<PAGE> 1
CORPORATE HEADQUARTERS
AUBURN HILLS, MICHIGAN 48326
CHAMPION ENTERPRISES INC., LOGO (810) 340-9090
September 24, 1996
Dear Fellow Shareholder:
I am pleased to inform you that on August 19, 1996, Champion Enterprises,
Inc. and Redman Industries, Inc. entered into a merger agreement under which
Redman will become a subsidiary of Champion and each Redman common share will be
converted into 1.24 Champion common shares.
At a Special Meeting of Shareholders of Champion to be held at the Hampton
Inn, 1461 North Opdyke Road, Auburn Hills, Michigan 48326 at 10:00 a.m. on
October 24, 1996, you will be asked to approve the issuance of Champion common
shares pursuant to the merger agreement. The merger is conditioned on the
approval of the share issuance by Champion's shareholders.
The Board of Directors has unanimously approved the merger agreement and
has determined that the merger contemplated by the merger agreement is fair to
and in the best interests of Champion and its shareholders. THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ISSUANCE OF SHARES IN THE MERGER.
The Board's recommendation is based on its belief that the merger will
deliver greater long-term value to Champion shareholders. The Board believes
that the combination will result in a number of strategic and financial
benefits, which will enhance the combined company's earnings potential. In
addition, Donaldson, Lufkin & Jenrette Securities Corporation has acted as
financial advisor to Champion in connection with the merger and has delivered
its written opinion dated August 19, 1996 to the Champion Board to the effect
that, based upon and subject to certain matters stated therein, as of the date
of such opinion, the exchange ratio is fair to Champion from a financial point
of view. The full text of the Donaldson, Lufkin & Jenrette written opinion,
which sets forth a description of the assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex B to the accompanying
Joint Proxy Statement and Prospectus and should be read carefully in its
entirety.
The transaction would bring together the high quality product lines and
distribution systems of each company into one strong organization. The Board
believes that the transaction will strengthen Champion's position in the West
and Southwest. Redman operates 18 manufactured housing facilities and sells
homes through over 1,400 independent retail locations. Champion operates 31
manufactured housing facilities and is represented by over 2,000 independent
retail locations.
It is expected that the combination of the businesses will provide growth
and profit opportunities. The Board believes that the combined companies will be
able to offer retailers a broader array of products and services, and will have
a stronger financial position due to enhanced cash flow and an improved balance
sheet, as more fully described in the attached Joint Proxy Statement and
Prospectus.
Details of the proposed merger and other important information concerning
Champion and Redman are contained in the Joint Proxy Statement and Prospectus.
Please give this material your careful attention.
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
postage-paid envelope. Your prompt cooperation will be greatly appreciated.
We are gratified by your continued support.
Sincerely yours,
/s/ WALTER R. YOUNG, JR.
Walter R. Young, Jr.
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 2
CHAMPION ENTERPRISES, INC.
------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 24, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Champion
Enterprises, Inc., a Michigan corporation ("Champion"), will be held on October
24, 1996 at 10:00 a.m., local time, at the Hampton Inn, 1461 North Opdyke Road,
Auburn Hills, Michigan 48326 and any adjournment or postponement thereof (the
"Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal for the issuance (the "Share
Issuance") of shares of common stock, par value $1.00 per share
("Champion Shares"), pursuant to an Agreement and Plan of Merger,
dated as of August 19, 1996 (the "Merger Agreement"), by and among
Redman Industries, Inc., a Delaware corporation ("Redman"),
Champion and RHI Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Champion ("Sub"). Upon the terms and
subject to the conditions of the Merger Agreement, Sub will be
merged (the "Merger") with and into Redman and Redman will become a
wholly owned subsidiary of Champion. In the Merger, and as more
fully described in the accompanying Joint Proxy Statement and
Prospectus and in the Merger Agreement included as Annex A thereto,
each share of common stock, par value $0.01 per share, of Redman
issued and outstanding immediately prior to the effective time of
the Merger will be converted into the right to receive 1.24
Champion Shares.
2. To transact such other business as may properly come before the
Special Meeting.
The close of business on September 23, 1996 has been fixed as the record
date for the determination of the shareholders entitled to notice of and to vote
at the Special Meeting.
Approval of the Share Issuance requires the affirmative vote of a majority
of the total votes cast by the holders of Champion Shares with respect to the
Share Issuance, provided that the total number of votes cast thereon represents
more than 50% of the outstanding Champion Shares entitled to vote on the Share
Issuance. Holders of Champion Shares do not have any appraisal rights in
connection with the Share Issuance.
Shareholders are invited to attend the Special Meeting. Whether or not you
expect to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. If you attend the meeting, you
may vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Special Meeting, you must obtain a letter from the
broker, bank or other nominee confirming your beneficial ownership of the shares
and bring it to the Special Meeting. In order to vote your shares at the Special
Meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By Order of the Board of Directors
Louis M. Balius
Secretary
Auburn Hills, Michigan
September 24, 1996
- --------------------------------------------------------------------------------
If you have any questions regarding your share ownership, please call Harris
Trust and Savings Bank, the transfer agent of Champion, at 312-461-7763. If
you have any questions regarding voting your shares, please call Morrow & Co.,
Inc., whom Champion has retained to assist in the solicitation of proxies, at
800-662-5200.
- --------------------------------------------------------------------------------
<PAGE> 3
REDMAN LOGO
September 24, 1996
Dear Fellow Stockholder:
I am pleased to inform you that on August 19, 1996, Redman Industries, Inc.
and Champion Enterprises, Inc. entered into a merger agreement under which
Redman will become a subsidiary of Champion and each Redman common share will be
converted into 1.24 Champion common shares. The transaction will be tax-free to
Redman stockholders.
At a Special Meeting of Stockholders of Redman to be held at the offices of
Redman, 2550 Walnut Hill Lane, Suite 200, Dallas, Texas 75229 at 10:00 a.m. on
October 24, 1996, you will be asked to vote upon the proposal to approve and
adopt the merger agreement. The merger is conditioned on the approval of the
merger agreement by Redman stockholders.
The Board of Directors has unanimously approved the merger agreement and
has determined the merger contemplated by the merger agreement is fair to and in
the best interests of Redman and its stockholders. THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AGREEMENT.
Dillon, Read & Co. Inc. has acted as financial advisor to Redman in
connection with the merger and has delivered its written opinion dated August
19, 1996 to the Redman Board to the effect that, based upon and subject to
certain matters stated therein, as of the date of such opinion, the exchange
ratio is fair to Redman stockholders from a financial point of view. The full
text of the Dillon Read written opinion, which sets forth a description of the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Annex C to the accompanying Joint Proxy Statement and Prospectus
and should be read carefully in its entirety.
The Redman Board believes that the merger offers Redman stockholders an
opportunity to participate in an entity that, following the merger, will have
greater financial flexibility and better opportunities for enhanced growth and
financial performance than Redman would have if it were to continue on a
stand-alone basis, as more fully described in the attached Joint Proxy Statement
and Prospectus.
Details of the proposed merger and other important information concerning
Redman and Champion are contained in the Joint Proxy Statement and Prospectus.
Please give this material your careful attention.
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
postage-paid envelope. Your prompt cooperation will be greatly appreciated.
We are gratified by your continued support.
Sincerely yours,
/s/ THOMAS W. STURGESS
Thomas W. Sturgess
Chairman of the Board
2550 Walnut Hill Lane, Suite 200
Dallas, Texas 75229
214/353-3600
<PAGE> 4
REDMAN INDUSTRIES, INC.
2550 WALNUT HILL LANE, SUITE 200
DALLAS, TEXAS 75229
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 24, 1996
---------------------
To The Stockholders of
Redman Industries, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Redman
Industries, Inc., a Delaware corporation ("Redman"), will be held on October 24,
1996 at 10:00 a.m., local time, at the offices of Redman, 2550 Walnut Hill Lane,
Suite 200, Dallas, Texas 75229 and any adjournment or postponement thereof (the
"Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of August 19, 1996 (the
"Merger Agreement"), by and among Redman, Champion Enterprises, Inc.,
a Michigan corporation ("Champion"), and RHI Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Champion
("Sub") and the transactions contemplated thereby. Upon the terms and
subject to the conditions of the Merger Agreement, Sub will be merged
(the "Merger") with and into Redman and Redman will become a wholly
owned subsidiary of Champion. In the Merger, and as more fully
described in the accompanying Joint Proxy Statement and Prospectus
and in the Merger Agreement included as Annex A thereto, each share
of common stock, par value $0.01 per share, of Redman ("Redman
Shares") issued and outstanding immediately prior to the effective
time of the Merger will be converted into the right to receive 1.24
shares of common stock, par value $1.00 per share, of Champion.
2. To transact such other business as may properly come before the
Special Meeting.
The close of business on September 23, 1996 has been fixed as the record
date for the determination of the stockholders entitled to notice of and to vote
at the Special Meeting.
The affirmative vote of a majority of the outstanding Redman Shares
entitled to vote at the Special Meeting is required to approve the Merger
Agreement. Holders of Redman Shares do not have rights of appraisal in
connection with the Merger.
Stockholders are invited to attend the Special Meeting. Whether or not you
expect to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. If you attend the meeting, you
may vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the Special Meeting, you must obtain a letter from the
broker, bank or other nominee confirming your beneficial ownership of the shares
and bring it to the Special Meeting. In order to vote your shares at the Special
Meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By Order of the Board of Directors
/s/ PAUL L. BARRETT
Paul L. Barrett
Secretary
Dallas, Texas
September 24, 1996
<PAGE> 5
Filed Pursuant to Rule 424(b)(3)
Registration Statement No.333-12351
CHAMPION ENTERPRISES, INC.
2701 UNIVERSITY DRIVE, SUITE 320
AUBURN HILLS, MICHIGAN 48326
REDMAN INDUSTRIES, INC.
2550 WALNUT HILL LANE, SUITE 200
DALLAS, TEXAS 75229
------------------------
JOINT PROXY STATEMENT AND PROSPECTUS
------------------------
This Joint Proxy Statement and Prospectus ("Joint Proxy Statement and
Prospectus") relates to a proposed merger pursuant to an Agreement and Plan of
Merger, dated as of August 19, 1996 (the "Merger Agreement"), by and among
Redman Industries, Inc., a Delaware corporation ("Redman"), Champion
Enterprises, Inc., a Michigan corporation ("Champion"), and RHI Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Champion ("Sub").
Upon the terms and subject to the conditions of the Merger Agreement, Sub
will be merged (the "Merger") with and into Redman and Redman will become a
wholly owned subsidiary of Champion. In the Merger, and as more fully described
in this Joint Proxy Statement and Prospectus and in the Merger Agreement, each
share of common stock, par value $0.01 per share, of Redman ("Redman Shares")
issued and outstanding immediately prior to the Merger (except as otherwise
provided in the Merger Agreement) will be converted into the right to receive
1.24 shares (the "Exchange Ratio") of common stock, par value $1.00 per share,
of Champion ("Champion Shares") and cash in lieu of any fractional share.
This Joint Proxy Statement and Prospectus constitutes the Prospectus of
Champion filed as part of a Registration Statement on Form S-4 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to up to 17,311,983 Champion Shares. Unless the context
otherwise requires, all references to Champion Shares in this Joint Proxy
Statement and Prospectus will include the associated preferred share purchase
rights issued pursuant to the rights agreement, dated January 9, 1996, between
Champion and Harris Trust and Savings Bank. This Joint Proxy Statement and
Prospectus also serves as the proxy statement of Redman relating to the
solicitation of proxies by its Board of Directors (the "Redman Board") for use
at a special meeting of Redman stockholders (including any adjournments or
postponements thereof) (the "Redman Special Meeting") to be held at 10:00 a.m.,
local time, on October 24, 1996. At the Redman Special Meeting, Redman
stockholders will consider and vote upon a proposal to approve and adopt the
Merger Agreement and the transactions contemplated thereby. In addition, this
Joint Proxy Statement and Prospectus serves as the proxy statement of Champion
relating to the solicitation of proxies by the Board of Directors of Champion
(the "Champion Board") for use at a special meeting of Champion shareholders
(including any adjournments or postponements thereof) (the "Champion Special
Meeting") to be held at 10:00 a.m., local time, on October 24, 1996. At the
Champion Special Meeting, Champion shareholders will consider and vote upon a
proposal to approve the issuance of Champion Shares in accordance with the terms
of the Merger Agreement (the "Share Issuance"). Approximately 16.5 million
Champion Shares will be issued in connection with the Merger and approximately
810,000 Champion Shares will be issuable upon exercise of Redman stock options.
See "TERMS OF THE MERGER -- Options." The consummation of the Merger is subject,
among other things, to: (i) the approval of the Share Issuance by the
affirmative vote of a majority of the Champion Shares cast thereon at the
Champion Special Meeting, provided that the total number of votes cast on such
proposal represents more than 50% of the outstanding Champion Shares entitled to
vote thereon at the Champion Special Meeting and (ii) the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of a majority of the outstanding Redman Shares entitled to vote
thereon at the Redman Special Meeting. A copy of the Merger Agreement is
attached hereto as Annex A.
Champion Shares are traded on the New York Stock Exchange ("NYSE"), the
Chicago Stock Exchange ("CSE") and the Pacific Stock Exchange ("PSE") under the
symbol "CHB" and Redman Shares are traded on The Nasdaq National Market
("Nasdaq") under the symbol "RDMN." The last reported sale prices were $18.38
per Champion Share as reported on the NYSE Composite Transactions Tape, and
$22.50 per Redman Share as reported on Nasdaq, on September 23, 1996 (the latest
practicable trading day before the printing of this Joint Proxy Statement and
Prospectus). See "SUMMARY OF JOINT PROXY STATEMENT AND PROSPECTUS -- The
Companies -- Trading Markets."
This Joint Proxy Statement and Prospectus and the accompanying form of proxy
are first being sent to Champion shareholders and Redman stockholders on or
about September 25, 1996.
------------------------
THE CHAMPION SHARES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement and Prospectus is September 24, 1996
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. iv
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... v
SUMMARY OF JOINT PROXY STATEMENT AND PROSPECTUS....................................... 1
The Companies....................................................................... 1
The Champion Special Meeting........................................................ 2
The Redman Special Meeting.......................................................... 3
The Proposed Merger................................................................. 4
Selected Historical Consolidated Financial Data of Champion......................... 9
Selected Historical Consolidated Financial Data of Redman........................... 11
Selected Unaudited Pro Forma Combined Financial Data of Champion.................... 12
Comparative Per Share Data of Champion and Redman................................... 13
Market Price and Dividends.......................................................... 15
THE CHAMPION SPECIAL MEETING.......................................................... 16
General............................................................................. 16
Purpose of the Champion Special Meeting............................................. 16
Record Date; Shares Outstanding..................................................... 16
Voting at the Champion Special Meeting.............................................. 16
Solicitation of Proxies............................................................. 17
Effect of Abstentions and "Broker Non-Votes"........................................ 17
Absence of Appraisal Rights......................................................... 17
THE REDMAN SPECIAL MEETING............................................................ 18
General............................................................................. 18
Purpose of the Redman Special Meeting............................................... 18
Record Date; Shares Outstanding..................................................... 18
Voting at the Redman Special Meeting................................................ 18
Solicitation of Proxies............................................................. 19
Effect of Abstentions and "Broker Non-Votes"........................................ 19
Absence of Appraisal Rights......................................................... 19
THE PROPOSED MERGER................................................................... 19
General............................................................................. 19
Background of the Merger............................................................ 20
Recommendation of the Board of Directors of Champion and Champion's Reasons for the
Merger........................................................................... 21
Opinion of Financial Advisor to Champion............................................ 21
Recommendation of the Board of Directors of Redman and Redman's Reasons for the
Merger........................................................................... 25
Opinion of Financial Advisor to Redman.............................................. 26
Plans for the Combined Company Following the Merger................................. 30
Certain Forward-Looking Information................................................. 31
Interests of Certain Persons in the Merger.......................................... 31
TERMS OF THE MERGER................................................................... 33
The Merger; Effective Time.......................................................... 33
Conversion of Securities............................................................ 34
Options............................................................................. 34
No Fractional Shares................................................................ 34
Exchange of Stock Certificates...................................................... 34
Directors and Officers of Redman.................................................... 35
Charter and By-laws of Redman....................................................... 35
Representations and Warranties...................................................... 35
Conduct of Business Pending the Merger.............................................. 35
Employee Benefits................................................................... 36
Severance Policy.................................................................... 36
New Directors....................................................................... 36
</TABLE>
ii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Sturgess Agreement.................................................................. 36
Pooling-of-Interests and Tax-Free Treatment......................................... 37
Other Acquisition Proposals......................................................... 37
Indemnification and Insurance....................................................... 37
Special Meetings.................................................................... 38
Conditions to the Merger............................................................ 38
Termination......................................................................... 39
Expenses............................................................................ 39
Termination Fee..................................................................... 40
Amendment and Waiver................................................................ 41
Regulatory Approvals................................................................ 41
Accounting Treatment................................................................ 41
Certain Federal Income Tax Consequences of the Merger............................... 42
Restrictions on Sales of Shares by Affiliates....................................... 43
NYSE Listing........................................................................ 43
Delisting of Redman Shares.......................................................... 43
Absence of Appraisal Rights......................................................... 43
NEW DIRECTORS OF CHAMPION............................................................. 43
COMPENSATION OF DIRECTORS............................................................. 45
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.................................... 46
COMPARISON OF RIGHTS OF CHAMPION SHAREHOLDERS AND REDMAN STOCKHOLDERS................. 58
Amendments to Charter............................................................... 58
By-laws............................................................................. 58
Board Classification................................................................ 58
Removal of Directors................................................................ 59
Newly Created Directorship and Vacancies............................................ 59
Vote Required for Mergers........................................................... 60
Anti-Takeover Provisions............................................................ 60
Dissenters' Rights.................................................................. 61
Limitation on Directors' Liability.................................................. 61
Indemnification..................................................................... 62
Shareholder/Stockholder Meetings.................................................... 62
Action by Written Consent........................................................... 62
Payment of Dividends................................................................ 63
Rights Plans........................................................................ 63
DESCRIPTION OF CHAMPION CAPITAL STOCK................................................. 64
General............................................................................. 64
Champion Shares..................................................................... 64
Champion Preferred Shares........................................................... 64
Preferred Share Purchase Rights..................................................... 64
Dividends........................................................................... 65
Anti-takeover Effects of Provisions of Champion's By-laws........................... 65
LEGAL MATTERS......................................................................... 65
EXPERTS............................................................................... 65
OTHER MATTERS......................................................................... 66
PROPOSALS OF CHAMPION SHAREHOLDERS AND REDMAN STOCKHOLDERS............................ 66
ANNEXES
ANNEX A MERGER AGREEMENT
ANNEX B OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ANNEX C OPINION OF DILLON, READ & CO. INC.
</TABLE>
iii
<PAGE> 8
No person has been authorized to give any information or to make any
representations in connection with the Merger or the other matters discussed in
this Joint Proxy Statement and Prospectus other than those contained or
incorporated by reference in this Joint Proxy Statement and Prospectus, and if
given or made, such information or representations should not be relied upon as
having been authorized by Champion, Sub or Redman. This Joint Proxy Statement
and Prospectus does not constitute an offer to sell, or a solicitation of an
offer to purchase, the securities offered by this Joint Proxy Statement and
Prospectus, or the solicitation of a proxy, in any jurisdiction to or from any
person to whom or from whom it is unlawful to make such offer, solicitation of
an offer or proxy solicitation in such jurisdiction. Neither the delivery of
this Joint Proxy Statement and Prospectus nor any distribution of securities
pursuant to this Joint Proxy Statement and Prospectus shall, under any
circumstances, create any implication that there has been no change in the
affairs of Champion, Sub or Redman since the date of this Joint Proxy Statement
and Prospectus or that the information contained herein is correct as of any
time subsequent to its date.
AVAILABLE INFORMATION
Champion and Redman are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Commission. Copies of such reports, proxy statements and other information can
be inspected and copied 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 following Regional Offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661. Copies of such material
can be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
material filed by Champion can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, the Chicago Stock
Exchange, Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605 and
the Pacific Stock Exchange Incorporated, 155 Sansome Street, San Francisco,
California 94104. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy statements and other information
regarding registrants that file electronically with the Commission.
Champion has filed with the Commission the Registration Statement under the
Securities Act with respect to the Champion Shares to be issued pursuant to the
Merger Agreement. This Joint Proxy Statement and Prospectus constitutes the
prospectus of Champion filed as part of the Registration Statement and does not
contain all the information set forth in the Registration Statement and exhibits
thereto, certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. Such additional information may be obtained from
the Commission's principal office in Washington, D.C. Statements contained in
this Joint Proxy Statement and Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
iv
<PAGE> 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission pursuant
to the Exchange Act are incorporated by reference in this Joint Proxy Statement
and Prospectus:
(1) Champion's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995.
(2) Champion's Quarterly Reports on Form 10-Q for the quarters ended
March 30, 1996 and June 29, 1996.
(3) Champion's Current Report on Form 8-K dated August 21, 1996.
(4) Champion's Current Report on Form 8-K/A dated July 9, 1996,
amending Champion's Current Report on Form 8-K dated May 10,
1996.
(5) Champion's Current Report on Form 8-K dated May 10, 1996.
(6) Champion's Current Report on Form 8-K dated April 11, 1996.
(7) Champion's Current Report on Form 8-K dated January 12, 1996.
(8) The description of Champion Shares contained in Champion's
Registration Statement on Form S-4 dated May 11, 1987, including
any amendments or reports filed for the purpose of updating such
description.
(9) Redman's Annual Report on Form 10-K for the fiscal year ended
March 29, 1996.
(10) Redman's Quarterly Report on Form 10-Q for the quarter ended June
28, 1996.
(11) Redman's Current Report on Form 8-K dated August 21, 1996.
All documents and reports filed by Champion or Redman pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement and Prospectus and prior to the date of the Champion Special Meeting
and the Redman Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such reports and
documents. Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy Statement and Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Joint Proxy Statement and Prospectus.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES BY REFERENCE
DOCUMENTS RELATING TO CHAMPION AND REDMAN WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE
WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF CHAMPION SHARES
OR REDMAN SHARES, TO WHOM THIS JOINT PROXY STATEMENT AND PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS RELATING TO
CHAMPION SHOULD BE DIRECTED TO GENERAL COUNSEL, CHAMPION ENTERPRISES, INC., 2701
UNIVERSITY DRIVE, SUITE 320, AUBURN HILLS, MICHIGAN 48326, TELEPHONE NUMBER
(810) 340-9090, AND REQUESTS FOR SUCH DOCUMENTS RELATING TO REDMAN SHOULD BE
DIRECTED TO GENERAL COUNSEL, REDMAN INDUSTRIES, INC., 2550 WALNUT HILL LANE,
SUITE 200, DALLAS, TEXAS 75229, TELEPHONE NUMBER (214) 353-3600. IN ORDER TO
ENSURE TIMELY DELIVERY OF ANY REQUESTED DOCUMENT, REQUESTS SHOULD BE MADE BY
FIVE BUSINESS DAYS PRIOR TO THE DATE OF THE CHAMPION SPECIAL MEETING AND THE
REDMAN SPECIAL MEETING.
All information contained in this Joint Proxy Statement and Prospectus
relating to Redman and its subsidiaries has been supplied by Redman and all
information relating to Champion and its subsidiaries has been supplied by
Champion.
v
<PAGE> 10
SUMMARY OF JOINT PROXY STATEMENT AND PROSPECTUS
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement and Prospectus, including the Annexes hereto, which
are a part of this Joint Proxy Statement and Prospectus. It is not, and is not
intended to be, complete in itself. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Joint Proxy Statement and Prospectus. Stockholders are encouraged to
read carefully all of the information contained in the Joint Proxy Statement and
Prospectus. Unless otherwise defined herein, capitalized terms used in this
summary have the respective meanings ascribed to them elsewhere in this Joint
Proxy Statement and Prospectus.
THE COMPANIES
CHAMPION...................... Champion is one of the fastest growing
companies in the manufactured housing industry
and is the second largest producer in the
United States. The company operates 31
manufactured housing facilities and is
represented by independent dealers at over
2,000 retail locations throughout the United
States and western Canada. Champion also
produces commercial buses through its
subsidiary Champion Motor Coach, Inc. Champion
sold 29,398 homes in 1995, of which 56 percent
were multi-section homes. The company has
nearly 6,000 employees in the U.S. and western
Canada. The principal executive offices of
Champion are located at 2701 University Drive,
Suite 320, Auburn Hills, Michigan 48326, and
its telephone number is (810) 340-9090. See
"AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
REDMAN........................ Redman is the third largest producer of
manufactured homes in the United States,
operating 18 manufactured housing facilities
and selling homes through independent dealers
at more than 1,400 retail locations in 40
states. Redman sold 24,557 homes during fiscal
year 1996, of which 53 percent were
multi-section homes. It has over 4,000
employees nationwide. The principal executive
offices of Redman are located at 2550 Walnut
Hill Lane, Suite 200, Dallas, Texas 75229, and
its telephone number is (214) 353-3600. See
"AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
RHI ACQUISITION CORP.......... Sub was incorporated in Delaware on August 13,
1996 solely for the purpose of consummating the
Merger and the other transactions contemplated
by the Merger Agreement. Sub has no assets and
no business and has carried on no activities
which are not directly related to its formation
and its execution of the Merger Agreement. Its
principal executive offices are located at 2701
University Drive, Suite 320, Auburn Hills,
Michigan 48326, and its telephone number is
(810) 340-9090.
TRADING MARKETS............... Champion Shares are traded on the NYSE, the CSE
and the PSE under the symbol "CHB" and Redman
Shares are traded on Nasdaq under the symbol
"RDMN." The last reported sale prices of
Champion Shares and Redman Shares on August 13,
1996, the last trading day prior to the public
announcement that Champion and Redman were
discussing the possibility of a merger at an
exchange ratio of 1.24 Champion Shares for each
Redman Share,
<PAGE> 11
were $19.88 per Champion Share, as reported on
the NYSE Composite Transactions Tape, and
$23.19 per Redman Share, as reported on Nasdaq.
The last reported sale prices of Champion
Shares and Redman Shares on August 19, 1996,
the last trading day prior to the public
announcement of the execution of the Merger
Agreement, were $21.63 per Champion Share, as
reported on the NYSE Composite Transactions
Tape and $25.75 per Redman Share, as reported
on Nasdaq. The last reported sale prices of
Champion Shares and Redman Shares on September
23, 1996, the latest practicable trading day
prior to the printing of this Joint Proxy
Statement and Prospectus, were $18.38 per
Champion Share, as reported on the NYSE
Composite Transactions Tape and $22.50 per
Redman Share, as reported on Nasdaq. See "--
Market Price and Dividends."
THE CHAMPION SPECIAL MEETING
TIME, DATE AND PLACE.......... The Champion Special Meeting will be held on
October 24, 1996 at 10:00 a.m., local time, at
the Hampton Inn, 1461 North Opdyke Road, Auburn
Hills, Michigan 48326. See "THE CHAMPION
SPECIAL MEETING -- General."
PURPOSE OF THE MEETING........ Champion shareholders will consider and vote
upon a proposal to approve the Share Issuance.
See "THE CHAMPION SPECIAL MEETING -- Purpose of
the Champion Special Meeting."
RECORD DATE................... Champion shareholders of record at the close of
business on September 23, 1996 (the "Champion
Record Date") are entitled to notice of and to
vote at the Champion Special Meeting. See "THE
CHAMPION SPECIAL MEETING -- Record Date; Shares
Outstanding."
VOTING RIGHTS................. Each Champion Share is entitled to one vote
with respect to all matters presented at the
Champion Special Meeting. See "THE CHAMPION
SPECIAL MEETING -- Voting at the Champion
Special Meeting."
VOTE REQUIRED................. Approval of the Share Issuance requires the
affirmative vote of a majority of the total
votes cast by Champion shareholders with
respect to the Share Issuance, provided that
the total number of votes cast thereon
represents more than 50% of the outstanding
Champion Shares entitled to vote on the Share
Issuance. Consummation of the Merger is
conditioned upon, among other things, the
approval of the Share Issuance by Champion
shareholders. See "THE CHAMPION SPECIAL MEETING
-- Voting at the Champion Special Meeting."
SHARE OWNERSHIP OF
MANAGEMENT.................... At the close of business on the Champion Record
Date, directors and executive officers of
Champion and their affiliates were the owners
of an aggregate of 1,455,892 Champion Shares
(approximately 4.7% of the outstanding shares)
and held options to purchase an aggregate of
2,247,600 Champion Shares. All directors and
executive officers of Champion are expected to
vote, or cause to be voted, all shares over
which they exercise voting control FOR the
approval of the Share Issuance. See "THE
CHAMPION SPECIAL MEETING -- Record Date; Shares
Outstanding."
2
<PAGE> 12
REVOCABILITY OF PROXY......... Any Champion shareholder who executes and
returns a proxy may revoke such proxy at any
time before it is voted by (i) filing with the
Secretary of Champion, at or before the
Champion Special Meeting, a written notice of
revocation bearing a later date than the proxy,
(ii) duly executing a subsequent proxy relating
to the same Champion Shares and delivering it
to the Secretary of Champion at or before the
Champion Special Meeting or (iii) attending the
Champion Special Meeting and voting in person
by ballot. Attendance at the Champion Special
Meeting will not in and of itself constitute
revocation of a proxy. See "THE CHAMPION
SPECIAL MEETING -- Voting at the Champion
Special Meeting."
THE REDMAN SPECIAL MEETING
TIME, DATE AND PLACE.......... The Redman Special Meeting will be held on
October 24, 1996 at 10:00 a.m., local time, at
the offices of Redman, 2550 Walnut Hill Lane,
Suite 200, Dallas, Texas 75229. See "THE REDMAN
SPECIAL MEETING -- General."
PURPOSE OF THE MEETING........ Redman stockholders will consider and vote upon
a proposal to approve and adopt the Merger
Agreement and the transactions contemplated
thereby. See "THE REDMAN SPECIAL MEETING --
Purpose of the Redman Special Meeting."
RECORD DATE................... Redman stockholders of record at the close of
business on September 23, 1996 (the "Redman
Record Date") are entitled to notice of and to
vote at the Redman Special Meeting. See "THE
REDMAN SPECIAL MEETING -- Record Date; Shares
Outstanding."
VOTING RIGHTS................. Each Redman Share is entitled to one vote with
respect to all matters presented at the Redman
Special Meeting. See "THE REDMAN SPECIAL
MEETING -- Voting at the Redman Special
Meeting."
VOTE REQUIRED................. The affirmative vote of holders of a majority
of the outstanding Redman Shares entitled to
vote is required to approve and adopt the
Merger Agreement and the transactions
contemplated thereby. Consummation of the
Merger is conditioned upon, among other things,
the approval and adoption of the Merger
Agreement by Redman stockholders. See "THE
REDMAN SPECIAL MEETING -- Voting at the Redman
Special Meeting."
SHARE OWNERSHIP OF
MANAGEMENT.................... At the close of business on the Redman Record
Date, directors and executive officers of
Redman and their affiliates were the owners of
an aggregate of 294,213 Redman Shares
(approximately 2.2% of the outstanding shares)
and held options to purchase an aggregate of
451,914 Redman Shares. All directors and
executive officers of Redman are expected to
vote, or cause to be voted, all shares over
which they exercise voting control FOR the
approval and adoption of the Merger Agreement.
See "THE REDMAN SPECIAL MEETING -- Record Date;
Shares Outstanding."
REVOCABILITY OF PROXY......... Any Redman stockholder who executes and returns
a proxy may revoke such proxy at any time
before it is voted by (i) filing a
3
<PAGE> 13
written notice of revocation with the Secretary
of Redman prior to the Redman Special Meeting,
(ii) presenting another executed proxy with a
subsequent date or (iii) attending and voting
in person at the Redman Special Meeting.
Attendance at the Redman Special Meeting will
not in and of itself constitute revocation of a
proxy. See "THE REDMAN SPECIAL MEETING --
Voting at the Redman Special Meeting."
THE PROPOSED MERGER
GENERAL....................... Upon the terms and subject to the conditions of
the Merger Agreement, Sub will be merged with
and into Redman, and Redman will become a
wholly owned subsidiary of Champion. See "THE
PROPOSED MERGER -- General."
EFFECTIVE TIME................ The Merger will become effective upon the
execution and filing of the Certificate of
Merger with the Secretary of State of the State
of Delaware in accordance with the Delaware
General Corporation Law or at such subsequent
date or time as shall be agreed by Champion and
Redman and be specified in the Certificate of
Merger (the "Effective Time"). The Merger will
be effective on a date (the "Closing Date") to
be specified by the parties to the Merger
Agreement, which will be no later than two
business days after satisfaction or waiver of
the conditions set forth in Article VI of the
Merger Agreement. See "TERMS OF THE MERGER --
The Merger; Effective Time."
CONVERSION OF SHARES.......... In the Merger, each Redman Share issued and
outstanding immediately prior to the Effective
Time (except as otherwise provided in the
Merger Agreement) will be converted into the
right to receive 1.24 Champion Shares. See
"TERMS OF THE MERGER -- Conversion of
Securities."
OPTIONS....................... At the Effective Time, each Redman Option
granted under the Redman Option Plans which is
outstanding and unexercised immediately prior
thereto will cease to represent a right to
acquire Redman Shares and will be adjusted into
an Adjusted Option to purchase a number of
Champion Shares equal to the product of (a) the
number of Redman Shares subject to the Redman
Option and (b) the Exchange Ratio, at an
exercise price equal to (x) the exercise price
per Redman Share under the Redman Option
divided by (y) the Exchange Ratio, and
otherwise subject to the terms of the
applicable Redman Option Plan and the
agreements evidencing grants thereunder. Each
Redman Option shall become immediately
exercisable upon consummation of the Merger
(subject, in the case of any incentive stock
options, to the consent of the holders
thereof). See "TERMS OF THE MERGER -- Options."
FRACTIONAL INTERESTS.......... Fractional interests of Champion Shares will
not be issued in the Merger. Redman
stockholders will be paid cash in lieu of such
fractional interests. See "TERMS OF THE MERGER
-- No Fractional Shares."
4
<PAGE> 14
RECOMMENDATION OF THE BOARD OF
DIRECTORS OF CHAMPION AND
CHAMPION'S REASONS FOR THE
MERGER........................ The Champion Board has reviewed the Merger
Agreement and the transactions contemplated
thereby, and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), financial
advisor to Champion, has delivered its written
opinion, dated August 19, 1996, to the Champion
Board (the "DLJ Opinion") to the effect that,
as of such date and based on, and subject to,
the assumptions, limitations and qualifications
set forth in such opinion, the Exchange Ratio
is fair to Champion from a financial point of
view. A copy of the DLJ Opinion is attached
hereto as Annex B. Champion shareholders are
urged to read the DLJ Opinion in its entirety
for assumptions made, procedures followed,
other matters considered and limits of the
review by DLJ. The Champion Board has reviewed
the terms and conditions of the Merger
Agreement and considered certain factors,
including the DLJ Opinion. After consideration
of each of these factors, the Champion Board
unanimously concluded that the Merger is fair
to and in the best interests of Champion and
its shareholders and unanimously approved the
Merger Agreement. THE CHAMPION BOARD
UNANIMOUSLY RECOMMENDS THAT CHAMPION
SHAREHOLDERS VOTE IN FAVOR OF THE APPROVAL OF
THE SHARE ISSUANCE AT THE CHAMPION SPECIAL
MEETING. See "THE PROPOSED MERGER --
Recommendation of the Board of Directors of
Champion and Champion's Reasons for the
Merger."
RECOMMENDATION OF THE BOARD OF
DIRECTORS OF REDMAN AND
REDMAN'S REASONS FOR THE
MERGER........................ The Redman Board has reviewed the Merger
Agreement and the transactions contemplated
thereby, and Dillon, Read & Co. Inc. ("Dillon
Read") has delivered its written opinion dated
August 19, 1996 to the Redman Board to the
effect that, based upon and subject to certain
matters stated therein, as of the date of such
opinion, the Exchange Ratio is fair to Redman
stockholders from a financial point of view.
The full text of the Dillon Read written
opinion, which sets forth a description of the
assumptions made, matters considered and
limitations on the review undertaken, is
attached as Annex C to the accompanying Joint
Proxy Statement and Prospectus and should be
read carefully in its entirety. The Redman
Board has reviewed the terms and conditions of
the Merger Agreement and considered certain
factors, including the opinion of Dillon Read.
After consideration of each of these factors,
the Redman Board unanimously concluded that the
Merger is in the best interests of Redman's
stockholders and unanimously approved the
Merger Agreement. THE REDMAN BOARD UNANIMOUSLY
RECOMMENDS THAT REDMAN STOCKHOLDERS VOTE IN
FAVOR OF THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AT THE REDMAN SPECIAL
MEETING. See "THE PROPOSED MERGER --
Recommendation of the Board of Directors of
Redman and Redman's Reasons for the Merger."
