purchaser; each has been
a homemaker for the past five years and each is a citizen of the United States.
3. DIRECTORS AND EXECUTIVE OFFICERS OF HK ACQUISITION COMPANY, INC. The
following table sets forth the name, position and offices held with HK
Acquisition Company, Inc. of each director and executive officer of HK
Acquisition Company, Inc. All directors and officers listed below are citizens
of the United States. For further information regarding such persons, see
Section 1 above and Section 4 below.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD WITH
HK ACQUISITION COMPANY, INC. PRINCIPAL OCCUPATION
NAME (YEAR ELECTED A DIRECTOR) AND BUSINESS EXPERIENCE
- ------------------------- ---------------------------------- ---------------------------------
<S> <C> <C>
Michael H. Solomon Chairman and Director (1995) See Section 1
Terry M. Theodore Vice President, Secretary and See Section 1
Director (1995)
Kurt L. Kamm Treasurer and Director (1995) See Section 1
</TABLE>
4. DIRECTORS AND EXECUTIVE OFFICERS OF KIDD, KAMM INVESTMENTS, INC. The
following table sets forth the name, position and offices held with Kidd, Kamm
Investments, Inc. of each director and executive officer of Kidd, Kamm
Investments, Inc. All directors and officers listed below are citizens of the
United States. For further information regarding such persons, see Sections 1, 2
and 3 above.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD WITH
KIDD, KAMM INVESTMENTS, INC. PRINCIPAL OCCUPATION
NAME (AGE) (YEAR ELECTED A DIRECTOR) AND BUSINESS EXPERIENCE
- ------------------------- ---------------------------------- ---------------------------------
<S> <C> <C>
Kurt L. Kamm President, Secretary and Director See Section 1
(1990)
William J. Kidd (54) Vice President and Director (1990) Co-Founder, Officer and
c/o Kidd, Kamm Controlling Stockholder, Kidd,
Equity Partners, L.P. Kamm & Company (1987-Present)
3 Pickwick Plaza
Greenwich, CT 06830
Terry M. Theodore Vice President See Section 1
Eric R. Hamburg (33) Vice President Partner, Kidd, Kamm & Company
(1993-Present), Senior Manager at
Anderson Consulting (1985-1993)
</TABLE>
S-2
<PAGE> 37
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
DATED SEPTEMBER 18, 1995
The parties to this agreement are Huffman Koos Inc., a Delaware corporation
("HK"), HK Acquisition Company, Inc., a Delaware corporation ("SUB"), and
Breuner's Home Furnishings Corporation, a Delaware corporation and holder of all
of the issued and outstanding capital stock of SUB ("Parent").
The boards of directors of each of HK, SUB and Parent have (i) approved
that certain stockholders agreement dated the date hereof (the "Stockholders
Agreement") among Parent, SUB, Jupiter Industries, Inc. ("Jupiter"), and Sussex
Group, Ltd. ("Sussex" and, together with Jupiter, the "Majority Sellers"),
pursuant to which, among other things, subject to the terms and conditions
thereof, the Majority Sellers have agreed to tender their shares (the "Majority
Shares") of common stock, par value $.01 per share (the "Common Stock"), of HK
in the Offer (as defined below), vote the Majority Shares in favor of the Merger
(as defined below) and give to Parent or SUB an option to purchase the Majority
Shares at a purchase price of $9.375 per Share, (ii) determined that it is
advisable and in the best interests of their respective companies and
stockholders that SUB shall make a tender offer (the "Offer") to acquire all of
the outstanding shares (the "Shares") of Common Stock at $9.375 per share, or
any greater amount per Share paid pursuant to the Offer (the "Per Share
Amount"), (iii) adopted and approved this agreement and the transactions
contemplated hereby, including but not limited to the merger (the "Merger") of
SUB with and into HK pursuant to the Delaware General Corporation Law (the
"GCL"), upon the terms and conditions contained in this agreement, and (iv)
resolved to recommend acceptance of the Offer and approval and adoption of this
agreement, if necessary, by their respective stockholders.
Now, therefore, the parties hereto agree as follows:
1. THE OFFER.
1.1 The Offer.
(a) Provided that this agreement shall not have been terminated in
accordance with section 8 and that no circumstances exist that would result in a
failure to satisfy any of the conditions set forth in section 1.1(c)(i) through
(vi), SUB shall commence the Offer as soon as practicable, but in no event later
than the fifth business day after the date of initial announcement of this
agreement and the Offer. SUB shall accept for payment Shares that have been
validly tendered, and not withdrawn, pursuant to the Offer at the earliest time
following expiration of the Offer that all conditions to the Offer shall have
been satisfied or waived by SUB. SUB shall have the right to increase the Per
Share Amount payable in the Offer or to make any other changes in the terms and
conditions of the Offer; provided that, unless previously approved by HK in
writing, no change may be made that (x) decreases the Per Share Amount payable
in the Offer, (y) changes the form of consideration to be paid in the Offer or
(z) imposes conditions to the Offer in addition to those set forth in section
1.1(c) or broadens the scope of those conditions; and further provided that (I)
SUB shall have the right in its sole discretion to extend the Offer for up to a
maximum of five additional business days if after 20 business days there shall
not have been tendered sufficient Shares to consummate a Short Form Merger as
described in section 2.9(c), (II) SUB may extend the Offer for such additional
number of trading days as may be reasonably necessary to allow Shares tendered
under "signature guarantees" to be delivered, and (III) if Parent or SUB
determines, upon the advice of outside legal counsel, that any supplement or
amendment to the Offer Documents (as defined in section 1.1(b)) is required to
be circulated to the offerees, then Parent or SUB shall have the right to extend
the offer for such additional number of days as may be necessary under
applicable law as determined by Parent and SUB, on the advice of counsel. The
Per Share Amount shall be paid net to the seller in cash, less any required
withholding of taxes, upon the terms and subject to the conditions of the Offer.
(b) As soon as practicable on the date of commencement of the Offer, SUB
shall file with the Securities and Exchange Commission (the "SEC") a tender
offer statement on Schedule 14D-1 with respect to the
A-1
<PAGE> 38
Offer which will contain the offer to purchase and form of the related letter of
transmittal (together with any supplements or amendments thereto, collectively,
the "Offer Documents"). The Offer Documents will comply in all material respects
with the provisions of applicable federal securities laws and the securities
laws of the state of Delaware. The information provided and to be provided by
HK, Parent and SUB for use in the Offer Documents shall not, on the date filed
with the SEC and on the date first published or sent or given to the Company's
stockholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Parent, SUB and the Company each
shall promptly correct any information provided by it for use in the Offer
Documents if and to the extent that it shall become false or misleading in any
material respect and SUB shall take all necessary steps to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws and the securities laws of the state of Delaware.
(c) Any other provision of this agreement or the Offer notwithstanding, SUB
shall not be required to accept for payment or pay for, and may delay the
acceptance for payment of, or the payment for, any Shares, and may terminate the
Offer and not accept for payment or pay for any Shares, unless all of the
following conditions shall have been satisfied:
(i) no statute, rule, regulation, executive order, decree, court
order, ruling or preliminary or permanent injunction shall have been
enacted, entered, promulgated or enforced by any local, state or federal
court or governmental authority in the United States that prohibits,
restrains, enjoins or materially restricts the Offer or the consummation of
the Offer or the Merger;
(ii) any waiting period applicable to the consummation of the Offer or
the Merger under the HSR Act (as defined in section 5.4) shall have
terminated or expired;
(iii) there shall not have occurred or been threatened any event or
series of events or any condition or circumstance arisen that, individually
or in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect (as defined in section 9.8) on HK, determined by reference
to the business, assets, results of operations or financial condition of HK
at July 31, 1995;
(iv) the representations and warranties of HK contained in this
agreement shall be true and correct in all material respects on and as of
the date of consummation of the Offer as though made on and as of that
date, except (i) for changes occurring after the date of this agreement
that are specifically permitted by this agreement, including changes
resulting from conduct permitted under section 5.1, and (ii) that those
representations and warranties that address matters only as of a particular
date shall remain true and correct as of that date; and Parent and SUB
shall have been furnished with a certificate of HK to the effect of the
matters referred to above (and only excepting the matters referred to in
items (i) and (ii) above) executed by its Chairman in form and substance
satisfactory to Parent and SUB;
(v) HK shall have performed and complied in all material respects with
all obligations, covenants, agreements and conditions required by this
agreement to be performed or complied with by it prior to or on the date of
consummation of the Offer, and Parent and SUB shall have been furnished
with a certificate of HK to that effect executed by its Chairman in form
and substance satisfactory to Parent and SUB;
(vi) Parent and/or SUB shall have obtained financing pursuant to the
Financing Commitment Letter referred to in section 4.4 or other financing
arrangements on terms not materially more adverse to the borrower than the
terms of the Financing Commitment Letter (the "Financing Condition"); and
(vii) at least 90% of the outstanding Shares shall have been tendered
in the Offer (the "90% Minimum Condition").
The conditions set forth above are for the sole benefit of SUB and Parent
only and may be asserted by SUB and Parent regardless of the circumstances
giving rise to any such condition (including the termination of this agreement
by SUB or Parent) or may be waived by SUB or Parent, in whole or in part at any
time and
A-2
<PAGE> 39
from time to time, in their sole discretion. The failure by SUB or Parent at any
time to exercise any of the rights set forth in this provision shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time. Any determination
by SUB or Parent with respect to any of the conditions referred to (including,
without limitation, the satisfaction of such conditions) shall be final and
binding on the parties.
1.2 HK Action.
(a)(i) HK hereby approves of and consents to the Offer and represents and
warrants that HK's board of directors, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, (A) approved the
Stockholders Agreement, (B) determined that this agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair to, and in the
best interests of, the stockholders of HK, (C) approved this agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and determined that such approval of the Offer, this agreement and the
Merger constitutes approval thereof for all purposes under sections 203(a) and
251(b) of the GCL and for purposes of any other applicable provision of the GCL
and any other state statutes that might be deemed applicable to the transactions
contemplated hereby and (D) resolved to recommend that the stockholders of HK
accept the Offer, tender their Shares thereunder to SUB and approve and adopt
this agreement and the Merger. HK consents to the inclusions of such
recommendation and approval in the Offer Documents.
(ii) The board of directors of HK shall not (x) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or SUB, its
approval or recommendation of the Offer, this agreement or the Merger, provided,
however, that to the extent required by the fiduciary obligations of such board
of directors, as determined in good faith by a majority of the "disinterested"
members thereof based on the advice of outside counsel, in the case of a
"superior proposal" (as defined below), HK's board of directors shall have the
right to withdraw such approval or recommendation; or (y) approve or recommend,
or propose to approve or recommend, any takeover proposal. If any of the
foregoing actions is taken by the board of directors of HK, Parent or SUB shall
have, and HK shall have (subject to the limitation on HK's right set forth in
section 8.1(c)), the right to terminate this agreement pursuant to section 8.1.
For purposes of this agreement, "superior proposal" means a bona fide proposal
made by a third party to acquire HK pursuant to a tender or exchange offer, a
merger, a sale of all or substantially all its assets or otherwise on terms
which a majority of the disinterested members of the board of directors of HK
determines in its good faith judgment to be more favorable to HK's stockholders
than the Offer and the Merger (based on the written opinion, with only customary
qualifications, of HK's financial advisor that the value of the consideration
provided for in such proposal exceeds the value of the consideration provided
for in the Offer and the Merger) and for which financing, to the extent
required, is then committed or which, in the good faith judgment of a majority
of such disinterested members (based on the written advice of HK's financial
advisor), is reasonably capable of being obtained by such third party. For
purposes of this agreement, "disinterested" shall mean disinterested with
respect to Parent and SUB. In determining "value of consideration," due
consideration shall be given to the cash equivalent of each specific component
of consideration, including but not limited to the form and timing thereof.
(iii) HK further represents that The Chicago Corporation (the "Financial
Advisor") has delivered to the board of directors of HK its written opinion
dated as of September 18, 1995 that based upon and subject to matters set forth
in the opinion and based upon such other matters as the Financial Advisor
considers relevant, the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view as of such date. HK has been authorized by the Financial Advisor
to permit, subject to the prior review and consent by the Financial Advisor
(such consent not to be unreasonably withheld), the inclusion of the fairness
opinion (or a reference thereto) in the Offer Documents, the Schedule 14D-9 (as
defined below) and the Proxy Statement (as defined below). Moreover, HK shall
use its best efforts to cause the Financial Advisor to deliver an updated
fairness opinion, to the same effect as the opinion described above, to Parent
or SUB in connection with any Long Form Merger referred to in and pursuant to
section 1.3.
A-3
<PAGE> 40
(b) HK shall file with the SEC as soon as practicable on the date of
commencement of the Offer a solicitation/recommendation statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "Schedule
14D-9") containing the recommendation described in section 1.2(a)(i) and shall
mail the Schedule 14D-9 to the stockholders of HK promptly after the
commencement of the Offer. The Schedule 14D-9 shall comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to HK's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by HK with
respect to information supplied by Parent or SUB for inclusion in the Schedule
14D-9. HK, Parent and SUB each shall promptly correct any information provided
by it for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect and HK shall take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
(c) In connection with the Offer, HK shall promptly furnish Parent and SUB
with mailing labels, security position listings and any available listing or
computer files containing the names and addresses of the record holders of the
Shares as of a recent date and shall furnish SUB with such additional
information and assistance (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) as SUB or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate Merger, Parent and SUB shall, and
shall use their best efforts to cause their affiliates, associates, agents and
advisors to (it being understood that "best efforts" for this purpose shall
include terminating the relationship with any agent and advisor that fails to
comply in this regard), keep such information confidential and use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger and, if this agreement should be terminated,
deliver to HK all copies of such information in their possession.
1.3 Long Form Merger. If SUB does not purchase Shares pursuant to the
Offer due to the failure solely of the 90% Minimum Condition to have been
satisfied, then the parties shall, subject to section 6, consummate the Merger
pursuant to section 2 in accordance with the provisions of section 251 of the
GCL (a "Long Form Merger"). The period after the termination of the Offer and
during which this agreement remains in effect shall be referred to hereinafter
as the "Extension Period".
1.4 Board of Directors and Committees; Section 14(f).
(a) Promptly upon the purchase by SUB of Shares pursuant to the Offer or
the Majority Shares pursuant to the Stockholders Agreement (unless as a result
of such Purchase SUB owns at least 90% of the Shares then outstanding) and from
time to time thereafter, and subject to the last sentence of this section
1.4(a), SUB shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the board of directors of HK as will
give SUB representation on the board equal to the product of the number of
directors on the board (giving effect to any increase in the number of directors
pursuant to this section 1.4) and the ratio that the combined voting power of
the Shares so purchased bears to the total combined voting power of all
outstanding Shares on a fully-diluted basis, and, upon request by SUB, HK shall
use its best efforts either, at HK's election, to increase promptly the size of
the board or to secure promptly the resignation of such number of directors as
is necessary to enable SUB's designees to be elected to the board and to cause
SUB's designees to be so elected. At such times, and subject to the last
sentence of this section 1.4(a), HK will use its best efforts to cause persons
designated by SUB to constitute the same percentage as is on the board of each
committee of the board. Notwithstanding the foregoing, HK shall use its best
efforts to ensure that two of the members of the board as of the date hereof
shall remain members of the board until the Effective Time (as defined in
section 2.2), and Parent and SUB shall not remove such members and, if
necessary, shall vote to keep such members on the board.
(b) HK's obligation to appoint designees to its board shall be subject to
section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14f-1 promulgated thereunder. HK
A-4
<PAGE> 41
shall promptly take all action required pursuant to such section and Rule in
order to fulfill its obligations under this section 1.4 and shall include in the
Schedule 14D-9 such information with respect to HK and its officers and
directors as is required under such section and Rule in order to fulfill its
obligations under this section 1.4. SUB shall supply to HK in writing, and shall
be solely responsible for, any information with respect to itself and its
nominees, officers, directors and affiliates required by such section and Rule.
(c) Following the election or appointment of SUB's designees pursuant to
this section 1.4 and prior to the Effective Time, if there shall be any
directors of HK who were directors as of the date hereof, any amendment of this
agreement, any termination of this agreement by HK, any extension by HK of the
time for the performance of any of the obligations or other acts of SUB or
Parent or waiver of any of HK's rights hereunder, will require the concurrence
of a majority of such directors.
2. THE MERGER.
2.1 Surviving Corporation. Upon the terms and subject to the conditions
set forth in section 6, and in accordance with the GCL, at the Effective Time
SUB shall be merged with and into HK. As a result of the Merger, the separate
corporate existence of SUB shall cease and HK shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). The effect of the
Merger shall be as provided in the applicable provisions of the GCL.
2.2 Effective Time. As promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in section 6, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger with the Secretary of State of Delaware in such form as required by, and
executed in accordance with the relevant provisions of, the GCL. Prior to the
filing referred to in this section 2.2, a closing shall be held at the offices
of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing. The Merger shall become effective at such time
as the certificate of merger is duly filed with the Secretary of State of
Delaware, or at such later time as is specified in the certificate of merger
(the time the Merger becomes effective being referred to herein as the
"Effective Time").
2.3 Certificate of Incorporation; By-Laws.
(a) The certificate of incorporation of HK, as in effect immediately prior
to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law, except that
article 4 thereof shall be amended to provide that the authorized capital stock
of the Surviving Corporation shall consist solely of 1,000 shares of common
stock, par value $.01 per share.
(b) The by-laws of HK, as in effect immediately prior to the Effective
Time, shall be the by-laws of the Surviving Corporation, until thereafter
amended as provided by law, the certificate of incorporation of the Surviving
Corporation and such by-laws.
2.4 Directors and Officers. The directors of SUB, immediately prior to
the Effective Time, shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation, and the officers of SUB, immediately prior
to the Effective Time, shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of SUB, HK, or the holders of any of
the following securities:
(i) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to section
2.5(ii) and any Dissenting Shares, as defined in section 2.6(a)) shall be
converted automatically into the right to receive the Per Share Amount in
cash (the "Merger Consideration") payable to the holder thereof, without
interest and less any required withholding taxes, upon surrender of the
certificate formerly representing such Share;
A-5
<PAGE> 42
(ii) Each Share held in the treasury of HK, or owned by Parent, SUB or
any subsidiary of Parent or SUB, immediately prior to the Effective Time
shall be canceled and cease to exist without any conversion thereof and no
payment or distribution shall be made with respect thereto; and
(iii) Each share of common stock, par value $.01 per share, of SUB
issued and outstanding immediately prior to the Effective Time shall, upon
surrender of the certificate formerly representing such Shares, be
converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving
Corporation.
2.6 Dissenting Shares.
(a) Notwithstanding any provision of this agreement to the contrary, any
Shares held by a holder who has properly demanded and perfected the right for
appraisal of such Shares in accordance with the GCL and who, as of the Effective
Time, has not effectively lost such right to appraisal ("Dissenting Shares"),
shall not be converted into or represent a right to receive the Per Share
Amount, but the holder thereof shall only be entitled to such rights as are
granted by the GCL.
(b) Notwithstanding the provisions of section 2.6(a), if any holder of
Shares who asserts the right for appraisal or demands payment for such Shares
under the GCL shall effectively lose the right to appraisal, then, as of the
later of the Effective Time or the occurrence of such event, such holder's
Shares shall automatically be converted into and represent only the right to
receive the Per Share Amount pursuant to section 2.5(i) without interest thereon
and less any required withholding taxes, upon surrender of the certificate or
certificates representing such Shares.
(c) HK shall give Parent (i) prompt notice of any demands for appraisal
received by it and of withdrawals of such demands received by it and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the GCL. HK shall not, except with the prior written consent
of Parent, voluntarily make any payment with respect to any demands for
appraisal or settle or offer to settle any such demands.
2.7 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Parent shall designate an agent reasonably
satisfactory to HK to act as Paying Agent in connection with the Merger (the
"Paying Agent") for purposes of effecting the exchange, for the Per Share
Amount, of certificates that, prior to the Effective Time, represented Shares
entitled to receive the Per Share Amount pursuant to section 2.5. At or before
the Effective Time, Parent shall take all steps necessary to provide the Paying
Agent, in trust for the benefit of the holders of Shares, with immediately
available funds in an aggregate amount (the "Payment Fund") equal to the
aggregate Per Share Amount to be paid to the holders of Shares pursuant to
section 2.5. The Payment Fund shall be invested by the Payment Agent, as
directed by Parent, in direct obligations of the United States of America, or
obligations for which the full faith and credit of the United States of America
is pledged to provide for the payment of principal thereof and interest thereon,
and any earnings with respect to the Payment Fund shall be paid to Parent as and
when requested by Parent and Parent shall replace any principal lost through any
investment made with respect to the Payment Fund. The parties agree that the
Surviving Corporation shall pay all charges and expenses, including those of the
Paying Agent, in connection with the exchange of the certificates formerly
representing Shares as contemplated hereby.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed (or delivered upon request in person) to each record holder,
as of the Effective Time, of an outstanding certificate or certificates that are
converted pursuant to section 2.5(i) into the right to receive the Per Share
Amount and that immediately prior to the Effective Time represented Shares (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates for payment
of the Per Share Amount therefor less any federal, state or local taxes required
to be withheld from such payment. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of
A-6
<PAGE> 43
such Certificate shall be entitled to receive in exchange therefor the Per Share
Amount, less such taxes withheld, for each Share formerly represented by such
Certificate, and such Certificate shall then be canceled. Until so surrendered
and exchanged, each Certificate shall, after the Effective Time, be deemed to
evidence only the right to receive the Per Share Amount without interest thereon
and less such taxes. If payment of the Per Share Amount 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 Per Share
Amount 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 in accordance with the provisions of this section 2.7(b), each
Certificate (other than Certificates representing Shares held by Parent, SUB or
any other subsidiary of Parent, and other than Certificates representing
Dissenting Shares) shall represent for all purposes only the right to receive
for each Share represented thereby the consideration provided for under this
agreement.
(c) At any time following six 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) only as general creditors thereof with respect to the Per Share
Amount payable upon due surrender of their Certificates without interest
thereon. Notwithstanding the foregoing, neither the Surviving Corporation, the
Parent nor the Paying Agent shall be liable to any holder of a Certificate for
the Per Share Amount delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of HK shall be closed
and thereafter there shall be no further registration or transfers of Shares on
the records of HK. From and after the Effective Time, the holders of
Certificates 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.
2.8 Employee Stock Options. Immediately prior to or at the Effective
Time, HK shall (i) take all necessary action to provide that (subject to receipt
of the consents referred to in the penultimate sentence of this section 2.8, if
required), immediately prior to the Effective Time, each outstanding stock
option (each, an "Option") granted under the Huffman Koos Inc. 1986 Stock Option
Plan, as amended (the "Option Plan"), shall be canceled and each holder of a
canceled Option shall be entitled to receive from HK, as of such date, in
cancellation and settlement of the Option, whether or not such Option was
exercisable at the time of such cancellation, only an amount equal to the
excess, if any, of the Per Share Amount over the per Share exercise price of
such Option, multiplied by the number of Shares covered by such Option (the
"Option Settlement Amount"), reduced by any applicable withholding taxes or
other amounts required by law to be paid or withheld by HK, and (ii) pay to each
person who formerly held such an Option the Option Settlement Amount, reduced by
such taxes or other amounts; provided, however, that with respect to any person
subject to section 16(a) of the Exchange Act, any such amount to be paid shall
be paid as soon as practicable after the first date payment can be made without
liability for such person under section 16(b) of the Exchange Act. Such Options
and any rights granted in connection with any such Option shall be canceled upon
the payment of the Option Settlement Amount. At the Effective Time, any such
Options with respect to which the holder thereof has not consented, if
necessary, to cancellation in exchange for the receipt of the Option Settlement
Amount will be converted into, and thereafter represent only the right to
receive, the Option Settlement Amount. Prior to the purchase of Shares pursuant
to the Offer, HK shall use its reasonable efforts to (x) obtain any requisite
consents or releases from holders of Options and (y) make any amendments to the
terms of the Option Plan or any awards granted thereunder that are necessary in
addition to such consents to give effect to the transactions contemplated by
this section 2.8. Notwithstanding any other provision of this section 2.8,
payment in respect of or delivery of Shares pursuant to the exercise of any
Options may be withheld until any necessary consents are obtained.
A-7
<PAGE> 44
2.9 Stockholder's Meeting.
(a) Except as provided below in section 2.9(c), after the consummation,
expiration or termination of the Offer, unless Parent or SUB terminates this
agreement, then HK, acting through its board of directors, shall in accordance
with applicable law:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders' Meeting"), to be held as
soon as practicable after the consummation, expiration or termination of
the Offer for the purposes of considering and taking action upon this
agreement;
(ii) subject to its fiduciary duties as determined in good faith by a
majority of its board of directors, based as to legal matters on the
opinion of legal counsel, include in any proxy or similar materials
distributed to HK's stockholders in connection with the Merger, including
any amendments or supplements thereto (the "Proxy Statement"), the
recommendation of the board that stockholders of HK vote in favor of the
approval and adoption of this agreement and the written opinion of the
Financial Advisor that based upon and subject to matters set forth in the
opinion and based upon such other matters as the Financial Advisor
considers relevant, the consideration to be received by the holders of
Shares pursuant to the Merger is fair to such holders from a financial
point of view as of the date of the opinion; and
(iii) use all reasonable efforts (A) to obtain and furnish the
information required to be included by it in any Proxy Statement and, after
consultation with Parent and SUB, respond promptly to any comments made by
the SEC with respect to any Proxy Statement and any preliminary version
thereof and cause any Proxy Statement to be mailed to its stockholders at
the earliest practicable time following the expiration or termination of
the Offer, and to the National Association of Securities Dealers, Inc. (the
"NASD") within five days thereafter, and (B) subject to a determination,
after consulting outside legal counsel of its fiduciary duty to HK's
stockholders under applicable law, to obtain the necessary approvals by its
stockholders of this agreement and the transactions contemplated hereby.
