<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Rexworks Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.12 per share
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
1,896,668 shares of Common Stock
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
FOR THE MERGER:
<TABLE>
<CAPTION>
NUMBER OF CONSIDERATION AGGREGATE AMOUNT OF
TITLE OF SECURITY SHARES PER SHARE CONSIDERATION FILING FEE
- ----------------- --------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Common Stock 1,896,668 $1.6139 $3,061,033 $612.21
</TABLE>
FOR THE ASSET SALE:
Aggregate Consideration: $17,440,000(1)
Amount of Filing Fee: $3,488
(4) Proposed maximum aggregate value of transactions: $20,501,033
- --------------------------------------------------------------------------------
(5) Total fee paid: $4,100.21
- --------------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
- -------------------------
(1) Based on balance sheet calculation as of August 23, 1997
<PAGE> 2
REXWORKS INC.
445 WEST OKLAHOMA AVENUE
MILWAUKEE, WISCONSIN 53207
414-747-7200
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders
of Rexworks Inc. (the "Company"), to be held at the Marriott Hotel, 375 South
Moorland Road, Brookfield, Wisconsin, on December 16, 1997, at 9:00 a.m., local
time. A notice of the Special Meeting, a proxy statement and a proxy card are
enclosed. All holders of the Company's outstanding shares of Common Stock as of
November 7, 1997 (the "Record Date"), will be entitled to notice of and to vote
at the Special Meeting.
At the Special Meeting, you will be asked to consider and to vote upon the
following matters:
(1) A proposal to approve and adopt an Asset Purchase Agreement (the
"Asset Purchase Agreement"), dated as of October 1, 1997, by and between
CMI Corporation ("CMI") and the Company, pursuant to which the Company will
sell to CMI substantially all of the assets relating to the Company's
landfill and embankment compactor and material reduction grinder divisions
(the "Asset Sale"). If the Asset Purchase Agreement is approved and the
Asset Sale is completed, CMI will pay a purchase price (the "Asset Purchase
Price") to the Company equal to the sum of (a) the net value as of the
closing date of the assets sold to CMI and the liabilities assumed by CMI,
and (b) $3,167,000. Approval of the Asset Purchase Agreement requires the
affirmative vote of the holders of a majority of all outstanding shares of
the Company's Common Stock voting as a group.
(2) A proposal to approve and adopt an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of August 15, 1997, by and among Giuffre
Bros. Cranes, Inc. ("Giuffre"), 13th Street Acquisition Corp., a wholly
owned subsidiary of Giuffre ("Giuffre Sub"), and the Company, pursuant to
which Giuffre Sub will be merged with and into the Company (the "Merger")
immediately after the completion of the Asset Sale with CMI. If the Merger
Agreement is approved and the Merger becomes effective, each outstanding
share of Common Stock of the Company (the "Common Stock" or "Company
Shares") (other than shares of Common Stock, if any, not converted because
of the exercise of dissenters' appraisal rights and other than shares of
Common Stock, if any, held by the Company, Giuffre or Giuffre Sub, which
are to be canceled as part of the Merger) will be converted into the right
to receive $1.6139 in cash, without interest (the "Merger Consideration").
In addition, immediately prior to the consummation of the Merger, a
subsidiary of Giuffre will purchase the Company's owned real property for a
purchase price of $1,756,000 (the "Real Property Sale"). Approval of the
Merger Agreement requires the affirmative vote of the holders of a majority
of all outstanding shares of the Company's Common Stock voting as a group.
The aggregate cost to Giuffre of acquiring all of the outstanding shares of
Common Stock in the Merger will be approximately $3.1 million. The
valuation of the Company for purposes of the Merger Consideration gives
effect to the Real Property Sale.
Immediately prior to the consummation of the Merger, the Company will
declare and pay a partial liquidating distribution (the "Distribution") equal to
the net proceeds of the Asset Sale (after using approximately $8.9 million of
proceeds to repay outstanding indebtedness, retire outstanding stock options and
pay other transaction-related expenses incurred by the Company). The proceeds of
the Real Property Sale are reflected in the Merger Consideration and will not be
included in the Distribution. Based upon the Company's balance sheet as of
August 23, 1997, the Company anticipates that the aggregate amount to be
received by the Company's stockholders pursuant to the Distribution and the
Merger Consideration will be approximately $5.11 per share. However, because the
amount of the Asset Purchase Price and the amount that will be required to repay
outstanding indebtedness, retire outstanding stock options and pay other
transaction-related expenses cannot be determined with certainty at this time,
no assurances can be given as to the exact amount of the Distribution.
Details of the proposed Asset Sale and the proposed Merger and other
important information are set forth in the accompanying Proxy Statement which
you are urged to read carefully. The consummation of the Asset
<PAGE> 3
Sale and the Merger are each subject to the satisfaction of certain closing
conditions as described in greater detail in the accompanying Proxy Statement.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Asset Sale and the proposed Merger. In addition, the
Board of Directors has received the opinion of its financial advisor, ABN AMRO
Chicago Corporation, that the aggregate consideration to be received pursuant to
the Asset Purchase Agreement and the Merger Agreement is fair to the holders of
the Company's Common Stock from a financial point of view.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ASSET SALE AND THE
MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF ASSET PURCHASE
AGREEMENT AND FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
If the proposed Merger is approved and consummated, holders of Company
Shares who neither vote for nor consent in writing to the Merger will have the
right to receive the fair value of their shares in cash (exclusive of any
element of value arising from the accomplishment of the Merger) as judicially
determined, if they comply with Section 262 ("Section 262") of the Delaware
General Corporation Law. Holders of Company Shares electing to exercise their
appraisal rights under Section 262 must NOT vote for approval of the Merger
Agreement. If a holder of Company Shares returns a signed proxy but does not
specify therein a vote AGAINST approval of the Merger Agreement or an
instruction to abstain, the proxy will be voted FOR approval of the Merger
Agreement, which will have the effect of waiving the appraisal rights under
Section 262 of that holder of Company Shares. Abstaining from voting or voting
against approval of the Merger Agreement will NOT constitute a waiver of
appraisal rights under Section 262. A written demand for appraisal of the shares
of Common Stock must be filed with the Company BEFORE the taking of the vote on
the Merger Agreement. Holders of Company Shares wishing to exercise their
dissenters appraisal rights must comply strictly with the provisions of Section
262. Holders of Company Shares should carefully read the section entitled
"DISSENTERS RIGHTS OF APPRAISAL" in the accompanying Proxy Statement. Pursuant
to the Delaware General Corporation Law, holders of Company Shares do not have
dissenters rights of appraisal in connection with the proposed Asset Sale.
Whether or not you plan to attend the Special Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. If you attend the Special Meeting, you may revoke such proxy and vote in
person if you wish, even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated.
Very truly yours,
Laurance R. Newman, President and
Chief Executive Officer
November 26, 1997
<PAGE> 4
REXWORKS INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
ON DECEMBER 16, 1997
To the Stockholders of Rexworks Inc.
A special meeting of the stockholders of Rexworks Inc. (the "Company") will
be held at the Marriott Hotel, 375 South Moorland Road, Brookfield, Wisconsin,
on December 16, 1997, at 9:00 a.m., local time (the "Special Meeting"), for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated as of October 1,
1997, by and between CMI Corporation ("CMI") and the Company. Pursuant to
the Asset Purchase Agreement, among other things, the Company will sell to
CMI substantially all of the assets relating to the Company's landfill and
embankment compactor and material reduction grinder division (the "Asset
Sale") for a purchase price to the Company equal to the sum of (a) the net
value as of the closing date of the assets sold to CMI and the liabilities
assumed by CMI, and (b) $3,167,000. A copy of the Asset Purchase Agreement
is attached as Exhibit A to the accompanying Proxy Statement.
2. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of August
15, 1997, by and among Giuffre Bros. Cranes, Inc., a Delaware corporation
("Giuffre"), 13th Street Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Giuffre ("Giuffre Sub") and the Company.
Pursuant to the Merger Agreement, among other things, (a) the Company will
sell its owned real property to Giuffre for a purchase price of $1,756,000,
(b) Giuffre Sub will be merged with and into the Company (the "Merger"),
and (c) each outstanding share of common stock, par value $0.12 per share,
of the Company (other than shares of Common Stock, if any, not converted
because of the exercise of dissenters' appraisal rights and other than
shares of Common Stock, if any, held by the Company, Giuffre or Giuffre
Sub, which are to be canceled as part of the Merger), will be converted
into the right to receive $1.6139 in cash, without interest (the "Merger
Consideration"). A copy of the Merger Agreement is attached as Exhibit B to
the accompanying Proxy Statement.
3. To transact such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
The close of business on November 7, 1997 is the record date for the
Special Meeting and only stockholders of record at that time will be entitled to
notice of and to vote at the Special Meeting or any adjournment or adjournments
thereof.
Your attention is called to the Proxy Statement accompanying this Notice
for a more complete statement regarding the matters to be acted upon at the
Special Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
ASSET PURCHASE AGREEMENT AND "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors,
Thomas D. Lauerman, Secretary
Milwaukee, Wisconsin
November 26, 1997
YOUR VOTE IS IMPORTANT. ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE
SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE> 5
PROXY STATEMENT
REXWORKS INC.
445 WEST OKLAHOMA AVENUE
MILWAUKEE, WISCONSIN 53207
414-747-7200
This Proxy Statement is being furnished to the stockholders of Rexworks
Inc. (the "Company") in connection with the solicitation of proxies by the
Company's Board of Directors to be voted at the Special Meeting of Stockholders
to be held on December 16, 1997, at 9:00 a.m., local time, at the Marriott
Hotel, 375 South Moorland Road, Brookfield, Wisconsin, (the "Special Meeting")
and at any adjournments or postponements thereof. The enclosed proxy card, the
accompanying Notice of Special Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders of the Company on or about November 26,
1997. At the Special Meeting, the stockholders of the Company will be asked to
consider and to vote upon the following matters:
(1) A proposal to approve and adopt an Asset Purchase Agreement (the
"Asset Purchase Agreement"), dated as of October 1, 1997, by and between
CMI Corporation ("CMI") and the Company, pursuant to which the Company will
sell to CMI substantially all of the assets relating to the Company's
landfill and embankment compactor and material reduction grinder divisions
(the "Asset Sale"). If the Asset Purchase Agreement is approved and the
Asset Sale is completed, CMI will pay a purchase price to the Company equal
to the sum of (a) the net value as of the closing date of the assets sold
to CMI and the liabilities assumed by CMI, and (b) $3,167,000. As of
October 25, 1997, the net asset value of the assets to be transferred to
CMI in the Asset Sale was $1.82 per share ($3.49 per share including the
premium of $3,167,000 to be paid by CMI in the Asset Sale). The net
tangible book value of the assets to be transferred to CMI in the Asset
Sale as of October 25, 1997 was $1.74 per share.
(2) A proposal to approve and adopt an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of August 15, 1997, by and among Giuffre
Bros. Cranes, Inc. ("Giuffre"), 13th Street Acquisition Corp., a wholly
owned subsidiary of Giuffre ("Giuffre Sub"), and the Company, pursuant to
which Giuffre Sub will be merged with and into the Company (the "Merger")
immediately after the completion of the Asset Sale with CMI. If the Merger
Agreement is approved and the Merger becomes effective, Giuffre Sub will be
merged into the Company, with the Company being the surviving corporation
(the "Surviving Corporation"). Pursuant to the Merger Agreement, each
outstanding share of Common Stock of the Company (the "Common Stock" or the
"Company Shares") (other than shares of Common Stock, if any, not converted
because of the exercise of dissenters' appraisal rights and other than
shares of Common Stock, if any, held by the Company, Giuffre or Giuffre
Sub, which are to be canceled as a part of the Merger) will be converted
into the right to receive $1.6139 in cash, without interest (the "Merger
Consideration"). Each outstanding share of Giuffre Sub common stock will be
converted into one share of Common Stock of the Surviving Corporation and
the Company will become a wholly owned subsidiary of Giuffre. In addition,
immediately prior to the consummation of the Merger, a subsidiary of
Giuffre will purchase the Company's owned real property for a purchase
price of $1,756,000 (the "Real Property Sale"). The aggregate cost to
Giuffre of acquiring all of the outstanding shares of Common Stock in the
Merger will be approximately $3.1 million. The valuation of the Company for
purposes of the Merger Consideration gives effect to the Real Property
Sale.
As a result of the Merger, Giuffre will acquire the entire equity interest
in the Company. Therefore, following the Merger, the present holders of shares
of Common Stock will no longer share in the future earnings and growth of the
Company, the risks associated with achieving such earnings and growth, or the
potential to realize greater value for their Company Shares through
divestitures, strategic acquisitions or other corporate opportunities that may
be pursued by the Company in the future. Instead, each such holder of shares of
Company Stock immediately prior to the Effective Time (other than shares of
Common Stock, if any, not converted because of the exercise of dissenters'
appraisal rights and other than shares of Common Stock, if any, held by the
Company, Giuffre or Giuffre Sub, which are to be canceled as a part of the
Merger)
<PAGE> 6
will have the right to receive a cash payment of the Merger Consideration to
which such holder is entitled under the Merger Agreement.
The Merger and the Asset Sale will be consummated on the same date in
essentially simultaneous transactions. The Company's obligation to consummate
the Merger is conditioned upon the consummation of the Asset Sale and the
Company's obligation to consummate the Asset Sale is conditioned upon the
consummation of the Merger. In the event that the Asset Sale is not consummated,
Giuffre and the Company have agreed to negotiate and enter into an amendment to
the Merger Agreement providing, in lieu of the Merger, for the formation of a
holding company ("Holdco") as the sole stockholder of the Company, the exchange
of all outstanding Company Shares for all outstanding shares of Holdco common
stock, the transfer of the assets relating to the Company's landfill and
embankment compactor and material reduction grinder divisions to Holdco and the
sale of all outstanding shares of capital stock of the Company by Holdco to
Giuffre. See "THE MERGER -- The Merger Agreement -- Holding Company
Alternative."
Immediately prior to the consummation of the Merger, the Company will
declare and pay a partial liquidating distribution (the "Distribution") equal to
the net proceeds of the Asset Sale (after using approximately $8.9 million of
proceeds to repay outstanding indebtedness, retire outstanding stock options and
pay other transaction-related expenses incurred by the Company). The proceeds of
the Real Property Sale are reflected in the Merger Consideration and will not be
included in the Distribution. Based upon the Company's balance sheet as of
August 23, 1997, the Company anticipates that the aggregate amount to be
received by the Company's stockholders pursuant to the Distribution and the
Merger Consideration will be approximately $5.11 per share. However, because the
amount of the Asset Purchase Price and the amount that will be required to repay
outstanding indebtedness, retire outstanding stock options and pay other
transaction-related expenses cannot be determined with certainty at this time,
no assurances can be given as to the exact amount of the Distribution. The Asset
Purchase Agreement does not provide for a minimum amount with respect to the
amount of the purchase price to be paid by CMI in the Asset Sale or a minimum
amount of the Distribution.
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol REXW. On November 24, 1997, the closing sales price per share of
Common Stock was $ . As a result of the Merger, shares of Common Stock will
no longer be traded or quoted on the Nasdaq National Market and the registration
of the Company Shares under the Securities Exchange Act of 1934, as amended will
be terminated.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
The Special Meeting......................................... 1
Date, Time and Location................................... 1
Record Date............................................... 1
Purpose of the Special Meeting; Quorum; Vote Required..... 1
The Asset Sale Proposal..................................... 1
The Parties to the Asset Purchase Agreement............... 1
The Asset Sale............................................ 2
Recommendation of Board of Directors...................... 2
The Asset Purchase Agreement................................ 2
The Closing Date.......................................... 2
Conditions to Consummation of the Asset Sale.............. 2
Termination of the Asset Purchase Agreement............... 2
Amendments to the Asset Purchase Agreement................ 3
The Merger Proposal......................................... 3
The Parties to the Merger................................. 3
Real Property Sale........................................ 3
The Merger................................................ 3
Certain Effects of the Merger............................. 4
Procedures for Exchange of Certificates................... 4
Recommendation of Board of Directors...................... 4
Accounting Treatment...................................... 4
The Merger Agreement........................................ 4
Effective Time of the Merger.............................. 4
Conditions to Consummation of the Merger.................. 4
Holding Company........................................... 5
Termination of the Merger Agreement....................... 5
Amendments to the Merger Agreement........................ 6
Distribution................................................ 6
Opinion of the Company's Financial Advisor.................. 6
Interests of Certain Persons in the Transactions............ 6
Dissenters' Rights of Appraisal............................. 7
Federal Income Tax Consequences............................. 7
Market Price Data........................................... 7
Selected Financial Data of the Company...................... 8
INTRODUCTION................................................ 9
Proposals to be Considered at the Special Meeting........... 9
The Asset Sale............................................ 9
The Merger................................................ 9
Voting Rights; Vote Required for Approval................... 9
Proxies..................................................... 10
BACKGROUND OF THE TRANSACTIONS.............................. 10
Background.................................................. 10
The Company's Reasons for the Asset Sale and the Merger;
Recommendation of the Company's Board of Directors........ 13
OPINION OF FINANCIAL ADVISOR TO THE COMPANY................. 15
THE ASSET SALE.............................................. 17
Effects of the Asset Sale................................... 18
Closing..................................................... 18
Regulatory Approvals........................................ 18
The Asset Purchase Agreement................................ 18
</TABLE>
i
<PAGE> 8
General................................................... 19
The Assets................................................ 19
The Assumed Liabilities................................... 19
The Asset Purchase Price.................................. 19
Representations and Warranties............................ 19
Covenants................................................. 20
Conditions to Closing of the Asset Sale................... 21
Termination............................................... 22
Asset Sale Termination Fee and Expenses................... 23
Amendments and Waivers.................................... 23
THE MERGER.................................................. 24
Effects of the Merger....................................... 24
Effective Time.............................................. 24
Procedures for Exchange of Certificates..................... 24
Accounting Treatment........................................ 25
Regulatory Approvals........................................ 25
The Merger Agreement........................................ 25
General................................................... 25
Effective Time............................................ 26
Merger Consideration...................................... 26
Representations and Warranties............................ 26
Covenants................................................. 27
Conditions to Consummation of the Merger.................. 28
Holding Company Alternative............................... 29
Termination............................................... 29
Merger Termination Fee and Expenses....................... 30
Amendments and Waivers.................................... 31
CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS OF THE
COMPANY................................................... 31
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS
TO THE COMPANY'S STOCKHOLDERS............................. 32
DISSENTERS' RIGHTS OF APPRAISAL............................. 33
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS............ 35
Stock Options............................................... 35
Severance Arrangements...................................... 36
Toll Manufacturing Arrangement.............................. 36
Consulting Arrangements..................................... 36
Indemnification and Insurance............................... 37
BUSINESS.................................................... 38
Introduction................................................ 38
Products.................................................... 38
Construction Equipment Products............................. 38
Waste and Recycling Products................................ 38
Landfill and Embankment Compactors........................ 38
Material Reduction Grinders............................... 39
Other....................................................... 39
Distribution................................................ 40
Sources of Supply........................................... 40
Patents and Trademarks...................................... 40
Seasonality................................................. 40
Backlog..................................................... 40
Competition................................................. 40
Engineering................................................. 40
Employees................................................... 41
ii
<PAGE> 9
Foreign Sales............................................... 41
Environmental Matters....................................... 41
Properties.................................................. 41
Legal Proceedings........................................... 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 43
Results of Operations....................................... 43
The Nine Months Ended September 30, 1997 Compared to the
Nine Months Ended September 30, 1996................... 43
Year Ended December 31, 1996 Compared to Year Ended
December 31, 1995...................................... 43
Year Ended December 31, 1995 Compared to Year Ended
December 31, 1994...................................... 44
Liquidity and Capitalization................................ 45
Forward Looking Statements.................................. 45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 46
DIRECTORS AND EXECUTIVE OFFICERS............................ 47
Directors................................................... 47
Executive Officers.......................................... 48
OTHER MATTERS............................................... 48
STOCKHOLDER PROPOSALS....................................... 49
EXPENSES OF SOLICITATION.................................... 49
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 49
AVAILABLE INFORMATION....................................... 49
FINANCIAL STATEMENTS........................................ F-1
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A -- Asset Purchase Agreement dated as of October 1, 1997 between
CMI Corporation and Rexworks Inc.
Exhibit B -- Agreement and Plan of Merger dated as of August 15, 1997
among Giuffre Bros. Cranes, Inc., 13th Street Acquisition
Corp. and Rexworks Inc.
Exhibit C -- Opinion of ABN AMRO Chicago Corporation
Exhibit D -- Section 262 of the Delaware General Corporation Law
</TABLE>
iii
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. The summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement and the exhibits hereto. Stockholders are
urged to review the entire Proxy Statement carefully.
THE SPECIAL MEETING
Date, Time and Location
The Special Meeting of Stockholders of Rexworks Inc. (the "Company") will
be held on December 16, 1997, at 9:00 a.m., local time, at the Marriott Hotel,
375 South Moorland Road, Brookfield, Wisconsin (the "Special Meeting").
Record Date
Only holders of record of shares of the $0.12 par value common stock of the
Company (the "Common Stock" or "Company Shares") at the close of business on
November 7, 1997 are entitled to notice of and to vote at the Special Meeting.
On that date, there were 1,896,668 Company Shares outstanding, with each share
entitled to cast one vote at the Special Meeting. See "INTRODUCTION -- Voting
Rights; Vote Required for Approval."
Purpose of the Special Meeting; Quorum; Vote Required
At the Special Meeting, stockholders will consider and vote upon the
adoption and approval of the Asset Purchase Agreement and the transactions
contemplated thereby and the approval and adoption of the Merger Agreement and
the transactions contemplated thereby. The presence, in person or by proxy, of
the holders of a majority of the outstanding Company Shares at the Special
Meeting is necessary to constitute a quorum at the Special Meeting. Under
Delaware law, approval of the Asset Purchase Agreement and the Merger Agreement
each requires the affirmative vote of the holders of a majority of the
outstanding Company Shares. All of the Company's executive officers and
directors, who collectively own 350,320 shares of Common Stock, representing
approximately 18.5% of the outstanding Common Stock, have indicated their intent
to vote for approval and adoption of the Asset Purchase Agreement and for
approval and adoption of the Merger Agreement. See "INTRODUCTION -- Voting
Rights; Vote Required for Approval."
THE ASSET SALE PROPOSAL
The Parties to the Asset Purchase Agreement
CMI Corporation CMI Corporation ("CMI") is an Oklahoma corporation which
manufactures and markets equipment for the road and heavy construction industry.
CMI's products include asphalt plants; asphalt pavement recycling systems;
concrete pavers; machines for concrete placing, spreading, finishing, texturing,
and curing; pavement profiling machines; pavement reclaimers; a complete line of
automated fine grading, material spreading and placing equipment; soil
stabilizers; and a series of multiple use machines that can be configured to
pave, trim, mill, excavate or widen. CMI also produces trailers used by the
construction and mining industries, industrial scales, bridge and canal paving
equipment, and thermal systems for remediating contaminated soils. The principal
executive offices of CMI are located at I-40 and Morgan Road, P.O. Box 1985,
Oklahoma City, Oklahoma 73101 and its telephone number is 405-787-6020.
Rexworks Inc. The Company designs, manufactures and sells truck mounted
concrete mixers, compaction equipment and material reduction grinders. The
principal executive offices of the Company are located at 445 West Oklahoma
Avenue, Milwaukee, Wisconsin 53207 and its telephone number is 414-747-7200.
<PAGE> 11
The Asset Sale
Pursuant to the Asset Purchase Agreement, the Company will sell to CMI
substantially all of the assets (the "Assets") relating to the Company's
landfill and embankment compactor and material reduction grinder divisions (the
"Divisions") and CMI will assume certain specified liabilities relating to the
Divisions. In consideration for the sale of the Assets, CMI will pay to the
Company a cash purchase price (the "Asset Purchase Price") equal to the sum of
(a) the net value as of the closing date of the assets sold to CMI and the
liabilities assumed by CMI, and (b) $3,167,000. CMI intends to fund payment of
the Asset Purchase Price through existing cash and through the utilization of
existing credit facilities.
Recommendation of Board of Directors
The Board of Directors has determined that the Asset Sale and the Asset
Purchase Price are fair to, and in the best interests of, the Company's
stockholders. The Board of Directors has unanimously approved the Asset Purchase
Agreement and recommends that stockholders vote FOR the proposal to approve and
adopt the Asset Purchase Agreement. See "BACKGROUND OF THE TRANSACTIONS -- The
Company's Reasons for the Asset Sale and the Merger; Recommendation of the
Company's Board of Directors."
THE ASSET PURCHASE AGREEMENT
The Closing Date
The Asset Sale will close on the same date as the Effective Time of the
Merger (the "Closing Date"). See "THE ASSET SALE -- The Asset Purchase Agreement
- -- General" and "-- Closing."
Conditions to Consummation of the Asset Sale
The respective obligations of the Company and CMI to close the Asset Sale
are subject to the satisfaction on or prior to the Closing Date of various
closing conditions. Such conditions include, among others, the approval and
adoption of the Asset Purchase Agreement by the holders of a majority of the
outstanding Company Shares, the simultaneous effectiveness of the Merger and the
Asset Sale and the correctness in all material respects of the representations
and warranties of the parties to the Asset Purchase Agreement. See "THE ASSET
SALE -- The Asset Purchase Agreement -- Conditions to Consummation of the Asset
Sale" and "-- Termination."
Termination of the Asset Purchase Agreement
The Asset Purchase Agreement may, under specified circumstances, be
terminated and the Asset Sale abandoned at any time prior to the Closing,
notwithstanding approval of the Asset Purchase Agreement by the stockholders of
the Company. The Asset Purchase Agreement requires the Company to pay CMI a
termination fee (the "Asset Sale Termination Fee") equal to the greater of (A)
$400,000 (approximately $0.21 per Company Share) and (B) 20% of the amount by
which the aggregate consideration with respect to the Divisions in any Competing
Transaction (as defined in the Asset Purchase Agreement) exceeds the Asset
Purchase Price if (a) the Company terminates the Asset Purchase Agreement
because the Board of Directors of the Company determines, in the exercise of its
judgment as to its fiduciary duties to the Company's stockholders after
consultation with counsel, that such termination is required by reason of any
Competing Transaction, or (b) CMI terminates the Asset Purchase Agreement
because (i) the Proxy Statement does not include the recommendation of the
Company's Board of Directors in favor of the Asset Purchase Agreement and the
Asset Sale, (ii) the Board of Directors of the Company withdraws, modifies or
changes in a manner materially adverse to CMI its recommendation of the Asset
Purchase Agreement or the Asset Sale or resolves to do any of the foregoing,
(iii) the Board of Directors of the Company recommends a Competing Transaction
to the stockholders of the Company or resolves to do so, or (iv) a tender offer
or exchange offer for 50% or more of the outstanding shares of Common Stock is
commenced, and the Board of Directors of the Company, within ten business days
after such tender offer or exchange offer is so commenced, either fails to
recommend against acceptance of such tender offer or exchange offer by the
Company's stockholders or takes no position with respect to the acceptance of
such tender offer or exchange offer by the Company's stockholders. If the
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<PAGE> 12
Asset Purchase Agreement is terminated as a direct result of the failure to
consummate the Merger, the Company must reimburse CMI for up to $200,000 of
CMI's expenses. If the Asset Purchase Agreement is terminated as a direct result
of a material breach by either party of any of its representations or warranties
in the Asset Purchase Agreement, the breaching party must reimburse the
nonbreaching party for up to $200,000 of the nonbreaching party's expenses. In
addition, if either party terminates the Asset Purchase Agreement due to a
material intentional breach by the other party of any of its covenants in the
Merger Agreement, all remedies available to the other party either in law or
equity shall be preserved and survive any termination of the Asset Purchase
Agreement. See "THE ASSET SALE -- The Asset Purchase Agreement -- Termination"
and "-- Asset Sale Termination Fee and Expenses."
Amendments to the Asset Purchase Agreement
The Asset Purchase Agreement may not be amended except by action of the
Company and CMI set forth in an instrument in writing signed on behalf of each
of the parties. After approval of the Asset Purchase Agreement by the
stockholders of the Company and without the further approval of such
stockholders, no amendment may be made which reduces the amount or changes the
type of the Asset Purchase Price. See "THE ASSET SALE -- The Asset Purchase
Agreement -- Amendments and Waivers."
THE MERGER PROPOSAL
The Parties to the Merger
Giuffre Bros. Cranes, Inc. Giuffre Bros. Cranes, Inc. ("Giuffre") is a
Delaware corporation which assembles and sells truck-mounted cranes and leases
transportable storage containers. The principal executive offices of Giuffre are
located at 6635 South 13th Street, Milwaukee, Wisconsin 53221 and its telephone
number is 414-764-9200.
Rexworks Inc. The Company designs, manufactures and sells truck mounted
concrete mixers, compaction equipment and material reduction grinders. The
principal executive offices of the Company are located at 445 West Oklahoma
Avenue, Milwaukee, Wisconsin 53207 and its telephone number is 414-747-7200.
13th Street Acquisition Corp. 13th Street Acquisition Corp. ("Giuffre Sub")
is a wholly owned subsidiary of Giuffre, formed solely for the purpose of the
Merger. Giuffre Sub has not engaged in any business activity unrelated to the
Merger. The principal executive offices of Giuffre Sub are located at 6635 South
13th Street, Milwaukee, Wisconsin 53221 and its telephone number is
414-764-9200.
Real Property Sale
Pursuant to the Merger Agreement, immediately prior to the consummation of
the Merger, a subsidiary of Giuffre will purchase the Company's owned real
property for a purchase price of $1,756,000 (the "Real Property Sale"). The
Company agreed to sell the real property separately to a subsidiary of Giuffre
to accommodate Giuffre's desired corporate structure. The agreement with respect
to the Real Property Sale was reached after the Company and Giuffre had reached
an understanding as to the valuation of the Company for purposes of the Merger
Consideration. The real property was valued separately based on the taxable
basis of the property and no appraisal was made to value the real property. The
proceeds of the Real Property Sale are reflected in the Merger Consideration and
will not be included in the Distribution.
The Merger
Pursuant to the Merger Agreement, Giuffre Sub will merge into the Company,
with the Company being the Surviving Corporation. Each outstanding share of the
Company's Common Stock will be converted into the right to receive from Giuffre
$1.6139 in cash, without interest (other than shares of Common Stock, if any,
not converted because of the exercise of dissenters' appraisal rights and other
than shares of Common Stock, if any, held by the Company, Giuffre or Giuffre
Sub, which are to be canceled as part of the Merger). The consideration to be
received by the Company's stockholders pursuant to the Merger Agreement is
sometimes referred to herein as the "Merger Consideration." Giuffre intends to
fund payment of the Merger
3
<PAGE> 13
Consideration through existing cash and by entering into a new credit facility.
Each outstanding share of Giuffre Sub's $.01 par value common stock (the
"Giuffre Sub Shares") will be converted into one share of common stock of the
Surviving Corporation. At the effective time of the Merger (the "Effective
Time"), Giuffre will own 100% of the outstanding Company Shares.
Certain Effects of the Merger
As a result of the Merger, Giuffre will acquire the entire equity interest
in the Company. Therefore, following the Merger the present holders of the
Company Shares will no longer have an equity interest in the Company and will no
longer share in future earnings and growth of the Company, the risks associated
with achieving such earnings and growth, or the potential to realize greater
value for their Company Shares through divestitures, strategic acquisitions or
other corporate opportunities that may be pursued by the Company in the future.
Instead, each such holder of Company Shares immediately prior to the Effective
Time (other than shares of Common Stock, if any, not converted because of the
exercise of dissenters' appraisal rights and other than shares of Common Stock,
if any, held by the Company, Giuffre or Giuffre Sub, which are to be canceled as
a part of the Merger) will have the right to receive the Merger Consideration to
which such holder is entitled under the Merger Agreement. The Company Shares
will no longer be traded or quoted on the Nasdaq National Market and the
registration of the Company Shares under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") will be terminated. See "THE MERGER -- Effects of
the Merger."
Procedures for Exchange of Certificates
Promptly after the Effective Time, a letter of transmittal and instructions
for surrendering stock certificates evidencing shares of the Company's Common
Stock will be mailed to each holder of the Company's Common Stock for use in
exchanging such holder's stock certificates for the Merger Consideration to
which such holder is entitled under the Merger Agreement. STOCKHOLDERS SHOULD
NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS. See "THE
MERGER -- Procedures for Exchange of Certificates."
Recommendation of Board of Directors
The Board of Directors has determined that the Merger and the Merger
Consideration are fair to, and in the best interests of, the Company's
stockholders. The Board of Directors has unanimously approved the Merger
Agreement and recommends that stockholders vote FOR the proposal to approve and
adopt the Merger Agreement. See "BACKGROUND OF THE TRANSACTIONS -- The Company's
Reasons for the Asset Sale and the Merger; Recommendation of the Company's Board
of Directors."
Accounting Treatment
The Merger will be accounted for by Giuffre under the purchase method of
accounting. See "THE MERGER -- Accounting Treatment."
THE MERGER AGREEMENT
Effective Time of the Merger
The Merger will become effective (the "Effective Time") upon the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware.
The filing of the Certificate of Merger will occur after all conditions to the
Merger contained in the Merger Agreement have been satisfied or waived. The
Company, Giuffre and Giuffre Sub anticipate that the Merger will be consummated
promptly following the Special Meeting. See "THE MERGER -- The Merger
Agreement -- General" and "-- Effective Time."
Conditions to Consummation of the Merger
The respective obligations of the Company, Giuffre and Giuffre Sub to
effect the Merger are subject to the satisfaction at or prior to the Effective
Time of various closing conditions. Such conditions include, among
4
<PAGE> 14
others, the approval and adoption of the Merger Agreement by the holders of a
majority of the outstanding Company Shares, the completion of the Asset Sale,
the completion of the Real Property Sale and the correctness in all material
respects of the representations and warranties of the parties to the Merger
Agreement. See "THE MERGER -- The Merger Agreement -- Conditions to Consummation
of the Merger" and "-- Termination."
Holding Company
Consummation of the Asset Sale and the other transactions contemplated by
the Asset Purchase Agreement is a condition of the obligations of Giuffre,
Giuffre Sub and the Company to effect the Merger. However, if the Asset Purchase
Agreement is terminated prior to the Effective Time or if the Company gives
written notice to Giuffre that the Company does not reasonably expect the Asset
Sale to be consummated, then Giuffre and the Company have agreed to negotiate
and enter into an amendment to the Merger Agreement providing, in lieu of the
Merger, for the formation of a holding company as the sole stockholder of the
Company ("Holdco"), the transfer of the Assets to Holdco and the sale of all
outstanding shares of capital stock of the Company by Holdco to Giuffre. In
connection with the formation of Holdco, the Company would seek the approval of
the holders of Company Shares with respect to a transaction involving the
following principal steps: (i) an exchange of all of the outstanding Company
Shares for all of the outstanding shares of Holdco common stock, (ii) the
transfer from the Company to Holdco of substantially all of the assets relating
to the Company's landfill and embankment compactor and material reduction
grinder divisions and (iii) the acquisition of the Company by Giuffre. After the
consummation of such transaction, the holders of Company Shares would be the
stockholders of Holdco. The Company anticipates Holdco would apply to have the
shares of Holdco common stock be listed for trading on Nasdaq or another
appropriate market. However, the formation of Holdco may entail significant
delays and uncertainties and no assurance can be given that transactions with
Giuffre could be consummated using the Holdco alternative if the Asset Purchase
Agreement were terminated. See "THE MERGER -- The Merger Agreement -- Holding
Company Alternative."
Termination of the Merger Agreement
The Merger Agreement may, under specified circumstances, be terminated and
the Merger abandoned at any time prior to the Effective Time, notwithstanding
approval of the Merger Agreement by the stockholders of the Company. The Merger
Agreement requires the Company to pay Giuffre a termination fee (the "Merger
Termination Fee") of $400,000 (approximately $0.21 per Company Share) if (a) the
Company terminates the Merger Agreement because the Board of Directors of the
Company determines, in the exercise of its judgment as to its fiduciary duties
to the Company's stockholders after consultation with counsel, that such
termination is required by reason of any Competing Transaction (as defined in
the Merger Agreement), or (b) Giuffre terminates the Merger Agreement because
(i) the Board of Directors of the Company withdraws, modifies or changes in a
manner materially adverse to Giuffre its recommendation of the Merger Agreement
or the Merger or resolves to do any of the foregoing, (ii) the Board of
Directors of the Company recommends a Competing Transaction to the stockholders
of the Company or resolves to do so, or (iii) a tender offer or exchange offer
for 50% or more of the outstanding shares of Common Stock is commenced, and the
Board of Directors of the Company, within ten business days after such tender
offer or exchange offer is so commenced, either fails to recommend against
acceptance of such tender offer or exchange offer by the Company's stockholders
or takes no position with respect to the acceptance of such tender offer or
exchange offer by the Company's stockholders. In addition, if either party
terminates the Merger Agreement due to a material intentional breach by the
other party of any of its covenants in the Merger Agreement, all remedies
available to the other party either in law or equity shall be preserved and
survive any termination of the Merger Agreement. See "THE MERGER -- The Merger
Agreement -- Termination" and "-- Merger Termination Fee and Expenses."
In the event that the Merger is not consummated, the Company does not
intend to consummate the Asset Sale or to pursue other transactions involving a
sale of all or part of the Company. The Company anticipates that it would
continue to design, manufacture and sell truck mounted concrete mixers, landfill
and
5
<PAGE> 15
embankment compactors and material reduction grinders in the ordinary course of
business as an independent, publicly traded company. Because the markets for the
Company's products are highly competitive, the Company would continue its
efforts with respect to cost containment, product quality and customer service.
Amendments to the Merger Agreement
The Merger Agreement may not be amended except by action of the Company,
Giuffre and Giuffre Sub set forth in an instrument in writing signed on behalf
of each of the parties. After approval of the Merger Agreement by the
stockholders of the Company and without the further approval of such
stockholders, no amendment may be made which reduces the amount or changes the
type of Merger Consideration. See "THE MERGER -- The Merger Agreement --
Amendments and Waivers."
DISTRIBUTION
Immediately prior to the consummation of the Merger, the Company will
declare and pay a partial liquidating distribution (the "Distribution") equal to
the net proceeds of the Asset Sale (after using approximately $8.9 million of
the proceeds to repay indebtedness, retire outstanding stock options and pay
other transaction-related expenses incurred by the Company). Based upon the
Company's balance sheet as of August 23, 1997, the Company anticipates that the
aggregate amount of the Distribution and the Merger Consideration will be
approximately $5.11 per share. However, because the amount of the Asset Purchase
Price and the amount that will be required to repay indebtedness, retire
outstanding stock options and pay other transaction-related expenses incurred by
the Company cannot be determined with certainty at this time, no assurance can
be given as to the exact amount of the Distribution. See "CONSIDERATION TO BE
RECEIVED BY THE COMPANY'S STOCKHOLDERS."
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
ABN AMRO Chicago Corporation ("ABN AMRO") has rendered its written opinion
that, subject to the assumptions set forth therein, the aggregate consideration
of at least $5.00 per share that the Company estimates will be received by
holders of Company Shares pursuant to the Distribution and the Merger
Consideration is fair to the holders of Company Shares from a financial point of
view. ABN AMRO's opinion does not address the fairness of the Asset Sale or the
Merger individually. The full text of ABN AMRO's written opinion, dated October
3, 1997, which sets forth the assumptions made, matters considered and the scope
and limitations of the review undertaken and procedures followed by ABN AMRO in
rendering its opinion, is attached hereto as Exhibit C. HOLDERS OF COMPANY
SHARES ARE URGED TO AND SHOULD READ SUCH OPINION IN ITS ENTIRETY. For
information relating to the opinion of ABN AMRO, see "OPINION OF FINANCIAL
ADVISOR TO THE COMPANY."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger Agreement and the Asset Purchase Agreement,
stockholders should be aware that certain members of management of the Company
and the Board of Directors of the Company have certain interests in the Merger
and the Asset Sale that are in addition to the interests of stockholders of the
Company generally. Such interests include (a) cash payments to officers and
directors of the Company equal to the difference between (i) the sum of the
Distribution and the Merger Consideration and (ii) the exercise price of stock
options of the Company, (b) severance and bonus payments due to certain officers
of the Company as a result of the consummation of the Merger and the Asset Sale,
and (c) payments for post-closing consulting services that may be received by
certain officers of the Company. Assuming the aggregate amount of the
Distribution and the Merger Consideration is $5.11 per share, it is anticipated
that the aggregate amount of such payments to officers and directors of the
Company will be approximately $900,000. See "INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTIONS."
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<PAGE> 16
DISSENTERS' RIGHTS OF APPRAISAL
The holders of Company Shares who vote against or abstain from voting on
approval of the Merger Agreement and file a demand for appraisal prior to the
Special Meeting have the right to receive a cash payment from the Company (as
the corporation surviving the Merger) for the fair value of their Company Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger). In order to exercise such rights, a holder of
Company Shares must comply with the requirements set forth in Section 262 of the
DGCL, the full text of which is set forth as Exhibit D to this Proxy Statement.
See "DISSENTERS' RIGHTS OF APPRAISAL."
FAILURE OF THE HOLDERS OF COMPANY SHARES TO COMPLY FULLY WITH THE SPECIAL
REQUIREMENTS OF THE DGCL WITH REGARD TO DISSENTERS' APPRAISAL RIGHTS MAY RESULT
IN THE LOSS OF SUCH RIGHTS.
The DGCL does not provide for dissenters' rights of appraisal in connection
with the Asset Sale.
Holders of Company Shares should also keep in mind that the Company may use
any vote in favor of the Asset Sale or the Merger against a stockholder in the
event that such stockholder later alleges that the Company's Board of Directors
breached its fiduciary duties in connection with the Asset Sale or the Merger or
otherwise challenges the fairness of the Asset Sale or the Merger.
FEDERAL INCOME TAX CONSEQUENCES
The receipt of the Distribution and the Merger Consideration by holders of
Company Shares will be taxable transactions for federal income tax purposes
under the Internal Revenue Code of 1986, as amended, and also may be taxable
transactions under applicable state, local, foreign and other tax laws. For
federal income tax purposes, a stockholder of the Company will realize taxable
gain or loss as a result of (a) the difference, if any, between the amount of
the cash distribution received by the stockholder pursuant to the Distribution
following the Asset Sale and the stockholder's adjusted tax basis in such stock,
and (b) the difference, if any, between the amount of cash received by the
stockholder in the Merger (i.e., $1.6139 per share) and the stockholder's
adjusted tax basis in such stock. In general, if the Company Shares are a
capital asset in the hands of a stockholder, any gain or loss recognized by such
stockholder pursuant to the Distribution or in the Merger will be eligible for
capital gain or loss treatment. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE TRANSACTIONS TO THE COMPANY'S STOCKHOLDERS."
MARKET PRICE DATA
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol REXW. As of September 30, 1997, there were approximately 271
stockholders of record. The following table sets forth the
7
<PAGE> 17
reported high and low sale prices of the Company's Common Stock for the periods
indicated. The Company has never paid cash dividends on its Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1995
First Quarter............................................. $4.88 $3.88
Second Quarter............................................ 4.38 3.38
Third Quarter............................................. 3.75 2.50
Fourth Quarter............................................ 3.13 2.00
Fiscal Year Ended December 31, 1996
First Quarter............................................. 3.50 2.25
Second Quarter............................................ 3.50 2.75
Third Quarter............................................. 3.38 2.63
Fourth Quarter............................................ 3.00 2.25
Fiscal Year Ending December 31, 1997
First Quarter............................................. 2.75 1.57
Second Quarter............................................ 4.88 2.25
Third Quarter............................................. 4.63 2.75
</TABLE>
On August 15, 1997, the last full day of trading prior to the announcement
by the Company of execution of the Merger Agreement and the execution of a
letter of intent with respect to the Asset Sale, the reported high and low sales
prices per share of Common Stock were $4.50 and $3.75, respectively. On November
24, 1997, the last full day of trading prior to the printing of this Proxy
Statement, such reported high and low sales prices per share were $ and
$ , respectively.
SELECTED FINANCIAL DATA OF THE COMPANY
The following selected financial data for the three years ended December
31, 1996 are derived from the financial statements of the Company and the
following selected financial data for the nine months ended September 30, 1997
and 1996 are derived from unaudited financial statements of the Company and
include all adjustments, consisting only of normal recurring accruals that the
Company considers necessary for a full presentation of the financial position
and results of operations for those periods.
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------- ---------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales...................................... $34,349 $38,176 $48,373 $52,479 $51,023
(Loss) income from operations.................. 8 786,000 484 598 1,640
(Loss) income before cumulative effect of
accounting change and extraordinary item..... (351) 112,000 (185) (260) 1,161
Extraordinary item............................. -- 214,000 214 -- --
Net (loss) income.............................. (351) 326,000 29 (260) 1,161
Net (loss) income before cumulative effect of
accounting change and extraordinary item per
share........................................ (0.18) 0.06 (0.09) (0.13) 0.59
Net (loss) income per share.................... (0.18) 0.17 0.02 (0.13) 0.59
BALANCE SHEET DATA:
Working Capital................................ 2,762 6,352 $ 5,231 $ 6,338 $ 6,054
Total assets................................... 24,327 22,475 24,283 28,899 24,916
Long-term debt, excluding current maturities... 0 3,686 2,984 4,835 4,753
Stockholders' investment....................... 7,651 8,300 8,002 7,944 8,142
Book value per share........................... 3.94 4.33 4.20 4.19 4.01
</TABLE>
8
<PAGE> 18
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Rexworks Inc. (the "Company") to be voted
at a Special Meeting of Stockholders to be held on December 16, 1997 (the
"Special Meeting") and any adjournments or postponements thereof. Shares
represented by properly executed proxies received by the Company will be voted
at the Special Meeting or any adjournment thereof in accordance with the terms
of such proxies, unless revoked. Proxies may be revoked at any time prior to the
voting thereof either by written notice filed with the Secretary or Acting
Secretary of the meeting or by oral notice to the presiding officers during the
meeting.
PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will consider and
vote upon the following matters: (a) a proposal to approve and adopt an Asset
Purchase Agreement, dated as of October 1, 1997, between CMI Corporation ("CMI")
and the Company, and (b) a proposal to approve and adopt an Agreement and Plan
of Merger, dated as of August 15, 1997 (the "Merger Agreement"), among Giuffre
Bros. Cranes, Inc. ("Giuffre"), 13th Street Acquisition Corp., a Delaware
corporation which is a wholly owned subsidiary of Giuffre ("Giuffre Sub"), and
the Company.
The Asset Sale
The Asset Purchase Agreement provides for the Company to sell to CMI
substantially all of the assets (the "Assets") relating to the Company's
landfill and embankment compactor and material reduction grinder divisions (the
"Divisions") and for CMI to assume certain specified liabilities relating to the
Divisions. In consideration for the sale of the Assets, CMI will pay to the
Company a cash purchase price (the "Asset Purchase Price") equal to the sum of
(a) the net value as of the closing date of the assets sold to CMI and the
liabilities assumed by CMI, and (b) $3,167,000. A copy of the Asset Purchase
Agreement is attached as Exhibit A to this Proxy Statement.
The Merger
The Merger Agreement provides for (a) the sale of the Company's owned real
property to Giuffre for a purchase price of $1,756,000 (the "Real Property
Sale"), and (b) the merger (the "Merger") of Giuffre Sub into the Company, with
the Company being the surviving corporation (the "Surviving Corporation").
Pursuant to the Merger, each outstanding share of the common stock, $0.12 par
value, of the Company (the "Common Stock" or "Company Shares"), will be
converted into the right to receive $1.6139 per share in cash, without interest
(other than shares of Common Stock, if any, held by the Company, Giuffre or
Giuffre Sub, which are to be canceled as part of the Merger), and each
outstanding share of Giuffre Sub common stock, $.01 par value per share (the
"Giuffre Sub Shares"), will be converted into one share of Common Stock of the
Surviving Corporation. The consideration to be received by the Company's
stockholders pursuant to the Merger is sometimes referred to herein as the
"Merger Consideration." A copy of the Merger Agreement is attached as Exhibit B
to this Proxy Statement.
VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
The record date for the Special Meeting is the close of business on
November 7, 1997. At that date, there were 1,896,668 Company Shares outstanding.
Each Company Share entitles its holder to one vote concerning all matters
properly coming before the Special Meeting. Any stockholder entitled to vote may
vote either in person or by duly authorized proxy. A majority of the shares
entitled to vote, represented in person or by proxy, will constitute a quorum.
Abstentions and broker non-votes (i.e., shares held by brokers in street name,
voting on certain matters due to discretionary authority or instructions from
the beneficial owner but not voting on other matters due to lack of authority to
vote on such matters without instructions from the beneficial owner) are counted
for the purpose of establishing a quorum. Under the Delaware General Corporation
Law ("DGCL"), for the Asset Sale to be approved by stockholders, the Asset
Purchase Agreement must be approved and adopted by the holders of at least a
majority of the outstanding Company Shares, and for the
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<PAGE> 19
Merger to be approved by stockholders, the Merger Agreement must be approved and
adopted by the holders of at least a majority of the outstanding Company Shares.
Accordingly, abstentions and broker non-votes have the same effect as a vote
"AGAINST" approval of the Asset Sale and "AGAINST" approval of the Merger. Votes
will be tabulated by Firstar Trust Company.
PROXIES
All Company Shares represented by properly executed proxies received prior
to or at the Special Meeting and not revoked will be voted in accordance with
the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED,
SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE ASSET SALE AND FOR APPROVAL OF
THE MERGER AND, IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY, ON SUCH
OTHER MATTERS AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING.
In the event that there is a vote to adjourn the Special Meeting in order
to continue to solicit proxies for approval of the Asset Sale or the Merger, it
is anticipated that any proxy other than a proxy which instructs a vote against
the Asset Sale or against the Merger will be voted, in the discretion of the
persons named in the proxy, in favor of adjournment of the Special Meeting.
A stockholder may revoke his, her or its proxy at any time prior to its use
by delivering to the Secretary of the Company a signed notice of revocation or a
later dated and signed proxy or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Upon request, the Company will reimburse brokers, dealers and banks or
their nominees, for reasonable expenses incurred in forwarding copies of the
proxy material to the beneficial owners of shares which such persons hold of
record. Solicitation of proxies will be made principally by mail. Proxies may
also be solicited in person, or by telephone or facsimile, by officers and
regular employees of the Company who will receive no additional compensation in
connection with the solicitation.
BACKGROUND OF THE TRANSACTIONS
BACKGROUND
The terms of the Asset Purchase Agreement are the result of arms-length
negotiations between representatives of the Company and CMI and the terms of the
Merger Agreement are the result of arms-length negotiations between
representatives of the Company and Giuffre. The following describes the
background of the discussions between the Company and Giuffre leading up to the
execution of the definitive Merger Agreement on August 15, 1997 and the
background of the discussions between the Company and CMI leading up to the
execution of the definitive Asset Purchase Agreement on October 1, 1997.
For the past several years, the Company's Board of Directors has from time
to time considered various strategic alternatives as part of its ongoing effort
to enhance shareholder value. On August 22, 1996, as a result of a strategic
review of the Company, the Board of Directors reviewed the earnings potential of
the Company based upon various operating and market assumptions. This review
included an analysis of (a) the Company's cost structure, including wage costs
and overhead costs, (b) the competitive market in each of the Company's business
segments, (c) issues with respect to efficiencies of scale at the Company's
manufacturing facility, (d) the Company's limited access to capital at favorable
rates, and (e) the Company's losses in recent periods. After discussing the
risks and likelihood of success in view of these factors, the Board of Directors
concluded that there was a significant probability that the earnings and
stockholder value of the Company would not significantly improve in the near
term from then current levels. As a result, the Board of Directors instructed
management to explore strategic and financial alternatives to increase
shareholder value, including identifying a third party to enter into a business
combination with the Company. On October 19, 1996, the Company engaged ABN AMRO
to analyze and present alternatives to the Board of Directors to increase
shareholder value.
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<PAGE> 20
ABN AMRO presented its findings and recommendations to the Board of
Directors at a meeting held on October 22, 1996. ABN AMRO presented an overview
of the risks and benefits of the Company (a) continuing to operate as an
independent public company and retaining all business segments, (b) exploring
opportunities involving the potential sale of one or more business segments, and
(c) exploring opportunities involving the sale of all business segments in one
or more transactions. The Board of Directors engaged in a thorough discussion
with representatives of ABN AMRO of the relative merits and risks of these
alternatives. The Board of Directors was concerned about the ability of the
Company to improve earnings and shareholder value in the near term. The Board of
Directors did not believe that there was a significant risk in exploring the
potential sale of all or part of the Company while at the same time continuing
management's efforts to improve earnings. Based on data presented by ABN AMRO,
including a discounted cash flow analysis, an analysis of comparable public
companies and an analysis of comparable transactions, the Board of Directors
concluded that the sale of all or part of the Company had the potential to
provide an immediate increase to shareholder value. The Board of Directors
authorized ABN AMRO to proceed with a business review, valuation and
alternatives analysis of the Company, and the identification of potential
strategic and financial acquirors. No decision was made to sell all or part of
the Company at this meeting.
ABN AMRO presented information on potential acquirors to the Board of
Directors at a meeting held on November 8, 1996. During the presentation by ABN
AMRO, the Board of Directors considered the anticipated interest levels of each
of the potential acquirors and the appropriate process for determining their
level of interest. The Board of Directors desired to minimize the risk of public
disclosure, which it believed could damage the Company by creating uncertainty
among its customers, employees, distributors and suppliers. After considering
various alternatives, the Board of Directors authorized ABN AMRO and management
to prepare evaluation materials for distribution to potential acquirors and
conduct a targeted, high level solicitation of potential acquirors on a
confidential basis.
During December 1996 and the first half of 1997, ABN AMRO and management
contacted, on a confidential basis, approximately 37 companies to determine
their level of interest in acquiring all or certain segments of the Company.
Eighteen companies expressed interest in reviewing the merits of a potential
acquisition of all or certain segments of the Company. After executing
confidentiality agreements, these companies received a corporate overview
describing the Company's businesses and assets. After reviewing these materials,
seven of these companies conducted additional due diligence of the Company which
included an opportunity to meet with the Company's senior management and an
internal review of the Company. The Board of Directors met with ABN AMRO on
January 14, 1997 to review the status of the process.
Following due diligence meetings, the Company requested that potential
acquirors submit indications of interest with respect to an acquisition of the
entire Company. CMI was the only company to express an interest in acquiring the
entire Company. Two other companies had withdrawn from discussions before the
end of the first quarter of 1997 after conducting preliminary due diligence.
Four other companies, including Giuffre, had expressed an interest in acquiring
only one business segment. These four companies continued discussions and due
diligence during the second quarter of 1997.
The Board of Directors met with ABN AMRO and management on March 25, 1997
and authorized ABN AMRO to continue discussions regarding the potential sale of
the Company to a single acquiror. From late March to early April,
representatives of the Company and representatives of CMI had discussions
regarding the terms of a proposed transaction involving the acquisition by CMI
of the entire Company. After undertaking due diligence, CMI withdrew from the
discussions in early April 1997 due to CMI's concerns that the acquisition of
the entire Company by CMI, including the Company's facility, would not fit with
CMI's strategic plans.
Following the termination of discussions with CMI, ABN AMRO presented an
overview of alternatives available to enhance shareholder value to the Board of
Directors on April 29, 1997. At that date, there were no ongoing discussions
with any of the companies previously contacted regarding the sale of the entire
Company in a single transaction. The Board of Directors continued to have
concerns regarding the earnings potential of the Company, particularly in view
of the operating loss that the Company had reported for fiscal 1996. ABN AMRO
made a presentation regarding the remaining alternatives to enhance shareholder
value, including (a) a significant restructuring of the Company, and (b)
identifying an acquiror for one or more business
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<PAGE> 21
segments of the Company. The Board of Directors did not consider a restructuring
to be an attractive alternative in view of the risks, likely time frame,
additional investment and potential reward of undertaking a restructuring. The
Board of Directors did note that several of the companies previously contacted
by the Company had expressed an interest in acquiring one or more business
segments of the Company. ABN AMRO expressed its view that the alternative of
selling one or more of the Company's business segments still had the potential
to enhance shareholder value. The Board of Directors also believed that there
was no significant risk to the Company in pursuing this alternative while
directing management to continue its efforts to improve the Company's earnings.
The Board of Directors directed management and ABN AMRO to explore opportunities
regarding the potential sale of one or more business segments.
Following the April 29, 1997 Board meeting, management and ABN AMRO
contacted the companies that had previously expressed an interest in acquiring
one or more business segments. Five companies, including Giuffre and CMI,
expressed an interest at that time. Based on preliminary discussions of value
and terms, each of these companies other than Giuffre and CMI withdrew from
discussions during the second quarter of 1997. From late-April through mid-July,
representatives of the Company and representatives of Giuffre conducted
preliminary discussions regarding the purchase by Giuffre of the Company's mixer
business and real estate. Also during this time frame, discussions with CMI were
reinitiated concerning CMI's potential interest in acquiring selected assets of
the Company's compactor and grinder segments.
At a meeting held on July 23, 1997, the Board of Directors reviewed the
status of discussions with Giuffre and CMI and received an update from ABN AMRO
regarding the remaining alternatives in the process to enhance shareholder
value. Management presented an analysis of the profitability of continuing the
compactor and grinder segments if the proposed Giuffre transaction was
consummated and those segments were not sold to CMI. This analysis consisted of
management's projections of the profitability of operating the grinder and
compactor segments as a stand alone company to determine if this stand alone
company would be immediately viable and at least nominally profitable after
consummation of the Giuffre transaction. Based on management's estimates, the
new stand alone company would be projected to show a nominal immediate profit.
In addition, preliminary plans were developed to restructure the business to
improve long-term profitability. At the July 23, 1997 meeting the Board of
Directors also reviewed the proposed economic terms of the Merger and the Asset
Sale. The Board of Directors authorized management to negotiate with Giuffre and
CMI. Representatives of the Company and representatives of Giuffre continued
their negotiations and had the final terms of the Merger Agreement ready for
approval of the Board of Directors on August 14, 1997. During this period, the
Company also agreed to the Real Property Sale to accommodate Giuffre's desired
corporate structure in a manner that would not affect the amount of the Merger
Consideration. In addition, representatives of the Company and representatives
of CMI commenced negotiations with respect to a non-binding letter of intent for
the sale of the compactor and grinder businesses to CMI.
On August 14, 1997, management of the Company held discussions with each of
the Company's directors regarding the terms and conditions of the proposed
Merger Agreement with Giuffre and the proposed letter of intent with CMI. The
directors reviewed management's estimate that the aggregate proceeds to
stockholders from the proposed Giuffre transaction and the proposed CMI
transaction would be from $5.00 to $5.25 per share and considered previous
analyses, both internally prepared and prepared by ABN AMRO, regarding potential
valuation parameters for the Company's Common Stock. The directors also
considered the potential profitability of the compaction and grinder segments in
the event the Giuffre transaction was consummated and the CMI transaction was
not consummated. Pursuant to a written consent dated August 14, 1997, the Board
of Directors unanimously determined that the Merger was in the best interests of
the Company's stockholders, unanimously approved the Merger Agreement and the
transactions contemplated by the Merger Agreement and unanimously resolved to
recommend that the Company's stockholders vote for adoption of the Merger
Agreement. In addition, the Board of Directors unanimously approved the
non-binding letter of intent with CMI and authorized management to continue
negotiations toward a definitive Asset Purchase Agreement with CMI. The members
of the Board of Directors did not hold a meeting on August 14, 1997 with respect
to the approval of the Merger Agreement and the letter of intent with CMI, but
the members of the Board of Directors had received copies of the Merger
Agreement and other significant transaction agreements for review and had held
numerous individual discussions with the Company's management
12
<PAGE> 22
regarding the proposed Merger and the proposed Asset Sale. On August 15, 1997,
the Company, Giuffre and Giuffre Sub executed the Merger Agreement and the
Company and CMI executed a non-binding letter of intent.
From mid-August until September 30, 1997, representatives of the Company
and representatives of CMI negotiated the terms of the Asset Purchase Agreement.
Pursuant to a written consent dated September 30, 1997, the Board of Directors
unanimously determined that the Asset Sale was in the best interests of the
Company's stockholders, unanimously approved the Asset Purchase Agreement and
the transactions contemplated by the Asset Purchase Agreement and unanimously
resolved to recommend that the Company's stockholders vote for adoption of the
Asset Purchase Agreement. The members of the Board of Directors did not hold a
meeting on September 30, 1997 with respect to the approval of the Asset Purchase
Agreement, but the members of the Board of Directors had received copies of the
Asset Purchase Agreement and other significant transaction agreements for review
and had held numerous individual discussions with the Company's management
regarding the proposed Asset Sale. On October 1, 1997, the Company and CMI
executed the Asset Purchase Agreement.
THE COMPANY'S REASONS FOR THE ASSET SALE AND THE MERGER; RECOMMENDATION OF THE
COMPANY'S BOARD OF DIRECTORS
Pursuant to a unanimous written consent executed by each of the directors
of the Company on August 14, 1997, the Company's Board of Directors determined
that the Merger is in the best interests of the Company's stockholders,
unanimously approved the Merger Agreement and the transactions contemplated by
the Merger Agreement and unanimously resolved to recommend that the Company's
stockholders vote for adoption of the Merger Agreement. Pursuant to a unanimous
written consent executed by each of the directors of the Company on September
30, 1997, the Company's Board of Directors unanimously determined that the Asset
Sale is in the best interests of the Company's stockholders, unanimously
approved the Asset Purchase Agreement and the transactions contemplated by the
Asset Purchase Agreement and unanimously resolved to recommend that the
Company's stockholders vote for adoption of the Asset Purchase Agreement. As
described above under "-- Background," at meetings held on July 23, 1997 and
August 14, 1997, the Company's Board of Directors received advice or
presentations from, and reviewed the then-current terms of the proposed Merger
and/or the proposed Asset Sale with, the Company's management and its financial
and legal advisors. The presentations by the Company's legal advisors described
and explained (i) the terms and conditions of the proposed Asset Sale as set
forth in the draft of the Asset Purchase Agreement, (ii) the terms and
conditions of the proposed Merger as set forth in the draft of the Merger
Agreement, and (iii) the fiduciary duties applicable to the Company's Board of
Directors in the evaluation of the proposed transactions.
In reaching its conclusion to enter into the Asset Purchase Agreement and
the Merger Agreement and recommend that the Company's stockholders vote for
adoption of the Asset Purchase Agreement and the Merger Agreement, the Company's
Board of Directors considered a number of factors, including, without
limitation, those outlined by ABN AMRO in support of its fairness opinions
discussed below, and the Board's own analysis of the following:
(i) The condition, prospects and strategic direction of the Company's
business. In this regard, the Board of Directors specifically reviewed its
prior analyses of the earnings potential of the Company based upon various
operating and market assumptions and its conclusion that there was a
significant probability that the earnings and stockholder value of the
Company would not significantly improve in the near term. This review
included an analysis of (a) the Company's cost structure, including wage
costs and overhead costs, (b) the competitive market in each of the
Company's business segments, (c) issues with respect to efficiencies of
scale at the Company's manufacturing facility, (d) the Company's limited
access to capital at favorable rates, and (e) the Company's losses in
recent periods.
(ii) The amount and type of consideration to be received by the
Company in the Asset Sale and by the stockholders of the Company in the
Merger and the historical trading prices of the Company's Common Stock,
including the fact that the anticipated aggregate amount of the
Distribution and the Merger Consideration represented a premium over the
then-prevailing market price of the Company
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<PAGE> 23
Shares of approximately 25% and a premium of approximately 85% over the low
sales price of the Company Shares during the third quarter of 1997, and the
relationship between the Asset Purchase Price and the Merger Consideration
and the Company's reported earnings and certain other measures. The Board
of Directors also considered the expectation that both the Distribution and
the Merger Consideration would be taxable to the Company's stockholders at
capital gains rates. In this regard, the Board of Directors reviewed the
analyses underlying ABN AMRO's fairness opinion described below. ABN AMRO
valued the entire Company as a going concern and did not conduct an
appraisal of the Assets to be acquired by CMI.
(iii) A comparison of selected acquisition transactions involving
companies of similar size or in similar industries as the Company.
(iv) Current market conditions and historical market prices,
volatility and trading information with respect to the Company Shares.
(v) The fact that over a period of approximately nine months and after
extensive contacts by ABN AMRO, there ultimately were no competing
proposals for the acquisition of the Company or any part of the Company.
(vi) The terms and conditions of the Asset Purchase Agreement and the
Merger Agreement, including the amount and the form of the consideration,
as well as the parties' mutual representations, warranties and covenants,
and the conditions to their respective obligations (including the
conditions requiring the simultaneous consummation of the Merger and the
Asset Sale).
(vii) The terms of the Asset Purchase Agreement and the Merger
Agreement that permit the Company's Board of Directors, in the exercise of
their fiduciary duties and subject to certain conditions, to respond to
inquiries regarding potential business combination transactions, to provide
information to, and negotiate with, third parties making an unsolicited
proposal to acquire the Company in such a transaction and to terminate the
Asset Purchase Agreement and the Merger Agreement if the Company's Board of
Directors determines in the exercise of its judgment as to its fiduciary
duties to the Company's stockholders, after consultation with counsel, that
such termination is required by reason of a subsequent acquisition
proposal. In that regard, the Board of Directors specifically considered
the applicability and amount of the aggregate of the Asset Sale Termination
Fee and the Merger Termination Fee. See "THE ASSET SALE -- The Asset
Purchase Agreement -- Asset Sale Termination Fee and Expenses" and "THE
MERGER -- The Merger Agreement -- Merger Termination Fee and Expenses." The
Company's Board of Directors did not view the Asset Sale Termination Fee or
the Merger Termination Fee as unreasonably impeding any interested third
party from proposing a superior transaction.
(viii) The likelihood that the Asset Sale and the Merger will be
consummated.
(ix) With respect to the Merger Agreement, the commitment of Giuffre
to negotiate and enter into an amendment forming a Holdco to hold the
Assets and operate the Divisions in the event that the Asset Sale is not
consummated.
(x) The interest of certain of the Company's directors and officers
disclosed below under "INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS."
The Board of Directors concluded that such interests did not materially
affect its approval and recommendation of the Merger and the Asset Sale.
These were all of the factors that were considered by the Board of
Directors in reaching its decision to enter into the Asset Purchase Agreement
and the Merger Agreement. The Board of Directors concluded that each of these
factors favored entering into the Asset Purchase Agreement and the Merger
Agreement and supported the Company's determination that the Asset Sale and the
Merger are fair to, and in the best interests of, the holders of Company Shares.
No factor considered by the Board of Directors materially weighed against its
approval and recommendation of the Merger and the Asset Sale. The Board of
Directors concluded that the consummation of the Merger and Asset Sale provides
the best alternative to enhance stockholder value in view of the Company's
financial condition and operating prospects. In view of the wide
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<PAGE> 24
variety of factors considered in connection with its evaluation of the terms of
the Asset Sale and the Merger, the Company's Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its conclusions.
OPINION OF FINANCIAL ADVISOR TO THE COMPANY
The Company has engaged ABN AMRO to act as its financial advisor in
connection with the transactions contemplated by the Asset Purchase Agreement
and the Merger Agreement and to render fairness opinions with respect to the
Asset Purchase Agreement and the Merger Agreement. ABN AMRO provided a written
fairness opinion to the Company's Board of Directors on October 3, 1997, to the
effect that the aggregate consideration of at least $5.00 per share that the
Company estimates will be received by holders of Company Shares pursuant to the
Distribution and the Merger Consideration (the "Estimated Consideration") is
fair, from a financial point of view, to the holders of the Company Shares. ABN
AMRO's opinion does not address the fairness of the Asset Sale or the Merger
individually.
The full text of ABN AMRO's fairness opinion, which set forth the
assumptions made, general procedures followed, matters considered and limits on
the review undertaken, is attached as Exhibit C to this Proxy Statement. ABN
AMRO has consented to the inclusion of its fairness opinion as an exhibit to
this Proxy Statement and the summary of such opinion below.
In rendering its opinion, ABN AMRO (i) reviewed the Asset Purchase
Agreement and the Merger Agreement; (ii) met with senior management of the
Company to discuss the business and prospects of the Company; (iii) met with
senior management of CMI and Giuffre to discuss their interest in the Company;
(iv) reviewed certain publicly available business and financial information
relating to the Company, CMI and Giuffre; (v) reviewed financial forecasts of
the Company that were provided to ABN AMRO by the Company, which information is
not publicly available; and (vi) considered certain financial and stock market
data of the Company and compared that data with similar data for other
publicly-held companies which ABN AMRO deemed relevant, the financial terms of
certain other business combinations which have recently been effected and such
other information, financial studies, analysis and financial, economic and
market criteria which ABN AMRO deemed relevant.
In rendering its opinion, ABN AMRO did not assume any responsibility for
independent verification of any of the foregoing information and, with the
Company's consent, relied on its being complete and accurate in all material
respects. With respect to financial forecasts, it assumed, with the Company's
consent, that such forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the Company's management as
to future financial performance of the Company. ABN AMRO has not made or been
furnished with an independent evaluation or appraisal of the assets of the
Company.
In preparing its opinion to the Board of Directors of the Company, ABN AMRO
performed a variety of financial and comparative analyses, including those
described below. The summary of such analyses set forth below does not purport
to be a complete description of the analyses underlying ABN AMRO's opinion. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, ABN AMRO made qualitative
judgments as to the significance and relevance of each analysis. Accordingly,
ABN AMRO believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. In its analyses, ABN AMRO made
numerous assumptions with respect to the Company, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company. The estimates contained in such
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. Additionally, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.
15
<PAGE> 25
The following is a summary of the material aspects of the financial
analysis ABN AMRO utilized in connection with providing its written opinion to
the Company's Board of Directors.
(a) Discounted Cash Flow Analysis. ABN AMRO performed a discounted cash
flow analysis of the Company based on management's financial forecasts. ABN
AMRO calculated the present value of the estimated cash flows from the
financial forecasts for the fiscal years ending December 31, 1998 through
2002 using discount rates ranging from 12.5% to 17.5%. This range of
discount rates was developed by adding to the then-prevailing risk-free
rate a premium based on general market risk, industry-specific risk as well
as risks associated with the Company's smaller capitalization. ABN AMRO
calculated the Company's terminal values at the end of fiscal year 2002
based on multiples ranging from 5.0x to 6.0x that year's earnings before
interest and taxes ("EBIT"). These terminal values were then discounted to
the present using discount rates ranging from 12.5% to 17.5%. This range of
discount rates was developed by adding to the then-prevailing risk-free
rate a premium based on general market risk, industry-specific risk as well
as risks associated with the Company's smaller capitalization. Using the
foregoing terminal values and discounted cash flows and deducting the
Company's current indebtedness, ABN AMRO calculated resultant equity values
per share having median and mean valuations of $4.39 and $4.42,
respectively, and a range from $3.15 to $5.81, and compared these ranges to
the Estimated Consideration of $5.00 per share to support its fairness
opinion.
(b) Comparison of Selected Peer Companies. ABN AMRO compared selected
historical stock market and balance sheet data and ratios for the Company
to the corresponding data and ratios of the following group of heavy
equipment manufacturers: Astec Industries, Inc., Case Corporation,
Caterpillar, Inc., CMI Corporation, Gencor Industries, Inc., Portec, Inc.
and Terex Corporation. Valuation ratios analyzed included, among other
things, adjusted market capitalization (current stock price multiplied by
shares outstanding plus total indebtedness less excess cash) as a multiple
of latest twelve months ("LTM") revenue, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and EBIT, as well as ratios of
current stock prices to LTM, estimated 1997 and estimated 1998 earnings per
share. The LTM data for the Company was based upon the Company's reported
results for the period ended June 30, 1997. Stock price data was based on
closing prices on October 1, 1997.
Such analyses indicated that: (i) the ratios of adjusted market
capitalization to LTM revenue had a median and mean of 0.8x and 0.9x,
respectively, and ranged from 0.6x to 1.6x for the peer group compared to
0.4x for the Company implied by the Estimated Consideration; (ii) the
ratios of adjusted market capitalization to LTM EBITDA had a median and
mean of 8.7x and 8.3x, respectively, and ranged from 6.5x to 9.8x for the
peer group compared to 21.9x for the Company implied by the Estimated
Consideration; (iii) the ratios of adjusted market capitalization to LTM
EBIT had a median and mean of 11.2x and 11.0x, respectively, and ranged
from 8.7x to 13.6x for the peer group compared to a negative multiple for
the Company (as a result of the Company's negative LTM EBIT); (iv) the LTM
P/E ratios had a median and mean of 13.9x and 15.4x, respectively, and
ranged from 11.1x to 22.2x for the peer group compared to a negative P/E
for the Company (as a result of the Company's negative LTM earnings per
share); and (v) the estimated 1997 P/E ratios had a median and mean of
13.7x and 13.8x, respectively, and ranged from 10.7x to 16.9x for the peer
group compared to a negative P/E for the Company (as a result of the
Company's negative estimated 1997 earnings per share); (vi) the estimated
1998 P/E ratios had a median and mean of 11.1x and 10.9x, respectively, and
ranged from 8.8x to 12.4x for the peer group compared to 12.8x for the
Company implied by the Estimated Consideration.
(c) Comparison of Selected Peer Transactions. ABN AMRO analyzed certain
information relating to selected transactions involving acquisitions of
heavy equipment manufacturing companies. Such analysis indicated that for
the selected transactions: (i) the ratios of aggregate consideration paid
to LTM revenue had a median and mean of 0.9x and 0.9x, respectively, and
ranged from 0.5x to 1.7x for the peer transactions compared to 0.4x for the
Company implied by the Estimated Consideration; (ii) the ratios of
aggregate consideration to LTM EBITDA had a median and mean of 7.8x and
8.3x, respectively, and ranged from 4.4x to 12.6x for the peer transactions
compared to 21.9x for the Company implied by the Estimated Consideration;
(iii) the ratios of aggregate consideration to LTM EBIT had a median and
mean of 10.8x and 11.4x, respectively, and ranged from 5.6x to 17.1x for
the peer transactions compared
16
<PAGE> 26
to a negative multiple for the Company (as a result of the Company's
negative LTM EBIT); and (iv) the ratios of equity consideration to LTM net
income had a median and mean of 21.3x and 21.7x, respectively, and ranged
from 6.5x to 34.8x for the peer transactions compared to a negative ratio
for the Company (as a result of the Company's negative LTM net earnings).
(d) Present Value of Projected Stock Price Analysis. ABN AMRO calculated
the hypothetical present value of a share of the Company's common stock at
the end of fiscal year 2002 assuming management's estimates were achieved.
Earnings per share multiples ranging from 9.0x to 11.0x were applied to
management's fiscal year 2002 estimated earnings per share, and then
discounted at rates ranging from 12.5% to 17.5%. This range of discount
rates was developed by adding to the then-prevailing risk-free rate a
premium based on general market risk, industry-specific risk as well as
risks associated with the Company's smaller capitalization. The present
value suggested median and mean per share valuations of $4.92 and $4.93,
respectively, and ranged from $4.42 to $5.49, and compared these ranges to
the Estimated Consideration of $5.00 per share to support its fairness
opinion.
(e) Analysis of Historical Premiums Paid. ABN AMRO also analyzed and
considered data relating to the implicit premiums paid by acquirors in cash
acquisitions of publicly-traded targets having total consideration ranging
from $5 to $25 million. The premiums paid over the targets' stock prices at
dates one week, four weeks and one year prior to their announced
acquisitions were compared to the implicit premium being offered in the
proposed transactions for the Company's common stock. The Company's
announcement date is based on its initial announcement on August 18, 1997.
Such analysis indicated that: (i) the median and mean premiums paid one
week before the acquisition announcements were 27.4% and 33.3%,
respectively, compared to 60% for the Company implied by the Estimated
Consideration; (ii) the median and mean premiums paid four weeks before the
acquisition announcements were 34.7% and 42.4%, respectively, compared to
81.8% for the Company implied by the Estimated Consideration; (iii) the
median and mean premiums paid one year before the acquisition announcements
were 45.9% and 63.1%, respectively, compared to 81.8% for the Company
implied by the Estimated Consideration.
ABN AMRO, as part of its investment banking business, is continually
engaged in the valuation of businesses in connection with mergers and
acquisitions, as well as initial and secondary offerings of securities and
valuations for other purposes. The Company selected ABN AMRO as its financial
advisor because ABN AMRO is a nationally recognized investment banking firm that
has substantial experience in transactions similar to the Asset Sale and the
Merger.
ABN AMRO may receive a fee of up to $554,200 from the Company if the Asset
Sale and the Merger are consummated.
In the ordinary course of ABN AMRO's business, ABN AMRO and its affiliates
may actively trade securities of the Company and CMI for their own account and
for the accounts of customers and accordingly, may at any time hold a long or
short position in such securities.
THE ASSET SALE
The following information describes the material aspects of the Asset Sale.
This description does not purport to be complete and is qualified in its
entirety by reference to the exhibits hereto, including the Asset Purchase
Agreement, which is attached to this Proxy Statement as Exhibit A and is
incorporated herein by reference. All stockholders are urged to read Exhibit A
in its entirety.
The Board of Directors of the Company has unanimously approved the Asset
Purchase Agreement and recommended approval and adoption of the Asset Purchase
Agreement by the stockholders and has determined that the transactions
contemplated by the Asset Purchase Agreement are fair to, and in the best
interests of, the Company's stockholders. See "BACKGROUND OF THE TRANSACTIONS --
The Company's Reasons for the Asset Sale and the Merger; Recommendation of the
Company's Board of Directors."
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THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE ASSET PURCHASE AGREEMENT.
EFFECTS OF THE ASSET SALE
Upon consummation of the Asset Sale, the Company will sell to CMI the
Assets in exchange for (a) the assumption by CMI of certain specified
liabilities relating to the Divisions, and (b) the cash payment by CMI to the
Company of the Asset Purchase Price equal to the sum of (i) the net value as of
the closing date of the assets sold to CMI and the liabilities assumed by CMI,
and (ii) $3,167,000. The Company immediately after the closing of the Asset Sale
will declare and pay the Distribution. See "CONSIDERATION TO BE RECEIVED BY
STOCKHOLDERS OF THE COMPANY."
CLOSING
If the Asset Purchase Agreement is adopted by the requisite vote of the
Company's stockholders and the other conditions to the Asset Sale are satisfied
(or waived to the extent permitted), the closing (the "Closing") of the Asset
Sale will occur immediately prior to the effective time of the Merger. The date
of the Closing is referred to herein as the "Closing Date."
The Asset Purchase Agreement provides that the parties will cause the
Closing to occur as promptly as practicable after the approval of the Asset
Purchase Agreement by the stockholders of the Company and the satisfaction (or
waiver, if permissible) of the other conditions set forth in the Asset Purchase
Agreement, provided, however, that the Closing may not occur prior to December
15, 1997 without the prior written consent of CMI. In certain circumstances, CMI
or the Company may terminate the Asset Purchase Agreement prior to the Closing,
whether before or after approval and adoption of the Asset Purchase Agreement by
the Company's stockholders. See "-- The Asset Purchase Agreement --
Termination."
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") and the rules promulgated thereunder by the Federal Trade Commission (the
"FTC"), certain acquisition transactions may not be consummated unless notice
has been given and certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
Asset Sale is subject to these requirements.
The Company and CMI each will file with the Antitrust Division and the FTC
a Notification and Report Form with respect to the Asset Sale. Under the HSR
Act, the Asset Sale may not be consummated until the expiration of a waiting
period of at least 30 days following the receipt of each filing, unless the
waiting period is earlier terminated by the FTC and the Antitrust Division or
unless the waiting period is extended by a request for additional information.
The FTC and the Antitrust Division frequently scrutinize the legality of
transactions such as the Asset Sale under the antitrust laws. At any time before
or after the Closing Date, the FTC or the Antitrust Division could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Asset Sale or seeking the divestiture
of the Divisions by CMI, in whole or in part, or the divestiture of substantial
assets of CMI, the Company or their respective subsidiaries. State Attorneys
General and private parties may also bring legal actions under the federal or
state antitrust laws under certain circumstances. There can be no assurance that
a challenge to the proposed Asset Sale on antitrust grounds will not be made or
of the result if such a challenge is made.
THE ASSET PURCHASE AGREEMENT
The following discussion of the material provisions of the Asset Purchase
Agreement is qualified in its entirety by reference to the complete text of the
Asset Purchase Agreement, which is included in this Proxy Statement as Exhibit A
(exclusive of all exhibits and schedules) and is incorporated herein by
reference.
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General
The Asset Purchase Agreement provides for the purchase by CMI of the Assets
and the assumption by CMI of the Assumed Liabilities.
The Assets
The Asset Purchase Agreement provides that as of the Closing Date CMI will
purchase all of the Company's right and title to and interest in all of the
following Assets: (a) certain listed machinery, equipment, supplies, tools and
other personal property relating to the Divisions; (b) certain listed contracts
and leases relating to the Divisions (the "Assigned Contracts"), including
customer contracts and supply contracts; (c) all of the Company's goodwill,
licenses, trade names, patents, trade secrets, processes, trademarks and other
intangible assets solely relating to the Divisions; (d) all of the Company's
inventories solely relating to the Divisions; (e) all records and documents used
by the Company exclusively in connection with the Divisions; (f) all of the
Company's accounts receivable solely relating to the Division; (g) certain
listed deposits and other prepaid items relating to the Divisions; and (h) all
rights with respect to legal actions or other claims solely relating to or
arising directly out of the Assets, the Assumed Liabilities or the operations of
the Divisions. All other assets of the Company will be excluded from the Asset
Sale and retained by the Company, including, without limitation, the assets
relating to the Company's mixer division, the Company's real property and all
cash and cash equivalents.
The Assumed Liabilities
As of the Closing Date, CMI will assume the following Assumed Liabilities
relating to the Divisions: (a) all liabilities relating to the Assigned
Contracts; (b) trade payables solely relating to the Divisions; (c) all
liabilities arising from any present or future product liability claims with
respect to landfill and embankment compactors or material reduction grinders
manufactured by the Divisions; and (d) all liabilities arising from any present
or future warranty claims with respect to landfill and embankment compactors or
material reduction grinders manufactured by the Divisions. All liabilities and
obligations of the Company other than the Assumed Liabilities will not be
assumed by Seller and will be retained by the Company.
The Asset Purchase Price
The Asset Purchase Price is equal to the sum of (a) the net value as of the
closing date of the assets sold to CMI and the liabilities assumed by CMI, and
(b) $3,167,000. Pursuant to the Asset Purchase Agreement, in order to determine
the amount of the Asset Purchase Price, CMI and the Company will prepare a
balance sheet dated as of the Closing Date reflecting the amount by which the
value of the Assets as of the Closing Date exceeds the Assumed Liabilities as of
the Closing Date. Based upon the Company's balance sheet as of August 23, 1997,
the Asset Purchase Price would be approximately $17.4 million. No assurance can
be given, however, as to what the exact amount of the Asset Purchase Price will
be on the Closing Date. See "CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS OF THE
COMPANY."
Representations and Warranties
The Asset Purchase Agreement contains various representations and
warranties relating to, among other things, (a) corporate organization,
existence, good standing and power and authority to own and operate properties
and carry on business; (b) corporate power and authority to enter into, and the
due, valid and binding execution and delivery of, the Asset Purchase Agreement;
(c) consents and approvals of public bodies; (d) the Asset Sale not resulting in
conflicts with respect to the articles of incorporation or By-Laws, breaches of
any agreements or instruments or violations of orders relating to the Company or
CMI; (e) the absence of certain material adverse changes concerning the
Divisions; (f) certain matters relating to litigation or product liability
claims relating to the Divisions; (g) the absence of defaults under or
terminations of the Company's material contracts relating to the Divisions; (h)
certain matters pertaining to the Company's intellectual property rights
relating to the Divisions; (i) the Company's good title to the Assets; (j) the
quality and quantity of the inventory and accounts receivable being sold to CMI;
(k) the condition of the Assets and
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<PAGE> 29
the adequacy of the Assets to operate the business of the Divisions; (l) the
major customers and suppliers of the Divisions; (m) product warranties provided
by the Company with respect to the business of the Divisions; (n) certain
matters pertaining to federal, state and local taxes and employee benefit plans
of the Company; (o) the absence of violations of applicable law by the Company;
(p) the absence of defaults under or terminations of the contracts being
assigned to CMI; and (q) the ability of CMI to finance the Asset Purchase Price
through existing cash and the utilization of existing credit facilities.
None of the representations and warranties described above survive the
Closing of the Asset Sale.
Covenants
Each of the parties to the Asset Purchase Agreement has agreed to use its
reasonable best efforts to take all such action as may be necessary or
appropriate to complete the Asset Sale and the other transactions contemplated
by the Asset Purchase Agreement, including cooperation in the preparation and
filing of this Proxy Statement, expiration or termination of governmental
filings and waiting period requirements, and execution of any additional
instruments reasonably necessary to effect the transactions contemplated by the
Asset Purchase Agreement.
Pursuant to the Asset Purchase Agreement, the Company has agreed that,
except as expressly contemplated by the Asset Purchase Agreement or consented to
in writing by CMI, from the date of the Asset Purchase Agreement until the
Closing Date, the Company will carry on the business of the Divisions in the
ordinary course of business consistent with its past practice and, to the extent
consistent with such business, will use its reasonable efforts to preserve
intact the Divisions and the assets thereof, maintain its rights and franchises,
keep available the services of its present officers and key employees, preserve
its relationships with its key customers and suppliers with respect to the
Divisions, confer with CMI regarding material operational matters and the
general status of the business of the Divisions, maintain compliance with all
permits, laws, rules, regulations and orders applicable to the Divisions, and
maintain the Assets in good working order and condition, except for ordinary
wear and tear. In addition, the Company has agreed that, except as contemplated
by the Asset Purchase Agreement or consented to in writing by CMI, from the date
of the Asset Purchase Agreement until the Closing Date, the Company shall not do
any of the following:
(a) Increase the compensation payable to any employee of the Divisions
(except for increases in salary or wages payable to or to become payable in
the ordinary course of business and consistent with policies currently in
effect);
(b) Acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with the Company's past practice);
(c) Sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any assets of the Divisions, except for
dispositions of inventory and supplies in the ordinary course of business
and consistent with the Company's past practice;
(d) Change any of its methods of accounting in effect at December 31,
1996 or make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 1996, except in
either case as may be required by law, the IRS, generally accepted
accounting principals or in the ordinary course of business consistent with
past practice;
(e) Incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except as approved by CMI in advance;
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<PAGE> 30
(f) Guaranty indebtedness for borrowed money of a third party;
(g) Enter into or establish any new compensation plan or employee
benefit plan; or
(h) Agree in writing or otherwise to do any of the foregoing.
The Asset Purchase Agreement also provides that the Company and its
officers, directors, employees, agents and advisors will immediately cease any
existing discussions or negotiations with any parties with respect to any
Acquisition Proposal (as defined below) and will not participate in any new
discussions with respect to any Acquisition Proposal unless permitted as
described in the next sentence. The Company is not prohibited from (a)
furnishing information and access in response to unsolicited requests to any
person or entity pursuant to confidentiality agreements, or (b) participating in
discussions and negotiating with any person or entity concerning any Acquisition
Proposal, if such person or entity has submitted a written proposal to the
Company's Board of Directors relating to any such transaction, and the Company's
Board of Directors determines in good faith after consultation with independent
legal counsel that the failure to provide such information or access or to
engage in such discussions or negotiations would be inconsistent with their
fiduciary duties to the Company's stockholders under applicable law. The Company
is required to notify CMI immediately if any such request or proposal, or any
inquiry or contact with any person with respect thereto, is made and to keep CMI
apprised of all developments that could reasonably be expected to culminate in
the Company's Board of Directors withdrawing, modifying or amending its
recommendation of the Asset Sale and the other transactions contemplated by the
Asset Purchase Agreement. The Asset Purchase Agreement defines "Acquisition
Proposal" as any proposal or offer for a merger, asset acquisition or other
business combination involving the acquisition, directly or indirectly, of the
Divisions or any material assets of the Divisions.
Conditions to Closing of the Asset Sale
The Asset Purchase Agreement provides that the obligations of the parties
to transactions contemplated by the Asset Purchase Agreement are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions: (a) the Company's stockholders shall have approved the Asset
Purchase Agreement and the Asset Sale; (b) no action or proceeding has been
instituted or is pending by any governmental entity before any court or
administrative agency; and no order or decree has been entered in any action or
proceeding before any such court or agency; (i) imposing or seeking to impose
limitations on the ability of CMI to acquire or hold or to exercise full rights
of ownership of any of the Assets; (ii) imposing or seeking to impose
limitations on the ability of CMI to combine and operate the business and assets
of the Divisions with CMI or any of CMI's subsidiaries or other operations;
(iii) imposing or seeking to impose other sanctions, damages or liabilities
arising out of the Asset Sale on CMI, the Company or any of their officers or
directors; (iv) requiring or seeking to require divestiture by CMI of all or any
material portion of the Divisions or the assets thereof; or (v) restraining,
enjoining or prohibiting or seeking to restrain, enjoin or prohibit the
consummation of the Asset Sale; and (c) any waiting period applicable to the
Asset Sale under the HSR Act shall have terminated or expired.
The Company's obligation to effect the transactions contemplated by the
Asset Purchase Agreement is also subject to the satisfaction, on or prior to the
Closing Date, of the following additional conditions, any or all of which may be
waived in whole or in part by the Company: (a) the representations and
warranties of CMI contained in the Asset Purchase Agreement shall be true and
correct in all material respects on and as of the Closing Date; (b) CMI shall
have performed in all material respects the obligations required to be performed
by it under the Asset Purchase Agreement prior to the Closing Date; (c) the
Company shall have received an opinion of counsel to CMI in form and substance
satisfactory to the Company and its counsel; (d) the Company shall have received
an opinion from ABN AMRO to the effect that the Asset Purchase Price is fair to
the Company's stockholders from a financial point of view; (e) the Company shall
have received a wire transfer of immediately available funds in the amount of
the Asset Purchase Price; (f) the Company shall have received such documents as
the Company reasonably deems necessary and appropriate to document the transfer
of the Assets and the assumption of the Assumed Liabilities; and (g) the Merger
and the other
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transactions contemplated by the Merger Agreement shall have closed
simultaneously with the Closing under the Asset Purchase Agreement.
The obligation of CMI to effect the transactions contemplated by the Asset
Purchase Agreement is also subject to the satisfaction, on or prior to the
Closing Date, of the following additional conditions: (a) the representations
and warranties of the Company contained in the Asset Purchase Agreement shall
have been true and correct in all material respects when made and such
representations and warranties, as updated by any update schedule delivered by
the Company to CMI, shall be true and correct in all material respects on and as
of the Closing Date; (b) the Company shall have performed in all material
respects the obligations required to be performed by it under the Asset Purchase
Agreement on or prior to the Closing Date; (c) the Company shall have obtained
certain listed third-party consents; (d) the Company shall have obtained all
other required third-party consents except where the failure to obtain such
consents would not have a material adverse effect on the Divisions or the Asset
Sale; (e) CMI shall have received an opinion of counsel to the Company in form
and substance satisfactory to CMI and its counsel; (f) CMI shall have received
such documents as CMI reasonably deems necessary and appropriate to document the
transfer of the Assets, the assumption of the Assumed Liabilities and the
release of any security interests relating to the Purchased Assets; (g) the
Company, Giuffre and CMI shall have entered into an agreement (the "Toll
Manufacturing Agreement") providing for the manufacture and supply by the
Company of landfill and embankment compactors and material reduction grinders
after the Closing Date; (h) since October 1, 1997, no condition or fact shall
have occurred which, as of the Closing Date, may have a material adverse effect
on the Divisions; (i) the Company and Giuffre each shall have entered into a
non-competition agreement with CMI in a form reasonably satisfactory to CMI,
Giuffre and the Company; and (j) the Company and CMI shall have complied in all
material respects with the provisions of the Wisconsin Bulk Sales Law.
