EXHIBIT 10.193
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to the action you should take, you are recommended to seek
immediately your own personal financial advice from your stockbroker, bank
manager, solicitor, accountant or other independent financial adviser authorised
under the Financial Services Act 1986. This document should be read in
conjunction with the accompanying Form(s) of Acceptance.
If you have sold or otherwise transferred all your Ring Shares, please send this
document, the accompanying Form(s) of Acceptance and the reply-paid envelope as
soon as possible to the purchaser or transferee or to the stockbroker, bank or
other agent through whom the sale or transfer was effected, for transmission to
the purchaser or transferee. However, these documents should not be forwarded or
transmitted in or into the US, Canada, Australia or Japan.
The Offers referred to in this document are not being made, directly or
indirectly, in or into the US, Canada, Australia or Japan. Accordingly, neither
this document nor the accompanying Form(s) of Acceptance are being or may be
mailed or otherwise forwarded, distributed or sent (including telephonically)
in, into or from the US, Canada, Australia or Japan. All persons (including,
without limitation, nominees, trustees or custodians) who would, or otherwise
intend to, forward this document or the accompanying Form(s) of Acceptance to
any jurisdiction outside the United Kingdom, should read the further details in
this regard which are contained in paragraph 11 of the letter from N M
Rothschild & Sons Limited contained in this document and paragraph 7 of Part B
of Appendix I to this document before taking any action.
RECOMMENDED CASH OFFERS
by
N M ROTHSCHILD & SONS LIMITED
on behalf of
CATALINA INTERNATIONAL PLC
a wholly owned subsidiary of
CATALINA LIGHTING, INC.
to acquire the whole of the ordinary and convertible preference share capital of
RING PLC
A letter recommending that Ring Shareholders accept the Offers, from the
Chairman of Ring, is set out on pages 3 to 6 of this document.
WHETHER OR NOT YOUR RING SHARES ARE IN CREST, ACCEPTANCES SHOULD BE DESPATCHED
AS SOON AS POSSIBLE AND, IN ANY EVENT, SO AS TO BE RECEIVED BY 3.00 PM ON 22
JUNE 2000. The procedure for acceptance of the Offers is set out on pages 12 to
15 of this document and in the accompanying Form(s) of Acceptance.
N M Rothschild & Sons Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting for Catalina and Catalina (UK) and no
one else in connection with the Offers and will not be responsible to anyone
other than Catalina and Catalina (UK) for providing the protections afforded to
customers of N M Rothschild & Sons Limited nor for giving advice in relation to
the Offers.
Arthur Andersen Corporate Finance, a division of Arthur Andersen, which is
authorised to carry on investment business by the Institute of Chartered
Accountants in England and Wales, is acting for Ring and no one else in
connection with the Offers and will not be responsible to anyone other than Ring
for providing the protections afforded to customers of Arthur Andersen nor for
giving advice in relation to the Offers.
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Contents
Page
Letter of recommendation from the Chairman of Ring 3
Letter from Rothschild 7
1. Introduction 7
2. The recommended Offers 7
3. Irrevocable undertakings 9
4. Information on Catalina 9
5. Information on Catalina (UK) 10
6. Information on Ring 10
7. Background to and reasons for the Offers 10
8. Management and employees 11
9. Ring Share Option Schemes 11
10. United Kingdom taxation 11
11. Overseas shareholders 11
12. Procedure for acceptance of the Offers 12
13. Settlement 15
14. Further information 15
15. Action to be taken 16
Appendices
I Conditions and further terms of the Offers 17
II Financial information relating to Catalina 35
III Catalina's unaudited results for the three months and six
months ended 31 March 2000 60
IV Financial information relating to Ring 68
V Ring's unaudited interim results for the six months
ended 31 December 1999 76
VI Additional information 84
VII Definitions 91
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LETTER OF RECOMMENDATION FROM THE CHAIRMAN OF RING
[LOGO OMITTED]
(Incorporated and registered in England No.29796)
Directors: Registered office:
K Jackson* (Chairman) Gelderd Road
J M Hall (Chief Executive) Leeds
A F Welham (Group Finance Director) LS12 6NB
B P Doe*
R G Hardie*
1 June 2000
* Non-executive
To Ring Shareholders and, for information only, to holders of options granted
under the Ring Share Option Schemes and the holders of Ring Preference Shares.
Dear Shareholder
Recommended Offers for Ring by Catalina (UK)
1. Introduction
The board of Ring announced on 13 March 2000 that discussions were taking place
which may or may not lead to an offer being made for Ring. It was announced
today that the boards of Catalina and Ring have agreed the terms of recommended
cash offers to be made by Rothschild on behalf of Catalina (UK) to acquire the
entire issued and to be issued ordinary and convertible preference share capital
of Ring. The Offers value the existing issued ordinary and convertible
preference share capital of Ring together at approximately [pounds]21.9 million.
The purpose of this letter is to explain the background to the Offers and the
reasons why the board of Ring considers the terms of the Offers to be fair and
reasonable and why it is unanimously recommending that Ring Shareholders accept
the Offers.
The Offers are final and will not be increased, except that the right is
reserved to revise and/or increase the Offers if a competitive situation, as
determined by the Panel, arises or otherwise with the Panel's consent.
2. The recommended Offers
(a) The Ordinary Offer
The Ordinary Offer is being made on the following basis:
for each Ring Ordinary Share 50 pence in cash
The Ordinary Offer includes an amount of 0.65 pence per Ordinary Share in lieu
of the interim dividend of 0.65 pence declared by the board of Ring on 1 March
2000. The interim dividend has therefore been revoked and will not be paid.
Further details are set out in paragraph 5 below.
The Ordinary Offer values the issued ordinary share capital of Ring at
approximately [pounds]19.8 million and represents a premium of approximately
42.9 per cent. over the closing middle-market price of 35 pence per Ordinary
Share on 31 May 2000, the last dealing day prior to the announcement of the
Offers, and a premium of approximately 53.8 per cent. over the closing
middle-market price of 32.5 pence per Ordinary Share on 10 March 2000, the last
dealing day prior to the announcement by Ring that discussions were taking place
which may or may not lead to an offer being made for Ring.
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The Ordinary Offer extends to any Ring Ordinary Shares which are unconditionally
allotted or issued while the Ordinary Offer remains open for acceptance (or such
earlier date as Catalina (UK) may, subject to the City Code, determine),
including those issued as a result of the conversion of Convertible Preference
Shares or otherwise.
(b) The Convertible Preference Offer
The Convertible Preference Offer is being made on the following basis:
for each Ring Convertible Preference Share 22.4 pence in cash
The Ring Convertible Preference Shares are being acquired together with the
right to receive the dividend of 2.4 pence (net) per Ring Convertible Preference
Share payable on 1 July 2000.
The Convertible Preference Offer values the issued convertible preference share
capital of Ring at approximately [pounds]2.1 million. It is not possible to give
a value comparison for the Convertible Preference Shares as they are not listed
and there is no market in the shares. The Convertible Preference Offer is
conditional on the Ordinary Offer becoming or being declared unconditional in
all respects.
Full details of the Offers and the action which should be taken to accept them
are set out in the letter from Rothschild following this letter, in Appendix I
to this document and in the Form(s) of Acceptance.
3. Current trading and prospects
Ring continues to experience the challenging trading conditions that were
referred to on 1 March 2000 when Ring announced its interim results for the six
months ended 31 December 1999.
The Lighting Division has maintained growth through the introduction of new
products and the growth of existing customers but the retail market remains
highly competitive.
Sales in the Automotive Division remain depressed, reflecting pressure from a
decline in the market and the continued strength of sterling.
The prior year acquisitions of Arctic Products Limited and PH Products Limited,
together with excellent progress by Van-Line Limited, are helping to deliver a
strong sales performance within the Consumables Division.
The board of Ring believes that the Ring Group's investment in new products,
information technology and distribution facilities should enable Ring to meet
the demands of a competitive market and consolidating customer base.
4. Background to and reasons for recommending the Offers
Since 1997, Ring has been positioned as a focused distributor of lighting,
automotive and consumable products. Ring has benefited from recent acquisitions
by its Consumables Division and the disposal of its Engineering Division.
The directors of Ring are pleased with the progress made to date and are aware
of the continuing need to increase shareholder value.
The lighting distribution sector is being driven by the need to service
customers who are becoming increasingly global and are focusing on closer
relationships with fewer suppliers. As such, the board of Ring believes that
Ring's growth prospects can be improved as part of an enlarged group. However,
the rating of Ring Ordinary Shares in the past two years has prevented Ring from
utilising its equity to fund significant acquisitions.
The board of Ring believes that there are bents to be derived from combining the
operations of the two companies. Specifically, Ring, following the Acquisition,
would have access to a broader product range and leading lighting brands offered
by Catalina, as well as the ability to source products directly from Catalina's
manufacturing operations in China.
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The directors of Ring therefore consider that Ring Shareholders should be given
the opportunity to realise their investment and are accordingly unanimously
recommending that Ring Shareholders accept the Offers.
5. The interim dividend
On 1 March 2000, Ring announced its unaudited interim results for the six months
ended 31 December 1999. At the same time, the board of Ring declared an interim
dividend of 0.65 pence per Ring Ordinary Share which was to be payable on 14
July 2000 to Ring Shareholders on the register on 9 June 2000.
As the record date will fall within the Offer Period and because the Ordinary
Offer includes an amount attributable to the interim dividend, the board of Ring
has agreed to revoke the interim dividend. In the event that the Ordinary Offer
does not become unconditional in all respects, the board of Ring will either
declare a special dividend of 0.65 pence per Ring Ordinary Share or increase the
final dividend with respect to the year ending 30 June 2000 by 0.65 pence per
Ring Ordinary Share.
6. Management and employees
In the event that the Offers become or are declared unconditional in all
respects, John Hall and Tony Welham will continue as Chief Executive and Group
Finance Director of Ring respectively. Also, upon the Offers becoming or being
declared unconditional in all respects, all of the non- executive directors of
Ring will resign from the board of Ring.
The board of Catalina has given assurances to the board of Ring that the
existing employment rights, including pension rights, of all employees of the
Ring Group will be fully safeguarded in the event that the Offers become or are
declared unconditional in all respects.
7. Taxation
Your attention is drawn to paragraph 10 of the letter from Rothschild entitled
"United Kingdom taxation". If you are in any doubt as to your own tax position
or are subject to taxation in any jurisdiction other than the UK, you should
consult an appropriately quailed independent professional adviser immediately.
8. Irrevocable undertakings to accept the Offers
All the directors of Ring with interests in Ring Ordinary Shares have
irrevocably undertaken to accept, or procure acceptance of, the Ordinary Offer
in respect of, in aggregate, 602,393 Ordinary Shares, representing approximately
1.5 per cent. of the current issued ordinary share capital of Ring. These
irrevocable undertakings will remain binding in the event of a higher offer
being made, but will cease to be binding in the event that the Offers lapse or
are withdrawn. None of the directors of Ring has any interest in the Convertible
Preference Shares.
Catalina (UK) has also received irrevocable undertakings from certain
shareholders of Ring, including the trustees of the Ring ESOP, to accept the
Offers in respect of 20,918,905 Ring Ordinary Shares and 6,590,592 Ring
Convertible Preference Shares, representing approximately 52.8 per cent. and
69.4 per cent. of Ring's existing issued ordinary and convertible preference
share capital respectively. Of these, irrevocable undertakings in respect of
1,163,127 Ring Ordinary Shares and 6,590,592 Ring Convertible Preference Shares
will remain binding in the event of a higher offer being made, but will cease to
be binding in the event that the Offers lapse or are withdrawn. If a competing
offer is announced for the ordinary share capital of Ring undertakings in
respect of 16,780,778 Ring Ordinary Shares may lapse if the offer price per Ring
Ordinary Share under any such competing offer is 54 pence or above and
undertakings in respect of 2,975,000 Ring Ordinary Shares may lapse if the offer
price per Ring Ordinary Share under any such competing offer is 55 pence or
above.
Consequently, Catalina (UK) has received irrevocable undertakings to accept the
Offers in respect of, in aggregate, 21,521,298 Ordinary Shares and 6,590,592
Convertible Preference Shares,
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representing approximately 54.3 per cent. and 69.4 per cent. of the existing
issued ordinary share capital and convertible preference share capital of Ring
respectively.
Further details of these irrevocable undertakings are set out in paragraph
3(b)(iii) of Appendix VI to this document.
9. Action to be taken
To accept the Offers, you should ensure that you return your completed Form(s)
of Acceptance, whether or not your Ring Shares are in CREST, to Catalina (UK)'s
receiving agent, by post or by hand to the New Issues Department, IRG plc, PO
Box 166, Bourne House, 34 Beckenham Road, Kent BR3 4TH or by hand only (during
normal business hours) to IRG plc, 23 Ironmonger Lane, London EC2, as soon as
possible and, in any event, so as to be received by no later than 3.00 pm on 22
June 2000.
The procedure for acceptance of the Offers is set out in paragraph 12 of the
letter from Rothschild contained in this document and in the Form(s) of
Acceptance.
10. Recommendation
The directors of Ring, who have been so advised by Arthur Andersen Corporate
Finance, consider the terms of the Offers to be fair and reasonable. In
providing advice to the directors of Ring, Arthur Andersen Corporate Finance has
taken into account the directors' commercial assessments.
Accordingly, the directors of Ring unanimously recommend that Ring Shareholders
accept the Offers, as they have irrevocably undertaken to do in respect of their
own beneficial holdings amounting to 602,393 Ordinary Shares, representing
approximately 1.5 per cent. of the existing issued ordinary share capital of
Ring.
Yours faithfully
Ken Jackson
Chairman
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LETTER FROM ROTHSCHILD
[LOGO OMITTED]
1 June 2000
To Ring Shareholders and, for information only, to participants in the Ring
Share Option Schemes and to holders of Ring Preference Shares.
Dear Sir or Madam
Recommended Offers for Ring
1. Introduction
On 13 March 2000, Ring announced that discussions were taking place which may or
may not lead to an offer being made for Ring. On 1 June 2000, the boards of
Catalina and Ring announced the terms of recommended cash offers, to be made by
Rothschild, on behalf of Catalina (UK), a wholly owned subsidiary of Catalina,
to acquire the issued and to be issued Ring Ordinary Shares and the issued Ring
Convertible Preference Shares. This letter formally sets out the Offers.
Your attention is drawn to the letter from the Chairman of Ring, set out on
pages 3 to 6 of this document, which gives the reasons why the directors of
Ring, who have been so advised by Arthur Andersen Corporate Finance, consider
the terms of the Offers to be fair and reasonable and therefore unanimously
recommend Ring Shareholders accept the Offers, as they have undertaken to do in
respect of their own shareholdings.
The procedure for acceptance of the Offers is set out in paragraph 12 of this
letter and in the accompanying Form(s) of Acceptance. Whether or not your Ring
Shares are in CREST, acceptances of the Offers should be dispatched as soon as
possible and, in any event, so as to be received by the New Issues Department,
IRG plc, PO Box 166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH no
later than 3.00 pm on 22 June 2000.
The Offers are final and will not be increased, save that the right is reserved
to revise and/ or increase the Offers if a competitive situation (as determined
by the Panel) arises or otherwise with the consent of the Panel.
No offer is being made for the issued Ring Preference Shares which are not
convertible into Ring Ordinary Shares, and which will continue to be entitled to
an annual net coupon of 3.5 per cent.
Rothschild is making the Offers on behalf of Catalina (UK). Both Catalina and
Catalina (UK) are being jointly advised by Rothschild and TM Capital Corporation
in connection with the Offers.
2. The recommended Offers
On behalf of Catalina (UK), Rothschild offers to acquire, on the terms and
subject to the conditions set out in this document and in the accompanying
Form(s) of Acceptance, all of the Ring Ordinary Shares and all of the Ring
Convertible Preference Shares on the bases set out below.
N M Rothschild & Sons Regulated by The Securities
1 Park Row and Futures Authority Limited
Leeds LS1 5NR
Registered Office:
New Court, St Swithin's Lane, London EC4P 4DU
Registered in England and Wales with number: 925279
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The Offers value the existing issued ordinary and convertible preference share
capital of Ring together at approximately [pounds]21.9 million.
(a) The Ordinary Offer
The offer for the Ring Ordinary Shares is made on the following basis:
for each Ring Ordinary Share 50 pence in cash
This represents a premium of approximately 42.9 per cent. over the closing
middle-market price of 35 pence per Ring Ordinary Share on 31 May 2000, the
last dealing day prior to the announcement of the Offers.
The Ordinary Offer represents a premium of approximately 53.8 per cent.
over the closing middle-market price of 32.5 pence per Ring Ordinary Share
on 10 March 2000, the last dealing day prior to the announcement by Ring
that discussions were taking place which may or may not lead to an offer
being made for Ring.