(b) At the Stockholders' Meeting, Parent, SUB and their affiliates shall
vote all Shares owned by them in favor of approval and adoption of this
agreement and the transactions contemplated hereby.
(c) If at any time after the satisfaction or waiver of the conditions set
forth in section 6.1(b) Parent and SUB own 90% or more of the Shares then
outstanding then the provisions of sections 2.9(a) and (b) shall not apply and,
as soon as practicable after the satisfaction or waiver of the conditions set
forth in section 6.1(b), the parties hereto will cause the Merger to be
consummated by filing the Certificate of Merger with the Secretary of State of
Delaware and make all other filings or recordings required by section 253 of the
GCL in connection with the Merger. Such Merger in accordance with section 253 of
the GCL is referred to herein as the "Short Form Merger."
3. REPRESENTATIONS AND WARRANTIES OF HK. HK represents and warrants to
Parent and SUB that:
3.1 Organization, Good Standing, etc. HK is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
has all requisite power to own its properties and to carry on its business as
now being conducted and is duly qualified to do business and is in good standing
in all other jurisdictions in which qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing, if any,
which when taken together with all other such failures would not in the
aggregate have a Material Adverse Effect. HK has heretofore delivered to SUB and
Parent accurate and complete copies of the certificate of incorporation and
by-laws, as currently in effect, of HK. Other than HKI Subsidiary One, Inc., a
Delaware corporation ("HK1"), HK has no subsidiaries. HK1 has no assets and no
liabilities except for a note and mortgage receivable on certain real property
owned by HK.
3.2 Authority Relative to this Agreement; Consents and Approvals. HK has
all necessary corporate power and authority to execute and deliver this
agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of HK and no other corporate proceedings on the part of HK are
necessary to authorize this agreement or to consummate the transactions
A-8
<PAGE> 45
contemplated hereby (other than, with respect to the Merger and subject to
section 2.9(c), the approval and adoption of this agreement by the holders,
including SUB, of a majority of the then outstanding Shares). This agreement has
been duly and validly executed and delivered by HK and constitutes a valid,
legal and binding agreement of HK, enforceable against HK in accordance with its
terms.
3.3 Capitalization.
(a) The authorized capital stock of HK consists of 10,000,000 Shares, of
which 3,938,400 Shares (which excludes 90,000 Shares held in treasury by HK) are
issued and outstanding as of the date hereof. All of the outstanding Shares are,
and all Shares issuable upon due exercise of Options will be, when issued in
accordance with the terms of such Options, duly authorized, validly issued,
fully paid and non-assessable. HK has 5,000,000 shares of preferred stock
authorized, none of which are issued or outstanding.
(b) Section 3.3 of the disclosure schedule attached to this agreement (the
"Schedule") sets forth the number, class, record owners, grant and expiration
dates and exercise prices of Shares that are subject to options (including all
Options issued pursuant to the Option Plan) or warrants, and the holders of all
debt instruments of HK and the amount outstanding thereon.
(c) Except for the Stockholders Agreement, or as described in the SEC
Reports (as defined in section 3.6) or in section 3.3 of the Schedule, there are
no stockholders agreements, voting trusts or other agreements or understandings
with respect to the voting of any Shares known to HK. Except for the Options
described in section 3.3 of the Schedule, (i) HK is not a party to or bound by
any written or oral contract or agreement that grants to any person an option,
warrant or right of first refusal or other right of any character to acquire at
any time, or upon the happening of any stated events, any shares of or interest
in HK, whether or not presently authorized, issued or outstanding and (ii) there
are outstanding no (A) shares of capital stock or other voting securities of HK,
(B) securities of HK convertible into or exchangeable for shares of capital
stock or voting securities of HK, (C) options or other rights to acquire from
HK, and no obligations of HK to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of HK and (D) equity equivalents, interests in the ownership or
earnings of HK or other similar rights (collectively, "Company Securities").
Except as provided in HK's certificate of incorporation, there are no
outstanding obligations of HK to repurchase, redeem or otherwise acquire any
Company Securities.
(d) The Shares constitute the only class of equity securities of HK
registered or required to be registered under the Exchange Act.
3.4 Effect of Agreement. The execution and delivery of this agreement by
HK and the consummation of the Merger have been duly authorized by the Board of
Directors of HK, do not require the consent, waiver, approval or authorization
of or filing with any person or public authority other than the approval of its
stockholders at the meeting of such stockholders referred to in section 2.9, the
filings with the SEC and the NASD contemplated by section 2.9(a) and the filings
with the Federal Trade Commission (the "FTC") and the U.S. Department of Justice
("Justice") contemplated by section 5.4, and the consents, waivers or approvals
from persons to specified contracts listed in section 3.4 of the Schedule and
will not, subject to obtaining the aforesaid consents, waivers or approvals and
making the aforesaid filings, and except such as would not have a Material
Adverse Effect, violate any law, statute, regulation, injunction, order or
decree of any governmental agency or authority or court, or conflict with or
result in a breach of or constitute a default under any of the terms or
provisions of any mortgage, note, bond or indenture or obligation to which HK is
a party or by which it or any of its properties may be bound. Subject to
securing the consents, waivers or approvals as set forth in section 3.4 of the
Schedule, and except as contemplated by this agreement or as may arise under
applicable law, the execution and delivery of this agreement by HK and the
consummation of the Merger will not give to others any interests or rights,
including rights of termination or cancellation, in or with respect to any
property, asset, contract, agreement, license or other commitment or instrument
of HK, except such as would not have a Material Adverse Effect.
3.5 Contracts and Commitments. Section 3.5 of the Schedule sets forth a
complete list of all contracts and agreements, written or oral, to which HK is a
party or by which any of its assets or properties is bound (i) that involve any
customer that accounted for more than one percent of the net revenues of HK for
the year
A-9
<PAGE> 46
ended January 31, 1995, (ii) that contain any covenant limiting the freedom of
HK to engage in any line of business or in any geographic area or to compete
with any entity, (iii) that involve any mortgages, leases or real property,
notes, bonds or indentures or agreements of guarantee or indemnification running
from HK to any person or entity, (iv) that require future payments by HK which
exceed $100,000 individually or $1,000,000 in the aggregate and are not
cancelable without penalty and (v) that HK has entered into with any of its
vendors. HK is not in breach or violation of or in default in any material
respects (x) under any of the terms or provisions of any mortgage, lease, note,
bond, indenture, commitment, contract, agreement (written or oral), license or
other instrument to which it is a party or by which it or any of its properties
is bound,(y) under any law, judgment or decree or any order, rule or regulation
applicable to it or to any of these properties or (z) in the payment of any of
its obligations for borrowed funds, and there exists no known condition or known
event that, after notice or lapse of time or both, would constitute a default in
connection with any of the foregoing by HK, or to HK's knowledge, any other
party.
3.6 SEC Reports; Financial Statements. HK has filed all required forms,
reports and documents with the SEC since February 1, 1992 (collectively, the
"SEC Reports"), each of which has complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates so
filed. HK heretofore has delivered to Parent a true and complete copy (including
any amendments thereto) of (i) its Annual Report on Form 10-K for the year ended
January 31, 1995 (the "10-K"), (ii) its Quarterly Report on Form 10-Q for the
quarter ended July 31, 1995 (the "10-Q") and (iii) all definitive proxy
statements relating to meetings of HK's stockholders (whether annual or special)
held since February 1, 1994. None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements contained in the 10-K and the
10-Q fairly present the financial condition of HK as at the dates thereof and
the results of operations for the periods indicated therein, all in conformity
with generally accepted accounting principles applied on a consistent basis
(except as otherwise stated therein). For the purposes of this agreement, all
financial statements of HK shall be deemed to include any notes to such
financial statements.
3.7 Absence of Liabilities. HK does not have any liabilities or
obligations, either accrued, absolute, contingent or otherwise which have not
been (i) reflected in the balance sheet as of July 31, 1995 (including any
related notes and schedules) included in the 10-Q (the "Balance Sheet"), (ii)
disclosed in the SEC Reports, (iii) that individually or in the aggregate would
not have a Material Adverse Effect, (iv) specifically described in the Schedule,
(v) incurred in the ordinary course of business since July 31, 1995 or (vi)
under this agreement.
3.8 Absence of Certain Changes or Events. Since July 31, 1995: (i) HK has
not sustained any damage, destruction or loss by reason of fire, flood, accident
or other calamity (whether or not covered by insurance), except such as would
not have a Material Adverse Effect; (ii) there have been no changes in the
financial condition of HK, except such as would not have a Material Adverse
Effect; (iii) HK has not, except as disclosed in section 3.8 of the Schedule,
borrowed any money; (iv) HK has not paid any obligation or liability (fixed or
contingent) except current liabilities included in the Balance Sheet and current
liabilities incurred since July 31, 1995 in the ordinary course of business or
pursuant to the terms of this agreement; (v) HK has not declared any dividend or
other distribution on or with respect to any Shares; (vi) HK has not purchased,
redeemed or otherwise acquired for a consideration, directly or indirectly, any
Shares; (vii) HK has not disposed of, or agreed to dispose of, any material
property or asset, other than in the ordinary course of business and for a
consideration at least equal to the fair value of such property or asset, nor
has it leased to others, or agreed so to lease, any property or asset except in
the ordinary course of business and for a consideration at least equal to the
fair rental value of such property or asset nor has it transferred or granted
any other rights under any lease, license or agreement; (viii) HK has not made
any expenditures or commitments for the purchase, acquisition, construction or
improvement of a capital asset except in the ordinary course of business and in
an aggregate amount not exceeding $100,000; (ix) HK has not amended its
A-10
<PAGE> 47
certificate of incorporation or, except as disclosed in Section 3.8 of the
Schedule, its by-laws; (x) HK has not made any change in its accounting methods,
principles or practices; (xi) HK has not made any revaluation of any of its
assets, including any write down or write off of inventory or accounts
receivable other than in the ordinary course of business; and (xii) HK has not
entered into any other transaction or contract other than in the ordinary course
of business, other than this agreement.
3.9 Tax and Other Returns. Except as set forth in section 3.9 of the
Schedule, HK and its subsidiaries have duly and timely filed all U.S. federal
Tax (as defined below) returns and all other Tax filings required to be filed
including, but not limited to, all foreign, state and local Tax returns and
filings (all such federal, foreign, state and local returns and filings being
complete and correct in all material respects), except for such state and local
returns and filings with respect to which the failure to file would not have a
Material Adverse Effect, have duly paid or made provision for the payment of all
Taxes (including any interest or penalties) that are due and payable (whether or
not shown on any such tax returns) and paid all payments of estimated Tax due
and all Taxes required to be withheld and collected. Except as disclosed in
section 3.9 of the Schedule, the liability for Taxes reflected in HK's balance
sheet at July 31, 1995 is sufficient for the payment of all unpaid Taxes
(including interest and penalties), whether or not disputed, accrued or
applicable for the period then ended and for all years and periods ended prior
thereto. The federal, state, local and foreign Tax returns of HK and its
subsidiary have not been audited by the Internal Revenue Service ("IRS") or any
other taxing authority. Except as set forth in section 3.9 of the Schedule, HK
and its subsidiaries (i) have not executed or filed with the IRS or any other
taxing authority a waiver or a consent providing for an extension of time with
respect to the assessment of any Tax or deficiency; (ii) have not granted powers
of attorney with respect to any Tax matter that is currently in force and (iii)
are not currently under, or have not received notice of commencement of, any
audit by any taxing authority, and are not parties to any judicial proceeding
with respect to Taxes. HK and its subsidiary have not made any payments, are not
obligated to make any payments and are not parties to any agreement that under
certain circumstances could obligate them to make any payments that will not be
deductible under section 280G of the Internal Revenue Code of 1986 (the "Code").
HK and its subsidiaries are not, and have not been United States real property
holding corporations within the meaning of section 897(c)(2) of the Code during
the applicable period specified in section 897(c)(1)(A)(ii) of the Code. Except
as set forth in section 3.9 of the Schedule, HK and its subsidiary have not
filed consents pursuant to 341(f) of the Code or agreed to have 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as such term is defined
in 341(f)(4) of the Code) owned by HK or its subsidiary. HK and its subsidiary
are not parties to any tax allocation or sharing agreement. HK and its
subsidiary are not and have never been (nor do HK and its subsidiary have any
liability for unpaid Taxes because they once were) members of an affiliated
group. For purposes of this agreement, the term "Taxes" (or "Tax", where the
context requires) shall mean all federal, state, local, foreign or other income,
gross receipts, sales, use, ad valorem, franchise, capital, profits, license,
and other withholding, employment, payroll, transfer, conveyance, documentary,
stamp, property, value added, customs duties, minimum taxes and any other taxes,
fees, charges, levies, excises, duties, or assessments of any kind whatsoever,
together with additions to tax or additional amounts, interest and penalties
relating thereto.
3.10 Employment Arrangements. Section 3.10 of the Schedule lists each
employment, severance, change of control, commission or consultant contract,
written or oral, with any present or former officer, director or employee, or
any collective bargaining agreement to which HK is a party. Except as disclosed
in section 3.10 of the Schedule since April 30, 1995 there has been no change in
any such plan or arrangement or in compensation to any director or officer, or
any change, either material in amount or other than in the ordinary course of
business, in compensation to any other employee of HK. Except as disclosed in
section 3.10 of the Schedule, since February 1, 1990 there have been no strikes,
work stoppages, work slowdowns or other labor unrest against HK or at any of its
locations in any material respect. HK's relations with its employees are good.
3.11 Property. HK has good and marketable title in fee simple to all of
the real property reflected on the Balance Sheet or acquired after the date
thereof and good and marketable title to all of the other tangible properties
and assets (other than properties and assets sold or otherwise disposed of for
fair value after the date thereof in the ordinary course of business) free and
clear of all mortgages, liens, pledges, restrictions, charges
A-11
<PAGE> 48
or encumbrances of any nature whatsoever, except (i) liens for taxes not yet
delinquent; (ii) liens for taxes and assessments not in excess of $25,000
individually or $100,000 in the aggregate being contested in good faith by
appropriate proceedings; (iii) such imperfections of title and encumbrances, if
any, as do not materially detract from the value of, or materially interfere
with the present use of, such property; and (iv) for those listed in section
3.11 of the Schedule. Each lease of real property, and each lease of personal
property requiring payments of $100,000 or more per annum to which HK is a party
(as lessor or lessee) is valid and effective and there are no known defaults
thereunder by any party thereto. No executive officers of HK have received
notice of any material violation of any zoning regulation, ordinance or other
law, order, regulation or requirement relating to real property owned or leased
by HK.
3.12 Patents, Trademarks, etc. HK owns, or is licensed to use, all
trademarks, trade names, copyrights and patents used in or necessary for the
conduct of its business as currently conducted which are material to its
business, assets, results of operations or financial condition. Section 3.12 of
the Schedule correctly lists all such trademarks, trade names, copyrights and
patents. The use by HK of such trademarks, trade names, copyrights or, to the
best of HK's knowledge, patents does not infringe upon or conflict with any
patent, trademark, trade name or copyright of others.
3.13 Litigation. HK is not a party to or threatened with any litigation,
governmental or other proceeding or investigation that, if adversely determined,
would have a Material Adverse Effect, other than any such matter arising in the
ordinary course fully covered by HK's insurance policies, and there is no
outstanding order, writ, injunction or decree of any court or governmental
agency against or affecting HK.
3.14 Proxy Statement. When the Proxy Statement referred to in section 2.9
or any amendment or supplement thereto shall be mailed to stockholders of HK,
and at all times subsequent to such mailing up to and including the Closing Date
(as promptly amended or supplemented, if so required), such Proxy Statement and
all amendments or supplements thereto, (i) will comply in all material respects
with the provisions of the Exchange Act, and all rules and regulations of the
SEC promulgated thereunder, and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein in light of the circumstances
under which they were made, not misleading, provided that no representation or
warranty is made with respect to information included in the Proxy Statement
based on information supplied by Parent or SUB specifically for inclusion
therein.
3.15 Brokers' and Finders' Fees. Section 3.15 of the Schedule lists the
only agent, broker, person or firm acting on behalf of HK or under its authority
which has claimed or is or will be entitled to any commission or broker's or
finder's fee from HK in connection with the Merger.
3.16 Insurance. Section 3.16 of the Schedule lists and briefly describes
all policies of fire, liability, workmen's compensation, life, business
interruption and other types of insurance held by HK.
3.17 Pension, Retirement and Profit Sharing Plans.
(a) Section 3.17(a) of the Schedule lists each Benefit Plan (as defined
below) and each Multiemployer Plan (as defined below). HK has provided to the
Parent true and complete copies of the following: (1) each of the Benefit Plans;
(2) summary plan descriptions of each of the Benefit Plans; (3) each trust
agreement, insurance policy or other instrument relating to the funding of each
of the Benefit Plans; (4) the two most recent Forms 5500 with respect to each of
the Benefit Plans; (5) the most recent audited financial statement for each of
the Benefit Plans; (6) each policy of fiduciary liability insurance and related
agreements maintained in connection with the Benefit Plans; and (7) the most
recent determination letter issued by the Internal Revenue Service (the "IRS")
with respect to each of the Benefit Plans that is intended to qualify under
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Except as set forth in section 3.17(a) of the Schedule, each Benefit Plan has
complied and currently is in compliance, both as to form and operation, with the
applicable provisions of the Code and the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), in all material respects. Each Benefit Plan
intended to qualify under section 401 of the Code is the subject of a favorable
determination letter issued by the IRS (which has not revoked or threatened to
revoke such letter) regarding the qualified status of the plan.
A-12
<PAGE> 49
(b) HK has complied with and performed all contractual obligations and all
obligations under applicable federal, state and local laws, rules and
regulations (domestic and foreign) required to be performed by it under or with
respect to any of Benefit Plans or any related trust agreement or insurance
contract, except where the failure to so comply or perform would not have a
Material Adverse Effect. All contributions and other payments required to be
made by HK to any Benefit Plan prior to the date hereof have been made. No
Benefit Plan is, and within the past six years HK has not maintained a plan that
is, subject to Part 3 of Title I of ERISA, section 412 of the Code or Title IV
of ERISA (a "Defined Benefit Plan"). No Benefit Plan has any accumulated funding
deficiency whether or not waived. There is no claim, investigation, suit,
action, dispute, grievance, charge, complaint, restraining or injunctive order,
litigation or proceeding pending, threatened or anticipated (other than routine
claims for benefits) against or relating to any Benefit Plan or against the
assets of any Benefit Plan. HK has not communicated (whether orally or in
writing) generally to employees or specifically to any employee regarding any
future increase of benefit levels (or creations of new benefits) with respect to
any Benefit Plan beyond those reflected in the copies of the Benefit Plans
provided to Parent, or the adoption or creation of any new benefit plan.
(c) Except as set forth in section 3.17(c) of the Schedule, HK has not
participated in or had an obligation to contribute to any Multiemployer Plan, or
incurred any withdrawal liability in respect of any Benefit Plan. In the event
HK were to withdraw as of the Effective Time from all Multiemployer Plans to
which it contributes, it would not incur any withdrawal liability except as set
forth in section 3.17(c) of the Schedule.
(d) No event or transaction in respect of a Benefit Plan (including,
without limitation, any "prohibited transaction" within the meaning of section
4975 of the Code or section 406 of ERISA) has occurred with respect to which HK,
directly or indirectly (through any indemnification agreement or otherwise), is
or could be expected to be subject to any liability or tax of any kind,
including, without limitation, under ERISA and the Code, except such as would
not have a Material Adverse Effect.
(e) Except as set forth in section 3.17(e) of the Schedule, no transaction
contemplated by this agreement will (either alone or upon the occurrence of any
additional or subsequent events) (i) constitute an event under any Benefit Plan,
trust funding a Benefit Plan or agreement with any employee that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in compensation or
benefits or obligation to fund benefits, (ii) result in any liability to the
PBGC under Title IV of ERISA, or (iii) result in the triggering or imposition of
any restrictions or limitations on the right or ability of HK or SUB to amend or
terminate any Benefit Plan or trust and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. Each Benefit Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms and in
accordance with the applicable provisions of the Code and ERISA, without any
losses, damages, liabilities, costs or expenses (other than incidental costs of
affecting such amendment or termination) to HK, SUB or any of their respective
affiliates.
(f) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(g) Except as set forth in section 3.17(g) of the Schedule, HK does not
maintain or contribute to any Benefit Plan which provides, and does not have any
liability or obligation to provide, life insurance, medical or other employee
welfare benefits to any employee (or such employee's beneficiary) upon such
employee's retirement or termination of employment, except as may be required by
federal, state or local laws, rules or regulations (domestic and foreign), and
HK has never represented, promised or contracted to any employee that such
employee would be provided with life insurance, medical or other employee
welfare benefits upon such employee's retirement or termination of employment,
except to the extent required by federal, state or local laws, rules or
regulations (domestic and foreign).
(h) "Benefit Plan" shall mean any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, welfare, workmen's compensation or other
insurance, severance, separation or other employee
A-13
<PAGE> 50
benefit plan, practice, policy or arrangement of any kind, including, but not
limited to, any "employee benefit plan" within the meaning of section 3(3) of
ERISA (other than a Multiemployer Plan) established by HK or to which HK
contributes or has contributed (including Benefit Plans not now maintained by
HK; Benefit Plans to which HK contributes or has contributed, and Benefit Plans
not now maintained by HK or to which HK does not now contribute, but with
respect to which HK has or may have any liability), and (ii) a "Multiemployer
Plan" shall have the meaning set forth in sections 3(37) and 4001(a)(3) of ERISA
.
3.18 Environmental Compliance.
(a) (i) HK is in compliance with all applicable federal, state and local
laws and regulations relating to pollution or the protection of human health or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance that individually or in the aggregate would
not have a Material Adverse Effect on HK, which compliance includes, but is not
limited to, the possession by HK of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (ii) HK has not received written notice of
and, to the best knowledge of HK, is not the subject of any action, cause of
action, claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim") that individually or in the aggregate would have a Material Adverse
Effect on HK and (iii) except as set forth in section 3.18 of the Schedule, to
the best knowledge of HK, there are no circumstances that are reasonably likely
to prevent or interfere with such compliance in the future or give rise to an
Environmental Claim that individually or in the aggregate would have a Material
Adverse Effect on HK.
(b) There are no Environmental Claims which individually or in the
aggregate would have a Material Adverse Effect on HK that are pending or, to the
best knowledge of HK, threatened against HK or, to the best knowledge of HK,
against any person or entity whose liability for any Environmental Claim HK has
or may have retained or assumed either contractually or by operation of law.
(c) There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath, above or into the
real property owned, leased, used, or in which any other interest is maintained
by HK at the Effective Time or previously owned by, used by or leased to HK
(collectively, the "Property"), of any pollutants, contaminants, hazardous
substances, hazardous chemicals, toxic substances, hazardous wastes, infectious
wastes, radioactive materials, petroleum (including crude oil or any fraction
thereof), or asbestos fibers (collectively referred to herein as "Hazardous
Materials"), including but not limited to those defined in any Environmental
Law, except such of the foregoing occurrences as would not, individually or in
the aggregate, have a Material Adverse Effect on HK.
(d) (i) To the best knowledge of HK, there is no current storage, disposal,
generation, manufacture, refinement, transportation, production or treatment of
any Hazardous Materials at, upon or from the Property; (ii) no friable asbestos
fibers or materials or polychlorinated biphenyls (PCBs) on the Property and
(iii) no underground storage tanks located on the Property except such as would
not, individually or in the aggregate, have a Material Adverse Effect.
(e) No Hazardous Materials managed or handled by HK have come to be located
at any site that is listed or proposed for listing pursuant to the Federal
Comprehensive Environmental Response, Compensation and Liability Act, or
analogous state law ("CERCLA") that could lead to claims against HK for clean-up
costs, remedial work, damages to natural resources or for personal injury claims
under Environmental Laws.
(f) No property operated by HK or for which HK could have legal
responsibility is listed or proposed for listing pursuant to CERCLA.
3.19 Inventories. The inventories set forth on HK's balance sheet dated
July 31, 1995 are and all inventories held at the Effective Time will be
properly valued at the lower of cost (last-in, first-out for inventories) or
market using the retail method of valuation and in accordance with generally
accepted accounting principles consistently applied and, except for obsolete
items which have been fully written off or reserved for, consist of items of a
quality and quantity currently usable and saleable in the ordinary course of
business without markdown or discount.
A-14
<PAGE> 51
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and SUB
represent and warrant as follows:
4.1 Organization, Good Standing, etc. Each of Parent and SUB is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, has all requisite power and authority to own its
properties and to carry on its business as now being conducted.
4.2 Authorization of Agreement. The execution and delivery of this
agreement by Parent and SUB and the consummation of the Merger have been duly
authorized by the board of directors of Parent and SUB and by Parent as the sole
stockholder of SUB, do not require the consent, approval or authorization of or
filing with any person or public authority other than the filings with FTC and
Justice contemplated by section 5.4 and will not violate any law, statute,
regulation, injunction, order or decree of any governmental agency or authority
or court or conflict with or result in a breach of or constitute a default under
any of the terms or provisions of any mortgage, note, bond or indenture or
material obligation to which either Parent or SUB is a party or by which either
of them or any of their properties may be bound.
4.3 Proxy Statement. When the Proxy Statement referred to in section 2.9
or any amendment or supplement thereto shall be mailed to holders of securities
of HK, and at all times subsequent to such mailing up to and including the
Closing Date (as promptly amended or supplemented, if so required), such Proxy
Statement and all amendments or supplements thereto, with respect to all
information set forth therein provided by Parent and SUB for inclusion therein,
(i) will comply in all material respects with the provisions of the Exchange
Act, and all rules and regulations of the SEC promulgated thereunder, and (ii)
will not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, in light of the circumstances under which they
were made.