Termination
The Asset Purchase Agreement may be terminated and the Asset Sale abandoned
at any time prior to the Closing, notwithstanding approval of the Asset Purchase
Agreement by the stockholders of the Company:
(a) by mutual written consent of CMI and the Company;
(b) by either CMI or the Company in the event the conditions to such
party's obligations under the Asset Purchase Agreement have not been met or
waived on or prior to January 31, 1998, but only if the party terminating
has not caused the condition giving rise to termination to be not satisfied
through its own action or inaction;
(c) by either CMI or the Company if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or
any governmental entity preventing or prohibiting consummation of the Asset
Sale has become final and nonappealable;
(d) by CMI, if (i) this Proxy Statement does not include the
recommendation of the Company's Board of Directors in favor of the Asset
Purchase Agreement and the Asset Sale, (ii) the Company's Board of
Directors withdraws, modifies or changes in a manner materially adverse to
CMI its recommendation of the Asset Purchase Agreement or the Asset Sale or
has resolved to do any of the foregoing, (iii) the Company's Board of
Directors has recommended to the stockholders of the Company any Competing
Transaction (as defined below) or resolved to do so, or (iv) a tender offer
or exchange offer for 50% or more of the outstanding shares of capital
stock of the Company is commenced, and the Board of Directors of the
Company, within 10 business days after such tender offer or exchange offer
is so commenced, either fails to recommend against acceptance of such
tender offer or exchange offer by its stockholders or takes no position
with respect to the acceptance of such tender offer or exchange offer by
its stockholders;
(e) by the Company if, in the exercise of its judgment as to its
fiduciary duties to its stockholders as imposed by applicable law and,
after consultation with and receipt of advice from outside legal counsel,
the Company's Board of Directors determines that such termination is
required by reasons of any Competing Transaction being made or proposed;
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<PAGE> 32
(f) by CMI or the Company, if any of the updated schedules of the
other party contains disclosures of any fact or condition which (i) makes
untrue, or shows to have been untrue, any representation or warranty by
such party in the Asset Purchase Agreement and (ii) the effect of the fact
or condition so disclosed upon the representation or warranty so affected
would constitute a material adverse effect on the such party, unless
concurrently with the delivery of such updated schedules, the such party
represents and warrants that the disclosed fact or condition can and will
be corrected at its expense prior to the Closing Date (but in no event more
than 30 days after the delivery of the updated schedules); or
(g) by CMI or the Company, at any time after the Special Meeting, if
the Asset Purchase Agreement and the Asset Sale are not approved by the
requisite vote of the Company's stockholders in accordance with the DGCL
and the Company's Certificate of Incorporation and By-Laws.
The Asset Purchase Agreement defines a "Competing Transaction" as any
proposed acquisition of the Divisions or a substantial part of the assets of the
Divisions by any person or entity or any "group" (as such term is defined under
section 13(d) of the Exchange Act) other than CMI and its affiliates by (i)
merger, consolidation, share exchange, business combination or other similar
transaction, (ii) purchase of all or a substantial part of the assets of the
Divisions, or (iii) the acquisition of more than 50% of the Company's
outstanding equity securities.
In the event of the termination of the Asset Purchase Agreement and the
Asset Sale for any reason, the Asset Purchase Agreement will become void, all
rights of each party thereto shall cease and none of the Company, CMI or their
respective officers, directors, stockholders, agents or advisors will have any
liability except for the provisions in the Asset Purchaser Agreement with
respect to payment of the Asset Sale Termination Fee and expenses described
below. In addition, the termination of the Asset Purchase Agreement does not
affect the parties' obligations under the Confidentiality Agreement, which
obligations survive such termination.
Asset Sale Termination Fee and Expenses
Pursuant to the Asset Purchase Agreement, the Company must pay CMI an Asset
Sale Termination Fee equal to the greater of (i) $400,000 (or approximately
$0.21 per Company Share outstanding on September 30, 1997) and (ii) 20% of the
amount by which the aggregate consideration with respect to the Divisions in any
Competing Transaction exceeds the Asset Purchase Price, if the Asset Purchase
Agreement is terminated by the Company pursuant to the sections of the Asset
Purchase Agreement described in paragraphs (d) or (e) of the above section. If
the Asset Purchase Agreement is terminated pursuant to paragraph (b) of the
above section as a direct result of a material intentional breach by a party of
any of its covenants in the Asset Purchase Agreement, all remedies available to
the other party either in law or equity shall be preserved and survive
termination of the Asset Purchase Agreement. If the Asset Purchase Agreement is
terminated pursuant to paragraph (b) of the above section because of the failure
to consummate the Merger, the Company must reimburse CMI for up to $200,000 of
CMI's expenses. If the Asset Purchase Agreement is terminated pursuant to
paragraph (b) of the above section because of a material breach by either party
of any of its representations or warranties in the Asset Purchase Agreement, the
breaching party must reimburse the nonbreaching party for up to $200,000 of the
nonbreaching party's expenses. If the Asset Sale is not consummated and the
Asset Purchase Agreement is terminated for any other reason or if the Asset Sale
is consummated, each party must bear its own expenses.
Amendments and Waivers
At any time prior to the Closing Date (notwithstanding any stockholder
approval) if authorized by CMI and the Company and to the extent permitted by
law, (a) the parties to the Asset Purchase Agreement may, by written agreement,
modify, amend or supplement any term or provision of the Asset Purchase
Agreement, and (b) any term or provision of the Asset Purchase Agreement may be
waived by any party which is entitled to the benefits thereof, provided that
after such stockholder approval, no amendment may be made which reduces the
amount or changes the type of the Asset Purchase Price unless such amendment is
approved by stockholders.
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THE MERGER
The following information describes the material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the exhibits hereto, including the Merger Agreement,
which is attached to this Proxy Statement as Exhibit B and is incorporated
herein by reference. All stockholders are urged to read Exhibit B in its
entirety.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and recommended approval and adoption of the Merger Agreement by the
stockholders and has determined that the transactions contemplated by the Merger
Agreement are fair to, and in the best interests of, the Company's stockholders.
See "BACKGROUND OF THE TRANSACTIONS -- The Company's Reasons for the Asset Sale
and the Merger; Recommendation of the Company's Board of Directors."
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
EFFECTS OF THE MERGER
Upon consummation of the Merger, (a) Giuffre Sub will merge with and into
the Company, with the Company being the Surviving Corporation; (b) the Company
will become a wholly owned subsidiary of Giuffre; (c) each Company Share
outstanding immediately prior to the Effective Time (other than shares of Common
Stock, if any, not converted because of the exercise of dissenters' appraisal
rights and other than shares of Common Stock, if any, held by the Company,
Giuffre or Giuffre Sub) will be converted, in a taxable transaction, into the
right to receive $1.6139 in cash, without interest; (d) each Company Share
outstanding immediately prior to the Effective Time and held by the Company as
treasury shares or by Giuffre or Giuffre Sub will be canceled and retired
without consideration; and (e) each Giuffre Sub Share will be converted into one
share of Common Stock of the Surviving Corporation.
Each certificate previously representing Company Shares will thereafter
represent only the right to receive the Merger Consideration to which such
certificate is entitled pursuant to the Merger Agreement. Certificates
previously representing Company Shares may be exchanged for the Merger
Consideration as provided below. Each Company Share held by Giuffre, Giuffre Sub
or the Company will be canceled and retired and no payment will be made with
respect thereto.
For a description of the procedures for exchanging certificates
representing Company Shares, see "-- Procedures for Exchange of Certificates."
EFFECTIVE TIME
If the Merger Agreement is adopted by the requisite vote of the Company's
stockholders and the other conditions to the Merger are satisfied (or waived to
the extent permitted), the Merger will be consummated and effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware. The date and time the Merger is effective is referred to herein as the
"Effective Time."
The Merger Agreement provides that the parties will cause the Effective
Time to occur as promptly as practicable after the adoption of the Merger
Agreement by the stockholders of the Company and the satisfaction (or waiver, if
permissible) of the other conditions set forth in the Merger Agreement. In
certain circumstances, Giuffre or the Company may terminate the Merger Agreement
prior to the Effective Time, whether before or after approval and adoption of
the Merger Agreement by the Company's stockholders. See "-- The Merger Agreement
- -- Termination."
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Immediately prior to the Effective Time, Giuffre will deposit, or will
cause to be deposited, with a bank or trust company to be designated by Giuffre
(the "Exchange Agent") approximately $3.1 million (the "Exchange Fund"), for the
benefit of the holders of Company Shares for exchange in accordance with the
terms of the Merger Agreement. Pursuant to irrevocable instructions, the
Exchange Agent will deliver out of
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the Exchange Fund the portion of the Merger Consideration associated with the
outstanding Company Shares pursuant to the Merger Agreement.
At or after the Effective Time there will be no transfers of Company Shares
on the stock transfer books of the Company.
Promptly after the Effective Time, Giuffre will instruct the Exchange Agent
to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Company Shares
(the "Certificates") (a) a letter of transmittal in customary form (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Exchange Agent), and (b) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with a letter of
transmittal, duly executed, and any other documents as may be required pursuant
to such instructions, the holder of a Certificate will be entitled to receive in
exchange therefor the Merger Consideration to which such Certificate is
entitled. The Certificate so surrendered will forthwith be canceled. In the
event of a transfer of ownership of Company Shares which is not registered in
the stock transfer records of the Company, it shall be a condition to such
exchange that a Certificate representing the proper number of Company Shares be
presented by a transferee to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon surrender the Merger Consideration to which such
Certificate is entitled.
STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Any portion of the Exchange Fund remaining undistributed 180 days after the
Effective Time will be returned to Giuffre, and any holders of theretofore
unsurrendered Company Shares will thereafter be able to look only to Giuffre for
any portion of the Exchange Fund to which they are entitled. Giuffre will not be
liable to any holder of Company Shares for Merger Consideration delivered to a
public official pursuant to any abandoned property, escheat or similar law.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the Merger will be allocated among
the Surviving Corporation's assets and liabilities based on the fair values of
the assets acquired and liabilities assumed and any amount of consideration in
excess of the total fair value of such assets and liabilities will be booked as
goodwill. At the Effective Time, the Company will become a wholly owned
subsidiary of Giuffre.
REGULATORY APPROVALS
There are no significant regulatory approvals or governmental consents
required prior to the consummation of the Merger.
THE MERGER AGREEMENT
The following discussion of the material provisions of the Merger Agreement
is qualified in its entirety by reference to the complete text of the Merger
Agreement, which is included in this Proxy Statement as Exhibit B (exclusive of
all exhibits and schedules) and is incorporated herein by reference.
General
The Merger Agreement provides for the merger of Giuffre Sub into the
Company. The Company will be the Surviving Corporation of the Merger and, as a
result of the Merger, Giuffre will indirectly own all of the
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Surviving Corporation's Common Stock. In the Merger, the stockholders of the
Company, other than Giuffre and Giuffre Sub, will receive the Merger
Consideration described below.
Effective Time
The Effective Time of the Merger will occur upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware. It
is anticipated that the Certificate of Merger will be filed promptly after the
approval and adoption of the Merger Agreement by the stockholders of the Company
at the Special Meeting. Such filing will be made, however, only upon
satisfaction or waiver of all conditions to the Merger contained in the Merger
Agreement.
Merger Consideration
In connection with the Merger, each outstanding Company Share at the
Effective Time will be converted into the right to receive $1.6139 in cash,
without interest (other than shares of Common Stock not converted because of the
exercise of dissenters' rights, if any, and other than shares of Common Stock,
if any, held by the Company, Giuffre or Giuffre Sub, which are to be canceled as
part of the Merger). Instructions with regard to the surrender of certificates
formerly representing Company Shares, together with the letter of transmittal to
be used for that purpose, will be mailed to stockholders as soon as practicable
after the Effective Time. The Exchange Agent as soon as practicable following
receipt from the stockholder of a duly executed letter of transmittal, together
with certificates formerly representing Company Shares and any other items
specified by the letter of transmittal, shall pay, by check or draft, to such
stockholder, the Merger Consideration to which such holder is entitled.
Each outstanding Giuffre Sub Share will automatically be converted into one
share of common stock, par value $.01 per share, of the Surviving Corporation.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES FOR COMPANY SHARES WITH
THE ENCLOSED PROXY CARD.
After the Effective Time, the holder of a certificate formerly representing
Company Shares shall cease to have any rights as a stockholder of the Company,
and such holder's sole right will be to receive the Merger Consideration with
respect to such shares. If payment is to be made to a person other than the
person in whose name the surrendered certificate is registered, it will be a
condition of payment that the certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of such payment
or establish to the satisfaction of the Surviving Corporation that such taxes
have been paid or are not applicable. No transfer of shares outstanding
immediately prior to the Effective Time will be made on the stock transfer books
of the Surviving Corporation after the Effective Time. Certificates formerly
representing Company Shares presented to the Surviving Corporation after the
Effective Time will be canceled in exchange for the Merger Consideration to
which such shares are entitled.
In no event will holders of Company Shares be entitled to receive any
interest on the Merger Consideration to be distributed to them in connection
with the Merger.
Representations and Warranties
The Merger Agreement contains various representations and warranties
relating to, among other things, (a) corporate organization, existence, good
standing and power and authority to own and operate properties and carry on
business; (b) corporate power and authority to enter into, and the due, valid
and binding execution and delivery of, the Merger Agreement; (c) the absence of
any violations of applicable law by the Company; (d) consents and approvals of
public bodies; (e) the Merger not resulting in conflicts with respect to the
articles of incorporation or By-Laws, breaches of any agreements or instruments
or violations of orders relating to the Company, Giuffre or Giuffre Sub; (f) the
capital structure of the Company; (g) the fair presentation of financial
statements supplied by the Company to Giuffre; (h) the absence of certain
material adverse changes concerning the Company; (i) certain matters relating to
litigation or product liability claims involving the Company; (j) certain
matters pertaining to federal, state and local taxes and employee benefit
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<PAGE> 36
plans of the Company; (k) the absence of defaults under or terminations of the
Company's material contracts; (l) certain matters pertaining to the Company's
intellectual property rights; and (m) certain matters pertaining to the
ownership and control of Giuffre and Giuffre Sub and the lack of prior
activities by Giuffre and Giuffre Sub.
None of the representations and warranties described above survive the
Effective Time of the Merger.
Covenants
Each of the parties to the Merger Agreement has agreed to use its
reasonable best efforts to take all such action as may be necessary or
appropriate to effectuate the Merger under the DGCL, including cooperation in
the preparation and filing of this Proxy Statement, expiration or termination of
governmental filings and waiting period requirements, and execution of any
additional instruments reasonably necessary to effect the transactions
contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, the Company has agreed that, except as
expressly contemplated by the Merger Agreement or consented to in writing by
Giuffre, from the date of the Merger Agreement until the Effective Time, the
Company will carry on the business of its mixer division in the ordinary course
of business consistent with its past practice and, to the extent consistent with
such business, will use its reasonable efforts to preserve intact its present
business organization, maintain its rights and franchises, keep available the
services of its present officers and key employees, preserve its relationships
with its key customers and suppliers, confer with Giuffre regarding material
operational matters and the general status of the business of the Company's
mixer division and provide reasonable access to Giuffre and its advisors to the
offices, properties, books and records of the Company. In addition, the Company
has agreed that, except as contemplated by the Merger Agreement or consented to
in writing by Giuffre, from the date of the Merger Agreement until the Effective
Time, the Company shall not do any of the following:
(a) Increase the compensation payable to any director, officer or
employee of the Company (except for increases in salary or wages payable to
or to become payable in the ordinary course of business and consistent with
policies currently in effect); grant any severance or termination pay
(other than pursuant to the normal severance policy of the Company in
effect as of the date of the Merger Agreement) to, or enter into any
severance agreement with, any director or officer; enter into or amend any
employment agreement with any director or officer that would extend beyond
the Effective Time except on an at-will basis; or establish, adopt, enter
into or amend any employee benefit plan, except as may be required to
comply with applicable law;
(b) Declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) Redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock; effect any
reorganization or recapitalization; or split, combine or reclassify any of
its capital stock (except for the issuance of shares upon the exercise of
options or warrants in accordance with their terms);
(d) Issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security
interests, liens, claims, pledges, limitations on voting rights, charges or
other encumbrances) of, any shares of any class of its capital stock, any
securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire any such shares
(except for the issuance of shares upon the exercise of options or warrants
in accordance with their terms), or amend or otherwise modify the terms of
any such rights, warrants or options the effect of which shall be to make
such terms more favorable to the holders thereof, except as contemplated by
the Merger Agreement;
(e) Acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any
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<PAGE> 37
assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
the Company's past practice);
(f) Sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any material amount of any of its assets, except
for (i) the Asset Sale, and (ii) dispositions in the ordinary course of
business and consistent with the Company's past practice;
(g) Adopt any amendments to its Certificate of Incorporation or
By-Laws;
(h) Change any of its methods of accounting in effect at December 31,
1996 or make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 1996, except in
either case as may be required by law, the IRS, generally accepted
accounting principals or in the ordinary course of business consistent with
past practice;
(i) Incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except as approved by Giuffre in advance; or
(j) Agree in writing or otherwise to do any of the foregoing.
The Merger Agreement also provides that the Company and its officers,
directors, employees, agents and advisors will immediately cease any existing
discussions or negotiations with any parties with respect to any Acquisition
Proposal (as defined below). The Company is not prohibited from (a) furnishing
information and access in response to unsolicited requests to any person or
entity pursuant to confidentiality agreements, or (b) participating in
discussions and negotiating with any person or entity concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction involving
the Company, if such person or entity has submitted a written proposal to the
Company's Board of Directors relating to any such transaction, and the Company's
Board of Directors determines in good faith after consultation with independent
legal counsel that the failure to provide such information or access or to
engage in such discussions or negotiations would be inconsistent with their
fiduciary duties to the Company's stockholders under applicable law. The Company
is required to notify Giuffre immediately if any such request or proposal, or
any inquiry or contact with any person with respect thereto, is made and to keep
Giuffre apprised of all developments that could reasonably be expected to
culminate in the Company's Board of Directors withdrawing, modifying or amending
its recommendation of the Merger and the other transactions contemplated by the
Merger Agreement. The Merger Agreement defines "Acquisition Proposal" as any
proposal or offer for a merger, asset acquisition or other business combination
(other than the Merger) involving the Company and any other person or entity, or
any proposal or offer to acquire a significant equity interest in, or a
significant portion of the real estate or mixer division assets of, the Company
by any other person or entity.
Conditions to Consummation of the Merger
The Merger Agreement provides that the obligations of the parties to effect
the Merger are subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions: (a) the Company's stockholders shall
have approved the Merger Agreement and the Merger; (b) no action or proceeding
has been instituted or is pending by any governmental entity before any court or
administrative agency, and no order or decree has been entered in any action or
proceeding before any such court or agency, (i) imposing or seeking to impose
limitations on the ability of Giuffre to acquire or hold or to exercise full
rights of ownership of any of the Company Shares; (ii) imposing or seeking to
impose limitations on the ability of Giuffre to combine and operate the business
and assets of the Company with Giuffre or Giuffre Sub; (iii) imposing or seeking
to impose other sanctions, damages or liabilities arising out of the Merger on
Giuffre, Giuffre Sub, the Company or any of their officers or directors; (iv)
requiring or seeking to require divestiture by Giuffre of all or any material
portion of the business, assets or property of the Company; or (v) restraining,
enjoining or prohibiting or seeking to restrain, enjoin or prohibit the
consummation of the Merger; (c) receipt of all
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<PAGE> 38
necessary governmental consents, approvals and authorizations; (d) completion of
the Real Property Sale; (e) completion of the Asset Sale; and (f) receipt of the
opinion of ABN AMRO.
The Company's obligation to effect the Merger is also subject to the
satisfaction, at or prior to the Effective Time, of the following additional
conditions, any or all of which may be waived in whole or in part by the
Company: (a) the representations and warranties of Giuffre and Giuffre Sub
contained in the Merger Agreement shall be true and correct in all material
respects at and as of the Effective Time; (b) Giuffre and Giuffre Sub shall have
performed in all material respects their obligations required to be performed by
them under the Merger Agreement prior to the Effective Time; (c) the Company
shall have received an opinion of counsel to Giuffre and Giuffre Sub in form and
substance satisfactory to the Company and its counsel; and (d) the Company,
Giuffre, Giuffre Sub and CMI shall have entered into the Toll Manufacturing
Agreement.
The obligation of Giuffre and Giuffre Sub to effect the Merger is also
subject to the satisfaction, at or prior to the Effective Time, of the following
additional conditions: (a) the representations and warranties of the Company
contained in the Merger Agreement shall have been true and correct in all
material respects when made and such representations and warranties, as updated
by any update schedule delivered by the Company to Giuffre, shall be true and
correct in all material respects at and as of the Effective Time; (b) the
Company shall have performed in all material respects the obligations required
to be performed by it under the Merger Agreement at or prior to the Effective
Time; (c) the Company shall have obtained all required third-party consents
except where the failure to obtain such consents would not have a material
adverse effect on the Company or the Merger; (d) Giuffre shall have received an
opinion of counsel to the Company in form and substance satisfactory to Giuffre
and its counsel; (e) the Company's long-term debt, including any current
portions thereof, shall have been paid in full prior to the Effective Time; and
(f) the aggregate Merger Consideration payable by Giuffre shall not be more than
$200,000 higher than what the aggregate Merger Consideration would be if
calculated as of the Effective Time in accordance with formula based upon the
net value of the assets and liabilities of the Company to be retained by the
Company after the Effective Time.
Holding Company Alternative
Consummation of the Asset Sale and the other transactions contemplated by
the Asset Purchase Agreement is a condition of the obligations of Giuffre,
Giuffre Sub and the Company to effect the Merger. However, if the Asset Purchase
Agreement is terminated prior to the Effective Time or if the Company gives
written notice to Giuffre that the Company does not reasonably expect the Asset
Sale to be consummated, then Giuffre and the Company have agreed to negotiate
and enter into an amendment to the Merger Agreement (the "Amendment") providing,
in lieu of the Merger, for the formation of a holding company as the sole
stockholder of the Company ("Holdco"), the transfer of the Assets to Holdco and
the sale of all outstanding shares of capital stock of the Company by Holdco to
Giuffre. In connection with the formation of Holdco, the Company would seek the
approval of the holders of Company Shares with respect to a transaction
involving the following principal steps: (i) an exchange of all of the
outstanding Company Shares for all of the outstanding shares of Holdco common
stock, (ii) the transfer from the Company to Holdco of substantially all of the
assets relating to the Company's landfill and embankment compactor and material
reduction grinder divisions and (iii) the acquisition of the Company by Giuffre.
After the consummation of such transaction, the holders of Company Shares would
be the stockholders of Holdco. The Company anticipates Holdco would apply to
have the shares of Holdco common stock be listed for trading on Nasdaq or
another appropriate market. However, the formation of Holdco may entail
significant delays and uncertainties and no assurance can be given that
transactions with Giuffre could be consummated using the Holdco alternative if
the Asset Purchase Agreement were terminated.
Termination
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, notwithstanding approval of the Merger Agreement by
the stockholders of the Company:
(a) by mutual written consent of Giuffre and the Company;
(b) by either Giuffre or the Company in the event the conditions to
such party's obligations under the Merger Agreement have not been met or
waived on or prior to December 31, 1997, but only if the
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<PAGE> 39
party terminating has not caused the condition giving rise to termination
to be not satisfied through its own action or inaction;
(c) by either Giuffre or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any governmental entity preventing or prohibiting
consummation of the Merger has become final and nonappealable;
(d) by Giuffre, if (i) the Company's Board of Directors withdraws,
modifies or changes in a manner materially adverse to Giuffre its
recommendation of the Merger Agreement or the Merger or has resolved to do
any of the foregoing, (ii) the Company's Board of Directors has recommended
to the stockholders of the Company any Competing Transaction (as defined
below) or resolved to do so, or (iii) a tender offer or exchange offer for
50% or more of the outstanding shares of capital stock of the Company is
commenced, and the Board of Directors of the Company, within 10 business
days after such tender offer or exchange offer is so commenced, either
fails to recommend against acceptance of such tender offer or exchange
offer by its stockholders or takes no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders;
(e) by the Company if, in the exercise of its judgment as to its
fiduciary duties to its stockholders as imposed by applicable law and,
after consultation with and receipt of advice from outside legal counsel,
the Company's Board of Directors determines that such termination is
required by reasons of any Competing Transaction being made or proposed; or
(f) by Giuffre, if any of the Company's updated schedules contains
disclosures of any fact or condition which (i) makes untrue, or shows to
have been untrue, any representation or warranty by the Company in this
Agreement and (ii) the effect of the fact or condition so disclosed upon
the representation or warranty so affected would constitute a material
adverse effect on the Company, unless concurrently with the delivery of
such updated schedules, the Company represents and warrants that the
disclosed fact or condition can and will be corrected at the Company's
expense prior to the Effective Time.
The Merger Agreement defines a "Competing Transaction" as any proposed
acquisition of the Company by any person or entity or any "group" (as such term
is defined under section 13(d) of the Exchange Act) other than Giuffre and its
affiliates by (i) merger, consolidation, share exchange, business combination or
other similar transaction, (ii) purchase of all or a substantial part of the
assets of the Company and its subsidiaries, taken as a whole, or (iii) the
acquisition of more than 50% of the Company's outstanding equity securities.
In the event of the termination of the Merger Agreement and the Merger for
any reason, the Merger Agreement will become void, all rights of each party
thereto shall cease and none of the Company, Giuffre, Giuffre Sub or their
respective officers, directors, stockholders, agents or advisors will have any
liability except for the provisions in the Merger Agreement with respect to
payment of the Termination Fee and expenses described below. In addition, the
termination of the Merger Agreement does not affect the parties' obligations
under the Confidentiality Agreement, which obligations survive such termination.
Merger Termination Fee and Expenses
Pursuant to the Merger Agreement, the Company must pay Giuffre a Merger
Termination Fee of $400,000 (or approximately $0.21 per Company Share
outstanding on September 30, 1997) if the Merger Agreement is terminated by the
Company pursuant to the sections of the Merger Agreement described in paragraphs
(d) or (e) of the above section. If the Merger Agreement is terminated pursuant
to paragraph (b) of the above section as a direct result of a material
intentional breach by a party of any of its covenants in the Merger Agreement,
all remedies available to the other party either in law or equity shall be
preserved and survive any termination of the Merger Agreement. If the Merger is
not consummated and the Merger Agreement is terminated for any other reason,
each party must bear its own expenses. If the Merger is consummated, all
expenses will be paid by the Surviving Corporation.
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Amendments and Waivers
At any time prior to the Effective Time of the Merger (notwithstanding any
stockholder approval) if authorized by Giuffre, Giuffre Sub and the Company and
to the extent permitted by law, (a) the parties to the Merger Agreement may, by
written agreement, modify, amend or supplement any term or provision of the
Merger Agreement, and (b) any term or provision of the Merger Agreement may be
waived by any party which is entitled to the benefits thereof, provided that
after such stockholder approval, no amendment may be made which reduces the
amount or changes the type of Merger Consideration unless such amendment is
approved by stockholders.
CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS OF THE COMPANY
Following the consummation of the Merger and the Asset Sale, stockholders
of the Company will receive two separate cash payments: (a) the Distribution,
and (b) the Merger Consideration (provided, however, that holders of shares of
Common Stock not converted in the Merger because of the exercise of dissenters'
appraisal rights, if any, will not receive the Merger Consideration).
Immediately prior to the consummation of the Merger, the Company will pay
the Distribution equal to the net proceeds of the Asset Sale (after using
approximately $8.9 million of the proceeds to repay indebtedness, retire all
outstanding stock options and pay other transaction-related expenses incurred by
the Company). The Asset Purchase Price is equal to the sum of (a) the net value
as of the closing date of the assets sold to CMI and the Assumed Liabilities,
and (b) $3,167,000. Pursuant to the Asset Purchase Agreement, in order to
determine the amount of the Asset Purchase Price, CMI and the Company will
prepare a balance sheet dated as of the Closing Date (the "Closing Date Balance
Sheet") reflecting the amount by which the value of the Assets as of the Closing
Date exceeds the Assumed Liabilities as of the Closing Date. The Asset Purchase
Agreement does not require any review or audit of the Closing Date Balance Sheet
by independent public accountants and the Company does not intend to obtain any
such review or audit. The Company intends to make the Closing Date Balance Sheet
available for inspection by the Company's stockholders at the Special Meeting.
The purchase price for the Company's real property in the Real Property Sale is
$1,756,000. The proceeds of the Real Property Sale are reflected in the Merger
Consideration and will not be included in the Distribution. Based upon the
Company's balance sheet as of August 23, 1997, the Company anticipates that the
aggregate amount of the Distribution and the Merger Consideration will be
approximately $5.11 per share. However, because the amount of the Asset Purchase
Price and the amount that will be required to repay indebtedness, retire
outstanding stock options and pay other transaction-related expenses cannot be
determined with certainty at this time, no assurance can be given as to the
exact amount of the Distribution. Each holder of Company Shares at the close of
business on November 7, 1997, will be entitled to receive the Distribution.
Stockholders need not exchange their stock certificates or take any other action
in order to receive the Distribution.
Pursuant to the Merger Agreement, upon the consummation of the Merger, each
outstanding share of the Company's Common Stock will be converted into the right
to receive from Giuffre $1.6139 in cash, without interest (other than shares of
Common Stock not converted because of the exercise of dissenters' appraisal
rights, if any, and other than shares of Common Stock, if any, held by the
Company, Giuffre or Giuffre Sub, which are to be canceled as part of the
Merger). Promptly after the Effective Time, a letter of transmittal and
instructions for surrendering stock certificates evidencing shares of the
Company's Common Stock will be mailed to each holder of the Company's Common
Stock for use in exchanging such holder's stock certificates for the Merger
Consideration to which such holder is entitled under the Merger Agreement.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS. See
"THE MERGER -- Procedures for Exchange of Certificates."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
TRANSACTIONS TO THE COMPANY'S STOCKHOLDERS
Set forth below is a description of certain federal income tax aspects of
the Distribution and the Merger to holders of Company Shares under current law
and regulations. The discussion is based on the Internal Revenue Code of 1986,
as amended. The Company has received an opinion from Arthur Andersen LLP in
connection with the Distribution, but will not seek an opinion of counsel with
respect to any of the other transactions contemplated by the Asset Purchase
Agreement or the Merger Agreement. The Company will not seek any rulings from
the Internal Revenue Service ("IRS").
The following discussion is limited to the material federal income tax
aspects of the Distribution and the Merger for a holder of Company Shares who is
a citizen or resident of the United States, and who, on the date of disposition
of such holder's Company Shares, holds such shares as capital assets. All
holders are urged to consult their own tax advisors regarding the federal,
foreign, state and local tax consequences of the Distribution and dispositions
of Company Shares in the Merger. The following discussion does not address
potential foreign, state, local and other tax consequences, nor does it address
taxpayers subject to special treatment under the federal income tax laws, such
as life insurance companies, tax-exempt organizations, S corporations,
broker-dealers, dealers in securities, regulated investment companies and
taxpayers subject to alternative minimum tax.
The Company has received an opinion from Arthur Andersen LLP to the effect
that, with respect to noncorporate stockholders, (i) the Distribution will be
treated as a distribution in part payment in exchange for the Common Stock, and
(ii) if the Company Shares are a capital asset in the hands of the stockholder,
the gain or loss realized will be a capital gain or loss. Although Arthur
Andersen LLP has delivered its opinion with respect to certain federal income
tax consequences relating to the Distribution, holders of Company Shares should
be aware that such an opinion is neither binding on the IRS or the courts, nor
are the IRS or the courts precluded from adopting a contrary position. No ruling
has been requested from the IRS with respect to any of the opinions or
statements set forth herein. Accordingly, there can be no assurance that such
opinions and statements will not be challenged by the IRS or would be sustained
by a court if so challenged.
A holder of Company Shares will recognize gain or loss upon the surrender
of such holder's Company Shares and receipt of the Merger Consideration pursuant
to the Merger in an amount equal to the difference, if any, between (a) the
amount of cash received, and (b) such holder's adjusted tax basis in the Company
Shares surrendered therefor.
In general, if the Company Shares are a capital asset in the hands of a
stockholder, any gain or loss recognized by such stockholder in the Merger will
be eligible for capital gain or loss treatment. Any capital gain or loss
recognized by stockholders will be long-term capital gain or loss if the Company
Shares giving rise to such recognized gain or loss have been held for more than
18 months; otherwise such capital gain or loss generally will be short term. An
individual's long-term capital gain is currently subject to federal income tax
at a maximum rate of 20% while any capital loss (assuming there are no capital
loss carryovers from prior years) can be offset only against other capital gains
plus $3,000 ($1,500 for married persons filing separately) of other income in
any tax year. For individuals, any unutilized capital loss will carry over as a
capital loss to succeeding years for an unlimited time until the loss is
exhausted.
For corporations, a capital gain is subject to federal income tax at a
maximum rate of 35% while any capital loss can be offset only against other
capital gains. Any unutilized capital loss generally can be carried back three
years and forward five years to be offset against net capital gains generated in
such years.
Under the federal income tax backup withholding rules, unless an exemption
applies, the Exchange Agent will be required to withhold, and will withhold, 31%
of all cash payments to which a holder of Company Shares or other payee is
entitled pursuant to the Merger Agreement, unless the stockholder or other payee
provides a tax identification number (social security number, in the case of an
individual, or employer identification number, in the case of other Company
stockholders) and certifies that such number is correct and that the stockholder
or other payee is not subject to backup withholding. Each Company stockholder,
and, if applicable, each other payee, should complete and sign the Form W-9
included with the letter of transmittal
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to be returned to the Exchange Agent in order to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Exchange Agent.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH HOLDER OF COMPANY SHARES IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO
SUCH STOCKHOLDER (INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS).
DISSENTERS' RIGHTS OF APPRAISAL
In accordance with Section 262 of the DGCL ("Section 262"), if the proposed
Merger is approved and consummated, holders of Company Shares who neither vote
for nor consent in writing to the proposal to approve the Merger Agreement will
have the right to receive the "fair value" of their Company Shares in cash
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) as judicially determined if they fully comply with
the provisions of Section 262.
The following is a brief summary of the procedures set forth in Section 262
which are required to be followed by holders of Company Shares who wish to
dissent from the Merger and demand their statutory appraisal rights. This
summary is qualified in its entirety by reference to Section 262, the complete
text of which is attached to this Proxy Statement as Exhibit D. Holders of
Company Shares who desire to exercise appraisal rights of dissenting
stockholders with respect to the Merger are advised to seek independent counsel.
This Proxy Statement constitutes notice to holders of Company Shares concerning
the availability of appraisal rights under Section 262. Under Section 262, a
holder of record wishing to assert appraisal rights must hold shares of Common
Stock on the date of making a demand for appraisal rights with respect to such
shares and must continuously hold such shares through the Effective Time.
Holders of record of Company Shares who desire to exercise their appraisal
rights must satisfy all of the conditions of Section 262. A written demand for
appraisal of shares of Common Stock must be filed with the Company before the
taking of the vote on the proposal to approve the Merger Agreement. This written
demand for appraisal of shares of Common Stock must be in addition to and
separate from any abstention or any vote, in person or by proxy, cast against
approval of the Merger Agreement.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON THE
ADOPTION OF THE PROPOSAL TO APPROVE THE MERGER AGREEMENT WILL CONSTITUTE A
DEMAND FOR APPRAISAL WITHIN THE MEANING OF SECTION 262.
Holders of Company Shares electing to exercise their appraisal rights under
Section 262 must NOT vote for approval of the Merger Agreement. If a holder of
Company Shares returns a signed proxy but does not specify therein a vote
AGAINST approval of the Merger Agreement or an instruction to abstain, the proxy
will be voted FOR approval of the Merger Agreement, which will have the effect
of waiving the appraisal rights of that holder of Company Shares. Abstaining
from voting or voting against the approval of the Merger Agreement will NOT
constitute a waiver of such stockholder's appraisal rights.
A demand for appraisal must be executed by or for the holder of record of
Company Shares as to which appraisal is demanded as such stockholder's name
appears on the certificate representing such Company Shares. If such Company
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by or for the appropriate
fiduciary. If such Company Shares are owned of record by or for more than one
person, as in a joint tenancy or tenancy in common, such demand must be executed
by all joint owners of such shares. An authorized agent, including an agent for
two or more joint owners, may execute the demand for appraisal for a stockholder
of record; however, the agent must identify the record owner and expressly
disclose the fact that, in exercising the demand, he or she is acting as agent
for the identified record owner.
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<PAGE> 43
A record owner, such as a broker, who holds Company Shares as a nominee for
others, may exercise rights of appraisal with respect to the shares held for all
or less than all beneficial owners of shares as to which he or she is the record
owner. In such case, the written demand submitted by such broker as record owner
must set forth the number of Company Shares covered by such demand. If the
number of shares is not expressly stated, the demand will be presumed to cover
all Company Shares outstanding and held in the name of such record owner.
Holders of Company Shares (or, if different, record owners acting on behalf
of such stockholders) who elect to exercise appraisal rights should mail or
deliver a written demand to: Rexworks Inc., 445 West Oklahoma Avenue, Milwaukee,
Wisconsin 53207 Attention: Secretary. The written demand for appraisal should
specify the record holder's name and mailing address, the number of Company
Shares owned, and that such holder is thereby demanding appraisal of his or her
shares. Within ten days after the Effective Time, the Company must provide
notice of the Effective Time to all holders of Company Shares who have complied
with Section 262 and have not voted for approval of the Merger Agreement.
Within 120 days after the Effective Time, either the Company or any holder
of Company Shares who has complied with the required conditions of Section 262
may file a petition in the Delaware Court of Chancery (the "Chancery Court")
demanding a determination of the fair value of the Company Shares owned by the
dissenting stockholders. The Company has no present intention to file such
petition if demand for appraisal is made.
Upon the filing of any petition by a stockholder in accordance with Section
262, service of a copy will be made upon the Company which will, within 20 days
after service, file in the office of the Register in the Chancery Court in which
the petition was filed, a duly verified list containing the names and addresses
of all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the Company.
The Register of Chancery, if so ordered by the Chancery Court, will give notice
of the time and place fixed for the hearing of such petition by registered or
certified mail to the Company and to the stockholders shown on the list at the
addresses therein stated, and notice will also be given by publishing a notice
at least one week before the day of the hearing in a newspaper of general
circulation published in the City of Wilmington, Delaware, or such publication
as the Chancery Court deems advisable. The forms of the notices by mail and by
publication must be approved by the Chancery Court, and the costs thereof shall
be borne by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition the Chancery Court will determine which stockholders are entitled to
appraisal rights and will appraise the Company Shares owned by such stockholders
and determine the fair value of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount so determined to be
the fair value.
In determining fair value, the Chancery Court is to take into account all
relevant factors. In Weinberger v. UOP, Inc., decided February 1, 1983, the
Delaware Supreme Court expanded the considerations that could be taken into
account in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered, and that "fair price obviously requires consideration of all
relevant factors involving the value of a company. . ." The Delaware Supreme
Court stated that, in making a determination of fair value, the agency or court
determining the value must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger and which throw any light on future
prospects of the merging corporation. Section 262 provides that fair value is to
be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court held that
"elements of future value, including the nature of the enterprise, which are
known or susceptible to proof as of the date of the merger and not the product
of speculation, may be considered."
HOLDERS OF COMPANY SHARES CONSIDERING SEEKING APPRAISAL SHOULD KEEP IN MIND
THAT THE FAIR VALUE OF THEIR COMPANY SHARES DETERMINED UNDER SECTION 262 COULD
BE MORE, THE SAME, OR LESS THAN THE MERGER CONSIDERATION
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<PAGE> 44
THEY ARE TO RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DO NOT SEEK
APPRAISAL OF THEIR SHARES AND THAT ABN AMRO'S OPINION AS TO FAIRNESS IS NOT
NECESSARILY AN OPINION AS TO FAIR VALUE UNDER SECTION 262.
The cost of the appraisal proceeding may be determined by the Chancery
Court and taxed against the parties as the Chancery Court deems equitable in the
circumstances. Upon application of a dissenting holder of Company Shares, the
Chancery Court may order that all or a portion of the expenses incurred by any
such dissenting stockholder in connection with the appraisal proceeding,
including without limitation reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all Company Shares
entitled to appraisal. In the absence of such a determination or assessment,
each party bears his own expenses.
At any time within 60 days after the Effective Time, any holder of Company
Shares who has demanded appraisal of the fair value thereof has the right to
withdraw his or her demand for appraisal and to accept the terms offered in the
Merger; after this period, such stockholder may withdraw his or her demand for
appraisal only with the consent of the Company. If no petition for appraisal is
filed with the Chancery Court within 120 days after the Effective Time, the
rights of holders of Company Shares to appraisal will cease and all such
stockholders will be entitled to receive the consideration offered per share of
Common Stock as provided for in the Merger Agreement.
BECAUSE THE COMPANY HAS NO OBLIGATION TO FILE SUCH A PETITION, AND HAS NO
PRESENT INTENTION TO DO SO, ANY HOLDER OF COMPANY SHARES WHO DESIRES SUCH A
PETITION TO BE FILED IS ADVISED TO FILE IT ON A TIMELY BASIS. No petition timely
filed in the Chancery Court demanding appraisal may be dismissed as to any
holder of Company Shares without the approval of the Chancery Court, and such
approval may be conditioned upon such terms as the Chancery Court deems just.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
THE PROVISIONS OF THE DGCL RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
COMPANY SHARES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE APPLICABLE
SECTIONS OF THE DGCL, WHICH ARE INCLUDED AS EXHIBIT D TO THIS PROXY STATEMENT.
HOLDERS OF COMPANY SHARES INTENDING TO EXERCISE THEIR DISSENTERS' RIGHTS ARE
URGED TO REVIEW CAREFULLY EXHIBIT D AND TO CONSULT WITH LEGAL COUNSEL SO AS TO
BE IN STRICT COMPLIANCE THEREWITH.
The holders of Company Shares will not have any appraisal rights as
dissenting stockholders by reason of the Asset Sale.
Holders of Company Shares should also keep in mind that the Company may use
any vote in favor of the Asset Sale or the Merger against a stockholder in the
event that such stockholder later alleges that the Company's Board of Directors
breached its fiduciary duties in connection with the Asset Sale or the Merger or
otherwise challenges the fairness of the Asset Sale or the Merger.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendation of the Board of Directors of the Company
with respect to the Asset Purchase Agreement and the Merger Agreement,
stockholders should be aware that certain members of the Company's management
and the Board of Directors have certain interests in the transactions
contemplated thereby that are in addition to the interests of stockholders of
the Company generally.
Stock Options
Pursuant to the Merger Agreement, at the Effective Time, each of the
outstanding stock options of the Company will be exercised or canceled in a
manner that does not increase the aggregate Merger Consideration. The Company
intends to provide for the termination of each such stock option in exchange for
the receipt by the holder on the Closing Date of a cash payment equal in amount
to the difference between (i) the sum of
35
<PAGE> 45
the Distribution and the Merger Consideration and (ii) the exercise price of
such stock option (the "Spread"). As of September 30, 1997, Company Options
covering a total of 248,413 Company shares were outstanding with exercise prices
between $2.00 and $5.375 per share. The aggregate Spread on all Company Options
is approximately $350,000. The Company anticipates that it will make such
payments prior to the Closing and that such payments will be included in the
transaction-related expenses to be deducted from the proceeds of the Asset Sale
prior to the payment of the Distribution.
Severance Arrangements
Pursuant to the Employment Agreement dated as of February 23, 1989, between
the Company and Christopher J. Klinck, Vice President -- Compaction Sales of the
Company, following the Merger, the Company may terminate Mr. Klinck's employment
only if the Company (a) either provides notice of termination one-year prior to
the date of termination or makes a cash payment equal to Mr. Klinck's base
salary during the notice period, and (b) makes a cash payment equal to 200% of
one year's base salary on the date the Company delivers the notice of
termination, provided, however, that such amount shall not exceed the amount
which would cause a penalty under section 280G of the Internal Revenue Code.
Assuming that the Company makes the payment to Mr. Klinck in lieu of the
one-year notice payment, the total severance payments payable to Mr. Klinck
would equal approximately $103,500.
In November 1996, the Company entered into separate bonus agreements (the
"Bonus Agreements") with each of Clinton E. Vogus, Vice President -- Operations
of the Company, Thomas D. Lauerman, Vice President -- Administration, Chief
Financial Officer, Treasurer and Secretary of the Company, George T. Moeller,
Vice President -- Maxigrind Sales of the Company, and Harold J. Murdock, Vice
President -- International Sales of the Company. Pursuant to the Bonus
Agreements, each of these executive officers will receive a bonus if a change of
control transaction (such as the Merger) occurs before November 1, 1998. Mr.
Vogus will be entitled to a bonus payment in the amount of $130,000 and each of
Mr. Lauerman, Mr. Moeller and Mr. Murdock will be entitled to a bonus payment in
the amount of $88,000. Each executive officer is also entitled to reimbursement
for certain medical and outplacement services pursuant to the bonus agreements.