5
<PAGE> 15
A member of the Redman Board was unable to
attend meetings at which the Merger Agreement
was considered because of a medical condition.
Accordingly, all references in this Joint Proxy
Statement and Prospectus to the unanimous
approval or recommendation of the Redman Board
with respect to the Merger Agreement shall mean
that all members of the Redman Board, other
than such member of the Redman Board, concurred
in such approval or recommendation. See "THE
PROPOSED MERGER -- Recommendations of the Board
of Directors of Redman and Redman's Reasons for
the Merger."
OPINIONS OF FINANCIAL
ADVISORS...................... DLJ has delivered the DLJ Opinion to the
Champion Board to the effect that, as of the
date of such opinion and based on, and subject
to, the assumptions, limitations and
qualifications set forth in such opinion, the
Exchange Ratio is fair to Champion from a
financial point of view. A copy of the DLJ
Opinion is attached hereto as Annex B. Champion
shareholders are urged to read the DLJ Opinion
in its entirety for assumptions made,
procedures followed, other matters considered
and limits of the review by DLJ. See "THE
PROPOSED MERGER -- Opinion of Financial Advisor
to Champion." Dillon Read has delivered its
written opinion dated August 19, 1996 to the
Redman Board to the effect that, based upon and
subject to certain matters stated therein, as
of the date of such opinion, the Exchange Ratio
is fair to Redman stockholders from a financial
point of view. See "THE PROPOSED MERGER --
Opinion of Financial Advisor to Redman." The
full text of the Dillon Read written opinion,
which sets forth a description of the
assumptions made, matters considered and
limitations on the review undertaken, is
attached as Annex C to the accompanying Joint
Proxy Statement and Prospectus and should be
read carefully in its entirety.
INTERESTS OF CERTAIN PERSONS
IN THE MERGER................. Redman stockholders should be aware that
certain directors and members of management of
Redman may be deemed to have an interest in the
Merger in addition to their interests as Redman
stockholders. The Redman Board and the Champion
Board were aware of these interests and
considered them, among other matters, in
approving the Merger Agreement and in
recommending the Merger Agreement for
stockholder approval. See "THE PROPOSED MERGER
-- Interests of Certain Persons in the Merger."
NEW DIRECTORS OF CHAMPION..... Champion has agreed to create two additional
seats on the Champion Board and to cause Thomas
W. Sturgess, Chairman of Redman, and another
director of Redman to be elected to the
Champion Board. For a period of two years
following the Effective Time, Champion has
agreed to take, or cause to be taken, all
action necessary to nominate Mr. Sturgess and
such other director of Redman to the Champion
Board and, in accordance with its normal
solicitation efforts, solicit proxies for their
election to the Champion Board. See "NEW
DIRECTORS OF CHAMPION."
CONDITIONS TO THE MERGER...... The respective obligations of each party to
effect the Merger are subject to the
satisfaction at or prior to the Effective Time
of a
6
<PAGE> 16
number of conditions, including, without
limitation, the approval of the Merger
Agreement and the transactions contemplated
thereby by the requisite vote of Redman
stockholders at the Redman Special Meeting, the
approval of the Share Issuance by the requisite
vote of Champion shareholders at the Champion
Special Meeting and the expiration or
termination of the relevant waiting period
under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR
Act"). The waiting period under the HSR Act is
scheduled to expire at 11:59 p.m., New York
City time, on September 26, 1996. See "TERMS OF
THE MERGER -- Conditions to the Merger" and "--
Regulatory Approvals."
REGULATORY APPROVALS.......... Other than the expiration or termination of the
relevant waiting period under the HSR Act,
there are no regulatory approvals required by
any governmental authorities to consummate the
Merger.
TERMINATION; EXPENSES......... Notwithstanding the approval of the Share
Issuance by Champion shareholders or the
approval and adoption of the Merger Agreement
by Redman stockholders, under certain
circumstances, the Merger Agreement may be
terminated and the Merger abandoned prior to
the Effective Time. See "TERMS OF THE MERGER --
Termination." If Champion shareholders or
Redman stockholders do not approve the Merger
Agreement, upon termination of the Merger
Agreement such party may be required to
reimburse reasonable documented out-of-pocket
expenses, not to exceed $2 million, incurred by
the other party in connection with the
transactions contemplated in the Merger
Agreement. Under certain circumstances upon
termination of the Merger Agreement, a
termination fee of $9.1 million, plus
reasonable documented out-of-pocket expenses
incurred in connection with the transactions
contemplated in the Merger Agreement, may be
required to be paid by either party. See "TERMS
OF THE MERGER -- Expenses" and "-- Termination
Fee."
ACCOUNTING TREATMENT.......... It is intended that the Merger will be
accounted for as a pooling-of-interests in
accordance with generally accepted accounting
principles. See "TERMS OF THE MERGER --
Accounting Treatment."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER.... The Merger is intended to qualify as a
reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Redman's obligation to
effect the Merger is conditioned on the
delivery of an opinion from Weil, Gotshal &
Manges LLP, counsel to Redman, substantially to
the effect that, on the basis of facts,
representations and assumptions set forth in
such opinion, for federal income tax purposes
the Merger will constitute a reorganization
within the meaning of Section 368(a) of the
Code and no gain or loss will be recognized by
Redman stockholders upon the receipt of
Champion Shares in exchange for their Redman
Shares in connection with the Merger (except
with respect to cash received in lieu of
fractional Champion Shares). Each stockholder
is urged to consult such stockholder's tax
advisors as to the tax consequences of the
Merger
7
<PAGE> 17
to the stockholder under federal, state, local
or any other applicable law after taking into
account the stockholder's particular tax status
and attributes. See "TERMS OF THE MERGER --
Certain Federal Income Tax Consequences of the
Merger."
NYSE LISTING.................. Champion has agreed to use its reasonable
efforts to cause the Champion Shares to be
issued in connection with the Merger to be
approved for listing on the NYSE, subject to
official notice of issuance, prior to the
Effective Time. See "TERMS OF THE MERGER --
NYSE Listing" and "TERMS OF THE MERGER --
Conditions to the Merger."
ABSENCE OF APPRAISAL RIGHTS... Under the Michigan Business Corporation Act,
Champion shareholders will not be entitled to
any appraisal rights in connection with the
Share Issuance. Under the Delaware General
Corporation Law, Redman stockholders will not
be entitled to any appraisal rights in
connection with the Merger Agreement and the
transactions contemplated thereby. See "TERMS
OF THE MERGER -- Absence of Appraisal Rights."
COMPARISON OF RIGHTS OF REDMAN
STOCKHOLDERS AND CHAMPION
SHAREHOLDERS.................. Upon consummation of the Merger, Redman
stockholders will become Champion shareholders.
There are differences between the rights of
Redman stockholders and the rights of Champion
shareholders. These differences result from (i)
differences between Delaware and Michigan law,
and (ii) differences between the governing
instruments of Redman and Champion. For a
summary of certain differences between the
rights of Redman stockholders and the rights of
Champion shareholders, see "COMPARISON OF
RIGHTS OF CHAMPION SHAREHOLDERS AND REDMAN
STOCKHOLDERS."
8
<PAGE> 18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CHAMPION
The following selected financial information of Champion for the fiscal
years ended December 30, 1995, December 31, 1994, January 1, 1994, February 28,
1992 and March 1, 1991, and the 44 week period ended January 1, 1993, have been
derived from the audited consolidated financial statements of Champion. The
selected financial information of Champion for the six months ended June 29,
1996 and July 1, 1995 have been derived from Champion's unaudited interim
financial statements. The selected financial information for the fiscal years
ended January 1, 1993 and December 27, 1991 have been derived from Champion's
unaudited consolidated financial statements for the respective periods. Such
unaudited financial statements include all adjustments (consisting only of
normal recurring adjustments) that Champion considers necessary for a fair
presentation of the financial position and the results of operations for such
periods.
The selected financial information of Champion also reflects the effects of
the following material business combinations from the respective dates of
acquisition. Dutch Housing, Inc. was acquired effective January 28, 1994.
Chandeleur Homes, Inc. and Crest Ridge Homes, Inc. were acquired effective
February 3, 1995. Grand Manor, Inc. was acquired effective March 29, 1996. Homes
of Legend, Inc. was acquired effective April 26, 1996.
The selected financial information of Champion should be read in
conjunction with the other financial information, including the notes thereto,
contained herein and incorporated herein by reference. See "UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION," "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED
------------------- ----------------------------------------------------
JUNE 29, JULY 1, DEC. 30, DEC. 31, JAN. 1, JAN. 1, DEC. 27,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1995 1994 1994 1993 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................................... $449,608 $376,917 $797,871 $585,574 $328,326 $260,499 $236,800
Income (loss) from continuing operations........ 19,554 14,504 32,250 25,190 11,183 5,462 (1,950)
Net income (loss)............................... 19,554 14,504 32,250 27,098 11,183 2,869 (3,438)
Per share data(1):
Income (loss) from continuing operations...... 0.59 0.46 1.01 0.82 0.38 0.19 (0.07)
Net income (loss)............................. $ 0.59 $ 0.46 $ 1.01 $ 0.88 $ 0.38 $ 0.10 $ (0.13)
Weighted average shares outstanding(1).......... 33,126 31,558 31,926 30,932 29,108 28,376 27,116
BALANCE SHEET DATA:
Working capital................................. $(10,658) $ (5,780) $ 3,986 $ 18,753 $ 31,969 $ 21,945 $ 16,472
Total assets.................................... 323,788 238,608 235,939 171,230 94,912 76,146 81,884
Long-term liabilities........................... 32,612 24,679 18,349 12,857 6,880 5,868 11,261
Shareholders' equity............................ $134,124 $ 94,306 $113,103 $ 79,294 $ 45,922 $ 34,037 $ 31,157
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
44 WEEKS ENDED -----------------------------
JAN. 1, 1993 FEB. 28, 1992 MAR. 1, 1991
-------------- ------------- ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............................................................. $226,435 $ 236,385 $246,840
Income from continuing operations...................................... 4,821 804 1,591
Net income (loss)...................................................... 2,811 (615) (1,781)
Per share data(1):
Income from continuing operations.................................... 0.17 0.03 0.05
Net income (loss).................................................... $ 0.10 $ (0.02) $ (0.07)
Weighted average shares outstanding(1)................................. 28,176 27,816 27,176
BALANCE SHEET DATA:
Working capital........................................................ $ 21,945 $ 17,504 $ 15,456
Total assets........................................................... 76,146 81,293 84,878
Long-term liabilities.................................................. 5,868 10,740 12,447
Shareholders' equity................................................... $ 34,037 $ 31,355 $ 31,964
</TABLE>
9
<PAGE> 19
The following selected financial information of Champion for the six months
ended June 29, 1996 and July 1, 1995, and the year ended December 30, 1995 have
been derived from Champion's pro forma financial statements which include
Champion's historical results combined with the historical results for the
comparable periods of Homes of Legend, Inc. which was acquired effective April
26, 1996 and Grand Manor, Inc. which was acquired effective March 29, 1996
(together, the "1996 Acquisitions"), together with resulting pro forma
adjustments. The income statement data assumes that the acquisitions had taken
place at the beginning of the periods presented.
CHAMPION ENTERPRISES, INC.
(Based on pro forma results which includes 1996 Acquisitions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------- YEAR ENDED
JUNE 29, 1996 JULY 1, 1995 DEC. 30, 1995
------------- ------------ -------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................................ $ 483,219 $417,350 $ 889,672
Income from continuing operations........................................ 20,390 14,897 33,984
Net income............................................................... 20,390 14,897 33,984
Per share data(1):
Income from continuing operations...................................... 0.62 0.47 1.06
Net income............................................................. $ 0.62 $ 0.47 $ 1.06
Weighted average shares outstanding(1)................................... 33,141 31,573 31,956
</TABLE>
- -------------------------
(1) Weighted average shares outstanding and per share amounts adjusted to
reflect two-for-one stock splits effected May 31, 1996 and May 30, 1995.
10
<PAGE> 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF REDMAN
The following selected financial information for each of the fiscal years
in the five year period ended March 29, 1996 has been derived from the audited
consolidated financial statements of Redman. The selected financial data for the
three month periods ended June 28, 1996 and June 30, 1995 are derived from
Redman's unaudited interim consolidated financial statements. Such unaudited
interim consolidated financial statements include all adjustments (consisting
only of normal recurring adjustments) that Redman considers necessary for a fair
presentation of the financial position and the results of operations for such
periods. The following selected financial information should be read in
conjunction with the audited and unaudited consolidated financial statements of
Redman, including the notes thereto, incorporated herein by reference and the
Unaudited Pro Forma Combined Financial Information appearing elsewhere in this
Joint Proxy Statement and Prospectus. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED
--------------------- -------------------------------------------------------------
JUNE 28, JUNE 30, MARCH 29, MARCH 31, APRIL 1, APRIL 2, APRIL 3,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995 1994 1993 1992
-------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $172,000 $157,804 $613,855 $557,973 $443,056 $365,023 $289,414
Income (loss) from continuing
operations before extraordinary
items............................... 7,347 6,058 24,035 19,940 7,768 732 (2,743)
Net income (loss)..................... 7,347 6,058 24,035 19,940 1,784 841 (2,801)
Per share data(1):
Income (loss) from continuing
operations before extraordinary
items............................. 0.54 0.42 1.69 1.38 0.70 0.10 (0.36)
Net income (loss)................... $ 0.54 $ 0.42 $ 1.69 $ 1.38 $ 0.16 $ 0.11 $ (0.36)
Weighted average shares
outstanding(1)...................... 13,606 14,345 14,185 14,490 11,166 7,616 7,714
BALANCE SHEET DATA:
Working capital(2).................... $ 23,915 $ 21,168 $ 22,447 $ 17,784 $ 3,077 $ (2,872) $ (894)
Total assets.......................... 173,616 151,842 156,468 140,892 118,414 108,352 111,699
Long-term liabilities................. 20,852 18,568 22,544 20,108 20,967 67,924 76,461
Stockholders' equity (deficit)........ $ 69,975 $ 59,535 $ 63,039 $ 53,972 $ 35,819 $(11,721) $(13,435)
</TABLE>
- -------------------------
(1) Weighted average shares outstanding and per share amounts adjusted to
reflect 100% stock dividend effected March 8, 1996.
(2) Excludes net assets of discontinued operations.
11
<PAGE> 21
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF CHAMPION
The following table sets forth selected unaudited pro forma combined
financial data for Champion for each of the fiscal years in the three year
period ended December 30, 1995 and for the six month periods ended June 29, 1996
and July 1, 1995, which are presented to reflect the estimated impact of the
Merger on the historical consolidated financial statements of Champion, on the
basis of pooling-of-interests accounting. The related estimated total number of
shares of additional Champion common stock included in the computation of
weighted average shares outstanding is 17 million, consisting of 16.5 million
shares estimated to be issued to effect the Merger and an additional 0.5 million
shares (determined by applying the treasury stock method to the approximately
810,000 Champion Shares issuable upon exercise of outstanding stock options of
Redman). The income statement data assume that the Merger had been consummated
at the beginning of the periods presented and the balance sheet data assume that
the Merger had been consummated on the related balance sheet date. The selected
unaudited pro forma combined financial data do not reflect any cost savings and
other benefits anticipated by Champion's and Redman's management as a result of
the Merger. However, the selected unaudited pro forma combined balance sheet
data reflect non-recurring, direct costs of the Merger, currently estimated to
be approximately $20 to $25 million. See note (1) below.
The selected unaudited pro forma combined financial data are not
necessarily indicative of the results of operations or the financial position
which would have occurred had the Merger been consummated at the beginning of
the earliest period presented, nor are they necessarily indicative of Champion's
future results of operations or financial position.
Due to the different fiscal year ends of Champion and Redman, Redman's
results for the three months ended March 29, 1996 are included in the Unaudited
Pro Forma Combined Condensed Statements of Income for the six months ended June
29, 1996 and for the year ended December 30, 1995. Similarly, Redman's results
for the three months ended March 31, 1995 are included in the Unaudited Pro
Forma Combined Condensed Statements of Income for the six months ended July 1,
1995 and for the year ended December 31, 1994.
The selected unaudited pro forma combined financial data should be read in
conjunction with the historical consolidated financial statements of Champion
and Redman and the Unaudited Pro Forma Information, including the notes thereto,
incorporated by reference or appearing elsewhere in this Joint Proxy Statement
and Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE," "TERMS OF THE MERGER -- Accounting Treatment," and "UNAUDITED PRO
FORMA COMBINED FINANCIAL INFORMATION."
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED
------------------- ----------------------------------
PRO FORMA COMBINED FINANCIAL DATA (BASED ON CHAMPION HISTORICAL JUNE 29, JULY 1, DEC. 30, DEC. 31, JAN. 1,
RESULTS): 1996 1995 1995 1994 1994
- ------------------------------------------------------------------ -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED INCOME STATEMENT DATA(1):
Net sales......................................................... $771,390 $673,436 $1,411,726 $1,143,547 $771,382
Income from continuing operations................................. 32,888 25,593 56,285 45,130 18,951
Income from continuing operations (per share)(2).................. $ 0.66 $ 0.53 $ 1.15 $ 0.94 $ 0.41
Weighted average shares outstanding(2)............................ 50,126 48,558 48,926 47,932 46,108
PRO FORMA COMBINED BALANCE SHEET DATA(1):
Working capital................................................... $ (3,543)
Total assets...................................................... 503,104
Long-term liabilities............................................. 53,464
Shareholders' equity.............................................. $187,299
PRO FORMA COMBINED FINANCIAL DATA (BASED ON CHAMPION PRO FORMA RESULTS WHICH INCLUDES 1996 ACQUISITIONS):
PRO FORMA COMBINED INCOME STATEMENT DATA(1):
Net sales......................................................... $805,001 $713,869 $1,503,527
Income from continuing operations................................. 33,724 25,986 58,019
Income from continuing operations (per share)(2).................. $ 0.67 $ 0.53 $ 1.19
Weighted average shares outstanding(2)............................ 50,141 48,573 48,956
</TABLE>
- -------------------------
(1) In connection with the Merger, Champion expects to record charges to
operations, currently estimated to be approximately $20 to $25 million, in
the quarter ending December 28, 1996, the quarter in which the Merger is
expected to be consummated. These charges are non-recurring, direct costs of
the Merger, of which approximately 40% are investment banking, legal and
accounting fees, approximately 25% are reserves against costs triggered by
change in control provisions contained in employment agreements with certain
executives of Redman, and the remainder are other costs associated with
combining and realigning the operations of the two companies. These charges
are not reflected in the Unaudited Pro Forma Combined Condensed Statements
of Income because they are non-recurring costs directly associated with the
Merger. An estimated pretax charge of $22.5 million (the midpoint of the
range of estimated costs), $17.1 million on an after tax basis, is reflected
in the Unaudited Pro Forma Combined Condensed Balance Sheet. This estimated
non-recurring charge is a preliminary estimate only and therefore is subject
to change. Although Champion currently has no plans to terminate any members
of Redman's current management, Champion believes that it is necessary to
reserve against severance costs because the change in control provisions
contained in employment agreements of certain executives of Redman allow
such persons to voluntarily terminate their employment and receive severance
payments.
(2) Weighted average shares outstanding and per share amounts adjusted to
reflect Champion's two-for-one stock splits effected May 31, 1996 and May
30, 1995 and an additional 17 million weighted average shares outstanding as
a result of the Merger.
12
<PAGE> 22
COMPARATIVE PER SHARE DATA OF CHAMPION AND REDMAN
The following table sets forth per share income from continuing operations
before extraordinary items and per share book value for Champion and Redman on
historical and pro forma combined bases. The pro forma per share income and per
share book value data is presented using the pooling-of-interests method of
accounting (which data are derived from the Unaudited Pro Forma Combined
Financial Information appearing elsewhere herein), which give effect to the
Merger as if the Merger had been consummated at the beginning of the periods
presented. See "TERMS OF THE MERGER -- Accounting Treatment." Book value data
for all pro forma presentations is based upon the number of outstanding Champion
Shares, adjusted to include the 16.5 million Champion Shares estimated to be
issued to effect the Merger. Pro forma combined per share income data is based
on Champion's weighted average shares outstanding and an additional 17 million
shares, consisting of 16.5 million shares estimated to be issued to effect the
Merger and an additional 0.5 million shares (determined by applying the treasury
stock method to the approximately 810,000 Champion Shares issuable upon exercise
of outstanding stock options of Redman). The information set forth below should
be read in conjunction with the historical consolidated financial statements of
Champion and Redman and the Unaudited Pro Forma Combined Financial Information,
including the notes thereto, incorporated by reference or appearing elsewhere in
this Joint Proxy Statement and Prospectus. See "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION" and "TERMS OF THE MERGER -- Accounting Treatment."
Due to the different fiscal year ends of Champion and Redman, Redman's
results for the three months ended March 29, 1996 are included in Champion's Pro
Forma Combined Per Share Income data for the six months ended June 29, 1996 and
for the year ended December 30, 1995. Similarly, Redman's results for the three
months ended March 31, 1995 are included in Champion's Pro Forma Combined Per
Share Income data for the six months ended July 1, 1995 and for the year ended
December 31, 1994.
The pro forma data do not reflect any cost savings and other benefits
anticipated by Champion's and Redman's management as a result of the Merger.
However, the pro forma book value data reflects non-recurring, direct costs of
the Merger, currently estimated to be approximately $22.5 million, which is the
midpoint of the range of $20 to $25 million in estimated costs.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED
-------------------- -----------------------------------
JUNE 29, JULY 1, DEC. 30, DEC. 31, JAN. 1,
CHAMPION ENTERPRISES, INC. 1996 1995 1995 1994 1994
- ---------------------------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Historical
Income from continuing operations............................. $ 0.59 $ 0.46 $1.01 $0.82 $0.38
Book value.................................................... $ 4.33 $3.70(1)
Pro Forma which includes 1996 Acquisitions
Income from continuing operations............................. $ 0.62 $ 0.47 $1.06
Book value.................................................... $ 4.33 $3.70(1)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED
-------------------- -----------------------------------
JUNE 28, JUNE 30, MARCH 29, MARCH 31, APRIL 1,
HISTORICAL REDMAN INDUSTRIES, INC. 1996 1995 1996 1995 1994
- ---------------------------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income from continuing operations............................... $ 0.54 $ 0.42 $1.69 $1.38 $0.70
Book value...................................................... $ 5.24 $4.72
</TABLE>
13
<PAGE> 23
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED
-------------------- -----------------------------------
JUNE 29, JULY 1, DEC. 30, DEC. 31, JAN. 1,
PRO FORMA COMBINED PER SHARE OF CHAMPION ENTERPRISES, INC.(2) 1996 1995 1995 1994 1994
- ---------------------------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Based on Champion Historical Results
Income from continuing operations............................. $ 0.66 $ 0.53 $1.15 $0.94 $0.41
Book value.................................................... $ 3.95 $3.38
Based on Champion Pro Forma Results which includes 1996
Acquisitions
Income from continuing operations............................. $ 0.67 $ 0.53 $1.19
Book value.................................................... $ 3.95 $3.38
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED
-------------------- -----------------------------------
EQUIVALENT PRO FORMA COMBINED PER SHARE OF JUNE 28, JUNE 30, MARCH 29, MARCH 31, APRIL 1,
REDMAN INDUSTRIES, INC.(3) 1996 1995 1996 1995 1994
- ---------------------------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Based on Champion Historical Results
Income from continuing operations............................. $ 0.81 $ 0.65 $1.43 $1.17 $0.51
Book value.................................................... $ 4.89 $4.19
Based on Champion Pro Forma Results which includes 1996
Acquisitions
Income from continuing operations............................. $ 0.83 $ 0.66 $1.47
Book value.................................................... $ 4.89 $4.19
</TABLE>
- -------------------------
(1) Adjusted to reflect Champion's two-for-one stock split on May 31, 1996.
(2) In connection with the Merger, Champion expects to record charges to
operations, currently estimated to be approximately $20 to $25 million, in
the quarter ending December 28, 1996, the quarter in which the Merger is
expected to be consummated. These charges are non-recurring, direct costs of
the Merger, of which approximately 40% are investment banking, legal and
accounting fees, approximately 25% are reserves against costs triggered by
change in control provisions contained in employment agreements with certain
executives of Redman, and the remainder are other costs associated with
combining and realigning the operations of the two companies. These charges
are not reflected in the Unaudited Pro Forma Combined Condensed Statements
of Income because they are non-recurring costs directly associated with the
Merger. An estimated pretax charge of $22.5 million (the midpoint of the
range of estimated costs), $17.1 million on an after tax basis, is reflected
in the Unaudited Pro Forma Combined Condensed Balance Sheet. This estimated
non-recurring charge is a preliminary estimate only and therefore is subject
to change. Although Champion currently has no plans to terminate any members
of Redman's current management, Champion believes that it is necessary to
reserve against severance costs because the change in control provisions
contained in employment agreements of certain executives of Redman allow
such persons to voluntarily terminate their employment and receive severance
payments.
(3) The equivalent pro forma combined per share of Redman amounts are calculated
by multiplying the pro forma combined per share of Champion amounts by the
exchange ratio of 1.24 Champion Shares for each Redman Share.
14
<PAGE> 24
MARKET PRICE AND DIVIDENDS
Champion Shares are listed and traded on the NYSE, the CSE and the PSE
under the symbol "CHB." Redman Shares are traded on Nasdaq under the symbol
"RDMN." The table below sets forth, for the quarters indicated, the high and low
prices of Champion Shares, as reported on the NYSE Composite Transactions Tape,
and the high and low prices for Redman Shares, as reported on Nasdaq. During the
periods set forth below, no dividends were paid on Champion Shares or Redman
Shares. Amounts for Champion Shares have been adjusted to reflect two-for-one
stock splits on May 31, 1996 and May 30, 1995. Amounts for Redman Shares have
been adjusted to reflect a 100% stock dividend paid on March 8, 1996.
<TABLE>
<CAPTION>
CHAMPION REDMAN
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1994:
First Quarter.............................. 7.00 4.38 13.25 8.25
Second Quarter............................. 8.72 5.69 9.50 7.50
Third Quarter.............................. 9.90 6.67 10.38 7.88
Fourth Quarter............................. 10.17 6.69 9.63 7.25
1995:
First Quarter.............................. 9.75 6.75 10.38 7.88
Second Quarter............................. 9.75 7.00 11.25 8.50
Third Quarter.............................. 10.31 7.50 13.63 10.50
Fourth Quarter............................. 15.50 9.25 16.75 11.88
1996:
First Quarter.............................. 15.50 11.88 21.00 14.75
Second Quarter............................. 26.13 14.13 22.50 16.75
Third Quarter (through September 23)....... 22.38 17.63 26.75 16.75
</TABLE>
Set forth below are the last reported sale prices of Champion Shares, as
reported on the NYSE Composite Transactions Tape, and Redman Shares, as reported
on Nasdaq, and the equivalent pro forma sale price of Redman Shares as
determined by multiplying such last reported sale prices of Champion Shares by
the Exchange Ratio of 1.24: (i) on August 13, 1996, the last trading day prior
to the public announcement that Champion and Redman were discussing the
possibility of a merger at an exchange ratio of 1.24 Champion Shares for each
Redman Share and (ii) on August 19, 1996, the last trading day prior to the
public announcement of the execution of the Merger Agreement.
<TABLE>
<CAPTION>
AUGUST 13, 1996 AUGUST 19, 1996
--------------- ---------------
<S> <C> <C>
Champion Shares................................... 19.88 21.63
Redman Shares..................................... 23.19 25.75
Redman Equivalent................................. 24.65 26.82
</TABLE>
The last reported sale prices of Champion Shares and Redman Shares on
September 23, 1996, the latest practicable trading day prior to the printing of
this Joint Proxy Statement and Prospectus, were $18.38 per Champion Share as
reported on the NYSE Composite Transactions Tape, and $22.50 per Redman Share as
reported on Nasdaq. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS.
15
<PAGE> 25
THE CHAMPION SPECIAL MEETING
GENERAL
This Joint Proxy Statement and Prospectus is being furnished to Champion
shareholders in connection with the solicitation of proxies by the Champion
Board for use at the Champion Special Meeting. Each copy of this Joint Proxy
Statement and Prospectus mailed to Champion shareholders is accompanied by a
form of proxy for use at the Champion Special Meeting. The Champion Special
Meeting is scheduled to be held on October 24, 1996, at 10:00 a.m., local time,
at the Hampton Inn, 1461 North Opdyke Road, Auburn Hills, Michigan 48326.
CHAMPION SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO CHAMPION IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
PURPOSE OF THE CHAMPION SPECIAL MEETING
At the Champion Special Meeting, Champion shareholders will be asked to
consider and vote upon: (i) a proposal to approve the Share Issuance and (ii)
the transaction of such other business as may properly come before the Champion
Special Meeting. Because the number of Champion Shares to be issued in the Share
Issuance will exceed 20% of the number of Champion Shares outstanding
immediately prior to the consummation of the Merger, the rules of the NYSE
require that Champion shareholders approve the Share Issuance.
The Champion Board, based upon certain factors, including the DLJ Opinion,
has concluded that the Merger is fair to and in the best interests of Champion
and its shareholders and has unanimously approved the Merger Agreement. THE
CHAMPION BOARD UNANIMOUSLY RECOMMENDS THAT CHAMPION SHAREHOLDERS VOTE IN FAVOR
OF THE APPROVAL OF THE SHARE ISSUANCE AT THE CHAMPION SPECIAL MEETING. See "THE
PROPOSED MERGER -- Recommendation of the Board of Directors of Champion and
Champion's Reasons for the Merger," "-- Opinion of Financial Advisor to
Champion" and "-- Interests of Certain Persons in the Merger".
RECORD DATE; SHARES OUTSTANDING
The close of business on September 23, 1996 has been fixed as the Champion
Record Date for the determination of Champion shareholders entitled to notice of
and to vote at the Champion Special Meeting. On the Champion Record Date, there
were 30,984,375 Champion Shares issued and outstanding held by approximately
5,323 shareholders of record. All directors and executive officers of Champion
are expected to vote, or cause to be voted, all Champion Shares over which they
exercise voting control (an aggregate of 1,455,892 Champion Shares or
approximately 4.7% of the outstanding Champion Shares on the Champion Record
Date) FOR the approval of the Share Issuance.
VOTING AT THE CHAMPION SPECIAL MEETING
The presence, either in person or by proxy, of the holders of a majority of
the issued and outstanding Champion Shares entitled to vote at the Champion
Special Meeting is necessary to constitute a quorum at the Champion Special
Meeting.
Approval of the Share Issuance requires the affirmative vote of a majority
of the total votes cast by Champion shareholders with respect to the Share
Issuance, provided that the total number of votes cast thereon represents more
than 50% of the outstanding Champion Shares entitled to vote. The consummation
of the Merger is conditioned upon, among other things, approval of the Share
Issuance by Champion shareholders.
Proxies will be voted as specified by Champion shareholders. If a Champion
shareholder does not return a signed proxy, such shareholder's shares will not
be voted. Champion shareholders are urged to mark the boxes on the proxy to
indicate how their shares are to be voted. Each Champion shareholder shall be
entitled to cast
16
<PAGE> 26
one vote per Champion Share on each matter to be voted upon at the Champion
Special Meeting. If a Champion shareholder returns a signed proxy, but does not
indicate how such shareholder's shares are to be voted, the Champion Shares
represented by the proxy will be voted FOR the Share Issuance. The proxy also
confers discretionary authority on the management of Champion to vote the
Champion Shares represented thereby on any other matter that may properly arise
at the Champion Special Meeting, including, but not limited to, consideration of
a motion to adjourn or postpone the Champion Special Meeting to another time
and/or place.
Returning a signed proxy will not affect a Champion shareholder's right to
attend the Champion Special Meeting and vote in person. Any Champion shareholder
who executes and returns a proxy may revoke such proxy at any time before it is
voted by (i) filing with the Secretary of Champion, at or before the Champion
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of Champion at or before the Champion Special
Meeting or (iii) attending the Champion Special Meeting and voting in person by
ballot. Attendance at the Champion Special Meeting will not in and of itself
constitute revocation of a proxy.
As of the date of this Joint Proxy Statement and Prospectus, the Champion
Board does not know of any other matters to be presented for action by Champion
shareholders at the Champion Special Meeting. If, however, any other matters not
now known are properly brought before the Champion Special Meeting, the
management of Champion will vote the proxies upon the same according to their
discretion and best judgment.
SOLICITATION OF PROXIES
Pursuant to the Merger Agreement, the entire cost of Champion's
solicitation of proxies will be borne by Champion, except that Champion and
Redman will share equally all printing and filing fees. In addition to
solicitation by use of the mail, solicitations may also be made by personal
interview, facsimile transmission, telegram and telephone. Champion has retained
Morrow & Co., Inc., a proxy solicitation firm, for assistance in connection with
the Champion Special Meeting at an estimated expense of approximately $6,000
plus reasonable out-of-pocket expenses. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
material to their principals, and Champion will reimburse them for expenses in
so doing.
EFFECT OF ABSTENTIONS AND "BROKER NON-VOTES"
At the Champion Special Meeting, abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum. A
"broker non-vote" occurs respecting a given proposal when a broker holding
Champion Shares (or, in the case of the Redman Special Meeting, Redman Shares)
in street name returns an executed proxy (or voting directions) which indicates
that such broker does not have discretionary authority to vote on such proposal.
Under the rules of the NYSE, brokers who hold Champion Shares as nominees will
not have discretionary authority to vote such shares on the Share Issuance in
the absence of specific instructions from the beneficial owners thereof.
Abstentions and broker non-votes will not affect the outcome of the vote
with respect to the proposal to approve the Share Issuance except to the extent
that abstentions and broker non-votes cause the total votes cast to be less than
a majority of the Champion Shares entitled to vote thereon.
ABSENCE OF APPRAISAL RIGHTS
Under the Michigan Business Corporation Act, Champion shareholders will not
be entitled to any appraisal rights in connection with the Share Issuance. See
"TERMS OF THE MERGER -- Absence of Appraisal Rights."
17
<PAGE> 27
THE REDMAN SPECIAL MEETING
GENERAL
This Joint Proxy Statement and Prospectus is being furnished to Redman
stockholders in connection with the solicitation of proxies by the Redman Board
for use at the Redman Special Meeting. Each copy of this Joint Proxy Statement
and Prospectus mailed to Redman stockholders is accompanied by a form of proxy
for use at the Redman Special Meeting. The Redman Special Meeting is scheduled
to be held on October 24, 1996, at 10:00 a.m. local time at the offices of
Redman, 2550 Walnut Hill Lane, Suite 200, Dallas, Texas 75229.
REDMAN STOCKHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO REDMAN IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
PURPOSE OF THE REDMAN SPECIAL MEETING
At the Redman Special Meeting, Redman stockholders will be asked to
consider and vote upon: (i) a proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby and (ii) the transaction of such other
business as may properly come before the Redman Special Meeting.
The Redman Board, based upon certain factors, including the opinion of
Dillon Read, has concluded that the Merger is fair to and in the best interests
of Redman's stockholders and has approved the Merger Agreement. THE REDMAN BOARD
RECOMMENDS THAT REDMAN STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AT THE REDMAN
SPECIAL MEETING. See "THE PROPOSED MERGER -- Recommendations of the Board of
Directors of Redman and Redman's Reasons for the Merger," "-- Opinion of
Financial Advisor to Redman" and "-- Interests of Certain Persons in the
Merger."
RECORD DATE; SHARES OUTSTANDING
The close of business on September 23, 1996 has been fixed as the Redman
Record Date for the determination of Redman stockholders entitled to notice of
and to vote at the Redman Special Meeting. On the Redman Record Date, there were
13,316,753 Redman Shares issued and outstanding held by approximately 87
stockholders of record. All directors and executive officers of Redman are
expected to vote, or cause to be voted, all Redman Shares over which they
exercise voting control (an aggregate of 294,213 Redman Shares or approximately
2.2% of the shares outstanding on the Redman Record Date) FOR the approval and
adoption of the Merger Agreement.
VOTING AT THE REDMAN SPECIAL MEETING
The presence, either in person or by proxy, of the holders of a majority of
the issued and outstanding Redman Shares entitled to vote at the Redman Special
Meeting is necessary to constitute a quorum at the Redman Special Meeting.
The affirmative vote of the holders of a majority of the outstanding Redman
Shares entitled to vote is required for approval of the Merger Agreement and the
transactions contemplated thereby. Consummation of the Merger is conditioned
upon, among other things, approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the affirmative vote of a majority of the
outstanding Redman Shares entitled to vote thereon.