4.4 Financing Commitment. Parent has, on or prior to the date hereof,
furnished to HK a true and complete copy of the commitment letter dated
September 11, 1995 (the "Financing Commitment Letter") from Nomura Holding
America Inc. ("Nomura"), pursuant to which, subject to the terms and conditions
thereof, Nomura has committed to provide all of the financing ("Financing")
necessary to purchase the Shares pursuant to the Offer and the Merger pursuant
to a Short Form Merger. The Financing Commitment Letter is in full force and
effect as of the date of this agreement. Parent believes as of the date of this
agreement that it will be able to obtain the Financing on terms and conditions
substantially as set forth in the Financing Commitment Letter.
4.5 No Litigation. There is no action, suit, proceeding or investigation,
pending or, to the knowledge of Parent or SUB, threatened, involving Parent or
SUB or any of Parent's subsidiaries, at law or in equity, or before any federal,
state, foreign, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, that in the aggregate is reasonably likely to
prevent or materially impair or materially delay the consummation of the
transactions contemplated hereby.
4.6 Brokers and Finders. Except as disclosed to HK in writing, no agent,
broker, person or firm acting on behalf of Parent or under its authority has
claimed or is or will be entitled to any commission or broker's or finder's fee
from Parent in connection with the Merger.
5. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
5.1 Conduct of Business of HK.
(a) Except as contemplated by this agreement, during the period from the
date hereof to the Effective Time, HK shall operate in all respects in the
ordinary course and in a manner consistent with past practices; without limiting
the generality of the foregoing, HK shall not, without the prior written consent
of Parent or SUB, take any of the following actions:
(i) amend or propose to amend its certificate of incorporation or
by-laws or create any subsidiary;
(ii) authorize for issuance, issue (other than issuances of Shares
pursuant to the exercise of Options), sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or
A-15
<PAGE> 52
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities or
equity equivalents (including, without limitation, any stock options,
warrants or stock appreciation rights);
(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, warrants, stock or property or any combination thereof) in respect of
its capital stock or redeem or otherwise acquire any of its securities;
(iv) (A) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to HK except for
the renewal of HK's revolving line of credit as described in section 5.1 of
the Schedule; (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to HK; (C) make
any loans, advances or capital contributions to or investments in any other
person (other than customary loans or advances to employees in the ordinary
course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (D) pledge or otherwise
encumber shares of capital stock of HK or (E) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material Lien (as defined below) thereupon;
(v) except as may be contemplated by this agreement, enter into, adopt
or amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or any other
employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any manner, or
(except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a material
increase in benefits or compensation expense to HK, and as required under
existing agreements or in the ordinary course of business generally
consistent with past practice) increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights
or performance units) or pay or agree to pay any management fee or other
payment to any Majority Seller or any of their affiliates;
(vi) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice, or enter into
any commitment or transaction outside the ordinary course of business
consistent with past practice or waive any rights that may exist under any
confidentiality agreement to which HK may be a party;
(vii) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
methods, principles or practices used by it;
(viii) revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts
receivable, other than in the ordinary course of business;
(ix) (A) acquire (by merger, consolidation, or acquisition of stock or
assets or otherwise), any corporation, partnership or other business
organization or division thereof or any equity interest therein; (B) enter
into any contract or agreement other than in the ordinary course of
business consistent with past practice; (C) authorize any new capital
expenditure or expenditures which individually is in excess of $100,000 or,
in the aggregate, are in excess of $500,000; provided, that none of the
foregoing shall limit any capital expenditure already included in HK's 1995
capital expenditure budget previously provided to Parent or SUB or (D)
enter into or amend any contract, agreement, commitment or arrangement
providing for the taking of any action that would be prohibited hereunder;
(x) make any tax election or settle or compromise any income tax
liability of HK;
(xi) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the financial statements (or the notes thereto) of HK or incurred in
the ordinary course of business consistent with past practice;
A-16
<PAGE> 53
(xii) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby; or
(xiii) take, or agree in writing or otherwise to take, any of the
actions described in sections 5.1(i) through 5.1(xii) or any action that
would make any of the representations or warranties of HK contained in this
agreement untrue or incorrect as of the date when made or would result in
any of the conditions set forth in section 1.1(c) not being satisfied. For
purposes of this agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset.
(b) In addition, HK shall use all commercially reasonable efforts to
continue its current business relationships (including all rights of exclusivity
with respect to any product or products) with all significant vendors and
suppliers.
(c) Anything to the contrary notwithstanding, at the closing of the Offer
or Merger HK shall be permitted to pay the reasonable fees and expenses of
Winston & Strawn, its legal counsel, provided that invoices and detailed support
with respect to such fees and expenses have been provided to Parent prior to the
closing.
5.2 Other Agreements of HK.
(a) Simultaneously with the execution and delivery of this agreement, the
Majority Sellers are delivering to Parent the Stockholders Agreement duly
executed by the Majority Sellers. In addition, prior to the consummation of the
Offer or the Merger, HK shall have terminated any and all management agreements
and any other arrangements pursuant to which HK paid fees or expenses of any
kind to any stockholder or other affiliate, all without liability of any kind to
such persons, and shall deliver to Parent satisfactory evidence of that
termination. In addition, HK shall cause each such person to refund to HK, prior
to any closing hereunder, a pro rata amount of all fees paid under any such
management and other agreements that may have been prepaid by HK (with such pro
rata amount determined based on the number of elapsed days over the period for
which such payment relates).
(b) HK shall give to Parent and to its counsel, accountants and other
representatives full access, during normal business hours, to all of the
employees, agents, properties (including for the purpose of conducting any
environmental reviews thereof), books, contracts, commitments and records of HK
and shall furnish all such information concerning its business and properties as
Parent reasonably may request. If no Closing occurs, Parent shall keep such
information confidential according to the terms of that certain Confidentiality
Agreement dated April 25, 1995 (the "Confidentiality Agreement") and not release
same to any third party without the written consent of HK.
(c) HK shall use all reasonable efforts to obtain all consents and other
approvals as may be required to enable it to perform its obligations hereunder.
(d) HK shall cause its officers, directors and employees to, and shall use
its best efforts (it being understood that for this purpose "best efforts" shall
include termination of any relationship with any representative, advisor,
attorney, accountant or agent who fails to comply) to cause its representatives,
advisors, attorneys, accountants and agents to (i) immediately cease any
existing discussions or negotiations, if any, with any corporation, partnership,
person (which includes a "person" as such term is defined in section 13(d)(3) of
the Exchange Act) or other entity or group other than Parent and SUB, any
affiliates or associate of Parent and SUB or any designees of Parent and SUB
(each, a "Third Party") conducted heretofore with respect to a tender offer or
exchange offer for any Shares, any acquisition of more than 25% of the assets
of, or more than 25% of the equity interest in, HK or any merger, consolidation
or other business combination with HK (each, a "Business Combination") and (ii)
shall not, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with or provide any information to any
Third Party concerning any Business Combination; provided, that nothing in this
section 5.2(d) shall be deemed to prohibit HK from (x) furnishing information
and access, in each case only in response to unsolicited requests therefor, to
any Third Party pursuant to confidentiality agreements or (y) participating in
discussions and negotiating with such entity or group concerning any Business
Combination involving HK or any division of HK if, in the case of either (x) or
(y), such Third Party has submitted an unsolicited bona fide written proposal to
the Board
A-17
<PAGE> 54
relating to any such Business Combination and the Board by a majority vote
determines in its good faith judgment, after consulting legal counsel, that
failing to take such action would be inconsistent with the Board's fiduciary
duty to HK's stockholders under applicable law. The Board shall provide a copy
of any such written proposal to Parent or SUB immediately after receipt thereof
and thereafter keep Parent and SUB promptly advised of any amended proposal with
respect thereto. Nothing contained in this section 5.2(d) shall prohibit HK from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act, or from making any disclosure to HK
stockholders if, in the good faith judgment of the board of directors of HK
based on the recommendation of outside legal counsel, failure to do so would be
inconsistent with applicable laws; provided that HK does not, except as
permitted by section 1.2(a)(ii), withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or recommend, or
propose to approve or recommend, a takeover proposal.
(e) HK shall cause all necessary documents to be prepared and submitted to
(i) the New York State Department of Taxation and Finance required under the New
York Real Estate Transfer Tax (NY Tax Law Article 31) and New York Tax on Gains
Derived from Certain Real Property Transfers (NY Tax Law Article 31-B) and (ii)
any other relevant tax authorities to which transfer taxes are required to be
paid. In furtherance of this agreement, HK and Parent shall cause any required
Forms TP-580, TPO-581 and TP-584 to be prepared and submitted.
(f) Anything in this agreement (including any matter referred to in
section 3.11) notwithstanding, HK shall cause First American Title Insurance
Company to issue (at standard title insurance premiums) to HK, at the
consummation of the Offer and/or at the Closing (as directed by the Buyer), an
ALTA Owner's Policy (10/17/92) with a TIRSA Non-Imputation Endorsement (Stock
Acquisition) (8/15/94), with respect to each of (i) the East Brunswick, New
Jersey owned real estate, which policy shall be in the amount of $4,000,000 and
contain only those exceptions listed in section 5.2(f)-1 of the Schedule plus an
exception as to real estate taxes and assessments not yet due and payable; and
(ii) the Livingston, New Jersey owned real estate, which policy shall be in the
amount of $4,500,000 and contain only those exceptions listed in section
5.2(f)-2 of the Schedule plus an exception as to real estate taxes and
assessments not yet due and payable.
(g) HK shall cooperate with Parent and SUB in their efforts to satisfy on
or before the Effective Time all requirements of the definitive financing
agreements which are conditions to closing all transactions constituting the
Financing and to drawing down the cash proceeds thereunder.
5.3 Agreements of Parent.
(a) Parent shall supply HK with all information relating to Parent and SUB
as shall be required for inclusion in the Proxy Statement.
(b) Parent shall use all reasonable efforts to obtain all consents and
other approvals as may be required to enable it and SUB to perform their
respective obligations hereunder.
(c) Parent shall use its reasonable best efforts to obtain all financing
needed to effect the Merger on terms reasonably satisfactory to Parent.
(d) Parent and SUB shall each use its reasonable best efforts to satisfy
on or before the Effective Time all requirements of the definitive financing
agreements which are conditions to closing all transactions constituting the
Financing and to drawing down the cash proceeds thereunder. The obligations
contained herein are not intended, nor shall they be construed, to benefit or
confer any rights upon any person, firm or corporation other than HK, Parent and
SUB, respectively.
5.4 H-S-R Filings. HK and Parent each shall file timely with FTC and
Justice all notices, reports and other documents required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and shall
promptly submit any additional information or documentary material requested by
any such governmental agency or department.
5.5 Public Announcements. Neither HK nor Parent shall without prior
written consent of the other (or, in the case of an announcement required by
applicable securities law, without prior written notice to and consultation with
the other) issue any press release or otherwise make any public statement or
furnish any
A-18
<PAGE> 55
written statement to its stockholders concerning the transactions contemplated
by this agreement, except as may be required by applicable legal requirements.
6. CONDITIONS PRECEDENT TO THE CLOSING.
6.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party hereto to effect the Merger is subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) this agreement shall have been adopted by the requisite affirmative
vote of the stockholders of HK or SUB shall have acquired sufficient Shares in
the Offer to effect a Short Form Merger;
(b) no statute, rule, regulation, executive order, decree, court order,
ruling or preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any local, state or federal court or governmental
authority in the United States that prohibits, restrains, enjoins or materially
restricts the consummation of the Merger;
(c) any waiting period applicable to the consummation of the Merger under
the HSR Act shall have terminated or expired;
(d) the Financing Condition shall have been satisfied; provided, however,
that this condition shall be deemed to have been waived if Parent or SUB has
purchased any Shares pursuant to the Offer.
6.2 Additional Conditions to the Obligations of Parent and SUB to Effect
the Merger. The obligations of each of Parent and SUB to effect the Merger are
also subject to the satisfaction of the following additional conditions;
provided, however, that the following conditions shall be deemed to have been
waived if Parent or SUB has purchased any Shares pursuant to the Offer:
(a) there shall not have occurred or been threatened any event or series
of events or any condition or circumstance arisen that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
HK, determined by reference to the business, assets, results of operations or
financial condition of HK at July 31, 1995;
(b) the representations and warranties of HK contained in this agreement
shall be true and correct in all material respects on and as of the date of
consummation of the Merger as though made on and as of that date, except (i) for
changes occurring after the date of this agreement that are specifically
permitted by this agreement, including changes resulting from conduct permitted
under section 5.1, and (ii) that those representations and warranties that
address matters only as of a particular date shall remain true and correct as of
that date; and Parent and SUB shall have been furnished with a certificate of HK
to the effect of the matters referred to above (and only excepting the matters
referred to in items (i) and (ii) above) executed by its Chairman in form and
substance satisfactory to Parent and SUB; and
(c) HK shall have performed and complied in all material respects with all
obligations, covenants, agreement and conditions required by this agreement to
be performed or complied with by it prior to or on the date of consummation of
the Merger, and Parent and SUB shall have been furnished with a certificate of
HK to that effect executed by its Chairman in form and substance satisfactory to
Parent and SUB.
6.3 Additional Conditions to the Obligations of HK to Effect the
Merger. The Obligations of HK to effect the Merger are also subject to the
satisfaction of the following additional conditions; provided, however, that the
following conditions shall be deemed to have been satisfied if Parent or SUB has
purchased any Shares pursuant to the Offer:
(a) the representations and warranties of Parent and SUB contained in this
agreement shall be true and correct in all material respects on and as of the
date of consummation of the Merger as though made on and as of that date, except
(i) for changes occurring after the date of this agreement that are specifically
permitted by this agreement, and (ii) that those representations and warranties
that address matters only as of a particular date shall remain true and correct
as of that date; and HK shall have been furnished with a certificate of each of
Parent and SUB to the effect of the matters referred to above (and only
excepting the matters referred to in
A-19
<PAGE> 56
items (i) and (ii) above) executed by their respective Chairmen in form and
substance satisfactory to HK; and
(b) Parent and SUB shall have performed and complied in all material
respects with all obligations, covenants, agreements and conditions required by
this agreement to be performed or complied with by them prior to or on the date
of consummation of the Merger, and HK shall have been furnished with a
certificate of Parent and SUB to that effect executed by their respective
Chairmen in form and substance satisfactory to HK.
6.4 Materiality of Representations and Warranties. Notwithstanding
anything contained herein, no condition involving the accuracy of
representations and warranties made by HK as of the date hereof or the Effective
Time shall be deemed not fulfilled, and Parent and SUB shall not be entitled to
fail to consummate the transactions contemplated by this agreement or terminate
this agreement on such basis, if the respects in which such representations and
warranties are untrue, in the aggregate, would not be reasonably likely to
result in a Material Adverse Effect on HK, determined by reference to the
business, assets, results of operations or financial condition of HK at July 31,
1995. Notwithstanding anything contained herein, no condition involving the
accuracy of representations and warranties made by Parent and SUB as of the date
hereof or the Effective Time shall be deemed not fulfilled, and HK shall not be
entitled to fail to consummate the transactions contemplated by this agreement
or terminate this agreement on such basis, if the respects in which such
representations and warranties are untrue, in the aggregate, would not be
reasonably likely to result in a Material Adverse Effect on the ability of
Parent and SUB to perform their respective obligations hereunder.
7. AMENDMENT OF AGREEMENT; WAIVERS.
7.1 Amendment. At any time, whether before or after submission to or
approval by the stockholders of HK as provided herein, this agreement may be
amended by an instrument in writing executed by the parties.
7.2 Waiver. Any party hereto may waive in writing compliance by the
others with any of the covenants and conditions contained in this agreement
(except such as may be imposed by law); such waiver shall be signed, in the case
of HK, by any one of its President and Vice Presidents, and in the case of
Parent or SUB, by any one of its President and Vice Presidents.
8. TERMINATION.
8.1 Termination. This agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, and the Offer may be
abandoned at any time prior to acceptance for payment of the tendered Shares:
(a) by mutual written consent of Parent, SUB and HK;
(b) by Parent, SUB or HK if any statute, rule, regulation, executive
order, decree, court order, ruling or preliminary or permanent injunction shall
have been enacted, entered, promulgated or enforced by any local, state or
federal court or governmental authority in the United States that prohibits,
restrains, enjoins or materially restricts the consummation of the Merger or
that would make the acquisition or holding by Parent or SUB of the Shares or
shares of common stock of the Surviving Corporation illegal; provided, that
prior to invoking this provision in respect of any such injunction, the party
seeking to invoke this provision shall use all commercially reasonable efforts
to have any such injunction vacated;
(c) by Parent, SUB or HK, if the board of directors of HK shall have
withdrawn or modified, or proposed to withdraw or modify, in a manner adverse to
Parent or SUB, its approval or recommendation of the Offer, this agreement or
the Merger pursuant to section 1.2(a)(ii); provided, however, that HK may not
exercise this right until after one business day following the expiration or
termination of the Offer (as it may have been extended pursuant to the
penultimate sentence of section 1.1(a)) and may then exercise this right if and
only if SUB has not then purchased at least 90% of the outstanding Shares;
(d) by Parent and SUB, on the one hand, or HK, on the other hand, if the
90% Minimum Condition is satisfied and, due to an occurrence or circumstance
that would result in failure to satisfy any of the other conditions to the Offer
pursuant to section 1.1(c) above, SUB shall have failed to pay for Shares
pursuant to the Offer after one business day following the expiration or
termination of the Offer (or such later day to which the Offer is extended
pursuant to the penultimate sentence of section 1.1(a)), except that the
foregoing
A-20
<PAGE> 57
right may not be exercised by a party in the event that such failure has been
caused by or results from the failure of that party to perform in any material
respect any of its respective covenants or agreements contained in this
agreement;
(e) by Parent and SUB, on the one hand, or HK, on the other hand, if the
Financing Commitment Letter is no longer in full force and effect and, within
ten business days thereafter, Parent fails to deliver to HK reasonable evidence
that it has obtained a financing commitment (on terms not materially more
adverse than the terms and conditions of the Financing Commitment Letter) to
enable it to consummate the Long Form Merger.
(f) by either the Parent or HK if the consummation of the Merger has not
occurred on or before March 1, 1996, except that the foregoing right may not be
exercised by a party in the event that such failure has been caused by or
results from the failure of that party to perform in any material respect any of
its respective covenants or agreements contained in this agreement.
8.2 Procedure and Effect to Termination. In the event of termination of
this agreement as provided in this section 8, notice thereof shall be promptly
given by the terminating party to the other parties and thereafter this
agreement shall be of no further force or effect and there shall be no liability
on the part of any party with respect thereto except (i) as otherwise expressly
provided in section 5.2(b) and section 9.1 and (ii) for any willful breach of
this agreement that occurs prior to termination (and nothing in this agreement,
including but not limited to section 9.1(b), shall diminish or impair the right
of any of the parties to assert any claim or cause of action pursuant to this
clause (ii)).
9. MISCELLANEOUS.
9.1 Fees and Expenses.
(a) HK shall pay to Parent a fee of $1,500,000 (the "Termination Fee"),
payable in immediately available funds, plus an amount equal to the Expenses (as
defined in section 9.1(b)), but not more than $1,850,000 of such Expenses,
within one business day after any termination of this agreement pursuant to
section 8.1(c).
(b) For purposes of this section 9.1, "Expenses" shall mean all reasonable
out-of-pocket fees and expenses incurred or paid by or on behalf of Parent or
SUB or any of their affiliates in connection with the Offer, the Merger or the
consummation of any of the transactions contemplated by this agreement,
including all fees and expenses of counsel, investment banking firms, lending
institutions, accountants, experts and consultants; the $500,000 cash fee
payable to SUB's proposed lender pursuant to the Financing Commitment Letter
shall be deemed to be a reasonable Expense for purposes of this section 9.1.
(c) Except as set forth in this section 9.1, each party to this agreement
shall bear its own costs and expenses related hereto.
(d) HK shall not pay any legal, accounting and other costs, fees and
expenses incurred by or on behalf of any of the stockholders of HK in connection
with the transactions contemplated hereby.
9.2 Nonsurvival of Representations, Warranties. None of the
representations and warranties in this agreement or in any instrument delivered
pursuant to this agreement shall survive the Effective Time. This section 9.2
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time or termination.
9.3 Notices. All notices and other communications under this agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) reputable overnight delivery
service. Notices shall be sent to the appropriate party at its address or
facsimile number given below (or at such other address or facsimile number for
such party as shall be specified by notice given hereunder):
A-21
<PAGE> 58
If to the Parent or Sub, to it at:
7069 Consolidated Way
San Diego, CA 92121
Attention: Michael Solomon
Telecopy No.: (619) 268-0021
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036
Attention: Edward R. Mandell, Esq.
Telecopy No.: (212) 704-6288
If to HK, to it at:
c/o JG Industries, Inc.
1615 West Chicago Avenue, 4th Floor
Chicago, IL 60622
Attention: William Hellman
Telecopy No.: (312) 787-5625
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attention: Robert F. Wall, Esq.
Telecopy No.: (312) 558-5700
All such notices and communications shall be deemed given upon (a) actual
receipt thereof by the addressee, (b) actual delivery thereof to the appropriate
address, (c) in the case of a facsimile transmission, upon transmission thereof
by the sender and issuance by the transmitting machine of a confirmation slip
confirming that the number of pages constituting the notice have been
transmitted without error and (d) in the case of overnight delivery service, the
day after such notice is given to such service for delivery. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed given.
9.4 Headings. The headings in this agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this agreement.
9.5 Governing Law. The agreement shall be construed, and the rights of
the parties hereto determined, in accordance with the internal laws of the state
of Delaware.
9.6 Assignment. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns,
provided that this agreement shall not be assignable by any party hereto except
with the written consent of the other parties. Nothing in this agreement,
express or implied, is intended to confer upon any person, other than the
parties hereto and their successors and permitted assigns, any rights or
remedies under or by reason of this agreement, other than section 2.5, section
2.7, section 2.8, section 9.7 and section 9.12.
9.7 Officers' and Directors' Insurance; Indemnification.
(a) For six years from the Effective Time, the Parent and the Surviving
Corporation shall use all reasonable efforts to cause to be maintained in effect
HK's current directors' and officers' insurance and indemnification policy or an
equivalent policy or policies (so long as no lapse in coverage occurs as a
result of such substitution) relating to actions, alleged actions, omissions,
and alleged omissions occurring on or prior to
A-22
<PAGE> 59
the Effective Time (the "D&O Insurance"), on terms no less favorable than those
of such current policy in terms of coverage and amounts so long as the annual
premium(s) therefor are not in excess of 150% of the last annual premium(s) paid
prior to the date hereof (the "Maximum Premium"); provided, however, that if the
existing D&O Insurance expires, is terminated or canceled during such six-year
period, HK or the Surviving Corporation, as the case may be, shall use
reasonable efforts to obtain as much D&O Insurance as can be obtained for the
remainder of such period for annualized premium(s) not in excess of the Maximum
Premium.
(b) After the Effective Time, the Parent and the Surviving Corporation
shall indemnify and hold harmless the present and former directors and officers
of HK (and those persons becoming directors or officers of HK prior to the
Effective Time) (collectively, together with their respective heirs and
representatives, the "Indemnified Parties") to the maximum extent permitted
under Delaware law as from time to time may be in effect and (subject to any
limitations in effect from time to time under Delaware law) under HK's
certificate of incorporation and by-laws as in effect on the date hereof (true,
complete and correct copies of which have been previously provided to Parent and
SUB) from all claims by any person or persons, with respect to acts, omissions
or other matters whether occurring prior to, on or at the Effective Time,
relating to (i) the fact that he or she is or was a director, officer, employee
or agent of HK or any of its Subsidiaries or (ii) acts, omissions and other
matters arising from or relating to this agreement, the Stockholders Agreement
or the transactions contemplated hereby or thereby, and (subject to any
limitations in effect from time to time under Delaware law) will advance
expenses to such directors and officers promptly upon receipt of written request
therefor and delivery of the undertaking required by section 145(e) of the GCL
(or any successor provision), and such indemnification shall (to the maximum
extent permitted by applicable law) be mandatory rather than permissive;
provided, that such indemnification obligations shall continue in full force and
effect for the later of (i) a period of seven years from the Effective Time or
(ii) the expiration of the applicable statute of limitations.
(c) The obligations of the Parent and the Surviving Corporation under this
section 9.7 shall not be terminated or modified in such a manner as to adversely
affect any Indemnified Party to whom this section 9.7 applies without the
consent of each Indemnified Party (it being expressly agreed that the
Indemnified Parties to whom this section 9.7 applies shall be third party
beneficiaries of this provision). If Parent or SUB exercise the options granted
in the Stockholders Agreement, then it will become liable in the same manner
under this section 9.7 as if the Effective Time shall have occurred.
(d) If the Surviving Corporation or any of its successors or assigns (i)
reorganizes or consolidates with or merges into any other person and is not the
resulting, continuing or surviving corporation or entity of such consolidation
or merger or (ii) liquidates, dissolves or transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this section 9.7.
9.8 Material Adverse Effect. As used herein, "Material Adverse Effect"
means any change or effect that is or is reasonably likely to be materially
adverse to the business, assets, results of operations or financial condition of
HK or does or is reasonably likely to materially impair the ability of HK to
consummate the Merger.
9.9 Entire Agreement. This agreement and Schedule attached hereto and the
Confidentiality Agreement contain the entire agreement of the parties hereto
with respect to the Merger and the other transactions contemplated herein and
supersede all prior understandings and agreements of the parties with respect to
the subject matter hereof. Any reference herein to this agreement shall be
deemed to include the Schedule attached hereto.