The Company anticipates that it will make such payments prior to the Closing and
that such payments will be included in the transaction-related expenses to be
deducted from the proceeds of the Asset Sale prior to the payment of the
Distribution.
Toll Manufacturing Arrangement
It is a condition to CMI's obligation to consummate the Asset Sale that
Giuffre and the Company enter into the Toll Manufacturing Agreement with CMI
providing for the manufacture and supply by the Company to CMI of landfill and
embankment compactors and material reduction grinders for approximately six
months after the Closing Date. In lieu of the direct participation of Giuffre
and the Company in the toll manufacturing arrangement, the parties have decided
that a newly formed corporation or other legal entity (the "Transition Company")
will manufacture and supply the products for CMI using manufacturing space and
employees leased from the Company. The sole shareholders of the Transition
Company will be Laurance R. Newman, President and Chief Executive Officer of the
Company, Thomas D. Lauerman, Vice President -- Administration, Chief Financial
Officer, Treasurer and Secretary of the Company, and Clinton E. Vogus, Vice
President -- Operations of the Company. The Toll Manufacturing Agreement will be
structured so that the prices and fees charged to CMI for the manufacturing
services to be provided by the Transition Company should cover the costs
incurred by the Transition Company. However, to the extent that the Transition
Company earns any profits in connection with the Toll Manufacturing Agreement,
such profits would be received by Messrs. Newman, Lauerman and Vogus as the sole
shareholders of the Transition Company.
Consulting Arrangements
At the request of Giuffre and CMI, a small transition team may serve as
consultants after the Closing to assist Giuffre and CMI with respect to the
operation of the businesses acquired from the Company for a short period after
Closing. This team is currently expected to include Laurance R. Newman,
President and Chief Executive Officer of the Company, Clinton E. Vogus, Vice
President -- Operations of the Company,
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<PAGE> 46
Thomas D. Lauerman, Vice President -- Administration, Chief Financial Officer,
Treasurer and Secretary of the Company, and up to three other employees of the
Company. It is currently anticipated that these consulting services will be
provided through the Transition Company. The Company plans to deposit
approximately $160,000 with the Transition Company to compensate these
individuals for post-Closing consulting based on their current rates of
compensation. The Company anticipates that the amount paid to the Transition
Company will be included in the transaction related-expenses to be deducted from
the proceeds of the Asset Sale prior to the payment of the Distribution.
Indemnification and Insurance
Pursuant to the Merger Agreement, Giuffre agreed to, and agreed to cause
the Surviving Corporation to, indemnify the present and former officers,
directors, employees, agents and representatives of the Company with respect to
events occurring at or prior to the Effective Time, including the transactions
contemplated by the Merger Agreement, to the full extent permitted or required
under the DGCL. In addition, Giuffre agreed that all rights to indemnification
as provided in the Company's Certificate of Incorporation or By-Laws or other
agreements or provisions, as in effect as of the date of the Merger Agreement,
with respect to matters occurring through the Effective Time, will survive the
Merger and will continue in full force and effect. Giuffre also agreed to cause
the Surviving Corporation to use reasonable efforts to obtain extended coverage
under the fiduciary liability, professional liability and directors and officers
liability policies currently covering any of the Company's directors, employees,
agents or representatives, and, in the event the Surviving Corporation is unable
to obtain extended coverage, to use reasonable efforts to provide similar
coverage for the Company's directors, employees, agents or representatives under
policies maintained by Giuffre; provided that such similar coverage is available
to Giuffre at a cost not substantially higher than the Company's present
coverage.
Aggregate Payments to Certain Directors and Executive Officers
Assuming the aggregate amount of the Distribution and the Merger
Consideration is $5.11 per share, it is anticipated that the aggregate amount of
payments to executive officers and directors of the Company for stock options,
severance and bonus arrangements and consulting fees will be approximately
$900,000. The following table provides information regarding such payments to
each executive officer or director who is expected to receive $100,000 or more:
<TABLE>
<CAPTION>
AGGREGATE SPREAD SEVERANCE AND TRANSITION
PERSON FOR STOCK OPTIONS BONUS CONSULTING(1) TOTAL
------ ----------------- ------------- ------------- --------
<S> <C> <C> <C> <C>
C. J. Klinck.......................... $ 9,571 $103,500 $ -- $113,071
T. D. Lauerman........................ 2,580 96,600 30,000 129,180
H. J. Murdock......................... 31,471 96,600 -- 128,071
C. E. Vogus........................... 9,540 138,600 30,000 178,140
</TABLE>
- ---------------
(1) Estimated amounts of consulting fees. Does not include profits, if any,
resulting from manufacturing services to be provided by Transition Company.
37
<PAGE> 47
BUSINESS
INTRODUCTION
The Company designs, manufacturers and sells truck mounted concrete mixers,
compaction equipment and the Maxigrind materials reduction product. These
products accounted for approximately 98% of sales in 1996. The remainder of the
Company's sales are attributable to contract machining operations performed for
others.
Truck mixers are concrete mixers mounted on chassis of various
manufacturers. Compaction equipment (used to compact landfills and soil)
includes sanitary landfill compactors and embankment compactors. The Maxigrind
product grinds and reduces the volume of a variety of materials including green
waste, asphalt, demolition debris, wood products and trash. The Company's
products are used to build and repair roads, bridges, airports, sewers,
pipelines and other infrastructure; to compact and cover sanitary landfill
sites; and to reduce the volume of grindable material.
The Company operates in the highly competitive heavy equipment industry in
which cost containment, product quality, and customer service are important
factors of long term success. See "-- Competition."
PRODUCTS
Construction Equipment Products accounted for 37% of the Company's revenue
in 1996, 38% in 1995 and 31% in 1994.
Waste and Recycling Products accounted for 61% of the Company's 1996
revenue, 60% in 1995 and 67% in 1994.
CONSTRUCTION EQUIPMENT PRODUCTS
REX(R) truck mixers are rotating-drum assemblies which are mounted on
trucks supplied by others. They are used to mix concrete and agitate it after it
is mixed, while conveying it to the pour-site.
The Company manufactures rear discharge truck mixers to meet varying
highway weight laws and modes of operation in the ready-mix concrete industry.
The two main types of truck mixers offered are the REX Premier, in 8 to 12 cubic
yard sizes, and the REX Premier Booster in 10 to 12 cubic yard sizes. The
Premier Booster includes a "trailing" axle at the rear of the truck to
distribute the weight over a longer wheelbase. The Company also sells the REX
Mark III paving mixer line for applications that demand particularly fast
charging and discharge cycles. The market for truck mounted concrete mixers
consists principally of ready mix concrete producers and paving contractors.
Based on the Company's internal market research, the Company believes it is the
second largest domestic manufacturer of truck-mounted rear discharge mixers by
dollar volume of sales.
During 1996 the Company formed a joint venture with Crane Carrier Company
to design, manufacture, and sell front discharge cement mixers. The first units
were offered for sale in early 1997.
WASTE AND RECYCLING PRODUCTS
Landfill and Embankment Compactors.
Compactors are large, heavy, specially-designed machines equipped with
dozer blades and special wheels, which spread, crush and compact refuse or soil.
Embankment compactors are used in compacting soil to specific densities in large
earthmoving projects. Both are powered by diesel engines which the Company
purchases from various suppliers.
The Company manufactures four models of REX Trashmaster(TM) landfill
compactors. The smallest, the REX 3-35 Trashmaster, weighs approximately 40,000
pounds and provides 370 pounds per linear inch of compaction (a measure of
compactive effort over the width of the wheel). The largest, the REX 3-90C
Trashmaster, weighs approximately 99,000 pounds and provides 658 pounds per
linear inch of compaction.
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<PAGE> 48
The use of landfill compactors helps extend the life of a landfill site by
compacting more refuse into a given volume.
REX Pactors are embankment compactors which are similar in design to
Trashmasters but use an open-wheel design to compact heavy clay soils in
construction projects. Typical uses include compaction of roadways, dams, berms,
landfill liners and airport runway bases.
The market for landfill and embankment compactors is principally private
and governmental landfill site operators and earthmoving contractors. Based upon
the Company's internal market research, the Company believes it is the second
largest manufacturer for the domestic market of landfill compactors by dollar
volume of sales. Strict environmental laws and the limited availability of
landfill sites are forcing landfill operators to increase the efficiency of
their facilities. Accordingly, the Company expects these markets to remain
attractive in the future.
Material Reduction Grinders.
In February 1993, Rexworks purchased the rights to manufacture and market
the Maxigrind materials reduction grinder product from Norkot Manufacturing
Company, Inc. ("Norkot"). The Company began production at its plant in
Milwaukee, Wisconsin in March 1993.
The Maxigrind is a large, specially designed materials grinder used in a
variety of waste disposal and recycling applications. It grinds and reduces the
volume of a wide range of material including green waste, asphalt, demolition
debris, wood products, shingles, gypsum and trash. The Maxigrind utilizes a
hydraulic push ram feeder to force material against the machine's cutting
surface and an exclusive concave system to effectively size grindable material.
The Company has patents and patents pending for this unique design. The Company
manufactures two basic Maxigrind models. One model contains a grapple mechanism
that is used to load material into the machine hopper, while the other model is
fed by a loader.
In late 1995, the Company introduced a larger grinder unit called the
Megagrind. This machine is roughly twice the size of the Maxigrind and used in
high volume grinding applications. In mid-1996 the Company introduced a smaller
grinder unit, the Biogrind. This unit is designed for smaller-volume grinding
operations than either the Maxigrind or Megagrind, and is especially well suited
to the grinding of brush, wood products, and other green waste. Both the
Megagrind and Biogrind have been well received in the market place.
The Company's grinder products typically compete with tub grinder
technology. The Company believes the unique designs of these machines, and
significant feature advantages, makes Rexworks' grinder products superior to tub
grinders.
Because the grinders can process a variety of material, their markets are
wide in scope. Typical purchasers include governmental entities involved in the
recycling of green waste, construction contractors interested in reducing the
volume of construction waste, demolition contractors interested in reducing the
bulk of demolished buildings, asphalt contractors involved in the recycling of
asphalt paving into the asphalt manufacturing process, and a wide range of
grinders involved in a variety of applications. The Company believes continued
growth in the recycling industry will have a positive impact on future grinder
sales.
OTHER
Approximately 2% of the Company's revenue in each of the last three years
was attributed to contract machining operations performed for others.
The markets which the Company serves are generally sensitive to changes in
the economy as a whole. Recessionary periods are characterized by lower
construction and repair activity resulting in decreased sales. Periods of
prosperity are generally characterized by increased construction and repair
activity and increased sales.
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<PAGE> 49
DISTRIBUTION
In 1996, approximately 84% of the Company's products were sold through a
network of domestic and foreign distributors.
Distributors generally represent several different manufacturers of
equipment, with minimal competition among product lines. The Company sells its
products to distributors, who in turn rent or sell the equipment to end users.
The Company supports its distributors by maintaining regional sales offices in
California, Colorado, Georgia, Michigan and Texas as well as its corporate
headquarters and manufacturing facility in Milwaukee, Wisconsin.
The Company believes good relationships with its distributors are important
to its success. Several distributors have been selling REX products for more
than 60 years. No single distributor has accounted for more than 10% of the
Company's sales in any of the past three years.
SOURCES OF SUPPLY
The Company purchases a number of components, including diesel engines,
axles, bearings and transmissions, from outside suppliers. Although identical
components are not always available from competing suppliers, the Company
believes that comparable components are available from alternative suppliers,
and as a result the Company is not dependent upon any single supplier for any of
its purchased components.
PATENTS AND TRADEMARKS
The Company holds numerous United States patents and has applications for
other patents pending. The Company considers its patents to be advantageous to
its business but it is not dependent on any single patent or group of patents.
All of the Company's equipment is sold under the trademark REX(R), REXWORKS(R),
MAXIGRIND(R), BIOGRIND(R), or MEGAGRIND(R).
SEASONALITY
The Company typically experiences a seasonal variation in its quarterly
sales, with the highest sales typically occurring in the second quarter and the
lowest sales generally occurring in the fourth quarter of the year.
BACKLOG
The Company's backlog of firm orders totaled $6,866,000 and $5,868,000 at
December 31, 1996 and 1995, respectively. At June 30, 1997 and June 30, 1996,
backlog totaled $1,633,000 and $4,834,000, respectively.
COMPETITION
The markets for the Company's products are highly competitive. In general,
the Company competes on the basis of quality, technological expertise,
performance features, product life, availability of parts and service, and
responsiveness to customer's special needs, rather than competing solely on the
basis of low price. Accordingly, the Company's products are not the lowest
priced equipment available; instead, they maintain a reputation for high
quality, durability and performance.
ENGINEERING
The Company employs 16 people in its engineering department, including 15
engineers, draftsmen and technical support personnel. For 1996, 1995, and 1994,
the Company incurred product development, field testing and design modification
expenditures of $754,000, $996,000, and $721,000, respectively.
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<PAGE> 50
EMPLOYEES
As of December 31, 1996 the Company had 233 employees, 222 of whom were
employed or based at its Milwaukee facility. 149 employees at the Milwaukee
facility are represented by the United Steelworkers of America union. No other
employee groups are unionized. Management believes labor relations are good.
There have been no work stoppages since the inception of the Company in 1982.
FOREIGN SALES
All of the Company's export sales are denominated in US dollars, and the
Company does not engage in any currency risk hedging programs.
In 1996, 1995, and 1994 the Company had revenues from export sales as
follows:
<TABLE>
<CAPTION>
LOCATION 1996 1995 1994
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Mexico, Central and South America................ $ 335,000 $ 727,000 $2,227,000
Australia and New Zealand........................ 1,019,000 102,000 326,000
Western Europe................................... 1,950,000 3,221,000 1,333,000
Canada........................................... 1,337,000 741,000 1,273,000
Middle East and North Africa..................... 335,000 1,053,000 847,000
Asia............................................. 703,000 2,093,000 142,000
Africa........................................... 375,000 871,000 --
All other........................................ 47,000 -- --
---------- ---------- ----------
Total export sales............................... $6,101,000 $8,808,000 $6,148,000
========== ========== ==========
Export sales as percentage of total sales........ 12.6% 16.8% 12.0%
</TABLE>
ENVIRONMENTAL MATTERS
The Company seeks to comply in all regards with applicable federal, state,
and local environmental control requirements in its operations. Compliance costs
have not had a material effect upon the Company's capital expenditures, results
of operations or competitive position and are not expected to have a material
adverse impact in the future.
PROPERTIES
The Company's Milwaukee, Wisconsin manufacturing facility (383,000 square
feet) is owned by the Company and is subject to the Company's financing
agreements with its principal lender. In general, the buildings are well
maintained and well adapted for the purposes for which they are utilized. The
Company manufactures all of its products and performs subcontract work at this
facility.
LEGAL PROCEEDINGS
Product liability claims against the Company arise from time to time in the
ordinary course of business. The Company is currently party to a number of legal
proceedings involving product liability claims in a number of states, some of
which involve significant claims. These proceedings are now pending before
courts in various stages or are in discovery stages. In most instances, pending
claims allege the Company produced faulty product which led to injury. The
Company generally denies liability and intends to vigorously defend these
proceedings.
The Company does not purchase product liability insurance because, in the
opinion of management, the premiums the Company would have to pay for such
insurance are not justified by the Company's historical and expected future loss
experience. Accordingly, all costs associated with product liability claims must
be paid by the Company and are not covered by any insurance.
As of September 30, 1997, there were 11 open product liability cases
against the Company. One of these cases went to trial during the first nine
months of 1997. The Company lost this case and is currently planning
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<PAGE> 51
an appeal. There is a possibility that one more of these cases may come to trial
in 1997. There is also the possibility that the trial dates for these cases may
be postponed or the Company may consider settlement offers.
Management believes the Company has liability defenses for each of the
cases that may come to trial during the remainder 1997, but does recognize there
is an inherent uncertainty as to the eventual resolution of unsettled claims. In
the opinion of management, any losses with respect to existing claims in excess
of established reserves will not have a material impact on the Company's
operating income or financial condition.
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<PAGE> 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Nine Months Ended September 30, 1997 Compared to the Nine Months Ended
September 30, 1996.
Net sales in the first nine months of 1997 declined by $3,827,000 (10.0%),
from $38,176,000 to $34,349,000. The sales decline affected all of the Company's
product lines, and was most significant in cement mixers ($2,401,000 or 20.1%)
and grinders ($897,000 or 9.5%). The declines were smaller in the Company's
landfill compaction, service parts, and contract machining lines, where sales
fell by $117,000 (1.1%), $112,000 (2.1%) and $299,000 (37.1%). The Company
continues to experience soft market demand for its concrete mixers, and domestic
sales demand for grinder products has been lower than the Company's expectations
and the prior year's results.
Gross profit declined by $1,377,000 (17.6%), to $6,443,000 in the first
nine months of 1997 compared to $7,820,000 in the same period one year ago.
Gross profit as a percentage of sales fell to 18.8% in 1997 from 20.5% in 1996.
Roughly one half of the total decline in margin dollars was due to lower sales
volume, while the balance of the decline reflects lower margin percentages in
the Company's cement mixer and service parts business. These lower margins
reflect a change in sales mix toward products with lower margins.
Selling, general, and administrative expenses declined by $599,000 (8.5%)
to $6,435,000 in the first nine months of 1997 from $7,034,000 in the same
period last year. Of the total spending reduction, about $545,000 resulted from
lower spending on salaries and employee benefits, and reflects the impact of
lower levels of average employment in 1997 compared to 1996.
Interest expense declined by $150,000 (22.4%) to $519,000 in the first nine
months of 1997 compared to $669,000 in the same period one year ago. The
reduction reflects lower average borrowing levels in 1997 compared to 1996.
Other income and expense changed to $56,000 of expense in 1997 from $63,000
of income in 1996. The 1997 amounts include $97,000 of expense associated with
dealer interest subsidy programs; there were no comparable expenses in the same
period in 1996.
During the third quarter of 1996 the Company recorded an extraordinary gain
on the early retirement of debt of $214,000 (net of income taxes of $129,000).
This gain arose after the Company reached an agreement with the former owners of
its material reduction grinder product line to accept a payment of $860,000 in
full satisfaction of the Company's obligation to make future payments under the
terms of a non-competition agreement. Those obligations had been recorded on the
Company's books at $1,203,000, resulting in a pre-tax gain of $343,000 and an
net-of-tax gain of $214,000. There was no comparable item in 1997.
The provision for income tax expense was recorded at effective rates of
approximately 38% in both 1997 and 1996. Changes in tax expense are largely the
result of changes in the level of pre-tax income.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
For the year ended December 31, 1996, net sales declined $4,106,000, or
7.8%. Sales of the Company's Trashmaster landfill compactor line decreased by
25.6% ($5,367,000) due to lower sales to private (non-municipal) landfill
operators, resulting from temporary capital spending reductions. Cement mixer
sales in 1996 decreased by 10.8% ($2,070,000) from 1995. The Company had an
unusually high level of mixer export sales in 1995; these sales returned to more
normal levels in 1996. Lower sales in the Trashmaster and cement mixer lines
were partially offset by an increase in sales of 30.8% ($3,358,000) in the
grinder product line, where the successful introduction of new products
(Megagrind and Biogrind) had a positive impact on sales volume.
Gross profit declined $584,000, or 5.7% to $9,745,000 for 1996 compared to
1995. Gross profit as a percentage of sales increased to 20.1% compared to 19.7%
in 1995. The dollar decline in margin was a result of
43
<PAGE> 53
lower sales volume. Margins as a percent of sales improved in the Company's
cement mixer and Trashmaster lines, and more than offset the impact of higher
manufacturing variances caused by lower levels of production.
Selling, general and administrative expenses declined $470,000 or 4.8% in
1996 compared to 1995. The decline reflects lower spending on product
development and product introduction costs, and management's efforts to control
spending in response to lower sales levels.
Interest expense declined by $96,000 to $811,000 in 1996. The decline
reflects lower levels of average borrowings in 1996, and the impact of slightly
lower interest rates. Other income (expense) moved to $30,000 of income in 1996
compared to $110,000 of expense in 1995. The change reflects a lower level of
activity in sales of receivables under a factoring agreement with Bank One
Milwaukee, N.A.
In 1996 the Company recorded an extraordinary gain on the early retirement
of debt of $214,000 (net of income taxes of $129,000). This gain arose after the
Company reached an agreement with the former owners of its material reduction
grinder product line to accept a payment of $860,000 in full satisfaction of the
Company's obligation to make future payments under the terms of a
non-competition agreement. Those obligations had been recorded on the company's
books at $1,203,000, resulting in a pre-tax gain of $343,000 and a net-of-tax
gain of $214,000. There was no comparable item in 1995.
The Company's backlog of firm orders totaled $6,866,000 as of December 31,
1996 compared to $5,868,000 at December 31, 1995. The increase is due to a
higher backlog of orders for the Company's grinder products.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the year ended December 31,1995, net sales increased $1,456,000 or 2.9%
compared to 1994. Strong market demand and a higher volume of exports resulted
in increased sales of the Company's truck mounted Mixer product line and also
the Trashmaster landfill compactor product line. Mixer sales increased by 28.2%
($4,234,000) while Trashmaster sales increased by 11.9% ($2,222,000). The higher
sales activity in these product lines more than offset weaker market demand
which resulted in a sales decrease of 30.3% ($4,698,000) in the Company's
Maxigrind material reduction product line.
Gross profit increased $38,000 or .4% to $10,329,000 for 1995 compared to
1994. Gross profit as a percentage of sales fell to 19.7% in 1995 from 20.2% in
1994. Higher costs for product warranties, and an unfavorable change in sales
mix, offset the effects of improved productivity and reduced manufacturing
spending and caused the decline in margins as a percentage of sales.
Selling, general and administrative expenses increased $1,080,000 to
$9,731,000 or 12.5% in 1995 compared to 1994 due to higher expenses related to
product development, new product introduction, and customer support. The
majority of the increase in the product development and new product introduction
expenses were associated with the grinder product line.
Interest expense increased $208,000 in 1995 to $907,000 or 29.7% from 1994
due to higher average borrowings associated with working capital needs and
higher interest rates. Other income (expense) moved from $40,000 of income in
1994 to $159,000 of expense in 1995. This swing was due to costs resulting from
the sale of receivables, associated with a Trashmaster landfill compactor
promotional program, under a factoring agreement with Bank One Milwaukee, N.A.
The results for 1994 include a $428,000 credit to earnings for the
elimination of a deferred tax valuation allowance. This credit is included as a
reduction in the provision for income taxes on the Company's 1994 Consolidated
Statement of Operations.
The Company's backlog of firm orders totaled $5,868,000 as of December 31,
1995 compared to $8,359,000 at December 31, 1994. This decrease is due to a
lower backlog for the Company's Trashmaster landfill compactor product line.
44
<PAGE> 54
LIQUIDITY AND CAPITALIZATION
Working capital and current ratio are financial measurements that provide
an indication of the Company's ability to meet its short-term obligations. This
data at September 30, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Current Assets...................................... $19,438,000 $18,528,000
Current Liabilities................................. 16,676,000 13,297,000
Working Capital..................................... 2,762,000 5,231,000
Current Ratio....................................... 1.2 1.4
</TABLE>
Receivables increased by $1,793,000 to $11,024,000 at September 30, 1997
from December 31, 1996. The increase was caused by higher levels of Trashmaster
and service parts receivables, offset partially by lower levels of mixer
receivables. Inventories declined by $869,000 to $7,963,000 at September 30,
1997 compared to December 31, 1996. The decline largely reflects lower levels of
finished Trashmaster machines.
Based on the proposed Asset Sale and Merger, the Company has chosen not to
negotiate an extension of its $10,000,000 line of credit with Bank One
Wisconsin, N.A. which is scheduled to expire on April 30, 1998. As a result, all
bank borrowings are now classified as current, and the current portion of bank
debt has increased to $7,639,000 at September 30, 1997 from $4,088,000 at
December 31, 1996. The Company had $2,361,000 available under its credit
facility at September 30, 1997.
In the event that the proposed Asset Sale and Merger are not consummated,
management believes that it will be able to extend the existing $10,000,000 line
of credit facility without significant change in the terms and conditions of the
agreement, and without any significant change in the interest rate charged.
Management believes cash flows from operating activities for the balance of
1997 and 1998 will be positive, after adjusting cash flow from net income (loss)
for depreciation and amortization. Management also believes that the Company's
working capital needs over the next twelve months will not vary materially from
current levels. The Company has no current material commitments for capital
expenditures and has no plans for material expenditures for the balance of 1997
and 1998. Therefore, in management's opinion, the existing credit facility and
anticipated future cash generated from operations will be adequate to meet the
Company's short- and long-term needs for capital additions, as well as for any
short-term fluctuations in the Company's level of working capital.
FORWARD LOOKING STATEMENTS
The forward-looking statements, or statements based on the Company's
belief, expectation, or opinion in this section are subject to many
uncertainties. The Company's actual results may differ materially from those
described in the forward-looking or other statements. Factors which could cause
such a variance to occur include, but are not limited to, changes in general
economic conditions in the geographical areas and market segments that the
Company is targeting for its products, access to sufficient debt or equity
capital to meet the Company's operating and financial needs, the inherent
uncertainty of litigation involving the Company's products, and the quality or
price of similar or comparable products offered by the Company's competitors.
45
<PAGE> 55
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by each director, the two persons who
served as Chief Executive Officer of the Company during 1996, each of the
Company's other executive officers who earned salary and bonus in excess of
$100,000 in 1996, each person known to own more than 5% of the Company's Common
Stock, and all directors and executive officers as a group, as of September 30,
1997. Except as indicated in the footnotes such persons have sole voting and
investment power of the shares beneficially owned.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ --------------- ----------
<S> <C> <C>
Trustees of the Rexworks Inc. Employee Stock Ownership
Trust..................................................... 120,572 6.4
B.A. Beda................................................... 10,000 *
J.L. Bleustein.............................................. 4,000 *
F.L. Brengel(1)............................................. 56,300 2.9
W.C. Frazier(1)............................................. 35,000 1.8
M.C. Hadjinian(1)........................................... 16,160 *
Heartland Advisors, Inc.(2)................................. 222,000 11.7
C.J. Klinck(1)(3)........................................... 73,363 3.9
T.D. Lauerman(1)(4)......................................... 138,572 7.3
W.J. Nasgovitz(2)........................................... 236,200 12.4
L.R. Newman(4).............................................. 120,572 6.4
R.A. Van Deuren(1).......................................... 121,419 6.3
C.J. Vogus(1)............................................... 15,500 *
All Directors and Executive Officers as a Group (12
persons)(1)(4)............................................ 497,202 24.3
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes the rights of the following persons to acquire shares pursuant to
the exercise of currently vested stock options: Mr. Brengel -- 25,000; Mr.
Frazier -- 25,000; Mr. Hadjinian -- 10,460; Mr. Klinck -- 7,534; Mr.
Lauerman -- 13,000; Mr. Van Deuren -- 25,000; Mr. Vogus -- 14,000; and all
directors and executive officers as a group -- 146,882.
(2) Heartland Advisors, Inc. ("Heartland") is an investment advisory firm
located at 790 North Milwaukee Street, Milwaukee, Wisconsin, 53202. Mr.
William J. Nasgovitz is President, Chief Executive Officer and a Director of
Heartland.
(3) The amounts shown for Mr. Klinck include 2,204 shares of Common Stock
allocated to his account under the Company's Employee Stock Plan.
(4) The amounts shown for Mr. Newman, Mr. Lauerman and for all directors and
executive officers as a group include 120,572 shares of Common Stock for
which Mr. Newman and Mr. Lauerman share dispositive power as Trustees of the
Rexworks Inc. Employee Stock Ownership Trust, which holds all shares under
the Company's Employee Stock Plan.
The above beneficial ownership information is based on information
furnished, or Schedule 13G or Schedule 13D filings made, by the specified
persons and is determined in accordance with Rule 13d-3, as required for
purposes of this Proxy Statement. It is not necessarily to be construed as an
admission of beneficial ownership for other purposes.
46
<PAGE> 56
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
Information regarding the Company's directors is set forth in the following
table.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AGE BUSINESS EXPERIENCE SINCE
---- --- ------------------------ --------
<S> <C> <C> <C>
Bruce A. Beda........................ 56 Chief Executive Officer of Orion Partners LLC 1996
(a private investment company) since 1995. From
1986 to 1995, Mr. Beda was Vice President and
Chief Financial Officer of Venturedyne Ltd.
Prior to that he held various management
positions at Kimberly-Clark, The Pillsbury
Company and Wehr Corporation.
Jeffrey L. Bleustein................. 56 President and Chief Executive Officer of 1994
Harley-Davidson, Inc. since July 1997.
President and Chief Operating Officer of the
Motorcycle Division of Harley-Davidson, Inc.
and Executive Vice President of
Harley-Davidson, Inc. for more than five years
prior to July 1997 until July 1997. Mr.
Bleustein is also a director of
Harley-Davidson, Inc. and Brunswick
Corporation.
Frederick L. Brengel................. 74 Mr. Brengel was President and Chief Executive 1988
Officer of Johnson Controls, Inc. (a
manufacturer of automated building controls,
automotive batteries and industrial process
instrumentation and piping systems) from 1967
until his retirement in 1988 and was Chairman
of the Board of Directors of Johnson Controls
from 1985 until his retirement in 1993. Mr.
Brengel is also a director of Johnson Controls,
Inc.
Warner C. Frazier.................... 64 Chairman of the Board of Directors, President 1986
and Chief Executive Officer of Simplicity
Manufacturing, Inc. (a manufacturer of lawn and
garden tractors and snow removal equipment) for
more than the past five years. Mr. Frazier is
also a director of Superior Services, Inc.
Richard A. Van Deuren................ 68 A Shareholder of the law firm Reinhart, 1983
Boerner, Van Deuren, Norris & Rieselbach for
more than the past five years. Mr. Van Deuren
serves in his individual capacity and not as a
representative of Reinhart, Boerner, Van
Deuren, Norris & Rieselbach, s.c.
</TABLE>
47
<PAGE> 57
EXECUTIVE OFFICERS
Information concerning those executive officers of the Company who are not
directors is set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITION AND EXPERIENCE
---- --- -----------------------
<S> <C> <C>
Laurance R. Newman................... 56 Mr. Newman has served as President and Chief Executive
Officer since December 1996. Prior to December 1996 Mr.
Newman served as a consultant to the Company. From 1963
to 1996 Mr. Newman held various positions with S.C.
Johnson Wax, retiring as Executive Vice President. Mr.
Newman is also a business consultant and Senior Managing
Director of the Kotler Marketing Group, a global
marketing consulting organization. Mr. Newman is a
Director of the Unico Corporation, Wesbar Corporation,
Bardon Products Corporation and Dexide Corporation.
Thomas D. Lauerman................... 43 Mr. Lauerman has served as Vice President --
Administration, Secretary, Treasurer and Chief Financial
Officer since joining the Company in 1994. From 1980
until he joined the Company, Mr. Lauerman held various
financial management positions at FMC Corporation, most
recently as Controller of an overseas joint venture
manufacturing military vehicles.
Clinton E. Vogus..................... 53 Mr. Vogus has served as Vice President -- Operations
since joining the Company in 1994. From 1992 until the
time he joined the Company, Mr. Vogus was Vice President
--Operation and Business Development for Reach All,
Inc., a manufacturer of aerial devices for the utility
industry. From 1989 to 1992, Mr. Vogus was General
Manager of the Chronos Richardson Division of Staveley
Industries, plc.
Christopher J. Klinck................ 61 Mr. Klinck has served as Vice President -- Compaction
Sales since 1990.
George T. Moeller.................... 53 Mr. Moeller has served as Vice President -- Grinder
Sales since joining the Company in 1993. Prior to
joining the Company, Mr. Moeller held various sales
management positions with FMC Corporation -- Sweeper
Division.
Harold J. Murdock.................... 53 Mr. Murdock has served as Vice President of
International Sales since joining the Company in 1992.
From 1978 until he joined the Company, Mr. Murdock held
various marketing management positions at FMC
Corporation -- Sweeper Division.
</TABLE>
OTHER MATTERS
The Board of Directors of the Company is not aware of any matters to be
presented for action at the Special Meeting other than those described herein
and does not intend to bring any other matters before the Special Meeting.
However, if other matters should come before the Special Meeting, it is intended
that the holders of proxies solicited hereby will vote thereon in their
discretion, unless such authority is withheld.
48
<PAGE> 58
STOCKHOLDER PROPOSALS
As described in the Company's Proxy Statement relating to its 1997 Annual
Meeting (in the event the Merger is not consummated for any reason), proposals
of stockholders intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company at its principal executive offices
not later than December 26, 1997, for inclusion in the Company's proxy statement
and form of proxy relating to that meeting. Stockholders should mail any
proposals by certified mail-return receipt requested.
EXPENSES OF SOLICITATION
The expenses in connection with solicitation of the enclosed form of proxy,
will be borne by the Company. In addition to solicitation by mail, officers or
regular employees of the Company, who will receive no compensation for such
services other than their regular salaries, may solicit proxies personally or by
telephone or facsimile. Arrangements will be made with brokerage houses,
nominees, participants in central certificate depository systems and other
custodians and fiduciaries to supply them with solicitation material for
forwarding to their principals, and arrangements may be made with such persons
to obtain authority to sign proxies. The Company may reimburse such persons for
reasonable out-of-pocket expenses incurred by them in connection therewith.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company as of December 31, 1996 and 1995,
and for each of the years in the two-year period ended December 31, 1996, have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report.
A representative of Arthur Andersen LLP will be at the Special Meeting to
answer questions by stockholders and will have the opportunity to make a
statement if so desired.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information are available for inspection and copying at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549 and at the Commission's regional office
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from the Public
Reference Section of the Commission at its Washington address at prescribed
rates. Such reports and other information filed with the Commission may also be
available at the Commission's site on the World Wide Web at http://www.sec.gov.
By order of the Board of Directors
Laurance R. Newman, President and
Chief Executive Officer
Milwaukee, Wisconsin
November 26, 1997
49
<PAGE> 59
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996......................................... F-2
Consolidated Statements of Operations and Retained Earnings
for the three months ended September 30, 1997 and 1996 and
for the nine months ended September 30, 1997 and 1996..... F-4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997
and 1996.................................................. F-5
Notes to Consolidated Financial Statements.................. F-6
AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-8
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-9
Consolidated Statements of Operations for years ended
December 31, 1996, 1995 and 1994.......................... F-10
Consolidated Statements of Stockholders' Investment for
years ended December 31, 1996, 1995 and 1994.............. F-11
Consolidated Statements of Cash Flows for years ended
December 31, 1996, 1995 and 1994.......................... F-12
Notes to Consolidated Financial Statements.................. F-13
</TABLE>
F-1
<PAGE> 60
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $ 5,000 $ 5,000
Accounts receivable (less reserves of $125,000)............. 11,024,000 9,231,000
Inventories................................................. 7,963,000 8,632,000
Other current assets........................................ 446,00 460,000
----------- -----------
Total current assets........................................ 19,438,000 18,528,000
----------- -----------
DEFERRED INCOME TAX BENEFIT................................. 969,000 969,000
NONCOMPETE AGREEMENT........................................ 786,000 1,228,000
OTHER ASSETS................................................ 826,000 918,000
PROPERTY, PLANT AND EQUIPMENT:
Land........................................................ 36,000 36,000
Buildings and land improvements............................. 1,445,000 1,445,000
Machinery and equipment..................................... 6,394,000 6,300,000
----------- -----------
7,876,000 7,781,000
Less accumulated depreciation............................... (5,567,000) (5,141,000)
----------- -----------
Net property, plant and equipment........................... 2,308,000 2,640,000
----------- -----------
TOTAL ASSETS................................................ $24,327,000 $24,283,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-2
<PAGE> 61
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
UNAUDITED
LIABILITIES AND SEPTEMBER 30 DECEMBER 31
STOCKHOLDERS' INVESTMENT 1997 1996
------------------------ ------------ -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt........................... $ 7,639,000 $ 4,088,000
Accounts payable -- trade................................... 4,449,000 4,453,000
Accrued expenses:
Salaries and other benefits............................... 831,000 964,000
Warranty.................................................. 1,303,000 1,323,000
Product liability defense................................. 1,872,000 1,657,000
Other..................................................... 234,000 521,000
Deferred income taxes....................................... 298,000 253,000
Advances from customers..................................... 50,000 38,000
----------- -----------
Total current liabilities................................. 16,676,000 13,297,000
LONG TERM DEBT.............................................. -- 2,984,000
----------- -----------
Total liabilities......................................... 16,676,000 16,281,000
STOCKHOLDERS' INVESTMENT:
Common stock, $.12 par value, 4,300,000 shares authorized,
1,896,668 shares issued and outstanding................... 227,000 227,000
Additional paid-in capital.................................. 7,023,000 7,023,000
Treasury stock.............................................. (26,000) (26,000)
Retained earnings........................................... 427,000 778,000
----------- -----------
Total stockholders' investment............................ 7,651,000 8,002,000
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' INVESTMENT.................................. $24,327,000 $24,283,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE> 62
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES................................ $10,735,000 $10,395,000 $34,349,000 $38,176,000
COST OF SALES............................ 8,652,000 8,439,000 27,906,000 30,356,000
----------- ----------- ----------- -----------
Gross profit........................... 2,083,000 1,956,000 6,443,000 7,820,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE................................ 2,021,000 2,100,000 6,435,000 7,034,000
Income from operations................. 62,000 (144,000) 8,000 786,000
----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Interest expense....................... (173,000) (211,000) (519,000) (669,000)
Other.................................. (10,000) 22,000 (56,000) 63,000
----------- ----------- ----------- -----------
(Loss) income before income taxes and
extraordinary item..................... (121,000) (333,000) (567,000) 180,000
(BENEFIT) PROVISION FOR INCOME TAXES..... (44,000) (125,000) (216,000) 68,000
Net (loss) income before extraordinary
item................................... (77,000) (208,000) (351,000) 112,000
EXTRAORDINARY ITEM Gain on early
retirement of debt, net of income taxes
of $129,000............................ 214,000 214,000
----------- ----------- ----------- -----------
NET (LOSS) INCOME........................ (77,000) 6,000 (351,000) 326,000
Retained Earnings, Beginning of period... 504,000 1,069,000 778,000 749,000
RETAINED EARNINGS, END OF PERIOD......... $ 427,000 $ 1,075,000 $ 427,000 $ 1,075,000
=========== =========== =========== ===========
PER SHARE AMOUNTS:
Net (loss) income before extraordinary
item................................ (0.04) (0.11) (0.18) 0.06
Extraordinary item..................... -- 0.11 -- 0.11
Net (loss) income...................... (0.04) 0.00 (0.18) 0.17
Weighted average number of common shares
outstanding............................ 1,927,000 1,918,000 1,917,000 1,913,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements of operations.
F-4
<PAGE> 63
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income........................................... $ (351,000) $ 326,000
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization............................. 960,000 996,000
Gain on early retirement of debt.......................... (214,000)
Provision for deferred income taxes....................... 45,000 122,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............. (1,793,000) 2,896,000
Decrease in inventories................................ 869,000 2,855,000
Decrease (increase) in other current assets............ 14,000 (134,000)
Net decrease in other current liabilities.............. (217,000) (3,272,000)
----------- -----------
Net cash provided by operating activities................... (473,000) 3,575,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................ (94,000) (402,000)
Investment in joint venture................................. (10,000)
----------- -----------
Net cash (used for) investing activities.................... (94,000) (412,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit
agreement................................................. 567,000 (2,064,000)
Noncompete liability principal payments..................... -- (1,099,000)
----------- -----------
Net cash provided by financing activities................... 567,000 (3,163,000)
----------- -----------
Net increase in cash........................................ -- --
CASH AT BEGINNING OF YEAR................................... 5,000 5,000
----------- -----------
CASH AT END OF QUARTER...................................... $ 5,000 $ 5,000
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid............................................... $ 518,000 $ 833,000
Income taxes (refunded) paid................................ (42,000) 77,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE> 64
REXWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(1) In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) which were necessary to a fair statement of the
results of the interim periods have been included in the preceding financial
statements. However, the results of operations for the nine month period
ended September 30, 1997 are not necessarily indicative of results to be
expected for the entire year. Certain items, including income taxes, LIFO
charges and various other accruals are included in these statements based on
current estimates for the entire year.
(2) INVENTORIES
Substantially all inventories are stated at cost which does not exceed
market, determined on the last-in, first-out (LIFO) basis. Inventory amounts as
of September 30, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
At lower of cost (FIFO) or market:
Raw materials............................................. $ 110,000 $ 146,000
Work-in-process and components............................ 6,017,000 6,550,000
Finished goods............................................ 4,525,000 4,825,000
----------- -----------
10,652,000 11,521,000
Excess of FIFO over LIFO cost............................... (2,689,000) (2,689,000)
Total inventories at LIFO................................... $ 7,963,000 $ 8,832,000
=========== ===========
</TABLE>
(3) DEBT
Debt as of September 30, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Borrowings under line-of-credit agreement................... $ 7,639,000 $ 7,072,000
Less: Current portion....................................... (7,639,000) (4,088,000)
----------- -----------
Long term portion of debt................................... $ -- $ 2,984,000
=========== ===========
</TABLE>
(4) LEGAL PROCEEDINGS
Product liability claims against the Company arise from time to time in the
ordinary course of business. The Company is currently party to a number of legal
proceedings involving product liability claims in a number of states, some of
which involve significant claims. These proceedings are now pending before
courts in various stages, or are in discovery stages. In most instances, pending
claims allege the Company produced faulty product which led to injury. The
Company generally denies liability and intends to vigorously defend these
proceedings.
The Company does not purchase product liability insurances because, in the
opinion of management, the premiums the Company would have to pay for such
insurance are not justified by the Company's historical and expected future loss
experience. Accordingly, all costs associated with product liability claims must
be paid by the Company and are not covered by insurance.
As of November 6, 1997 there were nine open product liability cases against
the Company. One of these cases went to trial during 1997. The Company lost this
case and is currently planning an appeal. No other cases are scheduled for trial
during the remainder of 1997.
Management believes the Company has liability defenses for each of the
cases that may come to trial during the remainder of 1997 or in future years,
but does recognize there is an inherent uncertainty as to the
F-6
<PAGE> 65
REXWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
eventual resolution of unsettled claims. In the opinion of management, any
losses with respect to existing claims in excess of established reserves will
not have a material impact on the Company's operating income or financial
condition
(5) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards Number 128, "Earnings per Share," which is
effective for periods ending after December 31, 1997. This Statement revised the
calculation of earnings per share. The Company will adopt this statement in its
1998 financial statements.
(6) REPORTING COMPREHENSIVE INCOME
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards Number 130, "Reporting Comprehensive Income,"
which is effective for periods beginning after December 15, 1997. This Statement
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. The
Company will adopt this statement in its 1998 financial statements.
(7) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Financial Accounting Standards Board also recently issued Statement of
Financial Accounting Standards Number 131, "Disclosures About Segments of an
Enterprise and Related Information," which is effective for periods beginning
after December 15, 1997. This Statement revised the rules for reporting
information about segments of an enterprise in financial statements. The Company
will adopt this statement in its 1998 financial statements.
F-7
<PAGE> 66
REXWORKS INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Rexworks Inc.:
We have audited the accompanying consolidated balance sheets of Rexworks
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' investment
and cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rexworks
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 11, 1997.
F-8
<PAGE> 67
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 5,000 $ 10,000
Accounts receivable, less reserves of $125,000 in both
years.................................................. 9,231,000 10,308,000
Inventories............................................... 8,832,000 12,111,000
Other current assets...................................... 460,000 29,000
----------- -----------
Total current assets.............................. 18,528,000 22,458,000
----------- -----------
DEFERRED INCOME TAX BENEFIT................................. 969,000 917,000
NONCOMPETE AGREEMENT........................................ 1,228,000 1,818,000
OTHER ASSETS................................................ 918,000 981,000
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 36,000 36,000
Buildings and land improvements........................... 1,445,000 1,397,000
Machinery and equipment................................... 6,300,000 5,863,000
----------- -----------
7,781,000 7,296,000
Less accumulated depreciation............................... (5,141,000) (4,571,000)
----------- -----------
Net property, plant and equipment........................... 2,640,000 2,725,000
----------- -----------
TOTAL ASSETS...................................... $24,283,000 $28,899,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long term debt......................... $ 4,088,000 $ 5,362,000
Accounts payable -- trade................................. 4,453,000 5,503,000
Accrued expenses:
Salaries and other benefits............................ 964,000 786,000
Warranty............................................... 1,323,000 1,380,000
Product liability defense.............................. 1,657,000 1,560,000
Other.................................................. 521,000 1,214,000
Deferred income taxes..................................... 253,000 232,000
Advances from customers................................... 38,000 83,000
----------- -----------
Total current liabilities......................... 13,297,000 16,120,000
LONG TERM DEBT.............................................. 2,984,000 4,835,000
----------- -----------
Total liabilities................................. 16,281,000 20,955,000
STOCKHOLDERS' INVESTMENT:
Common stock, $.12 par value, 4,300,000 shares authorized,
1,896,668 and 1,886,668 shares issued and outstanding,
respectively.............................................. 227,000 226,000
Additional paid-in capital.................................. 7,023,000 6,995,000
Treasury stock.............................................. (26,000) (26,000)
Retained earnings........................................... 778,000 749,000
----------- -----------
Total stockholders' investment.................... 8,002,000 7,944,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT...................................... $24,283,000 $28,899,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-9
<PAGE> 68
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET SALES............................................. $48,373,000 $52,479,000 $51,023,000
COST OF SALES......................................... 38,628,000 42,150,000 40,732,000
----------- ----------- -----------
Gross profit........................................ 9,745,000 10,329,000 10,291,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 9,261,000 9,731,000 8,651,000
----------- ----------- -----------
Income from operations.............................. 484,000 598,000 1,640,000
OTHER (EXPENSE) INCOME:
Interest expense.................................... (811,000) (907,000) (699,000)
Other............................................... 30,000 (110,000) 260,000
----------- ----------- -----------
(Loss) income before income taxes and extraordinary
item............................................. (297,000) (419,000) 1,201,000
(BENEFIT) PROVISION FOR INCOME TAXES.................. (112,000) (159,000) 40,000
----------- ----------- -----------
Net (loss) income before extraordinary item......... (185,000) (260,000) 1,161,000
EXTRAORDINARY ITEM
Gain on early retirement of debt, net of income
taxes of $129,000................................ 214,000 -- --
----------- ----------- -----------
NET INCOME (LOSS)................................... $ 29,000 $ (260,000) $ 1,161,000
=========== =========== ===========
PER SHARE AMOUNTS:
Net (loss) income before extraordinary item......... (0.09) (0.13) 0.59
Extraordinary item.................................. 0.11 -- --
Net income (loss)................................... 0.02 (0.13) 0.59
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements of operations.