Proxies will be voted as specified by Redman stockholders. If a Redman
stockholder does not return a signed proxy, such stockholder's shares will not
be voted. Redman stockholders are urged to mark the boxes on the proxy to
indicate how their shares are to be voted. Each Redman stockholder shall be
entitled to cast one vote per Redman Share on each matter to be voted upon at
the Redman Special Meeting. If a Redman stockholder returns a signed proxy, but
does not indicate how such stockholder's shares are to be voted, the
18
<PAGE> 28
Redman Shares represented by the proxy will be voted FOR the approval and
adoption of the Merger Agreement and the transactions contemplated thereby. The
proxy also confers discretionary authority on the management of Redman to vote
the Redman Shares represented thereby on any other matter that may properly
arise at the Redman Special Meeting, including, but not limited to,
consideration of a motion to adjourn or postpone the Redman Special Meeting to
another time and/or place.
Returning a signed proxy will not affect a stockholder's right to attend
the Redman Special Meeting and vote in person. Any Redman stockholder who
executes and returns a proxy may revoke such proxy at any time before it is
voted by (i) filing a written notice of revocation with the Secretary of Redman
prior to the Redman Special Meeting, (ii) presenting another executed proxy with
a subsequent date or (iii) attending and voting in person at the Redman Special
Meeting. Attendance at the Redman Special Meeting will not in and of itself
constitute revocation of a proxy.
As of the date of this Joint Proxy Statement and Prospectus, the Redman
Board does not know of any other matters to be presented for action by Redman
stockholders at the Redman Special Meeting. If, however, any other matters not
now known are properly brought before the Redman Special Meeting, the management
of Redman will vote the proxies upon the same according to their discretion and
best judgment.
SOLICITATION OF PROXIES
Pursuant to the Merger Agreement, the entire cost of Redman's solicitation
of proxies will be borne by Redman, except that Champion and Redman will share
equally all printing and filing fees. In addition to solicitation by use of the
mail, solicitations may also be made by personal interview, facsimile
transmission, telegram and telephone. Redman has retained Georgeson & Company,
Inc., a proxy solicitation firm, for assistance in connection with the Redman
Special Meeting at an estimated expense of approximately $6,000 plus reasonable
out-of-pocket expenses. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material to
their principals, and Redman will reimburse them for expenses in so doing.
EFFECT OF ABSTENTIONS AND "BROKER NON-VOTES"
At the Redman Special Meeting, abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum. In
determining whether the proposal to approve and adopt the Merger Agreement has
received the requisite number of affirmative votes, abstentions and broker non-
votes will have the same effect as a vote against such proposal because under
the Delaware General Corporation Law approval and adoption of the Merger
Agreement requires the affirmative vote of a majority of the outstanding Redman
Shares entitled to vote at the Redman Special Meeting.
ABSENCE OF APPRAISAL RIGHTS
Under the Delaware General Corporation Law, Redman stockholders will not be
entitled to any appraisal rights in connection with the Merger Agreement and the
transactions contemplated thereby. See "TERMS OF THE MERGER -- Absence of
Appraisal Rights."
THE PROPOSED MERGER
GENERAL
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time, Sub will merge with and into Redman, and Redman will become
a wholly owned subsidiary of Champion. In the Merger, each outstanding Redman
Share (except as otherwise provided in the Merger Agreement) will be converted
into the right to receive 1.24 Champion Shares. Following consummation of the
Merger, the registration of Redman Shares under the Exchange Act will be
terminated and Redman will no longer be required to file periodic reports with
the Commission. Champion will, however, continue to be subject to the reporting
requirements of the Exchange Act and will continue to file periodic reports with
the Commission.
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BACKGROUND OF THE MERGER
In 1992, early 1993 (before Redman's initial public offering) and in early
1995, representatives of Champion and Redman, including Walter R. Young, Jr.,
the Chairman, President and Chief Executive Officer of Champion, and Thomas W.
Sturgess, the Chairman of Redman, discussed the possibility of a business
combination between the two companies. No agreements were reached.
On June 5, 1996, a representative of Dillon Read, Redman's financial
advisor, met Mr. Young at an industry conference. The representative said that
Mr. Sturgess had authorized her to discuss the possibility of a business
combination between Champion and Redman in which Champion would issue Champion
Shares to Redman stockholders in exchange for their Redman Shares. Mr. Young
said that he would consider the matter.
Messrs. Young and Sturgess and Champion's and Redman's financial advisors
subsequently had conversations from time to time in which they discussed
publicly available financial and other information regarding Champion and
Redman.
On July 3, 1996, Messrs. Young and Sturgess and Champion's and Redman's
financial advisors met to discuss whether a basis existed to pursue discussions
that might culminate in a stock-for-stock exchange transaction. The parties
noted that any transaction would be subject to the satisfactory completion of
due diligence and the approval of their respective boards. The parties discussed
various issues, including structure and strategic and management issues.
Messrs. Young and Sturgess and Champion's and Redman's financial advisors
then continued their conversations from time to time regarding publicly
available financial and other information.
On August 1, 1996, Messrs. Young and Sturgess, other representatives of
Champion and the financial advisors of Champion and Redman met to discuss the
possible transaction. Champion and Redman executed a confidentiality agreement.
The parties then discussed confidential information with regard to each of
Champion and Redman and discussed valuation issues and possible exchange ratios.
Based on the information available to them, and subject to due diligence, board
approval and other conditions, Messrs. Young and Sturgess discussed the terms of
a transaction, including a range of exchange ratios, the midpoint of which was
1.24 Champion Shares per Redman Share. On July 31, 1996, the closing price of
the Champion Shares was $20 1/8 and the closing price of the Redman Shares was
$20 3/4.
On August 7, 1996, counsel for Champion distributed a proposed form of
merger agreement and the parties thereafter discussed such agreement.
On August 8, 1996, representatives of Champion, Redman and their respective
financial advisors met to perform further due diligence with regard to each
company. Additional due diligence was performed on subsequent dates.
On August 14, 1996, Champion and Redman jointly issued a press release in
which they stated that their managements had been discussing a possible
strategic combination in which Redman would merge with Champion and each Redman
Share would be converted into the right to receive Champion Shares at a fixed
exchange ratio equal to 1.24 Champion Shares per each Redman Share. In the press
release the companies also stated that the Boards of Directors of Champion and
Redman had not met to consider the transaction and that there could be no
assurances that an agreement would be executed or that any transaction would be
consummated.
On August 15, 1996, the Boards of Directors of Champion and Redman met
independently to consider the proposed Merger. On August 19, 1996, the Boards of
Directors of Champion and Redman independently met again, and both unanimously
approved the proposed Merger Agreement and the transactions contemplated
thereby. Champion and Redman executed the Merger Agreement later that evening
and issued a press release announcing such execution early in the morning,
August 20, 1996.
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RECOMMENDATION OF THE BOARD OF DIRECTORS OF CHAMPION AND CHAMPION'S REASONS FOR
THE MERGER
The Champion Board, based upon certain factors listed below, including the
DLJ Opinion, concluded that the Merger is fair to and in the best interests of
Champion and its shareholders, unanimously approved the Merger Agreement and
resolved to recommend that Champion shareholders approve the Share Issuance. In
determining to approve the Merger Agreement and to recommend that Champion
shareholders approve the Share Issuance, the Champion Board based its opinion as
to the fairness of the transactions contemplated in the Merger Agreement upon
consideration of the following factors:
(i) current industry, economic and market conditions;
(ii) the DLJ Opinion, to the effect that, as of the date of such
opinion and based on, and subject to, the assumptions,
limitations and qualifications set forth in such opinion, the
Exchange Ratio was fair to Champion from a financial point
of view. See "Opinion of Financial Advisor to Champion";
(iii) the financial condition, results of operations and cash flows of
Champion and Redman, both on an historical and a prospective
basis;
(iv) the historical market prices and trading information with respect
to Champion Shares and Redman Shares;
(v) the terms and conditions of the Merger Agreement, including the
requirement for Champion shareholder approval and the fees that
would be payable upon termination under certain circumstances; and
(vi) the ability to consummate the Merger as a pooling-of-interests
under generally accepted accounting principles.
The Champion Board believes that the Merger would provide growth and profit
opportunities. The combined companies will be able to offer a broader array of
products and services through a more geographically diverse sales base.
The Champion Board also believes that the Merger will result in enhanced
cash flow for the combined companies and will result in a stronger balance
sheet. Excluding initial transaction costs, on a pro forma basis (See "Unaudited
Pro Forma Combined Financial Information"), Redman's operations are accretive to
Champion's earnings per share. In addition, there is potential for cost savings
through, among other things, the elimination of duplicative costs. See "Plans
for the Combined Company Following the Merger."
There can be no assurances that the expected benefits of the Merger will be
realized.
The foregoing discussion of the factors and information considered by the
Champion Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Champion
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination.
THE CHAMPION BOARD UNANIMOUSLY RECOMMENDS THAT CHAMPION SHAREHOLDERS VOTE
IN FAVOR OF THE SHARE ISSUANCE AT THE CHAMPION SPECIAL MEETING.
OPINION OF FINANCIAL ADVISOR TO CHAMPION
In its role as financial advisor to Champion, DLJ was asked by Champion to
render an opinion to the Champion Board as to the fairness to Champion, from a
financial point of view, of the Exchange Ratio pursuant to the terms of the
Agreement. On August 19, 1996, DLJ delivered the DLJ Opinion to the effect that
as of the date of such opinion, and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the Exchange Ratio was
fair to Champion from a financial point of view.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS ANNEX B. CHAMPION
SHAREHOLDERS ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR
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ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF
THE REVIEW BY DLJ.
The DLJ Opinion was prepared for the Champion Board and is directed only to
the fairness of the Exchange Ratio to Champion from a financial point of view
and does not constitute a recommendation to any Champion shareholder as to how
such shareholder should vote at the Champion Special Meeting. DLJ was not
retained as an advisor or agent to Champion shareholders or any other person,
other than as an advisor to the Champion Board. As part of its investment
banking business, DLJ is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
The DLJ Opinion does not constitute an opinion as to the price at which the
Champion Shares will actually trade at any time. The Exchange Ratio was
determined in arm's-length negotiations between Champion and Redman, in which
negotiations DLJ advised Champion. No restrictions or limitations were imposed
by Champion upon DLJ with respect to the investigations made or the procedures
followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed the Merger Agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by Champion and Redman, including information provided during
discussions with their respective managements, which consisted of certain
financial projections of Champion prepared by the management of Champion,
certain financial projections of Redman prepared by the management of Redman and
certain financial information of Champion and Redman on a combined basis
prepared by the management of Champion. In addition, DLJ compared certain
financial and securities data of Champion and Redman with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of Champion Shares and Redman Shares, reviewed
premiums paid in certain other selected business combinations and conducted such
other financial studies, analyses and investigations as DLJ deemed appropriate
for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to it by Champion and
Redman or their respective representatives, or that was otherwise reviewed by
it. DLJ relied upon the estimates of the managements of Champion and Redman of
the limited operating synergies achievable as a result of the Merger and its
discussion of such synergies with the respective managements of Champion and
Redman. DLJ did not make any independent evaluation of the assets or liabilities
of Champion or Redman, nor did DLJ independently verify the information reviewed
by it. DLJ also assumed that the financial projections supplied to it were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of Champion and Redman as to the
future operating and financial performance of Champion and Redman, respectively.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to it
as of, the date of its opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm the DLJ Opinion.
The following is a summary of the presentation made by DLJ to the Champion
Board at its August 15, 1996 board meeting.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects resulting
from the Merger. DLJ reviewed the operating synergies contemplated to result
from the Merger by combining the operations of Redman and Champion as projected
by the managements of Redman and Champion. DLJ analyzed the pro forma effect of
such operating synergies on net income and earnings per share for Champion. The
analysis indicated that the pro forma earnings per share ("EPS") of Champion on
a fully taxed basis, assuming the annual operating synergies contemplated to
result from the Merger, would be higher in the fiscal years ending December 28,
1996 through December 30, 2000 than comparable projections for Champion as a
stand-alone company during the same periods.
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Contribution Analysis. DLJ analyzed Champion's and Redman's relative
contribution to the combined companies with respect to total revenues; earnings
before interest, taxes, depreciation and amortization ("EBITDA"); earnings
before interest and taxes ("EBIT") and shareholders' equity. Its analysis was
made for the actual fiscal year ended December 30, 1995, for the fiscal year
ending December 28, 1996 based on actual results for the first six months of
1996 and the projected results (based on Champion and Redman management
projections) for the final six months of 1996 and projected results for the
fiscal year ending December 31, 1997 (based on Champion and Redman management
projections). As a result of the Merger, current Champion shareholders will own
approximately 64% of the Champion Shares after the Effective Time. This compares
with Champion's contribution to the combined companies' pro forma results for
the period ending December 31, 1996 (prior to taking into account any operating
synergies which may result from the Merger) of approximately 60% of revenues,
62% of EBITDA, 62% of EBIT, and 66% of shareholders' equity.
Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings and operating and financial ratios for Redman to the
corresponding data and ratios of Champion and certain other companies whose
securities are publicly traded (collectively, the "Comparable Companies"). The
Comparable Companies were chosen because they possess general business,
operating and financial characteristics representative of companies in the
industry in which Champion and Redman operate. The Comparable Companies
consisted of: Cavalier Homes, Inc., Clayton Homes, Inc., Fleetwood Enterprises,
Inc., Oakwood Homes Corp., Schult Homes Corporation, Southern Energy Homes,
Inc., and Skyline Corporation. Such data and ratios included Enterprise Value
("Enterprise Value" is defined as the product of the stock price and total
shares outstanding minus Net Cash ("Net Cash" is defined as cash and cash
equivalents less total debt, which for Redman was assumed to be $22.6 million,
the amount outstanding at June 30, 1996)) as a multiple of revenues, EBITDA and
EBIT for the latest reported twelve months ("LTM"), growth rates of each of such
items for the three most recent fiscal years and operating margins for the three
most recent fiscal years. The median multiple of Enterprise Value to LTM
revenues ("LTM revenue multiple") for the Comparable Companies was 0.6. The
median LTM revenue multiple was then multiplied by Redman's LTM revenues, for
the period ending June 30, 1996, to arrive at an implied total Enterprise Value
which was then adjusted for Net Cash to yield an implied total Equity Value, and
then divided by Redman Shares outstanding on a fully diluted basis of 13.8
million shares as of June 30, 1996 to arrive at an implied price of $27.31 per
fully diluted share. The median multiple of Enterprise Value to LTM EBITDA ("LTM
EBITDA multiple") for the Comparable Companies was 7.2. The methodology
indicated in the preceding analysis resulted in an implied price of $24.67 per
fully diluted share. The median multiple of Enterprise Value to LTM EBIT ("LTM
EBIT multiple") for the Comparable Companies was 8.4. The methodology indicated
in the preceding analyses resulted in an implied price of $25.33 per fully
diluted share.
In addition, DLJ examined the ratios of current stock prices (based on
reported closing prices on August 13, 1996) to estimated fiscal year 1996 and
1997 EPS estimates of brokerage firm analysts (as provided by I/B/E/S Inc.). The
median multiple of current stock price to estimated fiscal year 1996 EPS for the
Comparable Companies was 14.2. The median multiple of estimated fiscal year 1996
EPS was then multiplied by Redman's estimated fiscal 1996 EPS (as provided by
I/B/E/S Inc.) to arrive at an implied value of $27.03 per fully diluted Redman
share. The average multiple of current stock price to estimated fiscal year 1997
EPS for the Comparable Companies was 11.0. The methodology indicated in the
preceding analysis resulted in an implied value of $24.42 per fully diluted
Redman Share. Additionally, DLJ performed the preceding analysis using estimated
1996 and estimated 1997 EPS, as prepared by the management of Redman. This
resulted in implied values of $28.02 and $24.86 per fully diluted Redman Share
for estimated 1996 and 1997 EPS respectively.
Stock Trading History. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both Champion Shares and Redman Shares for the latest 12 month
period ended August 9, 1996. DLJ also reviewed the daily closing prices of
Champion Shares and Redman Shares and compared the Redman closing stock prices
with an index of selected manufactured housing companies. The index of selected
companies included Clayton Homes, Inc., Fleetwood
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Enterprises, Inc., Oakwood Homes Corp., Cavalier Homes, Inc., Southern Energy
Homes, Inc., Schult Homes Corp. and Skyline Corp. This information was presented
solely to provide the Champion Board with background regarding the stock prices
of Redman and Champion over the period indicated. DLJ noted the high and low
prices for Champion over the twelve-month period ended August 9, 1996 were
$26.13 and $8.25, respectively, and the high and low prices for Redman over the
twelve-month period ended August 9, 1996 were $23.50 and $11.88, respectively.
Discounted Cash Flow Analysis. DLJ also performed a discounted cash flow
analysis. In conducting its analysis, DLJ relied on certain assumptions,
financial projections and other information provided by Redman management. Using
the information set forth in the Redman projections, DLJ performed stand-alone
discounted cash flow analyses for Redman. DLJ calculated the estimated "Free
Cash Flow" based on stand-alone projected unleveraged operating income adjusted
for: (i) taxes; (ii) certain projected non-cash items (i.e., depreciation and
amortization); (iii) projected changes in non-cash working capital; and (iv)
projected capital expenditures. DLJ analyzed the Redman stand-alone projections
and discounted the stream of free cash flows from fiscal 1997 to fiscal 2001,
provided in such projections, back to June 30, 1996 using discount rates ranging
from 13% to 15%. To estimate the residual values of Redman stand-alone at the
end of the forecast period, DLJ applied terminal multiples of 6.0 to 8.0 to the
projected fiscal 2001 EBITDA and discounted such value estimates back to June
30, 1996 using discount rates ranging from 13% to 15%. DLJ then aggregated the
present values of the free cash flows and the present values of the residual
values to derive a range of implied enterprise values for Redman stand-alone.
The range of implied enterprise values stand-alone were then adjusted for the
respective Net Cash to yield implied equity values of Redman stand-alone. The
range of equity values were then divided by the fully diluted shares to
determine a range of equity values per share for Redman stand-alone. The range
of implied equity values was $21.87 to $28.99 per share.
Premiums Paid Analysis. DLJ determined the percentage premium of the offer
price over the trading prices one day, one week and four weeks prior to the
announcement date of 45 selected recent merger or acquisition transactions
involving companies not necessarily comparable to Redman. These transactions
ranged in Enterprise Value from $250 million to $500 million and occurred since
January 1, 1994. The median premiums for the selected transactions over the
trading prices, one day, one week, and four weeks prior to the announcement
dates were 31.5%, 38.6% and 48.2%, respectively. Additionally, DLJ performed the
same analysis for 23 stock-for-stock merger or acquisition transactions for the
same period and range of enterprise values. The median premiums over the trading
prices one day, one week and four weeks prior to the announcement dates were
32.9%, 40.1% and 49.0%, respectively. For the proposed transaction, DLJ derived
premiums based on the implied purchase price of Redman's stock price one day,
one week, and four weeks prior to August 13, 1996 of 6.3%, 16.7% and 36.9%,
respectively.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation made by DLJ to the Champion Board on August 15,
1996. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Each of the
analyses conducted by DLJ was carried out in order to provide a different
perspective on the transaction and add to the total mix of information
available. DLJ did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an opinion as to
fairness from a financial point of view. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
did not place particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination. Accordingly, notwithstanding the separate factors summarized
above, DLJ believes that its analyses must be considered as a whole and that
selecting portions of its analysis and the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the evaluation process underlying its opinions. In performing its
analyses, DLJ made numerous assumptions with respect to industry performance,
business and economic conditions and other matters. The analyses performed by
DLJ are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses.
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Pursuant to the terms of an engagement letter dated August 15, 1996,
Champion agreed to pay DLJ a fee of $500,000 upon notification that DLJ is
prepared to deliver the DLJ Opinion and an additional fee of $2,250,000 to be
paid upon consummation of the Merger. Champion has also agreed to reimburse DLJ
promptly for all out-of-pocket expenses (including the reasonable fees and
out-of-pocket expenses of counsel) incurred by DLJ in connection with its
engagement, and to indemnify DLJ and certain related persons against certain
liabilities in connection with its engagement, including liabilities under the
federal securities laws. The terms of the fee arrangement with DLJ, which DLJ
and Champion believe are customary in transactions of this nature, were
negotiated at arm's length between Champion and DLJ and the Champion Board was
aware of such arrangement, including the fact that a significant portion of the
aggregate fee payable to DLJ is contingent upon consummation of the Merger.
In the ordinary course of business, DLJ may actively trade the securities
of both Champion and Redman for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF REDMAN AND REDMAN'S REASONS FOR THE
MERGER
The Redman Board held meetings on August 15, 1996 and August 19, 1996 after
the substantial completion of the negotiations between the parties and their
respective representatives with regard to the definitive terms of the Merger
Agreement. Fergus J. Walker, Redman's Executive Vice President and Chief
Financial Officer and a member of the Redman Board, was unable to attend either
of these meetings because of a medical condition. Accordingly, all references in
this Joint Proxy Statement and Prospectus to the unanimous approval or
recommendation of the Redman Board with respect to the Merger Agreement shall
mean that all members of the Redman Board, other than Mr. Walker, concurred in
such approval or recommendation.
At the August 15, 1996 meeting (which meeting was conducted telephonically)
the Redman Board heard a presentation by a representative of Weil, Gotshal &
Manges LLP, Redman's outside legal counsel, with regard to the Board's fiduciary
duties to Redman stockholders in the context of evaluating the terms of the
Merger Agreement. Representatives of Weil, Gotshal & Manges LLP also summarized
the terms of the Merger Agreement and its findings with respect to its due
diligence investigation of Champion. Dillon Read, as Redman's financial advisor,
made a presentation to the Board with regard to its analysis of the financial
terms of the Merger Agreement and discussed the methodologies and considerations
underlying its analysis. A draft of its report had been delivered to the members
of the Board prior to the meeting. Also, Redman's management discussed the
strategic implications of the Merger. Both during and after the foregoing
presentations, members of the Board asked detailed questions of Redman's
management, outside legal counsel and financial advisor about their respective
findings.
The Redman Board met again on the afternoon of August 19, 1996. Prior to
the meeting, each member of the Redman Board was provided with the most recent
draft of the Merger Agreement and the final report of Redman's financial
advisor. Representatives of Dillon Read provided the Redman Board with an update
of the information contained in its earlier draft report. The members of the
Redman Board were reminded of their fiduciary duties to Redman stockholders. In
connection therewith, a discussion ensued regarding the termination provisions
of the Merger Agreement, with the Redman Board expressing its desire to preserve
flexibility in light of their fiduciary duties. Members of the Redman Board then
questioned the representatives of Redman's outside legal counsel and financial
advisor and deliberated upon the merits of the Merger Agreement. At the
conclusion of this deliberation, the independent members of the Redman Board met
outside the presence of the other parties to further deliberate upon the merits
of the Merger Agreement. At the conclusion of the independent director's
deliberation, the meeting of the Redman Board was reconvened. Dillon Read
thereupon rendered its oral opinion, which was confirmed by its written opinion
dated August 19, 1996, to the Redman Board to the effect that, as of such date,
based upon and subject to certain matters stated therein, the Exchange Ratio
called for in the Merger Agreement is fair to Redman's stockholders from a
financial point of view. See "Opinion of Financial Advisor to Redman." Upon
receiving such opinion, the Redman Board, after having carefully considered the
terms of the Merger Agreement and the advice rendered
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by representatives of Redman's outside legal counsel and financial advisor,
unanimously approved the Merger Agreement in substantially the form presented to
it at the meeting.
In voting to approve the Merger Agreement, the Redman Board relied upon
many different factors, including the following:
(i) current industry, economic and market conditions;
(ii) the opinion rendered by Dillon Read dated August 19, 1996 to the
effect that, as of such date, based upon and subject to certain
matters stated therein, the Exchange Ratio is fair to Redman
stockholders from a financial point of view; See "Opinion of
Financial Advisor to Redman;"
(iii) the financial condition, results of operations and cash flows of
Champion and Redman, both on an historical and a prospective
basis;
(vi) the historical market prices and trading information with respect
to the Champion Shares and the Redman Shares;
(v) the terms and conditions of the Merger Agreement, including the
requirement for Redman stockholder approval and the fees and
expenses that would be payable upon termination under certain
circumstances; and
(vi) the ability to consummate the Merger as a pooling-of-interests
under generally accepted accounting principles and as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
The Redman Board believes that the Merger offers Redman stockholders an
opportunity to participate in an entity that, following the Merger, will have
greater financial flexibility, better opportunities for growth and a better
financial outlook than Redman would have if it were to continue on a stand-alone
basis.
There can be no assurances that the expected benefits of the Merger will be
realized.
The foregoing discussion of the information and factors considered by the
Redman Board is not intended to be exhaustive but is believed to include all
material factors considered by the Redman Board. In reaching the determination
to approve and recommend the Merger, the Redman Board did not assign any
relative or specific weights to the foregoing factors and individual directors
may have given differing weights to different factors.
THE REDMAN BOARD UNANIMOUSLY RECOMMENDS THAT THE REDMAN STOCKHOLDERS VOTE
IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AT THE REDMAN SPECIAL MEETING.
OPINION OF FINANCIAL ADVISOR TO REDMAN
On August 5, 1996, Redman retained Dillon Read to act as its exclusive
financial advisor in connection with the Merger. Prior to August 5, 1996, Dillon
Read had acted in a general financial advisory capacity for Redman from time to
time.
On August 19, 1996, Dillon Read rendered its oral opinion, which was
confirmed by its written opinion dated August 19, 1996, to the Redman Board to
the effect that, based upon and subject to certain matters stated therein, as of
the date of such opinion, the Exchange Ratio is fair to Redman stockholders from
a financial point of view.
THE FULL TEXT OF DILLON READ'S OPINION DATED AUGUST 19, 1996, WHICH SETS
FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS ANNEX C. DILLON READ'S OPINION IS DIRECTED ONLY TO THE FAIRNESS TO REDMAN
STOCKHOLDERS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY REDMAN STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE ON THE MERGER AGREEMENT. REDMAN STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO THE ASSUMPTIONS
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MADE AND MATTERS CONSIDERED BY DILLON READ. THE SUMMARY OF THE OPINION SET FORTH
IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Dillon Read reviewed, analyzed and considered
such financial and other factors as it deemed appropriate under the
circumstances, including, among other things: (i) reviewed certain publicly
available business and historical financial information relating to Redman and
Champion, (ii) reviewed certain financial information and other data provided to
Dillon Read by Redman that is not publicly available relating to the business
and prospects of Redman, including financial projections prepared by the
management of Redman, (iii) reviewed certain financial information and other
data provided to Dillon Read by Champion that is not publicly available relating
to the business and prospects of Champion, including financial projections
prepared by the management of Champion, (iv) conducted discussions with members
of the senior managements of Redman and Champion, (v) considered certain pro
forma effects of the Merger on the financial results of Champion and certain
resulting financial implications for Redman stockholders and reviewed certain
estimates of synergies prepared by the managements of Redman and Champion, (vi)
reviewed the historical market prices and trading volumes of Redman Shares and
Champion Shares, (vii) reviewed publicly available financial and stock market
data with respect to certain other companies in lines of business Dillon Read
believes to be generally comparable to those of Redman and Champion, (viii)
compared the financial terms of the Merger with the financial terms of certain
other mergers and acquisitions Dillon Read believes to be relevant, (ix)
reviewed the Merger Agreement, and (x) conducted such other financial studies,
analyses and investigations, and considered such other information as Dillon
Read deemed necessary or appropriate, but none of which was, individually,
material. Dillon Read's opinion was necessarily based on economic, monetary and
market conditions existing on the date thereof.
In connection with its review, Dillon Read did not assume any
responsibility for independent verification of any of the foregoing information
and, with Redman's consent, relied on such information as being complete and
accurate in all material respects. In addition, Dillon Read did not make any
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of Redman or Champion, nor was Dillon Read furnished with any such
evaluation or appraisal. With respect to the financial projections referred to
above, Dillon Read assumed, with Redman's consent, that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of Redman's and Champion's managements as to the future financial
performance of each company. Dillon Read also assumed that the Merger would be
treated as tax-free to both Redman and Redman stockholders, and that the Merger
would be accounted for as a pooling-of-interests. In addition, although Dillon
Read evaluated the Exchange Ratio from a financial point of view, Dillon Read
was not asked to and did not recommend the specific consideration to be received
in the Merger. No other limits were placed on Dillon Read with respect to the
investigations made or procedures followed by Dillon Read in rendering its
opinion.
In arriving at its opinion, Dillon Read did not assign any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments based on its experience in rendering such opinions and on then
existing economic, monetary and market conditions as to the significance and
relevance of each analysis and factor. Accordingly, Dillon Read believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered, 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, Dillon Read made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Redman's or
Champion's control. Any estimates contained in Dillon Read's analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of a business or securities
do not purport to be appraisals or to reflect the actual prices at which
businesses or securities might be sold.
The following paragraphs summarize the material quantitative analyses
performed by Dillon Read in arriving at the opinion dated August 19, 1996
presented to the Redman Board.
Summary of Recent Acquisition Transactions. Using publicly available
information, Dillon Read reviewed the purchase prices and multiples paid in
selected mergers and acquisitions involving manufactured
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<PAGE> 37
housing companies which Dillon Read deemed relevant in evaluating the Merger.
Dillon Read reviewed the acquisition of Grand Manor, Inc. by Champion; the
acquisition of Homes of Legend, Inc. by Champion; the acquisition of Imperial
Homes Corporation by Southern Energy Homes, Inc.; the acquisition of Spirit
Homes, Inc. by Belmont Homes, Inc.; the acquisition of Destiny Industries, Inc.
by Oakwood Homes Corporation; the acquisition of Chandeleur Homes, Inc. by
Champion; the acquisition of Crest Ridge Homes, Inc. by Champion; the
acquisition of Astro Manufacturing Co., Inc. by Cavalier Homes, Inc.; the
acquisition of Imperial Manufactured Homes of N.C., Inc. by Southern Energy
Homes, Inc.; the acquisition of Golden West Homes by Oakwood Homes Corporation;
the acquisition of Dutch Housing, Inc. by Champion; and the acquisition of
Homestead Homes, Inc. by Cavalier Homes, Inc.
Multiples of unlevered value of the transactions (consideration offered for
the equity plus the book value of debt less the cash and cash equivalents) to
the sales of the acquired businesses for the 12 months preceding the acquisition
announcement averaged 0.3x and ranged from 0.2x to 0.5x. The multiples of
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the 12 months preceding the acquisition announcement averaged 3.9x and ranged
from 2.9x to 4.7x. The multiples of earnings before interest and taxes ("EBIT")
for the 12 months preceding the acquisition announcement averaged 4.0x and
ranged from 3.1x to 5.4x. The multiples of latest net assets averaged 4.4x and
ranged from 1.8x to 9.4x. Dillon Read noted that, based on the closing price of
Champion Shares on August 9, 1996, the implied unlevered value for Redman in the
Merger based upon the Exchange Ratio represented 0.5x sales, 6.4x EBITDA, 7.3x
EBIT, and 6.9x net assets, all within or above the range for the transactions
considered.
Analysis of Selected Publicly Traded Comparable Companies in the
Manufactured Housing Industry. Using publicly available information, Dillon Read
reviewed the stock prices and market multiples of common stocks of the following
companies in the manufactured housing industry: Belmont Homes, Inc.; Cavalier
Homes, Inc.; Champion; Fleetwood Enterprises, Inc.; Liberty Homes, Inc.; Schult
Homes Corporation; Skyline Corporation; and Southern Energy Homes, Inc. Dillon
Read believes these companies are engaged in lines of business that are
generally comparable to those of Redman. Dillon Read determined the equity
market value and derived the unlevered value (defined as equity market value
plus the book value of debt less the cash and cash equivalents) for each of
these comparable companies. Dillon Read calculated a range of such unlevered
values as a multiple of the latest 12 months sales, EBITDA, EBIT, and latest net
assets. Unlevered value as a multiple of the latest 12 months sales averaged
0.5x and ranged from 0.2x to 0.7x for these comparable companies. Unlevered
value as a multiple of the latest 12 months EBITDA averaged 6.5x and ranged from
3.4x to 9.0x. Unlevered value as a multiple of the latest 12 months EBIT
averaged 7.6x and ranged from 4.3x to 10.0x. Unlevered value as a multiple of
the latest net assets averaged 3.1x and ranged from 1.0x to 4.1x. Dillon Read
noted that, based on the closing price of Champion Shares on August 9, 1996, the
implied unlevered value for Redman in the Merger based upon the Exchange Ratio
represented 0.5x sales, 6.4x EBITDA, 7.3x EBIT, and 6.9x net assets, within or
above the range for these comparable companies for sales, EBITDA, EBIT and net
assets. Dillon Read also determined the equity market value of the comparable
companies as a multiple of 1996 net income as estimated by Institutional Brokers
Estimate System ("I/B/E/S") and as a multiple of book value of equity. For 1996
estimated net income, the multiples averaged 13.0x and ranged from 9.9x to
16.0x. Dillon Read noted that, based on the closing price of Champion Shares on
August 9, 1996, the implied equity value for Redman in the Merger based upon the
Exchange Ratio represented 12.2x 1996 estimated net income, within the range for
the comparable companies. For book value of equity, the multiples averaged 2.5x
and ranged from 1.0x to 4.6x. Dillon Read noted that, based on the closing price
of Champion Shares on August 9, 1996, the implied equity value for Redman in the
Merger based upon the Exchange Ratio represented 4.7x book value, above the
range for the comparable companies.
No company, transaction or business used in the analyses described under
"-- Summary of Recent Acquisition Transactions" and "-- Analysis of Selected
Publicly Traded Comparable Companies in the Manufactured Housing Industry" is
identical to Redman, Champion or the Merger. Accordingly, an analysis of the
results thereof necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the transaction or the public trading or other values
of the company or companies to which they are being compared. Mathematical
analysis (such
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<PAGE> 38
as determining the average or median) is not in itself a meaningful method of
using comparable acquisition or company data.
Discounted Cash Flow Analysis. Dillon Read performed a discounted cash flow
analysis of Redman on a stand alone basis using a set of underlying operating
projections which were based upon the forecasts provided by management of Redman
(the "Redman Projections"). Utilizing the Redman Projections, Dillon Read
calculated the theoretical unlevered discounted present value for Redman by
adding together the present value of (i) the projected stream of unlevered free
cash flow through the year 2000 for Redman and (ii) the projected value of
Redman at the end of the year 2000 (the "Redman Terminal Value"). Dillon Read
also performed a discounted cash flow analysis of Champion using a set of
underlying operating projections which were based upon the forecasts provided by
the management of Champion (the "Champion Projections"). Utilizing the Champion
Projections, Dillon Read calculated the theoretical unlevered discounted present
value for Champion by adding together the present value of (i) the projected
stream of unlevered free cash flow through the year 2000 for Champion and (ii)
the projected value of Champion at the end of the year 2000 (the "Champion
Terminal Value"). The Redman Terminal Value and the Champion Terminal Value were
each calculated based on perpetuity growth rates ranging from 4.0% to 6.0%. The
unlevered after-tax discount rates utilized in the discounted cash flow analyses
ranged from 12.5% to 13.5%.
The theoretical value of Redman based on the Redman Projections produced a
range of value per Redman Share of $20.43 to $26.89. Dillon Read noted that,
based on the closing price of Champion Shares on August 9, 1996, the implied
value of $24.80 per Redman Share in the Merger based upon the Exchange Ratio was
within the range of the theoretical value based on the Redman Projections. The
theoretical value of Champion based on the Champion Projections produced a range
of value per Champion Share of $18.75 to $25.67. Dillon Read noted that the
closing price of Champion Shares on August 9, 1996, $20.00 per share, was within
the range of the theoretical value based on the Champion Projections.
In addition, Dillon Read calculated the theoretical value of (i) Redman and
Champion combined, based on the Redman Projections and the Champion Projections,
but excluding synergies and cost savings, and (ii) Redman and Champion combined,
based on the Redman Projections and the Champion Projections, including certain
synergies and cost savings estimated by the managements of Redman and Champion.
Excluding synergies and cost savings, the theoretical value of Redman based on
Redman and Champion combined produced a range of value per Redman Share of
$22.30 to $30.16. Including certain synergies and cost savings estimated by the
managements of Redman and Champion, the theoretical value of Redman based on
Redman and Champion combined produced a range of value per Redman Share of
$22.60 to $30.58. Dillon Read noted that, in each of these cases, the per share
values were above the comparable per share values for Redman on a stand alone
basis.
Contribution Analysis. Dillon Read analyzed the percentage of sales,
EBITDA, EBITDA less capital expenditures, EBIT, net income, book value of
equity, and net assets that each of Redman and Champion would contribute to the
total of the combined entity based upon latest 12 months data and the Redman
Projections and Champion Projections referred to above. Based upon latest 12
months data and the Redman Projections and Champion Projections, Redman's
contribution to the combined entity ranged from 22% to 42%. Dillon Read noted
that, based upon the Exchange Ratio of 1.24 Champion Shares for each Redman
Share, the Redman stockholders would own approximately 35% (after giving effect
to the exercise of outstanding, exercisable and in-the-money options to purchase
Redman Shares and Champion Shares) of the combined entity, within the range of
contribution based upon the statistics considered.