9.10 Severability. If any one or more of the provisions of this agreement
shall be held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions of this agreement shall not be affected thereby. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this agreement invalid, illegal or unenforceable in any
respect. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
A-23
<PAGE> 60
9.11 Parent Guarantee. Parent hereby unconditionally guarantees the
obligations of SUB set forth in this agreement.
9.12 Purchase of Shares Pursuant to Stockholders Agreement. Promptly
after purchase of the Shares pursuant to the Stockholders Agreement, other than
in connection with the consummation of the Offer, the Buyer (as defined therein)
and Parent shall take such steps as may be necessary to effect a Long Form
Merger in conjunction and cooperation with HK or, if such Long Form Merger is
not effected, to provide to each holder of Shares, other than Jupiter (as
defined therein) and Sussex (as defined therein), the opportunity to sell his,
her or its Shares to the Buyer or Parent at a price, in cash, net to the seller,
of not less than the purchase price which Buyer or Parent has paid for the
Shares pursuant to the Stockholders Agreement.
<TABLE>
<S> <C>
Attest: HUFFMAN KOOS INC.
/S/ JOSEPH ALBANESE By: /S/ WILLIAM HELLMAN
- ------------------- -----------------------------
Secretary Name: William Hellman
Title: Chairman of the Board
BREUNER'S HOME FURNISHINGS
CORPORATION
Attest:
/S/ TERRY M. THEODORE By: /S/ MICHAEL H. SOLOMON
- --------------------- -----------------------------
Secretary Name: Michael H. Solomon
Title: Chairman of the Board
HK ACQUISITION COMPANY, INC.
Attest:
/S/ TERRY M. THEODORE By: /S/ MICHAEL H. SOLOMON
- --------------------- -----------------------------
Secretary Name: Michael H. Solomon
Title: Chairman of the Board
</TABLE>
A-24
<PAGE> 61
EXHIBIT B
STOCKHOLDERS AGREEMENT
DATED SEPTEMBER 18, 1995
The parties to this agreement are HK Acquisition Company, Inc., a Delaware
corporation (the "Buyer"), Breuner's Home Furnishings Corporation, a Delaware
corporation ("Parent"), Jupiter Industries, Inc., a Tennessee corporation
("Jupiter"), and Sussex Group, Ltd., a Delaware corporation ("Sussex" and,
together with Jupiter, the "Sellers").
Jupiter owns 800,000 shares (the "Jupiter Shares") and Sussex owns
1,400,000 shares (the "Sussex Shares") of the common stock, par value $.01 per
share (the "Common Stock"), of Huffman Koos Inc., a Delaware corporation (the
"Company"). The Jupiter Shares and the Sussex Shares together represent an
aggregate of 55.9% of the outstanding shares of the Common Stock as of this
date. The Jupiter Shares, the Sussex Shares and any additional shares that
either of the Sellers may acquire prior to any tender pursuant to section 1
hereof, prior to any vote pursuant to section 2 hereof, or prior to any purchase
pursuant to section 3 hereof, as applicable, are collectively referred to as the
"Shares."
Simultaneously with the execution and delivery of this agreement, the
Buyer, Parent and the Company are executing an agreement and plan of merger (the
"Merger Agreement") providing for a tender offer by the Buyer for all of the
outstanding Common Stock (the "Offer") for $9.375 per share in cash (such
amount, or any greater amount per share paid pursuant to the Offer, being
hereinafter referred to as the "Per Share Amount") and the subsequent merger of
the Buyer with and into the Company (with the Company as the surviving
corporation), or other acquisition of the Company by Parent (collectively, the
"Acquisition"). To induce the Buyer and Parent to enter into the Merger
Agreement, the Sellers wish to agree to tender their shares in the Offer, vote
their Shares in favor of the Merger Agreement, grant to the Buyer options to
purchase the Shares and agree to the other matters provided in this agreement,
all on the terms set forth below.
It is therefore agreed as follows:
1. TENDER OF SHARES. (a) Within ten business days after the commencement
by the Buyer of the Offer, each of the Sellers shall tender to the paying agent
or depositary designated in the offer to purchase document (and related letter
of transmittal) distributed by the Buyer in connection with the Offer (i) a
completed and signed letter of transmittal with respect to the Shares, complying
with the terms of the Offer, (ii) the certificates representing the Shares and
(iii) all other documents or instruments required to be delivered pursuant to
the terms of the Offer. So long as the consideration in the Offer is in cash and
is at least equal to the Per Share Amount, neither of the Sellers shall withdraw
the tender effected in accordance with this section 1(a) under any circumstances
unless (i) the Offer expires or is terminated in accordance with the Merger
Agreement or (ii) this agreement terminates pursuant to its terms.
(b) Each of the Sellers shall execute and deliver all such further
documents and instruments as the Buyer may reasonably request to vest in the
Parent and the Buyer the power to carry out the provisions of this agreement.
2. AGREEMENT TO VOTE; PROXY.
2.1 Agreement to Vote. Until the Expiration Date (as defined in section
3(e)), each of the Sellers shall, at any meeting of the stockholders of the
Company, however called, or in connection with any written consent of the
stockholders of the Company, vote (or cause to be voted) the Shares (i) in favor
of the Acquisition, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this agreement; (ii) against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or this agreement; and (iii) against any
action or agreement (other than the Merger Agreement) that is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially and adversely affect the Acquisition or any of the other
transactions to be consummated pursuant to the Merger Agreement, including, but
not limited to: (A) any extraordinary corporate transaction, such as a
B-1
<PAGE> 62
merger, consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of material assets of the Company or
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company or its subsidiaries; (C) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing by the Buyer;
(D) any material change in the present capitalization or dividend policy of the
Company or any amendment of the Company's certificate of incorporation or
by-laws; or (E) any other material change in the Company's corporate structure
or business. Neither Seller shall enter into any agreement or understanding with
any person or entity prior to the Expiration Date to vote or give instructions
after the Expiration Date in any manner inconsistent with the preceding
sentence.
2.2 Proxy. Each of the Sellers hereby grants from the date of this
agreement until the Expiration Date to, and appoints, the Buyer and the Chairman
of the Board, the President, the Secretary and the Chief Financial Officer of
the Buyer, in their respective capacities as officers of the Buyer, and any
individual who shall hereafter succeed to any such office of the Buyer, and any
other designee of the Buyer, and each of those persons individually, as the
Seller's irrevocable proxy and attorney-in-fact (with full power of
substitution) to vote the Shares at any regular or special meeting of the
stockholders with respect to the Shares or take actions by written consent
solely for the matters indicated in section 2.1. Each of the Sellers intends
that the proxy it is granting pursuant to this provision be irrevocable and
coupled with an interest and each shall take such further action or execute such
other instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by it with respect to the Shares.
3. OPTION. (a) Jupiter and Sussex each hereby grants to the Buyer an
irrevocable option (collectively, the "Options") to purchase the Jupiter Shares
and the Sussex Shares, respectively, and any additional Shares that each may
acquire hereafter, at the cash purchase price of $9.375 per share (the "Purchase
Price"), exercisable by the Buyer in the manner provided in section 3(b) at any
time prior to the Expiration Date. The Options must be exercised simultaneously
by the Buyer and all the Shares must be purchased by the Buyer at the same time.
(b) The Options shall be exercisable (subject to the second following
sentence) by giving written notice to the Sellers specifying a date (not earlier
than one business day nor later than ten business days from the date such notice
is delivered to the Sellers) and place in either Chicago or New York City, at
the Buyer's option, for closing of the exercise of the Options (the "Closing").
Upon delivery of such notice, the Options shall be deemed to have been exercised
by the Buyer regardless of the actual date of Closing. The Options shall not be
exercised unless (i) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), required for the purchase
of the Shares hereunder shall have expired or been waived, (ii) there shall not
be in effect any preliminary or final injunction or other order issued by any
court or governmental, administrative or regulatory agency or authority
prohibiting the exercise of the Options pursuant to this agreement and (iii) the
Offer shall have expired, been terminated, or been otherwise cancelled. Except
as contemplated by this agreement, until the Expiration Date, no transfer or
other disposition of the Shares shall take place other than pursuant to a tender
of the Shares in the Offer or other transaction in connection with the
Acquisition.
(c) At the Closing, the Buyer shall deliver to the Sellers an amount, in
immediately available funds, equal to the product of (i) the number of Shares to
be purchased pursuant to the terms of this agreement and (ii) the Purchase
Price, and the Sellers shall deliver or cause to be delivered to the Buyer
certificates representing all of the Shares being acquired, in proper form for
transfer on the books of the Company, free and clear of all Encumbrances (as
defined in section 4.2(b)). Each of the Sellers acknowledges that performance of
its obligations under this section 3 is of vital importance to the Buyer, that
damages are an inadequate remedy for breach of its obligations represented
hereby and, accordingly, that the only remedy for failure to fulfill such
obligations is that of specific performance.
(d) Promptly after any purchase of the Shares pursuant to this agreement,
other than in connection with the consummation of the Offer, the Buyer and
Parent shall take such steps as may be necessary to effect a long form merger
(pursuant to section 251 of the Delaware General Corporation Law) in conjunction
with and cooperation with the Company or, if such long form merger is not
effected, to provide to each holder of
B-2
<PAGE> 63
Common Stock, other than Jupiter and Sussex, the opportunity to sell his, her or
its shares to the Buyer or Parent at a price per share, in cash net to the
seller, not less than the Purchase Price.
(e) "Expiration Date" shall mean the date on which the Merger Agreement
terminates or expires.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to each of the Sellers that:
(a) The Buyer is a corporation duly organized and validly existing under
the laws of its jurisdiction of incorporation. The Buyer has duly executed and
delivered this agreement and this agreement is a valid and binding agreement of
the Buyer, enforceable against the Buyer in accordance with its terms.
(b) Except for applicable filings under the HSR Act and under the
Securities Exchange Act of 1934 or any applicable state blue sky authorities in
connection with the Offer (i) no filing with, and no permit, authorization,
consent or approval of, any public body or authority of the United States or any
foreign government or any subdivision thereof is necessary for, or is otherwise
intended by the Buyer to be made in connection with, the consummation by the
Buyer or any of its affiliates of the transactions contemplated by this
agreement and (ii) neither the execution and delivery of this agreement by the
Buyer nor the consummation by the Buyer of the transactions contemplated hereby
nor compliance by the Buyer or any of its affiliates with any of the provisions
hereof will (A) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws (or similar documents) of the Buyer or
any of its affiliates, (B) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which the Buyer or any
of its affiliates is a party or by which any of them or any of their properties
or assets may be bound or (C) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer, any of its affiliates or
any of their properties or assets, except in the case of (B) and (C) for
violations, breaches or defaults that would not in the aggregate materially and
adversely affect the Buyer and its affiliates taken as a whole or the ability of
the Buyer to perform its obligations under this agreement.
(c) The Buyer or its designee will acquire the Shares (and any Additional
Shares) for its own account and not with a view to any resale or distribution
thereof, and will not sell any Shares (or any Additional Shares) unless such
shares are registered under the Securities Act of 1933 and any applicable blue
sky laws, or unless an exemption from such registration is available.
(d) The Buyer has the requisite corporate power and authority to execute
and deliver this agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of the Buyer and no other corporate proceedings on the part
of the Buyer are necessary to authorize this agreement or to consummate the
transactions so contemplated.
4.2 Representations and Warranties of the Sellers. Each of the Sellers
hereby represents and warrants to the Buyer and Parent that:
(a) Such Seller is a corporation duly organized and validly existing under
the laws of its jurisdiction of incorporation. Such Seller has duly executed and
delivered this agreement and this agreement is a valid and binding agreement of
such Seller, enforceable against such Seller in accordance with its terms.
(b) As of the date hereof, except as described in the last sentence of this
section 4.2(b), such Seller has good and marketable title to its respective
Shares, in each case free and clear of all liabilities, claims, liens, options,
proxies, charges and encumbrances of any kind whatsoever (collectively,
"Encumbrances"). Upon exercise of the Options and payment for the Shares or upon
purchase of the Shares in connection with the Offer, the Buyer will acquire (the
matters referred to in the following sentence notwithstanding) good, valid and
marketable title to such Seller's Shares free and clear of all Encumbrances.
Sussex has granted a security interest in, and pledged, the Sussex Shares
pursuant to a pledge agreement with LaSalle National Bank (the "Bank"). Such
pledge agreement notwithstanding, Sussex and the Bank will tender the Sussex
Shares in
B-3
<PAGE> 64
accordance with the provisions of section 1 and will otherwise perform and
comply with each and every one of Sussex's covenants under this agreement,
including such covenants under sections 2 and 3, as if no such pledge agreement
existed.
(c) The execution and delivery of this agreement by such Seller and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceedings on the part
of such Seller are necessary to consummate the transactions contemplated hereby,
and such Seller has all requisite corporate power and authority to enter into
this agreement and to consummate the transactions contemplated hereby. Except as
contemplated by this agreement, or as described in the last sentence of section
4.2(b), such Seller has or will have sole voting power and sole power of
disposition, or the sole power to direct voting and disposition, with respect to
all of its respective Shares to be purchased by the Buyer from such Seller, as
the case may be, with no restrictions on its voting rights or rights of
disposition pertaining thereto. Upon the exercise of the Options and payment for
the Shares, the Buyer will acquire the sole voting power and sole power of
disposition of all of the Shares purchased from such Seller pursuant to the
exercise of the Options. This agreement has been duly and validly executed and
delivered by such Seller and constitutes a valid and binding agreement of such
Seller, enforceable against such Seller in accordance with its terms.
(d) Neither the execution and delivery of this agreement nor the
consummation of the transactions contemplated hereby will (i) require such
Seller to file or register with, or obtain any material permit, authorization,
consent or approval of, any governmental agency or other entity, except as may
be required under the HSR Act or the Securities Exchange Act of 1934 or any
applicable state blue sky authorities, (ii) violate any provision of the
Certificate of Incorporation or By-laws (or equivalent documents) of such Seller
or the Company, (iii) either itself or with notice or lapse of time or both,
violate, or be in conflict with, or constitute a default under, or result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any material debt or obligation pursuant to, or
result in the creation or imposition of any lien, directly or indirectly, upon
any Shares under any material agreement or commitment to which such Seller is a
party or by which such Seller is bound or to which the property of such Seller
is subject, or (iv) violate any judgment, decree or order of any court or
governmental agency or other entity or any arbitration award binding upon such
Seller.
(e) Section 3.10(a) of the Schedule to the Merger Agreement lists every
employment or other agreement with any senior officer of the Company. The
Sellers have previously provided to the Buyer true and correct copies of any
agreements between them or any of their affiliates and the Company.
5. ADDITIONAL COVENANTS OF THE PARTIES.
5.1 Further Assurances. The parties shall use their reasonable best
efforts to take all action necessary in connection with the making of any
governmental filings (including any filings under the HSR Act) necessary or, in
the judgment of the Buyer, advisable, in connection with this agreement.
5.2 No Solicitation. Until the Expiration Date, each of the Sellers in
their capacities as stockholders shall not, and shall cause every investment
banker, financial advisor, attorney, accountant and other representative
retained by it not to, solicit, encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any proposal or agree to or endorse any proposal in connection with an
acquisition of all or substantially all of the outstanding capital stock or all
or substantially all of the assets of the Company. If a Seller receives or
becomes aware of any such proposal, then such Seller shall promptly inform the
Buyer of the terms and conditions of such proposal and the identity of the
person making it. The Sellers shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties to which
it, or any of its stockholders, directors, officers, attorneys or other agents
or representatives on its behalf, is a party in its capacity as a stockholder of
the Company, conducted heretofore with respect to any of the foregoing.
5.3 Restrictions on Transfer, Proxies and Non-Interference. Until the
Expiration Date, neither of the Sellers shall, except as contemplated by this
agreement, (i) sell, transfer, pledge, encumber, assign or
B-4
<PAGE> 65
otherwise dispose of, enforce or permit the execution of the provisions of any
redemption agreement with the Company or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, pledge, encumbrance, assignment or other disposition of,
any of the Shares, or any interest therein, (ii) grant any proxies or powers of
attorney, deposit any shares into a voting trust or enter into a voting
agreement with respect to any Shares or (iii) take any action that would make
any representation or warranty of such Seller contained herein untrue or
incorrect to any material extent or have the effect of preventing or disabling
such Seller from performing its obligations under this agreement.
5.4 Cooperation; Certain Matters. Upon purchase of the Shares pursuant to
this agreement or the Merger Agreement, each of the Sellers shall, at its sole
cost and expense, use all reasonable efforts to cooperate with and assist Parent
and the Company in connection with any audit, dispute or proceeding relating to
any deduction by the Company of any payment to either of the Sellers. This
cooperation will include furnishing all relevant records and documentation and
making available the appropriate officers and other persons to advise Parent and
the Company with respect to such matters and to appear in person as reasonably
necessary in connection with any such audits and other proceedings. Upon
purchase of the Shares pursuant to this agreement or the Merger Agreement,
Jupiter and Sussex shall be jointly and severally liable for all Environmental
Costs (as defined below) in connection with the matter described in section 3.18
of the Schedule to the Merger Agreement (the "Environmental Matter"), up to a
maximum aggregate liability of $500,000. In clarification of the foregoing, each
of Parent, on the one hand, and Jupiter and Sussex, on the other hand, shall pay
one-half of all Environmental Costs relating to the Environmental Matter but in
no event shall the Environmental Costs required to be paid by Jupiter and Sussex
exceed an aggregate of $500,000. Any Environmental Costs in excess of $1,000,000
(of which $500,000 will have been borne by Jupiter and Sussex and $500,000 will
have been borne by Parent) will not be the responsibility of Jupiter and Sussex.
If Parent is required or will be required to incur Environmental Costs, Parent
shall give reasonably prompt notice to Jupiter and Sussex. Thereafter, upon
presentation of invoices, Jupiter and Sussex shall pay to Parent, on demand,
one-half of all Environmental Costs. If Parent incurs and fully pays
Environmental Costs without prior contribution by Jupiter and Sussex, Parent
shall be entitled, upon presentation of proof of payment, to reimbursement, on
demand, by Jupiter and Sussex, of one-half of such expenses. No notice of claim
may be made by Parent for any Environmental Costs after three years from the
closing date of the Acquisition. Except as set forth below, Parent shall not
voluntarily initiate any remediation efforts with respect to the Environmental
Matter. Parent will only commence remediation efforts and incur Environmental
Costs if and to the extent required by a third party (i.e., by governmental
action, lawsuit or other third party event which reasonably requires Parent to
undertake further investigation and/or commence remediation action with respect
to the Environmental Matter) or if action is otherwise clearly required under
applicable law. "Environmental Costs" shall mean all costs and expenses incurred
in connection with the investigation, testing, remediation, encapsulation,
removal, treatment or disposal of material required under applicable law in
connection with the Environmental Matter and all costs, expenses, penalties or
fines incurred in connection with, in the defense of, or as a result of any
claim asserted by any third party, including but not limited to any governmental
agency, in connection with the Environmental Matter. Environmental Costs shall
include, but not be limited to, reasonable attorneys and consultants fees.
Section 7.9 notwithstanding, all disputes or actions relating to the
Environmental Matter or the obligation of Jupiter and Sussex to make payments
hereunder with respect to Environmental Costs shall be governed by and construed
in accordance with the internal laws of the state of New Jersey and Jupiter and
Sussex hereby consent to the jurisdiction of the courts of the state of New
Jersey as the situs for resolution of any claim arising in that connection.
5.5 Additional Shares. Until the Expiration Date, each of the Sellers
shall promptly notify the Buyer of the number of any additional Shares, if any,
acquired by the Seller or any of its affiliates.
5.6 Termination of Affiliate Agreements. Prior to the earliest of any
purchase of the Shares hereunder, the consummation of the Offer or the
consummation of the Merger, the Sellers shall, and shall cause the Company to,
terminate every management and other agreement referred to in the second
sentence of section 4.2(e) all without any liability of any kind to such
persons. In addition, the Sellers shall cause each such person to refund to the
Company, prior to any closing under the Merger Agreement, a pro rata amount of
all fees under any such management and other agreements that may have been
prepaid by the Company (with
B-5
<PAGE> 66
such pro rata amount determined based on the number of days elapsed over the
period for which such payment relates).
5.7 Stop Transfer Order. In furtherance of this agreement, concurrently
herewith, each of the Sellers hereby directs and authorizes the Company's
counsel to notify the Company's transfer agent that there is a stop transfer
order until the Expiration Date with respect to all of the Shares (and that this
agreement places limits on the voting and transfer of the Shares).
5.8 Expenses of the Sellers. The Buyer acknowledges that the Company will
pay the fees and expenses of the legal counsel employed by it in the negotiation
of any definitive agreement with respect to the acquisition of the Company by
the Buyer or its designee. However, each of the Sellers shall pay its own legal
fees and expenses, and all other fees and expenses incurred by such Seller, in
connection with this agreement, the transactions contemplated hereby and the
Acquisition or any other acquisition of the Company by the Buyer or any
affiliate or designee thereof.
5.9 Public Statements. Until the Expiration Date, the parties shall
consult with each other before issuing any press releases or otherwise making
any public statements with respect to the transactions contemplated herein and
shall not issue any such press release or make any such public statement without
the approval of the other parties, except as may be required by law or
applicable stock exchange rules.
6. SURVIVAL OF WARRANTIES. The representations and warranties of the
Sellers and of the Buyer contained herein shall survive the purchase of the
Shares pursuant to the Offer, the consummation of the Merger or the Closing
hereunder and shall not be deemed waived or otherwise affected by such purchase,
Merger or Closing or by any investigation made by the other parties hereto. Each
representation and warranty contained herein and therein shall survive such
purchase, Merger or Closing until the expiration of the applicable statute of
limitations, including extensions thereof, and termination of this agreement
shall not affect any of the rights of the parties with respect to breaches of
any agreements herein prior to termination.
7. MISCELLANEOUS.
7.1 Adjustments. In the event that the Company institutes any change in
the Shares by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
the number and kind of Shares subject to this agreement and the price to be paid
for such Shares shall be appropriately adjusted to reflect changes made in the
Shares.
7.2 Entire Agreement. This agreement contains the entire understanding of
the parties and supersedes any prior agreements and understandings between the
parties with respect to its subject matter. This agreement may be amended only
by a written instrument duly executed by the parties hereto.
7.3 Headings. The headings contained in this agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this agreement. Time is of the essence with respect to all provisions of this
agreement.
7.4 Assignment. This agreement may not be assigned by Seller, Parent or
Buyer; provided, however, that Parent or Buyer may assign this agreement to any
wholly owned subsidiary or person or entity owning 100% of the outstanding
common stock of Parent or Buyer but no such assignment shall affect the
obligations of Parent or Buyer under this agreement. Subject to the foregoing,
this agreement will be binding upon and inure to the benefit of the successors
and assigns of each of the parties hereto.
7.5 Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
B-6
<PAGE> 67
7.6 Notices. All notices and other communications under this agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) reputable overnight delivery
service. Notices shall be sent to the appropriate party at its address or
facsimile number given below (or at such other address or facsimile number for
such party as shall be specified by notice given hereunder):
(a) If to the Buyer or Parent:
7069 Consolidated Way
San Diego, CA 92121
Attention: Michael Solomon
Telecopy No.: (619) 268-0021
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036
Attention: Edward R. Mandell, Esq.
Telecopy No.: (212) 704-6288
(b) If to Jupiter or Sussex, to it at:
c/o JG Industries, Inc.
1615 West Chicago Avenue, 4th Floor
Chicago, IL 60622
Attention: William Hellman
Telecopy No.: (312) 787-5625
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attention: Robert F. Wall, Esq.
Telecopy No.: (312) 558-5700
All such notices and communications shall be deemed given upon the earliest to
occur of (a) actual receipt thereof by the addressee, (b) actual delivery
thereof to the appropriate address, (c) in the case of a facsimile transmission,
upon transmission thereof by the sender and issuance by the transmitting machine
of a confirmation slip confirming that the number of pages constituting the
notice have been transmitted without error and (d) in the case of overnight
delivery service, the day after such notice is given to such service for
delivery. In the case of notices sent by facsimile transmission, the sender
shall contemporaneously mail a copy of the notice to the addressee at the
address provided for above. However, such mailing shall in no way alter the time
at which the facsimile notice is deemed given.
7.7 Amendments. This agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
7.8 Severability. Whenever possible, each provision or portion of any
provision of this agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this agreement shall be
reformed, construed and
B-7
<PAGE> 68
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
7.9 Governing Law. This agreement shall be governed by and construed and
enforced in accordance with the laws of the state of Delaware, applicable to
agreements made and to be performed entirely in Delaware.
HK ACQUISITION COMPANY, INC.
By: /S/MICHAEL H. SOLOMON
-------------------------
Name: Michael H. Solomon
Title: Chairman
BREUNER'S HOME FURNISHINGS
CORPORATION
By: /S/MICHAEL H. SOLOMON
-------------------------
Name: Michael H. Solomon
Title: Chairman
JUPITER INDUSTRIES, INC.
By: /S/EDWARD W. ROSS
---------------------
Name: Edward W. Ross
Title: Chairman
SUSSEX GROUP, INC.
By: /S/WILLIAM HELLMAN
----------------------
Name: William Hellman
Title: Chairman
B-8
<PAGE> 69
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for Shares and any other required documents should
be sent by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
The Depositary:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: Facsimile Numbers: By Hand or Overnight Courier:
(For Eligible Institutions)
P.O. Box 2559 (201) 222-4720 14 Wall Street
Suite 4600-HKI or 8th Floor, Suite 4680-HKI New
Jersey City, New Jersey (201) 222-4721 York, New York 10005
07303-2559 To Confirm Receipt of Notice
of Guaranteed Delivery
(201) 222-4707
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank, trust company or nominee for additional copies of the
Offer to Purchase or the Letter of Transmittal.