F-10
<PAGE> 69
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK RETAINED
-------------------- PAID-IN ----------------- EARNINGS
SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT)
------ ------ ---------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993...... 1,843,021 $221,000 $6,908,000 (2,336) $(26,000) $ (152,000)
Net Income..................... -- -- -- -- -- 1,161,000
Exercise of Stock Options...... 15,000 2,000 28,000 -- -- --
--------- -------- ---------- ------ -------- ----------
Balance December 31, 1994...... 1,858,021 223,000 6,936,000 (2,336) (26,000) 1,009,000
Net Loss....................... -- -- -- -- -- (260,000)
Exercise of Stock Options...... 28,647 3,000 59,000 -- -- --
--------- -------- ---------- ------ -------- ----------
Balance December 31, 1995...... 1,886,668 226,000 6,995,000 (2,336) (26,000) 749,000
Issuance of Shares............. 10,000 1,000 28,000 -- -- --
Net Income..................... -- -- -- -- -- 29,000
--------- -------- ---------- ------ -------- ----------
Balance December 31, 1996...... 1,896,668 $227,000 $7,023,000 (2,336) $(26,000) $ 778,000
========= ======== ========== ====== ======== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-11
<PAGE> 70
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 29,000 $ (260,000) $ 1,161,000
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization....................... 1,282,000 1,283,000 1,210,000
Gain (loss) on sale of equipment.................... -- 18,000 (6,000)
Gain on early retirement of debt, net of taxes...... (214,000) -- --
(Credit) provision for deferred income taxes........ (160,000) (210,000) 98,000
Changes in assets and liabilities:
Decrease in accounts receivable.................. 1,077,000 (2,556,000) (2,075,000)
Decrease (increase) in inventories............... 3,279,000 (2,065,000) (2,409,000)
(Increase) decrease in other assets.............. (481,000) 237,000 (86,000)
Net (decrease) increase in other current
liabilities.................................... (1,487,000) 1,546,000 1,872,000
----------- ----------- -----------
Net cash provided by (used for) operating
activities.......................................... 3,325,000 (2,007,000) (235,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (495,000) (523,000) (1,026,000)
Proceeds from the sale of equipment................... -- 4,000 44,000
----------- ----------- -----------
Net cash used for investing activities................ (495,000) (519,000) (982,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayment) borrowings under line-of-credit
agreement........................................... (1,736,000) 2,464,000 1,613,000
Noncompete liability payments......................... (1,099,000) -- (426,000)
Exercise of stock options............................. -- 62,000 30,000
----------- ----------- -----------
Net cash (used for) provided by financing
activities.......................................... (2,835,000) 2,526,000 1,217,000
----------- ----------- -----------
Net decrease in cash.................................. (5,000) -- --
CASH AT BEGINNING OF YEAR............................. 10,000 10,000 10,000
----------- ----------- -----------
CASH AT END OF PERIOD................................. $ 5,000 $ 10,000 $ 10,000
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid......................................... $ 968,000 $ 731,000 $ 818,000
Income taxes paid..................................... 157,000 49,000 368,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-12
<PAGE> 71
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Rexworks Inc.
(the "Company") and its wholly-owned subsidiaries, Rexworks International, a
Domestic International Sales Corporation, and Rexworks International Trading
Corporation, a Foreign Sales Corporation. All intercompany accounts and
transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates. Specifically, the
Company has recorded a product liability reserve which could be significantly
different from actual settlements as described in Note 7.
Inventories
Substantially all inventories are stated at cost, which does not exceed
market, determined on the last-in, first-out ("LIFO") basis. Inventory costs
include the costs of material, labor and direct and indirect costs of
manufacturing.
Inventory amounts as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Lower of FIFO cost or market:
Raw materials..................................... $ 146,000 $ 350,000
Work-in-process and components.................... 6,550,000 6,780,000
Finished goods.................................... 4,825,000 7,431,000
----------- -----------
11,521,000 14,561,000
Excess of FIFO over LIFO cost....................... (2,689,000) (2,450,000)
----------- -----------
Total inventories at LIFO...................... $ 8,832,000 $12,111,000
=========== ===========
</TABLE>
Property, Plant and Equipment
Plant and equipment is stated at cost and is depreciated over the estimated
useful lives of the assets using the straight-line method. Asset lives used for
financial statement purposes are:
<TABLE>
<S> <C>
Buildings and land improvements............................. 6-20 years
Machinery and equipment..................................... 4-15 years
</TABLE>
Upon retirement, the asset account is reduced by the original cost and the
reserve account is reduced by the accumulated depreciation. The gain or loss on
disposition is reflected in current earnings. Maintenance and repair costs are
charged to expense as incurred. Renewals and improvements are added to plant and
equipment accounts.
Effective January 1, 1996, the Company adopted the provisions of the
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
F-13
<PAGE> 72
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assets to be Disposed of." SFAS No. 121 requires that long-lived assets and
certain identified intangibles be reviewed for impairment whenever circumstances
indicate that the carrying amount of an asset may not be recoverable. Adoption
of this statement did not have a significant impact on the Company's results of
operations.
Noncompete Agreement and Other Intangible Assets
The Company has a noncompete agreement in place with the former owner of
the Maxigrind product line. The related asset had an original value of
$3,500,000 and is being amortized over six years, the term of the agreement.
Accumulated amortization on the non-compete agreement was $2,272,000 and
$1,682,000 at December 31, 1996 and 1995, respectively.
The Company also acquired patent rights from the former owner of the
Maxigrind product line for $820,000, which are being amortized over 17 years.
Accumulated amortization on patents was $187,000 and $141,000 at December 31,
1996 and 1995, respectively. Patents are included in other assets on the
Consolidated Balance Sheets.
Warranties
The Company records liabilities for warranty costs under both standard and
extended warranty programs. The Company's standard warranty is typically in
effect for six to twelve months after the sale of a machine. The Company
estimates its liability for standard warranties based on recent warranty claim
experience as a percentage of sales, and uses this relationship to establish the
amount of standard warranty liabilities at the balance sheet date. The Company
also offers extended warranty coverage on certain components of some machines
sold. The Company estimates its liability for extended warranties based on a
specific review of the individual warranty contracts. These estimates include
both the expected cost of resolving known problems with machines, and the
estimated cost of resolving problems that are likely to occur in the future,
based on the Company's past history with similar machines and warranty
contracts.
Advances from Customers
Advances from customers represent progress payments received by the Company
for equipment to be delivered at a later date.
Foreign Sales
All of the Company's export sales are denominated in US dollars, and the
Company does not engage in any currency risk hedging programs.
In 1996, 1995, and 1994 the Company had revenues from export sales as
follows:
<TABLE>
<CAPTION>
LOCATION 1996 1995 1994
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Mexico, Central and South America.............. $ 335,000 $ 727,000 $2,227,000
Australia and New Zealand...................... 1,019,000 102,000 326,000
Western Europe................................. 1,950,000 3,221,000 1,333,000
Canada......................................... 1,337,000 741,000 1,273,000
Middle East and North Africa................... 335,000 1,053,000 847,000
Asia........................................... 703,000 2,093,000 142,000
Africa......................................... 375,000 871,000 --
All other...................................... 47,000 - --
---------- ---------- ----------
Total export sales................... $6,101,000 $8,808,000 $6,148,000
========== ========== ==========
Export sales as % of total sales............... 12.6% 16.8% 12.0%
</TABLE>
F-14
<PAGE> 73
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain prior year financial statement amounts have been reclassified to
conform with their current year classification.
(2) NATURE OF OPERATIONS
The Company designs, manufactures and sells truck mounted concrete mixers,
compaction equipment and the Maxigrind materials reduction product as well as
replacement parts for this equipment. Approximately 91% of 1996 sales (84% in
1995 and 91% in 1994) were made to equipment distributors, who in turn rent or
sell equipment to end users. Approximately 13% of 1995 sales, consisting of
waste and recycling products, were made to one customer. No one customer
accounted for more than 10% of sales in 1996 and 1994.
(3) DEBT
Debt as of December 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Borrowings under line-of-credit agreement........... $ 7,072,000 $ 8,809,000
Liability for noncompete payments to be made to
Norkot's sole shareholder, discounted at 8%....... 0 1,388,000
Less: Current portion............................... (4,088,000) (5,362,000)
----------- -----------
Long term portion of debt........................... $ 2,984,000 $ 4,835,000
=========== ===========
</TABLE>
The Company maintains a line-of-credit agreement with Bank One Milwaukee,
N.A. The agreement was originally entered into on May 31, 1990 and was most
recently amended on January 1, 1997. The agreement provides for borrowings up to
the lesser of $10.0 million or the sum of 80% of qualified accounts receivable
(as defined), 40% of FIFO inventory, and a fixed asset amount. The fixed asset
amount was $2,415,000 at December 31, 1996, and will be reduced by $37,000 each
month thereafter. A portion of the total outstanding line ($3,000,000) carries a
fixed interest rate of 9.375%; interest rates on the balance of the line vary
with the prime rate. The variable rate at December 31, 1996 was 8.50%.
Substantially all the Company's accounts receivable, inventories and property,
plant and equipment are pledged as collateral for this debt.
The loan agreement requires that the Company achieve agreed levels of Net
Cash Flow (as defined), and that the Company's ratio of total liabilities to
tangible net worth be less than 2.5 to 1.0. The agreement also limits capital
expenditures to no more than $1,000,000 in any year.
The amended loan agreement provides that the bank may terminate the
line-of-credit at any time after April 30, 1998 upon 90 days notice to the
Company.
Management does not expect to reduce line-of-credit borrowings below
$2,984,000 during 1997; therefore, that amount has been classified as long term.
Additional data related to borrowings due under the line-of-credit
agreement are summarized below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
At December 31:
Unused line-of credit............................... $2,928,000 $1,191,000
Interest rate....................................... 8.50% 9.25%
For the year ended December 31:
Maximum outstanding balance......................... $9,527,000 $9,256,000
Average outstanding balance......................... 7,921,000 7,549,000
</TABLE>
F-15
<PAGE> 74
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average interest rate on all borrowings was 9.3% in 1996 and
10.2% in 1995.
Based on borrowing rates currently available to the Company for bank loans
with similar terms and maturities, the fair value of outstanding debt
approximates its carrying value.
The original terms of the noncompete agreement with the former owner of the
Maxigrind product line (see note 1) provided for the Company to make payments
over future years. During 1996, the Company negotiated an arrangement with the
former owners of the Maxigrind product line to settle in full the remaining
liability and interest due under this agreement for $860,000. The early
retirement of this liability resulted in an extraordinary gain of $214,000,
after related income taxes, computed as follows:
<TABLE>
<S> <C>
Remaining liability......................................... $1,149,000
Accrued interest............................................ 54,000
----------
Total.................................................. 1,203,000
Settlement amount........................................... 860,000
----------
Gain on early retirement before income taxes................ 343,000
Income taxes................................................ 129,000
----------
Net gain on early retirement of debt........................ $ 214,000
==========
</TABLE>
(4) INCOME TAXES
The Company accounts for income taxes as prescribed by SFAS No. 109,
"Accounting For Income Taxes." Under this statement, deferred income taxes are
recorded on temporary differences between the book and tax basis at the tax rate
expected to be in effect when the temporary differences reverse. A valuation
allowance is provided when it is likely that some portion of the deferred tax
assets arising from temporary differences and net operating losses will not be
realized.
Information with respect to the Company's income tax provisions (credits)
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CURRENT:
Federal...................................... $ 38,000 $ 44,000 $ 351,000
State........................................ 10,000 7,000 19,000
Reversal of valuation allowance.............. -- -- (428,000)
--------- --------- ---------
Total current........................... 48,000 51,000 (58,000)
DEFERRED..................................... (160,000) (210,000) 98,000
--------- --------- ---------
Total (credit) provision................ $(112,000) $(159,000) $ 40,000
========= ========= =========
</TABLE>
A reconciliation of the Company's effective income tax rate to the
statutory federal tax rate for the years ended December 31, 1996, 1995 and 1994
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate..................... (34.0)% (34.0)% 34.0%
State income taxes, net of federal benefit............ (2.2)% (1.6)% 3.5%
Change in valuation allowance......................... -- -- (35.6)%
Other................................................. (1.5)% (2.3)% 1.4%
----- ----- -----
Effective income tax rate............................. (37.7)% (37.9)% 3.3%
===== ===== =====
</TABLE>
F-16
<PAGE> 75
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences which give rise to net deferred taxes under FASB
Statement No. 109 as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current deferred tax (liabilities) assets:
Inventory basis................................... $(1,731,000) $(1,622,000)
Accruals and reserves not currently deductible.... 1,478,000 1,390,000
----------- -----------
Net current deferred tax (liability)......... (253,000) (232,000)
----------- -----------
Long term deferred tax assets:
Alternative minimum tax credit carryforwards...... 230,000 228,000
Property, plant and equipment..................... 117,000 129,000
Intangibles....................................... 622,000 560,000
----------- -----------
Net long term deferred tax asset............. 969,000 917,000
----------- -----------
Net deferred tax asset....................... $ 716,000 $ 685,000
=========== ===========
</TABLE>
(5) STOCKHOLDER'S INVESTMENT
In 1983, the Company established the Rexworks Inc. Employee Stock Plan (the
"Plan") and Employee Stock Ownership Trust (the "Trust"). The plan is
non-contributory and includes all employees who have completed one year of
service. Under the plan provisions, the Company may make contributions to the
Trust for the benefit of eligible employees. No contributions were made to the
plan in 1996, 1995 or 1994 and the Board of Directors has not authorized any
future contributions to the Plan at this time.
Beginning in 1990, the Company granted options to purchase shares of
Rexworks Inc. common stock to certain directors, officers and key employees. In
1992, the Company (with the approval of its Board of Directors) established the
Rexworks Inc. Management Incentive Compensation Program (the "Program"). Program
awards are in the form of cash or stock options and are based upon the Company's
achievement of key financial performance measures and individual performance
objectives. In February 1995, participants in aggregate were awarded $204,000 in
cash and options to purchase 30,000 shares of Rexworks stock at an exercise
price of $4.25 (the market value on the date of grant) for the 1994 Program. No
awards were granted under the program for 1996 or 1995.
On December 30, 1996 the Company granted Michael C. Hadjinian, the Chairman
of the Board and former President, options to purchase 50,000 shares of Rexworks
stock at an exercise price of $2.25 per share. The options expire on November
30, 1997.
Effective January 1, 1996, the Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." This statement
establishes financial accounting and reporting standards for stock-based
employee compensation. The Company will continue to apply the accounting
provisions of Accounting Principles Board Opinion 25 to stock-based employee
compensation arrangements as is allowed by the statement. The impact of the pro
forma compensation cost on the earnings per share calculations for stock options
granted in 1996 and 1995 was not material to the consolidated financial
statements.
F-17
<PAGE> 76
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The number of options granted and outstanding is summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1.............. 338,413 4.03 337,060 3.86 332,060 3.71
Granted............................... 50,000 2.25 30,000 4.25 20,000 4.94
Exercised............................. -- -- (28,647) 2.16 (15,000) 2.00
Expired............................... (75,000) 4.00 -- -- -- --
------- ------- -------
Outstanding at December 31............ 313,413 3.76 338,413 4.03 337,060 3.86
======= ======= =======
Exercisable at end of year............ 313,413 3.76 295,080 4.23 262,060 4.10
======= ======= =======
Authorized for future issuance........ 312,000 362,000 392,000
======= ======= =======
</TABLE>
Of the 313,413 options outstanding at December 31, 1996, 218,413 have
exercise prices between $2.00 and $4.00, with a weighted average exercise price
of $2.84 and a weighted average remaining contractual life of 3.6 years. An
additional 60,000 options outstanding at December 31, 1996 have exercise prices
between $4.00 and $6.00, with a weighted average exercise price of $4.65 and a
weighted average remaining contractual life of 7.1 years. The remaining 35,000
options outstanding have an exercise price of $8.00 and a weighted average
remaining contractual life of 3.3 years.
(6) LEASES
The Company has no material noncancellable operating lease arrangements
with expirations of more than one year. Rental expense under various operating
leases was $31,000 in 1996 and 1995, and $87,000 in 1994.
(7) LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
Product liability claims against the Company arise from time to time in the
ordinary course of business. The Company is currently party to a number of legal
proceedings involving product liability claims in a number of states, some of
which involve significant amounts. These proceedings are now pending before
courts in various stages or are in discovery stages. In most instances, pending
claims allege the Company produced faulty product which led to injury. The
Company generally denies liability and intends to vigorously defend these
proceedings.
The Company does not purchase product liability insurance because, in the
opinion of management, the premiums the Company would have to pay for insurance
are not justified by the Company's historical and expected future loss
experience. Accordingly, all expenses related to product liability claims must
be paid by the Company and are not covered by insurance.
The Company maintains a reserve for costs expected to arise out of known
and expected product liability claims. The reserve is increased by provisions to
current earnings and is decreased by payments of defense costs, settlements and
judgments, if any. Activity in the reserve account is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance beginning of year.................. $1,560,000 $1,550,000 $1,175,000
Provisions................................. 800,000 793,000 707,000
Payments................................... (703,000) (783,000) (332,000)
---------- ---------- ----------
Balance, end of year....................... $1,657,000 $1,560,000 $1,550,000
========== ========== ==========
</TABLE>
F-18
<PAGE> 77
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1996, there were eight open product liability cases
against the Company. There is a possibility that up to four of these cases,
including two of the more significant cases, may come to trial in 1997. There is
also the possibility that the trial dates for those cases may be postponed or
the Company may consider settlement offers.
Management believes the Company has liability defenses for each of the
cases that may come to trial in 1997, but does recognize there is an inherent
uncertainty as to the eventual resolution of unsettled claims and the ultimate
settlements could be for amounts significantly greater than recorded
liabilities. In the opinion of management, based in part on advice from its
outside legal counsel, any costs, losses and settlements with respect to
existing claims in excess of established reserves will not have a material
impact on the Company's operating income or financial condition.
(8) EARNINGS PER SHARE
The weighted average number of common shares and common share equivalents
used in calculating earnings per share as of December 31 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding........... 1,889,334 1,881,947 1,854,435
Assuming exercise of options reduced by the
number of shares that could have been
purchased at average market price for the
year using exercise proceeds................ 23,012 47,867 112,828
--------- --------- ---------
Weighted average common shares and common
share equivalents........................... 1,912,346 1,929,814 1,967,263
========= ========= =========
</TABLE>
(9) RESEARCH AND DEVELOPMENT
The Company expenses research and development cost as incurred. These
costs, net of proceeds from sales of prototypes, were $745,000, $996,000, and
$721,000 in 1996, 1995 and 1994 respectively.
(10) SALES OF ACCOUNTS RECEIVABLE
The Company has an agreement with Bank One -- Milwaukee that allows the
sale of certain qualified receivables, with recourse, up to a maximum of
$7,000,000. The amount of receivables that had been sold to Bank One, but not
yet collected from customers, was $1,621,000 and $5,944,000 at December 31, 1996
and 1995, respectively. The costs associated with the sales were $84,000 in 1996
and $182,000 in 1995, and are included in other income and expense in the
accompanying statements of income.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," which establishes standards for asset and liability recognition
when transfers occur. This statement, effective January 1, 1997, specifies
conditions for when control has been surrendered which determines if sale
treatment of the receivables would be allowed. At the present time, this new
standard is not expected to materially impact the Company's financial position
or results of operation.
F-19
<PAGE> 78
REXWORKS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) QUARTERLY FINANCIAL AND STOCK PRICE INFORMATION (UNAUDITED)
Quarterly financial data for the years ended December 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
1996 FIRST SECOND THIRD FOURTH TOTAL
---- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net sales........................ $13,477,000 $14,304,000 $10,395,000 $10,197,000 $48,373,000
Gross profit..................... 3,045,000 2,819,000 1,956,000 1,925,000 9,745,000
Income (loss) before income taxes
and extraordinary item......... 305,000 208,000 (333,000) (477,000) (297,000)
Income (loss) before
extraordinary item............. 189,000 131,000 (208,000) (297,000) (185,000)
Extraordinary Item............... -- -- 214,000 -- 214,000
Net income....................... 189,000 131,000 6,000 (297,000) 29,000
Net income (loss) per share:
Before extraordinary item...... 0.10 0.07 (0.11) (0.15) (0.09)
Extraordinary item............. -- -- 0.11 -- .11
Net income (loss).............. 0.10 0.07 -- (0.15) 0.02
Dividends per share.............. -- -- -- -- --
Trade Price:
High........................... 3.50 3.50 3.38 3.00
Low............................ 2.25 2.75 2.63 2.25
</TABLE>
<TABLE>
<CAPTION>
1995 FIRST SECOND THIRD FOURTH TOTAL
---- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net sales........................ $13,718,000 $13,679,000 $13,397,000 $11,685,000 $52,479,000
Gross profit..................... 2,693,000 2,092,000 2,755,000 2,789,000 10,329,000
Income (loss) before income
taxes.......................... 26,000 (651,000) 171,000 35,000 (419,000)
Net income (loss)................ 16,000 (403,000) 106,000 21,000 (260,000)
Net income (loss) per share...... 0.01 (0.21) 0.06 0.01 (0.13)
Dividends per share.............. -- -- -- -- --
Trade Price:
High........................... 4.88 4.38 3.75 3.13
Low............................ 3.88 3.38 2.50 2.00
</TABLE>
F-20
<PAGE> 79
EXHIBIT A
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CMI CORPORATION
AND
REXWORKS INC.
OCTOBER 1, 1997
<PAGE> 80
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
TRANSFER OF ASSETS
1.01 Purchase and Sale of Assets................................. 1
1.02 Excluded Assets............................................. 2
ARTICLE II
LIABILITIES
2.01 Assumed Liabilities......................................... 3
2.02 Excluded Liabilities........................................ 3
2.03 Right to Contest............................................ 3
ARTICLE III
PURCHASE PRICE
3.01 Consideration............................................... 3
3.02 Amount and Payment of Purchase Price........................ 3
3.03 Closing Date Balance Sheet.................................. 4
3.04 Allocation of Purchase Price................................ 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.01 Organization and Qualification; Subsidiaries................ 5
4.02 Authority; Vote Required.................................... 5
4.03 No Conflict; Required Filings and Consents.................. 5
4.04 Permits; Compliance......................................... 6
4.05 Absence of Certain Changes or Events........................ 6
4.06 Absence of Litigation....................................... 7
4.07 Contracts; No Default....................................... 7
4.08 Intellectual Property Rights................................ 8
4.09 Insurance................................................... 9
4.10 Brokers..................................................... 9
4.11 Title to Properties......................................... 9
4.12 Proxy Statement............................................. 9
4.13 Inventory................................................... 9
4.14 Condition of Purchased Assets............................... 9
4.15 Accounts Receivable......................................... 10
4.16 Major Customers and Suppliers............................... 10
4.17 Product Warranty............................................ 10
4.18 Legal Compliance............................................ 10
4.19 Excluded Assets............................................. 10
4.20 Assigned Contracts.......................................... 10
4.21 Product Liability........................................... 10
4.22 Employee Benefit Plans; Labor Matters....................... 10
4.23 Taxes....................................................... 11
4.24 Environmental, Health and Safety............................ 11
</TABLE>
i
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.01 Organization and Qualification.............................. 12
5.02 Authority................................................... 12
5.03 No Conflict; Required Filings and Consents.................. 13
5.04 Brokers..................................................... 13
5.05 Financing................................................... 13
ARTICLE VI
COVENANTS
6.01 Affirmative Covenants of Seller............................. 13
6.02 Negative Covenants of Seller................................ 14
6.03 Confidentiality Agreement................................... 14
6.04 Acquisition Proposals....................................... 14
6.05 Merger Agreement............................................ 15
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Proxy Statement............................................. 15
7.02 Meeting of Stockholders..................................... 16
7.03 Appropriate Action; Consents; Filings....................... 16
7.04 Update Disclosure........................................... 17
ARTICLE VIII
CLOSING
8.01 Closing..................................................... 17
ARTICLE IX
CLOSING CONDITIONS
9.01 Conditions to Obligations of Each Party Under This
Agreement................................................... 17
9.02 Additional Conditions to Obligations of Purchaser........... 18
9.03 Additional Conditions to Obligations of Seller.............. 20
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.01 Termination................................................. 21
10.02 Effect of Termination....................................... 22
10.03 Expenses.................................................... 22
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification by Seller................................... 23
11.02 Indemnification by Purchaser................................ 23
11.03 Arbitration Procedure....................................... 23
11.04 Matters Involving Third Parties............................. 25
</TABLE>
ii
<PAGE> 82
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE XII
GENERAL PROVISIONS
12.01 Non-Survival of Representations, Warranties and Certain
Covenants................................................... 25
12.02 Notices..................................................... 26
12.03 Amendment................................................... 26
12.04 Waiver...................................................... 27
12.05 Headings.................................................... 27
12.06 Severability................................................ 27
12.07 Entire Agreement............................................ 27
12.08 Assignment.................................................. 27
12.09 Parties in Interest......................................... 27
12.10 Governing Law............................................... 27
12.11 Counterparts................................................ 27
12.12 Press Releases and Public Announcements..................... 27
12.13 Construction................................................ 28
12.14 Employees................................................... 28
12.15 WARN........................................................ 28
12.16 Access...................................................... 28
12.17 Bulk Sales.................................................. 28
12.18 Litigation Support.......................................... 28
12.19 Use of Marketing Materials.................................. 28
12.20 Further Assurances.......................................... 28
EXHIBITS
Exhibit A Balance Sheet of the Divisions as of June 28, 1997
Exhibit B General Bill of Sale
Exhibit C Assignment and Assumption Agreement
</TABLE>
INDEX OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<C> <S>
1.01(a) Personal Property
1.01(b) Assigned Contracts
1.01(c) Vehicles
1.01(d) Intangible Assets
1.01(e) Licenses and Permits
1.01(i) Prepaid Items
1.01(k) Additional Personal Property
1.02(b) Excluded Real Property
1.02(g) Other Excluded Assets
2.01(e) Other Assumed Liabilities
4.00(a) Changes or Events Which Shall Not Constitute a Seller
Material Adverse Effect
4.00(b) Persons With Knowledge
4.01(a) Organization and Qualification
4.01(b) Subsidiaries
4.03(a) Consents, Approvals, Authorizations or Permits
4.04 Permits; Compliance
4.05 Absence of Certain Changes or Events
4.06(a) Litigation
4.06(b) Orders, Decrees, etc.
</TABLE>
iii
<PAGE> 83
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<C> <S>
4.07 Contracts
4.08 Intellectual Property Rights
4.09 Insurance
4.13 Inventory
4.14 Condition of the Purchased Assets
4.15 Accounts Receivable
4.16 Customers and Suppliers
4.17 Product Warranty
4.19 Excluded Assets
4.20 Assigned Contracts
4.21 Product Liability
4.22 Employee Benefit Plans; Labor Matters
4.23 Taxes
9.02(c) Third Party Consents
</TABLE>
iv
<PAGE> 84
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of October 1, 1997 (the
"Agreement"), is made and entered into between CMI CORPORATION, an Oklahoma
corporation ("Purchaser"), and REXWORKS INC., a Delaware corporation ("Seller").
RECITALS
A. Seller operates, among other things, two divisions which are engaged in
the business of manufacturing and selling landfill and embankment compactors and
material reduction grinders (the "Divisions").
B. Seller desires to sell to Purchaser and Purchaser desires to buy from
Seller substantially all assets and rights of Seller relating to the Divisions
on the terms and conditions set forth in this Agreement (the "Asset Sale").
AGREEMENTS
In consideration of the premises and the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I
TRANSFER OF ASSETS
1.01 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, Seller agrees to sell and deliver to Purchaser and Purchaser
agrees to purchase from Seller as of the Closing Date all of Seller's right and
title to and interest in all of the following assets, properties and rights (the
"Purchased Assets") relating to the Divisions (but expressly excluding therefrom
the Excluded Assets):
(a) Personal Property. All machinery, equipment, leasehold
improvements, supplies, tools, fixtures, spare parts, furniture,
furnishings and other personal property listed on Schedule 1.01(a)
("Personal Property").
(b) Contracts and Leases. All rights of Seller under (including,
without limitation, all Seller's right to receive goods and services and to
assert claims and to take other action with respect to breaches, defaults
and other violations pursuant to) the contracts and leases listed on
Schedule 1.01(b) (the "Assigned Contracts").
(c) Vehicles. All automobiles, trucks, trailers, automotive equipment
and other vehicles owned or leased by Seller and listed on Schedule 1.01(c)
(the "Vehicles").
(d) Intangible Assets. All of Seller's and its Subsidiaries'
intangible assets solely relating to the Divisions or used exclusively in
the operation of the Divisions (collectively, the "Intangible Assets")
including, without limitation, all of the following Intangible Assets to
the extent that they relate solely to the Divisions or are used exclusively
in the operation of the Divisions: (i) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, logos, tradenames and corporate names, together
with all translations, adaptations, derivations and combinations thereof
and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (iii) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (iv) all mask works and all applications,
registrations and renewals in connection therewith, (v) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (vi) all
<PAGE> 85
assignable computer software (including data and related documentation),
(vii) all data bases, compilations and directories (in whatever form or
medium), (viii) all copies and intangible embodiments thereof (in whatever
form or medium), and (ix) all Intangible Assets listed on Schedule 1.01(d).
(e) Licenses and Permits. All of Seller's rights in all government
licenses, approvals, permits and authorizations (and all applications,
registrations and renewals for the foregoing) listed on Schedule 1.01(e)
("Licenses and Permits").
(f) Inventory. All of Seller's inventories, spare parts and supplies
solely relating to the Divisions and all such items that Seller has ordered
but not physically received by the Closing Date ("Inventory").
(g) Records and Documents. All records, computer software and
documents, books, customer and member lists, sales leads and all other
sales and marketing information, credit information and correspondence,
plans and specifications, drawings and all other records and documents used
exclusively by Seller in connection with the operation of the Divisions
("Documents").
(h) Accounts and Notes Receivable. All of Seller's accounts and notes
receivable relating solely to the Divisions ("Accounts Receivable").
(i) Prepaids. All prepaid rents, utilities, deposits and other prepaid
items listed on Schedule 1.01(i).
(j) Certain Claims. All rights to causes of action, suits,
proceedings, judgments, claims and demands of any nature, whenever maturing
or asserted, solely relating to or arising directly out of (a) the
Purchased Assets, (b) the Assumed Liabilities, or (c) the operations of the
Divisions (or either of them).
(k) Additional Personal Property. At Purchaser's option, which may be
exercised by providing written notice to Seller not less than 10 days prior
to the Closing Date, Seller will replace each of the assets listed on
Schedule 1.01(k) with comparable used equipment of equal or better quality
and include such replacement equipment in the Purchased Assets without an
increase in the Net Value (as defined in section 3.03). The book value of
the equipment listed on Schedule 1.01(k) shall be included in the
calculation of the Net Value regardless of whether Purchaser exercises its
option with respect to replacement equipment pursuant to this section
1.01(k).
To the extent that any Purchased Asset is not assignable without the
consent of another person or entity, and to the extent such consent is not
obtained prior to Closing, this Agreement shall, subject to the rights of
any such person or entity, constitute an assignment of Seller's interest in
such Purchased Asset. Seller agrees, at its expense, to use its reasonable
best efforts to obtain the consent of such other person or entity to the
assignment of any such Purchased Asset to the Purchaser.
1.02. Excluded Assets. There shall be excluded from sale by Seller under
this Agreement all assets, properties and rights of Seller other than the
Purchased Assets specifically identified in section 1.01 above (the "Excluded
Assets"). The Excluded Assets shall include, without limitation, the following:
(a) Mixer Assets. All of Seller's right and title to and interest in
all assets, properties and rights relating to the Seller's division which
is engaged in the business of manufacturing and selling concrete mixers.
(b) Real Property. Seller's interest in the real estate listed on
Schedule 1.02(b).
(c) Cash. All cash (currency and coin), negotiable instruments,
securities, bank deposits and similar cash equivalents on hand at the
Closing Date ("Cash").
(d) Certain Contracts. All rights of Seller under any contracts,
agreements or commitments other than the Assigned Contracts specifically
identified on Schedule 1.01(b).
(e) Certain Claims. All rights to causes of action, suits,
proceedings, judgments, claims and demands of any nature, whenever maturing
or asserted, relating to or arising directly out of the Excluded Assets or
the Excluded Liabilities.
2
<PAGE> 86
(f) Corporate Records. All corporate records, including but not
limited to, stockholder records, stock records, stock transfer journals,
board of directors and stockholder minutes, payroll and financial
information necessary for the preparation of Seller's tax returns and
satisfaction of other reporting requirements.
(g) Scheduled Assets. All assets listed on Schedule 1.02(g).
ARTICLE II
LIABILITIES
2.01 Assumed Liabilities. On the terms and subject to the conditions of
this Agreement, Purchaser shall, by written instrument, assume as of the Closing
Date and thereafter shall be obligated to pay and fully satisfy the liabilities
and obligations specifically identified below, and only such specifically
identified liabilities and obligations (collectively, the "Assumed
Liabilities"):
(a) The liabilities and obligations of Seller arising under the
Assigned Contracts.
(b) The liabilities of Seller for trade accounts payable solely
relating to the Divisions.
(c) Any and all liabilities and obligations of Seller arising from any
claims (whether known or unknown, asserted or unasserted, accrued or
unaccrued) with respect to any injury to individuals or property as a
result of the ownership, possession or use of any landfill and embankment
compactors or material reduction grinders manufactured by the Divisions
("Product Liabilities").
(d) Any and all liabilities and obligations of Seller arising from any
express or implied warranties (whether known or unknown, asserted or
unasserted, accrued or unaccrued) with respect to landfill and embankment
compactors or material reduction grinders manufactured by the Divisions
("Warranty Liabilities").
(e) The liabilities described on Schedule 2.01(e).
2.02 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, Purchaser will have no responsibility and will not
assume or be liable for any debts, liabilities or obligations of Seller or any
of its affiliates or any debts, liabilities or obligations of any kind or nature
relating to the respective businesses of Seller and its Subsidiaries, whenever
arising, and whether primary or secondary, direct or indirect, absolute or
contingent, contractual, tortuous or otherwise, other than the Assumed
Liabilities identified in section 2.01 above (all such liabilities other than
the Assumed Liabilities are collectively referred to as the "Excluded
Liabilities").
2.03 Right to Contest. The assumption and agreement of Purchaser to pay the
Assumed Liabilities when due will not prohibit Purchaser from contesting with
the obligee, in good faith and at Purchaser's expense, the amount, validity or
enforceability of any of the Assumed Liabilities.
ARTICLE III
PURCHASE PRICE
3.01 Consideration. In consideration of the sale, assignment, transfer and
conveyance of the Purchased Assets and the other undertakings of Seller in this
Agreement, and subject to the terms and conditions of this Agreement, Purchaser
shall (a) pay the Purchase Price as provided in this Article III, and (b) assume
the Assumed Liabilities as of the Closing Date as provided in section 2.01
above.
3.02 Amount and Payment of Purchase Price. The purchase price for the
Purchased Assets (the "Purchase Price") shall equal the sum of (a) the Net Value
(as defined in section 3.03 below), and (b) $3,167,000. At Closing, Purchaser
shall pay the Purchase Price to Seller by wire transfer of immediately available
funds.
3
<PAGE> 87
3.03 Closing Date Balance Sheet.
(a) Prior to Closing, the parties will cooperate in preparing a
balance sheet dated as of the Closing Date (the "Closing Date Balance
Sheet") reflecting the amount by which the value of the Purchased Assets as
of the Closing Date exceeds the Assumed Liabilities as of the Closing Date
(the "Net Value"). Purchaser and Seller agree that the Closing Date Balance
Sheet will be prepared in a manner consistent with the balance sheet as of
June 28, 1997 attached hereto as Exhibit A and will reflect an update of
the Preliminary Balance Sheet (as defined in Section 3.03(b) below).
Purchaser and Seller will endeavor in good faith to resolve any disputes in
the determination of the Net Value and the preparation of the Preliminary
Balance Sheet and the Closing Date Balance Sheet.
(b) Seller shall take a physical inventory (the "Closing Inventory")
of the Divisions as of the last day of the most recent month that is not
more than 30 days prior to the Closing Date (or such other date as Seller
and Purchaser shall mutually agree) and will prepare a preliminary balance
sheet as of the date of the Closing Inventory (the "Preliminary Balance
Sheet") reflecting the value of the Purchased Assets and the Assumed
Liabilities as of the date of the Preliminary Balance Sheet. Purchaser and
its representatives will have the right to participate in the taking of the
Closing Inventory. Not less than five days prior to Closing, Seller will
deliver a copy of the Preliminary Balance Sheet to Purchaser for its
review. Seller and Purchaser will cooperate to determine a method
reasonably acceptable to each party to make adjustments to and update the
Preliminary Balance Sheet for purposes of preparing the Closing Date
Balance Sheet.
3.04 Allocation of Purchase Price. The Purchase Price shall be assigned and
allocated to the Purchased Assets in the manner mutually agreed upon by the
parties. Purchaser and Seller agree to reflect such allocations in all reports
to governmental authorities, including, without limitation, with respect to all
taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
The term "Seller Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
other changes or effects, is materially adverse to the condition (financial or
otherwise), results of operations, businesses, properties, assets, or
liabilities of Seller relating to the Divisions; provided, however, that the
occurrence of any or all of the changes or events described on Schedule 4.00(a)
shall not, individually or in the aggregate, constitute a "Seller Material
Adverse Effect."
The term "Person" as used in this Agreement shall mean an individual,
corporation, partnership, association, trust, limited liability company,
unincorporated organization, other entity or group (as defined in section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act")).
The term "Affiliate" as used in this Agreement shall mean, with respect to
any Person, a Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
first mentioned Person. The term "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
The term "Subsidiary" (or its plural) as used in this Agreement with
respect to Seller, Purchaser or any other Person shall mean any corporation,
partnership, joint venture or other legal entity of which Seller, Purchaser or
such other Person, as the case may be (either alone or through or together with
any other Subsidiary), owns, directly or indirectly, greater than 50% of the
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
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With respect to any representation, warranty or statement of Seller in this
Agreement that is qualified by or to Seller's knowledge, such knowledge shall be
deemed to exist only if, at the time as of which such representation, warranty
or statement was made, any of the individuals listed on Schedule 4.00(b) had
actual knowledge, after reasonable investigation, of the matter to which such
qualification applies.
Except as set forth in the disclosure schedules delivered by Seller to
Purchaser prior to the execution of this Agreement, Seller represents and
warrants to Purchaser that the statements contained in this Article IV are true
and correct as of the date of this Agreement. The disclosure of any matter in
the disclosure schedules shall not necessarily be deemed an indication that such
matter is material or is required to be disclosed.
4.01 Organization and Qualification; Subsidiaries. Except as set forth on
Schedule 4.01(a), Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and is duly qualified and in
active status in each jurisdiction in which the nature of the business conducted
by it or the ownership or leasing of its properties makes such qualification
necessary, except such jurisdictions if any, where the failure to be so
qualified would not have a Seller Material Adverse Effect. A true and complete
list of all Seller's directly or indirectly owned Subsidiaries together with the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of each Subsidiary's outstanding capital stock or other equity
interest owned by Seller or another Subsidiary of Seller, is set forth on
Schedule 4.01(b).
4.02 Authority; Vote Required.
(a) Seller has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations under this Agreement
and to consummate the transactions contemplated by this Agreement, subject
to required approval of the holders of the common stock, par value $.12 per
share, of Seller ("Seller Common Stock"). The execution and delivery of
this Agreement by Seller and the consummation by Seller of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action, including such corporate action as may be required by
section 271 of the Delaware General Corporation Law (the "Delaware Law"),
and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement or to consummate the transactions contemplated by
this Agreement (other than with respect to the approval of this Agreement
by the holders of Seller Common Stock in accordance with the Delaware Law
and Seller's Certificate of Incorporation and By-Laws). This Agreement has
been duly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller, enforceable against Seller in accordance with
its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, moratorium
and other similar laws relating to or affecting the rights and remedies of
creditors generally and by general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
(b) The affirmative vote of the holders of at least a majority of the
outstanding shares of Seller Common Stock is the only vote of the holders
of any class or series of capital stock of Seller necessary to approve the
Asset Sale.
4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Seller do not, and
the performance of this Agreement by Seller will not: (i) violate the
Certificate of Incorporation or By-Laws of Seller or any of its
Subsidiaries; (ii) subject to (x) obtaining the requisite approval of this
Agreement by the holders of at least a majority of the outstanding shares
of Seller Common Stock in accordance with the Delaware Law and Seller's
Certificate of Incorporation and By-Laws, (y) obtaining the consents,
approvals, authorizations and permits of, and making filings with or
notifications to, any governmental or regulatory authority, domestic or
foreign ("Governmental Entities"), pursuant to the applicable requirements,
if any, of the Exchange Act, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules
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and regulations thereunder (the "HSR Act"), the applicable provisions of
the Delaware Law, and the requirements of the National Association of
Securities Dealers, Inc. ("NASD") or the NASDAQ National Market System, and
(z) giving the notices and obtaining the consents, approvals,
authorizations or permits described on Schedule 4.03(a), violate any
constitution, statute, regulation, rule, injunction, decree, ruling,
judgment, order or other restriction of any Governmental Entity or court to
which Seller or any of its Subsidiaries is subject or by which any of their
respective properties is bound, other than a potential violation under any
federal or state antitrust or similar laws, rules or regulations; or (iii),
except as set forth on Schedule 4.03(a), result in any material breach of
or constitute a material default (or an event that with notice or lapse of
time or both would become a material default) under, or give to any Person
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Seller or any of its Subsidiaries, or require any notice pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument, arrangement or obligation
to which Seller or any of its Subsidiaries is a party or by which Seller or
any of its Subsidiaries or any of their respective properties is bound.
(b) The execution and delivery of this Agreement by Seller do not, and
the performance of this Agreement by Seller shall not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any Governmental Entity, except for applicable requirements, if any, of (i)
the Exchange Act, the HSR Act, and the requirements of the NASD and the
NASDAQ National Market System, and (ii) the consents, approvals,
authorizations or permits described on Schedule 4.03(a).
4.04 Permits; Compliance. Except as set forth on Schedule 4.04, Seller is
in possession of all franchises, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary
for Seller or any of its Subsidiaries to own, lease and operate its properties
or to carry on the business of the Divisions as it is now being conducted (the
"Seller Permits"), except for any Seller Permits the absence of which would not
have a Seller Material Adverse Effect. No suspension, revocation or cancellation
of any of the Seller Permits is pending or, to the knowledge of Seller, is
threatened. Neither Seller nor any of its Subsidiaries is operating in material
default under or material violation of (i) any constitution, statute,
regulation, rule, injunction, decree, ruling, judgment, order or other
restriction of any Governmental Entity or court to which Seller or any of its
Subsidiaries is subject or by which any of their respective properties is bound
or (ii) any of the Seller Permits.
4.05 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.05 or as contemplated by this Agreement, since December 31, 1996:
(a) Seller conducted the business of the Divisions in the ordinary
course and consistent with Seller's past practice;
(b) there has not been any Seller Material Adverse Effect;
(c) there has not been any change in the accounting methods or
practices followed by Seller or any Subsidiary, except as required by
generally accepted accounting principles ("GAAP");
(d) there has not been any sale, lease, transfer, assignment,
abandonment or other disposition of (including, without limitation, any
grant of an option or similar right to purchase) any asset which would be a
Purchased Asset other than for a fair consideration in the ordinary course
of business;
(e) Seller has not entered into any material transaction with any of
its officers, directors or employees;
(f) No party (including any of Seller and its Subsidiaries) has
accelerated, terminated, modified or canceled (prior to the expiration of
its term) any material agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) relating to the
business of the Divisions and to which any of Seller and its Subsidiaries
is a party or by which any of its assets is bound;
(g) None of Seller and its Subsidiaries has delayed or postponed the
payment of accounts payable or other liabilities of any kind or nature
relating to the Divisions or the Purchased Assets outside the ordinary
course of business;
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(h) None of Seller and its Subsidiaries has canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims) relating to the Divisions or the Purchased Assets outside the
ordinary course of business;
(i) None of Seller and its Subsidiaries has granted any license or
sublicense of any rights under or with respect to any Intangible Assets;
(j) None of Seller and its Subsidiaries has experienced any damage,
destruction or loss (whether or not covered by insurance) to any material
assets of the Divisions, ordinary wear and tear excepted;
(k) None of Seller and its Subsidiaries has granted any increase in
the base compensation of, or made any other change in the employment terms
for, any employees of the Divisions outside the ordinary course of
business;
(l) None of Seller and its Subsidiaries has adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance or other
plan, contract or commitment for the benefit of any of the employees of the
Divisions (or taken any such action with respect to any other employee
benefit plan);
(m) None of Seller and its Subsidiaries has sold or otherwise
transferred any Intangible Asset; and
(n) neither Seller nor any Subsidiary has entered into any commitment
or other agreement to do any of the foregoing.