Earnings per Share Impact. Dillon Read examined the impact of the Merger on
Redman earnings per share based on operating and financial projections for the
two companies. The projection of such earnings was based upon operating
projections provided by Redman management for Redman, assuming the Merger did
not take place, operating projections provided by Champion management for
Champion, assuming the Merger did not take place, and the estimated cost savings
and synergies expected to result from the Merger. This analysis indicated that
the Merger would be dilutive to Redman earnings per share in 1996 by 10.5%,
dilutive to Redman earnings per share in 1997 by 4.4%, dilutive to Redman
earnings per share in 1998 by 6.6%,
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<PAGE> 39
dilutive to Redman earnings per share in 1999 by 5.5% and accretive to Redman
earnings per share in 2000 by 7.0%.
Historical Trading Analysis. Dillon Read reviewed the recent historical
stock market performance of Redman Shares and Champion Shares in relation to
each other. This analysis indicated that between August 9, 1994 and August 9,
1996 the ratio of the price of a Redman Share to the price of a Champion Share
ranged between 0.79 and 1.55 and averaged 1.15. Dillon Read also noted that such
ratio ranged from 0.79 to 1.55 and averaged 1.15 between August 9, 1995 and
August 9, 1996, and ranged from 0.79 to 1.47 and averaged 1.12 between January
1, 1996 and August 9, 1996. Such ratio was 1.11 based on the closing prices on
August 9, 1996, 1.07 based on the average of the closing prices for the 10
trading days ended August 9, 1996, 1.05 based on the average of the closing
prices for the 20 trading days ended August 9, 1996, and 0.98 based on the
average of the closing prices for the 60 trading days ended August 9, 1996.
Dillon Read is an internationally recognized investment banking firm which,
as a part of its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Redman Board selected
Dillon Read on the basis of its experience and independence. In the past, Dillon
Read has provided investment banking services to Redman and has received
customary compensation for the rendering of such services. In the ordinary
course of business, Dillon Read trades the equity securities of Redman and
Champion for its own account and the accounts of its customers and, accordingly,
may at any time hold a long or short position in such securities.
Pursuant to the engagement letter, dated as of August 5, 1996, between
Redman and Dillon Read, Redman has agreed to pay Dillon Read a fee of
approximately $3,600,000 for services rendered in connection with the Merger. Of
this amount, $500,000 was paid when Dillon Read rendered its opinion to the
Redman Board, and $500,000 will be paid upon the filing of this Joint Proxy
Statement and Prospectus; the payment of the balance is contingent upon the
consummation of the Merger. Redman has also agreed to reimburse Dillon Read for
the expenses reasonably incurred by it in connection with its engagement
(including reasonable counsel fees) and to indemnify Dillon Read and its
officers, directors, employees, agents and controlling persons against certain
expenses, losses, claims, damages or liabilities in connection with its
services, including those arising under the federal securities laws.
PLANS FOR THE COMBINED COMPANY FOLLOWING THE MERGER
After the completion of the Merger, Champion expects that Redman will
continue generally to operate its businesses as presently conducted. Other than
the consolidation of certain public entity expenses (estimated at approximately
$2 million annually), there were no assumed staffing or other synergies in the
companies' analyses of the Merger. Further, Champion presently has no plans for
any merger, reorganization, liquidation, sale or transfer of any material amount
of assets of Redman to any third party.
Potential operating and financial benefits are anticipated and will be
fully explored after the completion of the Merger. While both companies
anticipate maintaining their separate distribution channels, the combined
companies have the potential for improved new home design development, new
marketing efforts to developers and new housing markets. While both companies
anticipate maintaining their decentralized operations to better serve their
local housing markets, there will be efforts to review vendor purchasing on both
a national and regional level. Further, the Merger is anticipated to yield the
benefits of sharing knowledge with respect to the production process and new
plant construction and startup. The combined entities will address quality,
design, production and after-sale service skills on a "best-practices" sharing
basis.
The Merger will produce a stronger financial base for the combined entity,
and more opportunities for growth. With improved geographic balance in North
America, the combined entity will be less impacted by any particular geographic
economic cycle. On the other hand, with more operating entities, the combined
companies will have more opportunities for growth in markets that will support
expansions. The combined companies are expected to have a strong balance sheet
and strong cash flow that will support internal
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<PAGE> 40
expansions or acquisitions, at a higher level than otherwise available. There
can be no assurances, however, that the expected benefits of the Merger will be
realized.
CERTAIN FORWARD-LOOKING INFORMATION
This Joint Proxy Statement and Prospectus contains certain forward-looking
information that is subject to risks and uncertainties, including the
projections set forth below. Forward-looking information also includes
statements concerning possible or assumed future results of the combined
companies or the benefits of the Merger, including those set forth under "THE
PROPOSED MERGER -- Recommendation of the Board of Directors of Champion and
Champion's Reasons for the Merger," " -- Opinion of the Financial Advisor to
Champion," "-- Recommendation of the Board of Directors of Redman and Redman's
Reasons for the Merger," and "-- Plans for the Combined Company Following the
Merger." Redman has identified the following important factors in addition to
those discussed elsewhere in this document and in the documents incorporated by
reference, which could cause actual results to differ materially from any such
results which might be projected, forecast, estimated or budgeted in
forward-looking information. All of such factors are difficult to predict and
many are beyond the control of Champion and Redman. These important factors
include: (a) future economic conditions in the regional and national markets in
which the companies compete; (b) financial market conditions, including, but not
limited to, changes in interest rates; (c) inflation rates; (d) changing
competition; (e) the ability to carry out marketing and sales plans; (f) the
ability to enter new markets successfully and capitalize on growth
opportunities; and (g) adverse changes in applicable law, regulations or rules
governing environmental, tax or accounting matters. The Redman projected
financial information, which was specifically prepared for presentation to
Champion in connection with discussions regarding the Merger, includes the
following financial information for the fiscal years as indicated (amounts in
millions, except per share amounts): (i) revenues: 1997, $685.1; 1998, $778.1;
1999; $854.1; 2000, $869.1; 2001, $846.4; (ii) net income: 1997, $28.5; 1998,
$31.6; 1999, $35.4; 2000, $35.1; 2001, $33.0; (iii) earnings per share: 1997,
$2.10; 1998, $2.33; 1999 $2.60; 2000, $2.58; 2001, $2.43. This projected
financial information is based upon, among other factors considered relevant by
management, market outlook during the five years and an increasing market share
due to the internal expansion of Redman's capacity. The projected financial
information does not anticipate open market stock repurchases and expenses of
the Merger.
The Redman projected financial information was prepared for presentation to
Champion in connection with discussions regarding the Merger and not for
publication or with a view to complying with the published guidelines of the
Commission regarding projections or with a view to complying with the AICPA
Guide for Prospective Financial Statements. In addition, this information does
not purport to present operations in accordance with generally accepted
accounting principles and has not been audited, compiled or otherwise examined
by independent accountants. Accordingly, no independent accountant expressed an
opinion or any assurance with respect thereto. This projected financial
information is provided herein solely because it was provided to Champion during
the course of discussions regarding the Merger. The inclusion of this
information should not be regarded as an indication that Champion, Redman, DLJ,
Dillon Read or anyone who received this information considered it a reliable
predictor of future events, and this information should not be relied on as such
by any Champion shareholder or Redman stockholder in reaching a decision on how
to vote on, in the case of Champion, the Share Issuance, and in the case of
Redman, the Merger Agreement and the transactions contemplated thereby. None of
Champion, Redman, DLJ, Dillon Read or any other person assumes any
responsibility for the validity, reasonableness, accuracy or completeness of the
information presented, and Redman has not made any representation or warranty,
express or implied, to Champion regarding the information described above.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Champion shareholders and Redman stockholders should be aware that certain
directors and members of management of Champion and Redman may be deemed to have
certain interests in the Merger in addition to their interests as Champion
shareholders and Redman stockholders, as the case may be. The Champion Board and
the Redman Board were aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby and in recommending for shareholder
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<PAGE> 41
approval the Share Issuance, in the case of the Champion Board, and for
stockholder approval the Merger Agreement and the transactions contemplated
thereby, in the case of the Redman Board.
Directors' and Officers' Indemnification and Insurance. Champion has agreed
to indemnify the Indemnified Parties (as defined below) for certain losses and
maintain or procure insurance coverage for such persons. See "TERMS OF THE
MERGER -- Indemnification and Insurance."
Employee Benefit Plans. In the Merger Agreement, Champion stated that it
intends to cause Redman to maintain its existing employee benefit arrangements
until at least December 1, 1997, as described in "TERMS OF THE MERGER --
Employee Benefits."
Employment Agreements. Redman had previously entered into employment
agreements with Messrs. Sturgess, Linton and Walker and three other Redman
executives which provide certain severance benefits in the event any of these
executives is terminated by Redman or voluntarily terminates his employment with
Redman at any time within two years following a change of control (as defined in
the agreements). The Merger will constitute a change of control for the purposes
of these employment agreements. The value of the severance benefits to be paid
to Mr. Sturgess under his employment agreement is estimated to be approximately
$500,000, plus the amount of the tax gross-up required by such agreement. The
values of the severance benefits that may become payable to Messrs. Linton and
Walker under their respective employment agreements is estimated to be
$1,000,000 each, plus the amount of the tax gross-ups required by such
agreements. The aggregate value of the severance benefits that may become
payable to the other three executives under their employment agreements is
approximately $1,200,000, plus the amount of the tax gross-ups required by such
agreements. In addition to the foregoing severance benefits, the employment
agreements for each of Messrs. Sturgess, Linton, Walker and the three other
executive officers provide for the payment of a severance bonus for the portion
of Redman's fiscal year elapsed prior to the change of control in an amount to
be determined by the Compensation Committee of the Redman Board at the time the
Merger is consummated. Such severance bonus is payable under the same
circumstances and at the same time as the other severance benefits. Although the
amounts of such severance bonuses have not been determined, it is anticipated
that Redman's bonus accruals for the current period will be sufficient to cover
such severance bonuses.
Severance Policy. The Merger Agreement provides that Champion will, or will
cause Redman to, provide certain corporate headquarters employees with severance
benefits of up to twelve months salary and benefits and a pro rata portion of
their respective annual bonuses, if Redman terminates such employees for any
reason other than "cause" (as defined in the Merger Agreement) within six months
following the Effective Time. The aggregate value of such severance benefits is
approximately $3,850,000.
New Directors. The Merger Agreement provides that Champion will create two
additional seats on the Champion Board and will cause Thomas W. Sturgess and
another director of Redman to be elected to the Champion Board. See "NEW
DIRECTORS OF CHAMPION" and "COMPENSATION OF DIRECTORS."
Sturgess Agreement. Contemporaneously with the execution of the Merger
Agreement, Thomas W. Sturgess, Chairman of Redman, entered into an agreement
with Champion to be effective as of the Effective Time, pursuant to which Mr.
Sturgess agreed not to compete with Champion. In addition, Champion may, from
time to time, request that Mr. Sturgess perform consulting and advisory services
for Champion. Pursuant to this agreement, Mr. Sturgess is entitled to receive an
annual fee of $250,000, less any compensation that he receives as a Director of
Champion, plus reasonable expenses incurred while performing services for
Champion. This agreement will terminate on the earlier of the fifth anniversary
of the Closing Date or the death of Mr. Sturgess.
Redman Shares Owned by Champion, its Directors and Officers. Champion owned
20 Redman Shares, as of August 19, 1996. Selwyn Isakow, a member of the Board of
Directors of Champion, along with related parties, owned 4,000 Redman Shares as
of August 19, 1996.
Exercisability of Outstanding Redman Options. The Merger Agreement provides
that at the Effective Time all options (including options that have been
conditionally granted) to purchase Redman Shares under
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<PAGE> 42
Redman's stock option plans, including those held by directors and key
employees, will be adjusted to become options to purchase Champion Shares as
described under "TERMS OF THE MERGER -- Options." As a result of the Merger,
such options will become fully exercisable pursuant to their terms, except to
the extent that holders of incentive stock options have not consented to such
accelerated exercisability.
The following table sets forth, with respect to the directors and
management of Redman, (i) the number of Redman Shares subject to options held by
such persons, (ii) the weighted average exercise price for such options and
(iii) the aggregate value of such options (i.e., total stock value less the
exercise price) based upon the closing price of Redman Shares on September 23,
1996 of $22.50 per share.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE AGGREGATE VALUE
OPTION HOLDER OPTION SHARES(1) EXERCISE PRICE OF OPTIONS
- ------------------------------------------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
James T. Callier, Jr................................... 2,000 $ 12.750 $ 19,500
Henry T. DeNero........................................ 12,000 $ 9.261 $ 158,868
Garry F. Edmundson..................................... 30,000 $ 12.792(2) $ 291,240
Frank J. Feraco........................................ 14,000 $ 9.768 $ 178,248
Robert M. Linton....................................... 70,002 $ 12.792(2) $ 679,579
Merle W. Miller, II.................................... 30,000 $ 12.792(2) $ 291,240
C.A. Rundell, Jr....................................... 14,000 $ 9.232 $ 185,752
Robert L. Stark........................................ 14,000 $ 9.232 $ 185,752
Thomas W. Sturgess..................................... 70,002 $ 12.792(2) $ 679,579
Philip C. Surles....................................... 15,000 $ 13.125 $ 140,625
Fergus J. Walker....................................... 70,002 $ 12.792(2) $ 679,579
All directors and officers as a group.................. 451,914 $ 11.712(2) $ 4,875,248
</TABLE>
- -------------------------
(1) The option shares included in the table underlie options that are either
presently exercisable or will become immediately exercisable (subject, in
the case of any incentive options, to the consent of the applicable option
holder) upon the consummation of the Merger.
(2) Certain of the option shares reflected on the schedule are subject to option
grants that, subject to certain conditions, are scheduled to be made on
January 4, 1997. The exercise price of each option share subject to such
scheduled grants will be the fair market value of a Redman Share on January
4, 1997, unless there has been a Change of Control (as defined in Redman's
1993 Stock Option Plan) prior to such date, in which case the exercise price
will be the lesser of (i) $15.125 and (ii) the fair market value of a Redman
Share on the date of such Change of Control. The Merger will constitute a
change in control for purposes of Redman's 1993 Stock Option Plan. The
weighted average exercise price indicated for each of Garry F. Edmundson,
Robert M. Linton, Merle W. Miller, II, Thomas W. Sturgess and Fergus J.
Walker reflects assumptions that (i) the Merger will be consummated prior to
January 4, 1997 and (ii) that the fair market value of a Redman Share on the
date of the Merger will equal or exceed $15.125.
TERMS OF THE MERGER
The following is a summary of material provisions of the Merger Agreement.
A copy of the Merger Agreement is attached as Annex A to this Joint Proxy
Statement and Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement.
THE MERGER; EFFECTIVE TIME
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time, Sub will merge with and into Redman. Redman will be the
surviving corporation in the Merger, and will continue its corporate existence
under the Delaware General Corporation Law under the same name as a wholly owned
subsidiary of Champion. At the Effective Time, the separate corporate existence
of Sub will terminate. The Certificate of Incorporation and By-Laws of Redman as
in effect immediately prior to the Effective Time will be the initial
certificate of incorporation and by-laws, respectively, of Redman, as the
corporation surviving the Merger (the "Surviving Corporation"). The Merger will
become effective upon the execution and filing of the Certificate of Merger with
the Secretary of State of the State of Delaware or at such subsequent date or
time as shall be agreed by Champion and Redman and be specified in the
Certificate of Merger. Such filing will be made or otherwise become effective on
the Closing Date, which Closing Date will be no later than two business days
after satisfaction or waiver of the conditions set forth in Article VI of the
Merger Agreement.
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<PAGE> 43
CONVERSION OF SECURITIES
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time each outstanding Redman Share will be converted into the
right to receive 1.24 fully paid and nonassessable Champion Shares. All Redman
Shares that are owned by Redman as treasury shares, and any Redman Shares
directly or indirectly owned by Champion will be canceled and will cease to
exist at the Effective Time and no capital stock of Champion or other
consideration will be delivered in exchange therefor.
A description of the rights and privileges of Champion shareholders and
certain material differences between the rights of Redman stockholders and
Champion shareholders are set forth under the caption "COMPARISON OF RIGHTS OF
CHAMPION SHAREHOLDERS AND REDMAN STOCKHOLDERS."
OPTIONS
At the Effective Time, each option to purchase Redman Shares including,
without limitation, each option that has been conditionally granted (each, a
"Redman Option"), granted under Redman's various stock option plans in effect on
August 19, 1996 (the "Redman Option Plans") which is unexpired and unexercised
immediately prior thereto will cease to represent a right to acquire Redman
Shares and will be adjusted into an option (each, an "Adjusted Option") to
purchase the number of Champion Shares equal to the product of (a) the number of
Redman Shares subject to the Redman Option and (b) the Exchange Ratio, at an
exercise price equal to (x) the exercise price per Redman Share under the Redman
Option divided by (y) the Exchange Ratio, and with terms and conditions that are
the same as the terms and conditions of such Redman Option immediately before
the Effective Time. As of August 16, 1996, approximately 654,000 Redman Shares
were issuable upon exercise of Redman Options. Accordingly, approximately
810,000 Champion Shares will be issuable upon exercise of Adjusted Options. Each
Redman Option will become exercisable immediately upon the consummation of the
Merger (subject, in the case of any incentive stock options, to the consent of
the holders thereof).
NO FRACTIONAL SHARES
No fractional Champion Shares will be issued to any of the Redman
stockholders in the Merger. In lieu of any such fractional share, Champion will
pay cash in an amount equal to the value of such fractional interest (determined
with reference to the closing price of Champion Shares on the NYSE on the last
full trading day immediately prior to the Effective Time). No interest will be
paid or accrued on the cash in lieu of fractional shares (and unpaid dividends
and distributions, if any) payable to holders of certificates of Redman Shares.
No such holder will be entitled to dividends, voting rights or any other rights
as a Champion shareholder in respect of any fractional Champion Shares that such
holder otherwise would have been entitled to receive.
No dividends or other distributions declared with respect to Champion
Shares with a record date after the Effective Time will be paid to the holder of
any certificate representing Redman Shares until such certificate has been
surrendered for exchange. Holders of certificates representing Redman Shares
will be paid the amount of dividends or other distributions with a record date
after the Effective Time after surrender of such certificates without any
interest thereon.
EXCHANGE OF STOCK CERTIFICATES
As of the Effective Time, Champion will make available to an exchange agent
designated by Champion and reasonably acceptable to Redman (the "Exchange
Agent"), for the benefit of Redman stockholders, certificates representing the
Champion Shares (and cash in lieu of fractional Champion Shares and unpaid
dividends and distributions, if any).
As soon as practical after the Effective Time, Champion shall cause the
Exchange Agent to mail a form of transmittal letter to the holders of
certificates representing Redman Shares. The form of transmittal letter
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will contain instructions with respect to the surrender of such certificates in
exchange for Champion Shares (and cash in lieu of fractional Champion Shares and
unpaid dividends and distributions, if any).
REDMAN STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY
CARD AND SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT EXCEPT WITH A TRANSMITTAL
FORM, WHICH WILL BE PROVIDED TO REDMAN STOCKHOLDERS FOLLOWING THE EFFECTIVE
TIME.
If a certificate representing Redman Shares has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as to
such loss, theft or destruction, appropriate evidence as to the ownership of
such certificate and appropriate and customary indemnification.
DIRECTORS AND OFFICERS OF REDMAN
Pursuant to the Merger Agreement, the directors of Sub immediately prior to
the Effective Time will be the initial directors of Redman following the Merger,
and the officers of Redman immediately prior to the Effective Time will be the
officers of Redman following the Merger, in each case until their respective
successors are duly elected or appointed and duly qualified.
CHARTER AND BY-LAWS OF REDMAN
Pursuant to the Merger Agreement, the Restated Certificate of Incorporation
and the Amended and Restated By-laws of Redman, as in effect prior to the
Effective Time, will be the initial certificate of incorporation and by-laws of
the Surviving Corporation following the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Champion, Sub and Redman regarding, among other things: corporate organization
and standing, subsidiaries, corporate power and authority, capitalization,
conflicts, consents and approvals, absence of certain changes, filings with the
Commission, taxes and tax returns, compliance with applicable law, this Joint
Proxy Statement and Prospectus and the Registration Statement, litigation,
brokerage and finder's fees, opinions of financial advisors, accounting matters,
tax-free reorganization, employee benefit plans, contracts, labor relations,
permits, environmental matters and stock ownership in Champion and Redman.
The Merger Agreement contains certain additional representations and
warranties of Redman relating to state takeover laws and Redman's Rights
Agreement (as defined in the Merger Agreement).
The representations and warranties of each of Redman, Sub and Champion will
not survive the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
During the period from the date of the Merger Agreement to the Effective
Time, Redman agreed to, and agreed to cause each of its subsidiaries to,
generally conduct their operations in the ordinary course except as expressly
contemplated by the Merger Agreement and the transactions contemplated thereby,
including without limitation to not, and to not allow its subsidiaries to,
without the prior written consent of Champion: (i) effect certain actions with
respect to its securities; (ii) sell, encumber or otherwise dispose of any
material property or assets, other than in the ordinary course of business
consistent with past practice; (iii) make or propose any changes in its
certificate of incorporation, by-laws or other organizational documents; (iv)
merge or consolidate with any other person or acquire a material amount of
assets or capital stock of any other person or enter into any confidentiality
agreement with any person, other than in connection with the Merger Agreement
and the transactions contemplated thereby; (v) incur, or otherwise become liable
for, indebtedness other than in the ordinary course of business consistent with
past practice, or guarantee, endorse or otherwise become liable for obligations
of any other entity, other than in the ordinary course of business consistent
with past practice; (vi) enter into or modify any employment, severance or
similar agreements or arrangements with, or otherwise increase the compensation
or benefits provided to, any employee other than in the ordinary
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course of business consistent with past practice; (vii) change its method of
doing business or change any method or principle of accounting in a manner that
is inconsistent with past practice; (viii) settle any certain legal actions
involving an amount in excess of $200,000; (ix) modify, terminate, release or
assign any material rights or claims with respect to, any material contract to
which Redman is a party; (x) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof, other than in the ordinary course
of business consistent with past practice; (xi) take any other action that would
reasonably be expected to prevent or materially delay Redman from consummating
the transactions contemplated by the Merger Agreement; (xii) take any action to
make any person or entity (other than Champion or Sub) not subject to Section
203 of the Delaware General Corporation Law; or (xiii) agree to take any action
prohibited by the foregoing.
During the period from the date of the Merger Agreement to the Effective
Time, Champion agreed to, and agreed to cause each of its subsidiaries to,
generally conduct their operations in the ordinary course except as expressly
contemplated by the Merger Agreement and the transactions contemplated thereby,
including without limitation to not, and to not allow certain of its
subsidiaries to, without the prior written consent of Redman: (i) effect certain
actions with respect to its securities; (ii) make or propose any change in its
certificate of incorporation or by-laws or other organizational documents; (iii)
subject to the limitations of clause (iv) below, merge or consolidate with any
other person or acquire a material amount of assets or capital stock of any
other person, that would involve, in any case, the payment of more than
$100,000,000 or the issuance of more than 10% of the outstanding Champion Shares
on the date of the Merger Agreement or, in the aggregate, the payment of more
than $200,000,000 or the issuance of more than 20% of the outstanding Champion
Shares on the date of the Merger Agreement, other than in connection with the
Merger Agreement and the transactions contemplated thereby; (iv) take any other
action that would reasonably be expected to prevent or materially delay Champion
or Sub from consummating the transactions contemplated by the Merger Agreement;
or (v) agree to take any action prohibited by the foregoing.
EMPLOYEE BENEFITS
In the Merger Agreement, Champion stated that it intends, until at least
December 1, 1997, to cause the Surviving Corporation to honor and maintain in
effect the employee benefit plans, programs, policies, practices and other
arrangements of Redman (collectively, the "Redman Benefit Plans") substantially
in the form as of the date of the Merger Agreement, with such revisions or
amendments as may be required by applicable law. Champion has agreed to take,
and to cause the Surviving Corporation to take, any and all actions necessary to
amend the Redman Benefit Plans as of the Effective Time to remove or modify all
provisions therefrom which provide benefits which are based in whole or in part
upon Redman Shares or the market price thereof.
SEVERANCE POLICY
Champion has agreed to provide certain corporate headquarters employees of
Redman with certain severance benefits, if the Surviving Corporation terminates
such employees for any reason other than "cause" within six months following the
Effective Time. See "THE PROPOSED MERGER -- Interests of Certain Persons in The
Merger -- Severance Policy."
NEW DIRECTORS
Champion has agreed to create two additional seats on the Champion Board
and to cause Thomas W. Sturgess and another director of Redman to be elected to
the Champion Board. See "NEW DIRECTORS OF CHAMPION."
STURGESS AGREEMENT
Champion entered into an agreement with Thomas W. Sturgess,
contemporaneously with the Merger Agreement, providing that Mr. Sturgess will
not compete with Champion and will perform consulting and advisory services for
Champion from time to time. See "THE PROPOSED MERGER -- Interests of Certain
Persons in The Merger -- Sturgess Agreement."
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POOLING-OF-INTERESTS AND TAX-FREE TREATMENT
Champion and Redman agreed to use their reasonable efforts to cause the
Merger to (i) qualify for pooling-of-interests accounting treatment and (ii)
constitute a tax-free "reorganization" under Section 368(a) of the Code.
OTHER ACQUISITION PROPOSALS
Redman has agreed that, during the term of the Merger Agreement, it shall
not, and shall not authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to (i) solicit, initiate, encourage or facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving Redman, or acquisition of
any capital stock (except in connection with the exercise of options, as
permitted by the terms of the Merger Agreement) or any material portion of the
assets of Redman (except for acquisition of assets in the ordinary course of
business consistent with past practice), or any combination of the foregoing (a
"Redman Competing Transaction"), (ii) negotiate, explore or otherwise engage in
discussions with any person (other than Champion, Sub or their representatives)
with respect to any Redman Competing Transaction or (iii) enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by the
Merger Agreement; provided that Redman may (x) furnish information (subject to a
confidentiality agreement in reasonably customary form) to, and negotiate or
otherwise engage in discussions with, any party who delivers a written proposal
for a Redman Competing Transaction if and so long as the Redman Board determines
in good faith, based upon advice of its outside legal counsel, that failing to
take such action would reasonably be expected to constitute a breach of the
fiduciary duties of the Redman Board and (y) take a position with respect to the
Merger or a Redman Competing Transaction, or amend or withdraw such position, in
compliance with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with
regard to a Redman Competing Transaction. Redman also agreed to immediately
cease all existing activities, discussions and negotiations with any parties
conducted theretofore with respect to any Redman Competing Transaction. Redman
also agreed to immediately advise Champion of the receipt of any inquiries,
discussions, negotiations, or proposals relating to a Redman Competing
Transaction and promptly furnish to Champion a copy of any such proposal or
inquiry in addition to any information provided to or by any third party
relating thereto.
INDEMNIFICATION AND INSURANCE
From and after the Effective Time, Champion has agreed to, and has agreed
to cause the Surviving Corporation to, indemnify and hold harmless to the
fullest extent permitted under applicable law each person who was at or prior to
the date of the Merger Agreement, an officer, director, employee, trustee or
agent of Redman (or any subsidiary or division thereof), including, without
limitation, each person controlling any of the foregoing persons (individually,
an "Indemnified Party" and collectively, the "Indemnified Parties"), against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in their
capacities as such, whether commenced, asserted or claimed before the Effective
Time. Champion has also agreed to indemnify the Redman directors named under the
section captioned "NEW DIRECTORS OF CHAMPION" for liabilities arising out of or
pertaining to being so named. Champion has also agreed to cause the Surviving
Corporation to keep in effect Redman's current provisions in its Certificate of
Incorporation and By-laws providing for exculpation of director and officer
liability and indemnification of the Indemnified Parties to the fullest extent
permitted under the Delaware General Corporation Law. In the event of any actual
or threatened claim, action, suit, proceeding or investigation in respect of
such acts or omissions, Champion agreed to cause the Surviving Corporation to
cooperate in the defense of any such matter.
From and after the Effective Time, Champion has agreed to, and has agreed
to cause the Surviving Corporation to, maintain in effect for not less than six
years, the current policies of directors' and officers' liability insurance
maintained by Redman; provided that Champion may substitute therefor policies of
at least
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the same coverage and amounts containing terms and conditions that are no less
advantageous in any material respect to the Indemnified Parties.
SPECIAL MEETINGS
Champion and Redman have each agreed to duly call, give notice of, convene
and hold a meeting of its shareholders or stockholders, as the case may be, to
be held as promptly as practicable following the date of the Merger Agreement
for the purpose of obtaining the requisite shareholder and stockholder approvals
and adoptions in connection with the Merger Agreement, the Share Issuance and
the Merger, and each shall use reasonable efforts to cause such meetings to
occur on the same date. Champion and Redman have also agreed that the Champion
Board and Redman Board, subject to their fiduciary duties under applicable law
as advised by counsel, will (i) recommend that its shareholders or stockholders,
as the case may be, approve such matters and (ii) use reasonable efforts to
obtain any necessary approvals by its shareholders or stockholders, as the case
may be.
CONDITIONS TO THE MERGER
The respective obligations of each party to consummate the Merger is
generally subject to fulfillment of the following conditions: (i) no order or
decree which prevents the consummation of the Merger shall have been issued and
remain in effect, and no statute, rule or regulation shall have been enacted by
any Governmental Authority (as defined in the Merger Agreement) which prevents
the consummation of the Merger; (ii) all waiting periods under the HSR Act shall
have expired or been terminated and all other material consents, approvals,
permits or authorizations required to be obtained prior to the Effective Time
from any Governmental Authority shall have been obtained; (iii) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the Redman stockholders, and the Share Issuance shall have been
approved by the Champion shareholders; (iv) the Registration Statement shall
have become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated by the SEC or any other
Governmental Authority (as defined in the Merger Agreement); (v) no Action shall
have been instituted by any Governmental Authority which seeks to prevent
consummation of the Merger or which seeks material damages continues to be
outstanding; (vi) the Champion Shares to be issued in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance; and
(vii) all consents, waivers and approvals of third parties required in
connection with the transactions contemplated by the Merger Agreement shall have
been obtained, except where the failure to obtain such consents, waivers and
approvals, in the aggregate, would not be expected to result in a material
adverse effect on Champion or Redman, as the case may be.
The obligations of Redman to consummate the Merger shall be subject to the
fulfillment of the following conditions unless waived by Redman: (i) the
representations and warranties of each of Champion and Sub shall be true and
correct on the date of the Merger Agreement and on and as of the Closing Date;
(ii) each of Champion and Sub shall have performed in all material respects each
of its obligations in the Merger Agreement; (iii) Redman shall have received an
opinion dated as of the Closing Date of Weil, Gotshal & Manges LLP to the effect
that (1) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and (2) no gain or loss will be recognized by Redman
stockholders with respect to Champion Shares received in the Merger in exchange
for Redman Shares, except with respect to cash received in lieu of fractional
Champion Shares; and (iv) Redman shall have received a letter from Ernst & Young
LLP, dated the date of the Joint Proxy Statement and Prospectus and confirmed in
writing at the Effective Time, stating that the Merger will qualify as a
pooling-of-interests transaction.
The obligations of Champion and Sub to consummate the Merger and the other
transactions contemplated hereby shall be generally subject to the fulfillment
of the following conditions unless waived by each of Champion and Sub: (i) the
representations and warranties of Redman shall be true and correct on the date
of the Merger Agreement and on and as of the Closing Date; (ii) Redman shall
have performed in all material respects each of its obligations in the Merger
Agreement; (iii) each person who may be at the Effective Time or was on the date
of the Merger Agreement an "affiliate" of Redman within the meaning of Rule 145
under
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the Securities Act, shall have executed and delivered to Champion an Affiliate
Letter (see "-- Restrictions on Sales of Shares by Affiliates"); and (iv)
Champion shall have received a letter from Price Waterhouse LLP, dated the date
of the Joint Proxy Statement and Prospectus and confirmed in writing at the
Effective Time, stating that the Merger will qualify as a pooling-of-interests
transaction.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption of the Merger Agreement by
Redman stockholders: (i) by mutual consent of Champion and Redman; (ii) by
either Champion or Redman if any permanent injunction or other order or decree
of a court or other competent Governmental Authority preventing the consummation
of the Merger shall have become final and nonappealable; (iii) by either
Champion or Redman if the Merger shall not have been consummated before March
31, 1997, unless extended by both the Champion Board and the Redman Board; (iv)
by Champion or Redman if at the meeting of Redman stockholders held for such
purpose the requisite vote of Redman stockholders to approve the Merger and the
transactions contemplated thereby shall not have been obtained; (v) by Champion
or Redman if at the meeting of Champion shareholders held for such purpose the
requisite vote of the Champion shareholders to approve the Share Issuance shall
not have been obtained; (vi) by Champion or Redman if there shall have been a
material breach of any of the covenants or agreements or any of the
representations or warranties set forth in the Merger Agreement on the part of
the other party, which breach is not cured within 30 days following written
notice, or which breach, by its nature, cannot be cured prior to the Closing (as
defined in the Merger Agreement), but only if such breach would constitute a
failure of a condition of closing; (vii) by Redman if the Redman Board shall
determine to engage in a Redman Competing Transaction and Redman shall have
delivered to Champion a written notice of the determination by the Redman Board
to terminate the Merger Agreement pursuant to this clause; provided, however,
that Redman may not terminate the Merger Agreement pursuant to this clause
unless (w) five business days shall have elapsed after delivery to Champion of
notice, (x) at the end of such five business-day period the Redman Board shall
continue to believe that the failure to engage in such Redman Competing
Transaction would reasonably be expected to be a breach of the fiduciary duties
of the Redman Board (after giving effect to any adjustment to the terms and
conditions of such transactions proposed by Champion in response to such Redman
Competing Transaction), (y) at the time of such termination, Redman shall have
paid to Champion the Termination Fee (as defined below) and (z) promptly
thereafter Redman shall enter into a definitive acquisition, merger or similar
agreement to effect, or shall effect, such Redman Competing Transaction; or
(viii) by Champion if the Redman Board shall not have recommended the Merger to
Redman stockholders, or shall have resolved not to make such recommendation, or
shall have materially modified or rescinded its recommendation of the Merger to
Redman stockholders, or shall have modified or rescinded its approval of the
Merger Agreement, or shall have resolved to do any of the foregoing.
EXPENSES
Except as otherwise provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby, including, without
limitation, the fees and disbursements of counsel, financial advisors and
accountants, will be paid by the party incurring such costs and expenses,
provided that all printing and mailing expenses and filing fees will be divided
equally between Champion and Redman.
If the Merger Agreement is terminated (i) by Champion or Redman because the
Redman stockholders do not approve the Merger, then Redman will pay to Champion
in cash by wire transfer in immediately available funds to an account designated
by Champion the reasonable documented out-of-pocket expenses, up to $2 million,
incurred by Champion in connection with the transactions contemplated by the
Merger Agreement, including the negotiation and execution thereof; or (ii) by
Champion or Redman because the Champion shareholders do not approve the Share
Issuance, then Champion will pay to Redman in cash by wire transfer in
immediately available funds to an account designated by Redman the reasonable
documented out-of-pocket expenses, up to $2 million, incurred by Redman in
connection with the transactions contemplated by the Merger Agreement, including
the negotiation and execution thereof.
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TERMINATION FEE
If the Merger Agreement is terminated: (i) by Champion because the Merger
has not been consummated before March 31, 1997 or because there has been a
material breach in the Merger Agreement, if (A) Redman's breach of a covenant or
agreement or failure to perform a covenant or obligation under the Merger
Agreement has been the cause of or resulted in such termination and (B) a Prior
Event (as defined below) shall have occurred prior to such termination and (C)
either (x) Redman enters into a definitive agreement with respect to a Redman
Competing Transaction within twelve months following such termination and such
Redman Competing Transaction is thereafter (as it may be amended) consummated,
or (y) a Redman Competing Transaction is consummated within twelve months
following such termination; (ii) by Champion or Redman because the Redman
stockholders do not approve the Merger or by Champion because the Redman Board
did not recommend or modified or amended its recommendation or its approval of
the Merger Agreement, if (A) a Prior Event shall have occurred prior to such
termination and (B) either (x) Redman enters into a definitive agreement with
respect to a Redman Competing Transaction within twelve months following such
termination and such Redman Competing Transaction is thereafter consummated, or
(y) a Redman Competing Transaction is consummated within twelve months following
such termination; or (iii) by Redman because the Redman Board determines to
engage in a Redman Competing Transaction; then in any such case Redman will pay
to Champion in cash a termination fee in an amount equal to $9.1 million, plus
reasonable documented out-of-pocket expenses incurred by Champion in connection
with the transactions contemplated thereby, less any expenses paid or payable by
Redman pursuant to the provisions of the Merger Agreement described above under
the heading "-- Expenses" (the "Termination Fee").