The Information Agent for the Offer is:
(GEORGESON & COMPANY LOGO)
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Bankers and Brokers Call Collect: (212) 440-9800
Call Toll-Free: 1-800 223-2064
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
650 Fifth Avenue
New York, New York 10019
(212) 336-7160 (Call Collect)
<PAGE> 1
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 25, 1995
OF
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, OCTOBER 23, 1995, UNLESS THE OFFER IS EXTENDED
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
P.O. Box 2559 14 Wall Street
Suite 4660-HKI 8th Floor, Suite 4680-HKI
Jersey City, New Jersey 07303-2559 New York, New York 10005
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE DELIVERY.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------
NAMES AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any
certificate(s) delivered to the Depositary are being tendered. See Instruction 4.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or if tender of Shares is to be
made by book-entry transfer to the account maintained by the Depositary at The
Depository Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC")
or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase (as defined below). Stockholders who tender Shares by
book-entry transfer are referred to herein as "Book-Entry Stockholders" and
other stockholders are referred to herein as "Certificate Stockholders."
Delivery of documents to a Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates (or who cannot comply with the book-entry
transfer procedures on a timely basis) and all other documents required hereby
to the Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase) must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
Delivery of documents to a Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
THE BOXES BELOW ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________
Check Box of applicable Book-Entry Transfer Facility:
/ / DTC / / MSTC / / PDTC
Account Number___________________ Transaction Code Number ________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________
Window Ticket Number (if any) _______________________________________
Date of Execution of Notice of Guaranteed Delivery __________________
Name of Institution Which Guaranteed Delivery _______________________
If Delivery by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
/ / DTC / / MSTC / / PDTC
Account Number___________________ Transaction Code Number ________
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to HK Acquisition Company, Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Breuner's Home
Furnishings Corporation, a Delaware corporation (the "Parent"), the
above-described shares of Common Stock, par value $.01 per share (the "Shares"),
of Huffman Koos Inc., a Delaware corporation (the "Company"), pursuant to the
Purchaser's offer to purchase all of the outstanding Shares at a price of $9.375
per Share, net to the seller in cash and without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
September 25, 1995 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which collectively constitute
the "Offer").
Upon the terms and subject to the conditions of the Offer, and subject to,
and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
and other securities issuable in respect thereof on or after September 18,
1995), and irrevocably constitutes and appoints the Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such Shares
(and any and all such non-cash dividends, distributions, rights, other Shares
and other securities) with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest) to (i) deliver
certificates for such non-cash dividends, distributions, rights, other Shares
and other securities or transfer ownership of such Shares (and any and all such
non-cash dividends, distributions, rights, other Shares and other securities) on
the account books maintained by a Book-Entry Transfer Facility, together, in
either such case, with all accompanying evidence of transfer and authenticity,
to or upon the order of the Purchaser upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (ii) present such Shares (and any
and all such non-cash dividends, distributions, rights, other Shares and other
securities) for transfer on the books of the Company and (iii) receive all
benefits (including all dividends or distributions resulting from any stock
split, combination, or exchange of Shares) and otherwise exercise all rights of
beneficial ownership of such Shares (and any and all such non-cash dividends,
distributions, rights, other Shares and other securities) all in accordance with
the terms of the Offer. By tendering his Shares, the undersigned is hereby
authorizing the Purchaser to complete, execute and file any necessary tax forms
on his behalf or otherwise represent him before the relevant taxing authorities
with respect to these taxes in connection with the Offer and the Merger.
The undersigned irrevocably appoints the Purchaser and any other designees
of the Purchaser, as the attorney-in-fact and proxy of the undersigned, with
full power of substitution, to exercise all voting and other rights with respect
to any Shares tendered by the stockholder and accepted for payment by the
Purchaser (and any and all non-cash dividends, distributions, rights, other
Shares or other securities issued or issuable in respect of such Shares on or
after September 18, 1995). Any such power of attorney and proxy is coupled with
an interest in the tendered Shares and is irrevocable and is granted in
consideration of, and is effective upon, the Purchaser's oral or written notice
to the Depositary of its acceptance for payment of such Shares in accordance
with the terms of the Offer. Upon acceptance for payment pursuant to the Offer,
all prior proxies given by the stockholder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given, and if given, will not be effective (except as provided in the
following paragraph). The Purchaser and its designees will, with respect to the
Shares and other securities, be empowered to exercise all voting and other
rights of the stockholder as they, in their sole discretion, may deem proper at
any annual, special or adjourned meeting of the Company's stockholders or by
written consent or otherwise.
In addition and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints any person nominated by the
Purchaser (the "Agent") as his attorney-in-fact with an irrevocable instruction
to the Agent to execute all or any instruments of transfer and/or other
documents in the Agent's discretion in relation to the Shares tendered hereby in
favor of the Purchaser, or as it may direct, and to deliver such instruments of
transfer and/or other documents together with any certificate(s) for
registration within six
<PAGE> 4
months of the acceptance of such Shares for payment and to do all such other
acts and things as may in the opinion of the Agent be necessary or expedient for
the purpose of, or in connection with, the stockholder's acceptance of the Offer
and to vest title to the Shares in the Purchaser, or as it may direct; (b)
authorizes and requests the Company or its agents to procure the registration of
the transfer of such Shares pursuant to the Offer and the delivery of the share
certificate(s) in respect thereof to the Purchaser, or as it may direct; (c)
agrees that, after such Shares have been purchased under the Offer, the
Purchaser shall be entitled to direct the exercise of any votes attaching to
such Shares; (d) authorizes the Company to send any notice which may otherwise
be required to be sent to him as a stockholder of the Company to the Purchaser
at its registered office; (e) authorizes the Purchaser or the Agent to sign any
consent to notice of any meeting of stockholders of the Company on behalf of
such stockholder and/or to execute a form of proxy in respect of such Shares
appointing any person nominated by the Purchaser (provided such person is a
stockholder of the Company) to attend any meetings of stockholders of the
Company and to exercise the votes attaching to such Shares on his behalf; and
(f) agrees not to exercise any of such rights without the consent of the
Purchaser.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all non-cash dividends, distributions, rights,
other Shares and securities issued or issuable in respect thereof on or after
September 18, 1995) and that, when the same are accepted for payment and paid
for by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
claims and encumbrances and the same will not be subject to any adverse claim.
The undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any and all non-cash dividends, distributions, rights, other Shares and
securities). In addition, the undersigned shall promptly remit and transfer to
the Depositary for the account of the Purchaser the whole of any non-cash
dividend, distribution or right issued to the undersigned on or after September
18, 1995, in respect of the Shares tendered hereby, accompanied by appropriate
documentation of transfer. Pending such remittance, the Purchaser shall be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting rights with respect to such Shares (including voting at any annual,
special or adjourned meeting of the Company's stockholders, or by written
consent or otherwise).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, legal representatives, successors, assigns, executors,
administrators and trustees in bankruptcy of the undersigned. Except as stated
in the Offer to Purchase, tenders of Shares are irrevocable.
The undersigned understands that the valid tender of Shares (and acceptance
for payment of such Shares) pursuant to any of the procedures described in
Section 3 of the Offer to Purchase and in the instructions hereto will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer, including the
undersigned's representation and warranty that the undersigned owns the Shares
being tendered. Additionally, pursuant to the terms and conditions of the Offer,
each holder of Shares hereby irrevocably waives any right he may have with
respect to his Shares which are purchased in the Offer in the event a holder of
Shares exercises his rights as a dissenting stockholder under the Delaware
General Corporation Law in connection with the Merger (as defined in the Offer
to Purchase).
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
any Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the purchase price for any Shares purchased and/or return any certificates
for any Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the registered holder(s) at the address(es) appearing under
<PAGE> 5
"Description of Shares Tendered." In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
tendered or not accepted for payment in the name of, and deliver said check
and/or return such certificates to, the person or persons so indicated. Shares
tendered by Book-Entry Stockholders not accepted for payment will be returned by
credit to such applicable account maintained at the Book-Entry Transfer
Facility. The undersigned recognizes that the Purchaser has no obligation
pursuant to the Special Payment Instructions to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned.
Issue: / / Check / / Certificates to:
Name
---------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
--------------------------------------------------------------------
(ZIP CODE)
--------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
---------------------------------------------------------------
---------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 6)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that above.
Mail: / / Check / / Certificates to:
Name
---------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
--------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------
<PAGE> 6
STOCKHOLDER SIGN HERE
(ALSO COMPLETE THE FORM W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: , 1995
--------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by an officer of a corporation,
attorney-in-fact, executor, administrator, trustee, guardian or other person(s)
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5.)
Name(s)
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
----------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Tel. No.
--------------------------------------------------------
Tax Identification or Social Security Number
----------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
----------------------------------------------------------
Name
--------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
------------------------------------------------------------------
Address
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Tel. No.
--------------------------------------------------------
Dated: , 1995
--------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by a recognized member of a Medallion Signature Guarantee Program
(the foregoing being referred to as an "Eligible Institution") unless the Shares
tendered hereby are tendered (i) by the registered holder(s) of the Shares
(which term, for purposes of this document, shall include any participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of the Shares) tendered herewith who has not completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" on this Letter of Transmittal or (ii) for the account of
an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase.
For a stockholder validly to tender Shares, certificates for all physically
tendered Shares or any Book-Entry Confirmation (as defined in the Offer to
Purchase), as the case may be, as well as a properly completed and duly executed
Letter of Transmittal must be received by the Depositary at one of its addresses
set forth herein prior to the Expiration Date (as defined in the Offer to
Purchase), or the tendering stockholder must comply with the guaranteed delivery
procedure set forth below and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure, (i) such tender must be made by or through an Eligible Institution,
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser must be received by the
Depositary prior to the Expiration Date and (iii) the certificates for all
Shares, in proper form for transfer (or Book-Entry Confirmation with respect to
such Shares), together with this Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Depositary within
three Nasdaq National Market trading days after the date of the execution of the
Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to
Purchase.
The method of delivery of certificates for Shares and the other required
documents is at the option and risk of the tendering stockholder. If sent by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box which is entitled "Number of Shares Tendered." In such case,
new certificate(s) for the remainder of the Shares that were evidenced by the
old certificate(s) will be sent to the registered holder(s), unless otherwise
provided in the appropriate box on this Letter of Transmittal, as soon as
practicable after the Expiration Date. All Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly
<PAGE> 8
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint holders, all such holders must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made, or certificates
for Shares not tendered or purchased are to be issued, to a person other than
the registered holder(s). Signatures on such certificates or stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person or persons other than
the registered holder(s) of the certificate(s) listed or if payment is to be
made or certificates for unpurchased Shares are to be issued to a person other
than the registered holder, then the certificate(s) must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holder or holders appear(s) on the certificates.
Signatures on certificates or stock powers required by this Instruction 5 must
be guaranteed by an Eligible Institution, unless the signature is that of an
Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name(s) of, and/or certificates for unpurchased or untendered Shares are
to be issued to, a person(s) other than the signer(s) of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to someone other than the signer(s) of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
7. STOCK TRANSFER TAXES. The Purchaser will pay or cause to be paid any
stock transfer taxes applicable with respect to the transfer and sale of
purchased Shares to the Purchaser pursuant to the Offer. If, however, payment of
the purchase price is to be made to, or if certificates for Shares not tendered
or not accepted for payment are to be registered in the name of, any person(s)
other than the registered holder(s), or if tendered certificates are registered
in the name of any person(s) other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered owner or such person(s)) payable on account of the transfer to such
person(s) will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted. Except as
provided in this Instruction 7, it will not be necessary for transfer tax stamps
to be affixed to the certificates listed in this Letter of Transmittal.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right, in its
sole discretion, to waive any of the specified conditions of the Offer, in whole
or in part, in the case of any Shares tendered.
9. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent or the Dealer Manager at their
respective addresses set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the
Form W-9 may be obtained from the Information Agent or the Dealer Manager or
from your broker, dealer, commercial bank or trust company.
10. IMPORTANT TAX INFORMATION CONCERNING TAXPAYER IDENTIFICATION NUMBERS
(1) BACKUP WITHHOLDING. Under federal income tax law, any person who
receives cash upon purchase of tendered Shares is required to provide the
Depositary with such person's correct taxpayer identification number ("TIN") on
Form W-9 (set forth in the Letter of Transmittal) unless an exemption
<PAGE> 9
applies. If such person is an individual, the TIN is his or her social security
number. If the Depositary is not provided with the correct TIN, such person may
be subject to a $50 penalty imposed by the Internal Revenue Service and the
Depositary will be required to withhold 31% of any payments made to such person
("backup withholding").
Certain persons (including, among others, all corporations and certain
foreign persons) are not subject to backup withholding and reporting
requirements. Such persons should comply with the Certification Instructions
contained in the Form W-9 and write "exempt" under their social security or
other taxpayer identification numbers. In order for a foreign person to qualify
as an exempt recipient, that person must submit a statement on Form W-8, signed
under penalties of perjury, attesting to that person's exempt status. A Form W-8
may be obtained by contacting the Depositary either in writing or by telephone
at (201) 324-0137.
Backup withholding is not additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
(2) WHAT NUMBER TO GIVE THE DEPOSITARY. The Depositary must be provided
with the TIN of the record owner of the tendered certificates. If you do not
have a TIN, write "applied for" in the space for the TIN on the Form W-9. You
will then have 60 days to obtain a TIN and furnish it to the Depositary. In
addition, if the check is to be issued in the name of a person other than the
record owner of the tendered certificates, the TIN of that person should be
provided in the space provided under "Special Payment Instructions."
If the tendered certificates are in more than one name or are not in the
name of the actual owner, consult the Depositary for additional guidance on
which number to report. You should consult with your tax advisor if you have
questions regarding the applicability of backup withholding.
<PAGE> 10
<TABLE>
<S> <C> <C>
Form W-9 REQUEST FOR TAXPAYER
(Rev. March 1994) IDENTIFICATION NUMBER AND CERTIFICATION GIVE FORM TO THE
Department of the REQUESTER. DO NOT
Treasury SEND TO THE IRS.
Internal Revenue
Service
</TABLE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name (If joint names, list first and circle the name of the person or entity whose number you enter in Part
I below. SEE INSTRUCTIONS ON PAGE 2 IF YOUR NAME HAS CHANGED.)
PLEASE -----------------------------------------------------------------------------------------------------------
Business name (Sole proprietors see Instructions on page 2.)
PRINT -----------------------------------------------------------------------------------------------------------
Please check appropriate box: / / Individual/Sole Proprietor / / Corporation / / Partnership
OR / / Other .................................................................................................
-----------------------------------------------------------------------------------------------------------
TYPE Address (number, street, and apt. or suite no.) Requester's name and address (optional)
-------------------------------------------------------------
City, state and ZIP code
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART I TAXPAYER IDENTIFICATION NUMBER (TIN)
- ---------------------------------------------------------------------
<S> <C> <C>
Enter your TIN in the appropriate SOCIAL SECURITY NUMBER List account number(s) here
box. For individuals, this is your
social security number (SSN). For
sole proprietors, see the -----------------------------------------------
instructions on page 2. For other --------------------------- PART II
entities, it is your employer OR -----------
identification number (EIN). If you EMPLOYER IDENTIFICATION FOR PAYEES EXEMPT FROM BACKUP
do not have a number, see HOW TO GET NUMBER WITHHOLDING (SEE PART II
A TIN below. INSTRUCTIONS ON PAGE 2)
NOTE: If the account is in more than -----------------------------------------------
one name, see the chart on page 2 for
guidelines on whose number to enter. ---------------------------
</TABLE>
PART III CERTIFICATION
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because: (A) I am exempt from backup
withholding, or (B) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (C) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. For real estate
transactions, item 2 does not apply. For mortgage interest paid, the acquisition
or abandonment of secured property, cancellation of debt, contributions to an
individual retirement arrangement (IRA), and generally payments other than
interest and dividends, you are not required to sign the Certification, but you
must provide your correct TIN. (Also see PART III INSTRUCTIONS on page 2.)
- --------------------------------------------------------------------------------
SIGN
HERE SIGNATURE DATE
- --------------------------------------------------------------------------------
Section references are to the Internal Revenue Code.
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA. Use
Form W-9 to give your correct TIN to the requester (the person requesting your
TIN) and, when applicable, (1) to certify the TIN you are giving is correct (or
you are waiting for a number to be issued), (2) to certify you are not subject
to backup withholding, or (3) to claim exemption from backup withholding if you
are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return, your
payments will not be subject to backup withholding. Payments you receive will be
subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN. See the Part III instructions for exceptions.
Certain payees and payments are exempt from backup withholding and information
reporting. See the Part II instructions and the separate INSTRUCTIONS FOR THE
REQUESTER OF FORM W-9.
HOW TO GET A TIN.--If you do not have a TIN, apply for one immediately. To
apply, get FORM SS-5, Application for a social Security Number Card (for
individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in Part
I, sign and date the form, and give it to the requester. Generally, you will
then have 60 days to get a TIN and give it to the requester. If the requester
does not receive your TIN within 60 days, backup withholding, if applicable,
will begin and continue until you furnish your TIN.
- --------------------------------------------------------------------------------
Cat. No. 10231X
4/4/94
Published by Tax Management, Inc., a Subsidiary of The Bureau of National
Affairs, Inc. Form W-9 (Rev. 3-84)
<PAGE> 11
Form W-9 (Rev. 3-94) Page 2
- --------------------------------------------------------------------------------
NOTE: Writing "Applied For" on the form means that you have already applied for
a TIN OR that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make
a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally enter the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
Sole Proprietor. -- You must enter your INDIVIDUAL name. (Enter either your
SSN or EIN in Part I.) You may also enter your business name or "doing business
as" name on the business name line. Enter your name as shown on your social
security card and business name as it was used to apply for your EIN on Form
SS-4.
PART I -- TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a sole proprietor,
you may enter your SSN or EIN. Also see the chart on this page for further
clarification of name and TIN combinations. If you do not have a TIN, follow the
instructions under HOW TO GET A TIN on page 1.
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends. For a complete list of exempt payees, see the separate
instructions for the Requester of Form W-9.
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN in Part
1, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed FORM W-8, Certificate of Foreign Status.
PART III -- CERTIFICATION
For a joint account, only the person whose TIN is shown in Part I should sign.
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN,
but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross
out item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to sign
the certification unless you have been notified of an incorrect TIN. Other
payments include payments made in the course of the requester's trade or
business for rents, royalties, goods (other than bills for merchandise), medical
and health care services, payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your correct
TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 requires you to give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income paid to you, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or not
you are required to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
give a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- --------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN
OF:
- --------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds,the
first individual on
the account1
3. Custodian account of The minor2
a minor (Uniform
Gift to Minors Act)
4. a. The usual The grantor-trustee1
revocable savings
trust (grantor is
also trustee)
b. So-called trust The actual owner1
account that is
not a legal or
valid trust under
state law
5. Sole proprietorship The owner3
- --------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND EIN
OF:
- --------------------------------------------
6. Sole proprietorship The owner3
7. A valid trust, Legal entity4
estate, or pension
trust
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization
10. Partnership The partnership
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
- --------------------------------------------
</TABLE>
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's SSN.
3 You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
4 List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN MORE THAN ONE NAME IS LISTED, THE NUMBER
WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
- --------------------------------------------------------------------------------
W-9.2 4/4/94
PUBLISHED BY TAX MANAGEMENT INC., A SUBSIDIARY OF THE BUREAU OF NATIONAL
AFFAIRS, INC.
<PAGE> 12
The Information Agent for the Offer is:
(GEORGESON & COMPANY LOGO)
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Bankers and Brokers Call Collect: (212) 440-9800
Call Toll-Free: 1-800 223-2064
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
650 Fifth Avenue
New York, New York 10019
(212) 336-7160 (Call Collect)
<PAGE> 1
Exhibit (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
(Not To Be Used For Signature Guarantees)
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer (as
defined below) if certificates for shares of the Common Stock, par value $.01
per share (the "Shares"), of Huffman Koos Inc. a Delaware corporation (the
"Company"), are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary on or prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase). Such form may be delivered
by hand or transmitted by telegram, facsimile transmission or mail and must
include a signature guarantee by an Eligible Institution in the form set forth
herein to the Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: Facsimile Numbers: By Hand or
(For Eligible Institutions) Overnight Courier:
(201) 222-4720
P.O. Box 2559 or 14 Wall Street
Suite 4660-HKI (201) 222-4721 8th Floor, Suite 4680-HKI
Jersey City, New Jersey 07303-2559 To Confirm Receipt of Notice New York, New York 10005
of Guaranteed Delivery
(201) 222-4707
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to HK Acquisition Company, Inc., a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated September 25, 1995 (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares
indicated below pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Name(s) of Record Holder(s): __________________________________________________
_______________________________________________________________________________
(PLEASE TYPE OR PRINT)
Address(es) ___________________________________________________________________
_______________________________________________________________________________
(ZIP CODE)
Area Code and
Telephone Number ______________________________________________________________
_______________________________________________________________________________
Signature(s) __________________________________________________________________
_______________________________________________________________________________
Dated: ________________________________________________________________________
Number of Shares: _____________________________________________________________
Certificate No.(s) for Shares _________________________________________________
(if available)
If Shares will be delivered by book-entry transfer, check one box and provide
account number.
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number: _______________________________________________________________
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or any other "eligible guarantor institution" as such term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, hereby (a) represents
that the above named person(s) owns the Shares tendered hereby and (b)
guarantees to deliver to the Depositary the certificates representing the Shares
tendered hereby, in proper form for transfer, or timely confirmation of the
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company, the Midwest Securities Trust Company and the
Philadelphia Depository Trust Company (pursuant to the procedures set forth in
Section 3 of the Offer to Purchase), in either case together with a properly
completed and duly executed Letter of Transmittal, or a manually signed
facsimile thereof, with any required signature guarantee and any other documents
required by the Letter of Transmittal at one of the Depositary's addresses set
forth above within three Nasdaq National Market trading days after the date
hereof.
Name of Firm: _________________________________________________________________
Authorized Signature: _________________________________________________________
Name: _________________________________________________________________________
(PLEASE PRINT)
Title: ________________________________________________________________________
Address: ______________________________________________________________________
(ZIP CODE)
Area Code and Telephone Number: _______________________________________________
Dated: __________________________________________________________________, 19__
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit (a)(4)
JEFFERIES & COMPANY, INC. LETTERHEAD
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
AT
$9.375 NET PER SHARE
BY
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY OCTOBER 23, 1995, UNLESS THE OFFER IS EXTENDED
September 25, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
HK Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of Breuner's Home Furnishings Corporation, a Delaware
corporation (the "Parent"), has appointed us to act as Dealer Manager in
connection with this offer to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of Huffman Koos Inc., a Delaware
corporation (the "Company"), at $9.375 per share, net to the seller in cash and
without interest thereon, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated September 25, 1995 (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Offer"). We enclose the materials listed below relating to the Offer.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee or who hold Shares
registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase dated September 25, 1995;
2. The Letter of Transmittal to tender Shares, for your use and for
the information of your clients;
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates for Shares are not immediately available or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase) or if the procedure
for book-entry transfer cannot be completed on a timely basis;
4. The letter to stockholders of the Company from the Chairman of the
Board of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
5. A printed form letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer; and
<PAGE> 2
6. A return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares representing at least 90% of the outstanding Shares, and (ii) funds
necessary to purchase the Shares pursuant to the Offer and the Merger and to pay
all related fees and expenses being available to the Purchaser on terms
contemplated by the existing commitment letter or otherwise on terms not
materially more adverse to the Purchaser.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 23, 1995,
UNLESS THE OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will be deemed to have accepted for payment (and
thereby purchased), all Shares validly tendered prior to the Expiration Date and
not properly withdrawn if, as and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance of such Shares for
payment pursuant to the Offer. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates for such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, the Midwest Securities Trust Company or the Philadelphia Depository
Trust Company, pursuant to the procedure set forth in Section 3 of the Offer to
Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and (iii) any other documents required by such Letter of
Transmittal.
The Purchaser will not pay any fee or commission to any broker or dealer or
any other person (other than the Dealer Manager, as described in the Offer) in
connection with the solicitation of tenders of Shares pursuant to the Offer. The
Purchaser will, however, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Offer and the related documents to the
beneficial owners of Shares held by them as nominees or in a fiduciary capacity.
The Purchaser will pay or cause to be paid any transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 7 of the
Letter of Transmittal.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to tender such Shares on or prior to the Expiration Date, or to comply
with the book-entry transfer procedures on a timely basis, a tender may be
effected pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the undersigned or Georgeson & Company Inc., the Information Agent, at their
respective addresses and telephone numbers set forth on the back cover of the
Offer to Purchase. Additional copies of the enclosed material may be obtained
from the undersigned or from the Information Agent or from brokers, dealers,
commercial banks or trust companies.
Very truly yours,
Jefferies & Company, Inc.
Dealer Manager
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, ANY AFFILIATE OF THE PURCHASER,
THE DEALER MANAGER, THE DEPOSITARY OR THE INFORMATION AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER, OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF
TRANSMITTAL.
<PAGE> 1
Exhibit (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
AT
$9.375 NET PER SHARE
BY
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, OCTOBER 23, 1995, UNLESS THE OFFER IS EXTENDED
September 25, 1995
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated September 25,
1995 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by HK Acquisition
Company, Inc., a Delaware corporation ( the "Purchaser") and a wholly owned
subsidiary of Breuner's Home Furnishings Corporation, a Delaware corporation
(the "Parent"), to purchase all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of Huffman Koos Inc., a Delaware corporation (the
"Company"), at $9.375 per share, net to the seller in cash and without interest
thereon, upon the terms and subject to the conditions set forth in the Offer. We
are the holder of record of Shares held by us for your account. This material is
being sent to you as the beneficial owner of Shares held by us as the holder of
record and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $9.375 per Share net to you in cash.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously determined
that each of the Offer and the Merger (as defined below) is in the best
interests of the Company and its stockholders, has approved the Offer and
the Merger (as defined below) and recommends that the Company's
stockholders accept the Offer and tender their Shares in the Offer.