The Ordinary Offer values the whole of the existing issued Ring Ordinary
Shares at approximately [pounds]19.8 million.
The Ring Ordinary Shares will be acquired under the Ordinary Offer by
Catalina (UK) fully paid and free from all liens, charges, encumbrances,
equitable interests, rights of pre- emption and other third party rights or
interests of any nature whatsoever and together with all rights now or
hereafter attaching thereto, including the right to receive and retain in
full all dividends and other distributions declared, paid or made after the
date hereof, including, for the avoidance of doubt, the interim divided
declared on 1 March 2000 which has not yet been paid. In this regard, the
board of Ring has agreed to revoke the interim dividend of 0.65 pence per
Ring Ordinary Share announced on 1 March 2000, further details of which are
given in paragraph 5 of the Letter of Recommendation from the Chairman of
Ring set out on page 5 of this document.
The Ordinary Offer extends to all Ring Ordinary Shares currently in issue
or unconditionally allotted or issued prior to the time when the Ordinary
Offer ceases to be open for acceptances, or any earlier time (not being
earlier than 3.00 pm on the First Closing Date) as Catalina (UK) may,
subject to the City Code or with the consent of the Panel, decide.
The directors of Ring unanimously recommend that Ring Ordinary Shareholders
accept the Ordinary Offer.
(b) The Convertible Preference Offer
The offer for the Ring Convertible Preference Shares is made on the
following basis:
for each Ring Convertible Preference Share 22.4 pence in cash
The Convertible Preference Offer values the whole of the issued Convertible
Preference Shares at approximately [pounds]2.1 million.
The Ring Convertible Preference Shares will be acquired under the
Convertible Preference Offer by Catalina (UK) fully paid and free from all
liens, charges, encumbrances, equitable interests, rights of pre-emption
and other third party rights or interests of any nature whatsoever and
together with all rights now or hereafter attaching thereto, including the
right to receive and retain in full all dividends and other distributions
declared, paid or made after the date hereof. The Ring Convertible
Preference Shares are therefore being acquired together with the right to
receive the dividend of 2.4 pence (net) per Ring Convertible Preference
Share payable on 1 July 2000 and the 22.4 pence per share consideration
payable for each Ring Convertible Preference Share under the Convertible
Preference Offer will be reduced to the extent that such dividend has
actually been paid to any such holder of Ring Convertible Preference
Shares.
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Under the rights attaching to the Ring Convertible Preference Shares, if
the Ordinary Offer is declared unconditional in all respects and the right
to cast more than 50 per cent. of the votes which may ordinarily be cast on
a poll at a general meeting of Ring becomes vested in Catalina (UK), Ring
is required to notify all remaining holders of Ring Convertible Preference
Shares who have six weeks from the date of that notice to convert their
Convertible Preference Shares into Ring Ordinary Shares at a conversion
rate of two Ring Ordinary Shares for every five Ring Convertible Preference
Shares held. After conversion, any holder of such Ring Ordinary Shares
shall be entitled to accept the Ordinary Offer.
Those holders of Ring Convertible Preference Shares who do not accept the
Convertible Preference Offer or do not so convert shall be entitled to
receive a fixed cumulative dividend of 19.2 per cent. (4.8 pence per Ring
Convertible Preference Share) per annum until 1 January 2004 and thereafter
shall not be entitled to receive a dividend and shall automatically convert
into ordinary shares in Ring on the same basis as stated above. It is
anticipated that, should the Ordinary Offer be declared unconditional in
all respects, such ordinary shares in Ring will not be listed on any stock
exchange and that the realisation of any capital value for such ordinary
shares will be difficult.
The directors of Ring unanimously recommend that Ring Convertible
Preference Shareholders accept the Convertible Preference Offer.
If the Offers become or are declared unconditional in all respects, then,
irrespective of the level of acceptances, it is the intention of Catalina (UK)
to procure that Ring applies for the Ring Ordinary Shares to be de-listed and
seeks to re-register as a private company.
It having been a precondition of the announcement of the firm intention to make
the Offers, Ring has agreed to pay Catalina a fee of [pounds]198,200 in the
event that the Offers fail to become or be declared unconditional in all
respects, lapse or are withdrawn in circumstances where a competing recommended
higher offer is made by a third party and such competing offer subsequently
becomes or is declared unconditional in all respects.
3. Irrevocable undertakings
Catalina (UK) has received irrevocable undertakings to accept the Ordinary Offer
from the directors of Ring in respect of their entire interests in Ring Ordinary
Shares, amounting to 602,393 Ring Ordinary Shares, representing approximately
1.5 per cent. of Ring's existing issued ordinary share capital. These
irrevocable undertakings will remain binding in the event of a higher offer
being made, but will cease to be binding in the event that the Offers lapse or
are withdrawn. None of the directors of Ring has any interest in the Ring
Convertible Preference Shares.
Catalina (UK) has also received irrevocable undertakings from certain
shareholders of Ring, including the trustees of the Ring ESOP, to accept the
Offers in respect of 20,918,905 Ring Ordinary Shares and 6,590,592 Ring
Convertible Preference Shares, representing approximately 52.8 per cent. and
69.4 per cent. of Ring's existing issued ordinary share capital and convertible
preference share capital respectively. Of these, irrevocable undertakings in
respect of 1,163,127 Ring Ordinary Shares and 6,590,592 Ring Convertible
Preference Shares will remain binding in the event of a higher offer being made,
but will cease to be binding in the event that the Offers lapse or are
withdrawn. If a competing offer is announced for the ordinary share capital of
Ring, undertakings in respect of 16,780,778 Ring Ordinary Shares may lapse if
the offer price per Ring Ordinary Share under any such competing offer is 54
pence or above and undertakings in respect of 2,975,000 Ring Ordinary Shares may
lapse if the offer price per Ring Ordinary Share under any such competing offer
is 55 pence or above.
Accordingly, Catalina (UK) has received irrevocable undertakings in respect of
21,521,298 Ring Ordinary Shares and 6,590,592 Ring Convertible Preference
Shares, representing approximately 54.3 per cent. and 69.4 per cent. of Ring's
existing issued ordinary share capital and convertible preference share capital
respectively.
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4. Information on Catalina
Catalina is a designer, manufacturer and distributor of a broad range of
lighting fixtures and lamps under the Westinghouse brand and the Catalina, Dana
and Illuminada trade names. In addition, the Group supplies private label
lighting products to its customers.
Catalina operates throughout the US and in Europe, Canada, Mexico, Asia, Latin
America and Australia. The Group's manufacturing subsidiary, Go-Gro Limited, is
headquartered in Hong Kong with production facilities in the Guangdong Province
of China.
For the year ended 30 September 1999, Catalina reported profit before taxation
and exceptional items of $5.8 million (1998: $1.4 million) on turnover of $176.6
million (1998: $161.9 million).As at 30 September 1999, Catalina had net assets
of $48.1 million (1998: $42.3 million).
On 5 May 2000, Catalina announced its unaudited results for the six months ended
31 March 2000, which showed a profit before taxation and exceptional items of
$2.7 million (1999: $2.3 million) on turnover of $85.2 million (1999: $84.9
million). As at 31 March 2000, Catalina had net assets of $49.1 million (1999:
$43.6 million).
Catalina's ordinary shares are quoted on the New York Stock Exchange and as at
the close of business on 30 May 2000, the latest practicable date prior to the
publication of this document, Catalina had a market capitalisation of
approximately $27 million.
Financial information relating to Catalina is set out in Appendices II and III.
5. Information on Catalina (UK)
Catalina (UK) has been established in order to implement the Offers. Catalina
(UK) is a wholly- owned subsidiary of Catalina. To date, Catalina (UK) has
engaged in no activities other than those incidental to its formation and the
making of the Offers.
6. Information on Ring
Ring is a UK distribution group focused on three divisions, Lighting, Automotive
and Consumables. The Lighting Division, Ring's largest business, distributes
light fittings and lamps to consumer and commercial customers. The Automotive
Division is one of the leading suppliers of automotive light bulbs and driving
lamps to the UK automotive aftermarket. The Consumables Division distributes
consumable products to the garage, engineering, plumbing and gas markets.
For the year ended 30 June 1999, Ring reported profit before taxation and
exceptional items of [pounds]3.2 million (1998 restated: [pounds]2.6 million) on
turnover of [pounds]74.6 million (1998: [pounds]77.9 million). As at 30 June
1999, Ring had net assets of [pounds]12.0 million (1998: [pounds]11.1 million).
On 1 March 2000, Ring announced its unaudited interim results for the six months
ended 31 December 1999, which showed a profit before taxation and exceptional
items of [pounds]2.2 million (1998: [pounds]1.8 million) on turnover of
[pounds]41.9 million (1998: [pounds]37.9 million). As at 31 December 1999, Ring
had net assets of [pounds]13.0 million (1998: [pounds]11.8 million).
Financial information relating to Ring is set out in Appendices IV and V.
7. Background to and reasons for the Offers
Economic and other business factors have led to a recent consolidation in the
retail sector for consumer products, with large retailers acquiring
ever-increasing market shares. A key growth strategy of these large retailers,
particularly those headquartered in the US, is international expansion. These
retailers have expressed a need for sophisticated suppliers capable of meeting
the worldwide requirements of their business. This represents a major
opportunity for those manufacturers and distributors, such as Catalina, which
possess global expertise and resources.
Catalina is one of the leading global designers, manufacturers and distributors
of high-quality, value-priced lighting fixtures and lamps under the
Westinghouse, Catalina, Dana and Illuminada brand names. Catalina is a leading
supplier of lighting fixtures and lamps to major North American retail chains,
and operates in the US, Canada, Europe, Mexico, Latin America
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and Australia. Catalina owns one of the largest lighting product manufacturing
facilities in China which currently supplies products to its customers
worldwide.
The acquisition of Ring will represent a major step in the expansion of
Catalina's global distribution network. Ring will strengthen Catalina's
operations in Europe by providing both increased access to the UK marketplace
and an important platform into Europe. Catalina's major North American customers
are expanding into Europe and Ring will enable these customers to be serviced
more effectively. The Acquisition will also provide Ring with access to in-house
manufacturing in the Far East, improving its product ranges and relative
competitive position.
8. Management and employees
Catalina looks forward to welcoming the management and employees of the Ring
Group into the Catalina Group. Catalina has given assurances to the board of
Ring that the existing employment rights, including pension rights, of all
management and employees of the Ring Group will be fully safeguarded.
In the event that the Offers become or are declared unconditional in all
respects, John Hall and Tony Welham will continue as Chief Executive and Group
Finance Director of Ring respectively. Also, upon the Offers becoming or being
declared unconditional in all respects, all of the non- executive directors of
Ring will resign from the board of Ring.
9. Ring Share Option Schemes
As at 31 May 2000, options had been granted under the Ring Share Option Schemes
over 933,737 Ring Ordinary Shares currently held by the trustees of the Ring
ESOP. Accordingly, no new Ring Ordinary Shares will be issued on the exercise of
options under the Ring Share Option Schemes.
10. United Kingdom taxation
The following paragraphs, which are intended as a general guide only, are based
on current UK legislation and Inland Revenue practice at the date of this
document. They summarise certain limited aspects of the UK taxation treatment of
the Offers and they relate only to the position of Ring Shareholders who hold
their Ring Shares beneficially as an investment (otherwise than under a personal
equity plan or an individual savings account) and who are resident in the UK for
taxation purposes. If you are in any doubt as to your taxation position or if
you are subject to taxation in any jurisdiction other than the UK, you should
consult an appropriate professional adviser immediately.
(a) UK taxation on chargeable gains
Liability to UK taxation on chargeable gains will depend on the individual
circumstances of Ring Shareholders. To the extent that a Ring Shareholder
accepts the Offers, that will constitute a disposal of all or part of his Ring
Shares for the purpose of UK taxation on chargeable gains which may, depending
on the shareholder's individual circumstances (including the availability of
exemptions and allowable losses) give rise to a liability to UK taxation on
chargeable gains.
(b) Other direct tax matters
Special tax provisions may apply to Ring Shareholders who have acquired or
acquire their Ring Shares by exercising options under the Ring Share Option
Schemes including provisions imposing a charge to income tax when such an option
is exercised.
(c) Stamp duty and stamp duty reserve tax ("SDRT")
No stamp duty or SDRT will be payable by Ring Shareholders as a result of
accepting the Offers.
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11. Overseas shareholders
The attention of Ring Shareholders who are citizens or residents of
jurisdictions outside the UK is drawn to paragraph 7 of Part B and paragraph 2
of Part C of Appendix I to this document, and to the relevant provisions of the
Form(s) of Acceptance.
The availability of the Offers to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdiction in which they are resident.
Persons who are not resident in the United Kingdom should inform themselves
about, and observe, any applicable legal or regulatory requirements.
The Offers are not being made, directly or indirectly, in or into the US,
Canada, Australia or Japan, or by use of the mails of, or by any means or
instrumentality (including, without limitation, facsimile transmission, telex or
telephone) of interstate or foreign commerce of, or any facilities of a national
securities exchange of the US, Canada, Australia or Japan.
Accordingly, any accepting Ring Shareholder who is unable to give the
representations and warranties set out in paragraph 2 of Part C of Appendix I to
this document will, unless Catalina (UK) otherwise determines in its absolute
discretion, be deemed not to have accepted the Offers.
12. Procedure for acceptance of the Offers
Ring Shareholders should find accompanying this document Form(s) of Acceptance
for use in connection with the Offers. This section should be read in
conjunction with the notes on the Form(s) of Acceptance.
(a) Completion of Form(s) of Acceptance
You should note that if you hold Ring Shares in both certificated and
uncertificated form, you should complete separate Form(s) of Acceptance for each
holding. In addition, you should complete separate Form(s) of Acceptance for
Ring Shares held in uncertificated form, but under different member account IDs,
and for Ring Shares held in certificated form but under different designations.
Additional Forms of Acceptance are available from the New Issues Department, IRG
plc, PO Box 166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH,
telephone number 0208 639 2141.
(b) To accept the Ordinary Offer
To accept the Ordinary Offer, you must complete Boxes 1 and 3 and, if your Ring
Ordinary Shares are in CREST, Box 6 and sign Box 2 of the enclosed white Form of
Acceptance in accordance with these instructions and the instructions printed on
the white Form of Acceptance.
(c) To accept the Convertible Preference Offer
To accept the Convertible Preference Offer, you must complete Boxes 1 and 3 and
sign Box 2 of the enclosed blue Form of Acceptance in accordance with these
instructions and the instructions printed on the blue Form of Acceptance.
(d) Return of Form(s) of Acceptance
To accept the Offers, the completed Form(s) of Acceptance should be returned
together, if your Ring Shares are in certificated form, with the relevant share
certificate(s) and/or other document(s) of title whether or not your Ring Shares
are in CREST. The completed Form(s) of Acceptance should be returned by post or
by hand to the New Issues Department, IRG plc, PO Box 166, Bourne House, 34
Beckenham Road, Beckenham, Kent BR3 4TH, or by hand only (during normal business
hours), to IRG plc, 23 Ironmonger Lane, London EC2, as soon as possible and, in
any event, so as to arrive no later than 3.00 pm on 22 June 2000. A reply-paid
envelope is enclosed for your convenience. No acknowledgement of receipt of
documents will be given by or on behalf of Catalina (UK). The instructions
printed on the Form(s) of Acceptance are deemed to form part of the terms of the
Offers.
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(e) Share certificate not readily available or lost
If your Ring Shares are in certificated form but, for any reason, the relevant
share certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, you should nevertheless complete, sign and lodge the
Form(s) of Acceptance as stated above so as to be received not later than 3.00
pm on 22 June 2000, together with any share certificate(s) and/or other
document(s) of title which you may have available, with the New Issues
Department, IRG plc, PO Box 166, Bourne House, 34 Beckenham Road, Beckenham,
Kent BR3 4TH, accompanied by a letter stating that the balance will follow or
that you have lost one or more of your share certificate(s) and/or other
document(s) of title. You should then arrange for the relevant share
certificate(s) and/or other documents of title to be forwarded as soon as
possible thereafter. In the case of loss, you should then write to Ring's
registrars, IRG plc, 34 Beckenham Road, Beckenham, Kent BR3 4TU, for a letter of
indemnity for the lost share certificate(s) and/or other documents of title,
which, when completed in accordance with the instructions given, should be
returned by post or hand to IRG plc, as described in paragraph (d) above.