A "Prior Event" means any of the following events: (i) any person (other
than Champion or any of its subsidiaries) shall have commenced, or shall have
filed a registration statement under the Securities Act, with respect to, a
tender offer or exchange offer to purchase any Redman Shares, such that, upon
consummation of such offer, such person would beneficially own or control 15% or
more of the then outstanding Redman Shares; (ii) Redman or any of its
subsidiaries shall have entered into, authorized, recommended, proposed or
publicly announced an intention to enter into, authorize, recommend, or propose,
an agreement, arrangement or understanding with any person (other than Champion
or any of its subsidiaries) to, or any person (other than Champion or any of its
subsidiaries) shall have announced a bona fide intention to, or Redman shall
have announced that any person (other than Champion or any of it subsidiaries)
has proposed or communicated its intention to, or Redman shall have received a
bona fide proposal or communication regarding an intention to, (A) effect any
Redman Competing Transaction, (B) purchase, lease or otherwise acquire 15% or
more of the assets of Redman or any of its subsidiaries or (C) purchase or
otherwise acquire beneficial ownership of securities representing 15% or more of
the voting power of Redman or any of its subsidiaries; or (iii) any person
(other than Champion or any subsidiary of Champion) shall have acquired
beneficial ownership of a number of Redman Shares in addition to the number of
shares of Redman Shares beneficially owned by such person on August 19, 1996
equal to 15% or more of the voting power of Redman.
If the Merger Agreement is terminated by Champion or Redman because
Champion shareholders have failed to approve the Share Issuance, if (A) a
Champion Prior Event (as defined below) shall have occurred prior to such
termination, and (B) either (x) Champion shall enter into a definitive agreement
with respect to a Champion Competing Transaction (as defined below) within
twelve months following such termination and such Champion Competing Transaction
is thereafter consummated, or (y) a Champion Competing Transaction is
consummated within twelve months following such termination, then Champion will
pay to Redman in cash by wire transfer in immediately available funds to an
account designated by Redman a termination fee in an amount equal to $9.1
million, plus reasonable documented out-of-pocket expenses incurred by Redman in
connection with the transactions contemplated thereby, less any expenses paid or
payable by Champion pursuant to the provisions of the Merger Agreement described
above under the heading "-- Expenses".
As used herein, the term "Champion Prior Event" shall have the same meaning
with respect to Champion as the term "Prior Event" has with respect to Redman,
with such changes in the definition thereof as are appropriate to contemplate
Champion in lieu of Redman. As used herein, the term "Champion Competing
Transaction" shall have the same meaning with respect to Champion as the term
"Redman
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Competing Transaction" has with respect to Redman, with such changes in the
definition thereof as are appropriate to contemplate Champion in lieu of Redman.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto, at any time
before or after adoption of the Merger Agreement by the Redman stockholders or
authorization of issuance of Champion Shares in the Merger by the Champion
shareholders, but after such approval or authorization, no amendment shall be
made which by law requires further approval or authorization by the Redman
stockholders or the Champion shareholders, as the case may be, without such
further approval or authorization. Notwithstanding the foregoing, the Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties thereto.
At any time prior to the Effective Time, Champion (with respect to Redman)
and Redman (with respect to Champion and Sub) may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of such party, (b) waive any inaccuracies in the representations and
warranties contained in the Merger Agreement or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained in the Merger Agreement. Any agreement on the part of a
party thereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until requisite
pre-merger notifications have been filed and certain information has been
furnished to the Antitrust Division of the U.S. Department of Justice (the
"Antitrust Division") and the FTC and specified waiting period requirements have
been satisfied. Champion and Redman filed pre-merger notification and report
forms under the HSR Act with the FTC and the Antitrust Division on August 27,
1996. The waiting period under the HSR Act is scheduled to expire at 11:59 p.m.,
New York City time, on September 26, 1996. At any time before or after the
Effective Time, and notwithstanding that the HSR Act waiting period has expired,
the FTC or the Antitrust Division could take such action under antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin consummation of the Merger or seeking divestiture of substantial assets
of Champion or Redman. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under its antitrust laws as it deems necessary or desirable in
the public interest. Such action could include seeking to enjoin consummation of
the Merger or seeking divestiture of businesses or assets of Champion or Redman.
Private parties also may seek to take legal action under federal and/or state
antitrust laws under certain circumstances.
Champion and Redman believe that the Merger will be effected in compliance
with federal and state antitrust laws. However, there can be no assurance that a
challenge to consummation of the Merger on antitrust grounds will not be made or
that, if such a challenge were made, Champion and Redman would prevail or would
not be required to accept certain conditions, including certain divestitures, in
order to consummate the Merger.
Other than expiration or termination of the relevant waiting periods under
the HSR Act, there are no regulatory approvals required from any governmental
authorities to consummate the Merger.
ACCOUNTING TREATMENT
Champion currently proposes to account for the Merger as a
pooling-of-interests in accordance with generally accepted accounting
principles. Under this accounting method, the recorded assets and liabilities of
Champion and Redman will be carried forward at their recorded amounts to the
combined enterprise, income of the combined enterprise will include income of
Champion and Redman for the entire fiscal year in which the Merger occurs and
the reported income of Champion and Redman for prior periods will be combined
and restated as income of the combined enterprise.
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Champion, upon consummation of the Merger, will conduct a study of Redman's
accounting policies and procedures and conform such policies and procedures to
those used by Champion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material United States federal income
tax consequences of the Merger to the Redman stockholders. The discussion is
based on provisions of the Code, Treasury Regulations thereunder, current
administrative rulings and court decisions, which are in effect on the date of
this Joint Proxy Statement and Prospectus. All of the foregoing are subject to
change and any such change could be made with retroactive effect and/or affect
the continuing validity of this discussion. Redman and Champion have not sought
and will not seek any rulings from the Internal Revenue Service with respect to
any of the matters discussed herein.
The federal income tax discussion set forth below does not consider the
facts and circumstances of particular Redman stockholders and may not be
applicable to certain classes of special status taxpayers, including insurance
companies, securities dealers, financial institutions, tax-exempt organizations,
investment companies, foreign persons and persons who acquired Redman Shares
pursuant to the exercise of employee stock options or rights or otherwise as
compensation. The following discussion does not address the federal income tax
consequences of any of the transactions described in the section of this Joint
Proxy Statement and Prospectus, entitled "THE PROPOSED MERGER -- Interests of
Certain Persons in the Merger." In addition, no information is provided herein
with respect to the tax consequences of the Merger under applicable foreign,
state or local laws. Redman stockholders are urged to consult their tax advisors
as to their respective personal tax situations including the applicability and
effect of foreign, state, local and other tax laws.
The obligation of Redman to effect the Merger is conditioned on delivery to
Redman of an opinion dated as of the Closing Date from Weil, Gotshal & Manges
LLP, counsel to Redman, based on certain representations to be made by Redman
and Champion and on assumptions set forth in the opinion, that for federal
income tax purposes (1) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and (2) no gain or loss will be recognized
by Redman stockholders with respect to Champion Shares received in the Merger in
exchange for Redman Shares except with respect to cash received in lieu of
fractional Champion Shares.
Based on such opinion, the material federal income tax consequences of the
Merger for Redman stockholders are the following:
(i) No gain or loss will be recognized by Redman stockholders upon
their exchange of Redman Shares for Champion Shares, except that any Redman
stockholder who receives cash proceeds in lieu of a fractional Champion
Share will recognize gain or loss equal to the difference between such
proceeds and the tax basis allocated to the fractional Champion Share. Any
such gain or loss will constitute capital gain or loss if such
stockholder's Redman Shares are held as a capital asset at the Effective
Time;
(ii) The tax basis of the Champion Shares (including any fractional
Champion Share deemed received and exchanged for a cash payment) received
by a Redman stockholder in exchange for Redman Shares will be the same as
such stockholder's tax basis in the Redman Shares surrendered in exchange
therefor; and
(iii) The holding period of the Champion Shares (including any
fractional Champion Share deemed received and exchanged for a cash payment)
received by a Redman stockholder will include the period during which the
Redman Shares surrendered in exchange therefor were held (provided that
such Redman Shares were held by such Redman stockholder as a capital asset
at the Effective Time).
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER FOR THE REDMAN STOCKHOLDERS AND IS INCLUDED FOR
GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH REDMAN STOCKHOLDER'S TAX STATUS
AND ATTRIBUTES. AS A RESULT, THE
42
<PAGE> 52
FEDERAL INCOME TAX CONSEQUENCES DESCRIBED IN THE FOREGOING DISCUSSION MAY NOT
APPLY TO EVERY REDMAN STOCKHOLDER. ACCORDINGLY, EACH STOCKHOLDER IS ENCOURAGED
TO CONSULT HIS OR HER TAX ADVISOR AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH
MAY BE SPECIFIC TO SUCH STOCKHOLDER AND NOT COMMON TO STOCKHOLDERS AS A WHOLE
AND ALSO AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES THAT
MAY ARISE OUT OF THE MERGER AND/OR ANY SALE THEREAFTER OF CHAMPION SHARES
RECEIVED IN THE MERGER.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES
The Champion Shares issuable to former Redman stockholders pursuant to the
Merger have been registered under the Securities Act. Such shares will be freely
transferrable under the Securities Act, except for shares issued to any person
who may be deemed to be an affiliate of Redman or Champion, as the case may be,
for purposes of Rule 145 under the Securities Act (an "Affiliate").
Pursuant to the terms of the Merger Agreement, Redman has agreed to use its
reasonable efforts to cause each director, executive officer and other person
who is an Affiliate of Redman to deliver to Champion a written agreement (an
"Affiliate Letter"), providing that such person will not sell, transfer or
otherwise dispose of or offer or agree to sell, transfer or dispose of or in any
other way reduce such person's risk of ownership or investment in (any of the
foregoing, a "Disposition") any of the Champion Shares issued to such person in
the Merger pursuant to the terms of the Merger Agreement (the "Affiliate
Shares") in violation of the Securities Act or the rules and regulations
promulgated thereunder.
An Affiliate Letter provides that the Affiliate signing such letter will
not make any Disposition of any Redman Shares (and other rights exercisable for
or convertible into such shares) such Affiliate holds (i) in the 30-day period
immediately preceding the Effective Time or (ii) after the Effective Time, until
Champion shall have publicly released a report including the combined financial
results of Champion and Redman for a period of at least 30 days of combined
operations of Champion and Redman.
NYSE LISTING
Champion has agreed to use all reasonable efforts as to cause the approval
for listing on the NYSE of the Champion Shares to be issued in connection with
the Merger, subject to official notice of issuance. The obligations of the
parties to the Merger Agreement to consummate the Merger are subject to the
approval for listing on the NYSE of the Champion Shares, subject to official
notice of issuance. See "TERMS OF THE MERGER -- Conditions to the Merger."
DELISTING OF REDMAN SHARES
If the Merger is consummated, the Redman Shares will be delisted from
Nasdaq.
ABSENCE OF APPRAISAL RIGHTS
Under the Michigan Business Corporation Law, Champion shareholders will not
be entitled to any appraisal rights in connection with the Share Issuance. Under
the Delaware General Corporation Law, Redman stockholders will not be entitled
to any appraisal rights in connection with the Merger Agreement and the
consummation of the transactions contemplated thereby.
NEW DIRECTORS OF CHAMPION
Champion has agreed to create two additional seats on the Champion Board
and to cause Thomas W. Sturgess, Chairman of Redman and another director of
Redman selected by Champion from the three listed below, to be elected to the
Champion Board. These actions will be taken, in accordance with the Champion
By-laws, by the Champion Board effective promptly after the Effective Time. For
a period of two years following the Effective Time, Champion shall take, or
cause to be taken, all action necessary to nominate
43
<PAGE> 53
Mr. Sturgess and such other director of Redman to the Champion Board and, in
accordance with its normal solicitation efforts, solicit proxies for their
election to the Champion Board.
THOMAS W. STURGESS, 46, has served as Chairman of the Board of Redman since
July 1993, as Chief Executive Officer from July 1993 until January 1996, as a
director since August 1988, as President and Assistant Secretary from December
1992 until July 1993, as Vice President and Secretary from August 1988 to
December 1992 and as President of Redman Corporation, a former subsidiary of
Redman, from November 1988 until its merger with Redman in September 1993. Since
June 1991, Mr. Sturgess has served as a director of RBPI Holding Corporation, a
former subsidiary of Redman which engages, through its subsidiaries, in the
manufacture and sale of aluminum and vinyl windows and doors. For more than the
past five years, Mr. Sturgess has served as a general partner of Wingate
Partners, L.P., a Dallas-based private investment firm. Mr. Sturgess also serves
as Chairman of the Board, Chief Executive Officer and President of United
Stationers Inc., a wholesale distributor of office products.
FRANK J. FERACO, 49, has served as a director of Redman since July 1994.
Since April 1996, Mr. Feraco has been President of the Kohler Company, a company
engaged in the manufacturing and marketing of plumbing products worldwide. Mr.
Feraco was President of the Danaher Tool Group of the Danaher Corporation from
April 1994 to March 1996. The Danaher Tool Group is engaged in the manufacture
of hand tools for industrial and consumer use. From 1991 to 1994, Mr. Feraco
served as President and Chief Executive Officer of the Sterling Plumbing Group,
a subsidiary of the Kohler Company. From 1975 to 1991, he served in various
capacities with Emerson Electric Company, most recently as Senior Vice
President, Sales/Marketing for Skil Corporation, a subsidiary of Emerson
Electric Company.
C.A. RUNDELL, JR., 64, has served as a director of Redman since November
1993. Mr. Rundell has been president and sole proprietor of Rundell Enterprises,
a venture capital and investments company, since 1988 and Chairman of the Board
of NCI Building Systems, Inc., a company engaged in the manufacture of metal
building systems, since 1989. Mr. Rundell currently serves as a director of
Tyler Corporation, Tandy Brands Accessories, Inc., Eljer Industries, Inc. and
Inter-Regional Financial Group.
ROBERT L. STARK, 63, has served as a director of Redman since November
1993. Since September 1993, Mr. Stark has served as Dean of the University of
Kansas Regents Center. From 1958 until his retirement in March 1993, Mr. Stark
served in various capacities at Hallmark Cards, Inc., a worldwide manufacturer
of greeting cards and related products, including as Executive Vice President,
director and President of the Personal Communications Group. Mr. Stark currently
serves as a director of Mercantile Bancorporation and Payless Shoe Source, Inc.
44
<PAGE> 54
COMPENSATION OF DIRECTORS
Pursuant to Champion's 1995 Stock Retainer Plan for Non-employee Directors
("Retainer Plan"), each Director who is not an employee of Champion
("non-employee Director") receives in lieu of all cash compensation an annual
retainer of 4,800 Champion Shares or 5,200 Champion Shares if such non-employee
Director also serves as a chairperson of a Board Committee. The annual retainer
is paid on each annual meeting date upon being elected or reelected as a
non-employee Director. The Retainer Plan provides for the payment of retainers
through the annual meeting date in 2000. Non-employee Directors are reimbursed
for expenses they incur in attending Board and Committee meetings, and Champion
also maintains business travel accident insurance coverage for them. Directors
who are employees of Champion receive no compensation (beyond their compensation
for services as an employee) for serving as Directors.
Champion's 1991 Stock Plan for Directors (the "Directors' Plan") is
available to any new non-employee Director upon his or her first election to the
Board. Under the Directors' Plan, the first time a non-employee Director is
elected at an annual meeting, he or she will be entitled to a grant immediately
following such annual meeting. Stock grants under the Directors' Plan consist of
a right to purchase 8,000 shares and a nonqualified stock option to purchase up
to 24,000 shares. The right must be exercised within 60 days following the date
of grant. Shares purchased pursuant to the right are restricted and
nontransferable for a two-year period following the date of purchase. The option
becomes exercisable for 6,000 shares when a non-employee Director has exercised
the right in full during the applicable 60-day period. Thereafter, 6,000 shares
will become exercisable on each successive annual meeting date until the option
becomes fully exercisable, even if the Director does not remain on the Board
throughout such four-year period. Once the option becomes exercisable, it will
remain exercisable for a period not to exceed 10 years from the date of grant,
whether or not the non-employee Director remains on the Board for such period.
The exercise price for the right is the greater of $0.50 per share or 40% of the
fair market value per share on the date of grant and the exercise price for the
option is the closing price of the Champion Shares on the NYSE on the date of
the grant.
45
<PAGE> 55
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information (the
"Unaudited Pro Forma Combined Financial Information") is presented to reflect
the estimated impact of the Merger on the historical consolidated financial
statements of Champion, on the basis of pooling-of-interests accounting, and the
issuance of the estimated 16.5 million Champion Shares estimated to be issued to
effect the Merger. The related estimated total number of shares of additional
Champion common stock included in the computation of weighted average shares
outstanding is 17 million, consisting of 16.5 million shares estimated to be
issued to effect the Merger and an additional 0.5 million shares (determined by
applying the treasury stock method to the approximately 810,000 Champion Shares
issuable upon exercise of outstanding stock options of Redman).
The Unaudited Pro Forma Combined Financial Information including the Notes
thereto should be read in conjunction with the historical consolidated financial
statements of Champion and Redman and the unaudited pro forma combined financial
data, including the notes thereto, incorporated by reference or appearing
elsewhere in this Joint Proxy Statement and Prospectus. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "TERMS OF
THE MERGER -- Accounting Treatment."
The Unaudited Pro Forma Combined Condensed Statements of Income for each of
years in the three year period ended December 30, 1995 and for the six month
periods ended June 29, 1996 and July 1, 1995 assume that the Merger had been
consummated at the beginning of the periods presented. The Unaudited Pro Forma
Combined Condensed Balance Sheet at June 29, 1996 assumes that the Merger had
been consummated on the balance sheet date.
The Unaudited Pro Forma Combined Condensed Balance Sheet combines
Champion's June 29, 1996 consolidated balance sheet with Redman's June 28, 1996
consolidated balance sheet. The Unaudited Pro Forma Combined Condensed
Statements of Income combine Champion's statements of income for the six months
ended June 29, 1996 and July 1, 1995, and the fiscal years ended December 30,
1995, December 31, 1994 and January 1, 1994 with Redman's statements of income
for the six months ended June 28, 1996 and June 30, 1995, and the fiscal years
ended March 29, 1996, March 31, 1995 and April 1, 1994, respectively. The
Unaudited Pro Forma Combined Condensed Statements of Income presented on pages
48 to 52 are based on Champion's historical financial results, which reflect the
effects of the acquisitions, from the dates of such acquisitions, of Dutch
Housing, Inc., which was acquired effective January 28, 1994; Chandeleur Homes,
Inc. and Crest Ridge Homes, Inc., which were acquired effective February 3,
1995; Grand Manor, Inc., which was acquired effective March 29, 1996, and Homes
of Legend, Inc., which was acquired effective April 26, 1996. The Unaudited Pro
Forma Combined Condensed Statements of Income presented on pages 53 to 55 are
based on Champion's pro forma financial statements which include Champion's
historical results combined with the historical results for the comparable
periods of Homes of Legend, Inc., and Grand Manor, Inc. together with resulting
pro forma adjustments, and assumes the acquisitions had taken place at the
beginning of the periods presented.
In the Unaudited Pro Forma Combined Condensed Statements of Income,
Redman's income statement information for the three months ended March 29, 1996
is included in Redman's statements of income for the year ended March 29, 1996
and for the six months ended June 28, 1996, and Redman's income statement
information for the three months ended March 31, 1995 is included in Redman's
statements of income for the year ended March 31, 1995 and for the six months
ended June 30, 1995.
The Unaudited Pro Forma Combined Financial Information gives effect only to
the reclassifications and adjustments set forth in the accompanying Notes to the
Unaudited Pro Forma Combined Financial Information and does not reflect any cost
savings and other benefits anticipated by Champion's management as a result of
the Merger. However, the balance sheet data reflects non-recurring, direct costs
of the Merger, currently estimated to be $22.5 million, which is the midpoint of
$20 to $25 million, the range of the estimated costs. For a discussion of
anticipated cost savings and other benefits, see "THE PROPOSED MERGER --
Recommendation of the Board of Directors of Champion and Champion's Reasons for
the Merger," "-- Opinion of Financial Advisor to Champion," "-- Recommendation
of the Board of Directors of Redman and Redman's Reasons for the Merger," "--
Opinion of Financial Advisor to Redman" and "-- Plans for the
46
<PAGE> 56
Combined Company Following the Merger." The Unaudited Pro Forma Combined
Financial Information is not necessarily indicative of the results of operations
or the financial position which would have occurred had the Merger been
consummated at the beginning of the periods presented, nor is it necessarily
indicative of Champion's future results of operations or financial position.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the historical consolidated financial statements of Champion
and Redman incorporated by reference in this Joint Proxy Statement and
Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
47
<PAGE> 57
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
CHAMPION REDMAN
---------- ----------
HISTORICAL HISTORICAL
---------- ----------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 29, JUNE 28, PRO FORMA
1996 1996 RECLASSIFICATION COMBINED
---------- ---------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................................ $449,608 $321,782 $ -- $771,390
Cost of sales............................................ 379,305 253,035 18,494 (C) 650,834
Selling, general and administrative expenses............. 37,824 46,820 (18,494)(C) 66,150
-------- -------- -------- --------
417,129 299,855 -- 716,984
-------- -------- -------- --------
Operating income......................................... 32,479 21,927 -- 54,406
Other income (expense):
Interest income........................................ 272 1,029 1,301
Interest expense....................................... (997) (233) (1,230)
-------- -------- -------- --------
Income before income taxes............................... 31,754 22,723 -- 54,477
Income taxes............................................. 12,200 9,389 21,589
-------- -------- -------- --------
Net income............................................... $ 19,554 $ 13,334 $ -- $ 32,888
======== ======== ======== ========
Income per share......................................... $ 0.59 $ 0.66
======== ========
Weighted average shares outstanding...................... 33,126 50,126 (A)
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
48
<PAGE> 58
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JULY 1, 1995
<TABLE>
<CAPTION>
CHAMPION REDMAN
------------- --------------
HISTORICAL HISTORICAL
------------- --------------
SIX MONTHS SIX MONTHS
ENDED JULY 1, ENDED JUNE 30, PRO FORMA
1995 1995 RECLASSIFICATION COMBINED
------------- -------------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................ $ 376,917 $296,519 $ -- $673,436
Cost of sales........................................ 321,889 236,741 14,302 (C) 572,932
Selling, general and administrative expenses......... 29,939 41,054 (14,302)(C) 56,691
-------- -------- --------- --------
351,828 277,795 -- 629,623
-------- -------- --------- --------
Operating income..................................... 25,089 18,724 -- 43,813
Other income (expense):
Interest income.................................... 391 740 1,131
Interest expense................................... (1,276) (271) (1,547)
-------- -------- --------- --------
Income before income taxes........................... 24,204 19,193 -- 43,397
Income taxes......................................... 9,700 8,104 17,804
-------- -------- --------- --------
Net income........................................... $ 14,504 $ 11,089 $ -- $ 25,593
======== ======== ========= ========
Income per share..................................... $ 0.46 $ 0.53
======== ========
Weighted average shares outstanding.................. 31,558 48,558 (A)
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
49
<PAGE> 59
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
CHAMPION REDMAN
------------ ----------
HISTORICAL HISTORICAL
------------ ----------
YEAR ENDED YEAR ENDED
DECEMBER 30, MARCH 29, PRO FORMA
1995 1996 RECLASSIFICATION COMBINED
------------ ---------- ---------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................ $797,871 $613,855 $ -- $1,411,726
Cost of sales........................................ 679,732 485,550 32,796 (C) 1,198,078
Selling, general and administrative expenses......... 63,186 88,569 (32,796)(C) 118,959
-------- -------- -------- ----------
742,918 574,119 -- 1,317,037
-------- -------- -------- ----------
Operating income..................................... 54,953 39,736 -- 94,689
Other income (expense):
Interest income.................................... 810 2,156 2,966
Interest expense................................... (2,313) (495) (2,808)
-------- -------- -------- ----------
Income before income taxes........................... 53,450 41,397 -- 94,847
Income taxes......................................... 21,200 17,362 38,562
-------- -------- -------- ----------
Net income........................................... $ 32,250 $ 24,035 $ -- $ 56,285
======== ======== ======== ==========
Income per share..................................... $ 1.01 $ 1.15
======== ==========
Weighted average shares outstanding.................. 31,926 48,926 (A)
======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
50
<PAGE> 60
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
CHAMPION REDMAN
HISTORICAL HISTORICAL
------------ ----------
YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, PRO FORMA
1994 1995 RECLASSIFICATION COMBINED
------------ ---------- ---------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................ $585,574 $557,973 $ -- $1,143,547
Cost of sales........................................ 501,602 449,921 26,790 (C) 978,313
Selling, general and administrative expenses......... 47,332 73,949 (26,790)(C) 94,491
-------- -------- -------- ----------
548,934 523,870 -- 1,072,804
-------- -------- -------- ----------
Operating income..................................... 36,640 34,103 -- 70,743
Other income (expense):
Environmental reserve.............................. (2,700) (2,700)
Interest income.................................... 966 1,012 1,978
Interest expense................................... (816) (573) (1,389)
-------- -------- -------- ----------
Income from continuing operations before income
taxes.............................................. 34,090 34,542 -- 68,632
Income taxes......................................... 8,900 14,602 23,502
-------- -------- -------- ----------
Income from continuing operations.................... $ 25,190 $ 19,940 $ -- $ 45,130
======== ======== ======== ==========
Per share income from continuing operations.......... $ 0.82 $ 0.94
======== ==========
Weighted average shares outstanding.................. 30,932 47,932 (A)
======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
51
<PAGE> 61
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED JANUARY 1, 1994
<TABLE>
<CAPTION>
CHAMPION REDMAN
HISTORICAL HISTORICAL
YEAR ENDED YEAR ENDED
JANUARY 1, APRIL 1, PRO FORMA
1994 1994 RECLASSIFICATION COMBINED
---------- ---------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................................. $328,326 $443,056 $ -- $771,382
Cost of sales............................................. 284,012 358,654 21,076 (C) 663,742
Selling, general and administrative expenses.............. 32,636 61,570 (21,076)(C) 73,130
-------- -------- -------- --------
316,648 420,224 -- 736,872
-------- -------- -------- --------
Operating income.......................................... 11,678 22,832 -- 34,510
Other income (expense):
Special charge for stock options........................ (5,225) (5,225)
Decreased equity in subsidiary.......................... (572) (572)
Interest income......................................... 1,391 -- 1,391
Interest expense........................................ (486) (2,741) (3,227)
-------- -------- -------- --------
Income from continuing operations before income taxes and
extraordinary item...................................... 12,583 14,294 -- 26,877
Income taxes.............................................. 1,400 6,526 7,926
-------- -------- -------- --------
Income from continuing operations before extraordinary
item.................................................... $ 11,183 $ 7,768 $ -- $ 18,951
======== ======== ======== ========
Per share income from continuing operations before
extraordinary item...................................... $ 0.38 $ 0.41
======== ========
Weighted average shares outstanding....................... 29,108 46,108 (A)
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
52
<PAGE> 62
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
CHAMPION REDMAN
PRO FORMA HISTORICAL
---------- ----------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 29, JUNE 28, PRO FORMA
1996 1996 RECLASSIFICATION COMBINED
---------- ---------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................................ $483,219 $321,782 $ -- $805,001
Cost of sales............................................ 407,972 253,035 18,494 (C) 679,501
Selling, general and administrative expenses............. 40,746 46,820 (18,494)(C) 69,072
-------- -------- -------- --------
448,718 299,855 -- 748,573
-------- -------- -------- --------
Operating income......................................... 34,501 21,927 -- 56,428
Other income (expense):
Interest income........................................ 268 1,029 1,297
Interest expense....................................... (1,679) (233) (1,912)
-------- -------- -------- --------
Income before income taxes............................... 33,090 22,723 -- 55,813
Income taxes............................................. 12,700 9,389 22,089
-------- -------- -------- --------
Net income............................................... $ 20,390 $ 13,334 $ -- $ 33,724
======== ======== ======== ========
Income per share......................................... $ 0.62 $ 0.67
======== ========
Weighted average shares outstanding...................... 33,141 50,141 (A)
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
Champion's pro forma results for the period include its historical results
combined with the historical results for the comparable period of Homes of
Legend, Inc. which was acquired effective April 26, 1996 and Grand Manor, Inc.
which was acquired effective March 29, 1996, together with resulting pro forma
adjustments.
53
<PAGE> 63
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JULY 1, 1995
<TABLE>
<CAPTION>
CHAMPION REDMAN
------------- --------------
PRO FORMA HISTORICAL
------------- --------------
SIX MONTHS SIX MONTHS
ENDED JULY 1, ENDED JUNE 30, PRO FORMA
1995 1995 RECLASSIFICATION COMBINED
------------- -------------- ---------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales......................................... $ 417,350 $296,519 $ -- $ 713,869
Cost of sales..................................... 357,107 236,741 14,302 (C) 608,150
Selling, general and administrative expenses...... 33,486 41,054 (14,302)(C) 60,238
-------- -------- -------- ----------
390,593 277,795 -- 668,388
-------- -------- -------- ----------
Operating income.................................. 26,757 18,724 -- 45,481
Other income (expense):
Interest income................................. 360 740 1,100
Interest expense................................ (2,220) (271) (2,491)
-------- -------- -------- ----------
Income before income taxes........................ 24,897 19,193 -- 44,090
Income taxes...................................... 10,000 8,104 18,104
-------- -------- -------- ----------
Net income........................................ $ 14,897 $ 11,089 $ -- $ 25,986
======== ======== ======== ==========
Income per share.................................. $ 0.47 $ 0.53
======== ==========
Weighted average shares outstanding............... 31,573 48,573 (A)
======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
Champion's pro forma results for the period include its historical results
combined with the historical results for the comparable period of Homes of
Legend, Inc. which was acquired effective April 26, 1996 and Grand Manor, Inc.
which was acquired effective March 29, 1996, together with resulting pro forma
adjustments.
54
<PAGE> 64
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
CHAMPION REDMAN
------------ ----------
PRO FORMA HISTORICAL
------------ ----------
YEAR ENDED YEAR ENDED
DECEMBER 30, MARCH 29, PRO FORMA
1995 1996 RECLASSIFICATION COMBINED
------------ ---------- ---------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................... $889,672 $613,855 $ -- $1,503,527
Cost of sales........................................... 759,108 485,550 32,796 (C) 1,277,454
Selling, general and administrative expenses............ 70,792 88,569 (32,796)(C) 126,565
-------- -------- -------- ----------
829,900 574,119 -- 1,404,019
-------- -------- -------- ----------
Operating income........................................ 59,772 39,736 -- 99,508
Other income (expense):
Interest income....................................... 715 2,156 2,871
Interest expense...................................... (4,203) (495) (4,698)
-------- -------- -------- ----------
Income before income taxes.............................. 56,284 41,397 -- 97,681
Income taxes............................................ 22,300 17,362 39,662
-------- -------- -------- ----------
Net income.............................................. $ 33,984 $ 24,035 $ -- $ 58,019
======== ======== ======== ==========
Income per share........................................ $ 1.06 $ 1.19
======== ==========
Weighted average shares outstanding..................... 31,956 48,956 (A)
======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
Champion's pro forma results for the period include its historical results
combined with the historical results for the comparable period of Homes of
Legend, Inc. which was acquired effective April 26, 1996 and Grand Manor, Inc.
which was acquired effective March 29, 1996, together with resulting pro forma
adjustments.
55
<PAGE> 65
CHAMPION ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 29, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
CHAMPION REDMAN
HISTORICAL HISTORICAL --------------------- PRO FORMA
JUNE 29, 1996 JUNE 28, 1996 DEBIT CREDIT COMBINED
------------- ------------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and short-term
investments.................................... $ 8,859 $ 27,655 $ -- $ -- $ 36,514
Accounts receivable, trade....................... 65,527 44,755 110,282
Inventories...................................... 58,066 23,989 750(C) 82,805
Deferred taxes and other......................... 13,942 10,305 5,400(B) 450(C) 29,197
-------- -------- ------- ------- --------
Total current assets............................. 146,394 106,704 6,150 450 258,798
-------- -------- ------- ------- --------
PROPERTY AND EQUIPMENT, NET...................... 63,178 42,326 105,504
GOODWILL, NET.................................... 106,200 20,954 127,154
OTHER ASSETS..................................... 8,016 3,632 11,648
-------- -------- ------- ------- --------
$ 323,788 $ 173,616 $ 6,150 $ 450 $503,104
======== ======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank............................ $ 30,100 $ -- $ -- $ -- $ 30,100
Accounts payable................................. 57,849 26,341 84,190
Other accrued liabilities........................ 69,103 56,448 22,500(B) 148,051
-------- -------- ------- ------- --------
Total current liabilities........................ 157,052 82,789 -- 22,500 262,341
-------- -------- ------- ------- --------
LONG-TERM LIABILITIES............................ 32,612 20,852 53,464
SHAREHOLDERS' EQUITY:
Common stock..................................... 30,957 145 145(A) 16,500(A) 47,457
Capital in excess of par value................... 16,508 50,045 33,710(A) 32,843
Retained earnings................................ 87,633 37,140 17,100(B) 300(C) 107,973
Treasury stock................................... (17,355) 17,355(A) --
Foreign currency translation adjustments......... (974) (974)
-------- -------- ------- ------- --------
134,124 69,975 50,955 34,155 187,299
-------- -------- ------- ------- --------
$ 323,788 $ 173,616 $50,955 $56,655 $503,104
======== ======== ======= ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
56
<PAGE> 66
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(A) The Unaudited Pro Forma Combined Condensed Balance Sheet reflects the
issuance of 1.24 Champion Shares for each issued and outstanding Redman
Share to effect the Merger. The estimated total number of Champion Shares
assumed to be issued in connection with the Merger is estimated to be 16.5
million. The related estimated total number of shares of additional Champion
common stock included in the computation of weighted average shares
outstanding is 17 million, consisting of 16.5 million shares estimated to be
issued to effect the Merger and 0.5 million shares related to outstanding
stock options of Redman. The Unaudited Pro Forma Combined Condensed Balance
Sheet also reflects the assumed cancellation of Redman treasury stock in
connection with the Merger.
(B) In connection with the Merger, Champion expects to record charges to
operations, currently estimated to be approximately $20 to $25 million, in
the quarter ending December 28, 1996, the quarter in which the Merger is
expected to be consummated. These charges are non-recurring, direct costs of
the Merger, of which approximately 40% are investment banking, legal and
accounting fees, approximately 25% are reserves against costs triggered by
change in control provisions contained in employment agreements with certain
executives of Redman, and the remainder are other costs associated with
combining and realigning the operations of the two companies. These charges
are not reflected in the Unaudited Pro Forma Combined Condensed Statements
of Income because they are non-recurring costs directly associated with the
Merger. An estimated pretax charge of $22.5 million (the midpoint of the
range of estimated costs), $17.1 million on an after tax basis, is reflected
in the Unaudited Pro Forma Combined Condensed Balance Sheet, together with
the related $5.4 million deferred tax benefit. This estimated non-recurring
charge is a preliminary estimate only and therefore is subject to change.
Although Champion currently has no plans to terminate any members of
Redman's current management, Champion believes that it is necessary to
reserve against severance costs because the change in control provisions
contained in employment agreements of certain executives of Redman allow
such persons to voluntarily terminate their employment and receive severance
payments.
(C) In connection with the merger Redman's accounting policies will be conformed
to those of Champion. The principal differences are with respect to
accounting for inventories and plant start-up costs. Champion uses the first
in, first out (FIFO) method of accounting for inventories. Redman uses the
last in, last out (LIFO) method. Champion expenses plant start-up costs as
incurred. Redman defers plant start-up costs and amortizes them over twelve
months upon commencement of production. The effects of conforming the
companies' accounting policies are reflected on the Unaudited Pro Forma
Combined Condensed Balance Sheet. The reclassification reflected on the
Unaudited Pro Forma Combined Condensed Income Statements is to classify
Redman warranty service costs as cost of sales consistent with Champion's
classification.
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<PAGE> 67
COMPARISON OF RIGHTS OF CHAMPION SHAREHOLDERS
AND REDMAN STOCKHOLDERS
The following is a summary of the material differences between the rights
of Champion shareholders and the rights of Redman stockholders. Since Champion
is organized under the Michigan Business Corporation Act and Redman is organized
under the Delaware General Corporation Law, these differences arise from various
provisions of the corporate laws of such states as well as from various
differences in the provisions of the Restated Articles of Incorporation, as
amended, (the "Champion Articles") and By-laws (the "Champion By-laws") of
Champion and the Restated Certificate of Incorporation, as amended, (the "Redman
Certificate") and Amended and Restated By-laws (the "Redman By-laws") of Redman.