4. The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of September 18, 1995, which provides that subsequent to the
consummation of the Offer, the Purchaser will merge with the Company (the
"Merger"). At the effective time of the Merger, each Share issued and
outstanding (other than Shares held in the treasury of the Company, or
owned by the Parent, the Purchaser, or any subsidiary of the Parent or the
Purchaser and Shares held by stockholders who perfect their rights as
<PAGE> 2
stockholders under Delaware law) will be converted into the right to
receive $9.375 or any greater amount per share paid pursuant to the Offer,
without interest.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, October 23, 1995, unless the Offer is extended
(the "Expiration Date").
6. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the Expiration Date a number of
Shares representing at least 90% of the outstanding Shares and (ii) funds
necessary to purchase the Shares pursuant to the Offer and to pay all
related fees and expenses being available to the Purchaser on terms
contemplated by the existing commitment letter or otherwise on terms not
materially more adverse to the Purchaser.
7. Tendering stockholders will not be obligated to pay brokerage
commissions or, except as set forth in Instruction 7 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
set forth on the next page. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified below. Your instructions should be forwarded
to us in ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer.
The Purchaser is not aware of any jurisdiction where the making of the
Offer is prohibited by administrative or judicial action pursuant to statute. If
the Purchaser becomes aware of any jurisdiction where the making of the Offer is
so prohibited, the Purchaser will make a good faith effort to comply with any
such statute. If, after such good faith effort, the Purchaser cannot comply with
such statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such jurisdiction. In any jurisdiction
the securities laws or blue sky laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on behalf of the Purchaser by
the Dealer Manager or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK OF HUFFMAN KOOS INC. BY HK ACQUISITION COMPANY, INC., A
WHOLLY OWNED SUBSIDIARY OF BREUNER'S HOME FURNISHINGS CORPORATION.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated September 25, 1995 and the related Letter of
Transmittal, in connection with the offer by HK Acquisition Company, Inc., a
Delaware corporation (the "Purchaser"), to purchase all outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of Huffman Koos Inc., a
Delaware corporation (the "Company").
<PAGE> 3
This will instruct you to tender the number of shares indicated below held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase referred to above and the related
Letter of Transmittal.
<TABLE>
<S> <C>
SIGN HERE
Dates:_____________________________________
__________________________________________
__________________________________________
SIGNATURE(S)
__________________________________________
__________________________________________
NUMBER OF SHARES TO BE TENDERED:* PLEASE PRINT NAME(S) HERE
__________ SHARES __________________________________________
__________________________________________
ADDRESS(ES)
__________________________________________
AREA CODE & TELEPHONE NO.
__________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY
NUMBER
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all of your Shares are to
be tendered.
<PAGE> 1
EXHIBIT (a)(6)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 25, 1995 and the related Letter of Transmittal and is not being
made to (nor will tenders be accepted from or on behalf of) holders of
Shares in any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the laws of
such jurisdiction. In any jurisdiction the securities laws of
which require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed made on behalf of the
Purchaser by the Dealer Manager or one or more
registered brokers or dealers licensed under the
laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
HUFFMAN KOOS INC.
AT
$9.375 NET PER SHARE
BY
HK ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
BREUNER'S HOME FURNISHINGS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, OCTOBER 23, 1995, UNLESS EXTENDED.
HK Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of Breuner's Home Furnishings Corporation, a Delaware
corporation (the "Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Huffman Koos Inc., a
Delaware corporation (the "Company"), at $9.375 per Share, net to the seller in
cash and without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in the related Letter of Transmittal
(which together constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST 90% OF THE OUTSTANDING SHARES (THE "MINIMUM
CONDITION") AND (2) FUNDS NECESSARY TO PURCHASE THE SHARES PURSUANT TO THE OFFER
AND THE MERGER AND TO PAY ALL RELATED FEES AND EXPENSES BEING AVAILABLE TO THE
PURCHASER ON TERMS CONTEMPLATED BY THE EXISTING COMMITMENT LETTER OR OTHERWISE
ON TERMS NOT MATERIALLY MORE ADVERSE TO THE PURCHASER.
<PAGE> 2
The purpose of the Offer is for the Parent to acquire control of, and the
entire equity interest in, the Company. The Offer is being made pursuant to an
Agreement and Plan of Merger, dated September 18, 1995 (the "Merger Agreement"),
by and among the Company, the Purchaser and the Parent. The Merger Agreement
provides, among other things, for the making of the Offer by the Purchaser, and
further provides that, subject to certain conditions and upon the terms of the
Merger Agreement, the Purchaser will merge with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of the
Purchaser will cease and the Company will continue as the surviving corporation
in the Merger (the "Surviving Corporation"). At the effective time of the Merger
(the "Effective Time"): (i) each Share issued and outstanding immediately prior
to the Effective Time (other than Shares held by a holder who, in connection
with the Merger, has properly demanded and perfected the right for appraisal of
such Shares in accordance with the Delaware General Corporation Law) will be
converted automatically into the right to receive the amount in cash payable to
the holder thereof, without interest and less any required withholding taxes,
upon surrender of the certificate formerly representing such Share; (ii) each
Share held in the treasury of the Company, or owned by the Parent, the Purchaser
or any subsidiary of the Parent or the Purchaser, immediately prior to the
Effective Time will be canceled and cease to exist without any conversion
thereof and no payment or distribution will be made with respect thereto; and
(iii) each share of common stock, par value $.01 per share, of the Purchaser
issued and outstanding immediately prior to the Effective Time will, upon
surrender of the certificate formerly representing such Shares, be converted
into and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
In connection with the Merger Agreement, the Purchaser and the Parent have
entered into a Stockholders Agreement (the "Stockholders Agreement") with
certain stockholders (the "Majority Stockholders") who collectively are the
holders of 2,200,000 Shares (the "Majority Shares") representing 55.9% of the
Shares outstanding as of the date of the Stockholders Agreement. Pursuant to the
Stockholders Agreement, the Majority Stockholders have, among other things, (i)
agreed to tender pursuant to the Offer all Shares owned by them and any Shares
acquired after the date of the Stockholders Agreement within ten business days
after the commencement of the Offer, (ii) granted to the Purchaser options to
purchase all of the Shares owned by the Majority Stockholders and any Shares
acquired after the date of the Stockholders Agreement, upon the terms and
subject to the conditions of the Stockholders Agreement, at the cash purchase
price of $9.375 per Share, (iii) agreed that at any meeting of the Company's
stockholders or in connection with any written consent of the Company's
stockholders, to vote (or cause to be voted) the Shares currently owned by them
and any additional Shares that either of them may acquire (A) in favor of the
acquisition of the Company by the Purchaser or any other merger or other
transaction pursuant to which the Purchaser or an affiliate or designee thereof
would acquire the Company, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement, (B) against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or the Stockholders Agreement and (C) against any
action or agreement (other than the Merger Agreement) that is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially and adversely affect the Acquisition or any of the other
transactions to be consummated pursuant to the Merger Agreement and (iv) granted
to and appointed the Purchaser and the Chairman of the Board, the President, the
Secretary and the Chief Financial Officer of the Purchaser and any individual
who succeeds to any such office of the Purchaser, and any other designee of the
Purchaser, as its irrevocable proxy and attorney-in-fact (with full power of
substitution) to vote the Shares owned by such Majority Stockholder and any
Shares acquired after the date of the Stockholders Agreement at any regular or a
special meeting of stockholders with respect to the Shares or to take actions by
written consent with respect to such Shares in respect of the matters set forth
in clause (iii) above.
2
<PAGE> 3
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment pursuant to the Offer, and thereby purchased, validly tendered
Shares, if, as and when the Purchaser gives oral notice (promptly confirmed in
writing) or written notice to First Chicago Trust Company of New York (the
"Depositary") of the Purchaser's acceptance of such Shares for payment pursuant
to the Offer. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payment from the Purchaser and transmitting such payments to tendering
stockholders. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares, or timely confirmation of book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(each a "Book-Entry Transfer Facility"), pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (b) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and (c) any other documents
required by the Letter of Transmittal. Under no circumstances will interest be
paid by the Purchaser on the purchase price of the Shares, regardless of any
delay in making such payment.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will purchase, by accepting for payment and paying
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4 of the Offer to Purchase) as soon as is
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions to the Offer set forth in Section 13 of
the Offer to Purchase, including the expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. In
addition, the Purchaser reserves the right, in its sole discretion and subject
to applicable law, to delay the acceptance for payment or payment for Shares in
order to comply with applicable law.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, October 23, 1995, unless and until the Purchaser shall, in its sole
discretion, have extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall refer to the latest time and date
at which the Offer, as so extended by the Purchaser, shall expire.
Subject to the applicable regulations of the Securities and Exchange
Commission and the terms of the Merger Agreement, the Purchaser expressly
reserves the right at any time and from time to time, and regardless of whether
or not any of the events set forth in Section 13 of the Offer to Purchase shall
have occurred or shall have been determined by the Purchaser to have occurred,
to increase the amount payable in the Offer or to make any other changes in the
terms and conditions of the Offer; provided that, unless previously approved by
the Company in writing, no change may be made that (x) decreases the amount
payable in the Offer, (y) changes the form of consideration to be paid in the
Offer or (z) imposes additional conditions to the Offer or broadens the scope of
those conditions; and further provided that the Purchaser will have the right in
its sole discretion to extend the Offer for up to a maximum of five additional
business days if after 20 business days the Minimum Condition shall not have
been met. The Purchaser may also extend the Offer for such additional number of
trading days as may be reasonably necessary to allow Shares tendered under
"Notice of Guaranteed Delivery" to be delivered and if the Parent or the
Purchaser determines, upon the advice of outside legal counsel, that any
supplement or amendment to the Tender Offer Statement on Schedule 14D-1 is
required to be circulated to the Company's stockholders, then the Parent or the
Purchaser will have the right to extend the Offer for such additional number of
days as may be necessary under applicable law as determined by the Parent and
the Purchaser, on the advice of counsel. The rights reserved by the Purchaser in
this paragraph are in addition to the Purchaser's rights to terminate the Offer
pursuant to Section 13 of the Offer to Purchase.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares are irrevocable. Tenders of Shares pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may be withdrawn at
any time after November 24, 1995. If the Purchaser is delayed in its purchase of
or payment for Shares or is unable to purchase or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the
3
<PAGE> 4
Purchaser's rights, tendered Shares may be retained by the Depositary on behalf
of the Purchaser, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as set forth in Section
4 of the Offer to Purchase or under the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules promulgated thereunder.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
any of its addresses set forth on the back cover of the Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and (if
certificates for Shares have been tendered) the name of the registered holder(s)
of the Shares as set forth in the certificates, if different from that of the
person who tendered such Shares. If certificates for Shares have been delivered
or otherwise identified to the Depositary, then, prior to the physical release
of such certificates, the tendering stockholder must also furnish to the
Depositary the serial numbers of the particular certificates evidencing the
Shares to be withdrawn and a signed notice of withdrawal, along with
signature(s) guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), except in the case of Shares tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
A withdrawal of tenders of Shares may not be rescinded and any Shares properly
withdrawn will not be deemed to be validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by repeating one of the procedures
described in Section 3 of the Offer to Purchase at any time on or prior to the
Expiration Date. All questions as to validity, form, eligibility (including time
of receipt) and acceptance for payment of any tendered Shares will be determined
by the Purchaser, in its sole discretion, which determination will be final and
binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Exchange Act, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
4
<PAGE> 5
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase and the Letter of Transmittal
may be directed to the Information Agent or the Dealer Manager as set forth
below, and copies will be furnished promptly at the Purchaser's expense. The
Purchaser will not pay any fees or commissions to any broker or other person
(other than the Dealer Manager) for soliciting tenders of Shares pursuant to the
Offer.
The Information Agent for the Offer is:
(LOGO)
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Bankers and Brokers Call Collect: (212) 440-9800
Call Toll-Free: 1-800 223-2064
The Dealer Manager for the Offer is:
JEFFERIES & COMPANY, INC.
650 Fifth Avenue
New York, New York 10019
(212) 336-7160 (Call Collect)
September 25, 1995
<PAGE> 1
EXHIBIT (a)(7)
FOR IMMEDIATE RELEASE
CONTACTS:
BREUNER'S HOME FURNISHINGS CORPORATION
Michael H. Solomon
Chairman and Chief Executive Officer
(619) 268-3447
HUFFMAN KOOS INC.
Joseph Albanese
Chief Financial Officer
(201) 343-4300
HUFFMAN KOOS INC. AND
BREUNER'S HOME FURNISHINGS CORPORATION
ENTER INTO DEFINITIVE MERGER AGREEMENT
River Edge, New Jersey, September 19, 1995 -- Huffman Koos Inc. (NASDAQ:
HUFK) and Breuner's Home Furnishings Corporation announced today that they have
entered into a definitive merger agreement pursuant to which Breuner's will
acquire Huffman Koos. Under the merger agreement, HK Acquisition Company, Inc.,
a wholly owned subsidiary of Breuner's, will promptly commence a cash tender
offer for all of the outstanding shares of Huffman Koos common stock for $9.375
per share. Any shares not purchased in the tender offer will be acquired for the
same price in cash in a second-step merger. Huffman Koos has approximately
3,938,400 shares outstanding.
Huffman Koos is a full service, specialty retailer targeting middle and
upper middle income customers by offering high-quality, name-brand furniture at
competitive prices. Breuner's, through its wholly owned subsidiary Arnold's
Acquisition Corporation, operates 12 full line, better quality home furnishings
stores under the "Breuner's" name in Northern California and Nevada, and under
the "Arnold's" name in San Diego. Breuner's was recently formed by Kidd, Kamm &
Company and Michael H. Solomon to effect the transaction with Huffman Koos, and
is a holding company for its other furniture operations. The combination of
Breuner's and Huffman Koos will form one of the largest retailers of better home
furnishings in the United States with a significant and diversified presence in
the largest furniture markets in the country, California and the Greater New
York Metropolitan Area.
Fred Berk, the President and CEO of Huffman Koos, who will also be assuming
the position of President of Breuner's, stated that "I am looking forward to
working closely with Michael Solomon, Chairman and CEO of Breuner's, in building
the two organizations into one of the leading retailers in our industry."
Michael H. Solomon stated that "Huffman Koos and Breuner's are a perfect fit.
Together, the two companies have substantial operating advantages given similar
product lines, MIS systems, distribution structures and consumer financing
arrangements. All of us at Breuner's are excited about teaming up with Fred Berk
and the Huffman Koos management organization to build a leading retailer of
quality home furnishings on both the east and west coasts. Averaging 60,000
square feet and featuring such high quality lines as Thomasville, Henredon and
Lexington, Huffman Koos' large format stores are very similar to those operated
by Breuner's."
On April 19, 1995, Huffman Koos announced that it had retained The Chicago
Corporation to assist it in considering the possible sale of Huffman Koos and to
review other strategic alternatives.
Consummation of the tender offer is contingent upon the tender of 90% of
Huffman Koos outstanding shares, the expiration or termination of any applicable
waiting periods under the federal Hart-Scott-Rodino
<PAGE> 2
Antitrust Improvements Act, the receipt by Breuner's of sufficient financing for
the acquisition and other customary conditions. Breuner's has obtained a
commitment to provide the funding necessary for the acquisition subject to
customary conditions. If less than 90% of Huffman Koos outstanding shares are
tendered in Breuner's cash tender offer, the parties may, subject to the
satisfaction of certain conditions, complete the acquisition through a long-form
merger.
The Huffman Koos Board of Directors has unanimously approved the tender
offer and, accordingly, recommends that Huffman Koos' stockholders accept the
offer and tender their shares. Huffman Koos' two largest stockholders, Jupiter
Industries, Inc. and Sussex Group, Ltd., which together hold in the aggregate
approximately 55.9% of the total outstanding shares of Huffman Koos, have agreed
to tender their shares in the offer.
Jupiter and Sussex have also granted to HK Acquisition an option to
purchase, subject to certain customary conditions, their shares at $9.375 per
share. The option expires on the expiration of the merger agreement. Breuner's
and HK Acquisition have agreed that if HK Acquisition exercises the option,
Breuner's and HK Acquisition will cash out Huffman Koos' remaining stockholders
at the same price by merger or otherwise.
If the Huffman Koos Board of Directors in exercising its fiduciary duties
withdraws its approval or recommendation of the offer or the merger agreement,
in the case of a superior proposal, and the merger agreement is terminated, then
Huffman Koos is obligated to pay Breuner's a break-up fee of $1,500,000 plus
expenses not to exceed $1,850,000.
During its fiscal year ended January 31, 1995, Huffman Koos had net sales
of approximately $119.1 million, operating income of approximately $5.2 million
and over 500 employees.
<PAGE> 1
EXHIBIT (b)(1)
[LOGO]
NOMURA HOLDING AMERICA, INC.
2 World Financial Center, Building B
New York, NY 10281-1198
Telephone
(212) 667-8300
Telex
(International)
222371
September 11, 1995
HK Acquisition Company, Inc.
c/o Arnold's Acquisition Corporation
7069 Consolidated Way
San Diego, California 92121
Arnold's Acquisition Corp.
7069 Consolidated Way
San Diego, California 92121
Breuner's Home Furnishings Corporation
7069 Consolidated Way
San Diego, California 92121
Kidd, Kamm Equity Partners, L.P.
c/o Kidd, Kamm & Company
9454 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Re: $5,000,000 Senior Secured Guaranteed Revolving Notes due 1996; and
$40,000,000 Senior Secured Guaranteed Term Notes due 1996
Dear Sirs:
1. Commitment. We are pleased to inform you that Nomura Holding America
Inc. ("Nomura") agrees, subject to the terms and conditions of this letter
agreement, (a) to purchase from HK Acquisition Company, Inc. (the "Company") up
to $40,000,000 aggregate principal amount of the Company's Senior Secured
Guaranteed Term Notes due 1996 (the "Term Notes") and up to $5,000,000 aggregate
principal amount of the Company's Senior Secured Guaranteed Revolving Notes due
1996 (the "Revolver" and, together with the Term Notes, the "Notes"), all as
more fully described in the Summary of Terms (the "Summary of Terms"), which is
attached hereto, forms an integral part hereof and is included within the term
"this letter agreement". Breuner's Home Furnishings Corporation (the "Parent
Guarantor") and Arnold's Acquisition Corp. (the "Subsidiary Guarantor" and,
together with the Parent Guarantor, collectively, the "Guarantors") each hereby
irrevocably and unconditionally guarantees all of the Company's obligations
under the Notes, the payment by the Company of the fees contemplated hereby and
the performance in full of the Company's obligations hereunder. In addition,
Kidd, Kamm Equity Partners, L.P. (the "Commitment Guarantor") hereby agrees to
the provisions with respect to indemnification and other matters set forth in
Annex A hereto as set forth in paragraph 8 below and the other matters set forth
herein which refer to the
<PAGE> 2
Commitment Guarantor. Proceeds of the Notes, together with at least $3,600,000
of cash equity from the Guarantor, will be used by the Company to acquire 100%
of the issued and outstanding common stock of Huffman Koos Inc. ("HK") in a
tender offer or merger transaction (the "Transaction") pursuant to an agreement
and plan of merger (the "Agreement"), to refinance up to $1,800,000 of existing
indebtedness of HK following its merger with and into the Company (the "Merger")
and for other working capital and general corporate purposes as more fully
described in the Summary of Terms. All references herein to the Company shall,
following the Merger, be deemed to be references to the surviving entity
following the merger of the Company with and into HK.
Nomura Securities International, Inc., a subsidiary of Nomura ("NSI"), will
participate in the structuring of the Notes and assist in determining the terms
and conditions under which Nomura shall purchase the Notes. It is understood
that NSI will assist Nomura in its review of the Guarantors, the Company and the
Notes and the terms and conditions under which the Notes may be purchased. The
parties hereto agree that, notwithstanding any other relationship that NSI may
now or in the future have with the Guarantors, the Company or the Commitment
Guarantor, NSI is not an agent of, or advisor to, the Company, the Guarantors or
the Commitment Guarantor and has no duty or responsibility to the Guarantors,
the Company or the Commitment Guarantor in connection with the structuring,
issue or sale of the Notes.
2. Conditions. Nomura's commitment to purchase the Notes is subject to:
(i) the execution of definitive documentation in form and substance satisfactory
to Nomura, including the receipt of appropriate purchase and merger
documentation and legal opinions satisfactory in form and substance to both
Nomura and its counsel and to such other terms and conditions as are set forth
in this letter agreement; (ii) the receipt of an executed copy of the Agreement
in form and substance satisfactory to Nomura and its counsel and the closing of
the transactions contemplated by the Agreement (including the Transaction) on
the following terms: (a) without waiver of any condition precedent set forth
therein that is not approved by Nomura, (b) the obtaining to the satisfaction of
Nomura of all consents referred to therein, (c) the representations and
warranties therein, after giving effect to scheduled and other exceptions
thereto, being satisfactory to Nomura, and (d) the delivery to the board of
directors of HK of an opinion as to the fairness of the consideration to be paid
in the Transaction from The Chicago Corporation or another nationally recognized
investment bank in form and substance satisfactory to Nomura in all respects;
(iii) the acquisition by the Company of a sufficient number of shares of HK's
common stock in order to consummate, immediately upon consummation of the
Transaction, the Merger pursuant to Section 253 of the Delaware General
Corporation Law and such laws of other jurisdictions as may be applicable and
that will not require a vote of shareholders; (iv) affiliates of the Commitment
Guarantor having made a cash equity investment in the Parent Guarantor in the
amount of at least $5,000,000 on terms satisfactory to Nomura in all respects,
and the Parent Guarantor, in turn, having made a cash equity investment in the
Company in the amount of at least $3,600,000 on terms satisfactory to Nomura in
all respects; (v) aggregate consideration (including assumed indebtedness) and
expenses payable by the Company in connection with the transactions contemplated
by the Agreement (including the Transaction) not exceeding $43,600,000, unless
such amounts in excess of $43,600,000 are funded completely by additional cash
equity investments in the Company by the Parent Guarantor on terms satisfactory
to Nomura in all respects; (vi) Nomura having obtained a perfected first
priority security interest in all of the issued stock of the Company and the
Subsidiary Guarantor held by the Parent Guarantor and the shares of HK purchased
in the Transaction and (immediately upon funding of the initial purchase of
Notes and consummation of the Transaction and the Merger) in substantially all
of the Company's and the Parent Guarantor's tangible and intangible assets,
including, without limitation, mortgages or leasehold mortgages and landlord
waivers with respect to all of the Company's real property and receipt of
acceptable title insurance thereon; provided in the event that the Company after
exhausting its best efforts is not able to obtain prior to funding of the
initial purchase of Notes and consummation of the Transaction and the Merger
such leasehold mortgages and landlord waivers with respect to the Company's real
property, Nomura in its reasonable discretion (and taking into consideration the
value of such real property and the inventory located thereon and the
practicalities of obtaining such leasehold mortgages and landlord waivers) will
consider either waiving the requirement that the Company obtain such leasehold
mortgages and landlord waivers or extending to a date certain after such
consummation the period for obtaining such leasehold mortgages and landlord
waivers; (vii) the sources and uses of funds for the transactions contemplated
by the Agreement being as set
2
<PAGE> 3
forth in the Summary of Terms, including the purchase by the Company of all of
the shares of HK's common stock at a price not to exceed $9.375 per share;
(viii) receipt of the fees described in paragraph 4 below; (ix) all other
documentation and financing and terms, manner and timing thereof being
satisfactory in all respects to Nomura and its counsel; and (x) the absence of
any material adverse change in the financial condition, business, prospects or
results of operations of the Company, HK or the Guarantors from January 31, 1995
to the date of the purchase of any Notes. It is contemplated that the
documentation relating to the Notes will include the substance of the financial
terms and other provisions outlined in the Summary of Terms. Nomura's obligation
to purchase Notes shall also be subject to such documentation also including
such conditions precedent, representations and warranties, covenants, events of
default and other provisions as are mutually satisfactory to Nomura, the Company
and the Guarantors.
3. Inspection. In addition, Nomura and its advisors (including, without
limitation, NSI) will have the right to inspect and copy the books and records
of the Company, HK and the Guarantors, the right to inspect the property of each
of them, the right to receive all periodic financial statements of each of them,
the right to consult with management and the Board of Directors of each of them
and the right to receive all material and information provided to the Board of
Directors of each of them.
4. Fees. In consideration of the transactions contemplated hereunder, the
Company and the Guarantors, jointly and severally, each agrees to pay the
following fees:
(a) To Nomura, a cash commitment fee of $250,000 (the "Commitment
Fee") upon the initial closing of the purchase of any Notes. The
Commitment Fee shall be non-refundable.
(b) To NSI, a cash structuring fee of $650,000 (the "Structuring Fee")
upon the initial closing of the purchase of any Notes. The
Structuring Fee shall be non-refundable and shall be in addition
to the Commitment Fee.
(c) To Nomura, upon the closing of the purchase of any Notes, a cash
funding fee of 1.50% of the principal amount of Notes purchased at
such closing (the "Funding Fee"); provided that any Funding Fee
with respect to the Revolver shall be determined only on the
excess, if any, of the resulting outstanding amount of the
Revolver over the highest previous outstanding amount of the
Revolver. The Funding Fee shall be non-refundable and shall be in
addition to the Commitment Fee and the Structuring Fee.
(d) To Nomura, in the event that a break-up or termination fee or
liquidated damages or other amount is paid by any person to the
Company, either Guarantor or the Commitment Guarantor or any
affiliate thereof as a result of the failure to consummate the
transactions contemplated by the Agreement (including the
Transaction), a cash fee (the "Break-up Fee") equal to $500,000.