(f) Ring Ordinary Shares in uncertificated form (that is, in CREST)
If your Ring Ordinary Shares are in uncertificated form, you should insert in
Box 6 of the white Form of Acceptance the participant ID and member account ID
under which such shares are held by you in CREST and otherwise complete and
return the white Form of Acceptance as described above. In addition, you should
take (or procure to be taken) the action set out below to transfer the Ring
Ordinary Shares in respect of which you wish to accept the Ordinary Offer to an
escrow balance (that is, a TTE instruction) specifying IRG plc (in its capacity
as a CREST participant under its participant ID referred to below) as the escrow
agent, as soon as possible and, in any event, so that the transfer to escrow
settles not later than 3.00 pm on 22 June 2000.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action. Your CREST sponsor will be able to confirm details of
your participant ID and the member account ID under which your Ring Ordinary
Shares are held. In addition, only your CREST sponsor will be able to send the
TTE instruction to CRESTCo in relation to your Ring Ordinary Shares.
You should send (or, if you are a CREST sponsored member, procure that your
CREST sponsor sends) a TTE instruction to CRESTCo which must be properly
authenticated in accordance with CRESTCo's specifications and which must
contain, in addition to the other information that is required for a TTE
instruction to settle in CREST, the following details:
(i) the number of Ring Ordinary Shares to be transferred to an escrow balance;
(ii) your member account ID. This must be the same member account ID as the
member account ID that is inserted in Box 6 of the white Form of
Acceptance;
(iii) your participant ID. This must be the same participant ID as the
participant ID that is inserted in Box 6 of the white Form of Acceptance;
(iv) the participant ID of the escrow agent (namely IRG plc in its capacity as
a CREST Receiving Agent). This is RA10;
(v) the member account ID of the escrow agent. This is RING;
(vi) the Form of Acceptance reference number. This is the reference number that
appears pre-printed at the top of page 3 of the white Form of Acceptance.
This reference number should be inserted in the first eight characters of
the shared note field on the TTE instruction. Such insertion will enable
IRG plc to match the transfer to Escrow to your Form of Acceptance. You
should keep a separate record of this reference number for future
reference;
(vii) the intended settlement date. This should be as soon as possible and in
any event not later than 3.00 pm on 22 June 2000;
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(viii) the corporate action number for the Ordinary Offer allocated by CRESTCo
which can be found by viewing the relevant corporate action details in
CREST;
(ix) the corporate action ISIN which is GB0003826459; and
(x) an input with standard delivery instruction priority of 80.
After settlement of the TTE instruction, you will not be able to access the Ring
Ordinary Shares concerned in CREST for any transaction or charging purposes. If
the Ordinary Offer becomes or is declared unconditional in all respects, the
escrow agent will transfer the Ring Ordinary Shares concerned to itself in
accordance with paragraph 4 of Part C of Appendix I of this document.
You are recommended to refer to the CREST Manual published by CRESTCo for
further information on the CREST procedures outlined above. For ease of
processing, you are requested, whenever possible, to ensure that a white Form of
Acceptance relates to only one transfer to escrow.
If no Form of Acceptance reference number, or an incorrect Form of Acceptance
reference number is included on the TTE instruction, Catalina (UK) may treat any
number of Ring Ordinary Shares transferred to an escrow balance in favour of the
escrow agent specified above from the participant ID and member account ID
identified in the TTE instruction as relating to any Form of Acceptance which
relates to the same member account ID and participant ID (up to the amount of
Ring Ordinary Shares inserted or deemed to be inserted on the Form of Acceptance
concerned).
You should note that CRESTCo does not make available special procedures in CREST
for any particular corporate action. Normal system timings and limitations will
therefore apply in connection with a TTE instruction and its settlement. You
should therefore ensure that all necessary action is taken by you (or by your
CREST sponsor) to enable a TTE instruction relating to your Ring Ordinary Shares
to settle prior to 3.00 pm on the First Closing Date. In this connection, you
are referred in particular to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
Catalina (UK) will make an appropriate announcement if any of the details
contained in this paragraph alter for any reason.
(g) Deposits of Ring Ordinary Shares into, and withdrawals of Ring Ordinary
Shares from, CREST
Normal CREST procedures (including timings) apply in relation to any Ring
Ordinary Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Ordinary Offer (whether any such conversion arises as a result of
a transfer of Ring Ordinary Shares or otherwise). Holders of Ring Ordinary
Shares who are proposing so to convert any such shares are recommended to ensure
that the conversion procedures are implemented in sufficient time to enable the
person holding or acquiring the shares as a result of the conversion to take all
necessary steps in connection with an acceptance of the Ordinary Offer (in
particular, as regards delivery of share certificate(s) or other documents of
title or transfers to an escrow balance as described above) prior to 3.00 pm on
the First Closing Date.
(h) Validity of acceptances
Subject to the provisions of the City Code and without prejudice to Parts B and
C of Appendix I of this document, Catalina (UK) reserves the right to treat as
valid in whole or part any acceptance of the Offers which is not entirely in
order or which is not accompanied by the relevant TTE instruction or (as
applicable) the relevant share certificate(s) and/or other documents(s) of
title. In that event, the consideration payable under such acceptances will not
be despatched until after the relevant TTE instruction has settled or (as
applicable) the relevant share certificate(s) and/or other document(s) of title
or indemnities satisfactory to Catalina (UK) have been received.
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If you are in any doubt as to the procedure for acceptance, please contact IRG
plc by telephone on 0208 639 2141 or at the address in paragraph (d) above.
Please note that IRG plc will be unable to advise you whether or not to accept
the Offers. You are reminded that, if you are a CREST sponsored member, you
should contact your CREST sponsor in regard to the Ordinary Offer before taking
any action.
13. Settlement
Subject to the Offers becoming or being declared unconditional in all respects,
settlement of the consideration to which any Ring Shareholder is entitled under
the Offers will be effected (i) in the case of acceptances received, complete in
all respects, by the date on which the relevant Offer becomes or is declared
unconditional in all respects, within 14 days of such date, or (ii) in the case
of acceptances received, complete in all respects, after the date on which the
relevant Offer becomes or is declared unconditional in all respects, but while
the relevant Offer remains open for acceptance, within 14 days of such receipt,
in the following manner:
(a) Ring Shares in uncertificated form (that is, in CREST)
Where an acceptance relates to Ring Shares in uncertificated form, settlement of
the consideration to which the accepting Ring Shareholder is entitled will be
paid by means of CREST by Catalina (UK) procuring the creation of an assured
payment obligation in favour of the accepting Ring Shareholder's payment bank in
respect of the consideration due, in accordance with the CREST assured payment
arrangements.
Catalina (UK) reserves the right to settle all or any part of the consideration,
for all or any accepting Ring Shareholder(s) in the manner referred to in
sub-paragraph (b) below if, for any reason, it wishes to do so.
(b) Ring Shares in certificated form
Where an acceptance relates to Ring Shares in certificated form, settlement of
the consideration due will be despatched by post (or by such other method as the
Panel may approve). All such cash payments will be made in pounds sterling by
cheque drawn on a branch of a UK clearing bank.
(c) General
If the Offers do not become or are not declared unconditional in all respects
(i) the relevant share certificate(s) and/or other document(s) of title will be
returned by post (or such other method as may be approved by the Panel), within
14 days of the Offers lapsing, to the person or agent whose name and address
(outside the US, Canada, Australia and Japan) is set out in Box 4 of the
relevant Form of Acceptance or, if none is set out, to the first named holder at
his registered address (outside the US, Canada, Australia and Japan) and (ii)
IRG plc will, immediately after the lapsing of the Offers (or within such longer
period, not exceeding 14 days after the lapsing of the Offers, as the Panel may
approve), give TFE instructions to CRESTCo to transfer all Ring Shares held in
escrow balances and in relation to which it is the escrow agent for the purposes
of the Offers to the original available balances of the Ring Shareholders
concerned.
14. Further information
Your attention is drawn to the further information contained in the Appendices
which form part of this document and the accompanying Form(s) of Acceptance
which contain further information.
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15. Action to be taken
To accept the Offers, the relevant Form(s) of Acceptance must be completed and
returned, whether or not your Ring Shares are in CREST, by post or by hand
(during normal business hours), to the New Issues Department, IRG plc, PO Box
166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH, or by hand only
(during normal business hours), to IRG plc, 23 Ironmonger Lane, London EC2, as
soon as possible and, in any event, so as to be received no later than 3.00 pm
on 22 June 2000.
Yours very truly
for and on behalf of
N M Rothschild & Sons Limited
David M Forbes
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APPENDIX I
CONDITIONS AND FURTHER TERMS OF THE OFFERS
PART A: CONDITIONS OF THE OFFERS
1. Conditions of the Ordinary Offer
The Ordinary Offer is subject to the following conditions:
(i) valid acceptances being received (and not, where permitted, withdrawn) by
3.00 pm on the First Closing Date (or such later time(s) and/or date(s) as
Catalina (UK) may, subject to the rules of the City Code, decide) in
respect of not less than 90 per cent. (or such lesser percentage as
Catalina (UK) may decide) of the Ring Ordinary Shares to which the
Ordinary Offer relates, provided that this condition shall not be
satisfied unless Catalina (UK) and/or any of its wholly-owned subsidiaries
shall have acquired or agreed to acquire (whether pursuant to the Ordinary
Offer or otherwise) Ring Ordinary Shares carrying more than 50 per cent.
of the voting rights then normally exercisable at general meetings of Ring
(on such basis as may be required by the Panel, including for this purpose
(to the extent, if any, required by the Panel) any such voting rights
attributable to any Ring Ordinary Shares that are unconditionally allotted
or issued before the Ordinary Offer becomes or is declared unconditional
as to acceptances, whether pursuant to the exercise of conversion or
subscription rights or otherwise); for this purpose: (a) the expression
"Ring Ordinary Shares to which the Ordinary Offer relates" shall be
construed in accordance with sections 428 to 430F of the Companies Act
1985; and (b) shares which have been unconditionally allotted shall be
deemed to carry the voting rights which they will carry upon their issue;
(ii) there being no provision of any arrangement, agreement, licence, permit,
lease or other instrument whatsoever to which any member of the wider Ring
Group is a party or by or to which any such member or any of its assets is
or may be bound or entitled or is or may be subject (each of the foregoing
being a "Relevant Instrument"), which would, or might reasonably be
expected to, as a consequence of the making or implementation of the
Offers, the Acquisition or any acquisition or proposed acquisition by
Catalina (UK) of any Ring Shares or as a result of a change in the control
or management of Ring or any member of the wider Ring Group, or otherwise,
result in:
(a) any moneys borrowed by, or any other indebtedness of, any such
member becoming repayable or capable of being declared repayable
immediately, or earlier than the repayment date stated in such
Relevant Instrument, or the ability of any such member to incur any
indebtedness being withdrawn or inhibited;
(b) any such Relevant Instrument, or any interest or business of any
such member (or any arrangement relating to the same), being
terminated or modified or adversely affected, or any action being
taken, or any onerous obligation arising, under any such Relevant
Instrument;
(c) the business of any such member with, or the interests of any such
member in, any other person (or any arrangements relating to such
business or interests) being terminated or modified or adversely
affected;
(d) any such member ceasing to be able, or being restricted in being
able, to carry on business under any name under which it currently
carries on business;
(e) any asset or interest of, or any asset the use or operation of which
is enjoyed by, any such member, being or falling to be disposed of
or charged, or ceasing to be available to any such member, or any
right arising under which any such asset or interest will or could
be required to be disposed of or charged, or will or could cease to
be so available;
(f) the creation of any mortgage, charge or other security interest over
the whole or any part of the business, property or assets of any
such member, or the same (whenever arising or having arisen)
becoming enforceable;
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(g) without limiting any of the foregoing, any such member or any member
of the wider Catalina Group being required to acquire, or to offer
to acquire, any shares or other securities (or the equivalent) in
any member of the wider Ring Group or the wider Catalina Group or
any asset owned by any other person or to dispose of, or to offer to
dispose of, any shares or other securities (or the equivalent) in,
or any asset owned by, any member of the wider Catalina Group or the
wider Ring Group; or
(h) the creation of material liabilities, whether actual or contingent,
by any such member or there being prejudiced or adversely affected
the respective value or financial or trading position of any member
of the wider Ring Group;
(iii) no government or governmental, quasi-governmental, supranational,
statutory, regulatory or investigative body or authority or trade agency,
or professional association or any court or any institution or any other
person or body whatsoever in any jurisdiction (each of the foregoing being
a "Relevant Body") having instituted, implemented or threatened (or
having decided upon the same) any action, proceeding, suit, investigation,
reference or enquiry, or enacted, made or proposed any statute,
regulation, order or decision or required any action to be taken or
information to be provided or otherwise having taken or refrained from
having taken any other step, and there not continuing to be in force any
statute, regulation, order or decision thereof, which in any such case
would or might reasonably be expected to:
(a) make the Offers or either of them, the Acquisition or any
acquisition or proposed acquisition of any Ring Shares by Catalina
(UK) (or any other member of the wider Catalina Group), or the
acquisition by Catalina (UK) (or any other member of the wider
Catalina Group) of control or management of Ring or any member of
the wider Ring Group, void, voidable, unenforceable or illegal under
the laws of any jurisdiction, or otherwise, directly or indirectly,
restrict, restrain, prohibit, challenge, delay or interfere with the
implementation of, or impose additional or amended conditions or
obligations with respect to, any of the foregoing;
(b) require, prevent, delay, restrict or alter the proposed terms for
the divestiture by any member of the wider Ring Group or any member
of the wider Catalina Group of all or any part of their respective
businesses, assets or property, or impose any limitation on the
ability of any of them to conduct or to own their respective
businesses or any part thereof, or to own, use or operate any of the
respective assets or properties owned by, or the use or operation of
which is enjoyed by, any of them or any part thereof, or result in
any of them ceasing to be able to carry on business, or being
restricted in its carrying on business, under any name under which
it currently does so which, in each case, would have a material
adverse effect on the wider Ring Group and the wider Catalina Group
taken as a whole;
(c) impose any material limitation on the ability of any member of the
wider Catalina Group, or any member of the wider Ring Group,
directly or indirectly, to acquire or hold or exercise effectively
any rights of ownership of shares or other securities (or the
equivalent) in Ring or any member of the wider Ring Group or any
member of the wider Catalina Group, or to exercise management or
voting control over any member of the wider Ring Group or any member
of the wider Catalina Group;
(d) without limiting any of the foregoing, require any member of the
wider Catalina Group or the wider Ring Group to acquire, or to offer
to acquire, any shares or other securities (or the equivalent) in
any member of the wider Catalina Group or the wider Ring Group or
any asset owned by any other person, or to dispose of, or to offer
to dispose of, any shares or other securities (or the equivalent)
in, or any asset owned by, any member of the wider Catalina Group or
the wider Ring Group;
(e) impose any material limitation on the ability of any member of the
wider Catalina Group or the wider Ring Group to integrate its
business, or any part of it, with any business of any other member
of the wider Catalina Group or the wider Ring Group; or
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(f) otherwise materially and adversely affect the business, profits or
prospects of any member of the wider Ring Group or of any member of
the wider Catalina Group;
and all applicable waiting or other time periods during which any Relevant
Body could take, institute, implement or threaten any such action,
proceeding, suit, investigation, reference or enquiry having expired,
lapsed or been terminated;
(iv) all authorisations, orders, grants, recognitions, confirmations,
determinations, consents, clearances, licences, permissions, ministerial
allowances, deemed allowances and approvals necessary or appropriate for
or in respect of the Offers or either of them, the Acquisition or any
acquisition or proposed acquisition of any Ring Shares by Catalina (UK)
(or any other member of the wider Catalina Group), or the acquisition by
Catalina (UK) (or any other member of the wider Catalina Group) of control
or management of Ring or any member of the wider Ring Group (each of the
foregoing being a "Relevant Authorisation"), having been obtained, in
terms and form reasonably satisfactory to Catalina (UK), from all
appropriate Relevant Bodies and from all appropriate persons or bodies
with whom any member of the wider Catalina Group or any member of the
wider Ring Group has entered into contractual arrangements, and all such
Relevant Authorisations remaining in full force and effect, and there
being no intimation or notice of any intention to revoke, modify,
restrict, suspend or not to renew any of the same, and all necessary
filings having been made and all appropriate waiting or other time periods
under any applicable legislation or regulations of any jurisdiction having
expired, lapsed or been terminated and all statutory or regulatory
obligations in any jurisdiction which are material in the context of the
Offers having been complied with, in each case in connection with the
Offers or either of them, the Acquisition or any acquisition or proposed
acquisition of any Ring Shares by Catalina (UK) (or any other member of
the wider Catalina Group), or the acquisition by Catalina (UK) (or any
other member of the wider Catalina Group) of control or management of Ring
or any member of the wider Ring Group;
(v) except as disclosed in Ring's annual report and accounts for the year
ended 30 June 1999 or its interim statement for the six months ended 31
December 1999 (together the "Last Ring Accounts") or as publicly
announced by release of an announcement to the Company Announcements
Office of the London Stock Exchange ("publicly announced") prior to 31
May 2000, or as disclosed in this document, no member of the wider Ring
Group having:
(a) made any alteration to its Memorandum or Articles of Association or
other constitutional documents;
(b) other than to Ring or a wholly owned subsidiary of Ring, and save
for Ring Ordinary Shares issued pursuant to the exercise of options
granted under the Ring Share Option Schemes and publicly announced
before 31 May 2000, or on the conversion of Ring Convertible
Preference Shares in issue prior to 31 May 2000, issued or
authorised or agreed or proposed the issue of additional shares of
any class, or securities convertible into or exchangeable for, or
rights, warrants or options to subscribe for or acquire, any such
shares or securities or any loan capital or redeemed, purchased or
reduced any part of its share capital;
(c) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any dividend, bonus or other distribution,
whether in cash or otherwise (other than to Ring or a wholly-owned
subsidiary of Ring);
(d) authorised or proposed, or announced an intention to propose, or
effected, any merger or demerger or acquisition or disposal of, or
any charge or encumbrance or other security interest in respect of,
any assets or shares or interest in any undertaking or any change in
its share or loan capital;
(e) (other than to Ring or a wholly-owned subsidiary of Ring) issued,
authorised or proposed the issue of any debentures or securities or,
save in the ordinary course of
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business, incurred or increased any indebtedness or contingent
liability which is, in any such case, material in the context of the
wider Ring Group as a whole;
(f) entered into or varied, or authorised, proposed or announced its
intention to enter into or vary, any contract, transaction or
commitment (whether in respect of capital expenditure or any other
matter) which is of a long term, onerous or unusual nature or
magnitude or which is, will be or could be restrictive on the
business of any member of the wider Catalina Group or the wider Ring
Group or which involves or will or could involve an obligation of
such a nature or magnitude and which is, in any such case, material
in the context of the wider Ring Group as a whole;
(g) entered into, implemented or effected, or authorised, proposed or
announced its intention to enter into, authorise, propose, implement
or effect, any contract, transaction, reconstruction, amalgamation
or other scheme or arrangement, otherwise than in the ordinary
course of business and which is, in any such case, material in the
context of the wider Ring Group as a whole;
(h) entered into or varied the terms of, or made any offer (remaining
capable of acceptance) to enter into or vary the terms of, any
contract, agreement or arrangement with any of the directors of any
member of the wider Ring Group;
(i) waived or compromised any claim which is material in the context of
the relevant member of the wider Ring Group;
(j) taken or proposed any action or had any proceedings instituted,
threatened or proposed against it for its winding-up (whether
voluntarily or not), dissolution or reorganisation or for the
appointment of a receiver, administrator, administrative receiver,
trustee or similar or analogous officer of all or any of its assets
or revenue or any similar or analogous proceedings in any
jurisdiction and which is material in the context of the relevant
member of the wider Ring Group; or
(k) entered into any contract, commitment, agreement or arrangement with
respect to any of the transactions or events referred to in this
condition, or passed any resolution, made any proposal or announced
any intention with respect to any of the same;
(vi) except as disclosed in the Last Ring Accounts or as publicly announced
prior to 31 May 2000 or as disclosed in this document, since 30 June 1999:
(a) no adverse change in the business or financial or trading position
or profits or prospects of any member of the wider Ring Group which
in any case is material in the context of the wider Ring Group taken
as a whole having occurred;
(b) no litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the wider Ring Group is a party
(whether as plaintiff, defendant or otherwise) and no investigation
or enquiry by any Relevant Body having been instituted, announced or
threatened or remaining outstanding against or in respect of any
member of the wider Ring Group which is material in the context of
the wider Ring Group taken as a whole; and
(c) no contingent liability having arisen or become apparent to Catalina
(UK) which might reasonably be expected to materially and adversely
affect the wider Ring Group;
(vii) Catalina (UK) not having discovered that:
(a) any financial or business or other information relating to the wider
Ring Group as contained in the information publicly announced or
publicly disclosed at any time by or on behalf of any member of the
wider Ring Group is misleading or contains a misrepresentation of
fact or omits to state a fact necessary to make such information not
misleading to an extent which is material; and
(b) any partnership or company or other undertaking in which any member
of the wider Ring Group has a significant economic interest and
which is not a subsidiary
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undertaking of Ring is subject to any liability, contingent or
otherwise, which is not fairly disclosed in the Last Ring Accounts
and which is material in the context of the relevant member of the
wider Ring Group.