4.06 Absence of Litigation.
(a) Schedule 4.06(a) lists all claims, actions, suits, litigation, or
arbitrations or, to the knowledge of Seller, investigations or proceedings
relating to the Divisions (or either of them) or any of the Purchased
Assets, at law or in equity, which are pending or, to the knowledge of
Seller, threatened, and which involve in excess of $25,000. There is no
action pending seeking to enjoin or restrain any of the transactions
contemplated by this Agreement.
(b) Except as set forth on Schedule 4.06(b), neither Seller nor any of
its Subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar agreement (oral or written) with or,
to the knowledge of Seller, continuing investigation by, any Governmental
Entity with respect to the business of the Divisions.
4.07 Contracts; No Default.
(a) Schedule 4.07 lists:
(i) each contract or agreement to which Seller or any of its
Subsidiaries is a party concerning a partnership, joint venture or
similar arrangement with another Person or materially limiting the right
of Seller or any of its Subsidiaries prior to the Closing Date, or
Purchaser or any of its Subsidiaries at or after the Closing Date, to
engage in, or to compete with any Person in, any business of the
Divisions including each contract or agreement containing exclusivity
provisions restricting the geographical area in which, or the method by
which, any business may be conducted by Seller or any of its
Subsidiaries prior to the Closing Date, or by the Purchaser or any of
its Subsidiaries after the Closing Date;
(ii) each distributorship or other dealer or distribution agreement
which Seller or any of its Subsidiaries is a party relating to the
Divisions or any of the products manufactured or sold by either of the
Divisions;
(iii) each contract relating to the Divisions or the Purchased
Assets that would be required to be filed pursuant to Item 601(10) of
Regulation S-K under the Securities Act if Seller were filing a
Registration Statement on Form S-1 on the date of this Agreement.
(b) None of the distributors or former distributors identified in
Schedule 4.07 paid to Seller any fee or other consideration of any kind for
the right to become a distributor of any products manufactured by Seller.
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4.08 Intellectual Property Rights.
(a) To the knowledge of Seller, (i) Seller owns or has the right to
use pursuant to license, sublicense or other agreement all Intangible
Assets, without any conflict or alleged conflict with the rights of any
other Person, and (ii) Seller has taken all necessary action to maintain
and protect each Intangible Asset. Each Intangible Asset owned or used by
Seller immediately prior to the Closing hereunder will be owned or
available for use by Purchaser on substantially similar terms and
conditions immediately subsequent to the Closing hereunder.
(b) To the knowledge of Seller, with respect to the operation of the
Divisions, none of Seller and its Subsidiaries has infringed upon or
misappropriated any intellectual property rights of third parties, and none
of Seller and the directors and officers (and employees with responsibility
for intellectual property matters) of Seller and its Subsidiaries has
received any charge, complaint, claim, demand or notice alleging any such
infringement or misappropriation (including any claim that any of Seller
and its Subsidiaries must license or refrain from using any intellectual
property rights of any third party). To the knowledge of Seller, no third
party has infringed upon or misappropriated in any material respect any
intellectual property rights included in the Intangible Assets.
(c) Schedule 4.08(c) identifies each patent or registration which has
been issued to Seller with respect to any of the Intangible Assets,
identifies each pending patent application or application for registration
which Seller has made with respect to any of the Intangible Assets,
identifies each copyright, trade name, service name, unregistered trademark
and unregistered service mark used by Seller in connection with the
operation of the Divisions and the manufacture, marketing and distribution
of the products manufactured by the Divisions and identifies each license,
agreement or other permission which Seller has granted to any third party
with respect to any of its Intangible Assets (together with any
exceptions). Seller has made available to Purchaser correct and complete
copies of all such patents, registrations, applications, licenses,
agreements and permissions (as amended to date) and all other written
documentation evidencing ownership and prosecution (if applicable) of each
such item. With respect to each Intangible Asset required to be identified
in Schedule 4.08(c), except as set forth on Schedule 4.08(c):
(i) Seller possesses all right, title and interest in and to the
Intangible Asset, free and clear of any security interest, lien,
license, or other encumbrance;
(ii) the Intangible Asset is not subject to any outstanding
injunction, judgment, order, decree or ruling;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of Seller, is
threatened which challenges the legality, validity, enforceability, use
or ownership of the Intangible Asset; and
(iv) none of Seller and its Subsidiaries has ever agreed to
indemnify any Person for or against any infringement or misappropriation
with respect to the Intangible Asset.
(d) Schedule 4.08(d) identifies each Intangible Asset that any third
party owns and that Seller and its Subsidiaries use in the operation of the
Divisions pursuant to license, sublicense, agreement or permission. Seller
has made available to Purchaser correct and complete copies of all such
licenses, sublicenses, agreements and permissions (as amended to date).
With respect to each Intangible Asset required to be identified in Schedule
4.08(d), except as set forth on Schedule 4.08(d):
(i) the license, sublicense, agreement or permission covering the
Intangible Asset is legally valid, binding, enforceable and in full
force and effect;
(ii) the license, sublicense, agreement or permission will continue
on substantially similar terms following the consummation of the
transaction contemplated hereby;
(iii) Seller is not in breach or default of the license,
sublicense, agreement or permission and has not repudiated any
provisions thereof;
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(iv) to Seller's knowledge, no other party to the license,
sublicense, agreement or permission is in breach or default or has
repudiated any provision thereof and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying Intangible Asset is not subject to any
outstanding injunction, judgment, order, decree, ruling or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of Seller, is
threatened which challenges the legality, validity or enforceability of
the underlying Intangible Asset; and
(viii) none of Seller and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement or permission.
4.09 Insurance. All policies and binders of insurance for professional
liability, directors and officers, property and casualty, fire, liability,
worker's compensation and other customary matters held by or on behalf of Seller
or its Subsidiaries ("Insurance Policies") are identified on Schedule 4.09 and
have been made available to Purchaser. The Insurance Policies are in full force
and effect. To the knowledge of Seller, neither Seller nor any of its
Subsidiaries has failed to give any notice of any claim under any Insurance
Policy in due and timely fashion, nor to the knowledge of Seller, has any
coverage for claims been denied, which failure or denial has had or would have a
Seller Material Adverse Effect.
4.10 Brokers. No broker, finder or investment banker other than ABN AMRO
Chicago Corporation is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon any arrangements made by or on behalf of Seller.
4.11 Title to Properties. Seller has or will have at Closing good and
marketable title to, or a valid leasehold or contractual interest in, all
Purchased Assets, free and clear of all mortgages, liens, security interests,
rights of first refusal, easements or other similar encumbrances ("Liens"),
except Liens (a) for taxes not yet due and payable, or (b) which relate to any
of the Assumed Liabilities.
4.12 Proxy Statement. The definitive Proxy Statement and related materials
will comply with the Exchange Act in all material respects. The definitive proxy
materials will not contain an untrue statement of material fact or omit a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they will be made, not misleading; provided,
however, that Seller makes no representation or warranty with respect to any
information that the Purchaser supplies to Seller in writing for use in
connection with such proxy materials.
4.13 Inventory. The Inventory consists of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods, all of
which are merchantable and fit for the purpose for which they were procured or
manufactured, subject only to the reserve for inventory writedown set forth on
the balance sheet attached hereto as Exhibit A (as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Divisions). Except as described on Schedule 4.13, no Inventory has been
consigned to others. The quantity of Inventory is sufficient and adequate for,
but is not materially in excess of the level appropriate to, the conduct of the
business of the Divisions as it previously has been conducted. Seller has not
made any purchase commitments in excess of normal, ordinary and usual
requirements.
4.14 Condition of Purchased Assets. No maintenance outside the ordinary
course of business is needed with respect to the Purchased Assets. None of the
Purchased Assets or other assets owned, leased, occupied or operated by Seller
in connection with the business of the Divisions, or the ownership, leasing or
operation thereof, is in violation of any law, ordinance, code, rule or
regulation. Except as set forth on Schedule 4.14, the Purchased Assets are in
all respects in good condition and working order (reasonable wear and tear
excepted) and are adequate, in quality and quantity, for the operation of the
business of the Divisions.
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4.15 Accounts Receivable. All Accounts Receivable of the Seller and those
existing as of the Closing Date represent valid claims for bona fide,
arms-length sales of goods and services actually made by Seller in the ordinary
course of its business. All of the Accounts Receivable are valid receivables
subject to no setoffs or counterclaims, and are current (within 180 days) and
collectible (or have been collected) in the ordinary course of business using
normal collection practices at the aggregate recorded amounts thereof, net of an
allowance for doubtful account in the amount of $83,800 as of August 23, 1997.
Schedule 4.15 sets forth an aging schedule of the Accounts Receivable as of
August 23, 1997, and such schedule is correct and complete in all material
respects.
4.16 Major Customers and Suppliers. Schedule 4.16 sets forth (a) a list of
the ten largest customers of the Divisions for each of the fiscal years ended
December 31, 1995 and December 31, 1996 (determined on the basis of the total
dollar amount of net revenues) showing the dollar amount of net revenues from
each such customer during each such year, (b) a list of the ten largest
suppliers of the Divisions in terms of dollar volume of purchases during such
fiscal years, and (c) a list as of a recent date of all purchase orders for
finished goods accepted by the Company with respect to products manufactured by
either of the Divisions.
4.17 Product Warranty. Schedule 4.17 sets forth a general description of
all warranty, guaranty and indemnity provisions provided by Seller with respect
to the business of the Divisions. There are no claims pending or, to Seller's
knowledge, threatened against Seller or any of its Subsidiaries for warranty
obligations relating to the business of the Divisions, except claims which in
the aggregate involve an amount that is consistent with Seller's past practice.
4.18 Legal Compliance. Each of the Divisions has complied in all material
respects with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder of
federal, state, local and foreign governments (and all agencies thereof)), and
no material action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed or commenced against Seller or, to the
knowledge of Seller, threatened against Seller alleging any failure so to
comply.
4.19 Excluded Assets. Schedule 4.19 lists all material machinery, equipment
and intangible assets not included in the Purchased Assets that are used
primarily in the operation of the Divisions and the manufacture, marketing and
distribution of landfill and embankment compactors and material reduction
grinders.
4.20 Assigned Contracts. With respect to each Assigned Contract, except as
set forth on Schedule 4.20:
(a) the contract or lease is legal, valid, binding, enforceable and in
full force and effect;
(b) the benefits and burdens of such contract or lease will continue
on substantially similar terms following consummation of the transactions
contemplated hereby;
(c) Seller is not in breach or default under the contract or lease and
has not repudiated any provision of the contract or lease; and
(d) to Seller's knowledge, no other party is in breach or default
under the contract or lease, no other party has repudiated any provision of
the contract or lease, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit termination,
modification or acceleration under the contract or lease.
4.21 Product Liability. To the knowledge of Seller, except as set forth on
Schedule 4.21, there is no present (and Seller has no knowledge of any facts
which could reasonably be expected to result in any future) action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
Seller or either of the Divisions giving rise to any liability arising out of
any injury to individuals or property as a result of the ownership, possession
or use of any product manufactured, sold, leased or delivered by either of the
Divisions.
4.22 Employee Benefit Plans; Labor Matters.
(a) Schedule 4.22(a) lists or describes any pension, retirement,
savings, disability, medical, dental, health, life (including any
individual life insurance policy as to which Seller is the owner,
beneficiary or
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both), death benefit, group insurance, profit sharing, deferred
compensation, stock option, bonus incentive, vacation pay, severance pay,
"cafeteria" or "flexible benefit" plan under section 125 of the Internal
Revenue Code of 1986 as amended (the "Code"), or other employee benefit
plan, trust, arrangement, contract, agreement, policy or commitment, under
which employees of Seller or its Subsidiaries are entitled to participate
by reason of their employment with Seller or its Subsidiaries, (i) to which
Seller or a Subsidiary is a party or a sponsor or a fiduciary thereof or
(ii) with respect to which Seller or a Subsidiary has made payments,
contributions or commitments, or has any liability (collectively, the
"Employee Benefit Plans").
(b) The Employee Benefit Plans have been operated and administered by
Seller in compliance in all material respects with all applicable laws
relating to employment or labor matters, including without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
the Code and all contributions required under such plans have been made as
required.
(c) Each Employee Benefit Plan that is intended to be tax qualified
under section 401(a) of the Code has received, or Seller has applied for or
will in a timely manner apply for, a favorable determination letter from
the Internal Revenue Service (the "IRS") stating that the Plan meets the
requirements of the Code and that any trust or trusts associated with the
plan are tax exempt under section 501(a) of the Code.
(d) Neither Seller nor any of its Subsidiaries maintains, and neither
Seller nor any of its Subsidiaries has maintained or contributed to, any
defined benefit plan covering employees of Seller or its Subsidiaries
within the meaning of section 3(35) of ERISA or any multiemployer plan.
(e) Schedule 4.22(e) sets forth a list of all written employment
agreements, employment contracts or understandings relating to employment
(other than relating to "at-will" employment) to which Seller or any of its
Subsidiaries is a party.
4.23 Taxes. Seller and its Subsidiaries have filed or caused to be filed
with the appropriate Governmental Entity, all federal, state, municipal, and
local income, franchise, excise, sales, real and personal property, and other
tax returns and reports that are required to be filed, and neither Seller nor
any of its Subsidiaries is delinquent in the payment of any material taxes shown
on such returns or reports or on any material assessments for any such taxes
received by it and has otherwise complied in all material respects with all
legal requirements applicable to Seller and its Subsidiaries with respect to all
income, sales, use, real or personal property, excise or other taxes. Except as
set forth on Schedule 4.23, neither Seller nor any of its Subsidiaries has
executed or filed with the Internal Revenue Service any agreement extending the
period for assessment and collection of any federal tax. Neither Seller nor any
of its Subsidiaries is a party to any pending action or proceeding, nor, to the
knowledge of Seller, has any action or proceeding been threatened, by any
Governmental Entity for assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against Seller or any of its
Subsidiaries. Each of Seller and its Subsidiaries has withheld and paid all
taxes required to have been withheld and paid in connection with all amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
4.24 Environmental, Health and Safety.
(a) To the knowledge of Seller, each of Seller, its Subsidiaries and
their respective predecessors and Affiliates has complied with all
Environmental, Health, and Safety Laws (defined below), and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, to the knowledge of Seller, each of Seller, its Subsidiaries and
their respective predecessors and Affiliates has obtained and been in
compliance in all material respects with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under,
and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
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(b) To the knowledge of Seller, none of Seller and its Subsidiaries
has any liability for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any
employee or other individual or for any reason under any Environmental,
Health and Safety Law.
(c) All properties and equipment used in the operation of the
Divisions have been free of asbestos, PCBs, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
other hazardous substances or wastes.
(d) There is no pending audit known to Seller by any foreign, federal,
state, or local governmental authority with respect to groundwater, soil,
or air monitoring; the storage, burial, release, transportation, or
disposal of hazardous substances or wastes; or the use of underground
storage tanks by any of Seller, its Subsidiaries and their respective
predecessors and Affiliates or relating to the facilities of any of Seller,
its Subsidiaries and their respective predecessors and Affiliates. None of
Seller and its Subsidiaries has any agreement with any foreign, federal,
state, or local governmental authority or any other third party relating to
any such environmental matter or environmental cleanup.
(e) For purposes of this Agreement, the term "Environmental, Health,
and Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state and local governments
(and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water, groundwater
or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous. or toxic
materials or wastes.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The term "Purchaser Material Adverse Effect" as used in this Agreement
shall mean any change or effect that, individually or when taken together with
all such other changes or effects, is materially adverse to the condition
(financial or otherwise), results of operations, business, properties, assets or
liabilities of Purchaser and its Subsidiaries, taken as a whole.
Purchaser represents and warrants to Seller that the statements contained
in this Article V are true and correct as of the date of this Agreement.
5.01 Organization and Qualification. Purchaser is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Oklahoma, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted.
5.02 Authority. Purchaser has the requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Purchaser, and the consummation by Purchaser of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting the rights and remedies of creditors generally and by
general principles of equity including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific
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performance, injunctive relief or other equitable remedies, regardless of
whether enforceability is considered in a proceeding in equity or at law.
5.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Purchaser do not,
and the performance of this Agreement by Purchaser will not, (i) violate
the Certificate of Incorporation or By-Laws or equivalent organizational
documents of Purchaser, (ii) subject to obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to,
any Governmental Entity pursuant to the applicable requirements, if any, of
the Exchange Act and the HSR Act, conflict with or violate any laws
applicable to Purchaser or by which any of its properties is bound or
affected, except such as would not have a Purchaser Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Purchaser do not,
and the performance of this Agreement by Purchaser shall not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entities, except as described in section
5.03(a) above.
5.04 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.
5.05 Financing. Purchaser has the ability to and intends to finance the
aggregate of the Purchase Price pursuant to Article III with cash on hand and
utilization of existing credit facilities. Purchaser will use its best efforts
to ensure the continued availability of such financing and pay such amounts in
accordance with the terms of this Agreement and will not take any action between
the date hereof and the Closing Date which would impair its ability to obtain
such financing.
ARTICLE VI
COVENANTS
6.01 Affirmative Covenants of Seller. Seller covenants and agrees that
prior to the Closing Date, unless otherwise contemplated by this Agreement or
consented to in writing by Purchaser, Seller will and will cause each of its
Subsidiaries to:
(a) operate the Divisions in the ordinary course of business and
consistent with its past practice (provided, however, that Seller will not
cause or permit the Divisions to engage in any practice, take any action or
enter into any transaction of the sort described in Section 4.05 above);
(b) use reasonable efforts to preserve intact the Divisions and the
assets thereof, and maintain its rights and franchises, retain the services
of its respective officers and key employees and maintain the relationships
with its respective key customers, lessors, licensors and suppliers with
respect to the Divisions;
(c) subject to the provisions of the Purchaser Confidentiality
Agreement (as hereinafter defined), confer with Purchaser at its reasonable
request to report operational matters of a material nature relating to the
Divisions and to report the general status of the ongoing operations of the
Divisions;
(d) maintain compliance with all permits, laws, rules, regulations and
orders applicable to the Divisions; and
(e) maintain the Purchased Assets in good working order and condition,
ordinary wear and tear excepted.
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6.02 Negative Covenants of Seller. Except as contemplated by this Agreement
or consented to in writing by Purchaser, from the date of this Agreement until
the Closing Date, Seller shall not do, and shall not permit any of its
Subsidiaries to do, any of the following:
(a) increase the compensation payable to any employee of either of the
Divisions, except for increases in salary or wages payable or to become
payable in the ordinary course of business and consistent with the policies
currently in effect;
(b) enter into or establish any new compensation plan or employee
benefit plan;
(c) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other Person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with Seller's past practice);
(d) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any assets of the Divisions, except for
dispositions of inventory and supplies in the ordinary course of business
and consistent with Seller's past practice;
(e) change any of its methods of accounting in effect at December 31,
1996 or make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 1996, except in
either case as may be required by law, the IRS, or GAAP or in the ordinary
course of business consistent with past practice; provided, however, that
Seller shall immediately notify Purchaser of any such change or other
action;
(f) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except as approved by Purchaser in advance;
(g) guarantee any debts or obligations of any Person; or
(h) agree in writing or otherwise to do any of the foregoing.
6.03 Confidentiality Agreement. The parties will, and will cause their
respective officers, employees, accountants, consultants, legal counsel and
other representatives to, comply with all of their respective obligations under
the Confidentiality Agreement dated December 3, 1996 between Seller and
Purchaser concerning Seller's confidential information (the "Purchaser
Confidentiality Agreement").
6.04 Acquisition Proposals. Upon execution of this Agreement, Seller and
its Subsidiaries and their respective officers, directors, employees, agents and
advisors (a) will immediately cease any existing discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal
(as hereinafter defined), and (b) (except as described in the next sentence)
shall not participate in any new discussions or negotiations with respect to any
Acquisition Proposal. Seller may, directly or indirectly, furnish information
and access, in each case only in response to requests that were not solicited by
Seller (or any officer, director, employee, agent or advisor on its behalf)
after the date of this Agreement, to any corporation, partnership, person or
other entity or group (each, a "Potential Purchaser") pursuant to
confidentiality agreements, and may participate in discussions and negotiate
with a Potential Purchaser concerning any Acquisition Proposal, if such
Potential Purchaser has submitted a written proposal to the Board of Directors
relating to any such transaction, and the Board of Directors determines in good
faith after consultation with independent legal counsel that the failure to
provide such information or access or to engage in such discussions or
negotiations would be inconsistent with their fiduciary duties to Seller's
stockholders under applicable law. Seller shall notify Purchaser immediately if
any such request or proposal, or any inquiry or contact with any Person with
respect thereto, is made and shall keep Purchaser apprised of all developments
that could reasonably be expected to culminate in the Board withdrawing,
modifying or amending its
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recommendation of the Asset Sale and the other transactions contemplated by this
Agreement. Seller has entered into confidentiality agreements with other third
parties substantially in the form of the Purchaser Confidentiality Agreement.
Seller agrees not to release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which Seller is a party unless,
in the opinion of the Board of Directors after consultation with independent
legal counsel, the failure to provide such release or waiver would be
inconsistent with its fiduciary duties to Seller's stockholders under applicable
law. For purposes of this section 6.04, the term "Acquisition Proposal" means
any proposal or offer for a merger, asset acquisition or other business
combination involving the acquisition, directly or indirectly, of the Divisions
or any assets of the Divisions.
6.05 Merger Agreement. Notwithstanding anything else in this Agreement to
the contrary, the parties agree that on or prior to the Closing Date Seller may
take such actions as are contemplated in the Agreement and Plan of Merger, dated
as of August 15, 1997 (the "Merger Agreement"), by and among Seller, Giuffre
Bros. Cranes, Inc. ("Giuffre") and 13th Street Acquisition Corp. ("Giuffre
Sub"). On the Closing Date, Seller may consummate the transactions contemplated
by the Merger Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
Seller shall prepare and file with the SEC, and shall use all reasonable
efforts to have promptly cleared by the SEC, and promptly thereafter shall
mail to its stockholders, a proxy statement and a form of proxy
(collectively, the "Proxy Statement"), as may be amended and supplemented,
to be used in connection with the special meeting (the "Stockholders'
Meeting") of Seller's stockholders to consider the Asset Sale (the
"Stockholders' Meeting"). Seller shall provide Purchaser with a reasonable
opportunity to review and comment upon the Proxy Statement prior to its
filing with the SEC and distribution to Seller's stockholders, and
Purchaser shall use reasonable efforts to provide its comments thereon as
promptly as practicable after delivery of the Proxy Statement to Purchaser
and its legal counsel. Seller shall notify Purchaser promptly of the
receipt of any comments of the SEC with respect to the Proxy Statement and
of any requests by the SEC for amendments or supplements to the Proxy
Statement and will supply Purchaser with copies of all correspondence
between Seller and its representatives, on the one hand, and the SEC or the
members of its staff, on the other hand, with respect to the Proxy
Statement. Seller and Purchaser shall each use reasonable efforts to obtain
and furnish information required to be included in the Proxy Statement; and
Seller, after consultation with Purchaser, shall use reasonable efforts
(and Purchaser agrees to reasonably cooperate with Seller in connection
therewith) to respond promptly to any comments made by the SEC with respect
to the Proxy Statement and cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time. Seller shall notify
Purchaser of its intention to mail the Proxy Statement to the stockholders
of Seller at least 48 hours prior to the intended time of such mailing. The
Proxy Statement shall include the recommendation of Seller's Board of
Directors in favor of the Asset Sale and approval of this Agreement, unless
independent outside legal counsel to Seller shall advise Seller's Board of
Directors and the directors' fiduciary duties under applicable law make
such recommendation inappropriate.
(b) The information included in the Proxy Statement shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to stockholders or at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Stockholders'
Meeting, any event or circumstance relating to Seller or any of its
Subsidiaries, or its or their respective officers or directors, is
discovered by Seller which should be set forth in a supplement to the Proxy
Statement, Seller shall promptly inform Purchaser. All documents that
Seller is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in
all material respects with the applicable requirements of the Exchange Act.
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(c) Each of the parties will file (and Seller will cause each of its
Subsidiaries to file) any Notification and Report Forms and related
material that it may be required to file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice under
the HSR Act, will use its reasonable best efforts to obtain (and Seller
will cause each of its Subsidiaries to use its reasonable best efforts to
obtain) an early termination of the applicable waiting period, and will
make (and Seller will cause each of its Subsidiaries to make) any further
filings pursuant thereto that may be necessary, proper, or advisable.
7.02 Meeting of Stockholders. As promptly as practicable after the
execution of this Agreement, Seller shall take all action necessary or
appropriate in accordance with the Delaware Law and its Certificate of
Incorporation and By-Laws to convene the Stockholders' Meeting, and Seller shall
consult with Purchaser in connection therewith. Seller shall use reasonable
efforts to solicit from the stockholders of Seller proxies in favor of the Asset
Sale and shall take all other actions necessary or advisable to secure the vote
or consent of stockholders required by the Delaware Law to approve this
Agreement, including the retention of proxy solicitation agents if requested by
Purchaser, unless otherwise required by the applicable fiduciary duties of
directors or officers of Seller.
7.03 Appropriate Action; Consents; Filings.
(a) Subject to the terms and conditions herein provided, Seller and
Purchaser shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do or cause to be done, all things
necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable, (ii) obtain from all Governmental
Entities all consents, licenses or orders required to be obtained by
Purchaser or Seller or any of their respective Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Asset Sale, and (iii) make all necessary
notifications and filings and thereafter make any other required
submissions with respect to this Agreement and the Asset Sale required
under (A) the Exchange Act and any other applicable federal or state
securities laws, (B) the HSR Act and (C) any other applicable law; provided
that Purchaser and Seller shall cooperate with each other in connection
with the making of all such filings. Seller and Purchaser shall furnish to
each other all information required for any application or other filing to
be made pursuant to the rules and regulations of any applicable law
(including all information required to be included in the Proxy Statement)
in connection with the transactions contemplated by this Agreement.
(b) (i) Seller and Purchaser shall give (or cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause
their respective Subsidiaries to use, all reasonable efforts to obtain any
third-party consents, (A) necessary to consummate the transactions
contemplated in this Agreement, (B) disclosed or required to be disclosed
in the disclosure schedules to this Agreement, or (C) required to prevent a
Seller Material Adverse Effect from occurring prior to the Closing Date.
(ii) In the event that any party shall fail to obtain any third-party
consent described in subsection (b)(i) above, such party shall use
reasonable efforts, and shall take any such actions reasonably requested by
the other party to minimize any adverse effect upon the other party, its
Subsidiaries and its businesses resulting, or which could reasonably be
expected to result after the Closing Date, from the failure to obtain such
consent.
(c) From the date of this Agreement until the Closing Date, Seller
shall promptly notify Purchaser in writing of any pending or, to the
knowledge of Seller, threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking damages
in connection with the Asset Sale, (ii) alleging that the consent of such
Governmental Entity or Person may be required in connection with the Asset
Sale or this Agreement, (iii) seeking to restrain or prohibit the
consummation of the Asset Sale or otherwise limit the right of Purchaser or
its Subsidiaries to own or operate all or any portion of the businesses or
assets of the Divisions, or (iv) involving any of the Purchased Assets or
either of the Divisions.
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(d) From the date of this Agreement until the Closing Date, Purchaser
shall promptly notify Seller in writing of any pending or, to the knowledge
of Purchaser, threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking material
damages in connection with the Asset Sale or (ii) seeking to restrain or
prohibit the consummation of the Asset Sale or otherwise limit the right of
Purchaser or its Subsidiaries to own or operate all or any portion of the
business or assets of the Divisions.
(e) From the date of this Agreement until the Closing Date, Seller
shall promptly notify Purchaser in writing of (i) any amendments made to
the Merger Agreement, and (ii) any additional agreements between Seller and
Giuffre.
7.04 Update Disclosure. From and after the date of this Agreement until the
Closing Date, each party shall promptly notify the other party hereto by written
update to its disclosure schedules ("Update Schedule") of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
reasonably likely to cause any condition to the obligations of any party to
effect the Asset Sale and the other transactions contemplated by this Agreement
not to be satisfied, (ii) the failure of Seller or Purchaser, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it pursuant to this Agreement which would be
reasonably likely to result in any condition to the obligations of any party to
effect the Asset Sale and the other transactions contemplated by this Agreement
not to be satisfied, or (iii) of any changes to the information contained in its
disclosure schedules (including any change to any representations or warranties
herein as to which no schedule has been created as of the date hereof but as to
which a schedule would have been required hereunder to have been created on or
before the date hereof if such change had existed on the date hereof). No
disclosure by any party pursuant to this Section 7.04, however, shall cure any
breach of any representation or warranty made by such party as of the date of
this Agreement.
ARTICLE VIII
CLOSING
8.01 Closing. Unless this Agreement shall have been terminated pursuant to
Section 10.01 and subject to the fulfillment or waiver of each of the conditions
set forth in Article IX, the closing ("Closing") of the transactions pursuant to
this Agreement shall take place at (a) the offices of Reinhart, Boerner, Van
Deuren, Norris & Rieselbach, s.c., 1000 North Water Street, Milwaukee, Wisconsin
53202, at the same time as the effective time of the merger pursuant to the
Merger Agreement or (b) at such other time and place as the parties hereto shall
mutually agree. Notwithstanding anything to the contrary herein, without the
prior written consent of Purchaser, the Closing shall not occur prior to
December 15, 1997.
ARTICLE IX
CLOSING CONDITIONS
9.01 Conditions to Obligations of Each Party Under This Agreement. The
respective obligations of each party to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, any or all of which may be waived by the
parties hereto, in whole or in part, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Asset Sale shall have
been approved by the requisite vote of the stockholders of Seller in
accordance with the Delaware Law and the Certificate of Incorporation and
By-Laws of Seller.
(b) No Action or Proceeding. There shall not have been instituted and
there shall not be pending any action or proceeding by a Governmental
Entity, and no such action or proceeding shall have been approved by a
Governmental Entity with authority to institute such an action or
proceeding, before any court of competent jurisdiction or governmental
agency or regulatory or administrative body, and no order or decree shall
have been entered in any action or proceeding before such court, agency or
body of
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competent jurisdiction: (i) imposing or seeking to impose limitations on
the ability of Purchaser to acquire or hold or to exercise full rights of
ownership of any of the Purchased Assets; (ii) imposing or seeking to
impose limitations on the ability of Purchaser to combine and operate the
business and assets of the Divisions with any of Purchaser's Subsidiaries
or other operations; (iii) imposing or seeking to impose other sanctions,
damages or liabilities arising out of the Asset Sale on Purchaser, Seller
or any of their officers or directors; (iv) requiring or seeking to require
divestiture by Purchaser of all or any material portion of the Divisions or
the assets thereof; or (v) restraining, enjoining or prohibiting or seeking
to restrain, enjoin or prohibit the consummation of the Asset Sale, in each
case, with respect to clauses (i) through (iv) above, which would or is
reasonably likely to result in a Seller Material Adverse Effect on or prior
to or after the Closing Date or, with respect to clauses (i) through (v)
above, which would or is reasonably likely to subject any of their
respective officers or directors to any penalty or criminal liability.
Notwithstanding the foregoing, prior to invoking the condition set forth in
this section 9.01(b), the party seeking to invoke it shall have used its
reasonable efforts to have any such pending or approved action or
proceeding withdrawn or dismissed or such order or decree vacated.
(c) HSR Act. The applicable waiting period, together with any
extensions thereof, under the HSR Act shall have expired or been
terminated.
(d) Other Approvals or Notices. All other consents, waivers, approvals
and authorizations required to be obtained from, and all filings or notices
required to be made with, any Governmental Entity by Purchaser or Seller or
any Subsidiary prior to consummation of the transactions contemplated in
this Agreement shall have been obtained from and made with all required
Governmental Entities, except for such consents, waivers, approvals or
authorizations which the failure to obtain, or such filings or notices
which the failure to make, would not have a Seller Material Adverse Effect
prior to or after the Closing Date or a Purchaser Material Adverse Effect
before or after the Closing Date or be reasonably likely to subject Seller,
Purchaser, or any of their respective Subsidiaries or any of their
respective officers, directors, employees, agents or representatives to
substantial penalty or criminal liability.
9.02 Additional Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the transactions contemplated in this Agreement are also
subject to the satisfaction on or prior to the Closing Date of the following
conditions, any or all of which may be waived, in whole or in part, by Purchaser
in its sole discretion:
(a) Representations and Warranties. Each of the representations and
warranties of Seller contained in this Agreement shall have been true and
correct in all material respects when made and the information contained
therein, as updated by any Update Schedule, taken as a whole, shall not
have materially adversely changed; and each of the representations and
warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing Date. Purchaser shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Seller to that effect.
(b) Agreements and Covenants. Seller shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date, except to the extent failure to perform is caused by or is consented
to by Purchaser. Purchaser shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Seller to that effect.
(c) Consents Under Agreements. Seller shall have obtained the third
party consents described on Schedule 9.02(c)(i). Seller shall have obtained
a third party consent with respect to each agreement described on Schedule
9.02(c)(ii) that Seller and Purchaser reasonably agree is required pursuant
to applicable law to effectively assign to Purchaser all of Seller's rights
under any such agreement. Seller shall have obtained all other third-party
consents described in subsection 7.03(b)(i), except those for which the
failure to obtain such consents and approvals would not have a Seller
Material Adverse Effect prior to or after the Closing Date or a Purchaser
Material Adverse Effect before or after the Closing Date, other than as
contemplated by subsection 7.03(b)(ii).
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(d) Opinion of Counsel. The Purchaser shall have received an opinion
of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. counsel to
Seller, addressed to Purchaser, dated as of the Closing Date, and
reasonably satisfactory in form and substance to Purchaser and its counsel,
to the following effect:
(i) Seller is a corporation existing under the laws of the State of
Delaware and, based solely on a certificate of the Secretary of State of
Delaware, (a) has filed with the Secretary of State during its most
recently completed report year the required annual report; (b) is not
the subject of a proceeding under the Delaware Law to cause its
administrative dissolution; (c) no determination has been made by the
Secretary of State that grounds exist for such action with respect to
Seller; (d) no filing has been made with the Secretary of State of a
decree of dissolution with respect to Seller; and (e) no Certificate of
Dissolution of Seller has been filed with the Secretary of State. Seller
and its Subsidiaries have the corporate power to carry on their
respective businesses as currently being conducted.
(ii) This Agreement is a legal, valid and binding obligation of
Seller (a) except as this Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b)
subject to general principles of equity including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and
the possible unavailability of specific performance, injunctive relief
or other equitable remedies, regardless of whether considered in a
proceeding in equity or at law. Counsel expresses no opinion with
respect to section 10.03(e), section 10.03(g) or section 10.03(h) of
this Agreement. The execution, delivery and performance by Seller of the
Agreement have been duly authorized by all necessary corporation action,
including the requisite approval of the stockholders of Seller. Under
the Delaware Law and Seller's Certificate of Incorporation and By-Laws,
Seller's stockholders and Board of Directors properly approved the Asset
Sale in accordance with the terms of the Agreement.
(iii) The execution and delivery of the Agreement and the
performance by Seller of its terms do not [a] contravene or conflict
with any provision of the Certificate of Incorporation or By-Laws of
Seller; or [b] violate any order, judgment or decree of any court or
governmental instrumentality to which Seller or any of its assets is
subject and of which such counsel has knowledge.
(iv) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against Seller or any
assets, properties or rights of Seller by or before any court,
arbitrator or administrative or governmental body which questions the
validity of this Agreement or any action which has been or is to be
taken by Seller hereunder.
(e) Deliveries on or Prior to Closing. Seller shall have delivered or
cause to be delivered to Purchaser the following documents at or prior to
Closing:
(i) A General Bill of Sale duly executed by Seller, in the form
attached hereto as Exhibit B.
(ii) A written consent to the transfer or assignment to Purchaser
of any of the Purchased Assets, including the Assigned Contracts, where
the consent of any other party may be required for such assignment or
transfer.
(iii) Assignments of all United States and foreign patents, patent
applications, trademarks and trade names and other similar Intangible
Assets to be transferred in accordance with section 1.01(d), duly
executed by Seller.
(iv) Titles and registrations to all Vehicles, duly executed by
Seller.
(v) Certificate of status of Seller issued by the Secretary of
State of Delaware and other appropriate jurisdictions within one week of
the Closing Date.
(vi) The Assignment and Assumption Agreement duly executed by
Seller, in the form attached hereto as Exhibit C (the "Assignment and
Assumption Agreement").
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(vii) Releases of mortgages, liens and/or financing statements to
reflect the termination of any Liens against, or security interest in,
any of the Purchased Assets.
(viii) Such other documents as Purchaser reasonably deems necessary
or appropriate to vest in it good and marketable title to all or any
part of the Purchased Assets, free and clear of all liens, encumbrances
and other rights as provided in this Agreement.
(f) Toll Manufacturing Agreement. Seller, Giuffre and Purchaser shall
have entered into a Toll Manufacturing Agreement in a form reasonably
satisfactory to Seller, Giuffre and Purchaser.
(g) No Material Adverse Change. Since the date of this Agreement, no
condition or fact shall have occurred which, as of the Closing Date, is or
may have a Seller Material Adverse Effect.
(h) Bulk Sales. The parties shall have complied in all material
respects with the provisions of the Wisconsin Bulk Sales Act.
(i) Non-Competition Agreements. Seller and Giuffre each shall have
entered into a Non-Competition Agreement with Purchaser in a form
reasonably satisfactory to Purchaser, Seller and Giuffre.
9.03 Additional Conditions to Obligations of Seller. The obligation of
Seller to effect the transactions contemplated in this Agreement is also subject
to the satisfaction on or prior to the Closing Date of the following conditions,
any or all of which may be waived, in whole or in part, by Seller in its sole
discretion:
(a) Representations and Warranties. Each of the representations and
warranties of Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and the information
contained therein, as updated by any Update Schedule, taken as a whole,
shall not have materially adversely changed; and each of the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing Date.
Seller shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of Purchaser to that effect.
(b) Agreements and Covenants. Purchaser shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Closing Date. Seller shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of Purchaser to that
effect.
(c) Fairness Opinion. Seller shall have received from ABN AMRO Chicago
Corporation an opinion, dated as of the date of the Proxy Statement, to the
effect that the Purchase Price is fair to Seller's stockholders from a
financial point of view.
(d) Opinion of Counsel. Seller shall have received an opinion of
Hartzog Conger & Cason, counsel to Purchaser, addressed to Seller, dated as
of the Closing Date, and reasonably satisfactory in form and substance to
Seller and its counsel, to the following effect:
(i) Purchaser is a corporation existing in good standing under the
laws of the State of Oklahoma, based solely on a certificate of the
Oklahoma Secretary of State.
(ii) The execution, delivery and performance of this Agreement has
been duly authorized by all requisite corporate action on the part of
Purchaser. The Agreement constitutes the legally valid and binding
obligations of Purchaser, enforceable in accordance with its terms,
subject to the following qualifications: [a] the enforceability against
Purchaser of the Agreement in accordance with its terms may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally; [b] the enforceability of the
Agreement is subject to the effect of general principles of equity
including, without limitation, the possible unavailability of specific
performance or injunctive relief or other equitable remedies regardless
of whether considered in a proceeding in equity or at law; and [c] no
opinion is expressed as to any provision of the Agreement providing for
the indemnification of persons for liability under federal or other
securities laws or with respect to section 10.03(h).
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(iii) Execution and delivery of the Agreement and the performance
of the Purchaser of its terms do not [a] contravene or conflict with any
provision of the Certificate of Incorporation or By Laws of the
Purchaser; or [b] violate any order, judgment or decree of any Oklahoma
or federal court or governmental instrumentality to which Purchaser or
any of its assets is subject and of which such counsel has knowledge.
(iv) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Purchaser
or any assets, properties or rights of Purchaser by or before any court,
arbitrator or administrative or governmental body which questions the
validity of the Agreement or any action which has been or is to be taken
by the Purchaser thereunder.
(e) Deliveries on or Prior to Closing. Purchaser shall have delivered
or cause to be delivered to Seller the following documents at or prior to
Closing:
(i) Wire transfer of immediately available funds in the amount of
the Purchase Price.
(ii) A certificate of status for Purchaser issued by the Secretary
of State of Oklahoma within one week of the Closing Date.
(iii) The Assignment and Assumption Agreement duly executed by
Purchaser.
(iv) Such other documents as Seller reasonably deems necessary and
appropriate to document the transfer of the Purchased Assets and the
assumption of the Assumed Liabilities.
(f) Effectiveness of the Merger. The transactions contemplated by the
Merger Agreement shall have closed simultaneously with the Closing under
this Agreement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.01 Termination. This Agreement may be terminated upon written notice by
the terminating party at any time prior to the Closing, whether before or after
approval of this Agreement and the Asset Sale by the stockholders of Seller:
(a) by mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller in the event the conditions to such
party's (the "Nonfailing Party") obligations under Article IX shall not
have been met or waived by the Nonfailing Party on or prior to January 31,
1998, but only if the party terminating has not caused the condition giving
rise to termination to be not satisfied through its own action or inaction;
(c) by either Purchaser or Seller if any decree, permanent injunction,
judgment, order or other action by any court of competent jurisdiction or
any Governmental Entity preventing or prohibiting consummation of the Asset
Sale shall have become final and nonappealable;
(d) by Purchaser, if (A) the Proxy Statement does not include the
recommendation of Seller's Board of Directors in favor of this Agreement
and the Asset Sale, or (B) the Board of Directors of Seller withdraws,
modifies or changes in a manner materially adverse to Purchaser its
recommendation of this Agreement or the Asset Sale or shall have resolved
to do any of the foregoing, or (C) the Board of Directors of Seller shall
have recommended to the stockholders of Seller any proposed acquisition of
the Divisions by any Person or any "group" (as such term is defined under
section 13(d) of the Exchange Act) other than Purchaser and its Affiliates
by (i) merger, consolidation, share exchange, business combination or other
similar transaction providing for the acquisition of the Divisions or a
substantial part of the assets of the Divisions, (ii) purchase of all or a
substantial part of the assets of Seller relating to the Divisions, or
(iii) the acquisition of more than 50% of Seller's outstanding equity
securities (other than pursuant to the Merger) (a "Competing Transaction")
or resolved to do so, or (D) a tender offer or exchange offer for 50% or
more of the outstanding shares of capital stock of Seller is commenced, and
the Board of Directors of Seller, within 10 business days after such tender
offer or exchange offer is so
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commenced, either fails to recommend against acceptance of such tender
offer or exchange offer by its stockholders or takes no position with
respect to the acceptance of such tender offer or exchange offer by its
stockholders;
(e) by Seller if, in the exercise of its judgment as to its fiduciary
duties to its stockholders as imposed by applicable law and, after
consultation with and receipt of advice from outside legal counsel,
Seller's Board of Directors determines that such termination is required by
reasons of any Competing Transaction being made or proposed;
(f) by either Purchaser or Seller, if any Update Schedule of the other
party contains disclosures of any fact or condition which makes untrue, or
shows to have been untrue, any representation or warranty by the other
party in this Agreement, unless concurrently with the delivery of the
Update Schedule, the other party represents and warrants that the disclosed
fact or condition can and will be corrected at the other party's expense
prior to the Closing Date (but in no event more than 30 days after the
delivery of the Update Schedule); provided that the effect of the fact or
condition so disclosed upon the representation or warranty so affected
constitutes a Seller Material Adverse Effect or Purchaser Material Adverse
Effect, as applicable; or
(g) by either Purchaser or Seller, at any time after the Stockholders'
Meeting, in the event this Agreement and the Asset Sale are not approved by
the requisite vote of the stockholders of Seller in accordance with the
Delaware Law and the Certificate of Incorporation and By-Laws of Seller.
10.02 Effect of Termination. Subject to the remedies of the parties set
forth in section 10.03(c), in the event of the termination of this Agreement
pursuant to section 10.01, this Agreement shall forthwith become void, and,
subject to sections 10.03(c), (d), (e), (f), (g) and (h), there shall be no
liability under this Agreement on the part of Purchaser or Seller or any of
their respective officers or directors and all rights and obligations of each
party hereto shall cease.
The Purchaser Confidentiality Agreement shall survive any termination of this
Agreement.
10.03 Expenses.
(a) Except as provided in section 10.03(c), section 10.03(d), section
10.03(f), section 10.03(g) and section 10.03(h), all Expenses incurred by
the parties shall be borne solely and entirely by the party which has
incurred the same. Seller shall pay for all Expenses related to printing,
filing and mailing the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Proxy Statement.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
stockholder approvals and all other matters related to the closing of the
transactions contemplated by this Agreement.
(c) Seller and Purchaser each agree that with respect to any
termination of this Agreement pursuant to section 10.01(b) as a direct
result of a material intentional breach by a party of any of its covenants
or agreements contained in this Agreement, all remedies available to the
other party either in law or equity shall be preserved and survive the
termination of this Agreement.
(d) If all conditions to the obligations of a party at Closing
contained in Article IX of this Agreement have been satisfied (or waived by
the party entitled to waive such conditions), and the other party does not
proceed with the Closing, all remedies available to the party seeking to
proceed, either at law or in equity, on account of such failure to close,
including, without limitation, the right to seek specific performance of
this Agreement as well as the right to pursue a claim for damages on
account of a breach of this Agreement, shall be preserved and shall survive
any termination of this Agreement.