The Break-up Fee shall be nonrefundable and shall be in addition
to any other amounts paid to Nomura or NSI hereunder.
(e) To Nomura, a cash fee of 0.375% per annum (the "Unused Facility
Fee") of the average amount of the Revolver which remained unused
during the preceding calendar month, monthly on the first business
day of each month.
5. Expenses. The Guarantors and the Company, jointly and severally, each
also agrees to reimburse Nomura and NSI periodically for their out-of-pocket
costs and expenses incurred in connection with the transactions contemplated
hereunder, promptly upon demand, including, without limitation, travel,
reproduction, printing and similar expenses, as well as the fees and
disbursements of legal counsel and any other outside professionals retained by
Nomura and NSI, whether or not the subject transaction is consummated or
Nomura's commitment hereunder expires, plus any sales, use, value added, stamp,
withholding or similar taxes (including additions to such taxes, if any),
arising in connection with any matter referred to herein. Upon request, the
Company will provide tax receipts to Nomura evidencing payment of all such taxes
in full when due. In any event, such costs and expenses must be fully reimbursed
prior to any purchase of Notes by Nomura. Upon the signing of this letter
agreement, the Guarantors and the Company, jointly and severally, each agrees to
pay to Nomura and NSI as an advance against those costs and expenses $250,000 in
cash (the
3
<PAGE> 4
"Expense Advance"). Nomura will inform the Commitment Guarantor in the event
Nomura determines that such costs and expenses will exceed $250,000.
6. Cooperation. The Parent Guarantor, the Subsidiary Guarantor, the
Company and the Commitment Guarantor each covenants and agrees that it shall
cooperate fully with Nomura and NSI, make available to Nomura and NSI all
information concerning the Company, HK, the Parent Guarantor, the Subsidiary
Guarantor, the Commitment Guarantor and the transactions contemplated by the
Agreement that Nomura or NSI requests, and use all resources and personnel
necessary to assist Nomura and NSI in connection with the transactions
contemplated hereunder.
7. Non-Disclosure. No reference to Nomura's commitment hereunder or its
involvement in the transactions contemplated in this letter agreement may be
disclosed to any third party or circulated or referred to publicly without
Nomura's prior written consent, except that the fact of Nomura's engagement
hereunder may be disclosed to the Company's, the Parent Guarantor's, the
Subsidiary Guarantor's, the Commitment Guarantor's and HK's counsel, advisors
and accountants if they are also informed of the provisions of this paragraph
and the Company, the Parent Guarantor, the Subsidiary Guarantor and the
Commitment Guarantor assume responsibility for their maintaining that
information in confidence.
8. Indemnification. In connection with arrangements such as this, it is
Nomura's and NSI's policy to receive indemnification. The Guarantors, the
Company and the Commitment Guarantor each agrees to the provisions with respect
to indemnification of Nomura and NSI and other matters set forth in Annex A
hereto, which is hereby incorporated by reference in this letter agreement,
provided that the Commitment Guarantor's indemnification obligations shall
terminate upon the initial closing of the purchase of any Notes by Nomura.
9. Term of Commitment. In the absence of the execution and delivery of
definitive documentation and the initial closing of the purchase of any Notes,
as contemplated in paragraph 2(i) above, Nomura's commitment hereunder shall
expire on November 22, 1995, unless otherwise extended in writing by Nomura. The
obligations of the Company, the Guarantors and the Commitment Guarantor as set
forth in this letter agreement, including Annex A hereto, shall survive any
termination of the commitment contemplated hereby and any purchase of Notes by
Nomura, provided that anything in Annex A to the contrary notwithstanding the
Commitment Guarantor's obligations under paragraph 8 above shall terminate as
provided therein.
10. Tombstones. Upon consummation of the purchase of any Notes or, if no
such purchase is made, upon expiration of Nomura's commitment hereunder, Nomura
may make announcements or advertisements (including in financial newspapers and
journals) describing such purchase or commitment, as the case may be.
11. Market Transactions. NSI is a full service securities firm and as such
may from time to time effect transactions for its own account or the account of
customers, and hold positions, in securities or options on securities of the
Company, the Guarantors, HK or other issuers involved in the transactions
contemplated hereby.
12. Jurisdiction. The Parent Guarantor, the Subsidiary Guarantor, the
Company and the Commitment Guarantor each hereby agrees that any suit or
proceeding arising out of or relating to this letter agreement or Nomura's
commitment shall be had in the Federal or state courts in the Borough of
Manhattan in The City of New York, and hereby consents to exclusive jurisdiction
and venue in such courts.
13. Other. This letter agreement contains the entire understanding and
agreement of the parties hereto and supersedes all prior agreements,
understandings and negotiations between the parties hereto relating to the
subject matter hereof (including, without limitation, the letter agreements
dated September 6, 1995 and September 11, 1995 among the Company, the Subsidiary
Guarantor and the Commitment Guarantor). The invalidity or unenforceability of
any of the provisions of this letter agreement shall not affect the validity or
enforceability of any other provisions hereof, which shall remain in full force
and effect. The terms and provisions of this letter agreement shall be binding
on any successor of any party hereto, as if it were a party to this letter
agreement. Nomura's commitment hereunder may be assigned, and the Notes may be
transferred, by Nomura at any time to any person including, without limitation,
an affiliate of Nomura, without the
4
<PAGE> 5
consent of the Company, the Guarantors or the Commitment Guarantor, after which
all references in this letter agreement to Nomura shall be deemed to be to such
affiliate. None of the Parent Guarantor, the Subsidiary Guarantor, the Company
or the Commitment Guarantor may assign, delegate or otherwise transfer its
rights, duties or obligations hereunder without the prior written consent of
Nomura. This letter agreement is made solely for the benefit of the Guarantors,
the Company and the Commitment Guarantor and may not be relied upon or enforced
by any other person (other than Nomura and NSI). The Guarantors, the Company and
the Commitment Guarantor agree that neither Nomura nor NSI will be liable under
this letter agreement in respect of any act, omission or event relating to the
transactions contemplated herein, on the theory of liability for any special,
indirect, consequential, speculative or punitive damages. This letter agreement
may only be amended or modified by a writing signed by the parties hereto. THIS
LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.
If the above is acceptable, please so confirm by signing and returning the
enclosed copy of this letter agreement, together with the Expense Advance, to
the undersigned (to the attention of Howard Gellis, Managing Director, Nomura
Securities International, Inc.) no later than September 12, 1995, whereupon this
letter agreement and each counterpart hereof will constitute a binding agreement
among the Company, the Guarantors, the Commitment Guarantor and Nomura.
Very truly yours,
NOMURA HOLDING AMERICA INC.
By: /s/ SALVATORE GENTILE
------------------------------------
Name: Salvatore Gentile
Title: Attorney in Fact
Accepted and agreed to this 11
day of September, 1995:
HK ACQUISITION COMPANY, INC.
By: /s/ MICHAEL H. SOLOMON
--------------------------------------------------------
Name: Michael H. Solomon
Title: Chairman
BREUNER'S HOME FURNISHINGS CORPORATION
By: /s/ TERRY M. THEODORE
--------------------------------------------------------
Name: Terry M. Theodore
Title: Secretary
5
<PAGE> 6
ARNOLD'S ACQUISITION CORP.
By: /s/ TERRY M. THEODORE
------------------------------------------
Name: Terry M. Theodore
Title: Assistant Secretary
KIDD, KAMM EQUITY PARTNERS, L.P.
By: Kidd, Kamm Investments, L.P.
its General Partner
By: Kidd, Kamm Investments, Inc.
its General Partner
By: /s/ TERRY M. THEODORE
---------------------------------------------
Name: Terry M. Theodore
Title: Vice President
Attachments: Annex A
Summary of Terms
6
<PAGE> 7
COMPANY: HK ACQUISITION COMPANY, INC.
PARENT GUARANTOR: BREUNER'S HOME FURNISHINGS CORPORATION
SUBSIDIARY GUARANTOR: ARNOLD'S ACQUISITION CORP.
COMMITMENT GUARANTOR: KIDD, KAMM EQUITY PARTNERS, L.P.
DATE: SEPTEMBER 11, 1995
ANNEX A
The Company, the Guarantors and the Commitment Guarantor each jointly and
severally agrees to indemnify and hold harmless Nomura, its affiliates
(including, without limitation, NSI), the directors, officers and employees of
Nomura and its affiliates, and each other person or entity, if any, controlling
Nomura or any of its affiliates (collectively, "Indemnified Persons"), from and
against, and the Company, the Guarantors and the Commitment Guarantor each
jointly and severally agrees that no Indemnified Person shall have any liability
to the Company, the Guarantors, the Commitment Guarantor or their owners,
parents, affiliates, securityholders or creditors for, any losses, claims,
damages, liabilities or expenses (including actions, claims or proceedings in
respect thereof (collectively, "Actions") brought by or against any person,
including stockholders of the Company, the Guarantors or the Commitment
Guarantor and the cost of any investigation and preparation therefor and defense
thereof) (collectively, "Losses") (A) arising out of or in connection with (i)
the Company's, the Parent Guarantor's, the Subsidiary Guarantor's or the
Commitment Guarantor's action or failure to act, (ii) any statements or
omissions made in any disclosure or other information or materials used in
connection with the transaction(s) (collectively, the "Transactions") described
in or contemplated by the letter agreement of which this Annex A is a part (the
"Letter Agreement") or the advice, services, commitment or other obligations
undertaken or being considered by Nomura and NSI (collectively, "Nomura's Role")
in the Letter Agreement, or (iii) the action or failure to act by an Indemnified
Person with the Company's, the Parent Guarantor's, the Subsidiary Guarantor's or
the Commitment Guarantor's consent or in reliance on the Company's, the Parent
Guarantor's, the Subsidiary Guarantor's or the Commitment Guarantor's action or
failure to act or (B) otherwise arising out of or in connection with the
Transactions or Nomura's Role, or any other matter referred to in the Letter
Agreement, except that this clause (B) shall not apply to the Losses of an
Indemnified Person that are determined by a court of competent jurisdiction in a
final judgment not subject to appeal to have resulted from the bad faith or
gross negligence of such Indemnified Person. If such indemnification is for any
reason not available or is insufficient to hold an Indemnified Person harmless,
the Company, the Guarantors and the Commitment Guarantor each jointly and
severally agrees to contribute to the Losses involved in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by the Company, the Guarantors, the Commitment Guarantor, any
affiliate of the Company, the Guarantors or the Commitment Guarantor and any of
their securityholders, on the one hand, and by Nomura and NSI, on the other
hand, with respect to the Transaction(s) to which such indemnification relates
or would have related or, if such allocation is judicially determined by a court
of competent jurisdiction in a final judgment not subject to appeal to be
unavailable or if it is insufficient to hold an Indemnified Person harmless, in
such proportion as is appropriate to reflect not only such relative benefits,
but also other equitable considerations such as the relative fault of the
Company, the Guarantors, the Commitment Guarantor and any such affiliate and
securityholder, on the one hand, and of Nomura and NSI, on the other hand;
provided, however, that in no event shall the Indemnified Persons as a whole be
required to contribute an amount greater than the amount of all fees actually
received by Nomura and NSI from the Company, the Guarantors or the Commitment
Guarantor in connection with Nomura's Role as to such Transaction(s). Relative
benefits to the Company, the Guarantors, the Commitment Guarantor, any such
affiliate of the Company, the Guarantors or the Commitment Guarantor and any of
their securityholders, on the one hand, and Nomura and NSI, on the other hand,
with respect to the Transaction(s) to which such indemnification relates or
would have related shall be deemed to be in the same proportion as (i) the total
gross proceeds (before costs, expenses and underwriting or placement
compensation) received, or the total value paid or proposed to be paid or
received or proposed to be received, in each case by or on behalf of the
Company, the Guarantors, the Commitment Guarantor, each such affiliate and their
securityholders, as the case may be, pursuant to such Transaction(s), whether or
not consummated,
A-1
<PAGE> 8
bears to (ii) all fees paid or proposed to be paid to Nomura and NSI by the
Company, the Guarantors or the Commitment Guarantor in connection with Nomura's
Role as to such Transaction(s).
The Company, the Guarantors and the Commitment Guarantor each jointly and
severally will reimburse each Indemnified Person for all expenses (including
fees and disbursements of counsel) as they are incurred by such Indemnified
Person in connection with investigating, preparing for or defending any Action
(or enforcing the Letter Agreement or any related engagement or commitment
agreement), whether or not in connection with pending or threatened litigation
in which any Indemnified Person is a party, and whether or not such Action is
brought by Nomura or NSI. The Company, the Guarantors and the Commitment
Guarantor each agrees that it will not settle or compromise or consent to the
entry of any judgment in any pending or threatened Action in respect of which
indemnification may be sought hereunder (whether or not an Indemnified Person is
a party therein) unless the Company, the Guarantors and the Commitment Guarantor
each has given Nomura and NSI reasonable prior written notice thereof and
obtained an unconditional release of each Indemnified Person from all liability
arising therefrom.
The Company's, the Parent Guarantor's, the Subsidiary Guarantor's and the
Commitment Guarantor's reimbursement, indemnity and contribution obligations
hereunder shall be in addition to any liability that they may otherwise have,
and shall inure to the benefit of any successors, assigns, heirs and
representatives of any Indemnified Person. Solely for the purpose of enforcing
the Letter Agreement, the Company, the Guarantors and the Commitment Guarantor
each hereby consents to personal jurisdiction and venue in any court in which
any Action is brought. In the event that an arbitration is commenced against an
Indemnified Person in which a claim is asserted that arises out of or is in
connection with any of the matters referred to in clause (A) or (B) of the first
sentence of this Annex A, the Company, the Guarantors and the Commitment
Guarantor each agrees to arbitration of any claims the Indemnified Person may
have against the Company, the Guarantors or the Commitment Guarantor pursuant to
the Letter Agreement under the same rules as, and under the auspices of the same
organization as, the arbitration in which the claim is asserted against the
Indemnified Person. The Company, the Guarantors and the Commitment Guarantor
each acknowledges that, in connection with Nomura's Role, Nomura and NSI are
acting as independent contractors with duties owing solely to themselves. The
provisions of this Annex A shall survive any termination of the Letter Agreement
or completion of the Transaction(s) or Nomura's Role. NOMURA AND NSI EACH HEREBY
AGREES AND THE COMPANY, THE GUARANTORS AND THE COMMITMENT GUARANTOR EACH HEREBY
AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ITS SECURITYHOLDERS, TO WAIVE ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION
ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION(S), NOMURA'S ROLE OR THE
LETTER AGREEMENT.
A-2
<PAGE> 9
HK ACQUISITION COMPANY, INC.
UP TO $45,000,000 BRIDGE FINANCING
CONSISTING OF
UP TO $40,000,000 OF SENIOR SECURED GUARANTEED TERM NOTES DUE 1996 AND
UP TO $5,000,000 SENIOR SECURED GUARANTEED REVOLVING NOTES DUE 1996
SUMMARY OF TERMS
NOTE: THIS SUMMARY OF TERMS IS SUBJECT TO AND FORMS AN INTEGRAL PART OF THE
COMMITMENT LETTER TO WHICH IT IS ATTACHED (THE "COMMITMENT LETTER").
ISSUER OF NOTES: HK Acquisition Company, Inc. (the "Company"), a
company formed under the laws of the State of
Delaware, whose principal assets will be all of
the issued and outstanding equity shares of
Huffman Koos Inc. ("HK"), and which will merge
with and into HK, with HK as the surviving
corporation.
Upon completion of the merger (the "Merger") of
the Company and HK, the surviving entity will
assume all of the Company's obligations under
the Commitment Letter, the Notes and related
documents. All references herein to the Company
or HK shall be deemed to be references to such
surviving entity after completion of the
Merger.
NOTE PURCHASER: Nomura Holding America Inc. ("NHA"), subject to
NHA's right to assign its obligations to an
affiliate as set forth in the Commitment Letter
("Purchaser").
TITLE OF NOTES: Senior Secured Guaranteed Term Notes due 1996
(the "Term Notes"), and
Senior Secured Guaranteed Revolving Notes due
1996 (the "Revolver" and, collectively with the
Term Notes, the "Notes").
PRINCIPAL AMOUNT: Term Notes: Up to $40,000,000 aggregate
principal amount.
Revolver: Up to $5,000,000 aggregate principal
amount.
GUARANTORS: Breuner's Home Furnishings Corporation (the
"Parent Guarantor") and Arnold's Acquisition
Corp. (the "Subsidiary Guarantor" and, together
with the Parent Guarantor, collectively, the
"Guarantors") will irrevocably and
unconditionally guarantee all of the Company's
obligations under the Notes, including timely
payment of principal, interest and any other
amounts due thereunder (respectively, the
"Parent Guarantee" and the "Subsidiary
Guarantee" and, collectively, the
"Guarantees").
CLOSING: Closing of the initial purchase of the Notes
(the "Closing Date") is expected to occur on or
before October 31, 1995.
MATURITY: The Notes will mature on the six-month
anniversary of the Closing Date. The maturity
of the Notes may be extended up to 3 times, for
a period of six months per extension (for a
maximum term of 24 months) at the option (each,
an "Extension Option") of the Company upon no
less than 14 days' prior written notice to
S-1
<PAGE> 10
Purchaser accompanied by payment to Purchaser
of the Extension Fee described below.
EXTENSION FEE: A cash extension fee of $125,000 (the
"Extension Fee") will be payable by the Company
upon exercise of each Extension Option. The
Extension Fees shall be non-refundable and
shall be in addition to all other fees paid by
the Company.
INTEREST PAYMENT PERIODS: Commencing monthly, on the Closing Date pro
rata to the first day of the calendar month
following the Closing Date and thereafter
monthly on the first day of each calendar
month.
INTEREST RATE: Revolver: Initially, 11.25% per annum
Term Note: Initially, 11.25% per annum
For each six-month extension beyond the initial
Maturity, the interest rate shall be increased
by an incremental 50 basis points.
Interest on any overdue interest and principal
payments and on any other amounts overdue on
the Notes shall accrue at a rate of 200 basis
points in excess of the applicable rates
determined as provided above.
All interest shall be computed on the basis of
a 360-day year consisting of twelve 30-day
months.
PURCHASE PRICE: 100% of principal amount.
RANKING: The Notes will constitute senior secured
indebtedness of the Company and will rank pari
passu with all unsubordinated indebtedness of
the Company and senior to any subordinated
indebtedness of the Company.
The Parent Guarantee will constitute a senior
secured obligation of the Parent Guarantor and
the Subsidiary Guarantee will constitute a
senior unsecured obligation of the Subsidiary
Guarantor and each Guarantee and will rank
pari passu with all unsubordinated
indebtedness of such Guarantor and senior to
any subordinated indebtedness of such
Guarantor; provided that the Subsidiary
Guarantee will be subordinated, on terms
acceptable to the Purchaser, in respect of
payment to the Subsidiary Guarantor's
obligations under its working capital facility
with Norwest Financial Business Credit, Inc.
TRANSFERABILITY: The Notes shall be transferable, without
restriction, by the holder(s) thereof.
USE OF PROCEEDS: Proceeds from the sale of the Notes will be
used by the Company, together with at least
$3,600,000 in cash equity from the Parent
Guarantor, to purchase 100% of the issued and
outstanding common stock of Huffman Koos Inc.
("HK") at a price not to exceed $9.375 per
share, to refinance up to $1,800,000 of
existing indebtedness of HK following its
merger with and into the Company and for other
working capital and general corporate purposes.
The price per share paid to each selling
shareholder shall be the same.
The Notes are intended to serve as a temporary
financing arrangement until the Company is able
to undertake a permanent refinanc-
S-2
<PAGE> 11
ing of its liabilities, which it anticipates
completing within six months after the initial
purchase of Notes.
SOURCES AND USES OF FUNDS: SOURCES
<TABLE>
<S> <C> <C>
At least $3,600,000 Common Equity from Parent
Guarantor
Up to $40,000,000 Term Notes
Up to $5,000,000 Revolver
-----------
Total Sources
$48,600,000
===========
USES
Up to $37,600,000 Purchase of HK common stock
Up to $4,000,000 Fees and expenses
Up to $1,800,000 HK debt to be refinanced
At least $5,200,000 Working capital and general corporate
-----------
$48,600,000 Total Uses
===========
</TABLE>
SECURITY: The Notes will be secured by a perfected first
priority security interest in substantially all
of the Company's and its subsidiaries' and the
Parent Guarantor's tangible and intangible
assets, including all of the common stock of
HK, now held or hereafter acquired.
The Parent Guarantor will also secure its
obligations under the Parent Guarantee by a
perfected first priority security interest in
all of the capital stock of the Company and the
Subsidiary Guarantor held by the Parent
Guarantor. The Subsidiary Guarantee will be
unsecured.
DRAWDOWNS: Funds may be drawn down, under the Revolver
from time to time upon at least 5 business
days' notice to Purchaser, subject to the
condition that no more than two drawdowns under
the Revolver (each in a minimum principal
amount of $1,000,000) may take place in any
calendar month.
EXCESS CASH FLOWS: After the one-year anniversary of the Closing
Date (if the initial Maturity is extended) the
Company shall be required to redeem the Term
Notes, at a price of 100.0% of principal amount
redeemed plus accrued interest to the
redemption date, at the end of each additional
three-month period in which the Term Notes are
outstanding in an aggregate principal amount
equal to 75% of Excess Cash Flow for such
period. Excess Cash Flow will be defined as the
sum of (i) net income, plus (ii) net non-cash
charges (net of credits), reduced by allowable
capital expenditures and changes in working
capital, plus (or minus) (iii) net losses (or
net gains) resulting from any asset sale
covered by the limitation on the sale of assets
described under "Covenants" below.
MANDATORY REDEMPTION: The net proceeds from any public offering or
Rule 144A or private placement of debt, equity
or hybrid securities, and any funds raised
through the incurrence of bank indebtedness by
the Parent Guarantor, the Company or any
subsidiary thereof will be applied toward the
redemption of the Term Notes at a price of
100.0% of principal amount redeemed plus
accrued interest to the redemption date.
S-3
<PAGE> 12
Principal amounts repaid under this mandatory
redemption provision may not be drawn down
again.
OPTIONAL REDEMPTION: The Notes may be redeemed in whole or in part
from time to time, at the option of the
Company, by applying funds for such a
redemption at a price of 100.0% of principal
amount redeemed plus accrued interest to the
redemption date.
Optional redemption payments will be allowed
only in whole dollar amounts of at least
$1,000,000 of principal (unless the remaining
principal balance of any remaining Note is
less).
Principal amounts repaid on the Term Notes
under this redemption provision may not be
drawn down again; principal amounts repaid on
the Revolver under this redemption provision
may be drawn down again in accordance with the
terms hereof.
REPRESENTATIONS: The Note Purchase Agreement and the Guarantees
will contain representations and warranties by
the Company and the respective Guarantors
satisfactory to Purchaser, including, without
limitations as to their solvency after giving
effect to the Transaction and affirmation of
their intention to take all necessary and
deliberate actions to effect a refinancing of
the Notes as soon as practicable.
COVENANTS: The Note Purchase Agreement and the Parent
Guarantee will contain affirmative and negative
covenants satisfactory to Purchaser, including,
without limitation, those customary for
financings of this type, concerning the Company
and the Parent Guarantor. Affirmative and
negative covenants under the Subsidiary
Guarantee will include, but not be limited to,
restrictions on fundamental changes,
indebtedness, restricted payments, guarantees,
investments, transactions with affiliates and
asset sales.
Affirmative covenants under the Note Purchase
Agreement and the Parent Guarantee will
include, but not be limited to, compliance with
contractual obligations and law, maintenance of
existence, inspection rights, insurance,
payment of taxes and other claims, maintenance
of property and insurance, further assurances
and notices and reporting.
Negative covenants under the Note Purchase
Agreement and the Parent Guarantee will
include, but not be limited to, the following:
- limitations on liens and negative pledges
- limitations on sale/leasebacks
- limitations on indebtedness, capital leases,
contingent obligations and Company-issued
preferred stock
- restrictions on the creation of any
subsidiaries
- limitations on dividends or any payments on,
or redemptions or repurchases of, the
capital stock of the Company or the Parent
Guarantor and other restricted payments
- limitations on the sale of assets and
transactions with affiliates
- limitations on payments under operating
leases
S-4
<PAGE> 13
- limitations on mergers and/or consolidations
- limitations on investments, acquisitions and
joint ventures
- limitations on changes of control
- financial covenants satisfactory to
Purchaser including, but not limited to,
minimum net worth, minimum working capital,
fixed charge coverage ratio, leverage ratio
and EBITDA levels
- such other matters as Purchaser deems
advisable, including provisions related to
environmental liabilities, ERISA, conduct of
business and capital expenditures
EVENTS OF DEFAULT: The Note Purchase Agreement and the Guarantees
will contain default provisions satisfactory to
Purchaser, including, but not limited to:
- failure to pay principal or interest on the
Notes or any other amount due under the Note
Purchase Agreement or the Guarantees when
and as due
- failure to comply with any of the covenants
or other terms of the Note Purchase
Agreement, the Notes, the Guarantees or
other documents (including, without
limitation, security documents)
- breach of any representation or warranty in
the Note Purchase Agreement, the Guarantees
or other documents (including, without
limitation, security documents)
- cross-default on other obligations of the
Company or either Guarantor
- certain events of bankruptcy of the Company
or either Guarantor
- ERISA
- change of control of the Company or the
Parent Guarantor (the Parent Guarantor will
be required to own 100% of the Company)
- material judgment against the Company or
either Guarantor
- failure to maintain perfected security for
the Notes or the Parent Guarantee
- invalidity or disaffirmation of any of the
Guarantees
GOVERNING LAW: The Note Purchase Agreement, the Guarantees,
the Notes and other documents shall be governed
by and construed in accordance with the laws of
the State of New York, without giving effect to
conflicts of law principles.