Catalina (UK) reserves the right to waive, in whole or in part, all or any of
conditions (ii) to (vii) inclusive. If Catalina (UK) is required by the Panel to
make an offer or offers for Ring Shares under the provisions of Rule 9 of the
City Code, Catalina (UK) may make such alterations to any of the above
conditions as are necessary to comply with the provisions of that Rule.
Conditions (ii) to (vii) inclusive must be fulfilled, be determined by Catalina
(UK) to be or remain satisfied, or be waived, by midnight on the 21st day after
the date on which condition (i) is fulfilled or the First Closing Date whichever
is the later (or in each case such later date as the Panel may agree), failing
which the Ordinary Offer will lapse, provided that Catalina (UK) shall be under
no obligation to waive or treat as fulfilled any of conditions (ii) to (vii)
inclusive by a date earlier than the date specified above for the fulfilment
thereof notwithstanding that the other conditions of the Ordinary Offer may at
such earlier date have been fulfilled or waived and that there are at such
earlier date no circumstances indicating that any of such conditions may not be
capable of fulfilment.
The Offers will lapse if the acquisition of Ring is referred to the Competition
Commission before the later of 3.00 pm on the First Closing Date and the date
when the Offers become or are declared unconditional as to acceptances. In such
circumstances, the Offers will cease to be capable of further acceptance and
persons accepting the Offers and Catalina (UK) shall thereupon cease to be bound
by acceptances delivered on or before the date on which the Offers so lapse.
2. Condition of the Convertible Preference Offer
The Convertible Preference Offer is conditional on the Ordinary Offer becoming
or being declared unconditional in all respects.
The Convertible Preference Offer will lapse if the Ordinary Offer lapses.
PART B: FURTHER TERMS OF THE OFFERS
The following further terms apply, unless the context requires otherwise or the
contrary is expressed, to each of the Offers, which are separate Offers. Except
where the context requires otherwise, any reference in Parts B and C of this
Appendix I and in the Form(s) of Acceptance:
(i) to "the Offer" or "Offers" shall mean, separately, the Ordinary Offer
and the Convertible Preference Offer and any revision, variation, renewal
or reintroduction of, or extension to, either or both of them;
(i) to the Offer "becoming unconditional" shall include the Offer being
declared unconditional;
(iii) to "the Offer becoming or being declared unconditional" shall be
construed as the Ordinary Offer becoming or being declared unconditional
as to acceptances, whether or not any other condition thereof remains to
be fulfilled, and references to the Ordinary Offer having become or not
having become unconditional shall be construed accordingly;
(iv) to the "acceptance condition" shall mean the condition as to acceptances
set out in paragraph 1(i) of Part A of this Appendix I ; and
(v) the "Offer Document" shall mean this document and any other document
containing the Offers.
1. Acceptance period
(i) The Offers will initially remain open for acceptance until 3.00 pm on the
First Closing Date but may be extended, subject to paragraph 1(ii) below.
Although no revision is envisaged, if the Offer is revised it will remain
open for acceptance for a period of at least 14 days (or such lesser
period as may be permitted by the Panel) from the date on which the
revised
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offer document is posted to Ring Shareholders. Except with the consent of
the Panel, no such revised offer document may be posted after 17 July
2000, or, if later, the date falling 14 days before the last date on which
the relevant Offer can become unconditional.
(ii) The Offers, whether revised or not, shall not (except with the consent of
the Panel) be capable of becoming unconditional after midnight on 31 July
2000 (or any other time and/ or date beyond which Catalina (UK) has stated
that the Offer will not be extended and in respect of which it has not,
where permitted, withdrawn that statement), nor of being kept open for
acceptance thereafter, unless it has then or has previously become
unconditional. However, Catalina (UK) reserves the right, with the
permission of the Panel, to extend the Offer to a later time(s) and/or
date(s).
Except with the consent of the Panel, for the purpose of determining
whether the acceptance condition has been satisfied, Catalina (UK) may
only take into account acceptances received or purchases of Ring Ordinary
Shares made, by 1.00 pm on 31 July 2000 (or any other time and/or date
beyond which Catalina (UK) has stated that the Ordinary Offer will not be
extended and in respect of which it has not, where permitted, withdrawn
that statement) or, if the Offer is so extended, any such later time(s)
and/or date(s) as Catalina (UK) may decide and the Panel may agree. If the
latest time at which the Offer may become unconditional is extended beyond
midnight on 31 July 2000, acceptances received and purchases of Ring
Ordinary Shares made in respect of which the relevant documents are
received by IRG plc after 1.00 pm on the relevant date may (except where
the City Code otherwise permits) only be taken into account with the
agreement of the Panel.
(iii) If a competitive situation (as determined by the Panel) arises after a
"no extension" and/or "no increase" statement (including the "no
increase" statement already made in relation to the Offers) has been made
by Catalina (UK) in respect of the Offer, Catalina (UK) may withdraw such
statement and be free to extend and/or increase the Offer, if it
specifically reserved the right to do so at the time at which such
statement was made (which right Catalina (UK) hereby reserves in relation
to the "no increase" statement already made in relation to the Offers or
otherwise with the consent of the Panel), and provided that an
announcement to such effect is made as soon as possible and in any event
within four business days after the announcement of the competing offer or
other competitive situation and, at the earliest practicable opportunity
thereafter, Ring Shareholders are informed of such withdrawal in writing
or, in the case of Ring Shareholders with registered addresses outside the
United Kingdom, or whom Catalina (UK) or Rothschild know to be a trustee,
nominee or custodian holding Ring Shares for such persons, by announcement
in the United Kingdom and provided always that Ring Shareholders who
accepted the Offer after the date of the "no extension" or "no
increase" statement are given a right of withdrawal in accordance with
paragraph 3(iii) below.
(iv) If the Offer becomes unconditional, it will remain open for acceptance for
not less than 14 days from the date on which it would otherwise have
expired. If the Offer has become unconditional and it is stated by or on
behalf of Catalina (UK) that the Offer will remain open until further
notice, then not less than 14 days' notice in writing will be given prior
to the closing of the Offer to those Ring Shareholders who have not
accepted the Offer.
(v) Unless otherwise determined by the Panel, for the purpose of determining
at any particular time whether the acceptance condition has been
satisfied, Catalina (UK) shall be entitled to take account only of those
Ring Shares carrying voting rights which have been unconditionally
allotted or issued before that time, whether as a result of the exercise
of conversion or subscription rights or otherwise, and of the allotment or
issue of which Ring has notified IRG plc on behalf of Catalina (UK) by
written notice, containing all the relevant details, at the address
specified in paragraph 3(i) below, received before that time. Notification
by telex or facsimile transmission copies or other electronic transmission
will not be sufficient.
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2. Announcements
(i) By 8.30 am on the business day ("the relevant day") next following the
day on which the Offer is due to expire or becomes unconditional or is
revised or extended, as the case may be, or such later time(s) or date(s)
as the Panel may agree, Catalina (UK) will make an appropriate
announcement and simultaneously inform the London Stock Exchange of the
status of the Offer. Such announcement will also state (unless otherwise
permitted by the Panel) the total number of Ring Shares and rights over
Ring Shares (as nearly as practicable): (a) for which acceptances of the
Offer have been received; (b) acquired or agreed to be acquired by or on
behalf of Catalina (UK) or any person(s) deemed to be acting in concert
with Catalina (UK) during the course of the Offer Period; (c) held by or
on behalf of Catalina (UK), or any person(s) deemed to be acting in
concert with Catalina (UK) prior to the Offer Period; and (d) for which
acceptances of the Offer have been received from any person(s) deemed to
be acting in concert with Catalina (UK), and such announcement will
specify the percentages of the relevant class of share capital of Ring
represented by each of these figures. Any decision to extend the time
and/or date by which the acceptance condition has to be fulfilled or to
which the Offer is extended may be made at any time up to, and will be
announced not later than, 8.30 am on the relevant day (or such later
time(s) and/or date(s) as the Panel may agree) and the announcement will
state the next expiry time and/or date, unless the Offer is then
unconditional (in which case a statement may then be made that the Offer
will remain open until further notice). In calculating, for the above
purposes, the numbers of Ring Shares represented by acceptances and/or
purchases, acceptances and purchases may be excluded or included, for
announcement purposes, which are not complete in all respects or which are
subject to verification, but provided that acceptances or purchases will
not be included in the totals in an announcement under this paragraph 2(i)
(unless the Panel otherwise agrees), unless they could be counted, in
accordance with paragraph 5(i) or paragraph 5(ii) respectively below and
the provisions of the City Code, towards satisfying the acceptance
condition.
(ii) In this Appendix I, references to the making of an announcement or the
giving of notice in each case by or on behalf of Catalina (UK) include the
release of an announcement by public relations consultants of Catalina
(UK) or by Rothschild to the press and the delivery by hand or telephone,
telex, facsimile or other electronic transmission of an announcement to
the London Stock Exchange. An announcement made otherwise than to the
London Stock Exchange will be notified simultaneously to the London Stock
Exchange.
3. Rights of withdrawal
(i) If Catalina (UK), having announced the Offer to be unconditional, fails to
comply by 3.30 pm on the relevant day (as defined in paragraph 2(i) above)
(or such later time(s) and/or date(s) as the Panel may agree) with any of
the other requirements specified in paragraph 2(i) above, an accepting
Ring Shareholder may (unless the Panel agrees otherwise) immediately
thereafter withdraw his acceptance of the Offer by written notice signed
by such Ring Shareholder (or by his agent duly appointed in writing and
evidence of whose appointment, reasonably satisfactory to Catalina (UK),
is produced with the notice) received by hand or by post by the New Issues
Department, IRG plc, PO Box 166, Bourne House, 34 Beckenham Road,
Beckenham, Kent BR3 4TH or by hand only by IRG plc, 23 Ironmonger Lane,
London EC2 on behalf of Catalina (UK). Subject to paragraph 1(ii) above,
this right of withdrawal may be terminated not less than 8 days after the
relevant day by Catalina (UK) confirming, if that be the case, that the
Offer is still unconditional, and complying with the other requirements
specified in paragraph 2(i) above. If any such confirmation is given, the
first period of 14 days referred to in paragraph 1(iv) above will run from
the date of such confirmation and compliance.
(ii) If by 3.00 pm on 13 July 2000 (or such later time(s) and/or date(s) as the
Panel may agree) the Offer has not become unconditional, an accepting Ring
Shareholder may withdraw his acceptance of the Offer at any time
thereafter in the manner referred to in paragraph 3(i) above, before the
earlier of: (a) the time at which the Offer becomes unconditional; and
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<PAGE>
(b) the final time for lodgement of acceptances of the Offer which can be
taken into account in accordance with paragraph 1(ii) above.
(iii) If a "no extension" statement and/or "no increase" statement has been
withdrawn in accordance with paragraph 1(iii) above, any Ring Shareholder
who accepts the Offer after the date of such statement may withdraw his
acceptance thereafter, in the manner referred to in paragraph 3(i) above,
not later than the eighth day after the date on which written notice of
such withdrawal is posted to the relevant Ring Shareholder.
(iv) Except as provided by this paragraph 3 and paragraph 4 below, acceptances
of, and any elections under, the Offer shall be irrevocable.
(v) In this paragraph 3, "written notice" (including any letter of
appointment, direction or authority) means notice in writing bearing the
original signature(s) of the relevant accepting Ring Shareholder(s) or
his/their agent(s) duly appointed in writing (evidence of whose
appointment, reasonably satisfactory to Catalina (UK), is produced with
the notice). Telex or facsimile transmissions or other electronic
transmission or copies will not be sufficient. No notice which is
postmarked in, or otherwise appears to Catalina (UK) or its agents to have
been sent from, the USA, Canada, Australia or Japan or a US Person or a
resident of Canada, Australia or Japan will be treated as valid.
4. Revised Offer
(i) Although no such revision is envisaged, if the Offer (in its original or
any previously revised form(s)) is revised (either in its terms or
conditions or in the value or form of the consideration offered or
otherwise), which, subject to paragraph 1 (iii) above, Catalina (UK)
reserves the right to do, and any such revision represents, on the date on
which such revision is announced (on such basis as Rothschild may consider
appropriate) an improvement (or no diminution) in the value of the Offer
as so revised compared with the consideration previously offered, or in
the overall value received and/or retained by a Ring Shareholder (under or
in consequence of the Offer or otherwise), the benefit of the revised
Offer will, subject as provided in paragraphs 4(iv), 4(v) and 7 below, be
made available to any Ring Shareholder who has validly accepted the Offer
in its original or any previously revised form(s) and who has not validly
withdrawn such acceptance (hereinafter called a "Previous Acceptor").