(e) Notwithstanding anything to the contrary herein, Seller agrees
that if this Agreement is terminated pursuant to section 10.01(d) or
section 10.01(e), Seller shall pay to Purchaser an amount
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equal to the greater of (i) $400,000, and (ii) 20% of the amount by which
the aggregate consideration with respect to the Divisions in any Competing
Transaction exceeds the Purchase Price, provided that, solely for purposes
of this section 10.03(e)(ii), the Purchase Price shall be computed based on
the balance sheet attached hereto as Exhibit A and, if the Competing
Transaction involves the acquisition of all of Seller, whether by merger,
tender offer or otherwise, then the consideration with respect to the
Divisions in the Competing Transaction shall equal 66.8% of the total
consideration in the Competing Transaction. Such payment shall be made as
promptly as practicable but in no event later than the third business day
following termination of this Agreement and shall be made by wire transfer
of immediately available funds to an account designated by Purchaser.
(f) Seller and Purchaser shall share equally the filing fee for any
required filing under the HSR Act.
(g) Notwithstanding anything herein to the contrary, Seller agrees
that if this Agreement is terminated pursuant to section 10.01(b) as a
direct result of the failure to satisfy the condition to Seller's
obligations contained in section 9.03(f), then Seller shall reimburse
Purchaser for its Expenses up to $200,000. Such payment shall be made not
later than the third business day following receipt by Seller of written
notice from Purchaser describing in reasonable detail the amount of
Expenses to be reimbursed by Seller pursuant to this section 10.03(g).
(h) Notwithstanding anything herein to the contrary, Seller and
Purchaser each agree that if this Agreement is terminated pursuant to
section 10.01(b) as a direct result of a material breach by a party of any
of its representations or warranties contained in this Agreement, the
breaching party shall reimburse the nonbreaching party for its Expenses up
to $200,000. Such payment shall be made not later than the third business
day following receipt by the breaching party of written notice from the
nonbreaching party describing in reasonable detail the amount of Expenses
to be reimbursed by the breaching party pursuant to this section 10.03(h).
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification By Seller. Seller shall indemnify and hold harmless
Purchaser and its shareholders, directors, officers, employees and other agents
(collectively, the "Purchaser Indemnitees") in respect of any and all damages,
losses, liabilities, payments, obligations, penalties, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses (including, without limitation, reasonable fees, disbursements and
expense of attorneys, accountants and other professional advisors and of expert
witnesses and costs of investigation and preparation) of any kind or nature
whatsoever (collectively, "Losses") asserted against or incurred by any
Purchaser Indemnitee as a result of, in connection with or arising out of (a)
any of the Excluded Liabilities, or (b) any claims made under the provisions of
the Worker Adjustment and Retraining Notification Act (29 U.S.C. sec.sec.
2101-2109) and the regulations promulgated thereunder ("WARN") arising in
connection with the transactions contemplated by this Agreement.
11.02 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless Seller and its stockholders, directors, officers, employees and other
agents (collectively, the "Seller Indemnitees") in respect of any and all Losses
asserted against or incurred by any Seller Indemnitee as a result of, in
connection with, or arising out of any of the Assumed Liabilities.
11.03 Arbitration Procedure.
(a) Purchaser and the Seller agree that the arbitration procedure set
forth below shall be the sole and exclusive method for resolving and
remedying claims for Losses arising out of the provisions of section 11.01
and section 11.02 (the "Disputes"). Nothing in this section 11.03 shall
prohibit a party hereto from instituting litigation to enforce any Final
Determination (as defined below) or availing itself of the other remedies
set forth in this Agreement. The parties hereby agree and acknowledge that,
except as otherwise provided in this section 11.03 or in the Commercial
Arbitration Rules of the American Arbitration Association as in effect from
time to time, the arbitration procedures and any Final
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Determination hereunder shall be governed by, and shall be enforced
pursuant to the Uniform Arbitration Act and applicable provisions of,
Delaware law.
(b) In the event that any Purchaser Indemnitee or Seller Indemnitee
(the "Indemnified Party") asserts that there exists a Dispute, such
Indemnified Party shall deliver a written notice to the party alleged to
have indemnification obligations pursuant to this Agreement (the
"Indemnifying Party") specifying the nature of the asserted Dispute and
requesting a meeting to attempt to resolve the same. If no such resolution
is reached within ten business days after such delivery of such notice, the
Indemnified Party delivering such notice of Dispute (the "Disputing
Person") may, within 30 business days after delivery of such notice,
commence arbitration hereunder by delivering to the Indemnifying Party
involved therein a notice of arbitration (a "Notice of Arbitration") and by
filing a copy of such Notice of Arbitration with the Chicago office of the
American Arbitration Association. Such Notice of Arbitration shall specify
the matters as to which arbitration is sought, the nature of any Dispute,
the claims of each party to the arbitration and shall specify the amount
and nature of any Losses, if any, sought to be recovered as a result of any
alleged claim, and any other matters required by the Commercial Arbitration
Rules of the American Arbitration Association as in effect from time to
time to be included therein, if any.
(c) The Indemnified Party on the one hand and the Indemnifying Party
on the other hand each shall select one independent arbitrator expert in
the subject matter of the Dispute (the arbitrators so selected shall be
referred to herein as "Seller's Arbitrator" and "Purchaser's Arbitrator"
respectively). In the event that either party fails to select an
independent arbitrator as set forth herein within 20 days from delivery of
a Notice of Arbitration, then the matter shall be resolved by the
arbitrator selected by the other party. Seller's Arbitrator and Purchaser's
Arbitrator shall select a third independent arbitrator expert in the
subject matter of the dispute, and the three arbitrators so selected shall
resolve the matter according to the procedures set forth in this section
11.03. If Seller's Arbitrator and Purchaser's Arbitrator are unable to
agree on a third arbitrator within 20 days after their selection, Seller's
Arbitrator and Buyer's Arbitrator shall each prepare a list of three
independent arbitrators. Seller's Arbitrator and Purchaser's Arbitrator
shall each have the opportunity to designate as objectionable and eliminate
one arbitrator from the other arbitrator's list within seven days after
submission thereof, and the third arbitrator shall then be selected by lot
from the arbitrators remaining on the lists submitted by Seller's
Arbitrator and Purchaser's Arbitrator.
(d) The arbitrator(s) selected pursuant to section 11.03(c) will
determine the allocation of the costs and expenses of arbitration based
upon the percentage which the portion of the contested amount not awarded
to each party bears to the amount actually contested by such party. For
example, if Purchaser submits a claim for $1,000, and if the Seller
contests only $500 of the amount claimed by Purchaser, and if the
arbitrator(s) ultimately resolves the dispute by awarding Purchaser $300 of
the $500 contested, then the costs and expenses of arbitration will be
allocated 60% (i.e., 300 - 500) to the Seller and 40% (i.e., 200 - 500) to
Purchaser.
(e) The arbitration shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association as in effect from
time to time, except as otherwise set forth herein or as modified by the
agreement of all of the parties to this Agreement. The arbitrator(s) shall
so conduct the arbitration that a final result, determination finding,
judgment and/or award (the "Final Determination") is made or rendered as
soon as practicable, but in no event later than 90 business days after the
delivery of the Notice of Arbitration nor later than 10 days following
completion of the arbitration. The Final Determination must be agreed upon
and signed by the sole arbitrator or by at least two of the three
arbitrators (as the case may be). The Final Determination shall be final
and binding on all parties and there shall be no appeal from or
reexamination of the Final Determination, except for fraud, perjury,
evident partiality or misconduct by an arbitrator prejudicing the rights of
any party and to correct manifest clerical errors.
(f) The Purchaser Indemnitees and the Seller Indemnitees may enforce
any Final Determination in any state or federal court having jurisdiction
over the Dispute. For the purpose of any action or
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proceeding instituted with respect to any Final Determination, each party
hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or
personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction, the laying of the venue of any such action or
proceeding brought in any such court and any claim that any such action or
proceeding brought in such court has been brought in an inconvenient forum.
11.04 Matters Involving Third Parties.
(a) If any third party shall notify any Indemnified Party with respect
to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification against any Indemnifying Party under this section 11, then
the Indemnified Party shall promptly (and in any event within ten business
days after receiving notice of the Third Party Claim) notify the
Indemnifying Party in writing; provided, however, that no delay on the part
of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder, except to the extent
the Indemnifying Party thereby is materially prejudiced. Such notice shall
describe the claim, the amount thereof (to the extent then known and
quantifiable), and the basis thereof, in each case to the extent known to
the Indemnified Party.
(b) The Indemnifying Party will have the right at any time to assume
and thereafter conduct the defense of the Third Party Claim with counsel of
his or its choice reasonably satisfactory to the Indemnified Party; so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Losses the Indemnified Party may
suffer resulting from or in connection with the Third Party Claim, (ii) the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder,
(iii) the Third Party Claim involves only money damages and does not seek
an injunction or other equitable relief, and (iv) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(c) Unless and until the Indemnifying Party assumes the defense of the
Third Party Claim as provided in section 11.04(b) above, however, the
Indemnified Party may defend against the Third Party Claim in any manner it
reasonably may deem appropriate.
(d) If the Indemnifying Party has the right, but does not assume
control of defense of any claim in accordance with this section 11.04, then
the Indemnifying Party may nonetheless participate (at its own expense) in
the defense of such claim and the Indemnified Party will consult with the
Indemnifying Party in respect of such defense. If the Indemnifying Party
has the right and does assume control of defense of any claim in accordance
with this section 11.04, then the Indemnified Party may nonetheless
participate (at its own expense) in the defense of such claim and the
Indemnifying Party will consult with the Indemnified Party in respect of
such defense.
(e) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with paragraph 11.04(b) above, (i) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (ii) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
ARTICLE XII
GENERAL PROVISIONS
12.01 Non-Survival of Representations, Warranties and Certain
Covenants. The respective representations, warranties and covenants of the
parties in this Agreement shall expire with, and be terminated and extinguished
upon, consummation of the Asset Sale or termination of this Agreement, and,
except as otherwise provided in Section 10.03(c), thereafter neither Seller,
Purchaser nor any of their respective
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officers, directors or employees shall have any liability whatsoever with
respect to any such representation, warranty or covenant. Notwithstanding
anything to the contrary herein, the obligations of the parties set forth in
Article X, Article XI and Article XII shall survive the consummation of the
Asset Sale. This section 12.01 shall have no effect upon any other obligation of
the parties hereto, whether to be performed before or after consummation of the
transactions contemplated by this Agreement.
12.02 Notices. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made upon receipt, if delivered personally, on the third business day
following deposit in the U.S. mail if mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or when sent by electronic transmission to the telecopier
number specified below with receipt acknowledged:
(a) If to Purchaser:
CMI Corporation
I-40 and Morgan Road
P.O. Box 1985
Oklahoma City, OK 73101
Telecopier No. 405-491-2417
Attention: Mr. Jim D. Holland, Senior Vice President
With a copy to:
Hartzog Conger & Cason
1600 Bank of Oklahoma Plaza
201 Robert S. Kerr
Oklahoma City, OK 73102
Telecopier No. 405-235-7329
Attention: John Robertson, Esq.
(b) If to Seller:
Rexworks Inc.
445 West Oklahoma Avenue
Milwaukee, WI 53207
Facsimile: 414-747-7345
Attention: Mr. Laurance R. Newman, President and
Chief Executive Officer
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
Telecopier No: 414-298-8097
Attention: James M. Bedore, Esq.
12.03 Amendment. This Agreement may be amended by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Closing; provided, however, that after approval of this Agreement by the
stockholders of Seller, no amendment may be made without further approval of
such stockholders, which amendment would reduce the amount or change the type of
consideration to be received by Seller upon consummation of the Asset Sale. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
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12.04 Waiver. At any time prior to the Closing, any party may (a) extend
the time for the performance of any of the obligations or other acts of any
other party, (b) waive any inaccuracies in the representations and warranties of
any other party contained in this Agreement or in any document delivered
pursuant to this Agreement, or (c) waive compliance by any other party with any
of the agreements or conditions contained in this Agreement. Notwithstanding the
foregoing, no failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
12.05 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.
12.06 Severability. If any term or other provision of this Agreement is
finally adjudicated by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
12.07 Entire Agreement. This Agreement (together with the Purchaser's
Confidentiality Agreement, the Exhibits, the disclosure schedules to this
Agreement and the other documents delivered pursuant hereto), constitutes the
entire agreement of the parties and supersedes all prior agreements and
undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof including, without limitation, that certain
letter of intent dated August 15, 1997 between Purchaser and Seller.
12.08 Assignment. This Agreement shall not be assigned, whether by
operation of law or otherwise, without the prior written consent of the parties
hereto. Notwithstanding the preceding sentence, Purchaser may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases Purchaser nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
12.09 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of and be enforceable by each party and its respective
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
12.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law,
provided, however, that if any court of competent jurisdiction determines not to
construe this Agreement in accordance with the laws of the State of Delaware,
then this Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oklahoma, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
12.11 Counterparts. This Agreement may be executed by facsimile and in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
12.12 Press Releases and Public Announcements. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in
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which case the disclosing party will use its reasonable best efforts to advise
the other party prior to making the disclosure).
12.13 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
12.14 Employees. Purchaser shall not assume and shall not be deemed to have
assumed any obligation in respect of any employee of Seller or its Subsidiaries,
any employee benefit plans or any other similar obligations (including, but not
limited to wages, severance pay and vacation pay) of Seller or its Subsidiaries
to their employees who are employed at or in connection with the Divisions or
otherwise. Purchaser shall not assume and shall not be deemed to have assumed
any employee insurance or benefit plan or formal or informal practice maintained
by or contributed to by Seller or its Subsidiaries.
12.15 WARN. Seller shall be responsible for all notices and liabilities
required under WARN.
12.16 Access. From the date of this Agreement until the Closing Date,
Seller shall, and Seller shall cause each of its Subsidiaries to, afford
Purchaser and its representatives full and complete access to the books and
records, financial statements, tax returns and tax records, facilities,
employees and such other information of Seller and its Subsidiaries as Purchaser
may reasonably request to evaluate the business, operations, properties, assets,
liabilities and prospects of the Divisions. In connection therewith,
representatives of Purchaser shall be entitled to consult with the
representatives, officers and employees of Seller and its Subsidiaries. Such
access to information and any such consultations shall be conducted in a manner
not to unreasonably interfere with the operation of the business of Seller and
its Subsidiaries.
12.17 Bulk Sales. The parties acknowledge that it is the intent of the
parties to comply with the terms of the Wisconsin Bulk Sales Act. Seller shall
use all reasonable efforts to take or cause to be taken all appropriate action,
and do or cause to be done all things necessary, proper or advisable, to comply
with the terms of the Wisconsin Bulk Sales Act.
12.18 Litigation Support. In the event and for so long as Purchaser is
contesting or defending any action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand in connection with any of the Assumed
Liabilities, Seller will use reasonable efforts to cooperate with Purchaser and
its counsel in the contest or defense, make available its personnel and provide
such testimony and access to its books and records that shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of Purchaser.
12.19 Use of Marketing Materials. For a period of one year after the
Closing Date, Purchaser shall be entitled to use without charge any and all of
the current stock of sales and marketing materials used by Seller in connection
with the operation of the Divisions, but solely to the extent permitted by the
Agreement regarding trademarks dated April 23, 1982 between Rexnord, Inc. and
Seller.
12.20 Further Assurances. After the Closing, Seller shall from time to
time, at the request of Purchaser and at Purchaser's sole cost and expense,
execute and deliver to Purchaser such other instruments of conveyance and
transfer and take such other action as Purchaser may reasonably request so as to
more effectively transfer, assign and deliver and vest in Purchaser title to the
Purchased Assets as provided in this Agreement.
REXWORKS INC.
BY /s/ Thomas D. Lauerman
-------------------------------------
Thomas D. Lauerman, Vice President
Administration and Chief Financial
Officer
CMI CORPORATION
BY /s/ Jim D. Holland
-------------------------------------
Jim D. Holland, Senior Vice President
28
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EXHIBIT B
AGREEMENT AND PLAN OF MERGER
By and Among
GIUFFRE BROS. CRANES, INC.
13TH STREET ACQUISITION CORP.
and
REXWORKS INC.
August 15, 1997
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
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<C> <S> <C>
ARTICLE I
THE MERGER
1.01 The Merger.................................................. 1
1.02 Effective Time.............................................. 1
1.03 Effect of the Merger........................................ 1
1.04 Certificate of Incorporation; By-Laws....................... 1
1.05 Directors and Officers...................................... 1
1.06 Taking Necessary Action; Further Action..................... 2
1.07 The Closing................................................. 2
ARTICLE II
CONVERSION OF SECURITIES
2.01 Conversion of Securities.................................... 2
2.02 Dissenting Shares........................................... 2
2.03 Exchange of Certificates.................................... 3
2.04 Stock Options............................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 Organization and Qualification; Subsidiaries................ 4
3.02 Certificate of Incorporation; By-Laws....................... 5
3.03 Capitalization.............................................. 5
3.04 Authority; Vote Required.................................... 5
3.05 No Conflict; Required Filings and Consents.................. 6
3.06 Permits; Compliance......................................... 7
3.07 Reports; Financial Statements............................... 7
3.08 Absence of Certain Changes or Events........................ 7
3.09 Absence of Litigation....................................... 8
3.10 Contracts; No Default....................................... 8
3.11 Employee Benefit Plans; Labor Matters....................... 8
3.12 Taxes....................................................... 9
3.13 Intellectual Property Rights................................ 9
3.14 Insurance................................................... 9
3.15 Brokers..................................................... 9
3.16 Title to Properties......................................... 9
3.17 Labor Matters............................................... 10
3.18 Proxy Statement............................................. 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB
4.01 Organization and Qualification; Subsidiaries................ 10
4.02 Authority................................................... 10
4.03 No Conflict; Required Filings and Consents.................. 11
4.04 Ownership of Acquiror Sub; No Prior Activities.............. 11
4.05 Financing................................................... 11
</TABLE>
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<PAGE> 114
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE V
COVENANTS
5.01 Affirmative Covenants of the Company........................ 11
5.02 Negative Covenants of the Company........................... 12
5.03 Confidentiality Agreement................................... 13
5.04 Acquisition Proposals....................................... 13
5.05 Sale of Divisions........................................... 14
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Proxy Statement............................................. 14
6.02 Meeting of Shareholders..................................... 15
6.03 Appropriate Action; Consents; Filings....................... 15
6.04 Update Disclosure; Breaches................................. 16
6.05 Public Announcements........................................ 16
6.06 Indemnification............................................. 16
6.07 Obligations of Acquiror Sub................................. 17
6.08 Employee Benefits and Compensation.......................... 17
ARTICLE VII
CLOSING CONDITIONS
7.01 Conditions to Obligations of Each Party Under This
Agreement................................................... 17
7.02 Additional Conditions to Obligations of Acquiror and
Acquiror Sub................................................ 18
7.03 Additional Conditions to Obligations of the Company......... 20
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination................................................. 21
8.02 Effect of Termination....................................... 22
8.03 Expenses.................................................... 22
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations and Warranties.............. 23
9.02 Notices..................................................... 23
9.03 Amendment................................................... 23
9.04 Waiver...................................................... 24
9.05 Headings.................................................... 24
9.06 Severability................................................ 24
9.07 Entire Agreement............................................ 24
9.08 Assignment.................................................. 24
9.09 Parties in Interest......................................... 24
9.10 Governing Law............................................... 24
9.11 Counterparts................................................ 24
9.12 Press Releases and Public Announcements..................... 24
9.13 Construction................................................ 24
</TABLE>
ii
<PAGE> 115
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of August 15, 1997 (the
"Agreement"), is made and entered into among GIUFFRE BROS. CRANES, INC., a
Delaware corporation ("Acquiror"), 13TH STREET ACQUISITION CORP., a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Acquiror Sub") and
REXWORKS INC., a Delaware corporation (the "Company").
RECITAL
The respective Boards of Directors of Acquiror, Acquiror Sub and the
Company have determined that it is advisable and in the best interests of the
respective corporations and their shareholders that Acquiror Sub be merged with
and into the Company in accordance with the Delaware General Corporation Law
(the "Delaware Law") and the terms of this Agreement, pursuant to which the
Company will be the surviving corporation and will become a wholly-owned
subsidiary of Acquiror (the "Merger").
AGREEMENTS
In consideration of the representations, warranties, covenants and
agreements set forth in this Agreement, the parties agree:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware Law, at the Effective Time,
Acquiror Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Acquiror Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). Acquiror Sub and the Company are sometimes
collectively referred to in this Agreement as the "Constituent Corporations."
1.02 Effective Time. As promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in Article VII, the parties
shall cause the Merger to be consummated by filing the Certificate of Merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware in such form as required by, and executed in accordance with, the
relevant provisions of the Delaware Law and shall take all such further actions
as may be required by law to make the Merger effective upon the filing of the
Certificate of Merger (the date and time of such effectiveness being the
"Effective Time"); provided, however, that the Effective Time shall not be
earlier than November 1, 1997.
1.03 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Delaware Law. Without
limiting the generality of, and subject to the provisions of, the Delaware Law,
at the Effective Time, except as otherwise provided in this Agreement, all the
property, interests, assets, rights, privileges, immunities, powers and
franchises of Acquiror Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, duties and obligations of Acquiror Sub
and the Company shall become the debts, liabilities, duties and obligations of
the Surviving Corporation.
1.04 Certificate of Incorporation; By-Laws. At the Effective Time, the
Certificate of Incorporation, as amended by the amendments thereto set forth in
Exhibit A (which amendments shall become effective only at the Effective Time),
and the By-Laws of Acquiror Sub shall be the Certificate of Incorporation and
the By-Laws of the Surviving Corporation. The name of the Surviving Corporation
shall be Rexworks Inc.
1.05 Directors and Officers. The directors of Acquiror 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
Acquiror 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.
<PAGE> 116
1.06 Taking Necessary Action; Further Action. Acquiror, Acquiror Sub and
the Company, respectively, shall each use its reasonable efforts to take all
such action as may be necessary or appropriate to effectuate the Merger under
the Delaware Law at the time specified in section 1.02. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, interests, assets, rights,
privileges, immunities, powers and franchises of either of the Constituent
Corporations, the officers of the Surviving Corporation are fully authorized in
the name of each Constituent Corporation or otherwise to take, and shall take,
all such lawful and necessary action.
1.07 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Reinhart, Boerner,
Van Deuren, Norris & Rieselbach, s.c., 1000 North Water Street, Milwaukee,
Wisconsin 53202, or at such other place as the parties hereto shall mutually
agree, and will be effective at the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES
2.01 Conversion of Securities. At the Effective Time by virtue of the
Merger and without any further action on the part of Acquiror, Acquiror Sub, the
Company, the Surviving Corporation or the holders of any of the following
securities:
(a) each share of the common stock, $.12 par value, of the Company
("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than (i) shares of Company Common Stock owned by
Acquiror, Acquiror Sub or the Company or any direct or indirect subsidiary
of Acquiror, Acquiror Sub or the Company and (ii) any Dissenting Shares (as
defined in section 2.02)) shall be canceled and extinguished and be
converted into and become a right to receive a cash payment of $1.6139 per
share, without interest (the "Purchase Price" or the "Merger
Consideration"); provided, however, that the Purchase Price shall be
subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or other change in the number of shares of
Acquiror Common Stock outstanding;
(b) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Acquiror, Acquiror Sub
or the Company or any direct or indirect subsidiary of Acquiror, Acquiror
Sub or the Company shall be canceled and extinguished and no payment shall
be made with respect thereto;
(c) each share of common stock, $.01 par value, of Acquiror Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into one fully paid and nonassessable share of common stock, $.01 par
value, of the Surviving Corporation ("Surviving Corporation Common Stock");
and
2.02 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if
section 262 of the Delaware Law ("Subchapter 262") shall be applicable to
the Merger, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders
who have not voted such shares in favor of the Merger, who shall have
delivered, prior to any vote on the merger, a written objection to the
Merger in the manner provided in Subchapter 262 and who as of the Effective
Time, shall not have effectively withdrawn or lost such right to
dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to section
2.01, but the holders thereof shall be entitled only to such rights as are
granted by Subchapter 262. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Subchapter 262 shall
receive payment therefor from the Surviving Corporation in accordance with
the Subchapter 262; provided, however, that if any such holder of
Dissenting Shares shall have effectively withdrawn such holder's demand for
appraisal of such shares or lost such holder's right to appraisal and
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<PAGE> 117
payment of such shares under Subchapter 262, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares and each
such share shall thereupon be deemed, as of the Effective Time, to have
been canceled, extinguished and converted into and represent the right to
receive payment from the Surviving Corporation of the Merger Consideration
as provided in section 2.01.
(b) The Company shall give Acquiror (i) prompt notice of any written
demand for fair value, any withdrawal of a demand for fair value and any
other instrument served pursuant to Subchapter 262 received by the Company,
and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for fair value under such Subchapter 262. The Company
shall not, except with the prior written consent of Acquiror, voluntarily
make any payment with respect to any demand for fair value or offer to
settle or settle any such demand.
2.03 Exchange of Certificates.
(a) Prior to the Effective Time, Acquiror shall designate a bank or
trust company (the "Exchange Agent") to act as exchange agent in effecting
the exchange of the Merger Consideration for certificates representing
shares of Company Common Stock entitled to payment pursuant to section 2.01
(the "Certificates"). Immediately prior to the Effective Time, Acquiror
shall deposit with the Exchange Agent an amount equal to the aggregate
Merger Consideration (assuming there are no Dissenting Shares). The deposit
will consist of cash sufficient in the aggregate for the Exchange Agent to
make full payment of the Merger Consideration to the holders of all of the
outstanding shares of Company Common Stock. The Exchange Agent shall hold
such sums in escrow for the purposes set forth in section 2.01(b).
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of Certificates a letter of transmittal and
instructions for use in surrendering Certificates and receiving the
applicable Merger Consideration therefor. The form of the transmittal
letter shall have been prepared by Acquiror, subject to the approval of the
Company, prior to the Effective Time. Upon the surrender of each
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor an amount
equal to the applicable Merger Consideration multiplied by the number of
shares of Company Common Stock represented by such Certificate, and such
Certificate shall be canceled. Until so surrendered and exchanged, each
such Certificate shall represent solely the right to receive an amount
equal to the Merger Consideration multiplied by the number of shares of
Company Common Stock represented by such Certificate. No interest shall be
paid or accrued on the Merger Consideration upon the surrender of the
Certificates.
If any Merger Consideration is to be paid to a person other than the
person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
other similar taxes required by reason of the payment of such Merger
Consideration to a person other than the registered holder of the
Certificate surrendered, or such person shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
(c) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent's duties shall terminate and any portion of the
fund not disbursed pursuant to section 2.01(b) shall be released to the
Surviving Corporation. Thereafter, each holder of a Certificate may
surrender Certificates to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
exchange therefor an amount equal to the Merger Consideration multiplied by
the number of shares of Company Common Stock represented by such
Certificate, without any interest thereon, but shall have no greater rights
against the Surviving Corporation than may be accorded to general creditors
of the Surviving Corporation.
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<PAGE> 118
(d) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Company Common
Stock. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration, as provided in this Article II,
subject to applicable law in the case of Dissenting Shares.
2.04 Stock Options. At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (a "Company Stock Option") issued
pursuant to the Company's stock option plans described on Schedule 3.11(a)
(together, the "Company Stock Plans") shall be exercised by the holder or
canceled and extinguished in a manner to be agreed upon by Acquiror and the
Company, which shall not increase Acquiror's aggregate Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The term "Company Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
other similar changes or effects, is materially adverse to the condition
(financial or otherwise), results of operations, businesses, properties, assets,
or liabilities of the Company and its Subsidiaries, taken as a whole; provided,
however, that the occurrence of any or all of the changes or events described on
Schedule 3.00(a) shall not, individually or in the aggregate, constitute a
"Company Material Adverse Effect."
The term "Person" as used in this Agreement shall mean an individual,
corporation, partnership, association, trust, unincorporated organization, other
entity or group (as defined in section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act")).
The term "Affiliate" as used in this Agreement shall mean, with respect to
any Person, a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
first mentioned Person. The term "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
The term "Subsidiary" (or its plural) as used in this Agreement with
respect to the Company, Acquiror, the Surviving Corporation or any other person
shall mean any corporation, partnership, joint venture or other legal entity of
which the Company, Acquiror, the Surviving Corporation or such other Person, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, greater than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
With respect to any representation, warranty or statement of the Company in
this Agreement that is qualified by or to the Company's knowledge, such
knowledge shall be deemed to exist only if, at the time as of which such
representation, warranty or statement was made, any of the individuals listed on
Schedule 3.00(b) had actual knowledge of the matter to which such qualification
applies.
Except as set forth in the disclosure schedules delivered by the Company to
Acquiror and Acquiror Sub prior to the execution of this Agreement, the Company
makes the following representations and warranties to Acquiror and Acquiror Sub.
Notwithstanding anything in this Agreement to the contrary, any matter disclosed
in any part of the disclosure schedules shall be deemed to be disclosed in all
parts of the disclosure schedules where such matter is required to be disclosed,
regardless of whether such matter is specifically cross-referenced. The
disclosure of any matter in the disclosure schedules shall not necessarily be
deemed an indication that such matter is material or is required to be
disclosed.
3.01 Organization and Qualification; Subsidiaries. Except as set forth on
Schedule 3.01(a), each of the Company and its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under
4
<PAGE> 119
the laws of the jurisdiction of its incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary, except such jurisdictions if any, where the failure to
be so qualified would not have a Company Material Adverse Effect. A true and
complete list of all the Company's directly or indirectly owned Subsidiaries
together with the jurisdiction of incorporation or organization of each
Subsidiary and the percentage of each Subsidiary's outstanding capital stock or
other equity interest owned by the Company or another Subsidiary of the Company,
is set forth on Schedule 3.01(b).
3.02 Certificate of Incorporation; By-Laws. The Company has furnished to
Acquiror complete and correct copies of the Certificate of Incorporation and the
By-Laws, as amended or restated, of the Company and each of its Subsidiaries.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its Certificate of Incorporation or By-Laws, as amended or restated.
3.03 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 4,300,000 shares of Company Common Stock, of which
1,896,668 shares are issued and outstanding, 248,413 shares reserved for
issuance pursuant to the Company Stock Plans and 248,413 Company Stock
Options are outstanding.
(b) Information as of the date of this Agreement relating to the
amounts of the authorized and issued and outstanding capital stock of each
Subsidiary is listed on Schedule 3.03(b).
(c) No shares of Company Common Stock are reserved for any purpose
other than as described in this section 3.03. Since December 31, 1996, no
shares of Company Common Stock have been issued by the Company, except
pursuant to the exercise of outstanding Company Stock Options in accordance
with their terms. Except as contemplated by this Agreement or as described
on Schedule 3.03(c), there have been no changes in the terms of any
outstanding Company Stock Options or the grant of any additional Company
Stock Options since December 31, 1996. All outstanding shares of Company
Common Stock have been duly authorized and are validly issued, fully paid
and nonassessable and are not subject to preemptive rights under the
Delaware Law, the Company's Certificate of Incorporation or By-Laws or any
agreement to which the Company is a party. Each of the outstanding shares
of capital stock of, or other equity interests in, each of the Company's
Subsidiaries has been duly authorized and is validly issued, fully paid and
nonassessable, and such shares or other equity interests are owned by the
Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's voting rights, charges or other
encumbrances of any nature whatsoever, subject to federal and state
securities laws. Except as contemplated by this Agreement or described in
section 3.03(a) there are no options, warrants or other rights, agreements,
arrangements or commitments to which the Company or any of its Subsidiaries
is a party of any character relating to the issued or unissued capital
stock of, or other equity interests in, the Company or any of the
Subsidiaries or obligating the Company or any of the Subsidiaries to grant,
issue, sell or register for sale any shares of the capital stock of, or
other equity interests in, the Company or any of the Subsidiaries. Except
as set forth on Schedule 3.03(c), as of the date of this Agreement, there
are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of
Company Common Stock, or the capital stock of, or other equity interests
in, any Subsidiary of the Company, or (ii) provide funds to, or make any
investment in (in the form of a loan, capital contribution or otherwise),
or provide any guarantee with respect to the obligations of, any Subsidiary
of the Company, except for the provision of funds to, making an investment
in (in the form of a loan, capital contribution or otherwise) or provision
of any guarantees of obligations of Subsidiaries in the ordinary course of
business.
3.04 Authority; Vote Required.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions
5
<PAGE> 120
contemplated by this Agreement, subject to required shareholder approval.
The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action,
including such corporate action as may be required by section 251 of the
Delaware Law, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement (other than with respect to the approval of
this Agreement by the holders of Company Common Stock in accordance with
the Delaware Law and the Company's Certificate of Incorporation and
By-Laws). This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting the rights and remedies of creditors generally and
by general principles of equity including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether enforceability is considered in a
proceeding in equity or at law.
(b) The affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of capital stock of the Company necessary to approve
the Merger.
3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not: (i)
violate the Certificate of Incorporation or By-Laws of the Company or any
of its Subsidiaries; (ii) subject to [a] obtaining the requisite approval
of this Agreement by the holders of at least a majority of the outstanding
shares of Company Common Stock in accordance with the Delaware Law and the
Company's Certificate of Incorporation and By-Laws, [b] obtaining the
consents, approvals, authorizations and permits of, and making filings with
or notifications to, any governmental or regulatory authority, domestic or
foreign ("Governmental Entities"), pursuant to the applicable requirements,
if any, of the Securities Act of 1933 (the "Securities Act"), the Exchange
Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations thereunder (the "HSR Act"), the applicable
provisions of Delaware law and the rules and regulations thereunder, the
requirements of the National Association of Securities Dealers, Inc.
("NASD") or the NASDAQ National Market System, and the filing and
recordation of appropriate merger documents as required by the Delaware
Law, and [c] giving the notices and obtaining the consents, approvals,
authorizations or permits described on Schedule 3.05(a), violate any laws
applicable to the Company or any of its Subsidiaries or by which any of
their respective properties is bound, other than a potential violation
under any federal or state antitrust or similar laws, rules or regulations;
or (iii) except as set forth on Schedule 3.05(a), result in any breach of
or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries or any of their
respective properties is bound, except for such violations, breaches or
defaults as would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entities, except for applicable
requirements, if any, of (i) the Securities Act, the Exchange Act, the HSR
Act, and the requirements of the NASD and the NASDAQ National Market
System, (ii) the consents, approvals, authorizations or permits described
on Schedule 3.05(a), and (iii) the filing and recordation of appropriate
merger documents as required by the Delaware Law, except for any consent,
approvals, authorizations, permits, filings or notifications that, if not
obtained, would not have a Company Material Averse Effect.
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3.06 Permits; Compliance. Except as set forth on Schedule 3.06, each of the
Company and its Subsidiaries is in possession of all franchises, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary for the Company or any of its Subsidiaries to
own, lease and operate its properties or to carry on its business as it is now
being conducted (the "Company Permits"), except for any Company Permits the
absence of which would not have a Company Material Adverse Effect. To the
knowledge of the Company, no suspension, revocation or cancellation of any of
the Company Permits is pending or threatened. Neither the Company nor any of its
Subsidiaries is operating in default under or violation of (i) any law
applicable to the Company or any of its Subsidiaries or by which any of their
respective properties is bound or (ii) any of the Company Permits, except for
any such defaults or violations which would not have a Company Material Adverse
Effect.
3.07 Reports; Financial Statements.
(a) Since December 31, 1996, (i) the Company has filed all forms,
reports, statements and other documents required to be filed with [a] the
Securities and Exchange Commission (the "SEC") including, without
limitation, [i] all Annual Reports on Form 10-K, [ii] all Quarterly Reports
on Form 10-Q, [iii] all proxy statements relating to meetings of
shareholders (whether annual or special), [iv] all required Current Reports
on Form 8-K, [v] all other reports or registration statements and [vi] all
amendments and supplements to all such reports and registration statements,
which amendments and supplements have been, to the knowledge of the
Company, required to be filed (collectively, as amended or supplemented,
the "Company SEC Reports"), and [b] any applicable state securities
authorities; and (ii) the Company and each of its Subsidiaries have filed
all forms, reports, statements and other documents required to be filed
with any other applicable federal or state regulatory authorities, except
as set forth on Schedule 3.07(a) or where the failure to file such forms,
reports or statements would not have a Company Material Adverse Effect (all
such forms, reports, statements and other documents in clauses (i) and (ii)
of this section 3.07(a) being collectively referred to as the "Company
Reports"). Such Company SEC Reports and Company Reports do not contain any
untrue statement of a material fact or omit any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes to such statements) contained in the Company SEC
Reports (i) have been prepared in all material respects in accordance with
the published rules and regulations of the SEC and generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except to the extent required by changes in GAAP and as
may be indicated in the notes thereto) and (ii) fairly represent the
consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
(c) Except as and to the extent reflected on, or reserved against in,
the consolidated balance sheet of the Company and its Subsidiaries at
December 31, 1996, including all notes thereto (the "Company Balance
Sheet"), or as set forth on Schedule 3.07(c), neither the Company nor any
of its Subsidiaries has any liabilities or obligations (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected
on, or reserved against in, a balance sheet of the Company or in the notes
thereto, prepared in accordance with the published rules and regulations of
the SEC and GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1996 that, individually or
in the aggregate, would not have a Company Material Adverse Effect.
3.08 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports (or the notes thereto) or as contemplated by this Agreement,
since December 31, 1996:
(a) each of the Company and its Subsidiaries has conducted its
business in the ordinary course and consistent with the Company's past
practice;
(b) there has not been any Company Material Adverse Effect;
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(c) except as set forth on Schedule 3.08, neither the Company nor any
Subsidiary has made any material increase in compensation to officers or
key employees or any material increase in any or created any new bonus,
insurance, pension or other employee benefit plan, payment or arrangement
(including, but not limited to, the granting of stock options) other than
in the ordinary course of business and consistent with the Company's past
practice;
(d) neither the Company nor any Subsidiary has made any loans or
advances to any officer, director, shareholder or Affiliate of the Company
or of any Subsidiary (except for travel and business expense payments);
(e) there has not been any change in the accounting methods or
practices followed by the Company or any Subsidiary, except as required by
GAAP;
(f) the Company has not sold or disposed of material assets outside of
the ordinary course of business, other than the sale of assets pertaining
solely to the grinder and compactor divisions of the Company and those
assets listed on Schedule 5.05(a); and
(g) neither the Company nor any Subsidiary has entered into any
commitment or other agreement to do any of the foregoing.
3.09 Absence of Litigation.
(a) Schedule 3.09(a) lists all claims, actions, suits, litigation, or
arbitrations or, to the knowledge of the Company, investigations or
proceedings affecting the Company or any of its Subsidiaries, at law or in
equity, which are pending or, to the knowledge of the Company, threatened,
and which has had or would reasonably be expected to have a Company
Material Adverse Effect. There is no action pending seeking to enjoin or
restrain the Merger.
(b) Except as set forth on Schedule 3.09(b), neither the Company nor
any of its Subsidiaries is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with or, to
the knowledge of the Company, continuing investigation by, any Governmental
Entity.
3.10 Contracts; No Default. Schedule 3.10 lists each contract or agreement
to which the Company or any of its Subsidiaries is a party concerning a
partnership or joint venture with another Person or materially limiting the
right of the Company or any of its Subsidiaries prior to the Effective Time, or
Acquiror or any of its Subsidiaries at or after the Effective Time, to engage
in, or to compete with any Person in, any business including each contract or
agreement containing exclusivity provisions restricting the geographical area in
which, or the method by which, any business may be conducted by the Company or
any of its Subsidiaries prior to the Effective Time, or by the Acquiror or any
of its Subsidiaries after the Effective Time.
3.11 Employee Benefit Plans; Labor Matters.
(a) Schedule 3.11(a) lists or describes any pension, retirement,
savings, disability, medical, dental, health, life (including any
individual life insurance policy as to which the Company is the owner,
beneficiary or both), death benefit, group insurance, profit sharing,
deferred compensation, stock option, bonus incentive, vacation pay,
severance pay, "cafeteria" or "flexible benefit" plan under section 125 of
the Internal Revenue Code of 1986 as amended (the "Code"), or other
employee benefit plan, trust, arrangement, contract, agreement, policy or
commitment, under which employees of the Company or its Subsidiaries are
entitled to participate by reason of their employment with the Company or
its Subsidiaries, (i) to which the Company or a Subsidiary is a party or a
sponsor or a fiduciary thereof or (ii) with respect to which the Company or
a Subsidiary has made payments, contributions or commitments, or has any
liability (collectively, the "Employee Benefit Plans").
(b) The Employee Benefit Plans have been operated and administered by
the Company in compliance in all material respects with all applicable laws
relating to employment or labor matters, including without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
the Code.
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(c) Each Employee Benefit Plan that is intended to be tax qualified
under section 401(a) of the Code has received, or the Company has applied
for or will in a timely manner apply for, a favorable determination letter
from the Internal Revenue Service (the "IRS") stating that the Plan meets
the requirements of the Code and that any trust or trusts associated with
the plan are tax exempt under section 501(a) of the Code.
(d) The Company does not maintain any defined benefit plan covering
employees of the Company or its Subsidiaries within the meaning of section
3(35) of ERISA.
(e) Schedule 3.11(e) sets forth a list of all written employment
agreements, employment contracts or understandings relating to employment
(other than relating to "at-will" employment) to which the Company or any
of its Subsidiaries is a party.
3.12 Taxes. The Company has filed or caused to be filed with the
appropriate Governmental Entities, all federal, state, municipal, and local
income, franchise, excise, real and personal property, and other tax returns and
reports that are required to be filed, and the Company is not delinquent in the
payment of any material taxes shown on such returns or reports or on any
material assessments for any such taxes received by it and has otherwise
complied in all material respects with all legal requirements applicable to the
Company with respect to all income, sales, use, real or personal property,
excise or other taxes. The Company Balance Sheet includes adequate reserves for
the payment of all accrued but unpaid federal, state, municipal and local taxes
of the Company, including, without limitation, interest and penalties, whether
or not disputed, for the year ended December 31, 1996 and for all fiscal years
prior thereto. Except as set forth on Schedule 3.12, the Company has not
executed or filed with the Internal Revenue Service any agreement extending the
period for assessment and collection of any federal tax. The Company is not a
party to any pending action or proceeding, nor, to the knowledge of the Company,
has any action or proceeding been threatened, by any Governmental Entity for
assessment or collection of taxes, and no claim for assessment or collection of
taxes has been asserted against the Company.
3.13 Intellectual Property Rights. To the knowledge of the Company, the
Company and each of the Subsidiaries owns or possesses the right to use (in the
manner and the geographic areas in which they are currently used) all patents,
patents pending, trademarks, service marks, trade names, service names, slogans,
registered copyrights, trade secrets and other intellectual property rights it
currently uses, without any conflict or alleged conflict with the rights of
others, except where any such conflict would not have a Company Material Adverse
Effect.
3.14 Insurance. All policies and binders of insurance for professional
liability, directors and officers, property and casualty, fire, liability,
worker's compensation and other customary matters held by or on behalf of the
Company or its Subsidiaries ("Insurance Policies") have been made available to
Acquiror. The Insurance Policies are in full force and effect. To the knowledge
of the Company, the Company or its Subsidiaries have not failed to give any
notice of any claim under any Insurance Policy in due and timely fashion, nor to
the knowledge of the Company, has any coverage for claims been denied, which
failure or denial has had or would have a Company Material Adverse Effect.
3.15 Brokers. No broker, finder or investment banker other than The Chicago
Corporation is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon any
arrangements made by or on behalf of the Company.
3.16 Title to Properties.
(a) Schedule 3.16(a) lists all real property owned and leased by the
Company and its Subsidiaries. The Company and its Subsidiaries have good
title to all of their tangible properties and tangible assets, real and
personal, free and clear of all mortgage liens and free and clear of all
other liens, charges and encumbrances except liens for taxes not yet due
and payable, and such other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of
the property effected thereby or which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
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(b) To the knowledge of the Company, the leases for the real property
described on Schedule 3.16(a) are in full force and effect and the Company
holds a valid and existing leasehold interest under each of the leases. The
Company has delivered to Acquiror complete and accurate copies of each of
the leases described on Schedule 3.16.
(c) Neither the Company nor any Subsidiary is in violation of any
applicable material zoning ordinance or other law, regulation or
requirement relating to the operation of any properties used in the
operation of its business, which violation has had or would have a Company
Material Adverse Effect, and neither the Company nor any Subsidiary has
received any notice of any such violation, or the existence of any
condemnation proceeding with respect to any of its real property.
3.17 Labor Matters. Except for matters which will not cause a Company
Material Adverse Effect (a) the Company and its Subsidiaries are in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in any
unfair labor practice; (b) there is no unfair labor practice complaint against
the Company or its Subsidiaries pending before the National Labor Relations
Board; (c) there is no labor strike, dispute, slow down, representation campaign
or work stoppage actually pending or threatened against or effecting the Company
or its Subsidiaries; (d) no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is pending and no claim therefore has
been asserted against the Company or its Subsidiaries; and (e) neither the
Company nor its Subsidiaries are experiencing any material work stoppage.
3.18 Proxy Statement. The definitive Proxy Statement and related materials
will comply with the Exchange Act in all material respects. The definitive proxy
materials will not contain a untrue statement of material fact or omit a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they will be made, not misleading; provided,
however, that the Company makes no representation or warranty with respect to
any information that the Acquiror will supply for use in connection with such
proxy materials.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
The term "Acquiror Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
such other changes or effects, is materially adverse to the condition (financial
or otherwise), results of operations business, properties, assets or liabilities
of Acquiror and its Subsidiaries, taken as a whole.
Acquiror and Acquiror Sub jointly and severally represent and warrant to
the Company that:
4.01 Organization and Qualification; Subsidiaries. Each of Acquiror and
Acquiror Sub is a corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted.