COUNSEL TO THE PURCHASERS: Paul, Hastings, Janofsky & Walker
S-5
<PAGE> 1
Exhibit (c)(3)
THE CHICAGO CORPORATION
James C. Derks
Vice President
April 25, 1995
Private and Confidential
Mr. Steve Dollinger
Kidd, Kamm & Company
9454 Wilshire Boulevard
Suite 920
Beverly Hills, CA 90212
Dear Mr. Dollinger:
In connection with your consideration of a possible business
combination with, or any related transaction involving, the assets or business
of Huffman Koos Inc. ("HK" or the "Company") in one or a series of transactions
(each, a "Transaction"), the Company and/or its affiliates, agents, advisors or
other representatives (each, an "HK Representative") is prepared to furnish you
with certain confidential and proprietary information concerning the Company's
assets and business. The Chicago Corporation is acting as exclusive financial
advisor to the Company and is authorized to sign this Agreement on its behalf.
In consideraton of the opportunity to review any such information provided by
HK, you agree as follows:
1. You hereby agree to treat confidentially any information furnished
to you by HK or HK's Representatives (collectively, the "Evaluation Material");
provided, however, that the term "Evaluation Material" does not include
information which (i) is at the time of disclosure to you or later becomes
generally known to the public other than as a result of disclosure directly or
indirectly by you or your affiliates, agents, advisors or other representatives
(each, "your Representative"), (ii) becomes available to you on a
non-confidential basis from a source other than HK or HK's Representatives,
provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to HK or (iii) has already been
independently acquired or developed by you without violating any
confidentiality agreement with or obligation of secrecy to HK.
One First National Plaza
Suite 3350
Chicago, Illinois 60603
312-732-8200
INVESTMENT BANKING/INVESTMENT ADVICE/MEMBER OF ALL PRINCIPAL EXCHANGES
<PAGE> 2
April 25, 1995
Page 2 of 5
2. You agree to use the Evaluation Material only for the purpose of
evaluating the Transaction and you will not use the Evaluation Material in any
other way (including but not limited to direct or indirect disclosure to any
third parties); provided, however, that you may disclose any Evaluation
Material to your Representatives who need to know such information for the sole
purpose of evaluating the Transaction (provided that they shall be informed by
you of the confidential nature of such information and that prior to any such
disclosure such Representatives shall agree to be bound by this agreement). You
also agree that all communications by you and your Representatives shall be
through representatives of The Chicago Corporation. Under no circumstances
shall HK be contacted directly.
3. If at any time when the Evaluation Material is in your
possession or in the possession of your Representatives such information is
subpoenaed or demand for production is made by any other form of legal process
by any court, administrative or legislative body, or any other person or entity
purporting to have authority to subpoena or demand the Evaluation Material, the
person to whom the subpoena or demand is directed will not produce the
Evaluation Material without first giving written notice of the subpoena or
demand (including the delivery of a copy thereof) to William Hellman, Chairman
of the Board of HK within a reasonable time prior to the time when production
of the Evaluation Material is requested by the subpoena or demand. In any event,
the party to whom the subpoena or demand is directed shall request the person
or entity propounding the subpoena or demand to give HK a reasonable time to
object to such production. In the event that a protective order or other remedy
is not obtained, or that HK waives compliance with the provisions hereof, you
agree to furnish only the portion of the Evaluation Material which you are
advised by written opinion of your counsel is legally required and to use every
reasonable effort to obtain assurances that confidential treatment will be
accorded such Evaluation Material.
4. For a period of two years from the date hereof you and your
affiliates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) will not (and you and they will not assist or
encourage others to), directly or indirectly, unless specifically authorized in
writing in advance by HK:
(i) acquire or agree, offer, seek or propose to acquire
ownership (including, but not limited to, beneficial ownership as
defined in Rule 13d-3 under the Exchange Act) of any of HK's assets or
businesses or any securities issued by HK, or any rights or options to
acquire such ownership (including from a third party), or
<PAGE> 3
April 25, 1995
Page 3 of 5
(ii) seek or propose to influence or control HK management
or its policies (or request permission to do so) or
(iii) enter into any discussions, negotiations, arrangements
or understandings with any third party with respect to any of the
foregoing.
5. You shall not make any public disclosure concerning the subject
matter of this agreement or of your consideration of a Transaction, including
that Evaluation Material has been made available to you or that you are having
or have had discussions with HK; provided, however, that you may make such
disclosure if you have received the written opinion of your outside counsel
that such disclosure must be made by you in order that you not commit a
violation of applicable law, and you advise HK of your obligation to make such
disclosure, and provide HK with a copy of the opinion of counsel, the proposed
disclosure and an opportunity to discuss such disclosure with you and your
counsel as early as practicable prior to such disclosure.
6. The Company may elect at any time to terminate further access
by you to Evaluation Material, and you agree that, upon any such termination or
upon our request you will promptly (and in any case within 14 days of the
Company's request) return to us all copies of the Evaluation Material and will
destroy or cause to be destroyed all memoranda, notes and other writings
prepared by you or your Representatives based on the Evaluation Material. No
such actions will affect your obligations hereunder or those of your
Representatives, all of which obligations shall continue in effect. You agree
not to make copies of the Evaluation Material except as necessary to assist you
in your consideration of the Transaction.
7. From and after the date of this Agreement and continuing for a
period of eighteen months thereafter, you agree that no person involved in or
with a knowledge of the discussions between us with respect to a Transaction,
acting on your behalf or on behalf of your subsidiaries or affiliates (a
"Restricted Person"), shall, directly or indirectly, solicit to employ (whether
as an employee, officer, director, agent, consultant or independent contractor)
any person who is now employed by the Company or its Representatives. The term
"solicit for employment" includes any communication (written, telephone or
oral) from or initiated by a Restricted Person, or any search or other
recruitment entity or person employed by or at the direction of a Restricted
<PAGE> 4
April 25, 1995
Page 4 of 5
Person, to any employee of HK (except any such communication directly in
response to a written, telephonic or other contact initiated by such employee)
but does not include advertising to fill one or more positions in any newspaper
of general circulation or industry publication on a basis consistent with past
practice.
8. You agree that money damages would not be a sufficient remedy
for any breach of this agreement by you or your Representatives, and that in
addition to all other remedies HK shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and you
further agree to waive any requirement for the securing or posting of any bond
in connection with such remedy.
9. Neither HK nor any HK Representative makes any representation
or warranty as to the accuracy or completeness of the Evaluation Material.
Neither HK nor any HK Representative shall be subject to any liability
resulting from the use of the Evaluation Material by you or your
Representatives. Only those representations and warranties that are made in a
definitive agreement relating to the Transaction, when, as, and if it is
executed, and subject to such qualifications, limitations and restrictions as
may be specified in such agreement, will have legal effect. You also acknowledge
that to the extent the Evaluation Material consists of financial projections,
such projections may be based upon a number of assumptions and no assurance is
given that such assumptions are correct or that such projections will be
realized. Finally, HK is under no duty or obligation to provide you or your
Representatives with access to any information, and nothing herein is intended
to impose any such obligation upon HK or the HK Representatives.
10. This agreement may be executed in one or more counterparts,
each of which shall, for all purposes, be deemed an original and all such
counterparts, taken together, shall constitute one and the same agreement, even
though all of the parties may not have executed the same counterpart of this
agreement.
11. It is understood and agreed that no failure or delay by the
Company 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 right, power or
privilege hereunder.
12. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this letter agreement, which shall remain in full force and
effect.
13. This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to its conflict
of laws, principles or rules. This agreement shall be binding on you and your
Representatives for a period of two years from the date hereof.
<PAGE> 5
April 25, 1995
Page 5 of 5
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this agreement, which will constitute your
binding agreement with HK with respect to the matters set forth herein;
provided, however, that it is mutually understood and agreed that you or any of
your Representatives use of the Evaluation Material for any purpose shall
itself constitute your agreement and acceptance of the terms and restrictions
hereof.
Sincerely,
THE CHICAGO CORPORATION,
as representative and on behalf
of the Company
By: /s/ James Derks
---------------------
AGREED:
KIDD, KAMM & COMPANY
By: /s/ Steven Dollinger
---------------------------
Title: Associate
------------------------
Dated: 4/25/95
------------------------
<PAGE> 1
Exhibit (c)(4)
July 28, 1995
Arnold's Acquisition Corporation
c/o Kidd, Kamm Equity Partners, L.P.
9454 Wilshire Boulevard
Suite 920
Beverly Hills, California 90212
Gentlemen:
Our financial advisor, The Chicago Corporation, has distributed to you
and others on a confidential basis information about Huffman Koos Inc. (the
"Company"). You have indicated to The Chicago Corporation that, in addition to
such information, you wish to conduct a financial, business, regulatory and
legal "due diligence" investigation of the Company in order to determine
whether you or one of your affiliates would agree to enter into a definitive
agreement to acquire the Company.
The Company and its Board of Directors acknowledge that you will devote
substantial time and resources, and incur substantial expenses, in connection
with conducting such investigation. To induce you to incur such expenses, the
Company agrees that, until September 5, 1995, or such later date as may be
agreed to by the Company in its sole discretion (the "Exclusivity Period"), it
will not directly or indirectly through any officer, director, employee, agent,
advisor or otherwise (i) solicit, initiate or encourage submission of proposals
or offers from any corporation, partnership, persons or group relating to any
acquisition, purchase or option to purchase any stock of the Company, or any of
the assets of, or any equity interest in the Company, or any merger,
consolidation or other form of business combination or joint venture with the
Company or (ii) furnish to any person or entity any information with respect to
any of the foregoing without your prior written consent. However,
notwithstanding the foregoing, the Company and its Board of Directors shall not
be prohibited from entering into any negotiations which were not so solicited
or initiated to the extent
<PAGE> 2
Arnold's Acquisition Corporation
July 28, 1995
Page 2
such action is taken on the exercise of good faith judgment as to their
fiduciary duties to the shareholders of the Company, which judgment is based
upon the written advice of independent, outside legal counsel that a failure of
the Board of Directors of the Company to take such action would be likely to
constitute a breach of its fiduciary duties to the shareholders of the
Company. Each time, if any, that the Board of Directors of the Company
determines, upon written advice of such legal counsel and in the exercise of its
good faith judgment as to its fiduciary duties to the Company's shareholders,
that it must enter into negotiations with, or furnish any information that is
not publicly available to, any corporation, partnership, person or other
entity or group (other than you, one of your affiliates, or their authorized
representatives) concerning any acquisition proposal, the Company will
give you prompt notice of such determination (which shall include
a copy of the written advice of such legal counsel). The Company will notify
you promptly in writing if the Company or its Board of Directors becomes aware
that any inquiries or proposals are received by, any information is requested
from or any negotiations or discussions are sought to be initiated with the
Company or its Board of Directors with respect to any proposed purchase of
assets, equity interests or any proposed merger or other form of business
combination.
The Company agrees that should it or any of its employees, directors or
representatives during the Exclusivity Period either (a) receive an unsolicited
proposal for the purchase of assets, equity interests or any proposed merger or
other form of business combination (an "Acquisition Proposal") (other than from
you, one of your affiliates or their authorized representatives) which it does
not reject or (b) solicit or initiate any discussion for an Acquisition
Proposal (regardless of whether it results in any acquisition), then in either
case the Company shall pay to you an amount equal to all documented
out-of-pocket expenses (including, without limitation, fees and expenses of
counsel, accountants and financial advisors and fees and expenses paid to
financing sources) not in excess of $350,000 in the aggregate incurred by you
in connection with your "due diligence" investigation and attempted financing
of an offer for the Company.
The Company agrees that any proposal, written or oral, which it
receives from you will be kept and maintained confidential by the Company,
except to the extent required by the fiduciary duties discussed above or as
mutually agreed by us.
If the foregoing is acceptable to you, please sign the enclosed
counterpart of this letter and return it to the undersigned.
/s/ Peter C. B. Bynoe
---------------------------
Peter C. B. Bynoe
for and on behalf of Huffman
Koos Inc. and its Board
of Directors
Agreed to and accepted this
28th day of July, 1995.
Arnold's Acquisition Corporation
By /s/ Michael H. Solomon
--------------------------
<PAGE> 1
Exhibit (c)(5)
September 7, 1995
FRED BERK
1. Elected to the Board of Parent Company.
2. Appointed President and Chief Operating Officer of Parent Company.
3. Continue to be President and CEO of Huffman Koos.
4. Reports to Michael Solomon, Chairman and CEO of Parent Company.
5. Base salary of $325,000.
6. Bonus Potential of up to 75% of base for achievement of EBITDA Target.
Additional (bonus without a cap) for exceeding annual EBITDA
Target (see attached Exhibit A). The annual EBITDA Target will be
established in conjunction with the Company's Management and approved
by the Board of Directors.
7. Participation in Management Stock Option Plan (currently
allocated up to 5% of Parent Company stock for use in the Management
Stock Option Plan).
8. Extend the 30-day separation option to begin 6 months after close of
acquisition.
<PAGE> 2
FRED BERK
ANNUAL BONUS PLAN
You can earn up to 75% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
- ------------------------- ---------------
90% -0-
91% 7.5%
92% 15%
93% 22.5%
94% 30%
95% 37.5%
96% 45%
97% 52.5%
98% 60%
99% 67.5%
100% 75%
101% 76%
102% 77%
103% 78%
---- -----
<PAGE> 1
Exhibit (c)(6)
ARNOLD'S ACQUISITION CORP.
4750 KEARNY MESA ROAD
SAN DIEGO, CA 92111
September 7, 1995
Personal and Confidential
Mr. Joseph Albanese
Vice President - Chief Financial Officer
Huffman Koos Inc.
Route 4 and Main Street
River Edge, NJ 07661
Dear Joe:
We are pleased to offer you the opportunity to join our team at Huffman Koos
following the closing of our acquisition. We are well on the way to building a
national furniture company in which Huffman Koos will be a key component.
While we intend to prepare a formalized employment agreement with you as soon
as possible, we wanted to let you know what the key terms of this agreement
will cover. We hope you will be pleased and realize that we consider you to be
an important part of the Huffman Koos team.
- - Position: You will continue in your current position as Vice President -
Chief Financial Officer.
- - Employment Term: One year with automatic one year extensions unless Company
provides written notice of their intention not to renew this agreement at
least 60 days prior to the end of term.
- - Base Salary: Your base salary will be $115,000.00 per year.
- - Bonus: You will be eligible to earn an annual bonus of up to 50% of
your annual salary for achieving the annual profit target developed in
conjunction with the Company's management and approved by the Board of
Directors. You can earn an additional Bonus (with no cap) for exceeding
the annual target. See Exhibit A attached.
- - Stock Option Plan: As a key member of the Management Team, you will be
eligible to participate in the Parent Company's Management Stock Option Plan.
This plan will be in place shortly after the completion of this acquisition,
and the Board of Directors has authorized up to 5% of the shares of the
Parent Company for inclusion in this stock option plan.
<PAGE> 2
Mr. Joseph Albanese
September 7, 1995
Page 2
Joe, we look forward to building a large and profitable business
together, with corresponding financial rewards for all of us. Please let me
know if you have any questions. Also, I ask that you keep this letter and its
contents confidential. Thanks.
Sincerely,
Michael H. Solomon
Michael H. Solomon
Chairman and CEO
Arnold's Acquisition Corp.
MHS:ch
Enc: Exhibit A
<PAGE> 3
Joseph Albanese, Continued
EXHIBIT A
ANNUAL BONUS PLAN
You can earn up to 50% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
<TABLE>
<CAPTION>
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
- ------------------------- -------------------------
<S> <C>
90% -0-
91% 5%
92% 10%
93% 15%
94% 20%
95% 25%
96% 30%
97% 35%
98% 40%
99% 45%
100% 50%
101% 51%
102% 52%
103% 53%
... ...
</TABLE>
<PAGE> 1
Exhibit (c)(7)
ARNOLD'S ACQUISITION CORP.
4750 KEARNY MESA ROAD
SAN DIEGO, CA 92111
September 7, 1995
Personal and Confidential
Mr. John Alecci
Vice President - MIS
Huffman Koos Inc.
Route 4 and Main Street
River Edge, NJ 07661
Dear John:
We are pleased to offer you the opportunity to join our team at Huffman Koos
following the closing of our acquisition. We are well on the way to building a
national furniture company in which Huffman Koos will be a key component.
While we intend to prepare a formalized employment agreement with you as soon
as possible, we wanted to let you know what the key terms of this agreement
will cover. We hope you will be pleased and realize that we consider you to be
an important part of the Huffman Koos team.
- - Position: You will continue in your current position as Vice President
- MIS.
- - Employment Term: One year with automatic one year extensions unless
Company provides written notice of their intention not to renew this
agreement at least 60 days prior to the end of term.
- - Base Salary: Your base salary will be $107,000.00 per year.
- - Bonus: You will be eligible to earn an annual bonus of up to 50% of
your annual salary for achieving the annual profit target developed in
conjunction with the Company's management and approved by the Board of
Directors. You can earn an additional Bonus (with no cap) for
exceeding the annual target. See Exhibit A attached.
- - Stock Option Plan: As a key member of the Management Team, you will
be eligible to participate in the Parent Company's Management Stock
Option Plan. This plan will be in place shortly after the completion
of this acquisition, and the Board of Directors has authorized up to
5% of the shares of the Parent Company for inclusion in this stock
option plan.
<PAGE> 2
Mr. John Alecci
September 7, 1995
Page 2
John, we look forward to building a large and profitable business together,
with corresponding financial rewards for all of us. Please let me know if you
have any questions. Also, I ask that you keep this letter and its contents
confidential. Thanks.
Sincerely,
Michael H. Solomon
Michael H. Solomon
Chairman and CEO
Arnold's Acquisition Corp.
MHS:ch
Enc: Exhibit A
<PAGE> 3
John Alecci, Continued
EXHIBIT A
ANNUAL BONUS PLAN
You can earn up to 50% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
<TABLE>
<CAPTION>
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
- ------------------------- ------------------------
<S> <C>
90% -0-
91% 5%
92% 10%
93% 15%
94% 20%
95% 25%
96% 30%
97% 35%
98% 40%
99% 45%
100% 50%
101% 51%
102% 52%
103% 53%
... ...
</TABLE>
<PAGE> 1
Exhibit (c)(8)
ARNOLD'S ACQUISITION CORP.
4750 KEARNY MESA ROAD
SAN DIEGO, CA 92111
September 7, 1995
Personal and Confidential
Mr. Timothy Costello
Vice President - Warehouse Distribution
Huffman Koos Inc.
Route 4 and Main Street
River Edge, NJ 07661
Dear Tim:
We are pleased to offer you the opportunity to join our team at Huffman Koos
following the closing of our acquisition. We are well on the way to building a
national furniture company in which Huffman Koos will be a key component.
While we intend to prepare a formalized employment agreement with you as soon
as possible, we wanted to let you know what the key terms of this agreement
will cover. We hope you will be pleased and realize that we consider you to be
an important part of the Huffman Koos team.
- - Position: You will continue in your current position as Vice
President - Warehouse Distribution.
- - Employment Term: One year with automatic one year extensions unless Company
provides written notice of their intention not to renew this agreement at
least 60 days prior to the end of term.
- - Base Salary: Your base salary will be $115,000.00 per year.
- - Bonus: You will be eligible to earn an annual bonus of up to 50% of your
annual salary for achieving the annual profit target developed in conjunction
with the Company's management and approved by the Board of Directors. You can
earn an additional Bonus (with no cap) for exceeding the annual target. See
Exhibit A attached.
- - Stock Option Plan: As a key member of the Management Team, you will be
eligible to participate in the Parent Company's Management Stock Option Plan.
This plan will be in place shortly after the completion of this acquisition,
and the Board of Directors has authorized up to 5% of the shares of the
Parent Company for inclusion in this stock option plan.
<PAGE> 2
Mr. Timothy Costello
September 7, 1995
Page 2
Tim, we look forward to building a large and profitable business together, with
corresponding financial rewards for all of us. Please let me know if you have
any questions. Also, I ask that you keep this letter and its contents
confidential. Thanks.
Sincerely,
Michael H. Solomon
Michael H. Solomon
Chairman and CEO
Arnold's Acquisition Corp.
MHS:ch
Enc: Exhibit A
<PAGE> 3
Timothy Costello, Continued
EXHIBIT A
ANNUAL BONUS PLAN
You can earn up to 50% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
------------------------- ------------------------
90% -0-
91% 5%
92% 10%
93% 15%
94% 20%
95% 25%
96% 30%
97% 35%
98% 40%
99% 45%
100% 50%
101% 51%
102% 52%
103% 53%
... ...
<PAGE> 1
Exhibit (c)(9)
ARNOLDS' ACQUISITION CORP.
4750 KEARNY MESA ROAD
SAN DIEGO, CA 92111
September 7, 1995
Personal and Confidential
Mr. John DiSanza
Vice President - Store Operations
Huffman Koos Inc.
Route 4 and Main Street
River Edge, NJ 07661
Dear Jack:
We are pleased to offer you the opportunity to join our team at Huffman Koos
following the closing of our acquisition. We are well on the way to building a
national furniture company in which Huffman Koos will be a key component.
While we intend to prepare a formalized employment agreement with you as soon
as possible, we wanted to let you know what the key terms of this agreement will
cover. We hope you will be pleased and realize that we consider you to be an
important part of the Huffman Koos team.
- -- Position: You will continue in your current position as Vice President -
Store Operations.
- -- Employment Term: One year with automatic one year extensions unless
Company provides written notice of their intention not to renew this
agreement at least 60 days prior to the end of term.
- -- Base Salary: Your base salary will be $115,000.00 per year.
- -- Bonus: You will be eligible to earn an annual bonus of up to 50% of your
annual salary for achieving the annual profit target developed in
conjunction with the Company's management and approved by the Board of
Directors. You can earn an additional Bonus (with no cap) for exceeding the
annual target. See Exhibit A attached.
- -- Stock Option Plan: As a key member of the Management Team, you will be
eligible to participate in the Parent Company's Management Stock Option
Plan. This plan will be in place shortly after the completion of this
acquisition, and the Board of Directors has authorized up to 5% of the
shares of the Parent Company for inclusion in this stock option plan.
<PAGE> 2
Mr. John DiSanza
September 7, 1995
Page 2
Jack, we look forward to building a large and profitable business together,
with corresponding financial rewards for all of us. Please let me know if you
have any questions. Also, I ask that you keep this letter and its contents
confidential. Thanks.
Sincerely,
Michael H. Solomon
Michael H. Solomon
Chairman and CEO
Arnold's Acquisition Corp.
MHS:ch
Enc: Exhibit A
<PAGE> 3
John DiSanza, Continued
EXHIBIT A
ANNUAL BONUS PLAN
You can earn up to 50% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
<TABLE>
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
<S> <C>
90% -0-
91% 5%
92% 10%
93% 15%
94% 20%
95% 25%
96% 30%
97% 35%
98% 40%
99% 45%
100% 50%
101% 51%
102% 52%
103% 53%
... ...
</TABLE>
<PAGE> 1
Exhibit (c)(10)
ARNOLD'S ACQUISITION CORP.
4750 KEARNY MESA ROAD
SAN DIEGO, CA 92111
September 7, 1995
Personal and Confidential
Mr. Al Melchiano
Vice President - Marketing & Advertising
Huffman Koos Inc.
Route 4 and Main Street
River Edge, NJ 07661
Dear Al:
We are pleased to offer you the opportunity to join our team at Huffman Koos
following the closing of our acquisition. We are well on the way to building a
national furniture company in which Huffman Koos will be a key component.
While we intend to prepare a formalized employment agreement with you as soon
as possible, we wanted to let you know what the key terms of this agreement
will cover. We hope you will be pleased and realize that we consider you to be
an important part of the Huffman Koos team.
- - Position: You will continue in your current position as Vice President -
Marketing & Advertising.
- - Employment Term: One year with automatic one year extensions unless Company
provides written notice of their intention not to renew this agreement at
least 60 days prior to the end of term.
- - Base Salary: Your base salary will be $122,000.00 per year.
- - Bonus: You will be eligible to earn an annual bonus of up to 50% of your
annual salary for achieving the annual profit target developed in conjunction
with the Company's management and approved by the Board of Directors. You can
earn an additional Bonus (with no cap) for exceeding the annual target. See
Exhibit A attached.
- - Stock Option Plan: As a key member of the Management Team, you will be
eligible to participate in the Parent Company's Management Stock Option Plan.
This plan will be in place shortly after the completion of this acquisition,
and the Board of Directors has authorized up to 5% of the shares of the
Parent Company for inclusion in this stock option plan.
<PAGE> 2
Mr. Al Melchiano
September 7, 1995
Page 2
Al, we look forward to building a large and profitable business together, with
corresponding financial rewards for all of us. Please let me know if you have
any questions. Also, I ask that you keep this letter and its contents
confidential. Thanks.
Sincerely,
Michael H. Solomon
Michael H. Solomon
Chairman and CEO
Arnold's Acquisition Corp.
MHS:ch
Enc: Exhibit A
<PAGE> 3
Al Melchiano, Continued
EXHIBIT A
ANNUAL BONUS PLAN
You can earn up to 50% of your annual base salary in bonus for achieving the
company's annual EBITDA (earnings before interest, taxes, depreciation and
amortization) target as approved by the company's Board of Directors. Further,
you can earn an additional 1% of your annual base salary for each 1% by which
actual annual EBITDA exceeds the annual target. There will be no ceiling on
this total bonus potential.
<TABLE>
<CAPTION>
Actual Annual EBITDA Percent of Annual Salary
as a Percentage of Target Earned as Bonus
------------------------- ------------------------
<S> <C>
90% -0-
91% 5%
92% 10%
93% 15%
94% 20%
95% 25%
96% 30%
97% 35%
98% 40%
99% 45%
100% 50%
101% 51%
102% 52%
103% 53%
... ...
</TABLE>