The acceptance, by or on behalf of a Previous Acceptor, of the Offer in
its original or any previously revised form(s) shall, subject as provided
in paragraphs 4(iv), 4(v) and 7 below, be deemed to be an acceptance of
the Offer as so revised and shall also constitute the separate appointment
of Catalina (UK) and/or Rothschild and/or any director of Catalina (UK) or
Rothschild as his attorney and/or agent to accept any such revised Offer
on behalf of such Previous Acceptor and, if such revised Offer includes
alternative forms of consideration, to make elections and/or accept
alternative forms of consideration on his behalf as such attorney and/or
agent in his absolute discretion thinks fit and to execute on behalf of
and in the name of such Previous Acceptor all such further documents (if
any) and to do all such things (if any) as may be required to give effect
to any such acceptance and/or election. In making any such election and/or
acceptance, such attorney and/or agent shall take into account the nature
of any previous acceptance and/or any election made by the Previous
Acceptor and such other facts or matters as he may reasonably consider
relevant. For the avoidance of doubt, in this paragraph "the Offer"
shall, and shall be deemed to, mean and include the Offer and/or all or
any alternative form(s) of consideration to be given under or in
consequence of the Offer and any combination or choice of the Offer and/or
all or any alternative form(s) of consideration.
(ii) Subject as provided below in this paragraph 4, the powers of attorney and
authorities referred to in this paragraph 4 and any acceptance of a
revised Offer and/or any alternative or election(s) pursuant thereto shall
be irrevocable unless and until the Previous Acceptor becomes entitled to
withdraw his acceptance under paragraph 3 above and duly does so.
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<PAGE>
(iii) Each of Catalina (UK) and Rothschild reserves the right, subject to
paragraph 5 below, to treat an executed Form of Acceptance relating to the
Offer (in its original or any previously revised form(s)) which is
received, or dated, on or after the announcement or issue of the Offer in
any revised form as a valid acceptance of such revised Offer and/or, where
applicable, a valid election for, or acceptance of, any alternative form
or forms of consideration and such acceptance shall constitute an
authority in the terms of paragraph 4(i) above, mutatis mutandis on behalf
of the relevant Ring Shareholder.
(iv) The deemed acceptance referred to in paragraph 4(i) above shall not apply,
and the exercise of powers of attorney and authorities conferred by
paragraph 4(i) above shall be ineffective, to the extent that a Previous
Acceptor shall lodge with IRG plc, within 14 days of the posting of the
document containing the revised Offer and/or any alternative or revised or
other alternative, a Form of Acceptance (or other form issued for such
purpose by or on behalf of Catalina (UK)) in which he validly elects to
receive the consideration receivable by him under such revised Offer in
some other manner than set out in his original acceptance.
(v) The deemed acceptance referred to in paragraph 4(i) above shall not apply,
and the exercise of powers of attorney and authorities conferred by
paragraph 4(i) shall not be exercised, if, as a result thereof, the
Previous Acceptor would (on such basis as Rothschild may consider
appropriate) thereby receive and/or retain (as appropriate) under or in
consequence of the Offer and/or any alternative pursuant thereto as
revised or otherwise less in aggregate in consideration or overall value
than he would have received and/or retained (as appropriate) in aggregate
in consideration as a result of acceptance of the Offer and/or any
alternative pursuant thereto in the form in which it was previously
accepted and/or elected for by him or on his behalf (unless such Previous
Acceptor shall have previously agreed in writing to receive less in
aggregate consideration). The powers of attorney and authorities conferred
by paragraph 4(i) above shall not be exercised in respect of any election
available under any revised offer save in accordance with this paragraph
4.
5. Acceptances and purchases
Except as otherwise agreed with the Panel, and notwithstanding, but without
prejudice to, the right reserved by Catalina (UK) and Rothschild to treat a Form
of Acceptance as valid even though not entirely in order or not accompanied by
the relevant share certificate(s) and/or other document(s) of title, or not
accompanied by the relevant TTE instruction:
(i) an acceptance of the Ordinary Offer will only be counted towards
fulfilling the acceptance condition if the requirements of Note 4 and, if
applicable, Note 6 to Rule 10 of the City Code are satisfied in respect of
it ;
(ii) a purchase of Ring Shares by Catalina (UK) or its nominee (or, if Catalina
(UK) is required by the Panel to make an offer for Ring Shares under the
provisions of Rule 9 of the City Code, by a person acting in concert with
Catalina (UK) or its nominee(s)) will be counted towards fulfilling the
acceptance condition only if the requirements of Note 5 and, if
applicable, Note 6 to Rule 10 of the City Code are satisfied in respect of
it ; and
(iii) the Ordinary Offer will not become unconditional unless IRG plc has issued
a certificate to Catalina (UK) or Rothschild which states the number of
Ring Ordinary Shares in respect of which acceptances have been received
and the number of Ring Ordinary Shares otherwise acquired (whether before
or during the Offer Period), which in any such case comply with the
provisions of this paragraph 5. Copies of such certificate will be sent to
the Panel and to the financial advisers to Ring as soon as possible after
it is issued.
6. General
(i) The Offers will lapse if, in respect of the proposed acquisition of Ring
by Catalina (UK), there is a reference to the Competition Commission
before 3.00 pm on the First Closing
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<PAGE>
Date or the date on which the Ordinary Offer becomes or is declared
unconditional as to acceptances, whichever is the later.
(ii) Except with the consent of the Panel, the Offer will lapse unless all the
conditions to the Offer have been fulfilled or (if capable of waiver)
waived or, where appropriate, have been determined by Catalina (UK) in its
reasonable opinion to be or remain satisfied, in each case by midnight on
13 July 2000 or by midnight on the date which is 21 days after the date on
which the Offer becomes unconditional, whichever is the later, or such
later date(s) as Catalina (UK) may, with the consent of the Panel, decide.
If the Offers lapse for any reason, the Offers will cease to be capable of
further acceptance and Ring Shareholders and Catalina (UK) will thereupon
cease to be bound by any Form of Acceptance submitted before the time when
the Offers so lapse.
(iii) Except with the consent of the Panel, settlement of the consideration to
which any Ring Shareholder is entitled under the Offer will be implemented
in full in accordance with the terms of the Offer without regard to any
lien, right of set-off, counterclaim or other analogous right to which
Catalina (UK) may otherwise be, or claim to be, entitled as against such
Ring Shareholder and, subject as described below, will be effected within
14 days of the date on which the Offer becomes or is declared
unconditional in all respects or within 14 days after a receipt of a valid
and complete acceptance, whichever is the later. No consideration will be
sent to addresses in the USA, Canada, Australia or Japan and/or to a US
Person or a resident of Canada, Australia or Japan. Any cash amount which
may become due to a Ring Shareholder will be settled by way of cheques
drawn on a United Kingdom clearing bank and will be denominated in pounds
sterling.
(iv) Ring Shares will be acquired fully paid and free from all liens, equities,
charges, encumbrances, rights of pre-emption and other third party rights
or interests of any nature whatsoever and together with all rights now or
hereafter attaching thereto, including the right to receive and retain all
dividends and other distributions declared, made or paid on or after 31
May 2000.
(v) If a TTE instruction is settled which contains an incorrect Form of
Acceptance Reference Number, or no Form of Acceptance Reference Number,
the right is reserved for the Escrow Agent to apply the TTE instruction to
any Form of Acceptance on which the same member account ID and participant
ID is specified.
(vi) The instructions, authorities, terms and provisions contained in or deemed
to be incorporated in the Form(s) of Acceptance constitute part of the
terms of the Offer. Words and expressions defined in this document have
the same meanings when used in the Form(s) of Acceptance, unless the
context otherwise requires. The provisions of this Appendix I shall be
deemed to be incorporated in the Form(s) of Acceptance.
(vii) Without prejudice to any other provision of this Part B of this Appendix
I, each of Catalina (UK) and Rothschild reserves the right to treat
acceptances of the Offer and/or any elections pursuant thereto as valid if
not entirely in order or not accompanied by the relevant share
certificate(s) and/or other relevant document(s) of title or not
accompanied by the relevant TTE instruction or if received, by or on
behalf of it, at any place or places, or in any manner, determined by it,
otherwise than as specified in this document or in the Form(s) of
Acceptance.
(viii) All references in this document and in the Form of Acceptance to the
First Closing Date shall (except in Part A of this Appendix I, in the
definition of "Offer Period" and in paragraph 1(i) above and elsewhere
where the context otherwise requires), if the expiry date of the Offer is
extended, be deemed to refer to the expiry date of the Offer as so
extended.
(ix) Any omission, failure, or decision not, to despatch this document, the
Form(s) of Acceptance, any other document relating to the Offer and/or any
notice required to be despatched under the terms of the Offer to, or any
failure to receive the same by, any
26
<PAGE>
person to whom the Offer is made, or should be made, shall not invalidate
the Offer in any way or create any implication that the Offer has not been
made to any such person. The Offer extends to any such person and any Ring
Shareholder to whom this document, the Form(s) of Acceptance, and/or any
other such document may not be despatched or who may not receive the same
and such persons may collect copies of those documents, during normal
business hours, from IRG plc at either of the addresses set out in
paragraph 3(i) above.
(x) If the Offer does not become unconditional in all respects, the Form(s) of
Acceptance and any share certificate(s) and/or other document(s) of title
will (subject to paragraph 7 of this Part B) be returned by post (or such
other method as the Panel may approve) within 14 days of the Offer
lapsing, at the risk of the person entitled thereto, to the person or
agent whose name and address is set out in the relevant box of the Form(s)
of Acceptance or, if none is set out, to the first-named holder at his/her
registered address outside the USA, Canada, Australia or Japan. No such
document will be sent to an address in the USA, Canada, Australia or
Japan. IRG plc will, immediately after the lapsing of the Offer (or within
such longer period as the Panel may permit, not exceeding 14 days
following the lapsing of the Offer), give TFE instructions to CRESTCo to
transfer all Ring Shares held in escrow balances and in relation to which
it is the escrow agent for the purposes of the Offer to the original
available balances of the Ring Shareholders concerned.
(xi) All powers of attorney, appointments of agents and authorities on the
terms conferred by or referred to in this Appendix I or in the Form(s) of
Acceptance are given by way of security for the performance of the
obligations of the Ring Shareholder concerned and are irrevocable (in
respect of powers of attorney, in accordance with section 4 of the Powers
of Attorney Act 1971), except in the circumstances where the donor of such
power of attorney, appointment or authority is entitled to withdraw his
acceptance in accordance with paragraph 3 above and duly does so.
(xii) All communications, notices, certificates, documents of title and
remittances to be delivered by or sent to or from any Ring Shareholders
(or their designated agents) will be delivered by or sent to or from them
(or their designated agents) at their risk. No acknowledgement of receipt
of any Form(s) of Acceptance, transfer by means of CREST, communication,
notice, share certificate(s) and/or other document(s) of title will be
given by or on behalf of Catalina (UK).
(xiii) Each of Catalina (UK) and Rothschild reserves the right to notify any
matter (including the making of the Offer) to any or all Ring
Shareholder(s) with (a) registered address(es) outside the United Kingdom
or whom Catalina (UK) or Rothschild knows to be a nominee, trustee or
custodian holding Ring Shares for such persons who are citizens, residents
or nationals of jurisdictions outside the United Kingdom by announcement
or by paid advertisement in a daily newspaper published and circulated in
the United Kingdom, including an evening paper circulated in London, in
which case such notice shall be deemed to have been sufficiently given
notwithstanding any failure by any such shareholders to receive or see
such notice. All references in this document to notice or informing in
writing by or on behalf of Catalina (UK) shall be construed accordingly.
(xiv) The Offer and all acceptances and/or elections in respect thereof, the
Form(s) of Acceptance, this document and all contracts made pursuant to
the Offer, and actions taken or made or deemed to be taken or made under
any of the foregoing, shall be governed by and construed in accordance
with English law. Execution by or on behalf of any Ring Shareholder of (a)
Form(s) of Acceptance constitutes his submission, in relation to all
matters arising out of the Offer and/or the Form(s) of Acceptance, to the
jurisdiction of the Courts of England and his agreement that nothing shall
limit the right of Catalina (UK) or Rothschild to bring any suit, action
or proceeding arising out of or in connection with the Offer and/or the
Form(s) of Acceptance in any other manner permitted by law or any court of
competent jurisdiction. All references in this document to any statute or
statutory
27
<PAGE>
provision shall include any statute or statutory provision which amends,
consolidates or replaces the same (whether before or after the date
hereof).
(xv) The Offer is made on 1 June 2000 and is capable of acceptance thereafter.
The Offer is being made by means of this document and by means of an
advertisement to be inserted in the "Financial Times" (United Kingdom
edition). Copies of this document, the Form(s) of Acceptance and any
related documents are available, during normal business hours, from IRG
plc at either of the addresses set out in paragraph 3(i) of this Part B.
(xvi) If sufficient acceptances are received and/or sufficient Ring Shares are
otherwise acquired, such that Catalina (UK) is deemed (for the purposes of
Section 429 of the Act) to have acquired by way of acceptances 90 per
cent. of the Ring Ordinary Shares and/or 90 per cent. of the Ring
Convertible Preference Shares to which the Ordinary Offer and the
Convertible Preference Offer respectively relate, Catalina (UK) intends to
apply the provisions of sections 428 to 430F of the Act separately in
respect of each of the Offers to acquire compulsorily any outstanding Ring
Ordinary Shares or Ring Convertible Preference Shares (as the case may be)
for the consideration under the respective Offers or, under certain
circumstances, substantially equivalent consideration.
(xvii) If the Offers become or are declared unconditional in all respects,
Catalina (UK) intends (whether or not it is able to apply the compulsory
acquisition procedures referred to above in relation to that class of
shares) to seek to procure the making of an application by Ring to the
London Stock Exchange for the cancellation of the listing of Ring Ordinary
Shares. (xviii)In relation to any acceptance of the Offer in respect of a
holding of Ring Shares which are in uncertificated form, Catalina (UK)
reserves the right to make such alterations, additions or modifications to
the terms of the Offer and/or any alternative pursuant thereto as may be
necessary or desirable to give effect to any purported acceptance of the
Offer, whether in order to comply or be consistent with the facilities or
requirements of CREST or otherwise, provided such alterations, additions
or modifications are consistent with the requirements of the City Code or
are otherwise made with the consent of the Panel. (xix) For the avoidance
of doubt, the Convertible Preference Offer will lapse if the Ordinary
Offer lapses.
(xx) All references to times are to London times.
7. Overseas shareholders
(i) The making of the Offer to certain persons not resident in the United
Kingdom, or who are citizens, residents or nationals of jurisdictions
outside the United Kingdom or who are nominees of, or custodians or
trustees for, citizens, residents or nationals of other countries
("overseas shareholders"), may be prohibited or affected by the laws of
the relevant overseas jurisdictions. Such overseas shareholders should
inform themselves about and observe any applicable legal requirements. It
is the responsibility of any overseas shareholder wishing to accept the
Offer to satisfy himself as to the full observance of the laws of the
relevant jurisdiction in connection therewith, including the obtaining of
any governmental, exchange control or other consents which may be
required, the compliance with other formalities needing to be observed and
the payment of any issue, transfer or other taxes due in such
jurisdiction. Any such overseas shareholder will be responsible for
payment of any issue, transfer or other taxes, duties or other requisite
payment(s) due in such jurisdiction(s) by whomsoever payable and Catalina
(UK) and any person acting on its behalf shall be entitled to be fully
indemnified and held harmless by such overseas shareholder for any issue,
transfer or other taxes or duties or other requisite payments as Catalina
(UK) or any person acting on behalf of Catalina (UK) may be required to
pay in respect of the Offer insofar as they relate to such overseas
shareholder.
(ii) In particular, the Offer is not being made, directly or indirectly, in or
into, or by use of mails of or by any means or instrumentality of
interstate or foreign commerce of, or any facilities
28
<PAGE>
of a securities exchange of, the USA, Canada, Australia or Japan and the
Offer will not be capable of acceptance by any such use, means or
instrumentality or from or within the USA, Canada, Australia or Japan.
Catalina (UK) will not (unless determined by it in its sole discretion)
mail or deliver or authorise the mailing or other delivery of this
document, the Form(s) of Acceptance, and any related offering documents in
or into or from the USA, Canada, Australia or Japan or to any US Person or
resident of Canada, Australia or Japan, including (without limitation) to
Ring Shareholders or participants in the Ring Share Option Schemes with
registered addresses in the USA, Canada, Australia or Japan or to persons
whom Catalina (UK) knows to be trustees, nominees or custodians holding
Ring Shares for such persons. Persons receiving such documents (including,
without limitation, custodians, nominees and trustees) must not
distribute, send or mail them in, into or from the USA, Canada, Australia
or Japan or to any US Person or resident of Canada, Australia or Japan or
use the USA, Canadian, Australian or Japanese mails or use any such means
or instrumentality for any purpose, directly or indirectly, in connection
with the Offer, and so doing will invalidate any related purported
acceptance of the Offer. Persons wishing to accept the Offer must not use
the USA, Canadian, Australian or Japanese mails or any such means or
instrumentality for any purpose, directly or indirectly, related to
acceptance of the Offer. Envelopes containing Form(s) of Acceptance must
not be postmarked in the USA, Canada, Australia or Japan or otherwise
despatched from the USA, Canada, Australia or Japan and all acceptors must
provide addresses outside the USA, Canada, Australia or Japan for the
remittance of cash and/or the return of Form(s) of Acceptance, Ring Share
certificates and/or other documents of title.