4.02 Authority. Each of Acquiror and Acquiror Sub has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Acquiror and Acquiror
Sub, and the consummation by Acquiror and Acquiror Sub of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of Acquiror or Acquiror Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Acquiror and Acquiror Sub and constitutes a legal, valid and
binding obligation of Acquiror and Acquiror Sub enforceable against Acquiror and
Acquiror Sub in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws relating to or
affecting the rights and remedies of creditors generally and by general
principles of equity including, without
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limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance, injunctive relief or
other equitable remedies, regardless of whether enforceability is considered in
a proceeding in equity or at law.
4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror will not, (i) violate the Certificate of Incorporation or By-Laws
or equivalent organizational documents of Acquiror or Acquiror Sub, (ii)
subject to obtaining the consents, approvals, authorizations and permits
of, and making filings with or notifications to, any Governmental Entities
pursuant to the applicable requirements, if any, of the Securities Act, any
stock exchange or quotation service on which Acquiror's securities are
listed or quoted, the HSR Act and the filing and recordation of appropriate
merger documents as required by the Delaware Law, conflict with or violate
any laws applicable to Acquiror or Acquiror Sub or by which any of their
respective properties is bound or affected, except such as would not have
an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entities,
except as described in section 4.03(a) above.
4.04 Ownership of Acquiror Sub; No Prior Activities.
(a) Acquiror Sub was formed for the purpose of engaging in the
transactions contemplated by this Agreement. As of the Effective Time, all
of the outstanding capital stock of Acquiror Sub will be owned directly by
Acquiror. As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Acquiror
Sub has not and will not have incurred, directly or indirectly, through any
Subsidiary or Affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreement or arrangements with any Person.
4.05 Financing. Acquiror has the ability to and intends to finance the
aggregate of the amounts payable pursuant to Article II with cash on hand and
utilization of existing credit facilities. Acquiror will use its best efforts to
ensure the continued availability of such financing and pay such amounts in
accordance with the terms of this Agreement and will not take any action between
the date hereof and the Effective Time which would impair its ability to obtain
such financing.
ARTICLE V
COVENANTS
5.01 Affirmative Covenants of the Company. With respect to the mixer
division assets, operations, business and employees, the Company covenants and
agrees that prior to the Effective Time, unless otherwise contemplated by this
Agreement or consented to in writing by Acquiror, the Company will and will
cause each of its Subsidiaries to:
(a) operate its business in the ordinary course of business and
consistent with its past practice;
(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain the
relationships with its respective key customers and suppliers;
(c) subject to the provisions of the Acquiror Confidentiality
Agreement (as hereinafter defined), confer with Acquiror at its reasonable
request to report operational matters of a material nature and to report
the general status of the ongoing operations of the business of the Company
and its Subsidiaries;
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(d) Subject to the provisions of the Acquiror Confidentiality
Agreement, from the date hereof until the Closing Date, the Company (i)
will give, and will cause each of its Subsidiaries to give, Acquiror, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of the
Company and its Subsidiaries, (ii) will furnish, and will cause each
Subsidiary to furnish, to Acquiror, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information relating to the Company and the Subsidiaries as
such persons may reasonably request, and (iii) will instruct the employees,
counsel and financial advisors of the Company and the Subsidiaries to
cooperate in all reasonable respects with Acquiror in its investigation of
the Company and the Subsidiaries. From the date of this Agreement until the
Effective Time, upon reasonable request, Acquiror shall be permitted to
have one or more of its personnel at the Company's premises for purposes of
due diligence and review of the business of the Mixer Division.
Notwithstanding the foregoing, Acquiror shall not have access to
information, analyses and materials prepared for the Company by ABN AMRO
Chicago Corporation, personnel records, medical histories or other
information which in the Company's good faith opinion is sensitive or the
disclosure of which could subject the Company to risk of liability.
5.02 Negative Covenants of the Company. Except as contemplated by this
Agreement or consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time, the Company shall not do, and shall not
permit any of its Subsidiaries to do, any of the following:
(a) except as set forth on Schedule 5.02(a): (i) increase the
compensation payable to any director, officer or employee of the Company or
any of its Subsidiaries, except for increases in salary or wages payable or
to become payable in the ordinary course of business and consistent with
the policies currently in effect; (ii) grant any severance or termination
pay (other than pursuant to the severance policy and agreements of the
Company or its Subsidiaries currently in effect) to, or enter into any
severance agreement with, any director or officer; (iii) subject to clause
(i), enter into or amend any employment agreement with any director or
officer that would extend beyond the Effective Time except on an at-will
basis; or (iv) establish, adopt, enter into or amend any Employee Benefit
Plan, except as may be required to comply with applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its Subsidiaries'
capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or its Subsidiaries capital stock; (ii) effect
any reorganization or recapitalization; or (iii) split, combine or
reclassify any of its or its Subsidiaries' capital stock (except for the
issuance of shares upon the exercise of options or warrants in accordance
with their terms);
(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security
interests, liens, claims, pledges, limitations on voting rights, charges or
other encumbrances) of, any shares of any class of its or its Subsidiaries'
capital stock, any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire any such shares (except for the issuance of shares upon the
exercise of options or warrants in accordance with their terms), or amend
or otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms more favorable to the holders
thereof, except as contemplated by this Agreement;
(e) to the extent material, acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets of any other
Person (other than the purchase of assets from suppliers or vendors in the
ordinary course of business and consistent with the Company's past
practice);
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(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any material amount of any of its or its
Subsidiaries' assets (other than assets pertaining solely to the grinder
and compactor divisions and the assets listed on Schedule 5.05(a)), except
for dispositions in the ordinary course of business and consistent with the
Company's past practice;
(g) adopt any amendments to its Certificate of Incorporation or
By-Laws;
(h) except as set forth in Schedule 5.02(h); (i) change any of its
methods of accounting in effect at December 31, 1996 or (ii) make or
rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, or change any of its
methods of reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax returns
for the taxable year ending December 31, 1996, except in either case as may
be required by law, the IRS, or GAAP or in the ordinary course of business
consistent with past practice;
(i) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except as approved by Acquiror in advance; or
(j) agree in writing or otherwise to do any of the foregoing.
5.03 Confidentiality Agreement. The parties will, and will cause their
respective officers, employees, accountants, consultants, legal counsel and
other representatives to, comply with all of their respective obligations under
the Confidentiality Agreement entered into by the Company and Acquiror on
February 11, 1997 concerning the Company's confidential information (the
"Acquiror Confidentiality Agreement").
5.04 Acquisition Proposals. Upon execution of this Agreement, the Company
and its Subsidiaries and their respective officers, directors, employees, agents
and advisors will immediately cease any existing discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal
(as hereinafter defined). The Company may, directly or indirectly, furnish
information and access, in each case only in response to requests that were not
solicited by the Company (or any officer, director, employee, agent or advisor
on its behalf) after the date of this Agreement, to any corporation,
partnership, person or other entity or group (each, a "Potential Acquiror")
pursuant to confidentiality agreements, and may participate in discussions and
negotiate with a Potential Acquiror concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
Subsidiary or division of the Company, if such Potential Acquiror has submitted
a written proposal to the Board of Directors relating to any such transaction,
and the Board of Directors determines in good faith after consultation with
independent legal counsel that the failure to provide such information or access
or to engage in such discussions or negotiations would be inconsistent with
their fiduciary duties to the Company's shareholders under applicable law. The
Company shall notify Acquiror immediately if any such request or proposal, or
any inquiry or contact with any Person with respect thereto, is made and shall
keep Acquiror apprised of all developments that could reasonably be expected to
culminate in the Board withdrawing, modifying or amending its recommendation of
the Merger and the other transactions contemplated by this Agreement. The
Company has entered into confidentiality agreements with other third parties
substantially in the form of the Acquiror Confidentiality Agreement. The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party unless,
in the opinion of the Board of Directors after consultation with independent
legal counsel, the failure to provide such release or waiver would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable law. For purposes of this section 5.04, the term "Acquisition
Proposal" means any proposal or offer for a merger, consolidation or similar
combination (other than the Merger contemplated by this Agreement) involving the
Company or any Subsidiary and any Potential Acquiror, or any proposal or offer
to acquire a significant equity interest in the Company, or a significant
portion of the real estate or mixer division assets of the Company by a
Potential Acquiror.
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5.05 Sale of Divisions.
(a) Notwithstanding anything else in this Agreement to the contrary,
the parties agree that prior to the Effective Time the Company may enter
into an agreement (the "Purchase Agreement") with CMI Corporation
("Purchaser") for the sale of assets pertaining solely to the grinder and
compactor divisions of the Company, together with the assets listed on
Schedule 5.05(a) (collectively, the "Divisional Assets"). Such agreement
shall be substantially consistent with the terms of the Company's Letter of
Intent with Purchaser as reviewed by Acquiror. At or prior to Closing, the
Company shall distribute to its shareholders all of the proceeds of the
sale of the Divisional Assets, less the amount of all tax liabilities and
unpaid transaction expenses pertaining to such sales.
(b) If the Purchase Agreement is terminated prior to Closing or the
Company gives written notice to Acquiror that the Company does not
reasonably expect the sale of the Divisional Assets to Purchaser to be
consummated, then Acquiror, Acquiror Sub and the Company will execute, upon
request of the Company or Acquiror, an amendment to this Agreement (the
"Amendment") providing, in lieu of the Merger contemplated by this
Agreement, for the formation of a holding company as the sole shareholder
of the Company ("Holdco"), the transfer of the Divisional Assets to Holdco
and the sale of all of the outstanding shares of capital stock of the
Company by Holdco to Acquiror.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC a proxy statement and a
form of proxy to be sent to the shareholders of the Company in connection
with the meeting of the Company's shareholders to consider the Merger (the
"Shareholders' Meeting") (such proxy statement, together with any
amendments thereof or supplements thereto, in each case in the form or
forms mailed to the Company's shareholders, being the "Proxy Statement").
The Proxy Statement shall include the recommendation of the Company's Board
of Directors in favor of the Merger and approval of this Agreement, unless
outside legal counsel to the Company advise the Company's Board of
Directors that the directors' fiduciary duties under applicable law make
such recommendation inappropriate.
(b) The information included in the Proxy Statement shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to shareholders or at the time of the Shareholders'
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Shareholders'
Meeting, any event or circumstance relating to the Company or any of its
Subsidiaries, or its or their respective officers or directors, is
discovered by the Company which should be set forth in a supplement to the
Proxy Statement, the Company shall promptly inform Acquiror. All documents
that the Company is responsible for filing with the SEC in connection with
the transactions contemplated herein will comply as to form and substance
in all material respects with the applicable requirements of the Exchange
Act.
(c) The Acquiror will provide the Company with whatever information
and assistance in connection with the foregoing filings that the Company
reasonably may request.
(d) The Acquiror agrees as the sole shareholder of the Acquiror Sub to
vote in favor of the Merger and to take all actions that may be required to
approve the Merger and to effect the transactions contemplated by this
Merger Agreement on behalf of the Acquiror Sub.
(e) Each of the Parties will file (and the Company will cause each of
its Subsidiaries to file) any Notification and Report Forms and related
material that it may be required to file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice under
the HSR Act, will use its reasonable best efforts to obtain (and the
Company will cause each of its Subsidiaries to use
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its reasonable best efforts to obtain) an early termination of the
applicable waiting period, and will make (and the Company will cause each
of its Subsidiaries to make) any further filings pursuant thereto that may
be necessary, proper, or advisable.
6.02 Meeting of Shareholders. The Company shall take all action necessary
in accordance with the Delaware Law and its Certificate of Incorporation and
By-Laws to convene the Shareholders' Meeting, and the Company shall consult with
Acquiror in connection therewith. The Company shall use reasonable efforts to
solicit from the shareholders of the Company proxies in favor of the Merger and
shall take all other actions necessary or advisable to secure the vote or
consent of shareholders required by the Delaware Law to approve this Agreement,
including the retention of proxy solicitation agents if requested by Acquiror,
unless otherwise required by the applicable fiduciary duties of directors or
officers of the Company.
6.03 Appropriate Action; Consents; Filings.
(a) Subject to the terms and conditions herein provided, the Company,
Acquiror and Acquiror Sub shall use all reasonable efforts to (i) take, or
cause to be taken, all appropriate action, and do or cause to be done, all
things necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable, (ii) obtain from any Governmental
Entities any consents, licenses or orders required to be obtained by
Acquiror or the Company or any of their respective Subsidiaries in
connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement,
including, without limitation, the Merger, and (iii) make all necessary
notifications and filings and thereafter make any other required
submissions with respect to this Agreement and the Merger required under
[a] the Securities Act, the Exchange Act and any other applicable federal
or state securities laws, [b] the HSR Act, and [c] any other applicable
law; provided that Acquiror and the Company shall cooperate with each other
in connection with the making of all such filings. The Company and Acquiror
shall furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any
applicable law (including all information required to be included in the
Proxy Statement and Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) (i) The Company and Acquiror shall give (or cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause
their respective Subsidiaries to use, all reasonable efforts to obtain any
third-party consents, [a] necessary to consummate the transactions
contemplated in this Agreement, [b] disclosed or required to be disclosed
in the disclosure schedules to this Agreement, or [c] required to prevent a
Company Material Adverse Effect from occurring prior to the Effective Time.
(ii) In the event that any party shall fail to obtain any third-party
consent described in subsection (b)(i) above, such party shall use
reasonable efforts, and shall take any such actions reasonably requested by
the Company and Acquiror to minimize any adverse effect upon the Company,
its Subsidiaries and its businesses resulting, or which could reasonably be
expected to result after the Effective Time, from the failure to obtain
such consent.
(c) From the date of this Agreement until the Effective Time, the
Company shall promptly notify Acquiror in writing of any pending or, to the
knowledge of the Company, threatened action, proceeding or investigation by
any Governmental Entity or any other Person (i) challenging or seeking
material damages in connection with the Merger, (ii) alleging that the
consent of such Governmental Entity or Person may be required in connection
with the Merger or this Agreement, or (iii) seeking to restrain or prohibit
the consummation of the Merger or otherwise limit the right of Acquiror or,
to the knowledge of the Company, its Subsidiaries, to own or operate all or
any portion of the businesses or assets of the Company or its Subsidiaries.
(d) From the date of this Agreement until the Effective Time, Acquiror
shall promptly notify the Company in writing of any pending or, to the
knowledge of Acquiror, threatened action, proceeding or investigation by
any Governmental Entity or any other Person (i) challenging or seeking
material damages in connection with the Merger or (ii) seeking to restrain
or prohibit the consummation of the
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Merger or otherwise limit the right of Acquiror or its Subsidiaries to own
or operate all or any portion of the business or assets of the Company or
its Subsidiaries.
6.04 Update Disclosure; Breaches. From and after the date of this Agreement
until the Effective Time, each party shall promptly notify the other parties
hereto by written update to its disclosure schedules ("Update Schedule") of (a)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be reasonably likely to cause any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied, (b) the failure of the Company or Acquiror, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it pursuant to this Agreement which would be
reasonably likely to result in any condition to the obligations of any party to
effect the Merger and the other transactions contemplated by this Agreement not
to be satisfied, or (c) of any changes to the information contained in its
disclosure schedule (including any change to any representations or warranties
herein as to which no schedule has been created as of the date hereof but as to
which a schedule would have been required hereunder to have been created on or
before the date hereof if such change had existed on the date hereof).
6.05 Public Announcements. The parties to this Agreement shall consult in
good faith with each other before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement without the prior written
agreement of the other party, except as may be required by law or the
requirements of the New York Stock Exchange or the NASDAQ National Market.
6.06 Indemnification.
(a) From and after the Effective Time, Acquiror shall, and shall cause
the Surviving Corporation to, indemnify, defend and hold harmless the
present and former officers, directors, employees, agents and
representatives of the Company and its Subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring at or prior to
the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the fullest extent permitted or required
under the Delaware Law or other applicable state law (and shall also
advance reasonable expenses as incurred to the fullest extent permitted
under the Delaware Law or other applicable state law, provided that the
persons to whom expenses are advanced provides an undertaking to repay such
advances contemplated by the Delaware Law). Acquiror and Acquiror Sub agree
that all rights to indemnification, including provisions relating to
advances of expenses incurred in defense of any claim, action, suit,
proceeding or investigation (a "Claim") existing in favor of the
Indemnified Parties as provided in the Company's Certificate of
Incorporation or By-Laws or other agreement or provisions, as in effect as
of the date hereof, with respect to matters occurring through the Effective
Time, shall survive the Merger and shall continue in full force and effect.
(b) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Indemnified Parties may
retain counsel satisfactory to them (subject to approval by Acquiror and
the Surviving Corporation, which approval will not be unreasonably withheld
or delayed), (ii) Acquiror and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received subject to the ability of
Acquiror and the Surviving Corporation to receive such information relative
to the legal services provided as is customarily provided and reasonably
requested by Acquiror and the Surviving Corporation, and (iii) Acquiror and
the Surviving Corporation will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that neither Acquiror nor the
Surviving Corporation shall be liable for any settlement of any Claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld or delayed. Any Indemnified Party wishing to claim
indemnification under this section 6.06, upon learning of any such Claim,
shall notify Acquiror (but the failure so to notify Acquiror shall not
relieve it from any liability which it may have under this section 6.06
except to the extent such failure materially prejudices Acquiror). The
Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, as evidenced by the
written opinion of counsel reasonably
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acceptable to Acquiror and the Surviving Corporation, under applicable
standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(c) The Surviving Corporation shall use reasonable efforts to obtain
extended reporting endorsements on the fiduciary liability, professional
liability and directors and officers liability policies currently covering
the Company or any of its Subsidiaries or any of the Indemnified Parties,
and will submit to the applicable insurer a full and complete list of any
potential claims under the policy issued by such insurer. In the event the
Surviving Corporation is unable to obtain extended coverage under its
existing directors and officers liability insurance policies, Acquiror
shall use reasonable efforts to provide similar coverage for the
Indemnified Parties under policies then maintained by Acquiror; provided
that such similar coverage is available to Acquiror at a cost not
substantially higher than the Company's present coverage.
(d) This section 6.06 is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of Acquiror, Acquiror
Sub, the Company and the Surviving Corporation.
6.07 Obligations of Acquiror Sub. Acquiror shall take all action necessary
to cause Acquiror Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.08 Employee Benefits and Compensation. After the Effective Time, the
employee benefit plans of the Surviving Corporation shall recognize for
eligibility, vesting, accrual and all other purposes the credited service of
employees of the Company and its Subsidiaries credited as of the Effective Time
under the Company's Employee Benefit Plans on a basis that is consistent with
the manner in which the Employee Benefit Plans of the Company recognized such
employment for similar purposes.
ARTICLE VII
CLOSING CONDITIONS
7.01 Conditions to Obligations of Each Party Under This Agreement. The
respective obligations of each party to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
law:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved by the requisite vote of the shareholders of the Company.
(b) No Action or Proceeding. There shall not have been instituted and
there shall not be pending any action or proceeding by a Governmental
Entity, and no such action or proceeding shall have been approved by a
Governmental Entity with authority to institute such an action or
proceeding, before any court of competent jurisdiction or governmental
agency or regulatory or administrative body, and no order or decree shall
have been entered in any action or proceeding before such court, agency or
body of competent jurisdiction: (i) imposing or seeking to impose
limitations on the ability of Acquiror to acquire or hold or to exercise
full rights of ownership of any securities of the Company or any of its
Subsidiaries; (ii) imposing or seeking to impose limitations on the ability
of Acquiror to combine and operate the business and assets of the Company
with any of Acquiror's Subsidiaries or other operations; (iii) imposing or
seeking to impose other sanctions, damages or liabilities arising out of
the Merger on Acquiror, Acquiror Sub, the Company or any of their officers
or directors; (iv) requiring or seeking to require divestiture by Acquiror
of all or any material portion of the business, assets or property of the
Company and its Subsidiaries; or (v) restraining, enjoining or prohibiting
or seeking to restrain, enjoin or prohibit the consummation of the Merger,
in each case, with respect to clauses (i) through (iv) above, which would
or is reasonably likely to result in a Company Material Adverse Effect at
or prior to or after the Effective Time or, with respect to clauses (i)
through (v) above, which would or is reasonably likely to subject any of
their respective officers or directors to any penalty or criminal
liability. Notwithstanding the foregoing, prior to invoking the condition
set forth in this section 7.01(b), the party seeking to invoke
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it shall have used its reasonable efforts to have any such pending or
approved action or proceeding withdrawn or dismissed or such order or
decree vacated.
(c) HSR Act. The applicable waiting period, together with any
extensions thereof, under the HSR Act shall have expired or been
terminated.
(d) Other Approvals or Notices. All other consents, waivers, approvals
and authorizations required to be obtained from, and all filings or notices
required to be made with, any Governmental Entity by Acquiror or the
Company or any Subsidiary prior to consummation of the transactions
contemplated in this Agreement (other than the filing and recordation of
Merger documents in accordance with the Delaware Law) shall have been
obtained from and made with all required Governmental Entities, except for
such consents, waivers, approvals or authorizations which the failure to
obtain, or such filings or notices which the failure to make, would not
have a Company Material Adverse Effect prior to or after the Effective Time
or an Acquiror Material Adverse Effect before or after the Effective Time
or be reasonably likely to subject the Company, Acquiror, Acquiror Sub or
any of their respective Subsidiaries or any of their respective officers,
directors, employees, agents or representatives to substantial penalty or
criminal liability.
(e) Transfer of Divisional Assets. The sale of the Divisional Assets
to the Purchaser shall have been consummated on terms and conditions
reasonably satisfactory to the Company and Acquiror.
(f) Transfer of Real Property. The Company shall have completed the
transfer of the real property owned by the Company located at 445 West
Oklahoma Avenue, Milwaukee, Wisconsin and at 550 West Oklahoma Avenue,
Milwaukee, Wisconsin, to Acquiror, on terms and conditions reasonably
satisfactory to Company and the Acquiror, in exchange for the receipt by
the Company from Acquiror of immediately available funds in the amount of
$1,756,000.
(g) Fairness Opinion. The Company shall have received from ABN AMRO
Chicago Corporation an opinion, dated as of the date of the Proxy
Statement, to the effect that the consideration which the Company's
shareholders will receive pursuant to the Merger is fair to the Company's
shareholders from a financial point of view.
7.02 Additional Conditions to Obligations of Acquiror and Acquiror Sub. The
obligations of Acquiror and Acquiror Sub to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall have been true
and correct in all material respects when made and the information
contained therein, as updated by any Update Schedule, taken as a whole,
shall not have materially adversely changed; and each of the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects as of the Effective
Time. Acquiror shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, except to the extent failure to perform is
caused by or is consented to by Acquiror or Acquiror Sub. Acquiror shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company to that effect.
(c) Consents Under Agreements. The Company shall have obtained the
third-party consents described in subsection 6.03(b)(i), except those for
which the failure to obtain such consents and approvals would not have a
Company Material Adverse Effect prior to or after the Effective Time or an
Acquiror Material Adverse Effect before or after the Effective Time, other
than as contemplated by subsection 6.03(b)(ii).
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(d) Opinion of Counsel. The Acquiror and the Acquiror Sub shall have
received an opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c. counsel to the Company, addressed to Acquiror and Acquiror Sub, dated
as of the Effective Time, and reasonably satisfactory in form and substance
to Acquiror, Acquiror Sub and its counsel, to the following effect:
(i) The Company and each Subsidiary is a corporation existing under
the laws of the State of Delaware and, based solely on a certificate of
the Secretary of State of Delaware, [a] has filed with the Secretary of
State during its most recently completed report year the required annual
report; [b] is not the subject of a proceeding under the Delaware Law,
to cause its administrative dissolution; [c] no determination has been
made by the Secretary of State that grounds exist for such action with
respect to the Company or any Subsidiary; [d] no filing has been made
with the Secretary of State of a decree of dissolution with respect to
the Company or any Subsidiary; and [e] Certificate of Dissolution of the
Company or any Subsidiary have not been filed with the Secretary of
State. Immediately prior to the Effective Time, the Company was the sole
registered holder of record of the number of shares of stock or equity
interests in its Subsidiaries as is set forth in the Agreement and the
Company Disclosure Schedule with respect to section 3.03(b). The Company
and its Subsidiaries have the corporate power to carry on their
respective businesses as currently being conducted.
(ii) The Agreement and Plan of Merger (the "Agreement") is a legal,
valid and binding obligation of the Company [a] except as the Agreement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally; and [b] subject to general principles of equity
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance, injunctive relief or other equitable remedies, regardless
of whether considered in a proceeding in equity or at law. Counsel
expresses no opinion with respect to section 8.03(e) of the Agreement.
The execution, delivery and performance by the Company of the Agreement
have been duly authorized by all necessary corporation action, including
the requisite approval of the shareholders of the Company. Under the
Delaware Law and the Company's Certificate of Incorporation and By-Laws,
the Company's shareholders and Board of Directors properly approved the
Merger in accordance with the terms of the Agreement. Upon filing the
Certificate of Merger as contemplated by the Agreement, the Merger shall
be effective under Delaware law.
(iii) The execution and delivery of the Agreement and the
performance by the Company of its terms do not [a] contravene or
conflict with any provision of the Certificate of Incorporation or By-
Laws of the Company; or [b] violate any order, judgment or decree of any
Delaware or federal court or governmental instrumentality to which the
Company is subject and of which such counsel has knowledge.
(iv) The authorized capital stock of the Company consists of
4,300,000 authorized shares of Company Common Stock, par value $.12 per
share, of which, to the knowledge of such counsel, 1,896,668 shares are
issued and outstanding, fully paid and nonassessable. To the knowledge
of such counsel, the Company does not have outstanding any stock or
securities convertible into or exchangeable for any shares of capital
stock or any preemptive rights or other rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments, rights or claims of any other character relating to the
issuance of, any capital stock or any stock or securities convertible
into or exchangeable for any capital stock other than as set forth in
[a] the Certificate of Incorporation and [b] the Agreement or the
Disclosure Schedules. To the knowledge of such counsel, except as set
forth in the Certificate of Incorporation and as set forth in the
Agreement or the Disclosure Schedules, the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of capital stock of the Company.
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(v) There are no preemptive rights of stockholders under the
Certificate of Incorporation of the Company or as a matter of law under
the Delaware Law with respect to the Agreement or the Merger.
(vi) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Company or
any properties or rights of the Company by or before any court,
arbitrator or administrative or governmental body which questions the
validity of the Agreement or any action which has been or is to be taken
by the Company thereunder.
(e) Long-Term Debt. The Company's long-term debt, including any
current portions thereof, shall have been paid in full prior to the
Closing.
(f) Purchase Price. The aggregate Purchase Price payable pursuant to
Article II shall not be more than $200,000 higher than what the aggregate
Purchase Price would be if calculated as of the Closing Date in accordance
with the formula attached hereto as Exhibit B (the "Closing Date
Calculation"), provided that (i) the Closing Date Calculation will give
effect to any severance payments made by the Company on a net after-tax
basis by including the expected tax deduction that will accrue to the
Company as a result of such severance payments, and (ii) the value of any
inventory approved by Acquiror for inclusion in the calculation of the
Purchase Price as of the date of this Agreement will be the value of such
inventory for the Closing Date Calculation to the extent that the Company
retains such inventory on the Closing Date. Acquiror, however, may examine
the value of any inventory acquired by the Company after the date of this
Agreement. Prior to Closing, the parties will cooperate in preparing the
Closing Date Calculation to verify satisfaction of the foregoing condition.
Acquiror and the Company will endeavor in good faith to resolve any
disputes in the determination of the Closing Date Calculation. In the
absence of a resolution of the disputed items on the Closing Date, Acquiror
and the Company will promptly select an independent certified public
accountant (the "Independent Accountant") from a nationally recognized
public accounting firm to act as arbitrator to decide the disputed items
and to prepare the Closing Date Calculation. The Closing Date Calculation
as determined by the Independent Accountant will be conclusive and binding
on Acquiror and the Company. The fees and expenses of the Independent
Accountant will be divided equally between Acquiror and the Company.
7.03 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger and the other transactions contemplated in this
Agreement is also subject to the satisfaction at or prior to the Effective Time
of the following conditions, any or all of which may be waived, in whole or in
part;
(a) Representations and Warranties. Each of the representations and
warranties of Acquiror contained in this Agreement shall have been true and
correct in all material respects when made and the information contained
therein, as updated by any Update Schedule, taken as a whole, shall not
have materially adversely changed; and each other representations and
warranties of the Acquiror contained in this Agreement shall be true and
correct in all material respects as of the Effective Time. The Company
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Acquiror to that effect.
(b) Agreements and Covenants. Acquiror and Acquiror Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
each of them on or prior to the Effective Time. The Company shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have received an opinion of
Kranitz & Philipp, counsel to Acquiror and Acquiror Sub, addressed to the
Company, dated as of the Effective Time, and reasonably satisfactory in
form and substance to the Company and its counsel, to the following effect:
(i) Acquiror is a corporation existing in good standing under the
laws of the State of Delaware, based solely on a certificate of the
Delaware Secretary of State. Acquiror Sub is a corporation existing in
good standing under the laws of the state of Delaware, based solely on a
certificate of the Delaware Secretary of State. Acquiror owns, directly
or indirectly, all of the capital stock of Acquiror Sub.
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(ii) The execution, delivery and performance of the Agreement and
Plan of Merger (the "Agreement") has been duly authorized by all
requisite corporate action on the part of Acquiror and Acquiror Sub. The
Agreement constitutes the legally valid and binding obligations of
Acquiror and Acquiror Sub, enforceable in accordance with its terms,
subject to the following qualifications: [a] the enforceability against
Acquiror or Acquiror Sub of the Agreement in accordance with its terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally; [b] the
enforceability of the Agreement is subject to the effect of general
principles of equity and the possible unavailability of specific
performance or injunctive relief regardless of whether considered in a
proceeding in equity or at law; and [c] no opinion is expressed as to
any provision of the Agreement providing for the indemnification of
persons for liability under federal or other securities laws.
(iii) Exclusion and delivery of the Agreement and the performance
of the Acquiror of its terms do not [a] contravene or conflict with any
provision of the Certificate of Incorporation or By Laws of the
Acquiror; or [b] violate any order, judgment or decree of any Delaware
or federal court or governmental instrumentality to which the Company is
subject and of which such counsel has knowledge.
(iv) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Acquiror
or any properties or rights of Acquiror by or before any court,
arbitrator or administrative or governmental body which questions
suability of the Agreement or any action which has been or is to be
taken by the Acquiror thereunder.
(d) Toll Manufacturing Agreement. The Company, Acquiror, Acquiror Sub
and Purchaser shall have entered into a Toll Manufacturing Agreement in a
form reasonably satisfactory to the Company, Acquiror and Purchaser.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Merger by the shareholders of the Company:
(a) by mutual written consent of Acquiror and the Company;
(b) by either Acquiror or the Company in the event the conditions to
such party's (the "Nonfailing Party") obligations under Article VII shall
not have been met or waived by the Nonfailing Party on or prior to December
31, 1997, but only if the party terminating has not caused the condition
giving rise to termination to be not satisfied through its own action or
inaction;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
(d) by Acquiror, if (i) the Board of Directors of the Company
withdraws, modifies or changes in a manner materially adverse to Acquiror
its recommendation of this Agreement or Merger or shall have resolved to do
any of the foregoing, or (ii) the Board of Directors of the Company shall
have recommended to the shareholders of the Company any proposed
acquisition of the Company by any Person or any "group" (as such term is
defined under section 13(d) of the Exchange Act) other than Acquiror and
its Affiliates by [a] merger, consolidation, share exchange, business
combination or other similar transaction, [b] purchase of all or a
substantial part of the assets of the Company and its Subsidiaries, taken
as a whole, or [c] the acquisition of more than 50% of the Company's
outstanding equity securities (a "Competing Transaction") or resolved to do
so, or (iii) a tender offer or exchange offer for 50% or more of the
outstanding shares of capital stock of the Company is commenced, the Board
of Directors of the Company, within 10 business days after such tender
offer or exchange offer is so commenced, either fails to recommend against
acceptance of such tender offer or exchange offer by its
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shareholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its shareholders;
(e) by the Company if, in the exercise of its judgment as to its
fiduciary duties to its shareholders as imposed by applicable law and,
after consultation with and receipt of advice from outside legal counsel,
the Company's Board of Directors determines that such termination is
required by reasons of any Competing Transaction being made or proposed; or
(f) by either Acquiror or the Company, if any Update Schedule of the
other party contains disclosures of any fact or condition which makes
untrue, or shows to have been untrue, any representation or warranty by the
other party in this Agreement, unless concurrently with the delivery of the
Update Schedule, the other party represents and warrants that the disclosed
fact or condition can and will be corrected at the other party's expense
prior to the Effective Time; provided that the effect of the fact or
condition so disclosed upon the representation or warranty so affected
constitutes a Company Material Adverse Effect or Acquiror Material Adverse
Effect, as applicable.
8.02 Effect of Termination. Subject to the remedies of the parties set
forth in section 8.03(c), in the event of the termination of this Agreement
pursuant to section 8.01, this Agreement shall forthwith become void, and,
subject to sections 8.03(c) and (d) there shall be no liability under this
Agreement on the part of Acquiror, Acquiror Sub or the Company or any of their
respective officers or directors and all rights and obligations of each party
hereto shall cease. The Acquiror's Confidentiality Agreement shall survive any
termination of this Agreement.
8.03 Expenses.
(a) Except as provided in section 8.03(c), all Expenses incurred by
the parties shall be borne solely and entirely by the party which has
incurred the same. The Company shall pay for all Expenses related to
printing, filing and mailing the Proxy Statement and all SEC and other
regulatory filing fees incurred in connection with the Proxy Statement.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
shareholder approvals and all other matters related to the closing of the
transactions contemplated by this Agreement.
(c) The Company and Acquiror each agree that with respect to any
termination of this Agreement pursuant to section 8.01(b) as a direct
result of a material intentional breach by a party of any of its covenants
or agreements contained in this Agreement, all remedies available to the
other party either in law or equity shall be preserved and survive the
termination of this Agreement.
(d) If all conditions to the obligations of a party at Closing
contained in Article VII of this Agreement have been satisfied (or waived
by the party entitled to waive such conditions), and the other party does
not proceed with the Closing, all remedies available to the other parties,
either at law or in equity, on account of such failure to close, including,
without limitation, the right to seek specific performance of this
Agreement as well as the right to pursue a claim for damages on account of
a breach of this Agreement, shall be preserved and shall survive any
termination of this Agreement.
(e) The Company agrees that if this Agreement is terminated pursuant
to section 8.01(d) or section 8.01(e), Company shall pay to Acquiror the
sum of $400,000. Such payment shall be made as promptly as practicable but
in no event later than the third business day following termination of this
Agreement and shall be made by wire transfer of immediately available funds
to an account designated by Acquiror. The Company and Acquiror each agree
that the payment provided for in section 8.03(e) shall be the sole and
exclusive remedy of Acquiror upon any termination of this Agreement as
described in section 8.03(e) and such remedies shall be limited to the sum
stipulated in section 8.03(e) regardless of the circumstances (including
willful or deliberate conduct) giving rise to such termination.
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ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations and Warranties. The respective
representations and warranties of the parties in this Agreement shall expire
with, and be terminated and extinguished upon, consummation of the Merger or
termination of this Agreement, and thereafter neither the Company, Acquiror nor
any of their respective officers, directors or employees shall have any
liability whatsoever with respect to any such representation or warranty. This
section 9.01 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after consummation of the Merger.
9.02 Notices. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made upon receipt, if delivered personally, on the third business day
following deposit in the U.S. mail if mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or when sent by electronic transmission to the telecopier
number specified below with receipt acknowledged:
(a) If to Acquiror or Acquiror Sub:
Giuffre Bros. Cranes, Inc.
6635 South 13th Street
Milwaukee, WI 53221
Telecopier No. 414-764-8180
Attention: Mr. Frank Giuffre, President
With a copy to:
Gordon F. Barrington, Esq.
224 North 76th Street
Suite 100
Wauwatosa, WI 53213
Telecopier No. 414-771-8030
(b) If to the Company:
Rexworks Inc.
445 West Oklahoma Avenue
Milwaukee, WI 53207
Facsimile: 414-747-7345
Attention: Mr. Laurance R. Newman, President and Chief Executive
Officer
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
Telecopier No: 414-298-8097
Attention: James M. Bedore, Esq.
9.03 Amendment. This Agreement may be amended by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Effective Time; provided, however, that after approval of this Agreement
by the shareholders of the Company, no amendment may be made without further
approval of such shareholders, which amendment would reduce the amount or change
the type of consideration into which each share of Company Common Stock shall be
converted pursuant to this Agreement upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
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9.04 Waiver. At any time prior to the Effective Time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
any other party, (b) waive any inaccuracies in the representations and
warranties of any other party contained in this Agreement or in any document
delivered pursuant to this Agreement, and (c) waive compliance by any other
party with any of the agreements or conditions contained in this Agreement.
Notwithstanding the foregoing, no failure or delay by either party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by a party or parties to be bound thereby.
9.05 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.
9.06 Severability. If any term or other provision of this Agreement is
finally adjudicated by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.07 Entire Agreement. This Agreement (together with the Acquiror's
Confidentiality Agreement, the Exhibits, the disclosure schedules to this
Agreement and the other documents delivered pursuant hereto), constitutes the
entire agreement of the parties and supersedes all prior agreements and
undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof. The parties hereby acknowledge that, no
party shall have the right to acquire or shall be deemed to have acquired shares
of common stock of the other party pursuant to the Merger until the consummation
thereof.
9.08 Assignment. This Agreement shall not be assigned, whether by operation
of law or otherwise.
9.09 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of and be enforceable by each party and its respective
successors, and nothing in this Agreement, express or implied, other than
pursuant to section 2.04 and sections 6.06 and 6.08 or the right to receive the
consideration payable in the Merger pursuant to Article II, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
9.11 Counterparts. This Agreement may be executed by facsimile and in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
9.12 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
9.13 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to
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any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including without
limitation.
REXWORKS INC.
By /s/ LAURANCE R. NEWMAN
-------------------------------------
Laurance R. Newman, President and
Chief Executive Officer
GIUFFRE BROS. CRANES, INC.
By /s/ FRANK GIUFFRE
-------------------------------------
Frank Giuffre, President
13TH STREET ACQUISITION CORPORATION
By /s/ FRANK GIUFFRE
-------------------------------------
Frank Giuffre, President
25
<PAGE> 140
EXHIBIT C
[LETTERHEAD OF ABN AMRO CHICAGO CORPORATION]
October 3, 1997
The Board of Directors
Rexworks Inc.
445 West Oklahoma Avenue
Milwaukee, Wisconsin 53201
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view and as of the date hereof, to the stockholders of Rexworks Inc. (the
"Company") of the aggregate consideration to be received by such stockholders
pursuant to the terms of (i) the Asset Purchase Agreement dated as of October 1,
1997 by and among the Company and CMI Corporation ("CMI"); (ii) a Commercial
Offer to Purchase to be signed at or immediately prior to closing by and among
the Company, Giuffre Bros. Cranes, Inc. ("Giuffre") and a direct wholly-owned
subsidiary of Giuffre; and (iii) the Agreement and Plan of Merger dated as of
August 15, 1997 by and among the Company, Giuffre and 13th Street Acquisition
Corp., a direct wholly-owned subsidiary of Giuffre (collectively, the
"Agreements").
The Agreements provide for (i) the sale by the Company to CMI of the assets
and business of the Company's business segments which are engaged in the
manufacture and sale of landfill/embankment compactors and material reduction
grinders (the "Segments") for cash consideration together with the assumption of
and agreement to pay substantially all of the liabilities relating to the
Segments; (ii) the sale by the Company to a wholly-owned subsidiary of Giuffre
of certain real property located at 445 West Oklahoma Avenue, Milwaukee,
Wisconsin (the "Real Estate") for cash consideration; and (iii) the merger of a
wholly-owned subsidiary of Giuffre into the Company (the "Merger") pursuant to
which each outstanding share of common stock of the Company will be converted
into cash. The Agreements contemplate that the cash proceeds of the transactions
referred to in (i) and (ii) above (net of any outstanding indebtedness, tax
liabilities related to the sales and transaction-related expenses incurred by
the Company) (the "Distribution") will be distributed to the stockholders of the
Company prior to or simultaneously with the consummation of the Merger. As of
the date hereof, the Company estimates that such distribution, together with the
cash payments to be made to the Company's stockholders in connection with the
Merger, will result in the receipt of at least $5.00 per share by each
stockholder of the Company (the "Consideration") as a result of these
transactions (the "Transactions").
In connection with rendering this opinion, we have reviewed the Agreements
and certain related documents, and have held discussions with certain senior
officers, directors and other representatives and advisors of the Company
concerning the business, operations and prospects of the Company. We examined
certain publicly available business and financial information relating to the
Company, as well as certain financial forecasts and other data for the Company
which were provided to or otherwise discussed with us by the management of the
Company. We reviewed the financial terms of the Transactions as set forth in the
Agreements in relation to, among other things: (i) current and historical market
prices and trading volumes of Company's common stock; (ii) the Company's
historical and projected earnings and other operating data; and (iii) the
capitalization and financial condition of the Company. We also considered, to
the extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Transactions and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of the Company. In
connection with our engagement, we were requested to approach, and held
discussions with, certain third parties to solicit indications of interest in a
possible acquisition of the Company or its constituent businesses. In addition
to the foregoing, we conducted such other analyses and examinations and
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
<PAGE> 141
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us, and we have
not made or obtained, or assumed any responsibility for, an independent
verification of such information. Additionally, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries. With respect to the financial projections of the Company, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company. We have assumed
that the Transactions will be consummated in accordance with the terms of the
Agreements and the stockholders will receive the Consideration as discussed
above. We have further assumed that the Distribution will be treated for tax
purposes as a liquidating distribution, which would treat the Consideration
similarly to a sale of the stock of each stockholder. We are not expressing any
opinion as to the value attributable to any particular one of the Transactions
on an individual basis.
ABN AMRO Chicago Corporation ("AACC"), as part of its investment banking
business, is continually engaged in the valuation of businesses in connection
with mergers and acquisitions, as well as initial and secondary offerings of
securities and valuations for other purposes. We have acted as financial advisor
to the Board of Directors of the Company in connection with the Transactions and
will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the
Transactions. In the ordinary course of our business, AACC and its affiliates
may actively trade securities of the Company for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transactions and may not
be used for any other purpose or reproduced, disseminated, quoted or referred to
at any time in any manner or for any purpose without our prior written consent,
except that this letter may be used as part of any proxy statement filed
pursuant to the Transactions. This letter does not address the Company's
underlying business decision to enter into the Transactions or constitute a
recommendation to any shareholder as to how such shareholder should vote with
respect to the Transactions. Finally, our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us, as of the date hereof, and we assume no
responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof.
Based upon and subject to the foregoing, including the assumptions stated
above, it is our opinion that, as of the date hereof, the Consideration to be
received by the stockholders of the Company in connection with the Transactions
is fair to such stockholders from a financial point of view.
VERY TRULY YOURS,
/S/ ABN AMRO CHICAGO CORPORATION
ABN AMRO CHICAGO CORPORATION
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<PAGE> 142
EXHIBIT D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SEC.262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to sec. 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this section. As
used in this section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a non-stock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a non-stock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sections 251 (other than a merger effected pursuant to
subsection (g) of section 251), 252, 254, 257, 258, 263 or 264 of this title;
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of section 251 of this title.
(2) Notwithstanding the provisions of subsection (b)(l) of this
section, appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to sections 251, 252, 254, 257, 258, 263 and 264 of
this title to accept for such stock anything except
a. shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
<PAGE> 143
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e), shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal right
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with the
provisions of this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to section
228 or section 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or within
10 days thereafter, shall notify each of the stockholders entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within twenty days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within ten days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
ten days prior to the date the notice is given; provided that, if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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<PAGE> 144
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the Office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
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other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
4
<PAGE> 146
PROXY
REXWORKS INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lawrance R. Newman and Thomas D. Lauerman,
or either one of them, with full power of substitution and resubstitution, as
proxy or proxies of the undersigned to attend the Special Meeting of
Stockholders of Rexworks Inc. to be held on December 16, 1997 at 9:00 a.m.
local time, at the the Marriott Hotel, 375 South Moorland Road, Brookfield,
Wisconsin, and at any adjournment thereof, there to vote all shares of stock of
Rexworks Inc. which the undersigned would be entitled to vote if personally
present as specified upon the following matters and in their discretion upon
such other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and accompanying Proxy Statement, ratifies all that
said proxies or their substitutes may lawfully do by virtue hereof, and revokes
all former proxies.
Please sign exactly as your name appears hereon, date and return this Proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY TO
APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER AND TO APPROVE AND ADOPT THE
ASSET PURCHASE AGREEMENT. IF OTHER MATTERS COME BEFORE THE MEETING, THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES APPOINTED.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
REXWORKS INC. SPECIAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Approval and adoption of
Agreement and Plan of Merger dated
as of August 15, 1997 by and among
Giuffre Bros. Cranes, Inc., 13th
Street Acquisition Corp. and
Rexworks Inc. / / FOR / / AGAINST / / ABSTAIN
2. Approval and adoption of Asset
Purchase Agreement dated as of
October 1, 1997 by and between CMI
Corporation and Rexworks Inc. / / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the Proxies
are authorized to vote upon such
other matters as may properly come
before the meeting.
Address change? Date _____________________________________ NO. OF SHARES
MARK BOX / /
Indicate changes below: /_______________________________________________________/
Signature(s) in Box
If signing as attorney, executor,
administrator, trustee or guardian,
please add your full title as such. If
shares are held by two or more persons,
all holders must sign the Proxy.
</TABLE>