The following summary of the material differences between the rights of
Champion shareholders and Redman stockholders is qualified in its entirety by
reference to the Michigan Business Corporation Act and the Delaware General
Corporation Law, respectively, and the Champion Articles, Champion By-laws,
Redman Certificate and Redman By-laws.
AMENDMENTS TO CHARTER
The Champion Articles may be amended, altered, changed or repealed in the
manner prescribed by applicable law. To amend articles of incorporation, the
Michigan Business Corporation Act generally requires approval of the holders of
a majority of all outstanding shares entitled to vote thereon at a meeting of
shareholders. The Redman Certificate provides that notwithstanding any provision
of the Delaware General Corporation Law which may provide otherwise, the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of each class of capital stock is required to alter, amend, change or repeal the
Redman Certificate. To amend a certificate of incorporation, the Delaware
General Corporation Law requires the affirmative recommendation of the Redman
Board and the approval of a majority of all outstanding shares entitled to vote
therefor. Under both the Michigan Business Corporation Act and the Delaware
General Corporation Law, the holders of the outstanding shares of a class are
entitled to vote as a class upon any proposed amendment to the articles or
certificate of incorporation, as the case may be, if the amendment would
increase or decrease the number of authorized shares of such class, increase or
decrease the par value of the shares of such class (with respect to the Delaware
General Corporation Law), or alter or change the powers, preferences or special
rights of the shares of such class so as to adversely affect the holders
thereof.
BY-LAWS
Under the Delaware General Corporation Law, the authority to adopt, amend
or repeal the by-laws of a Delaware corporation is held exclusively by the
stockholders entitled to vote unless such authority is conferred upon the board
of directors in the corporation's certificate of incorporation. The Redman
Certificate expressly grants to its Board of Directors the powers to make, alter
or amend the Redman By-laws by vote of at least two-thirds of the directors (not
including directors which may be elected by any series of preferred stock, if
any), subject to the right of the stockholders to adopt, alter, amend and repeal
By-laws made by the Redman Board. Redman stockholders also have the power to
adopt, amend or repeal the by-laws by a two-thirds vote. The Michigan Business
Corporation Act provides that the shareholders or the Board of a Michigan
corporation may adopt, amend or repeal the by-laws unless such power is
expressly reserved to the shareholders in the corporation's articles of
incorporation or by-laws. The Champion Articles do not expressly reserve such
power to the shareholders. The Champion By-laws provide that such By-laws may be
amended, altered or repealed by the Champion Board or shareholders.
BOARD CLASSIFICATION
The Redman By-laws provide that Redman's directors shall be divided into
three classes with each class consisting as nearly as possible of one third of
the total number of directors comprising the Redman Board and being elected to
serve until the third succeeding annual meeting. Champion's Board of Directors
is elected each year to serve until the next annual meeting.
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<PAGE> 68
REMOVAL OF DIRECTORS
The Redman Certificate and the Redman By-laws provide for the removal of
directors at any time for cause by the affirmative vote of a majority of the
then outstanding shares of each class of capital stock of Redman generally
entitled to vote in the election of directors. The Redman By-laws provide for
the removal of directors which may be elected by any series of preferred stock,
if any, with or without cause by the affirmative vote of a majority of the then
outstanding shares of each class of capital stock of Redman generally entitled
to vote in the election of directors, subject to the terms of any amendment to
the Redman Certificate designating a series of preferred stock. The Certificate
of Designations of Series A Preferred Stock of Redman Industries, Inc. dated as
of August 5, 1994 provides that in the event that preferential dividends accrued
on the Series A Preferred Stock for four or more quarterly dividend periods,
whether consecutive or not, shall not have been declared or paid or set aside
for payment, the holders of record of all shares of Redman's preferred stock
(including the Series A Preferred Stock), other than any series in respect of
which such right has been expressly withheld by the Redman Certificate or the
authorizing resolutions included in any certificate of designations therefor,
shall have the right, at the next meeting of stockholders called for the
election of directors, to elect two members to the Redman Board, which directors
shall be in addition to the number of directors required by the Redman By-laws
prior to such default, to serve until the next annual meeting. Such right shall
continue until all accrued and unpaid preferential dividends on the Series A
Preferred Stock shall have been paid (or set aside for payment) in full. Such
directors may be removed and replaced by such stockholders in the manner
permitted by law; provided, however, that no such action may be taken by written
consent. There are currently no outstanding shares of Series A Preferred Stock.
The Champion By-laws provide that directors may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
The Champion By-laws provide that newly created directorships resulting
from an increase in the number of directors or the death, resignation or removal
of a director may be filled by the affirmative vote of a majority of the
directors then in office (even if the number of directors then in office is less
than a quorum) unless filled by proper action of the shareholders. Each director
chosen to fill such directorship or vacancy shall hold office only until the
next election of directors by the shareholders. The Redman By-laws provide that
vacancies or newly created directorships may be filled by a majority vote of the
directors in office, although less than a quorum, or by the affirmative vote of
the stockholders at the next annual meeting or at any special meeting called for
such purpose subject to rights of holders of Redman preferred stock.
Notwithstanding the foregoing, any vacancies in directorships that have been
created pursuant to the terms of the Certificate of Designations of Redman's
Series A Preferred Stock as described above may be filled only by Redman's
preferred stockholders (or by the remaining director elected by such
stockholders, if there be one). Under both the Michigan Business Corporation Act
and the Delaware General Corporation Law, newly created directorships resulting
from an increase in the number of directors may be filled by a majority vote of
the directors then in office, even if the number of directors then in office is
less than a quorum. The Michigan Business Corporation Act and the Delaware
General Corporation Law also provide that unless the articles or certificate of
incorporation or by-laws otherwise provide, vacancies occurring by reason of the
removal of directors with or without cause may be filled by a majority vote of
the directors then in office. In addition, under the Delaware General
Corporation Law, if, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the entire Board of Directors, the Delaware Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of shares outstanding at the time and entitled to vote,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office, such election to be conducted in accordance with the procedures under
the Delaware General Corporation Law for holding stockholder meetings.
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<PAGE> 69
VOTE REQUIRED FOR MERGERS
The Michigan Business Corporation Act and the Delaware General Corporation
Law generally require the affirmative vote of a majority of a corporation's
outstanding shares entitled to vote, unless the articles or certificate of
incorporation, as applicable, require a greater proportion (neither the Champion
Articles nor the Redman Certificate require a greater proportion) to authorize a
merger, consolidation, share exchange, dissolution or disposition of all or
substantially all of its assets, except that, (a) unless required by its
charter, no authorizing stockholder vote is required of a corporation surviving
a merger if (i) such corporation's charter is not amended by the merger; (ii)
each share of stock of such corporation will be an identical share of the
surviving corporation after the merger; and (iii) under the Delaware General
Corporation Law the number of shares to be issued in the merger does not exceed
20% of such corporation's outstanding common stock immediately prior to the
effective date of the merger and (b) unless a dissolution is adopted by a
majority of the board of directors, under the Delaware General Corporation Law,
a dissolution must be approved by all stockholders entitled to vote thereon.
ANTI-TAKEOVER PROVISIONS
The Michigan Business Corporation Act provides that "control shares" of
Champion acquired in a control share acquisition have no voting rights except as
granted by Champion shareholders. "Control shares" are shares that, when added
to shares previously owned by a shareholder, increase such shareholder's
ownership of Champion voting stock to 20% or more, 33 1/3% or more or a majority
of the outstanding voting power of Champion. A control share acquisition must be
approved by a majority of the votes cast by Champion shareholders entitled to
vote excluding shares owned by the acquiror and certain Champion officers and
directors. No such approval is required, however, for gifts or acquisitions
pursuant to a merger to which Champion is a party. The Delaware General
Corporation Law has no similar provision.
The Michigan Business Corporation Act also prohibits Michigan corporations,
the shares of which are listed on a national securities exchange, from
purchasing any of its shares from any person who holds 3% or more of its shares
unless an offer to repurchase is made to all shareholders at the same price, its
shareholders authorize the purchase, the shares have been held for at least two
years, the purchase is made in the open market, the price is not greater than
the average market price during the previous 30 business days or the purchase is
otherwise authorized by the Michigan Business Corporation Act. The Delaware
General Corporation Law has no similar provision.
The Michigan Business Corporation Act provides that business combinations
between a Michigan corporation which elects to be subject to the relevant
statute and a beneficial owner of 10% or more of the voting power of such
corporation require the approval of 90% of the votes of each class of stock
entitled to be cast and at least 2/3 of the votes of each class of stock
entitled to be cast other than shares owned by such 10% owner. Such requirements
will not apply if (i) the corporation's board of directors approves the
transaction prior to the time the 10% owner becomes such or (ii) the transaction
satisfies certain fairness standards, certain other conditions are met and the
10% owner has been such for at least five years. The Champion Certificate
contains an election to be governed by the relevant statute. The statute does
not apply to the Merger.
The Delaware General Corporation Law prohibits certain transactions between
a Delaware corporation and an "interested stockholder," which is defined as a
person that is directly or indirectly a beneficial owner of 15% or more of the
voting power of the outstanding voting stock of a Delaware corporation and such
persons' affiliates and associates. This provision prohibits certain business
combinations (defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain other transactions) between
an interested stockholder and a corporation for a period of three years after
the date the interested stockholder became an interested stockholder. However,
the prohibition does not apply if: (i) the business combination is approved by
the corporation's board of directors prior to the date the interested
stockholder became an interested stockholder; (ii) the interested stockholder
acquired at least 85% of the voting stock of the corporation (excluding shares
held by directors of the corporation who are also officers and shares held under
certain employee stock plans)
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<PAGE> 70
in the transaction in which it became an interested stockholder; or (iii) the
business combination is approved by a majority of the board of directors and the
affirmative vote of two-thirds of the votes entitled to be cast by stockholders
other than the interested stockholder at an annual or special meeting. This
provision of the Delaware General Corporation Law applies automatically to a
Delaware corporation unless otherwise provided in its certificate of
incorporation or by-laws or if it has less than 2,000 stockholders of record and
does not have voting stock listed on a national securities exchange or listed
for quotation with a registered national securities association. The Redman
Certificate expressly elects to be governed by this provision of the Delaware
General Corporation Law.
DISSENTERS' RIGHTS
Under the Michigan Business Corporation Act and the Delaware General
Corporation Law, holders of shares have the right, in certain circumstances, to
dissent from certain extraordinary corporate transactions as to which they have
voting rights by demanding payment in cash for their shares equal to the fair
value of such shares, as determined by agreement with the corporation or by a
court in an action timely brought by the corporation or the dissenters.
Unlike the Michigan Business Corporation Act, the Delaware General
Corporation Law grants dissenters' appraisal rights only in the case of certain
mergers and not in certain transactions involving a sale or transfer of assets,
a share exchange, a charter amendment or control share acquisition and certain
other transactions. The Delaware General Corporation Law does not extend
appraisal rights in a merger to holders of shares listed on a national
securities exchange or designated as a national market system security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 stockholders if stockholders are
required to accept as consideration in the merger only stock of the surviving
corporation, shares of stock of another corporation which at the effective date
will be listed on a national securities exchange or designated as a national
market system security on an inter-dealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than 2,000
stockholders, cash in lieu of fractional shares or a combination of the above.
The Michigan Business Corporation Act does not extend appraisal rights in most
situations where the shares held are listed on a national securities exchange or
held of record by 2,000 or more shareholders or where the consideration received
is cash or a combination of cash and shares listed on a national securities
exchange or held of record by 2,000 or more shareholders.
LIMITATION ON DIRECTORS' LIABILITY
The Champion Articles limit the liability of Champion's directors to
Champion or its shareholders to the fullest extent permitted by the Michigan
Business Corporation Act. Directors would not be personally liable to Champion
or its shareholders for any breach of duty as a director, except for (i) a
breach of the director's duty of loyalty; (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of law; (iii) a
violation of Section 551(1) of the Michigan Business Corporation Act (involving
unlawful distributions to shareholders and loans to directors, officers or
employees); (iv) a transaction from which the director derived an improper
personal benefit; or (v) an act or omission occurring before March 1, 1987.
The Redman Certificate provides that no director of Redman shall be liable
to Redman or its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent that exculpation from liabilities is not
permitted under the Delaware General Corporation Law. The Delaware General
Corporation Law prohibits exculpation (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law; (iii) for unlawful payments of dividends or unlawful stock repurchases
or redemptions; or (iv) for any transactions from which the director derived an
improper personal benefit.
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<PAGE> 71
INDEMNIFICATION
Both the Michigan Business Corporation Act and Delaware General Corporation
Law contain provisions setting forth conditions under which a corporation may
indemnify its directors and officers. These provisions are generally referred to
as "statutory indemnification" provisions. Corporations are permitted to adopt
charter provisions or by-laws which provide for additional indemnification of
directors and officers. These non-exclusive provisions are generally referred to
as "non-statutory indemnification" provisions. Non-statutory indemnification
provisions are generally adopted to expand the circumstances and liberalize the
conditions under which indemnification will occur. The statutory indemnification
provisions under the Michigan Business Corporation Act and the Delaware General
Corporation Law are substantially the same, although the Michigan Business
Corporation Act's non-statutory provisions may be slightly broader with respect
to indemnification in suits brought by or in the right of the corporation since
the Michigan Business Corporation Act expressly permits indemnification of
amounts paid in settlement in connection with such suits while the Delaware
General Corporation Law does not expressly permit such indemnification (except
for payment of expenses incurred in connection with such suit). As a result,
directors, officers, employees or agents who agree to a settlement in a
derivative suit brought on behalf of Champion may be indemnified by Champion for
the amount paid in settlement as well as expenses incurred in connection with
the suit if the standard set forth in the Michigan Business Corporation Act and
the Champion By-laws are met. The Champion By-laws provide that its officers,
directors, employees and agents shall be indemnified to the fullest extent
authorized or permitted by the Michigan Business Corporation Act; provided,
however, that Champion shall indemnify such persons with respect to actions
initiated by such persons only if authorized by the Champion Board. The Redman
Certificate provides that its officers and directors shall be indemnified to the
fullest extent permitted by the Delaware General Corporation Law.
SHAREHOLDER/STOCKHOLDER MEETINGS
The Michigan Business Corporation Act provides that if a corporation's
annual meeting is not held for 90 days after the date designated therefor or for
15 months after its last annual meeting, a court may order the meeting or
election to be held upon application by a shareholder. Under the Delaware
General Corporation Law, if an annual meeting is not held within 30 days of the
date designated for such meeting, or if not held for a period of 13 months after
the last annual meeting, the Delaware Court of Chancery may summarily order a
meeting to be held upon the application of any stockholder or director.
Under the Michigan Business Corporation Act and the Delaware General
Corporation Law, special meetings of shareholders and stockholders, as the case
may be, may be called by the board of directors and by such person or persons as
so authorized by the charter or the by-laws. The Champion By-laws provide that
special meetings of shareholders may be called at any time by the Chairman, the
President or the Board of Directors. The Redman Certificate and By-laws provide
that special meetings of stockholders may be called at any time by the Chairman
of the Board, the Board of Directors, or any holder or holders of record of at
least 25% of the outstanding shares of capital stock of Redman then entitled to
vote on any matter for which the meeting is being called.
ACTION BY WRITTEN CONSENT
Under the Michigan Business Corporation Act, any shareholder action
required or permitted to be taken by shareholder vote may be taken with the
unanimous written consent of the shareholders. The articles of incorporation may
provide that such shareholder action may be taken upon the written consent of
holders of the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. The Champion Articles do not so provide. Under the Delaware
General Corporation Law, unless the charter provides otherwise, any action
required to be taken or which may be taken at a meeting of stockholders may be
taken without a vote, without a meeting and without prior notice, with the
written consent of not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. The Redman Certificate provides
that actions of the stockholders may not be effected by written consent (except
for those actions to be taken by holders of preferred stock, if any).
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<PAGE> 72
PAYMENT OF DIVIDENDS
Under the Delaware General Corporation Law, a corporation may generally pay
dividends out of surplus or, if there is no surplus, out of the net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year, unless the capital of the corporation has been diminished by depreciation
in the value of its property, losses or otherwise to an amount less than the
aggregate amount of the capital represented by the issued outstanding stock of
all classes having a preference upon the distribution of assets. The Michigan
Business Corporation Act permits Champion to pay dividends and make other
distributions unless, as a result, Champion would become insolvent or its assets
would be less than its liabilities (each as valued as provided in the Michigan
Business Corporation Act) plus any preferential rights.
RIGHTS PLANS
Champion. Champion has distributed one preferred share purchase right on
each Champion Share. The rights entitle the shareholders to certain rights in
the event of certain transactions involving Champion. Redman stockholders shall
receive one such preferred share purchase right with respect to each Champion
Share received pursuant to the Merger Agreement. See "Description of Champion
Capital Stock -- Preferred Share Purchase Rights."
Redman. On July 26, 1994, the Board of Directors of Redman declared a
dividend of one preferred stock purchase right on each outstanding Redman Share.
The rights, which, unless earlier redeemed, expire on July 26, 2004, were issued
on August 5, 1994 to Redman stockholders of record on that date and were
authorized to be issued in respect of each Redman Share subsequently issued.
Under certain circumstances each right will entitle the holder to purchase one
one-hundredth of a share of Series A Junior Preferred Stock, par value $0.01 per
share, of Redman at an exercise prise of $60 per one one-hundredth of a share,
subject to adjustment. The rights will not be exercisable or transferable apart
from the Redman Common Stock until the earlier to occur of either (i) the tenth
day following the first date on which there has been a public announcement by
Redman or an Acquiring Person (as hereinafter defined) that an Acquiring Person
has become such or, if earlier, the date on which a majority of the Continuing
Directors (as defined in the Rights Agreement, dated as of July 26, 1994,
between Redman and Bank One Texas, N.A.) have become aware of the existence of
an Acquiring Person or (ii) the tenth business day after the date of the
commencement by a person of, or the first public announcement of the intent of
any person to commence, a tender or exchange offer, upon the consummation of
which such person, together with its affiliates and associates, would be the
beneficial owner of 30% or more of Redman's voting stock (such earlier date
being referred to as the "Distribution Date"). The rights will not have any
voting rights or be entitled to dividends.
If, after the Distribution Date, Redman is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power is sold, each holder of a right shall thereafter have the right to
receive on exercise of the right, that number of shares of common stock of the
acquiring company which at the time of such transaction would have a market
value of two times the exercise price of the right. In addition, in the event a
person or group shall become the beneficial owner of 15% or more of the
outstanding Redman voting stock, including the Redman Shares without the
approval of the Redman Board (such person being an "Acquiring Person"), each
holder of a right other than an Acquiring Person shall have the right, upon
exercise of a right, to receive Redman preferred stock having a market value
equal to two times the exercise price of the right. Notwithstanding the
foregoing, any rights that are owned or acquired by an Acquiring Person will be
void and the holder thereof shall have no right to exercise or transfer such
rights. The rights are redeemable at $.01 per right at any time on or prior to
the earlier of (i) the tenth day following the time that a person or group has
become an Acquiring Person, or (ii) July 26, 2004. After the Distribution Date,
the rights may be redeemed only if approved by a majority of Continuing
Directors provided that there are at least two such Continuing Directors.
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DESCRIPTION OF CHAMPION CAPITAL STOCK
GENERAL
The authorized capital stock of Champion consists of: 75,000,000 Champion
Shares and 5,000,000 shares of preferred stock, no par value ("Champion
Preferred Shares"). As of September 23, 1996, there were 30,984,375 Champion
Shares issued and outstanding, 3,765,400 Champion Shares issuable upon the
exercise or conversion of options, warrants or convertible securities granted or
issuable by Champion, and no Champion Preferred Shares issued and outstanding.
CHAMPION SHARES
Champion shareholders are entitled to one vote per share and have no
preemptive rights to subscribe for any additional securities which Champion may
issue. There are no redemption provisions or sinking fund provisions applicable
to the Champion Shares, nor are the Champion Shares subject to calls or
assessments by Champion. Champion shareholders do not have preference,
conversion or exchange rights. In the event of liquidation, dissolution or
winding up of Champion, Champion shareholders will be entitled to share equally
in the assets available for distribution after payment of all creditors and the
liquidation preferences of any shares of Champion Preferred Shares issued and
outstanding.
CHAMPION PREFERRED SHARES
The Champion Board is authorized to provide for the issuance from time to
time of one or more classes or series of Champion Preferred Shares and to fix
the voting powers and the designations, preferences, qualifications or
restrictions which Champion Preferred Shares will have with respect to any other
class or series of capital stock of Champion.
PREFERRED SHARE PURCHASE RIGHTS
On January 9, 1996, the Champion Board of Directors declared a dividend of
one preferred share purchase right (a "Champion Right") on each outstanding
Champion Share. The Champion Rights, which expire on February 5, 2006, were
issued on February 5, 1996 to shareholders of record on that date and were
authorized to be issued in respect of each share of Champion Share subsequently
issued. Under certain circumstances each Champion Right will entitle the holder
to purchase one-half of one-hundredth of a share of Series A Preferred Stock, no
par value (the "Series A Preferred Shares"), of Champion at an exercise price of
$70 per one half of one-hundredth of a Series A Preferred Share, subject to
adjustment. The Champion Rights will not be exercisable or transferable apart
from the Champion Shares until the earlier to occur of either: (i) ten business
days following a public announcement that a person or group has acquired 20% or
more of the outstanding Champion Shares, or (ii) ten business days following
commencement of, or a public announcement of an intention to make, a tender or
exchange offer, which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding Champion Shares. The Champion Rights
will not have any voting rights nor be entitled to dividends.
If, after the Champion Rights become exercisable, Champion is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, provision will be made for each
holder of a Champion Right to receive on exercise of the Champion Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction would have a market value of two times the exercise price of
the Champion Right. In addition, in the event a person or group shall become the
beneficial owner of 20% or more of the outstanding Champion Shares (an
"Acquiring Person"), each holder of a Champion Right other than an Acquiring
Person shall have the right, upon exercise of a Champion Right, to purchase
Champion Shares (or other property or securities) having a market value equal to
two times the exercise price of the Champion Right. Notwithstanding the
foregoing, any Champion Rights that are owned or acquired by an Acquiring Person
will be void and the holder thereof shall have no right to exercise or transfer
such Champion Rights. The Champion Rights are redeemable at $.01 per Champion
Right at any time prior to the time that a person or group acquires beneficial
ownership of 20% or more of the outstanding Champion Shares.
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DIVIDENDS
Champion shareholders are entitled to receive dividends, when and if
declared by the Champion Board, out of funds legally available therefor.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CHAMPION'S BY-LAWS
Certain provisions of the By-laws summarized in the following paragraphs
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a shareholder might consider to be in his
or her best interest, including those attempts that might result in a premium
over the market price for the Champion Shares held by shareholders.
Special Meeting of Shareholders. The Champion By-laws provide that special
meetings of shareholders of Champion may be called only by the Champion Board of
Directors, the Chairman of the Board of Directors or the President. This
provision will make it more difficult for stockholders to take action opposed by
the Champion Board.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. Champion's By-laws provide that shareholders seeking to bring
business before an annual or special meeting of shareholders, or to nominate
candidates for election as directors at an annual or special meeting of
shareholders, must provide timely notice thereof in writing. Champion's By-laws
also specify certain requirements for a shareholder's notice to be in proper
written form. These provisions may preclude some stockholders from bringing
matters before the shareholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting. For a more complete
description of the provisions of Champion's By-laws regarding these matters, see
"COMPARISON OF RIGHTS OF CHAMPION SHAREHOLDERS AND REDMAN STOCKHOLDERS --
Shareholders/Stockholders Meetings."
LEGAL MATTERS
Certain legal matters with respect to the Champion Shares offered hereby
(including the validity thereof) will be passed upon for Champion by Dykema
Gossett PLLC, counsel to Champion.
Certain tax matters in connection with the Merger as discussed under "TERMS
OF THE MERGER -- Certain Federal Income Tax Consequences of the Merger" will be
passed upon by Weil, Gotshal & Manges LLP, counsel to Redman.
EXPERTS
The financial statements incorporated in this Joint Proxy Statement and
Prospectus by reference to the Champion Enterprises, Inc. Annual Report on Form
10-K for the year ended December 30, 1995 has been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
It is anticipated that a representative of Price Waterhouse LLP will be
present at the Champion Special Meeting, will have an opportunity to make a
statement, and will respond to appropriate questions.
The consolidated financial statements of Redman incorporated by reference
in Redman's Annual Report (Form 10-K) for the year ended March 29, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon, incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
It is anticipated that a representative of Ernst & Young LLP will be
present at the Redman Special Meeting, will have an opportunity to make a
statement, and will respond to appropriate questions.
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OTHER MATTERS
As of the date of this Joint Proxy Statement and Prospectus, neither the
Redman Board nor the Champion Board knows of any other matters to be presented
for action by Redman stockholders or Champion shareholders at the respective
Special Meetings. If, however, any other matters not now known are properly
brought before the Special Meetings, the management of Redman or Champion, as
the case may be, will vote upon the same according to their discretion and best
judgment.
PROPOSALS OF CHAMPION SHAREHOLDERS
AND REDMAN STOCKHOLDERS
Shareholder proposals intended to be considered for inclusion in Champion's
proxy statement for presentation at the 1997 annual meeting of Champion must be
received by Champion by November 22, 1996.
The deadline has passed for stockholder proposals intended to be considered
for inclusion in Redman's proxy statement for presentation at the 1996 annual
meeting of Redman. Such stockholder proposals must have been received by Redman
by March 11, 1996. If the Merger is consummated, no 1996 annual meeting will be
held.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CHAMPION ENTERPRISES, INC.,
RHI ACQUISITION CORP.
AND
REDMAN INDUSTRIES, INC.
August 19, 1996
<PAGE> 77
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
THE MERGER
1.1 The Merger................................................................... A-1
1.2 Effective Time............................................................... A-1
1.3 Effects of the Merger........................................................ A-1
1.4 Certificate of Incorporation and By-laws..................................... A-2
1.5 Directors and Officers....................................................... A-2
1.6 Additional Actions........................................................... A-2
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock.................................................. A-2
2.2 Exchange Ratio; Fractional Shares............................................ A-2
2.3 Exchange of Certificates..................................................... A-2
(a) Exchange Agent........................................................... A-2
(b) Exchange Procedures...................................................... A-3
(c) Distributions with Respect to Unexchanged Shares......................... A-3
(d) No Further Ownership Rights in Company Common Stock...................... A-3
(e) Termination of Exchange Fund............................................. A-4
(f) No Liability............................................................. A-4
(g) Investment of Exchange Fund.............................................. A-4
2.4 Treatment of Stock Options................................................... A-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
3.1 Organization and Standing.................................................... A-5
3.2 Subsidiaries................................................................. A-5
3.3 Corporate Power and Authority................................................ A-5
3.4 Capitalization of Parent..................................................... A-6
3.5 Conflicts, Consents and Approval............................................. A-6
3.6 Absence of Certain Changes................................................... A-7
3.7 Parent SEC Documents......................................................... A-7
3.8 Taxes........................................................................ A-7
3.9 Compliance with Law.......................................................... A-8
3.10 Registration Statement....................................................... A-8
3.11 Litigation................................................................... A-8
3.12 Brokerage and Finder's Fees.................................................. A-8
3.13 Opinion of Financial Advisor................................................. A-8
3.14 Accounting Matters........................................................... A-8
3.15 Tax-Free Reorganization...................................................... A-9
3.16 Employee Benefit Plans....................................................... A-9
3.17 Contracts.................................................................... A-10
3.18 Labor Relations.............................................................. A-10
3.19 Permits...................................................................... A-11
3.20 Environmental Matters........................................................ A-11
3.21 Company Stock Ownership...................................................... A-11
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Standing.................................................... A-11
4.2 Subsidiaries................................................................. A-12
4.3 Corporate Power and Authority................................................ A-12
4.4 Capitalization of the Company................................................ A-12
4.5 Conflicts; Consents and Approvals............................................ A-13
4.6 Absence of Certain Changes................................................... A-13
4.7 Company SEC Documents........................................................ A-13
4.8 Taxes........................................................................ A-14
4.9 Compliance with Law.......................................................... A-14
4.10 Registration Statement....................................................... A-14
4.11 Litigation................................................................... A-14
4.12 Brokerage and Finder's Fees.................................................. A-15
4.13 Opinion of Financial Advisor................................................. A-15
4.14 Accounting Matters........................................................... A-15
4.15 Tax-Free Reorganization...................................................... A-15
4.16 Employee Benefit Plans....................................................... A-15
4.17 Contracts.................................................................... A-16
4.18 Labor Relations.............................................................. A-16
4.19 Permits...................................................................... A-17
4.20 Environmental Matters........................................................ A-17
4.21 Parent Stock Ownership....................................................... A-17
4.22 DGCL Section 203 and State Takeover Laws..................................... A-17
4.23 Company Rights Agreement..................................................... A-17
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Mutual Covenants............................................................. A-17
(a) General.................................................................. A-17
(b) HSR Act.................................................................. A-18
(c) Other Governmental Matters............................................... A-18
(d) Pooling-of-Interests..................................................... A-18
(e) Tax-Free Treatment....................................................... A-18
(f) Public Announcements..................................................... A-18
(g) Access................................................................... A-18
(h) Stockholders Meeting..................................................... A-18
(i) Preparation of Proxy Statement and Registration Statement................ A-18
(j) Notification of Certain Matters.......................................... A-19
(k) Affiliates............................................................... A-19
5.2 Covenants of Parent.......................................................... A-19
(a) Conduct of Parent's Operations........................................... A-19
(b) Indemnification; Insurance............................................... A-20
(c) Consulting Agreement..................................................... A-20
(d) Listing Application...................................................... A-20
(e) Directors of Parent...................................................... A-20
(f) Employee Benefits........................................................ A-21
5.3 Covenants of the Company..................................................... A-21
(a) Conduct of the Company's Operations...................................... A-21
(b) No Solicitation.......................................................... A-23
</TABLE>
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<TABLE>
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<S> <C>
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions............................................................ A-23
6.2 Conditions to Obligations of the Company..................................... A-24
6.3 Conditions to Obligations of Parent and Sub.................................. A-24
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination.................................................................. A-25
7.2 Effect of Termination........................................................ A-26
7.3 Amendment.................................................................... A-27
7.4 Extension; Waiver............................................................ A-28
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties................................... A-28
8.2 Notices...................................................................... A-28
8.3 Interpretation............................................................... A-29
8.4 Counterparts................................................................. A-29
8.5 Entire Agreement............................................................. A-29
8.6 Third Party Beneficiaries.................................................... A-29
8.7 Governing Law................................................................ A-29
8.8 Specific Performance......................................................... A-29
8.9 Assignment................................................................... A-29
8.10 Expenses..................................................................... A-29
8.11 Incorporation of Disclosure Schedules........................................ A-29
8.12 Severability................................................................. A-29
8.13 Subsidiaries................................................................. A-29
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 19th day of August, 1996, by and among Champion Enterprises,
Inc., a Michigan corporation ("Parent"), RHI Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Redman
Industries, Inc., a Delaware corporation (the "Company").
PRELIMINARY STATEMENTS
A. Parent desires to combine with the business and operations of the
Company through the merger (the "Merger") of Sub with and into the Company, with
the Company as the surviving corporation, pursuant to which each share of
Company Common Stock (as defined in Section 4.4) outstanding at the Effective
Time (as defined in Section 1.2) will be converted into the right to receive
shares of Parent Common Stock (as defined in Section 3.4) as more fully provided
herein.
B. The Company desires to combine its business and operations with the
businesses of Parent and to become a wholly owned subsidiary of Parent and for
the holders of shares of Company Common Stock ("Company Stockholders") to have a
continuing equity interest in the combined businesses of Parent and the Company.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
D. The parties intend that the Merger be accounted for as a
pooling-of-interests for financial reporting purposes.
E. The respective Boards of Directors of Parent, Sub and the Company have
determined that the Merger in the manner contemplated herein is fair to and in
the best interests of their respective stockholders and, by duly adopted
resolutions, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, and in
accordance with the provisions of the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company as soon as practicable
following the satisfaction or waiver of the conditions set forth in Article VI,
but in no event later than two business days thereafter (the date of such merger
being referred to herein as the "Closing Date"). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
its existence under the laws of the State of Delaware. The Company, in its
capacity as the corporation surviving the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time. The Merger shall be consummated by filing with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the DGCL. The Merger shall become
effective (the "Effective Time") when the Certificate of Merger has been filed
with the Delaware Secretary of State or at such later time as may be agreed by
Parent and the Company and specified in the Certificate of Merger. Prior to the
filing referred to in this Section 1.2, a closing (the "Closing") shall be held
at the offices of Skadden, Arps, Slate, Meagher & Flom at 919 Third Avenue, New
York, New York, or such other place as the parties may agree.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
the DGCL.
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1.4 Certificate of Incorporation and By-laws. The Restated Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the initial Certificate of Incorporation of the Surviving
Corporation. The Amended and Restated By-laws of the Company, as in effect
immediately prior to the Effective Time, shall be the initial By-laws of the
Surviving Corporation.
1.5 Directors and Officers. From and after the Effective Time, the officers
of the Company shall be the officers of the Surviving Corporation and the
directors of Sub shall be the directors of the Surviving Corporation, in each
case until their respective successors are duly elected and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
carry out the provisions of this Agreement, the proper officers and directors of
Parent and the Company shall take all such necessary action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub or the Company:
(a) Each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one share
of common stock of the Surviving Corporation. Such shares shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) Each share of Company Common Stock (other than shares to be
cancelled in accordance with Section 2.1(c)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive 1.24 shares of Parent Common Stock (the "Exchange Ratio").
(c) Each share of capital stock of the Company held in the treasury of
the Company or held by Parent or any of its subsidiaries shall be cancelled
and retired and no payment shall be made in respect thereof.
2.2 Exchange Ratio; Fractional Shares. No certificates for fractional
shares of Parent Common Stock shall be issued as a result of the conversion
provided for in Section 2.1(b). To the extent that an outstanding share of
Company Common Stock would otherwise have become a fractional share of Parent
Common Stock, the holder thereof, upon presentation of such fractional interest
represented by an appropriate certificate for Company Common Stock to the
Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Parent Common Stock on the New York Stock Exchange
Composite Tape ("NYSE") on the last full trading day immediately prior to the
Effective Time) of such fractional interest. Such payment with respect to
fractional shares is merely intended to provide a mechanical rounding off of,
and is not a separately bargained for, consideration. If more than one
certificate representing shares of Company Common Stock shall be surrendered for
the account of the same holder, the number of shares of Parent Common Stock for
which certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered. In
the event that prior to the Effective Time Parent or the Company shall declare a
stock dividend or other distribution payable in shares of its common stock or
securities convertible into shares of its common stock, or effect a stock split,
reclassification, combination or other change with respect to its common stock,
the Exchange Ratio shall be adjusted to reflect such dividend, distribution,
stock split, reclassification, combination or other change.
2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall make
available to an exchange agent designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of
Company Stockholders, for exchange in accordance with this Section 2.3,
certificates representing shares of Parent Common Stock issuable pursuant
to Section 2.1 in exchange for outstanding shares of Company Common Stock
and shall from time-to-time deposit cash in an amount reasonably expected
to
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be paid pursuant to Section 2.2 (such shares of Parent Common Stock and
cash, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 2.1(b) hereof (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions
for effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing
that number of shares of Parent Common Stock which such holder has the
right to receive pursuant to Section 2.1 and (y) a check representing the
amount of cash in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, which such holder has the right to receive
pursuant to the provisions of this Article II, after giving effect to any
required withholding tax, and the shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or
accrued on the cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, payable to holders of shares of
Company Common Stock. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered on the transfer records of the
Company, a certificate representing the proper number of shares of Parent
Common Stock, together with a check for the cash to be paid in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any,
may be issued to such transferee if the Certificate representing such
shares of Company Common Stock held by such transferee is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon surrender a certificate
representing shares of Parent Common Stock and cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, as provided
in this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to shares of Parent
Common Stock having a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Law (as defined in Section 3.9), following surrender
of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of
Parent Common Stock and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
shares of Parent Common Stock, less the amount of any withholding taxes
which may be required thereon.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon surrender of Certificates in accordance
with the terms hereof (including any cash paid pursuant to this Article II)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock represented thereby, and
from and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the Company of shares of Company
Common Stock. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Section 2.3.