(iii) A Ring Shareholder will be deemed not to have accepted the Offer if :
(a) he/she puts "No" in Box 5 of the Form(s) of Acceptance and thereby
does not give the representations and warranties set out in
paragraph (2) of Part C of this Appendix I ;
(b) he/she completes Box 3 of (a) Form(s) of Acceptance with an address
in the USA, Canada, Australia or Japan or has a registered address
in the USA, Canada, Australia or Japan and he/she does not insert in
Box 4 of the Form(s) of Acceptance the name and address of a person
or agent outside the USA, Canada, Australia or Japan to whom he
wishes the consideration to which he is entitled under the Offer to
be sent;
(c) in any case the Form(s) of Acceptance received from him is received
in an envelope postmarked in, or which otherwise appears to Catalina
(UK) or its agents to have been sent from, the USA, Canada,
Australia or Japan or a US Person or resident of Canada, Australia
or Japan.
Catalina (UK) reserves the right, in its sole discretion, to investigate,
in relation to any acceptance, whether the representations and warranties
set out in paragraph 2 of Part C of this Appendix I below could have been
truthfully given by the relevant Ring Shareholder and, if such
investigation is made and, as a result, Catalina (UK) cannot, in its sole
opinion, satisfy itself that such representation and warranty was true and
correct, such acceptance shall not be valid.
(iv) If, in accordance with the making of the Offer, notwithstanding the
restrictions described above, any person (including, without limitation,
custodians, nominees and trustees) whether pursuant to a contractual or
legal obligation or otherwise, forwards this document or any related
offering documents in, into or from the USA, Canada, Australia or Japan or
uses the mails of or any means or instrumentality (including, without
limitation, facsimile transmission, telex or telephone) of interstate or
foreign commerce of, or any facility of a securities exchange of, the USA,
Canada, Australia or Japan in connection with such forwarding, such person
should: (a) inform the recipient of such fact ; (b) explain to the
recipient that such action may (subject to paragraph 7(v) below)
invalidate any purported acceptance by the recipient; and (c) draw the
attention of the recipient to this paragraph 7.
29
<PAGE>
(v) These provisions and/or any other terms of the Offer relating to overseas
shareholders may be waived, varied or modified as regards specific Ring
Shareholders or on a general basis by Catalina (UK), in any such case in
Catalina (UK)'s sole discretion.
(vi) Neither Catalina (UK) nor Rothschild nor any agent or director of Catalina
(UK) or Rothschild nor any person acting on behalf of any of them shall
have any liability to any person for any loss or alleged loss arising from
any decision as to the treatment of acceptances of the Offer on any of the
bases set out above or otherwise in connection therewith.
(vii) As used in this document and in the Form(s) of Acceptance, (a) "USA"
means the United States of America, its territories and possessions, any
state of the United States and the District of Columbia and all other
areas subject to its jurisdiction; (b) "Canada" means Canada, its
possessions and territories and all areas subject to its jurisdiction and
any political subdivision thereof; (c) "Australia" means Australia, its
possessions and territories and all areas subject to its jurisdiction and
any political subdivision thereof; and (d) "Japan" means Japan, its
possessions and territories and all areas subject to its jurisdiction and
any political subdivision thereof.
(viii) The provisions of this paragraph 7 supersede any terms of the Offer
inconsistent herewith.
PART C: FORM OF ACCEPTANCE
Each Ring Shareholder by whom, or on whose behalf, (a) Form(s) of Acceptance
is/are executed, irrevocably undertakes, represents, warrants and agrees to and
with each of Catalina (UK) and Rothschild and IRG plc, as receiving agent and
separately as escrow agent, (so as to bind him/ her and his/her personal
representatives, heirs, successors and assigns) to the following effect, that:
1. the execution of the Form(s) of Acceptance shall constitute: (a) an
acceptance of the Offer in respect of the number of Ring Shares inserted
or deemed to be inserted in Box 1 of the Form(s) of Acceptance (or in
respect of which the Offer is deemed to have been accepted); (b) an
authority to Catalina (UK) or its agents to execute any further documents
and give any further assurances which may be required in connection with
the foregoing and an undertaking to execute all or any documents and/or
give any such further assurances as may be required to enable Catalina
(UK) to obtain the full benefit of the terms of this Part C of this
Appendix I and/or to perfect any of the authorities expressed to be given
hereunder, in each case, on and subject to the terms and conditions set
out or referred to in this document and in the Form(s) of Acceptance and,
subject to the rights of withdrawal set out in paragraph 3 of Part B
above, such acceptance shall be irrevocable provided that if (i) Box 1 of
the Form(s) of Acceptance is not completed or a number greater than such
shareholder's registered holding appears in Box 1; or (ii) the acceptance
is otherwise completed incorrectly but the Form(s) of Acceptance is
signed, it will be deemed an acceptance of the terms of the Offer in
respect of all the Ring Shares comprised in the acceptance.
For the purposes of this Appendix I and the Form(s) of Acceptance, the
phrase "Ring Shares comprised in the acceptance" shall mean the number
of Ring Shares inserted in Box 1 of the Form(s) of Acceptance or, if no
number is inserted, the greater of:
(a) the relevant Ring Shareholder's entire holding of Ring Shares as
disclosed by details of the register of members made available to
IRG plc prior to the time the relevant Form(s) of Acceptance is
processed by them;
(b) the relevant Ring Shareholder's entire holding of Ring Shares as
disclosed by details of the register of members made available to
the Escrow Agent prior to the latest time for receipt of Form(s) of
Acceptance which can be taken into account for determining whether
the Offer is unconditional; or
30
<PAGE>
(c) the number of Ring Shares in respect of which certificates or an
indemnity in lieu thereof is received and/or in respect of all Ring
Shares in CREST, the number of shares which are transferred by the
relevant Ring Shareholder to his escrow account by means of a TTE
instruction;
2. unless "No" is put in Box 5 of the Form of Acceptance, such shareholder:
(a) has not received or sent copies of this document, the Form(s) of
Acceptance, or any related offering documents in, into or from the USA,
Canada, Australia or Japan; (b) has not otherwise utilised in connection
with the Offer, directly or indirectly, the mails of, or any means or
instrumentality (including, without limitation, facsimile transmission,
telex or telephone) of interstate or foreign commerce of, or any
facilities of a securities exchange of, the USA, Canada, Australia or
Japan; (c) was outside the USA, Canada, Australia or Japan when the
Form(s) of Acceptance was sent and at the time of accepting the Offer; and
(d) in respect of the Ring Shares to which the Form(s) of Acceptance
relate(s), is not an agent or fiduciary acting on a non-discretionary
basis for a principal who has given any instructions with respect to the
Offer from within the USA, Canada, Australia or Japan and the Form(s) of
Acceptance has not been mailed or otherwise sent in, into or from the USA,
Canada, Australia or Japan or signed in the USA, Canada, Australia or
Japan and such shareholder is accepting the Offer from outside USA,
Canada, Australia or Japan;
3. the execution of the Form(s) of Acceptance and its receipt by or on behalf
of Catalina (UK) constitutes, subject to the Offer becoming unconditional
in all respects in accordance with its terms and to the relevant accepting
Ring Shareholder not having validly withdrawn his acceptance, the
irrevocable separate appointment of each of Catalina (UK) and/or
Rothschild or any director of Catalina (UK) or Rothschild as such Ring
Shareholder's attorney and/or agent, and an irrevocable instruction to the
attorney and/or agent to complete and execute all or any form(s) of
transfer and/or other document(s) at the discretion of the attorney and/or
agent in relation to the Ring Shares referred to in paragraph 1 of this
Part C above in favour of Catalina (UK), or such other person or persons
as Catalina (UK) may direct, and to deliver such form(s) of transfer
and/or other document(s) in the attorney's and/or agent's discretion,
and/or certificate(s) and/or the document(s) of title relating to such
Ring Shares, for registration within six months of the Offer becoming
unconditional in all respects and to do all such other acts and things as
may in the opinion of such attorney and/or agent be necessary or expedient
for the purpose of, or in connection with, the acceptance of the Offer and
to vest in Catalina (UK) or its nominee(s) the Ring Shares as aforesaid;
4. the execution of the Form(s) of Acceptance and its receipt by or on behalf
of Catalina (UK) constitutes the irrevocable appointment of IRG plc as
such Ring Shareholder's attorney and/ or agent and an irrevocable
instruction and authority to the attorney and/or agent (a) subject to the
Offer becoming or being declared unconditional in all respects in
accordance with its terms and to the relevant accepting Ring Shareholder
not having validly withdrawn his/her relevant acceptance, to transfer to
itself (or to such other person or persons as Catalina (UK) or its agents
may direct) by means of CREST all or any of the Relevant Ring Shares (as
defined below) (but not exceeding the number of Ring Shares in respect of
which the Offer is accepted or deemed to be accepted), or (b) if the Offer
does not become unconditional in all respects, to give instructions to
CRESTCo, immediately after the lapsing of the Offer (or within such longer
period as the Panel may permit, not exceeding 14 days of the lapsing of
the Offer), to transfer all Relevant Ring Shares to the original available
balance of the accepting Ring Shareholder. "Relevant Ring Shares" means
Ring Shares in uncertificated form and in respect of which a transfer or
transfers to escrow has or have been effected pursuant to the procedures
described in paragraph 12 of the letter from Rothschild contained in this
document and where the transfer(s) to escrow was or were made in respect
of Ring Shares held under the same member account ID and participant ID as
the member account ID and participant ID relating to the Form(s) of
Acceptance concerned (but irrespective of whether or not any Form of
Acceptance
31
<PAGE>
Reference Number, or a Form of Acceptance Reference Number corresponding
to that appearing on the Form(s) of Acceptance concerned, was included in
the TTE instruction concerned);
5. the execution of the Form(s) of Acceptance and their delivery to and
receipt by IRG plc will constitute, subject to the Offer becoming
unconditional in all respects and to the person accepting the Offer not
having validly withdrawn his acceptance, an irrevocable authority and
request:
(a) subject to paragraph 7 of Part B of this Appendix I, to Ring or its
agents to procure the registration of the transfer of the Ring
Shares in certificated form pursuant to the Offer and, the delivery
of the share certificate(s) and/or other document(s) of title in
respect thereof, to Catalina (UK) or as it may direct;
(b) subject to the provisions of paragraph 7 of Part B of this Appendix
I, if the Ring Shares are in certificated form or if either of the
provisos to sub-paragraph (c) of this paragraph 5 applies, to
Catalina (UK) or Rothschild, or their respective agents, to procure
the despatch by post (or by such other method as may be approved by
the Panel) of a cheque for the cash to which an accepting Ring
Shareholder may become entitled pursuant to his acceptance of the
Offer, at the risk of such Ring Shareholder, to the person or agent
whose name and address outside the USA, Canada, Australia or Japan
is set out in Box 3 or, if appropriate, Box 4 of the Form(s) of
Acceptance or, if none is set out, to the first named holder at his
registered address outside the USA, Canada, Australia or Japan; and
(c) subject to paragraph 7 of Part B of this Appendix I, if the Ring
Shares concerned are in uncertificated form, to Catalina (UK) or its
agents to procure the creation of an assured payment obligation in
favour of the relevant Ring Shareholder's payment bank in accordance
with the CREST assured payment arrangements in respect of the cash
to which such shareholder is entitled, provided that (i) Catalina
(UK) may (if, for any reason, it wishes to do so) determine that all
or any part of such cash shall be paid by cheque drawn on a UK
clearing bank despatched by post and (ii) if any Ring Shareholder
concerned is a CREST member whose registered address is in the USA,
Canada, Australia or Japan, any cash consideration to which such
shareholder is entitled shall be paid by cheque despatched by post,
and in either of such cases, sub- paragraph (b) of this paragraph 5
shall apply;
6. after the Offer becomes unconditional in all respects, or if the Offer
will become unconditional in all respects immediately upon the outcome of
the resolution in question, or if the Panel otherwise gives its consent
and pending registration:
(a) Catalina (UK) or its agents shall be entitled to direct the exercise
of any votes and any and all other rights, privileges (including the
right to requisition the convening of a general or separate class
meeting of Ring) attaching to any Ring Shares in respect of which
the Offer has been accepted or is deemed to have been accepted and
not validly withdrawn;
(b) the execution of the Form(s) of Acceptance by a Ring Shareholder in
respect of Ring Shares in respect of which the Offer has been
accepted or deemed to have been accepted and in respect of which
such acceptance has not been validly withdrawn, will constitute an
authority to Ring from such Ring Shareholder to send any notice,
circular, warrant or other document or communication which may be
required to be sent to him as a member of Ring in respect of such
Ring Shares (including any share certificate(s) or other document(s)
of title issued as a result of conversion of such Ring Shares into
certificated form) to Catalina (UK) at its registered office and an
irrevocable authority to Catalina (UK) or any director of Catalina
(UK) or any person appointed by Catalina (UK) to sign any consent to
short notice of a general meeting or separate class meeting as his
attorney and/or agent and on his behalf and/or to execute a form of
proxy in respect of such Ring Shares and/or, where appropriate, any
appointment pursuant to
32
<PAGE>
section 375 of the Act, appointing any person nominated by Catalina
(UK) to attend general meetings and separate class meetings of Ring
or its members (or any of them) and any adjournments and to exercise
or refrain from exercising (but subject to the City Code) the votes
attaching to such Ring Shares on its behalf, where relevant, such
votes to be cast so far as possible to satisfy any outstanding
condition of the Offer, and the execution of the Form(s) of
Acceptance will also constitute the agreement of such Ring
Shareholder not to exercise any of such rights without the consent
of Catalina (UK) and the irrevocable undertaking of such Ring
Shareholder not to appoint a proxy for or to attend such general
meetings or separate class meetings. This authority will cease to be
valid if the acceptance is withdrawn in accordance with paragraph 3
of Part B of this Appendix I ;
7. he is irrevocably and unconditionally entitled to transfer the Ring Shares
in respect of which the Form(s) of Acceptance is completed and that the
entire beneficial interest in such Ring Shares in respect of which the
Offer is accepted or deemed to be accepted will be acquired under the
Offer fully paid up and free from all liens, equitable interests, charges,
encumbrances and all other third party rights or interests of any nature
whatsoever and together with all rights attaching thereto including,
without limitation, the right to receive and retain all dividends and
other distributions (if any) declared, made or paid on or after 31 May
2000;
8. he will:
(a) deliver, or procure the delivery, to IRG plc at either of the
addresses set out in paragraph 3(i) of Part B of this Appendix I of
his share certificate(s) and/or other document(s) of title in
respect of the Ring Shares (which are in certificated form) in
respect of which the Offer has been accepted, or is deemed to have
been accepted and not validly withdrawn, or an indemnity acceptable
to Catalina (UK) in lieu thereof, as soon as possible and, in any
event within six months of the Offer becoming or being declared
unconditional in all respects;
(b) give or procure the giving, in accordance with paragraph 12(f) of
the letter from Rothschild contained in this document, of an
instruction to transfer those of the Ring Shares in respect of which
the Offer has been accepted or is deemed to have been accepted and
not validly withdrawn which are in CREST to the escrow balance
within the member's account in accordance with the facilities and
requirements of CRESTCo, as soon as possible and, in any event, so
that the transfer to escrow settles within 6 months of the Offer
becoming or being declared unconditional in all respects; and
(c) if for any reason any Ring Shares in respect of which a transfer to
an escrow balance has been effected in accordance with paragraph
12(f) of the letter from Rothschild contained in this document are
converted to certificated form (without prejudice to paragraph 6(b)
above), immediately deliver or procure the immediate delivery of the
share certificate(s) or other document(s) of title in respect of all
such Ring Shares as so converted to IRG plc at either of the
addresses referred to in paragraph 3(i) of Part B of this Appendix I
or to Catalina (UK) at its registered office or as Catalina (UK) or
its agent may direct;
9. the execution of the Form(s) of Acceptance and its receipt by or on behalf
of Catalina (UK) constitutes the irrevocable appointment of each of
Catalina (UK) and Rothschild and their respective directors and agents as
such shareholder's attorney and/or agent ("attorney") within the terms
of paragraphs 4 and 7 of Part B of this Appendix I and this Part C and
with authority to execute any further documents and give any further
assurances which may be required in connection with the matters referred
to in Part B of this Appendix I and this Part C and an irrevocable
undertaking to such attorney to execute any such further documents and/or
give any such further assurances as may be required;
10. the creation of an assured payment obligation in favour of his/her payment
bank in accordance with the CREST assured payment arrangements as referred
to in paragraph 5(c)
33
<PAGE>
of this Part C shall, to the extent of the obligation so created,
discharge in full any obligation of Catalina (UK) and/or Rothschild to pay
to him the cash to which he is entitled pursuant to or in consequence of
the Offer;
11. he shall do all such acts and things whatsoever as shall in the opinion of
Catalina (UK) or its agent be necessary or expedient to vest in Catalina
(UK) or its nominees the Ring Shares in respect of which the Offer has
been accepted or deemed accepted and not validly withdrawn and that he
shall do all things as may be necessary or expedient to allow the Escrow
Agent to perform his functions as escrow agent in relation to the Offer to
the fullest extent;
12. the terms of Parts A and B of this Appendix I and of this Part C shall be
deemed to be incorporated in, and form part of, the Form(s) of Acceptance,
which shall be read and construed accordingly;
13. he agrees to ratify each and every act or thing which may be done or
effected by any of Catalina (UK) and Rothschild and/or any director of
Catalina (UK), Rothschild or their respective agents or by Ring or its
agents, as the case may be, in exercise of any of the powers and/or
authorities hereunder (and to indemnify each such person against any
losses arising therefrom);
14. if any provisions of Part B of this Appendix I or this Part C shall be
unenforceable or invalid or shall not operate so as to afford Catalina
(UK) and/or Rothschild and/or IRG plc and/or the Escrow Agent and/or any
director or agent of any of them the benefit of any authority expressed to
be given therein or herein, he shall, with all practicable speed, do all
such acts and things and execute all such documents and give all such
assurances as may be required or desirable to enable Catalina (UK) and/or
Rothschild and/or IRG plc and/or the Escrow Agent and/or any director or
agent of any of them to secure the full benefit of Part B of this Appendix
I and this Part C;
15. on execution a Form of Acceptance shall take effect as a deed;
16. he agrees that he does not expect Rothschild to have any duties or
responsibilities towards him comparable or similar to those imposed by The
Securities and Futures Authority Limited's rules requiring best execution
and suitability and that in respect of the Offers he is not and will not
be a customer of Rothschild; and
17. the execution of the Form of Acceptance constitutes his submission, in
relation to all matters arising out of the Offer and the Form of
Acceptance, to the jurisdiction of the Courts of England.