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(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to Company Stockholders for six months after
the Effective Time shall be delivered to Parent or the Surviving
Corporation, upon demand thereby, and holders of shares of Company Common
Stock who have not theretofore complied with this Section 2.3 shall
thereafter look only to Parent for payment of any claim to shares of Parent
Common Stock, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of
Company Common Stock (or dividends or distributions with respect thereto)
or cash from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time of the Merger (or immediately prior to such earlier date on
which any cash, any cash in lieu of fractional shares or any dividends or
distributions with respect to whole shares of Company Common Stock in
respect of such Certificate would otherwise escheat to or become the
property of any Governmental Authority (as defined in Section 3.5)), any
such cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by Applicable Law, become the property of Parent,
free and clear of all claims or interest of any person previously entitled
thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Parent. In the event the Exchange Fund shall realize a loss on
any such investment, Parent shall promptly thereafter deposit, or cause to
be deposited, in such Exchange Fund on behalf of the Surviving Corporation
cash in an amount equal to such loss.
2.4 Treatment of Stock Options
(a) Prior to the Effective Time, Parent and the Company shall take all
such actions as may be necessary to cause each unexpired and unexercised
option or right to purchase shares of Company Common Stock granted (or
subject to being granted on a contingent basis) under the Company's various
stock option plans in effect on the date hereof to current or former
directors, officers, employees, consultants or independent contractors of
the Company or its subsidiaries (each, a "Company Option") to cease to
represent the right to purchase Company Common Stock and to be adjusted at
the Effective Time to represent the right (an "Adjusted Option") to
purchase that number of shares of Parent Common Stock equal to the number
of shares of Company Common Stock issuable immediately prior to the
Effective Time upon exercise of the Company Option (without regard to
actual restrictions on exercisability) multiplied by the Exchange Ratio,
with an exercise price equal to the exercise price which existed under the
corresponding Company Option divided by the Exchange Ratio, and with other
terms and conditions that are the same as the terms and conditions of such
Company Option immediately before the Effective Time. In connection with
the issuance of Adjusted Options, Parent shall (i) reserve for issuance the
number of shares of Parent Common Stock that will become subject to
Adjusted Options pursuant to this Section 2.4 and (ii) from and after the
Effective Time, upon exercise of Adjusted Options, make available for
issuance all shares of Parent Common Stock covered thereby, subject to the
terms and conditions applicable thereto.
(b) Parent agrees to file with the Securities and Exchange Commission
(the "Commission") as soon as reasonably practicable after the Closing Date
a registration statement on Form S-8 or other appropriate form under the
Securities Act of 1933 (together with the rules and regulations thereunder,
the "Securities Act") to register shares of Parent Common Stock issuable
upon exercise of the Adjusted Options and use its reasonable efforts to
cause such registration statement to remain effective until the exercise or
expiration of such options.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement, Parent and Sub
hereby represent and warrant to the Company that the statements contained in
this Article III are true, correct and complete.
3.1 Organization and Standing. Each of Parent and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation with full power and authority to own, lease, use
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of Parent and its subsidiaries is
duly qualified to do business and in good standing in each jurisdiction in which
the nature of the business conducted by it or the property it owns, leases or
operates makes such qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a material
adverse effect on Parent. The copies of the Certificate of Incorporation and
By-laws (or similar organizational documents) of Parent and each of its
subsidiaries, which have previously been made available to the Company, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
3.2 Subsidiaries. As of the date hereof, other than immaterial interests,
Parent does not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, joint venture or other entity or
enterprise, except as set forth in Section 3.2 to the disclosure schedule (the
"Parent Disclosure Schedule") delivered by Parent to the Company and dated the
date hereof. Section 3.2 to the Parent Disclosure Schedule sets forth as to each
subsidiary of Parent: (i) its name and jurisdiction of incorporation or
organization, (ii) its authorized capital stock or share capital, and (iii) the
number of issued and outstanding shares of its capital stock or share capital.
Except as set forth in Section 3.2 to the Parent Disclosure Schedule, each of
the outstanding shares of capital stock of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by Parent free and clear of all liens, pledges, security
interests, claims or other encumbrances, other than liens imposed by law which
could not reasonably be expected to have, in the aggregate, a material adverse
effect on Parent. All of the outstanding shares of the capital stock of Sub are
directly owned by Parent. Other than as set forth in Section 3.2 to the Parent
Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer of any securities of any subsidiary of Parent, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of any subsidiary of Parent; and no subsidiary of Parent
has any obligation of any kind to issue any additional securities or to pay for
securities of any subsidiary of Parent or any predecessor thereof. As used in
this Section 3.2, "capital stock" shall include capital stock or other ownership
interests having by their terms ordinary voting power to elect directors or
others performing similar functions with respect to such entity.
3.3 Corporate Power and Authority.
(a) Parent has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby, subject to the approval of the Share Issuance (as defined below) by
the requisite votes of the stockholders of Parent (the "Parent
Stockholders") in accordance with the rules of the NYSE and this Agreement.
The execution and delivery of this Agreement by Parent and the consummation
by Parent of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Parent. The Board of
Directors of Parent has directed that the issuance of Parent Common Stock
pursuant hereto (the "Share Issuance") be submitted to the Parent
Stockholders for approval at a stockholders meeting and, except for the
approval of the Share Issuance by the Parent Stockholders in accordance
with the rules of the NYSE, no other corporate proceedings on the part of
Parent are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with its
terms.
(b) Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Sub
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and the consummation by Sub of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Sub and by
Parent as the sole stockholder of Sub, and no other corporate proceedings
on the part of Sub are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and constitutes a valid and binding obligation of Sub,
enforceable against Sub in accordance with its terms.
3.4 Capitalization of Parent. Parent's authorized capital stock consists
solely of (a) 75,000,000 shares of common stock, $1.00 par value per share
("Parent Common Stock"), and (b) 5,000,000 shares of preferred stock, no par
value ("Parent Preferred Stock"), of which 300,000 shares are designated as
"Series A Preferred Stock." As of August 16, 1996, (i) 30,921,235 shares of
Parent Common Stock were issued and outstanding, (ii) 3,828,540 shares of Parent
Common Stock were issuable upon the exercise or conversion of options, warrants
or convertible securities granted or issuable by Parent, other than the rights
("Parent Rights") issued under the rights agreement, dated January 9, 1996,
between Parent and Harris Trust and Savings Bank (the "Parent Rights
Agreement"), (iii) no shares of Parent Preferred Stock were issued and
outstanding, and (iv) 309,212 shares of Series A Preferred Stock were issuable
upon exercise of the Parent Rights in accordance with the terms of the Parent
Rights Agreement. Since August 16, 1996, Parent has not issued any shares of its
capital stock except upon the exercise of such options, warrants or convertible
securities. Each outstanding share of Parent capital stock is, and all shares of
Parent Common Stock to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and nonassessable and free of any
preemptive rights. As of the date hereof, other than as set forth above, in the
Parent SEC Documents (as defined in Section 3.7) or in Section 3.4 to the Parent
Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer by Parent of any securities of Parent, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Parent; and Parent has no obligation of any kind to issue any
additional securities or to pay for securities of Parent or any predecessor.
Parent has no outstanding bonds, debentures, notes or other similar obligations
the holders of which have the right to vote generally with holders of Parent
Common Stock.
3.5 Conflicts, Consents and Approvals. Neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of Parent
or any subsidiary of Parent;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of Parent or any of its subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which any of their respective properties or
assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Parent or any of its subsidiaries or their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Parent or any of its affiliates with any third
party or any court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory body, agency, instrumentality or
authority (a "Governmental Authority"), other than (i) approval of the
Share Issuance by Parent Stockholders, (ii) approval of the listing of the
shares of Parent Common Stock to be issued in the Merger on the NYSE,
subject to official notice of issuance, (iii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), and (iv)
registrations or other actions required under federal and state securities
laws as are contemplated by this Agreement;
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except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 3.5 to the Parent Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that would not, in the aggregate, have a
material adverse effect on Parent or that would not prevent or delay the
consummation of the transactions contemplated hereby.
3.6 Absence of Certain Changes. Except as set forth in the Parent SEC
Documents filed with the Commission as of the date hereof, since December 31,
1995, (i) each of Parent and its subsidiaries has conducted its business in the
ordinary course, consistent with past practice, (ii) no event has occurred which
has or which would reasonably be expected to have, in the aggregate, a material
adverse effect on Parent (but, excluding for such purposes, events that are
generally applicable in Parent's and the Company's industry and the United
States economy), and (iii) neither Parent nor any of its subsidiaries has taken
any action which would be prohibited by Section 5.2(a).
3.7 Parent SEC Documents. Each of Parent and its subsidiaries has timely
filed with the Commission all forms, reports, schedules, statements, exhibits
and other documents required to be filed by it since December 31, 1992 under the
Securities Exchange Act of 1934 (together with the rules and regulations
thereunder, the "Exchange Act") or the Securities Act (such documents, as
supplemented and amended since the time of filing, collectively, the "Parent SEC
Documents"). The Parent SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The financial
statements (including the related notes) of Parent included in the Parent SEC
Documents were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto), and fairly present (subject in the case
of unaudited statements to normal, recurring and year-end audit adjustments) in
all material respects the consolidated financial position of Parent as of the
dates thereof and the consolidated results of its operations and cash flows for
the periods then ended.
3.8 Taxes. Except as set forth in the Parent SEC Documents, (i) each of
Parent and its subsidiaries has duly filed all federal and state income tax
returns and all other material tax returns (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by Parent or any of its subsidiaries prior to the date hereof and will file, on
or before the Effective Time, all such returns which are required to be filed
after the date hereof and on or before the Effective Time, (ii) all of the
foregoing returns and reports are true and correct in all material respects, and
each of Parent and its subsidiaries has paid or, prior to the Effective Time,
will pay all taxes required to be paid in respect of the periods covered by such
returns or reports to any federal, state, foreign, local or other taxing
authority, (iii) each of Parent and its subsidiaries has paid or made adequate
provision (in accordance with generally accepted accounting principles) in the
financial statements of Parent included in the Parent SEC Documents for all
taxes payable in respect of all periods ending on or prior to December 31, 1995,
(iv) neither Parent nor any of its subsidiaries will have any material liability
for any taxes in excess of the amounts so paid or reserves so established and
neither Parent nor any of its subsidiaries is delinquent in the payment of any
material tax, assessment or governmental charge and none of them has requested
any extension of time within which to file any returns in respect of any fiscal
year which have not since been filed, (v) no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed in
writing (tentatively or definitely), in each case, by any taxing authority,
against Parent or any of its subsidiaries for which there are not adequate
reserves in its financial statements (in accordance with generally accepted
accounting principles), (vi) as of the date of this Agreement, there are no
extensions or waivers or pending requests for extensions or waivers of the time
to assess or collect any such tax, (vii) the federal income tax returns of
Parent have never been audited by the Internal Revenue Service, and the federal
income tax returns of its subsidiaries have not been audited by the Internal
Revenue Service, since February 25, 1977, (viii) neither Parent nor any of its
subsidiaries is or has been a party to any tax sharing agreement with any
corporation which is not currently a member of the
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affiliated group of which Parent is currently a member, (ix) there are no liens
for taxes on any assets of Parent or any of its subsidiaries (other than
statutory liens for taxes not yet due or liens for which adequate reserves have
been established in its financial statements in accordance with generally
accepted accounting principles), (x) Parent and its subsidiaries have withheld
and paid (and until the Effective Time will withhold and pay) all income, social
security, unemployment, and all other material payroll taxes required to be
withheld (including, without limitation, pursuant to Sections 1441 and 1442 of
the Code or similar provisions under foreign law) and paid in connection with
amounts paid to any employee, independent contractor, stockholder, creditor or
other third party, and (xi) Parent has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation. For purposes of
this Agreement, the term "tax" shall include all federal, state, local and
foreign taxes including interest and penalties thereon and additions to tax. In
addition, the term "tax return" shall mean any return, declaration, statement,
report, schedule, certificate, form information return, or any other document
(including any related or supporting information) required to be supplied to, or
filed with, a taxing authority (foreign or domestic) in connection with taxes.
3.9 Compliance with Law. Each of Parent and its subsidiaries is in
compliance with, and at all times since December 31, 1992 has been in compliance
with, all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority (collectively, "Applicable Law") relating to it or its
business or properties, except for any such failures to be in compliance
therewith which, in the aggregate, would not have a material adverse effect on
Parent.
3.10 Registration Statement. None of the information provided by Parent or
any of its subsidiaries for inclusion in the registration statement on Form S-4
to be filed with the Commission by Parent under the Securities Act, including
the prospectus (as amended, supplemented or modified, the "Prospectus") relating
to shares of Parent Common Stock to be issued in the Merger and the joint proxy
statement and form of proxies relating to the vote of Company Stockholders with
respect to the Merger and the Parent Stockholders with respect to the Share
Issuance (collectively and as amended, supplemented or modified, the "Proxy
Statement") contained therein (such registration statement as amended,
supplemented or modified, the "Registration Statement"), at the time the
Registration Statement becomes effective or, in the case of the Proxy Statement,
at the date of mailing, will 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. Each of the Registration Statement and Proxy
Statement, except for such portions thereof that relate only to the Company and
its subsidiaries, will comply in all material respects with the provisions of
the Securities Act and the Exchange Act.
3.11 Litigation. Except as set forth in the Parent SEC Documents, there is
no suit, claim, action, proceeding or investigation (an "Action") pending or, to
the knowledge of Parent, threatened against Parent or any of its subsidiaries
which, in the aggregate, could reasonably be expected to have a material adverse
effect on Parent. Neither Parent nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, in the aggregate, could
reasonably be expected to have a material adverse effect on Parent.
3.12 Brokerage and Finder's Fees. Except for Parent's obligation to
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") (a copy of the
agreement relating to such obligation having previously been provided to the
Company), Parent has not incurred and will not incur, directly or indirectly,
any brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligation to DLJ,
Parent is not aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiation of
this Agreement or in connection with the transactions contemplated hereby.
3.13 Opinion of Financial Advisor. Parent has received the opinion of DLJ
to the effect that, as of the date hereof, the Exchange Ratio is fair to Parent
from a financial point of view.
3.14 Accounting Matters. To the best knowledge of Parent, neither Parent
nor any of its affiliates has taken or agreed to take any action that
(without giving effect to any actions taken or agreed to be taken by the
Company or any of its affiliates) would prevent Parent from accounting for the
business combination to be effected by the Merger as a pooling-of-interests for
financial reporting purposes in accordance with
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Accounting Principles Board Opinion No. 16, the interpretative releases issued
pursuant thereto, and the pronouncements of the Commission thereon.
3.15 Tax-Free Reorganization. To the best knowledge of Parent, neither
Parent nor any of its subsidiaries has taken any action or failed to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
3.16 Employee Benefit Plans.
(a) For purposes of this Agreement, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and
4971 of the Code, (iv) the continuation coverage requirements of section
601 et seq. of ERISA and section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations, in
each case other than pursuant to the Parent Plans with respect to
Parent, or Company Plans (as defined below) with respect to the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Parent Plans" means all employee benefit plans, programs,
policies, practices, and other arrangements providing benefits to any
employee or former employee or beneficiary or dependent thereof, whether
or not written, and whether covering one person or more than one person,
sponsored or maintained by Parent or any of its subsidiaries or to which
Parent or any of its subsidiaries contributes or is obligated to
contribute. Without limiting the generality of the foregoing, the term
"Parent Plans" includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA.
(b) Section 3.16 to the Parent Disclosure Schedule lists all Parent
Plans. With respect to each Parent Plan, Parent has made available to the
Company a true, correct and complete copy of: (i) each writing constituting
a part of such Parent Plan, including without limitation all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500
Series) and accompanying schedule, if any; (iii) the current summary plan
description, if any; (iv) the most recent annual financial report, if any;
and (v) the most recent determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each Parent Plan that is intended to be a "qualified
plan" within the meaning of Section 401(a) of the Code (a "Qualified Parent
Plan") and there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified
Parent Plan or the related trust.
(d) All contributions required to be made to any Parent Plan by
Applicable Law or by any plan document or other contractual undertaking,
and all premiums due or payable with respect to insurance policies funding
any Parent Plan, for any period through the date hereof have been timely
made or paid in full and through the Closing Date will be timely made or
paid in full or, to the extent not required to be made or paid on or before
the date hereof or the Closing Date, as applicable, have been or will be
fully reflected in Parent's financial statements contained in the Parent
SEC Documents.
(e) Parent and its subsidiaries have complied, and are now in
compliance, in all material respects, with all provisions of ERISA, the
Code and all laws and regulations applicable to the Parent Plans. There is
not now, and there are no existing, circumstances that standing alone could
give rise to, any
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requirement for the posting of security with respect to a Parent Plan or
the imposition of any lien on the assets of Parent or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.16(f) to the Parent Disclosure
Schedule, no Parent Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Parent Plan is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan")
or a plan that has two or more contributing sponsors at least two of whom
are not under common control, within the meaning of Section 4063 of ERISA
(a "Multiple Employer Plan"), nor has Parent or any of its subsidiaries or
any of their respective ERISA Affiliates, at any time within five years
before the date hereof, contributed to or been obligated to contribute to
any Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing, circumstances
that could result in, any Controlled Group Liability that would be a
liability of Parent or any of its subsidiaries following the Closing, other
than normal funding responsibilities. Without limiting the generality of
the foregoing, neither Parent nor any of its subsidiaries nor any of their
respective ERISA Affiliates has engaged in any transaction described in
Section 4069 or Section 4204 of ERISA.
(h) Except as set forth in Section 3.16(h) to the Parent Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, neither Parent nor any of
its subsidiaries has any liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents
thereof.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause
the accelerated vesting or delivery of, or increase the amount or value of,
any payment or benefit to any employee or director or former employee or
former director of Parent or any of its subsidiaries, pursuant to a "change
in control" or "change of control" or otherwise. Without limiting the
generality of the foregoing and except as set forth in Section 3.16(i) to
the Parent Disclosure Schedule, no amount paid or payable by Parent or any
of its subsidiaries in connection with the transactions contemplated hereby
either solely as a result thereof or as a result of such transactions in
conjunction with any other events will be an "excess parachute payment"
within the meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Parent Plans, any fiduciaries thereof
with respect to their duties to the Parent Plans or the assets of any of
the trusts under any of the Parent Plans which could reasonably be expected
to result in any material liability of Parent or any of its subsidiaries to
the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
3.17 Contracts. None of Parent, any of its subsidiaries, or, to the
knowledge of Parent, any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default by Parent
under, any contract, agreement, guarantee, lease or executory commitment (each a
"Contract") to which it is a party, except such violations or defaults under
such Contracts which, in the aggregate, would not have a material adverse effect
on Parent.
3.18 Labor Relations. There is no unfair labor practice complaint against
Parent or any of its subsidiaries pending before the NLRB and there is no labor
strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the knowledge of Parent, threatened against or involving
Parent or any of its subsidiaries, except for any such proceedings which would
not have a material adverse effect on Parent. Except as disclosed in the Parent
SEC Documents, neither Parent nor any of its subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. To the knowledge of
Parent, there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of Parent or any of its subsidiaries.
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3.19 Permits. Each of Parent and its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders (collectively,
"Permits") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except for any such Permits the
failure of which to possess, in the aggregate, would not reasonably be expected
to have a material adverse effect on Parent.
3.20 Environmental Matters.
(a) As used herein, the term "Environmental Laws" means all applicable
federal, state, local or foreign laws relating to pollution or protection
of human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively, "Hazardous
Materials") into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all applicable authorizations,
codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder to the extent
applicable to the specific operations of Parent or the Company, as
applicable.
(b) Except as set forth in the Parent SEC Documents filed with the
Commission as of the date hereof, there are, with respect to Parent, its
subsidiaries or any predecessor of the foregoing, no past or present
violations of Environmental Laws, releases of any materials into the
environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws, other than those which, in the
aggregate, would not reasonably be expected to have a material adverse
effect on Parent and none of Parent and its subsidiaries has received any
notice with respect to any of the foregoing, nor is any Action pending or
threatened in connection with any of the foregoing that, if adversely
determined, could reasonably be expected to have a material adverse effect
on Parent.
(c) Except as set forth in the Parent SEC Documents filed with the
Commission as of the date hereof, no Hazardous Materials are contained on
or about any real property currently owned, leased or used by Parent or any
of its subsidiaries and no Hazardous Materials were released on or about
any real property previously owned, leased or used by Parent or any of its
subsidiaries during the period the property was so owned, leased or used,
except in the normal course of Parent's business, other than those which,
in the aggregate, would not reasonably be expected to have a material
adverse effect on Parent.
3.21 Company Stock Ownership. Except as set forth in Section 3.21 to the
Parent Disclosure Schedule, neither Parent nor any of its "affiliates" or
"associates" "owns" (as each of such terms is defined in Section 203 of the
DGCL) any shares of Company Common Stock or other securities convertible into
Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this Agreement, the Company
hereby represents and warrants to Parent and Sub that the statements contained
in this Article IV are true, correct and complete.
4.1 Organization and Standing. Each of the Company and its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with full power and authority to own, lease,
use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. Each of the Company and its
subsidiaries is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates makes such qualification necessary, except where the
failure to be so qualified or in good standing in such jurisdiction would not
have a material adverse effect on the Company. The copies of the Certificate of
Incorporation and By-laws (or similar organizational documents) of the
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Company and each of its subsidiaries, which have previously been made available
to Parent, are true, complete and correct copies of such documents as in effect
as of the date of this Agreement.
4.2 Subsidiaries. As of the date hereof, other than immaterial interests,
the Company does not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, joint venture or other entity or
enterprise, except as set forth in Section 4.2 to the disclosure schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent and dated the
date hereof. Section 4.2 to the Company Disclosure Schedule sets forth as to
each subsidiary of the Company: (i) its name and jurisdiction of incorporation
or organization, (ii) its authorized capital stock or share capital and (iii)
the number of issued and outstanding shares of its capital stock or share
capital. Except as set forth in Section 4.2 of the Company Disclosure Schedule,
each of the outstanding shares of capital stock of each of the Company's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Company free and clear of all
liens, pledges, security interests, claims or other encumbrances, other than
liens imposed by law which could not reasonably be expected to have, in the
aggregate, a material adverse effect on the Company. Other than as set forth in
Section 4.2 to the Company Disclosure Schedule, there are no outstanding shares
of capital stock or subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of the
Company, nor are there outstanding any securities which are convertible into or
exchangeable for any shares of capital stock of any subsidiary of the Company;
and no subsidiary of the Company has any obligation of any kind to issue any
additional securities or to pay for securities of any subsidiary of the Company
or any predecessor thereof. As used in this Section 4.2, "capital stock" shall
include capital stock or other ownership interests having by their terms
ordinary voting power to elect directors or others performing similar functions
with respect to such entity.
4.3 Corporate Power and Authority. The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of the Merger and the
adoption and authorization of this Agreement by the stockholders of the Company
in accordance with the DGCL and this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. The Board of Directors of the Company has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Company Stockholders for adoption at a stockholders meeting
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of shares of Company Common Stock in accordance with the
Applicable Law, no other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4.4 Capitalization of the Company. The Company's authorized capital stock
consists solely of (a) 20,000,000 shares of common stock, $0.01 par value per
share ("Company Common Stock") and (b) 10,000,000 shares of preferred stock,
$.01 par value per share ("Company Preferred Stock"), of which 1,000,000 are
designated as "Series A Junior Preferred Stock". As of August 16, 1996, (i)
13,307,251 shares of Company Common Stock were issued and outstanding, (ii)
654,026 shares of Company Common Stock were issuable upon the exercise or
conversion of outstanding options, warrants or convertible securities granted or
issuable (on a contingent basis or otherwise) by the Company, other than the
rights (the "Company Rights") issued under the Company Rights Agreement (as
defined below), (iii) no shares of Company Preferred Stock were issued and
outstanding, and (iv) 13,308 shares of "Series A Junior Preferred Stock" were
issuable upon exercise of the Company Rights in accordance with the terms of the
Company Rights Agreement. Since August 16, 1996, the Company has not issued any
shares of its capital stock except upon the exercise of such options, warrants
or convertible securities. Each outstanding share of Company capital stock is
duly authorized and validly issued, fully paid and nonassessable and free of any
preemptive rights. As of the date hereof, other than as set forth above, in the
Company SEC Documents (as defined in Section 4.7) or in Section 4.4 to the
Company Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or
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rights of any type relating to the issuance, sale or transfer by the Company of
any securities of the Company, nor are there outstanding any securities which
are convertible into or exchangeable for any shares of capital stock of the
Company; and the Company has no obligation of any kind to issue any additional
securities or to pay for securities of the Company or any predecessor. The
Company has no outstanding bonds, debentures, notes or other similar obligations
the holders of which have the right to vote generally with holders of Company
Common Stock.
4.5 Conflicts; Consents and Approvals. Neither the execution and delivery
of this Agreement by the Company, nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of the
Company or any subsidiary of the Company;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of the Company or any of its subsidiaries
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which any of their respective
properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of
their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by the Company or any of its affiliates with any
third party or any Governmental Authority, other than (i) authorization of
the Merger and the transactions contemplated hereby by Company
Stockholders, (ii) actions required by the HSR Act and (iii) registrations
or other actions required under federal and state securities laws as are
contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 4.5 of the Company Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that would not, in the aggregate, have a
material adverse effect on the Company or that would not prevent or delay the
consummation of the transactions contemplated hereby.
4.6 Absence of Certain Changes. Except as set forth in the Company SEC
Documents filed with the Commission as of the date hereof, since March 29, 1996,
(i) each of the Company and its subsidiaries has conducted its business in the
ordinary course, consistent with past practice, (ii) no event has occurred which
has or which would reasonably be expected to have, in the aggregate, a material
adverse effect on the Company (but, excluding for such purposes, events that are
generally applicable in Parent's and the Company's industry and the United
States economy), and (iii) neither the Company nor any of its subsidiaries has
taken any action which would be prohibited by Section 5.3(a).
4.7 Company SEC Documents. Each of the Company and its subsidiaries has
timely filed with the Commission all forms, reports, schedules, statements,
exhibits and other documents required to be filed by it since September 23, 1993
under the Exchange Act or the Securities Act (such documents, as supplemented
and amended since the time of filing, collectively, the "Company SEC
Documents"). The Company SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The financial
statements (including the related notes) of the Company included in the Company
SEC Documents were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the
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periods involved (except as may be indicated in the notes thereto), and fairly
present (subject in the case of unaudited statements to normal, recurring and
year-end audit adjustments) in all material respects the consolidated financial
position of the Company as of the dates thereof and the consolidated results of
its operations and cash flows for the periods then ended.
4.8 Taxes. Except as set forth in the Company SEC Documents or in Section
4.8 to the Company Disclosure Schedule, (i) each of the Company and its
subsidiaries has duly filed all federal and state income tax returns and all
other material tax returns (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by the
Company or any of its subsidiaries prior to the date hereof and will file, on or
before the Effective Time, all such returns which are required to be filed after
the date hereof and on or before the Effective Time, (ii) all of the foregoing
returns and reports are true and correct in all material respects, and each of
the Company and its subsidiaries has paid or, prior to the Effective Time, will
pay all taxes required to be paid in respect of the periods covered by such
returns or reports to any federal, state, foreign, local or other taxing
authority, (iii) each of the Company and its subsidiaries has paid or made
adequate provision (in accordance with generally accepted accounting principles)
in the financial statements of the Company included in the Company SEC Documents
for all taxes payable in respect of all periods ending on or prior to December
31, 1995, (iv) neither the Company nor any of its subsidiaries will have any
material liability for any taxes in excess of the amounts so paid or reserves so
established and neither the Company nor any of its subsidiaries is delinquent in
the payment of any material tax, assessment or governmental charge and none of
them has requested any extension of time within which to file any returns in
respect of any fiscal year which have not since been filed, (v) no deficiencies
for any tax, assessment or governmental charge have been proposed, asserted or
assessed in writing (tentatively or definitely), in each case, by any taxing
authority, against the Company or any of its subsidiaries for which there are
not adequate reserves in its financial statements (in accordance with generally
accepted accounting principles), (vi) as of the date of this Agreement, there
are no extensions or waivers or pending requests for extensions or waivers of
the time to assess or collect any such tax, (vii) the federal income tax returns
of the Company and its subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ending March 31, 1989, (viii) neither the
Company nor any of its subsidiaries is or has been a party to any tax sharing
agreement with any corporation which is not currently a member of the affiliated
group of which the Company is currently a member (other than RBPI Holding
Corporation and its subsidiaries), (ix) there are no liens for taxes on any
assets of the Company or any of its subsidiaries (other than statutory liens for
taxes not yet due or liens for which adequate reserves have been established in
its financial statements in accordance with generally accepted accounting
principles), (x) the Company and its subsidiaries have withheld and paid (and
until the Effective Time will withhold and pay) all income, social security,
unemployment, and all other material payroll taxes required to be withheld
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign law) and paid in connection with amounts
paid to any employee, independent contractor, stockholder, creditor or other
third party, and (xi) the Company has not filed an election under Section 341(f)
of the Code to be treated as a consenting corporation.
4.9 Compliance with Law. Each of the Company and its subsidiaries is in
compliance with, and at all times since December 31, 1992 has been in compliance
with, all Applicable Law relating to it or its business or properties, except
for any such failures to be in compliance therewith which, in the aggregate,
would not have a material adverse effect on the Company.
4.10 Registration Statement. None of the information provided by the
Company or any of its subsidiaries for inclusion in the Registration Statement
at the time it becomes effective or, in the case of the Proxy Statement, at the
date of mailing, will 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. Each of the Registration Statement and Proxy Statement,
except for such portions thereof that relate only to Parent and its
subsidiaries, will comply in all material respects with the provisions of the
Securities Act and the Exchange Act.
4.11 Litigation. Except as set forth in the Company SEC Documents, there is
no Action pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries which, in the aggregate, could reasonably be
expected to have a material adverse effect on the Company. Neither the
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Company nor any of its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, in the aggregate, could reasonably be expected to
have a material adverse effect on the Company.
4.12 Brokerage and Finder's Fees. Except for the Company's obligation to
Dillon, Read & Co. Inc. ("Dillon Read") (a copy of the written agreement
relating to such obligation having previously been provided to Parent), the
Company has not incurred and will not incur, directly or indirectly, any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligation to Dillon
Read, the Company is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiation of this Agreement or in connection with the transactions
contemplated hereby.
4.13 Opinion of Financial Advisor. The Company has received the opinion of
Dillon Read to the effect that, as of the date hereof, the Exchange Ratio is
fair to the Company Stockholders from a financial point of view.
4.14 Accounting Matters. To the best knowledge of the Company, neither the
Company nor any of its affiliates has taken or agreed to take any action that
(without giving effect to any actions taken or agreed to be taken by Parent or
any of its affiliates) would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling-of-interests for financial
reporting purposes in accordance with Accounting Principles Board Opinion No.
16, the interpretative releases issued pursuant thereto, and the pronouncements
of the Commission thereon.
4.15 Tax-Free Reorganization. To the best knowledge of the Company, neither
the Company nor any of its subsidiaries has taken any action or failed to take
any action which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
4.16 Employee Benefit Plans.
(a) For purposes of this Agreement, "Company Plans" means all employee
benefit plans, programs, policies, practices, and other arrangements
providing benefits to any employee or former employee or beneficiary or
dependent thereof, whether or not written, and whether covering one person
or more than one person, sponsored or maintained by the Company or any of
its subsidiaries or to which the Company or any of its subsidiaries
contributes or is obligated to contribute. Without limiting the generality
of the foregoing, the term "Company Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of ERISA and all employee
pension benefit plans within the meaning of Section 3(2) of ERISA.
(b) Section 4.16 to the Company Disclosure Schedule lists all Company
Plans. With respect to each Company Plan, the Company has made available to
Parent a true, correct and complete copy of: (i) each writing constituting
a part of such Company Plan, including without limitation all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500
Series) and accompanying schedule, if any; (iii) the current summary plan
description, if any; (iv) the most recent annual financial report, if any;
and (v) the most recent determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favorable determination
letter with respect to each Company Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code (a
"Qualified Company Plan") and there are no existing circumstances nor any
events that have occurred that could adversely affect the qualified status
of any Qualified Company Plan or the related trust.
(d) All contributions required to be made to any Company Plan by
Applicable Law or by any plan document or other contractual undertaking,
and all premiums due or payable with respect to insurance policies funding
any Company Plan, for any period through the date hereof have been timely
made or paid in full and through the Closing Date will be timely made or
paid in full or, to the extent not required to be made or paid on or before
the date hereof or the Closing Date, as applicable, have been or will be
fully reflected in the Company's financial statements contained in the
Company SEC Documents.
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(e) The Company and its subsidiaries have complied, and are now in
compliance, in all material respects, with all provisions of ERISA, the
Code and all laws and regulations applicable to the Company Plans. There is
not now, and there are no existing, circumstances that standing alone could
give rise to, any requirement for the posting of security with respect to a
Company Plan or the imposition of any lien on the assets of the Company or
any of its subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 4.16(f) to the Company Disclosure
Schedule, no Company Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Company Plan is a Multiemployer Plan
(as defined in Section 3.16) or a Multiple Employer Plan (as defined in
Section 3.16), nor has the Company or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within five years before the
date hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing, circumstances
that could result in, any Controlled Group Liability that would be a
liability of the Company or any of its subsidiaries following the Closing,
other than normal funding responsibilities. Without limiting the generality
of the foregoing, neither the Company nor any of its subsidiaries nor any
of their respective ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
(h) Except as set forth in Section 4.16(h) to the Company Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, neither the Company nor
any of its subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or dependents
thereof.
(i) Except as set forth in Section 4.16(i) to the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause
the accelerated vesting or delivery of, or increase the amount or value of,
any payment or benefit to any employee or director or former employee or
former director of the Company or any of its subsidiaries, pursuant to a
"change in control" or "change of control" or otherwise. Without limiting
the generality of the foregoing and except as set forth in Section 4.16(i)
to the Company Disclosure Schedule, no amount paid or payable by the
Company or any of its subsidiaries in connection with the transactions
contemplated hereby either solely as a result thereof or as a result of
such transactions in conjunction with any other events will be an "excess
parachute payment" within the meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Company Plans, any fiduciaries thereof
with respect to their duties to the Company Plans or the assets of any of
the trusts under any of the Company Plans which could reasonably be
expected to result in any material liability of the Company or any of its
subsidiaries to the Pension Benefit Guaranty Corporation, the Department of
Treasury, the Department of Labor or any Multiemployer Plan.
4.17 Contracts. Except as set forth in Section 4.17 of the Company
Disclosure Schedule, none of the Company, any of its subsidiaries, or, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default by
the Company under, any Contract to which it is a party, except such violations
or defaults under such Contracts which, in the aggregate, would not have a
material adverse effect on the Company.
4.18 Labor Relations. There is no unfair labor practice complaint against
the Company or any of its subsidiaries pending before the NLRB and there is no
labor strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its subsidiaries, except for any such
proceedings which would not have a material adverse effect on the Company.
Except as disclosed in the Company SEC Documents, neither the Company nor any of
its subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization. To the knowledge of the Company,
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there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its subsidiaries.
4.19 Permits. Each of the Company and its subsidiaries is in possession of
all Permits necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except for any such Permits the
failure of which to possess, in the aggregate, would not reasonably be expected
to have a material adverse effect on the Company.
4.20 Environmental Matters.
(a) Except as set forth in the Company SEC Documents filed with the
Commission as of the date hereof, there are, with respect to the Company,
its subsidiaries or any predecessor of the foregoing, no past or present
violations of Environmental Laws, releases of any materials into the
environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws, other than those which, in the
aggregate, would not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries, taken as a whole, and none of
the Company and its subsidiaries has received any notice with respect to
any of the foregoing, nor is any Action pending or threatened in connection
with any of the foregoing that, if adversely determined, could reasonably
be expected to have a material adverse effect on the Company.
(b) Except as set forth in Section 4.20 to the Company Disclosure
Schedule or set forth in the Company SEC Documents filed with the
Commission as of the date hereof, no Hazardous Materials are contained on
or about any real property currently owned, leased or used by the Company
or any of its subsidiaries and no Hazardous Materials were released on or
about any real property previously owned, leased or used by the Company or
any of its subsidiaries during the period the property was so owned, leased
or used, except in the normal course of the Company's business, other than
those which, in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company.
4.21 Parent Stock Ownership. Except as set forth in Section 4.21 to the
Company Disclosure Schedule, neither the Company nor any of its "affiliates" or
"associates" "owns" (as each of such terms is defined in Section 203 of the
DGCL) any shares of Parent Common Stock or other securities convertible into
Parent Common Stock.
4.22 DGCL Section 203 and State Takeover Laws. Assuming the accuracy of the
representations and warranties set forth in Section 3.21, prior to the date
hereof, the Board of Directors of the Company has taken all action necessary to
exempt under or make not subject to Section 203 of the DGCL: (i) the execution
of this Agreement, (ii) the Merger and (iii) the transactions contemplated
hereby.
4.23 Company Rights Agreement. The Company has taken all action necessary,
if any, in respect of the Rights Agreement dated as of July 26, 1994, between
the Company and Chemical Mellon Shareholder Services, LLC (the "Company Rights
Agreement"), so as to provide that none of Parent and its affiliates will become
an "Acquiring Person" and that no "Stock Acquisition Date" or "Distribution
Date" (as such terms are defined in the Company Rights Agreement) will occur as
a result of the execution of this Agreement or the consummation of the Merger
pursuant to this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from and
after the execution of this Agreement.
5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable efforts to
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this
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Agreement as promptly as possible (including, without limitation, using its
reasonable efforts to cause the conditions set forth in Article VI for
which they are responsible to be satisfied as soon as reasonably
practicable and to prepare, execute and deliver such further instruments
and take or cause to be taken such other and further action as any other
party hereto shall reasonably request).
(b) HSR Act. As soon as practicable, and in any event no later than
ten business days after the date hereof, each of the parties hereto will
file any Notification and Report Forms and related material required to be
filed by it with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act with respect to
the Merger, will use its reasonable efforts to obtain an early termination
of the applicable waiting period, and shall promptly make any further
filings pursuant thereto that may be necessary, proper or advisable.
(c) Other Governmental Matters. Each of the parties shall use its
reasonable efforts to take any additional action that may be necessary,
proper or advisable in connection with any other notices to, filings with,
and authorizations, consents and approvals of any Governmental Authority
that it may be required to give, make or obtain.
(d) Pooling-of-Interests. Each of the parties shall use its reasonable
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment for financial reporting purposes.
(e) Tax-Free Treatment. Each of the parties shall use its reasonable
efforts to cause the Merger to constitute a tax-free "reorganization" under
Section 368(a) of the Code and to permit Weil, Gotshal & Manges LLP to
issue its opinion provided for in Section 6.2(c).
(f) Public Announcements. Unless otherwise required by Applicable Law
or requirements of the NYSE or The Nasdaq Stock Market, at all times prior
to the earlier of the Effective Time or termination of this Agreement
pursuant to Section 7.1, Parent and the Company shall consult with each
other before issuing any press release with respect to the Merger and shall
not issue any such press release prior to such consultation.
(g) Access. Subject to Applicable Law, from and after the date of this
Agreement until the Effective Time (or the termination of this Agreement),
Parent and the Company shall permit representatives of the other to have
reasonable access to the other's officers, employees, premises, properties,
books, records, contracts, tax records and documents. Information obtained
by Parent and the Company pursuant to this Section 5.1(g) shall be subject
to the provisions of the confidentiality agreement between them dated
August 1, 1996 (the "Confidentiality Agreement"), which agreement remains
in full force and effect.
(h) Stockholders Meetings. Each of Parent and the Company shall duly
call, give notice of, convene and hold a meeting of its stockholders, to be
held as promptly as practicable following the date hereof for the purpose
of obtaining the requisite stockholder approvals and adoptions in
connection with this Agreement, the Share Issuance and the Merger, and each
shall use reasonable efforts to cause such meetings to occur on the same
date. Subject to its fiduciary duties under Applicable Law as advised by
counsel, the Board of Directors of each of Parent and the Company will (i)
recommend that its stockholders approve such matters and (ii) use
reasonable efforts to obtain any necessary approvals by its stockholders.
(i) Preparation of Proxy Statement and Registration Statement. Each of
Parent and the Company shall cooperate to, and shall, as soon as is
reasonably practicable, prepare and file the Proxy Statement with the
Commission on a confidential basis. Each of Parent and the Company shall
cooperate to prepare and file, and Parent shall prepare and file, the
Registration Statement with the Commission as soon as is reasonably
practicable following clearance of the Proxy Statement by the Commission
and each of Parent and the Company shall cooperate to, and shall, use all
reasonable efforts to have the Registration Statement declared effective by
the Commission as promptly as practicable and to maintain the effectiveness
of the Registration Statement through the Effective Time. Parent shall
advise the Company promptly after it receives notice of (i) the
Registration Statement being declared effective or any supplement or
amendment thereto being filed with the Commission, (ii) the issuance of any
stop order in
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respect of the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in respect of the
Registration Statement. If at any time prior to the Effective Time, any
information pertaining to the Company contained in or omitted from the
Registration Statement makes statements contained in the Registration
Statement false or misleading, the Company shall promptly so inform Parent
and provide Parent with the information necessary to make such statements
contained therein not false and misleading. Each of Parent and Company
shall also cooperate to, and shall, take such other reasonable actions
(other than qualifying to do business in any jurisdiction in which it is
not so qualified) required to be taken under any applicable state
securities laws in connection with the Share Issuance.
(j) Notification of Certain Matters. Each of Parent and the Company
shall give prompt notice to the other party of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement made by
such party to be untrue or inaccurate at or prior to the Effective Time and
(ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.1(j) shall not limit or otherwise affect the remedies
available hereunder to any party.
(k) Affiliates. Each of Parent and the Company shall use its
reasonable efforts to cause each such person who may be at the Effective
Time or was on the date hereof an "affiliate" of such party within the
meaning of Rule 145 under the Securities Act, to execute and deliver to
Parent no less than 35 days prior to the date of the meeting of such
party's stockholders written undertakings in the form attached hereto as
Exhibit 5.1(k).
5.2 Covenants of Parent.
(a) Conduct of Parent's Operations. During the period from the date of
this Agreement to the Effective Time, Parent shall, and shall cause its
subsidiaries to, conduct its operations in the ordinary course except as
expressly contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises and to retain
the services of its officers and key employees and maintain relationships
with customers, suppliers and other third parties to the end that their
goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time or the earlier
termination of this Agreement pursuant to Section 7.1, Parent shall not,
and with respect to clauses (i) and (ii) below, Sub shall not, and with
respect to clauses (iii) and (iv) below, Parent shall cause each of its
subsidiaries to not, except as otherwise expressly contemplated by this
Agreement and the transactions contemplated hereby, without the prior
written consent of the Company:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock,
or (B) make, declare or pay any dividend or distribution on, or directly
or indirectly redeem, purchase or otherwise acquire, any of its
securities (except in connection with the use of shares of capital stock
of Parent to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of Parent);
(ii) make or propose any change in its Certificate of
Incorporation, as amended, or By-laws, as amended, or other
organizational documents;
(iii) subject to the limitations of clause (iv) below, merge or
consolidate with any other person or acquire a material amount of assets
or capital stock of any other person, that would involve, in any case,
the payment of more than $100,000,000 or the issuance of more than 10%
of the outstanding Parent Common Stock on the date hereof or, in the
aggregate, the payment of more than $200,000,000 or the issuance of more
than 20% of the outstanding Parent Common Stock on the date hereof,
other than in connection with this Agreement and the transactions
contemplated hereby;
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(iv) conduct its business in a manner or take, or cause to be
taken, any other action that would or might reasonably be expected to
prevent or materially delay Parent or Sub from consummating the
transactions contemplated by this Agreement (regardless of whether such
action would otherwise be permitted or not prohibited hereunder),
including without limitation, any action that may materially limit or
delay the ability of Parent or Sub to consummate the transactions
contemplated by this Agreement as a result of antitrust or securities
laws or other regulatory concerns; or
(v) agree to take any action prohibited by the foregoing.
(b) Indemnification; Insurance.
(i) From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, indemnify and hold harmless to the
fullest extent permitted under Applicable Law each person who is now, or
has been at any time prior to the date hereof, an officer, director,
employee, trustee or agent of the Company (or any subsidiary or division
thereof), including, without limitation, each person controlling any of
the foregoing persons (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties"), against all losses, claims,
damages, liabilities, costs or expenses (including attorneys' fees),
judgments, fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation (and shall pay
expenses for legal fees in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent
permitted under Delaware law, provided that the Indemnified Party agrees
that, in the event that it is ultimately determined that such
Indemnified Party is not entitled to the payment of such expenses, for
any reason, such Indemnified Party shall reimburse Parent or the
Surviving Corporation for such expenses paid in advance) arising out of
or pertaining to acts or omissions, or alleged acts or omissions, by
them in their capacities as such, whether commenced, asserted or claimed
before the Effective Time and including, without limitation, liabilities
arising under the Securities Act, the Exchange Act and state corporation
laws in connection with the Merger; provided that the Surviving
Corporation shall pay for only one law firm (in addition to local
counsel) for all Indemnified Parties, unless the use of one law firm for
all Indemnified Parties would present such law firm with a conflict of
interest. Parent shall cause the Surviving Corporation to keep in effect
the Company's current provisions in its Certificate of Incorporation and
By-laws providing for exculpation of director and officer liability and
indemnification of the Indemnified Parties to the fullest extent
permitted under the DGCL. In the event of any actual or threatened
claim, action, suit, proceeding or investigation in respect of such acts
or omissions, Parent shall cause the Surviving Corporation to cooperate
in the defense of any such matter; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld).
Parent shall, and shall cause the Surviving Corporation to, maintain the
Company's existing indemnification provisions.
(ii) From and after the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, maintain in effect for not less than
6 years, the current policies of directors' and officers' liability
insurance maintained by the Company; provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing
terms and conditions that are no less advantageous in any material
respect to the Indemnified Parties.
(c) Consulting Agreement. Simultaneous herewith, Parent is entering
into a consulting agreement with Thomas W. Sturgess in the form of Exhibit
5.2(c).
(d) Listing Application. Parent shall, as soon as practicable
following the date hereof, prepare and submit to the NYSE a subsequent
listing application covering the shares of Parent Common Stock issuable in
the Merger, and shall use its reasonable efforts to obtain, prior to the
Effective Time, approval for the listing of such shares of Parent Common
Stock, subject to official notice of issuance.
(e) Directors of Parent. Immediately after the Effective Time, Parent
will take such action as may be necessary to create two additional seats on
the Board of Directors of Parent and to cause Thomas W.
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Sturgess and one of the individuals set forth in Section 5.2(e) to the
Company Disclosure Schedule, as selected by Parent (Mr. Sturgess and such
individual initially selected by Parent being referred to herein as the
"New Members") to be elected to the Board of Directors of Parent. For a
period of two years following the Effective Time, Parent shall take, or
cause to be taken, all action necessary to nominate the New Members for
election to the Board of Directors of Parent and, in accordance with its
normal solicitation efforts, solicit proxies for their election to such
Board of Directors.
(f) Employee Benefits.
(i) Parent intends that, until at least December 1, 1997, it will
or will cause the Surviving Corporation to, honor and maintain in effect
the Company Plans (other than those under which the participants'
interests are based in whole or in part upon Company Common Stock or the
respective market price thereof) substantially in the form as of the
date hereof, with such revisions or amendments as may be required by
Applicable Law. Parent shall take, and shall cause the Surviving
Corporation to take, any and all actions necessary to amend the Company
Plans as of the Effective Time to remove or modify all provisions
therefrom which provide benefits which are based in whole or in part
upon Company Common Stock or the respective market price thereof.
(ii) The parties hereto each acknowledge and agree that the
transactions contemplated by this Agreement shall constitute a "Change
of Control," a "Change in Control" or any other term with a similar
intended effect, and a "Retirement" with respect to "Outside Director
Participants" (as those two terms are defined in the Company's 1993
Stock Option Plan), for purposes of the plans, agreements and
arrangements listed in Section 5.2(f)(ii) of the Company Disclosure
Schedule, and Parent shall, and shall cause the Surviving Corporation
to, honor the terms of such plans, agreements and arrangements.
(iii) In the event that Phil Surles, Mike Garvin, Merle Miller or
any of up to 40 corporate headquarters employees of the Company or any
of its subsidiaries listed on a schedule to be delivered within two days
from the date hereof, which schedule shall be added to and become part
of Section 5.2(f)(iii) of the Company Disclosure Schedule, is terminated
by the Surviving Corporation for any reason other than "cause" within
six months following the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, provide such individual with the severance
benefits set forth in Section 5.2(f)(iii) of the Company Disclosure
Schedule. For purposes of this Section 5.2(f)(iii), "cause" shall mean
(A) the engaging in willful or grossly negligent misconduct injurious to
the Company, (B) the embezzlement or misappropriation of funds or
property of the Company or the conviction of a felony or the entrance of
a plea of guilty or nolo contendere to a felony, (C) the use of illegal
drugs, or (D) the failure or refusal to substantially perform his or her
employment related duties.
5.3 Covenants of the Company.
(a) Conduct of the Company's Operations. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall
cause its subsidiaries to, conduct its operations in the ordinary course
except as expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use its reasonable efforts to maintain and
preserve its business organization and its material rights and franchises
and to retain the services of its officers and key employees and maintain
relationships with customers, suppliers and other third parties to the end
that their goodwill and ongoing business shall not be impaired in any
material respect. Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the Effective Time or the
earlier termination of this Agreement pursuant to Section 7.1, the Company
shall not, and shall cause its subsidiaries to not, except as otherwise
expressly contemplated by this Agreement and the transactions contemplated
hereby, without the prior written consent of Parent:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire any of its securities
(except in
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connection with the use of shares of capital stock of the Company to pay
the exercise price or tax withholding in connection with stock-based
employee benefit plans of the Company or any of its subsidiaries), (C)
grant any person any right or option to acquire any of its securities,
(D) issue, deliver or sell or agree to issue, deliver or sell any
additional securities (except pursuant to the exercise of outstanding
options to purchase Company Common Stock) or amend the terms of any of
its securities, or (E) enter into any agreement, understanding or
arrangement with respect to the sale or voting of its capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets which are material, in the
aggregate, other than in the ordinary course of business consistent with
past practice;
(iii) make or propose any changes in its Certificate of
Incorporation, as amended, or By-laws, as amended, or other
organizational documents;
(iv) merge or consolidate with any other person or acquire a
material amount of assets or capital stock of any other person or enter
into any confidentiality agreement with any person, other than in
connection with this Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable for
indebtedness for borrowed money, other than in the ordinary course of
business consistent with past practice, or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for
obligations of any other individual, corporation or other entity, other
than in the ordinary course of business consistent with past practice;
(vi) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than salary increases and bonuses granted
in the ordinary course of business consistent with past practice, or
otherwise increase the compensation or benefits provided to any officer,
director, consultant or employee except as may be required by Applicable
Law, this Agreement, any applicable collective bargaining agreement or a
binding written contract in effect on the date of this Agreement, or
adopt any new employee benefit plan, including the proposed 1996 Long
Term Incentive Plan (or grant any options or awards thereunder);
(vii) change its method of doing business or change any method or
principle of accounting in a manner that is inconsistent with past
practice;
(viii) settle any Actions, whether now pending or hereafter made or
brought involving, in any Action or related series of Actions, an amount
in excess of $200,000;
(ix) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any material Contract to
which the Company is a party or any confidentiality agreement to which
the Company is a party;
(x) incur or commit to any capital expenditures, obligations or
liabilities in respect thereof, other than in the ordinary course of
business consistent with past practice;
(xi) conduct its business in a manner or take, or cause to be
taken, any other action that would or might reasonably be expected to
prevent or materially delay the Company from consummating the
transactions contemplated by this Agreement (regardless of whether such
action would otherwise be permitted or not prohibited hereunder),
including without limitation, any action that may materially limit or
delay the ability of the Company to consummate the transactions
contemplated by this Agreement as a result of antitrust or securities
laws or other regulatory concerns;
(xii) take any action to exempt under or make not subject to
Section 203 of the DGCL, any person or entity (other than Parent or its
subsidiaries) or any action taken thereby, which person,
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entity or action would have otherwise been subject to the restrictive
provisions thereof and not exempt therefrom; or
(xiii) agree to take any action prohibited by the foregoing.
(b) No Solicitation. The Company agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to (i)
solicit, initiate, encourage or facilitate, or furnish or disclose
non-public information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger, consolidation or
other business combination involving the Company, or acquisition of any
capital stock (except in connection with the exercise of options, as
permitted in Section 5.3(a)) or any material portion of the assets of the
Company (except for acquisition of assets in the ordinary course of
business consistent with past practice), or any combination of the
foregoing (a "Company Competing Transaction"), (ii) negotiate, explore or
otherwise engage in discussions with any person (other than Parent, Sub or
their respective directors, officers, employees, agents and
representatives) with respect to any Company Competing Transaction or (iii)
enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; provided that the Company may
(x) furnish information (subject to a confidentiality agreement in
reasonably customary form) to, and negotiate or otherwise engage in
discussions with, any party who delivers a written proposal for a Company
Competing Transaction if and so long as the Board of Directors of the
Company determines in good faith, based upon advice of its outside legal
counsel, that failing to take such action would reasonably be expected to
constitute a breach of the fiduciary duties of the Board and (y) take a
position with respect to the Merger or a Company Competing Transaction, or
amend or withdraw such position, in compliance with Rule 14d-9 or Rule
14e-2 promulgated under the Exchange Act with regard to a Company Competing
Transaction. The Company will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to any Company Competing Transaction. From and after the execution
of this Agreement, the Company shall immediately advise Parent orally, to
be followed by a confirmation in writing, of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals
relating to a Company Competing Transaction (including the status and a
summary of the general terms thereof) and promptly furnish to Parent a copy
of any such proposal or inquiry in addition to any information provided to
or by any third party relating thereto.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the parties hereto to consummate
the Merger shall be subject to fulfillment of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Authority which
prevents the consummation of the Merger.
(b) All waiting periods applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and all other
material consents, approvals, permits or authorizations required to be
obtained prior to the Effective Time from any Governmental Authority in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been
obtained.
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the affirmative vote of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon, in
accordance with Applicable Law, at the Company's stockholder meeting, and
the Share Issuance shall have been approved by the Parent Stockholders in
accordance with the rules of NYSE.
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(d) The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of Parent or the
Company, threatened by the SEC or any other Governmental Entity.
(e) No Action shall be instituted by any Governmental Authority which
seeks to prevent consummation of the Merger or which seeks material damages
in connection with the transactions contemplated hereby which continues to
be outstanding.
(f) The shares of Parent Common Stock to be issued in the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(g) All consents, waivers and approvals of third parties required in
connection with the transactions contemplated hereby shall have been
obtained, except where the failure to obtain such consents, waivers or
approvals, in the aggregate, would not reasonably be expected to result in
a material adverse effect on Parent or the Company, as the case may be,
provided that a party which has not used all reasonable efforts to obtain a
consent, approval or waiver may not assert this condition with respect to
such consent, approval or waiver.
6.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by the
Company:
(a) The representations and warranties of each of Parent and Sub shall
be true and correct on the date hereof and on and as of the Closing Date as
though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct only
as of the specified date), other than such breaches of representations and
warranties which would not have or which would not be reasonably expected
to have, in aggregate, a material adverse effect on Parent.
(b) Each of Parent and Sub shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) The Company shall have received an opinion dated as of the Closing
Date of Weil, Gotshal & Manges LLP, substantially in the form of Exhibit
6.2(c), to the effect that (1) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and (2) no gain or loss
will be recognized by Company Stockholders with respect to shares of Parent
Common Stock received in the Merger in exchange for shares of Company
Common Stock, except with respect to cash received in lieu of fractional
shares of Parent Common Stock. In rendering such opinion, Weil, Gotshal &
Manges LLP may require and rely on representations contained in
certificates of Parent, the Company, Sub and others, as they deem
reasonably appropriate.
(d) The Company shall have received a letter, in form and substance
reasonably satisfactory to the Company, from Ernst & Young LLP, dated the
date of the Proxy Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of interests transaction
under Opinion 16 of the Accounting Principles Board.
6.3 Conditions to Obligations of Parent and Sub. The obligations of Parent
and Sub to consummate the Merger and the other transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
each of Parent and Sub:
(a) The representations and warranties of the Company shall be true
and correct on the date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct only
as of the specified date), other than such breaches of representations and
warranties which would not have or which would not be reasonably expect to
have, in the aggregate, a material adverse effect on the Company.
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(b) The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it hereunder at or
prior to the Effective Time.
(c) Each person who may be at the Effective Time or was on the date of
this Agreement an "affiliate" of the Company within the meaning of Rule 145
under the Securities Act, shall have executed and delivered to Parent a
written undertaking in the form attached hereto as Exhibit 5.1(k).
(d) Parent shall have received a letter, in form and substance
reasonably satisfactory to Parent, from Price Waterhouse LLP, dated the
date of the Proxy Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of interests transaction
under Opinion 16 of the Accounting Principles Board.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval and adoption of this Agreement
by Company Stockholders:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if any permanent injunction or
other order or decree of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(c) by either Parent or the Company if the Merger shall not have been
consummated before March 31, 1997, unless extended by the Boards of
Directors of both Parent and the Company (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be available
to any party whose failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(d) by Parent or the Company if at the meeting of Company Stockholders
held for such purpose (including any adjournment or postponement thereof)
the requisite vote of the Company Stockholders to approve the Merger and
the transactions contemplated hereby shall not have been obtained;
(e) by Parent or the Company if at the meeting of Parent Stockholders
held for such purpose (including any adjournment or postponement thereof)
the requisite vote of the Parent Stockholders to approve the Share Issuance
shall not have been obtained;
(f) by Parent or the Company (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements or any of the representations
or warranties set forth in this Agreement on the part of the other party,
which breach is not cured within 30 days following written notice given by
the terminating party to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing, but only if such
breach would constitute a failure of a condition contained in Section 6.2
or Section 6.3, as applicable;
(g) by the Company if the Board of Directors of the Company shall
determine to engage in a Company Competing Transaction and the Company
shall have delivered to Parent a written notice of the determination by the
Company Board of Directors to terminate this Agreement pursuant to this
Section 7.1(g); provided, however, that the Company may not terminate this
Agreement pursuant to this clause (g) unless (w) five business days shall
have elapsed after delivery to Parent of the notice referred to above, (x)
at the end of such five business-day period the Company Board of Directors
shall continue to believe that the failure to engage in such Company
Competing Transaction would reasonably be expected to be a breach of the
fiduciary duties of the Board of Directors of the Company (after giving
effect to any adjustment to the terms and conditions of such transactions
proposed by Parent in response to such Company Competing Transaction), (y)
at the time of such termination, the Company shall have
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paid to Parent the Termination Fee (as hereinafter defined) and (z)
promptly thereafter the Company shall enter into a definitive acquisition,
merger or similar agreement to effect, or shall effect, such Company
Competing Transaction; or
(h) by Parent if the Board of Directors of the Company shall not have
recommended the Merger to the Company Stockholders, or shall have resolved
not to make such recommendation, or shall have materially modified or
rescinded its recommendation of the Merger to the Company Stockholders, or
shall have modified or rescinded its approval of this Agreement, or shall
have resolved to do any of the foregoing.
7.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement, except for the provisions of the last sentence
of Section 5.1(g) and the provisions of Sections 7.2 and 8.10, shall become
void and have no effect, without any liability on the part of any party or
its directors, officers, employees or stockholders. Notwithstanding the
foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this
Agreement.
(b) If this Agreement is terminated
(i) by Parent or the Company pursuant to Section 7.1(d), then the
Company will pay to Parent in cash by wire transfer in immediately
available funds to an account designated by Parent the reasonable
documented out-of-pocket expenses, up to $2 million, incurred by Parent
in connection with the transactions contemplated hereby, including the
negotiation and execution of this Agreement; or
(ii) by Parent or the Company pursuant to Section 7.1(e), then
Parent will pay to the Company in cash by wire transfer in immediately
available funds to an account designated by the Company the reasonable
documented out-of-pocket expenses, up to $2 million, incurred by the
Company in connection with the transactions contemplated hereby,
including the negotiation and execution of this Agreement.
(c) If this Agreement is terminated
(i) by Parent pursuant to Section 7.1(c) or 7.1(f), if (A) the
Company's breach of a covenant or agreement or failure to perform a
covenant or obligation under this Agreement has been the cause of or
resulted in such termination and (B) a Prior Event (as defined below)
shall have occurred prior to such termination and (C) either (x) the
Company shall enter into a definitive agreement with respect to a
Company Competing Transaction within twelve months following such
termination and such Company Competing Transaction is thereafter (as it
may be amended) consummated, or (y) a Company Competing Transaction is
consummated within twelve months following such termination;
(ii) by Parent or the Company pursuant to Section 7.1(d) or by
Parent pursuant to Section 7.1(h), if (A) a Prior Event shall have
occurred prior to such termination and (B) either (x) the Company shall
enter into a definitive agreement with respect to a Company Competing
Transaction within twelve months following such termination and such
Company Competing Transaction is thereafter consummated, or (y) a
Company Competing Transaction is consummated within twelve months
following such termination; or
(iii) by the Company pursuant to Section 7.1(g);
then in any such case the Company will pay to Parent in cash by wire
transfer in immediately available funds to an account designated by Parent
a termination fee in an amount equal to $9.1 million, plus reasonable
documented out-of-pocket expenses incurred by Parent in connection with the
transactions contemplated hereby, including the negotiation and execution
of this Agreement, less any amounts paid or payable pursuant to Section
7.2(b) hereof (the "Termination Fee"). Such payment shall be made (a) in
the case of clauses (i) or (ii), above, within one business day following
the consummation of such
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Company Competing Transaction, (b) in the case of clause (iii), no later
than immediately prior to such termination.
(d) If this Agreement is terminated by Parent or the Company pursuant
to Section 7.1(e), if (A) a Parent Prior Event (as defined below) shall
have occurred prior to such termination, and (B) either (x) Parent shall
enter into a definitive agreement with respect to a Parent Competing
Transaction (as defined below) within twelve months following such
termination and such Parent Competing Transaction (as it may be amended) is
thereafter consummated, or (y) a Parent Competing Transaction is
consummated within twelve months following such termination, then Parent
will pay to the Company in cash by wire transfer in immediately available
funds to an account designated by the Company a termination fee in an
amount equal to $9.1 million, plus reasonable documented out-of-pocket
expenses incurred by the Company in connection with the transactions
contemplated hereby, including the negotiation and execution of this
Agreement, less any amounts paid or payable pursuant to Section 7.2(b)
hereof. Such payment shall be made within one business day following the
consummation of the Parent Competing Transaction.
(e) As used herein, a "Prior Event" shall mean any of the following
events:
(i) any person (other than Parent or any of its subsidiaries) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to purchase any
shares of Company Common Stock such that, upon consummation of such
offer, such person would Beneficially Own (as defined below) or control
15% or more of the then outstanding Company Common Stock;
(ii) the Company or any of its subsidiaries shall have entered
into, authorized, recommended, proposed or publicly announced an
intention to enter into, authorize, recommend, or propose, an agreement,
arrangement or understanding with any person (other than Parent or any
of its subsidiaries) to, or any person (other than Parent or any of its
subsidiaries) shall have announced a bona fide intention to, or the
Company shall have announced that any person (other than Parent or any
of it subsidiaries) has proposed or communicated its intention to, or
the Company shall have received a bona fide proposal or communication
regarding an intention to, (A) effect any Competing Transaction, (B)
purchase, lease or otherwise acquire 15% or more of the assets of the
Company or any of its subsidiaries or (C) purchase or otherwise acquire
(including by way of merger, consolidation, tender or exchange offer or
similar transaction) Beneficial Ownership of securities representing 15%
or more of the voting power of the Company or any of its subsidiaries;
or
(iii) any person (other than Parent or any subsidiary of Parent)
shall have acquired Beneficial Ownership of a number of shares of
Company Common Stock in addition to the number of shares of Company
Common Stock Beneficially Owned by such person on the date hereof equal
to 15% or more of the voting power of the Company.
(f) As used herein, the term "Parent Prior Event" shall have the same
meaning with respect to Parent as the term "Prior Event" has with respect
to the Company, with such changes in the definition thereof as are
appropriate to contemplate Parent in lieu of the Company.
(g) As used herein, the term "Parent Competing Transaction" shall have
the same meaning with respect to Parent as the term "Company Competing
Transaction" has with respect to the Company, with such changes in the
definition thereof as are appropriate to contemplate Parent in lieu of the
Company.
(h) As used herein, the terms "Beneficial Ownership" and "Beneficially
Own" shall have the meanings ascribed to them in Rule 13d-3 under the
Exchange Act. As used herein, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
7.3 Amendment. This Agreement may be amended by the parties hereto, at any
time before or after adoption of this Agreement by Company Stockholders or
authorization of issuance of shares of Parent Common Stock in the Merger by
Parent Stockholders, but after such approval or authorization, no
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amendment shall be made which by law requires further approval or authorization
by the Company Stockholders or Parent Stockholders, as the case may be, without
such further approval or authorization. Notwithstanding the foregoing, this
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, Parent
(with respect to the Company) and the Company (with respect to Parent and Sub)
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of such party, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
the termination of this Agreement.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, Michigan 48326
Attention: Walter R. Young, Jr.
Telecopy No.: (810) 340-9345
with a copy to
Jeffrey W. Tindell, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopy No.: (212) 735-2000
(b) if to the Company:
Redman Industries, Inc.
2550 Walnut Hill Lane
Dallas, Texas 75229
Attention: Thomas W. Sturgess
Robert M. Linton
Telecopy No.: (214) 351-2983
with a copy to
Mary R. Korby, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy No.: (214) 746-7777
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8.3 Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When a reference is
made in this Agreement to common stock of the Company or Parent, as the case may
be, or shares thereof, such reference shall be deemed to include the preferred
share purchase rights issued pursuant to the Parent Rights Agreement or Company
Rights Agreement, as the case may be, that trade together with such common
stock. For the purposes of this Agreement, a "material adverse effect" shall
mean, as to any party, a material adverse effect on the assets, liabilities,
results of operations, business or financial condition of such party and its
subsidiaries, taken as a whole, or on such party's ability to consummate the
transactions contemplated hereby.
8.4 Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.
8.5 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) and the Confidentiality Agreement constitute the
entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
8.6 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries, except for the provisions of Section 5.2(b) and Section
5.2(f)(ii) and (iii) which may be enforced by the beneficiaries thereof.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
8.8 Specific Performance. The transactions contemplated by this Agreement
are unique and monetary damages would not be an adequate remedy for a breach
hereof. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided that such party
is not in material default hereunder.
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.10 Expenses. Subject to the provisions of Section 7.2, Parent and the
Company shall pay their own costs and expenses associated with the transactions
contemplated by this Agreement, except that the Company and Parent shall share
equally (i) the filing fees in connection with the filing of the Proxy Statement
and Registration Statement with the Commission and (ii) the expenses incurred in
connection with printing and mailing the Proxy Statement to the Company
Stockholders.
8.11 Incorporation of Disclosure Schedules. The Company Disclosure Schedule
and the Parent Disclosure Schedule are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13 Subsidiaries. As used in this Agreement, the word "subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions
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with respect to such corporation or other organization, or any organization of
which such party is a general partner.
IN WITNESS WHEREOF, Parent, Sub and the Company have signed this Agreement
as of the date first written above.
CHAMPION ENTERPRISES, INC.
By: /s/ WALTER R. YOUNG, JR.
--------------------------------------
Name:Walter R. Young, Jr.
Title: Chairman, President and CEO
RHI ACQUISITION CORP.
By: /s/ WALTER R. YOUNG, JR.
--------------------------------------
Name:Walter R. Young, Jr.
Title: Chairman
REDMAN INDUSTRIES, INC.
By: /s/ THOMAS W. STURGESS
--------------------------------------
Name:Thomas W. Sturgess
Title: Chairman of the Board
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<PAGE> 110
ANNEX B
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
August 19, 1996
Board of Directors
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, MI 48326
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to Champion Enterprises, Inc. ("Champion" or the "Company") of the Exchange
Ratio (as defined below) provided for in the Agreement and Plan of Merger dated
as of August 19, 1996 (the "Agreement") to be entered into by and among
Champion, RAC Acquisition Corp. (a wholly-owned subsidiary of Champion) and
Redman Industries, Inc. ("Redman"), pursuant to which RAC Acquisition Corp. will
be merged with and into Redman.
Pursuant to the Agreement, each share of common stock of Redman will be
converted into the right to receive 1.24 shares of common stock, $1.00 par value
per share, of the Company (the "Exchange Ratio").
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and Redman including information provided during discussions with
their respective managements. Included in the information provided during
discussions with the respective managements were certain financial projections
of the Company for the period beginning July 1, 1996 and ending December 31,
2000 prepared by the management of the Company, certain financial projections of
Redman for the period beginning July 1, 1996 and ending March 31, 2001 prepared
by the management of Redman and estimates of the managements of the Company and
Redman of the operating synergies achievable as a result of the proposed merger.
In addition, we have compared certain financial and securities data of the
Company and Redman with various other companies whose securities are traded in
public markets, reviewed the historical stock prices and trading volumes of the
common stock of the Company and Redman, reviewed stock purchase price premiums
paid in other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company, and
Redman and their respective representatives, or that was otherwise reviewed by
us. In particular, we have relied upon the estimates of the managements of the
Company and Redman of the operating synergies achievable as a result of the
proposed merger and upon our discussion of such synergies with the managements
of the Company and Redman. With respect to the financial projections supplied to
us, we have assumed that they have been reasonably prepared on the basis
reflecting the best currently available estimates and judgments of the
management of the Company and Redman as to the future operating and financial
performance of the Company and Redman.
We have not assumed any responsibility for making any independent
evaluation of assets or liabilities of the Company or Redman or for
independently verifying any of the information reviewed by us. We have relied as
to all legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter and does not represent an opinion as to the price at
which shares of common stock of the Company will trade at any time. It should be
understood that, although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this opinion. Our opinion
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
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Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In addition, in the
ordinary course of our business, we trade the securities of the Company and
Redman for our own account and for the accounts of customers, and, accordingly,
may at any time hold a long or short position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ GEOFFREY A. STERN
------------------------------------
Geoffrey A. Stern
Managing Director
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<PAGE> 112
ANNEX C
OPINION OF DILLON, READ & CO. INC.
August 19, 1996
Board of Directors
Redman Industries, Inc.
2550 Walnut Hill Lane
Dallas, Texas 75229-5672
Gentlemen:
We understand that Redman Industries, Inc. (the "Company") is considering a
transaction (the "Merger") whereby a subsidiary of Champion Enterprises, Inc.
("Champion") would be merged with and into the Company, pursuant to the terms of
an Agreement and Plan of Merger, dated as of August 19, 1996 (the "Merger
Agreement"), such that the Company will become a wholly owned subsidiary of
Champion. In the Merger, each outstanding share of common stock, par value $0.01
per share, of the Company would be converted into 1.24 shares (the "Exchange
Ratio") of common stock, par value $1.00 per share, of Champion. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have requested our opinion as to whether the Exchange Ratio is fair to
the shareholders of the Company from a financial point of view.
For its services, Dillon, Read & Co. Inc. ("Dillon Read") will receive a
fee, a substantial portion of which is contingent upon the consummation of the
Merger. In the past, Dillon Read has provided investment banking services to the
Company and has received customary compensation for the rendering of such
services. In the ordinary course of business, Dillon Read trades the equity
securities of the Company and Champion for our own account and the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and Champion, (ii) reviewed certain financial
information and other data provided to us by the Company that is not publicly
available relating to the business and prospects of the Company, including
financial projections prepared by the management of the Company, (iii) reviewed
certain financial information and other data provided to us by Champion that is
not publicly available relating to the business and prospects of Champion,
including financial projections prepared by the management of Champion, (iv)
conducted discussions with members of the senior managements of the Company and
Champion, (v) considered certain pro forma effects of the Merger on the
financial results of Champion and certain resulting financial implications for
the shareholders of the Company and reviewed certain estimates of synergies
prepared by the managements of the Company and Champion, (vi) reviewed the
historical market prices and trading volumes of the common stocks of the Company
and Champion, (vii) reviewed publicly available financial and stock market data
with respect to certain other companies in lines of business we believe to be
generally comparable to those of the Company and Champion, (viii) compared the
financial terms of the Merger with the financial terms of certain other mergers
and acquisitions we believe to be relevant, (ix) reviewed the Merger Agreement,
and (x) conducted such other financial studies, analyses and investigations, and
considered such other information as we deemed necessary or appropriate.
Our opinion does not address the Company's underlying business decision to
effect the Merger or constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Merger. Our
opinion does not imply any conclusion as to the likely trading range for the
common stock of Champion following the consummation of the Merger, which may
vary depending on numerous factors which generally influence the prices of
securities, or constitute a recommendation to shareholders of the Company with
respect to the advisability of disposing of or retaining the common stock of
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Champion. With your consent, we have assumed that the Merger will be treated as
tax-free to both the Company and the shareholders of the Company and will be
accounted for as a pooling-of-interests.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have, with your
consent, relied on its being complete and accurate in all material respects. In
addition, we have not made any evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of the Company or Champion, nor have we
been furnished with any such evaluation or appraisal. We have not been requested
to, nor have we, solicited third party offers for the acquisition of all or any
portion of the Company. With respect to the financial projections and estimates
of synergies referred to above, we have assumed, with your consent, that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's and Champion's managements as to the
future financial performance of the Company and Champion, respectively. Further,
our opinion is based on economic, monetary and market conditions existing on the
date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the shareholders of the Company from
a financial point of view.
Very truly yours,
DILLON, READ & CO. INC.
--------------------------
/s/ DILLON, READ & CO. INC.
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