References in Part B of this Appendix I and this Part C to a Ring Shareholder
shall include references to the person or persons executing a Form(s) of
Acceptance and, in the event of more than one person executing a Form(s) of
Acceptance, the provisions of this Part C shall apply to them jointly and to
each of them.
34
<PAGE>
APPENDIX II
FINANCIAL INFORMATION RELATING TO CATALINA
Nature of financial information
The following selected financial information contained in this Appendix II does
not constitute statutory accounts within the meaning of Section 240 of the Act.
The financial information has been extracted without material adjustment from
Catalina's audited 1999 Annual Report and Form 10-K for the fiscal year ended 30
September 1999 on which the audit opinion was unqualified.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended Year ended Year ended
30 September 30 September 30 September
1999 1998 1997
($'000) ($'000) ($'000)
<S> <C> <C> <C>
Net sales 176,561 161,860 196,955
Cost of sales 140,906 130,763 164,493
-------- -------- --------
Gross profit 35,655 31,097 32,462
Selling, general and administrative expenses 28,554 26,608 25,946
Reversal of provision for litigation (2,728) -- --
Plant closing costs -- -- 930
Litigation charges and related professional fees -- (95) 7,453
-------- -------- --------
Operating income (loss) 9,829 4,584 (1,867)
-------- -------- --------
Other income (expenses)
Interest expense (2,413) (3,801) (4,088)
Reversal of post judgment interest relating
to litigation settlement 893 -- --
Other income 1,118 684 128
-------- -------- --------
Total other expenses (402) (3,117) (3,960)
-------- -------- --------
Income (loss) before income taxes 9,427 1,467 (5,827)
Income tax (provision) benefit (2,938) (365) 2,734
-------- -------- --------
Net income (loss) 6,489 1,102 (3,093)
======== ======== ========
Earnings (loss) per share
Basic
Earnings (loss) per share ($) 0.92 0.15 (0.44)
Weighted average number of shares ('000) 7,055 7,128 7,071
Diluted
Earnings (loss) per share ($) 0.80 0.15 (0.44)
Weighted average number of shares ('000) 8,688 7,477 7,071
</TABLE>
See accompanying notes to consolidated financial statements
35
<PAGE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
At
30 September
1999
($'000)
<S> <C>
Assets
Current assets
Cash and cash equivalents 7,253
Restricted cash and short-term investments 1,721
Accounts receivable, net of allowances
of $8,591,000 20,150
Inventories 28,668
Income taxes receivable 1,049
Deferred tax asset 2,247
Other current assets 3,139
-------
Total current assets 64,227
Property and equipment, net 24,737
Goodwill, net 10,561
Other assets 2,372
-------
101,897
=======
Liabilities and Stockholders Equity
Current liabilities
Notes payable -- credit lines 2,200
Current maturities of subordinated notes 2,500
Accounts and letters of credit payable 14,939
Current maturities of bonds payable-real estate related 2,210
Current maturities of other long-term debt 487
Accrued employee compensation and benefits 2,718
Other current liabilities 3,719
-------
Total current liabilities 28,773
Notes payable -- credit lines 12,150
Convertible subordinated notes 5,100
Bonds payable -- real estate related 6,000
Other long-term debt 1,524
Other liabilities 293
-------
Total liabilities 53,840
-------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 per value
authorised 1,000,000 shares; none issued --
Common stock, $.01 per value authorised 20,000,000 shares;
issued and outstanding 7,373,013 shares 74
Additional paid-in capital 26,927
Retained earnings 22,266
Treasury stock, 378,200 shares (1,210)
-------
Total stockholders' equity 48,057
-------
101,897
=======
</TABLE>
See accompanying notes to consolidated financial statements
36
<PAGE>
Consolidated Statement of Cash Flow
<TABLE>
<CAPTION>
Year ended
30 September
1999
($'000)
<S> <C>
Cash flows from operating activities:
Net income 6,489
-------
Adjustments to reconcile net income to net cash used in operating activities:
Reversal of provision for litigation (2,728)
Reversal of post judgment interest (893)
Provision for litigation judgment under appeal 212
Depreciation and amortization 5,368
Deferred income taxes 1,951
Gain on disposition of property and equipment (175)
Change in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable (1,755)
Increase in inventories (411)
Increase in income taxes receivable (1,049)
Decrease in other current assets 21
Increase in other assets (342)
Decrease in income taxes payable (438)
Decrease in accrued litigation judgment under appeal (1,500)
Increase in accounts and letters of credit payable, accrued employee
compensation and benefits and other liabilities 3,564
-------
Total adjustments 1,825
-------
Net cash provided by operating activities 8,314
-------
Cash flows from investing activities:
Capital expenditures, net (1,833)
Proceeds from sale of property 997
Decrease in restricted cash equivalents and short-term investments 986
-------
Net cash provided by investing activities 150
-------
Cash flows from financing activities:
Proceeds from notes payable -- credit lines 35,300
Payments on notes payable -- credit lines (35,550)
Net proceeds from notes payable-credit lines due on demand 672
Sinking fund redemption payments on bonds (900)
Payments on other long-term debt (737)
Payments on bonds payable -- real estate related (980)
Payments to repurchase common stock (1,210)
Proceeds from issuance of common stock and related income tax benefit 404
-------
Net cash used in financing activities (3,001)
-------
Net increase in cash and cash equivalents 5,463
Cash and cash equivalents at beginning of year 1,790
-------
Cash and cash equivalents at end of year 7,253
=======
</TABLE>
37
<PAGE>
Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Year ended
30 September
1999
($'000)
<S> <C>
Cash paid for:
Interest 2,304
=====
Income taxes 2,439
=====
</TABLE>
During the year ended 30 September 1999, the Company issued 1,778 common shares
to each of its seven outside directors as compensation for their services. The
aggregate market value of the stock issued was $50,000.
During the year ended 30 September 1999, capital lease obligations aggregating
approximately $102,000 were incurred when the Company entered into leases for
new office, computer, machinery and warehouse equipment.
See accompanying notes to consolidated financial statements
38
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies and Nature of Operations
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly- owned subsidiaries. The consolidated statements include the results
of the wholly-owned subsidiaries Catalina Industries, Inc., Go-Gro Industries
Limited ("Go-Gro"), Meridian Lamps, Inc. ("Meridian"), a subsidiary formed
by the Company that commenced operations in fiscal 1995 and ceased operations in
June 1997, Catalina Canada, Catalina Mexico and other wholly- owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Geographic Risks
Substantially all of the Company's products are obtained from suppliers located
in China. Any inability by the Company to continue to obtain its products from
China could significantly disrupt its business. In addition, in the Company's
consolidated balance sheet at 30 September 1999 are net assets of $17.9 million
of Company subsidiaries located in China and Hong Kong, a sovereign territory of
China. With respect to these assets, the Company maintains $14.4 million in
non-cancellable political risk insurance.
(d) Cash and Cash Equivalents
Cash on hand and in banks, money market funds and other short-term securities
with maturities of three months or less when purchased are considered cash and
cash equivalents.
(e) Accounts Receivable
Pursuant to an agreement between the Company and a bank, the bank assumes the
credit risk of certain of the Company's US and Canadian receivables. The Company
pays a fee of .50 per cent. of billings to customers covered by the arrangement.
In addition, the Company insures certain of its foreign receivables with an
insurance company. Gross accounts receivable secured under such agreements at 30
September 1999 amounted to $10.5 million. In addition, certain of the Company's
sales are made to customers who pay pursuant to their own international,
irrevocable, transferable letters of credit. Gross accounts receivable secured
by such letters of credit at 30 September 1999 amounted to $12.4 million.
The Company provides allowances against accounts receivable for doubtful
accounts, sales returns and sales incentives.
(f) Inventories
Inventories are stated at the lower of cost or market value. Cost is determined
using the first-in, first-out (FIFO) method.
(g) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and
amortisation. Interest expense incurred for the construction of facilities is
capitalised until such facilities are ready for use. Depreciation is computed
using the straight-line method over the estimated useful lives of the related
assets. Amortisation of leasehold improvements is computed using
39
<PAGE>
the straight-line method over the shorter of the lease term or estimated useful
lives of the related assets.
(h) Restricted Cash Equivalents and Short-Term Investments
The Company's restricted cash equivalents and short term investments at 30
September 1999 represented sinking fund payments on bonds issued to finance the
Company's US warehouse and investment income earned on such payments and $1.4
million escrow payment made on the bonds which financed the Meridian facility.
(i) Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
and is being amortised on a straight-line basis over periods from twenty to
forty years. The Company periodically evaluates the recoverability of recorded
costs for goodwill based upon estimations of future undiscounted operating
income from the related acquired companies. Should the Company determine it
probable that future estimated undiscounted operating income from any of its
acquired companies will be less than the carrying amount of the associated
goodwill, an impairment of goodwill would be recognised, and goodwill would be
reduced to the amount estimated to be recoverable. Accumulated amortisation of
goodwill amounted to $2.9 million at 30 September 1999.
(j) Capital Leases
Leases that transfer substantially all of the benefits and risks of ownership to
the Company are accounted for as the acquisition of assets and assumption of
obligations under the capital lease standards issued by the Financial Accounting
Standards Board. Accordingly, capitalised leased assets are recorded as property
and equipment and the present values of the minimum lease payments are recorded
as capital lease obligations under other long-term debt. Depreciation of such
assets is computed using the shorter of the lease terms or estimated useful
lives of the assets and is included in depreciation expense.
(k) Income Taxes
The Company and its wholly-owned domestic subsidiaries file consolidated federal
and state tax returns in the United States. Separate foreign tax returns are
filed for the Company's Hong Kong, Canadian and Mexican subsidiaries and China
joint venture. The Company follows the asset and liability method of accounting
for income taxes prescribed by Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes". Under the asset and liability method,
deferred income taxes are recognised for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on deferred taxes of a
change in tax rates is recognised in income in the year that includes the
enactment date.
(l) Earnings (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS 128") during fiscal 1998. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per share
on the face of the statement of operations. Basic earnings per share is computed
by dividing net income or loss attributable to common shareholders by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Earnings per share information presented in the
accompanying financial statements for the year ended 30 September 1997 has been
restated to comply with SFAS 128.
40
<PAGE>
(m) Foreign Currency Translation
The accounts of the Company's foreign subsidiaries are translated into US
dollars in accordance with the Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation". For subsidiaries where the functional
currency is the US dollar, monetary balance sheet accounts are remeasured at the
current exchange rate and non-monetary balance sheet accounts are remeasured at
historical exchange rates. For subsidiaries where the functional currency is
other than the US dollar, all balance sheet accounts are remeasured at the
current exchange rate. Income and expense accounts are translated at the average
exchange rates in effect during the year. Adjustments resulting from the
translation of these entities and gains and losses arising from foreign currency
transactions are included in net income.
(n) Stock-Based Compensation
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), in fiscal 1997. As
permitted by SFAS 123, the Company continues to measure compensation costs in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but provides pro forma disclosures of net income
(loss) and earnings (loss) per share as if the fair value method (as defined in
SFAS 123) had been applied.
(o) Long-Lived Assets
Effective 1 October 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
requires companies to write down to estimated fair value long-lived assets that
are impaired. The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. In performing the review for recoverability the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows is less
than the carrying amount of the assets, an impairment loss is recognised. In
1997, in conjunction with the decision to cease Meridian operations, the Company
recorded a $735,000 charge to write down the plant and equipment to fair market
value (less disposition costs).
(p) Comprehensive Income
Effective 1 October 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which
establishes standards for reporting and display of comprehensive income and its
components. The Company's net income for the years ended 30 September 1999, 1998
and 1997 equals comprehensive income for the same periods.
(q) Disclosures About Segments and Related Information
Effective 1 October 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for the way that public companies report selected information about operating
segments in financial statements and requires that those companies report
selected information about segments in interim and annual financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. SFAS No.
131, which supersedes No. 14, "Financial Reporting for Segments of a Business
Enterprise", but retains the requirement to report information about major
customers, requires that a public company report financial and descriptive
information about it reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision-maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131
41
<PAGE>
requires that a public company report a measure of segment profit or loss,
certain specific revenue and expense items, and segment assets. However, SFAS
No. 131 does not require the reporting of information that is not prepared for
internal use if reporting would be impracticable. SFAS No. 131 also requires
that a public company report descriptive information about the way that the
operating segments were determined, the products and services provided by the
operating segments, differences between the measurements used in reporting
segment information and those used in the enterprise's general-purpose financial
statements, and changes in the measurement of segment amounts from period to
period. Upon adoption, information for prior years is required to be restated.
Information presented in Note 13 has been restated to comply with SFAS 131.
(r) Impact of Recently Issued Accounting Standard
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", was
issued in June 1998. SFAS 133 establishes standards for the accounting and
reporting of derivative instruments embedded in other contracts (collectively
referred to as derivatives) and of hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This statement is effective
for fiscal years beginning after 15 June, 2000. The Company has not determined
the effects, if any, that SFAS 133 will have on the Company's financial position
or results of operations.
(s) Reclassifications
Certain amounts presented in the financial statements of prior years have been
reclassified to conform to the current year presentation.
2. Acquisition
On 30 July, 1994, the Company acquired all of the issued and outstanding capital
stock of two Hong Kong companies, Go-Gro Industries Limited ("Go-Gro") and Lamp
Depot Limited ("Lamp Depot"), for an aggregate consideration of $7.5 million and
750,000 shares of the Company's common stock. The stock of Go-Gro was purchased
by the Company from selling stockholders who represented at the closing that
they were, in fact, the actual stockholders of Go-Gro. Subsequent to the date of
the closing, the Company discovered that part of the Go-Gro stock acquired had
been conveyed to one of the selling stockholders prior to closing by a former
officer of a subsidiary of the Company, who ceased employment with such
subsidiary in 1993. The Company made a claim for indemnification and return of
$1,904,000 of the consideration from Go-Gro, such funds were returned to the
Company in November 1994 and the Company filed a lawsuit against the former
officer in May 1995. The purchase price and resulting goodwill recorded for the
Go-Gro acquisition were reduced accordingly for the return of these funds. The
Company settled all litigation relating to this matter in June 1997 by payment
of $600,000 which was recorded as an increase in the purchase price and goodwill
recorded for the Go-Gro acquisition.
3. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
At
30 September
1999
($'000)
<S> <C>
Raw materials 4,050
Work-in-progress 932
Finished goods 23,686
------
28,668
======
</TABLE>
42
<PAGE>
The Company capitalises certain costs in finished goods inventory associated
with acquiring, storing and preparing inventory for distribution. Such costs
aggregated approximately $8.8 million for the year ended 30 September 1999 of
which $2.2 million remained in inventory at 30 September 1999
Inventory allowances amounted to $2.3 million at 30 September 1999.
4. Property and Equipment
Property and equipment and related depreciable lives were as follows:
<TABLE>
<CAPTION>
At
30 September Depreciable
1999 lives
($'000)
<S> <C> <C>
Land 1,354 --
Land use rights 1,912 42-50 years
Buildings and improvements 15,352 5 to 30 years
Leasehold improvements 1,619 lease terms
Furniture and office equipment 1,151 5 to 7 years
Computer software and equipment 4,299 2 to 6 years
Machinery, moulds and equipment 13,457 3 to 11 years
Display fixtures 1,112 2 years
Other assets 475 4 to 7 years
------
40,731
Less accumulated depreciation 15,994
------
Property and equipment, net 24,737
======
</TABLE>
Depreciation expense for the year ended 30 September was approximately
$4,297,000.
5. Notes Payable -- Credit Lines
The Company has a $25 million credit facility with a group of US commercial
banks. The facility provides credit in the form of revolving loans, acceptances,
and trade and stand-by letters of credit and matures 31 March 2002. Borrowings
under the facility bear interest, payable monthly, at the Company's preference
of either the prime rate or the LIBOR rate plus a variable spread based upon
earnings, debt and interest expense levels defined under the credit agreement
(LIBOR plus 1.8 per cent. at 30 September 1999). The effective rate for the
borrowings was 7.29 per cent. at 30 September 1999. Obligations under the
facility are secured by substantially all of the Company's US assets, including
100 per cent. of the common stock of the Company's US subsidiaries and 49 per
cent. of the stock of the Company's Canadian subsidiary. The agreement contains
covenants requiring that the Company maintain a minimum level of equity and meet
certain debt to adjusted earnings and fixed charges coverage ratios. The
agreement prohibits the payment of cash dividends or other distribution on any
shares of the Company's common stock, other than dividends payable solely in
shares of common stock, unless approval is obtained from the lenders. The
Company pays a quarterly commitment fee of .25 per cent. based on the unused
portion of the facility. At 30 September 1999, the Company had used $13.4
million under this credit facility (loans amounted to $12.2 million) and $11.6
million was available for additional borrowings.
The Company has a credit facility with a Canadian bank which provides four
million Canadian dollars or US equivalent (approximately US $2.7 million) in
revolving demand credit. Canadian dollar advances bear interest at the Canadian
prime rate plus .5 per cent. (6.75 per cent. at 30 September 1999) and US dollar
advances bear interest at the US base rate of the bank (8.75 per cent. at 30
September 1999). The credit facility is secured by substantially all of the
assets of the Company's Canadian subsidiary. The agreement contains certain
minimum covenants to be met by the Canadian subsidiary, prohibits the payment of
dividends, and limits advances by the bank
43
<PAGE>
to a borrowing base calculated based upon receivables and inventory. At 30
September 1999, $335,000 in net assets of the Company's Canadian subsidiary were
restricted under the credit facility and could not be transferred to the parent
Company. This facility is payable upon demand and is subject to an annual review
by the bank. The Company pays a monthly commitment fee of .25 per cent. based on
the unused portion of the facility. At 30 September 1999, total Canadian and US
dollar borrowings amounted to US $2.2 million (included in current notes
payable-credit lines) and US $530,000 was available under the borrowing base
calculation.
Go-Gro has a 35 million Hong Kong dollars (approximately US $4.5 million) credit
facility with a Hong Kong bank. The facility provides credit in the form of
acceptances, trade and stand-by letters of credit, overdraft protection, and
negotiation of discrepant documents presented under export letters of credit
issued by banks. Advances bear interest at the Hong Kong prime rate plus .25 per
cent. (8.75 per cent. at 30 September 1999). The facility is secured by a
guarantee issued by the Company and requires Go-Gro to maintain a minimum level
of equity. This agreement prohibits the payment of dividends without consent of
the bank and limits the amount of loans or advances from Go-Gro to the Company
at any time to 50 per cent. of Go-Gro's pre-tax profits for the previous 12
months. At 30 September 1999, $20.7 million in net assets of Go-Gro were
restricted under the agreement and could not be transferred to the parent
Company. This facility is repayable upon demand and is subject to an annual
review by the bank. At 30 September 1999 the Company had used $4.1 million of
this line for letters of credit (there were no borrowings) and US $379,000 was
available.
The Company's availability under its credit lines consisted of the following:
<TABLE>
<CAPTION>
At
30 September
1999
($'000)
<S> <C>
Total lines of credit 32,248
Less:
Borrowings (14,350)
Stand-by letters of credit (1,213)
Open letters of credit and other (4,126)
-------
Lines of credit available 12,559
=======
</TABLE>
The weighted average interest rate on the current portion of notes payable --
credit lines was 8.75 per cent. at 30 September 1999.
6. Bonds Payable -- Real Estate Related
The Company financed the purchase and improvements of its Meridian manufacturing
facility through the issuance of a series of State of Mississippi General
Obligation Bonds (Mississippi Small Enterprise Development Finance Act Issue,
1994 Series GG) with an aggregate available principal balance of $1,605,000, a
weighted average coupon rate of 6.23 per cent. and a contractual maturity of 1
November 2009. In June 1997, the Company ceased manufacturing operations at
Meridian and leased the facility to a non-manufacturing entity. As a result, the
Company made a $1.5 million payment to escrow on the bonds, which was included
in restricted cash equivalents and short-term investments in the 30 September
1999 balance sheets. The bonds were secured by a first mortgage on land,
building and improvements and a $1,713,000 standby letter of credit, which was
not part of the Company's credit lines. Interest on the bonds was payable
semiannually and principal payments were due annually. The outstanding balance
of these bonds was $1.3 million at 30 September 1999. The Company redeemed the
bonds at their earliest redemption date of 1 November 1999.
The Company arranged for the issuance in 1995 of $10.5 million in State of
Mississippi Variable Rate Industrial Revenue Development Bonds to finance (along
with internally generated cash
44
<PAGE>
flow and the Company's $1 million leasing facility) a warehouse located near
Tupelo, Mississippi. The bonds have a stated maturity of 1 May 2010 and require
mandatory sinking fund redemption payments, payable monthly, aggregating
$900,000 per year, from 1996 to 2002, $600,000 per year in 2003 and 2004, and
$500,000 per year from 2005 to 2010. The bonds bear interest at a variable rate
(5.45 per cent. at 30 September 1999) that is adjustable weekly to the rate the
remarketing agent for the bonds deems to be the market rate for such bonds. The
bonds are secured by a lien on the land, building, and all other property
financed by the bonds. Additional security is provided by a $7.1 million direct
pay letter of credit which is not part of the Company's credit line. The
outstanding balance of these bonds was $6.9 million at 30 September 1999. In
January 1999, the Company entered into an interest rate swap agreement maturing
1 May 2004, to manage its exposure to interest rate movements by effectively
converting its debt from a variable interest rate to a fixed interest rate of
5.52 per cent.. Interest rate differentials paid or received under the agreement
are recognised as adjustments to interest expense.
The aggregate maturities and sinking fund requirements of bonds payable at 30
September 1999, are as follows:
($'000)
2000 2,210
2001 900
2002 900
2003 600
2004 600
Thereafter 3,000
-----
8,210
=====
7. Convertible Subordinated Notes
The Company has outstanding $7.6 million of 8 per cent. convertible subordinated
notes due 15 March 2002. The notes are convertible at the option of the holders
into common shares of the Company's stock at a conversion price of $6.63 per
share subject to certain anti-dilution adjustments (as defined in the note
agreement), at any time prior to maturity. The notes are subordinated in right
of payment to all existing and future senior indebtedness of the Company. The
notes are callable at the Company's option with certain required premium
payments. Principal payments of approximately $2.5 million are required on 15
March in each of the years 2000 and 2001. The remaining outstanding principal
and interest is due in full on 15 March 2002. Interest is payable semiannually.
The terms of the note agreement require the Company to maintain specific
interest coverage ratio levels in order to increase its credit facilities or
otherwise incur new debt and to maintain a minimum consolidated net worth. In
addition, the note agreement prohibits the declaration or payment of dividends
on any shares of the Company's capital stock, except dividends or other
distributions payable solely in shares of the Company's common stock, and limits
the purchase or retirement of any shares of capital stock or other capital
distributions.
45
<PAGE>
8. Other Long-Term Debt
Other long-term debt consisted of the following:
At
30 September
1999
($'000)
Loan payable monthly through 2004 based on a 15 year
amortisation schedule with a balloon payment in 2004,
bearing interest at 8 per cent., secured by a mortgage on
land and building with a net book value of $1.3 million at
30 September 1999 958
Borrowings under a leasing facility with a Hong Kong
financial institution to finance the purchase of equipment
for the China facility ; payable monthly, bearing interest
at the LIBOR rate plus 3.5 per cent. (8.69 per cent. at 30
September 1999) maturing at various dates through 2002 and
secured by a guarantee issued by the Company and warehouse
equipment with a net book value of $386,000 at 30
September 1999; $370,000 was available for future
borrowings at 30 September 1999. 443
Borrowings under a leasing facility with a US financial
institution to finance the purchase of US assets; payable
monthly, maturing at various dates through 2004, bearing
interest 8.75 per cent. and secured by office, computers
and warehouse equipment with a net book value of $336,000
at 30 September 1999; $477,000 was available for future
borrowings at 30 September 1999. 523
Other 87
-----
Subtotal 2,011
Less current maturities (487)
-----
1,524
=====
The aggregate maturities of other long-term debt at 30 September 1999, are as
follows:
($'000)
2000 487
2001 464
2002 259
2003 125
2004 676
-----
2,011
=====
9. Income Taxes
The following table summarises the differences between the Company's effective
income tax rate and the statutory federal income tax rate:
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 1997
% % %
<S> <C> <C> <C>
Statutory federal income tax rate 34.0 34.0 (34.0)
Increase (decrease) resulting from:
State income taxes, net of federal income tax effect 2.8 2.8 (0.5)
Foreign tax rate differential (6.3) (33.2) (17.3)
Goodwill amortisation 1.6 10.6 2.6
Adjustment to tax rate applied to US temporary
differences -- 8.9 --
Other (0.9) 1.8 2.3
---- ---- -----
31.2 24.9 (46.9)
==== ==== =====
</TABLE>
46
<PAGE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
Current Deferred Total
($'000) ($'000) ($'000)
<S> <C> <C> <C>
Year ended 30 September 1999
Federal (95) 1,788 1,693
State 80 165 245
Foreign 1,002 (2) 1,000
------ ------ ------
987 1,951 2,938
====== ====== ======
Year ended 30 September 1998
Federal (993) 453 (540)
State 22 341 363
Foreign 631 (89) 542
------ ------ ------
(340) 705 365
====== ====== ======
Year ended 30 September 1997
Federal (2,894) (1,109) (4,003)
State 15 (333) (318)
Foreign 1,597 (10) 1,587
------ ------ ------
(1,282) 1,452 (2,734)
====== ====== ======
</TABLE>
Income (loss) before income taxes by source consisted of the following:
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 1997
($'000) ($'000) ($'000)
<S> <C> <C> <C>
United States 5,046 (1,265) (13,183)
Foreign 4,381 2,732 7,356
------ ------ ------
9,427 1,467 (5,827)
====== ====== ======
</TABLE>
The tax effects of each type of temporary difference that gave rise to the
Company's current net deferred tax asset is as follows:
At
30 September
1999
($'000)
Accounts receivable allowances 1,337
Prepaid expenses (175)
Allowances and capitalised costs for inventory 961
Accrued expenses 76
Other 48
-----
2,247
=====
47
<PAGE>
The tax effects of each type of temporary difference that gave rise to the
Company's net long term deferred tax asset (liability) (included in other long
term assets or other long term liabilities) are as follows:
At
30 September
1999
($'000)
Net loss on sublease of facility 136
US tax loss and other carryforwards 259
Foreign tax loss carryforward 796
Depreciation:
US assets (523)
Foreign assets (63)
Other 10
Valuation allowance (796)
----
(181)
====
The Company has not provided for possible US income taxes on $19.7 million in
undistributed earnings of foreign subsidiaries that are considered to be
reinvested indefinitely. Calculation of the unrecognised deferred tax liability
related to these foreign earnings is not practicable.
10. Earnings Per Share
The computation of basic and diluted earnings (loss) per common share ("EPS") is
as follows (in thousands except per share data):
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 1997
Basic EPS: ($'000) ($'000) ($'000)
Numerator:
<S> <C> <C> <C>
Net income (loss) for basic earnings per share 6,489 1,102 (3,093)
===== ===== ======
Denominator:
Weighted average shares outstanding during the
year ('000) 7,252 7,128 7,071
Weighted average of shares repurchased during the
year ('000) (197)
----- ----- ------
Weighted average shares used for basic EPS ('000) 7,055 7,128 7,071
===== ===== ======
Basic EPS ($) 0.92 0.15 (0.44)
===== ===== ======
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 1997
($'000) ($'000) ($'000)
Diluted EPS:
Numerator:
<S> <C> <C> <C>
Net income (loss) 6,489 1,102 (3,093)
===== ===== ======
Interest on convertible subordinated notes, net
of income taxes 424 -- --
----- ----- ------
Net income (loss) for diluted earnings per share 6,913 1,102 (3,093)
===== ===== ======
Denominator:
Weighted average shares outstanding during the
year ('000) 7,252 7,128 7,071
Shares upon conversion of convertible subordinated
notes ('000) 1,138 -- --
Effect of stock options ('000) 495 349 --
Weighted average of shares repurchased during the
year ('000) (197) -- --
----- ----- ------
Weighted average shares used for diluted EPS ('000) 8,688 7,477 7,071
===== ===== ======
Diluted EPS ($) 0.80 0.15 (0.44)
===== ===== ======
</TABLE>
The convertible subordinated notes were not included in the denominator for
diluted EPS for the years ended 30 September 1998 and 1997 because their effect
was anti-dilutive.
11. Common Stock, Stock Options, Warrants and Rights
Common Stock
The Company's board of directors has authorized the repurchase of up to $2
million of common shares of the Company from time to time in the open market or
in negotiated purchases. At 30 September 1999, the Company had repurchased
378,200 shares for $1,210,000.
Stock Options Under Plans
In August 1987, the Company adopted the Stock Option/Stock Appreciation Rights
Plan ("Employee Plan") which provides for the granting of options to officers
and other key employees. Under the Employee Plan, the Company and its
shareholders authorized the granting of options for up to 1,750,000 shares of
common stock to be granted as either incentive or non-statutory options at a
price of 100 per cent. of the fair market value of the shares at the date of
grant, 110 per cent. in the case of a holder of more than 10 per cent. of the
Company's stock. As of 30 September 1999, options for approximately 1,491 shares
of common stock remained available for future grants. Options generally vest
ratably over a three- year period commencing on 1 October following the date of
grant and are exercisable, with cash or previously acquired common stock of the
Company, no later than 10 years from the grant date.
In March 1989, the Company adopted the Non-Employee Director Stock Option Plan
("Director Plan"), which provides for the granting of options for up to 50,000
shares of common stock to non-employee directors. Under the Director Plan,
options to purchase 2,000 common shares are granted annually to non-employee
directors automatically upon their election to the Board of Directors which vest
upon the serving of a one-year term. The exercise price is the fair market value
of the common stock on the date the options are granted. As of 30 September
1999, no shares of common stock remained available for future grants. These
options are generally exercisable no later than ten years from the date of
grant.
49
<PAGE>
Transactions and related information for each plan are as follows:
<TABLE>
<CAPTION>
Weighted
Number of Average Price
Employee Plan: Options Per Share
<S> <C> <C>
Options outstanding at 30 September 1996 1,340,301 $ 3.98
Options granted 25,700 $ 4.09
Options exercised (17,166) $ 4.04
Options terminated (22,368) $ 4.11
--------- --------
Options outstanding at 30 September 1997 1,326,467 $ 3.98
Options granted 5,000 $ 3.38
Options exercised (25,100) $ 3.03
Options terminated (16,719) $ 4.36
--------- --------
Options outstanding at 30 September 1998 1,289,648 $ 3.99**
Options granted 91,000 $ 3.28
Options exercised (185,898) $ 2.20
Options terminated (63,848) $ 4.10
--------- --------
Options outstanding at 30 September 1999 1,130,902 $ 2.81
--------- --------
Options exercisable at 30 September 1999 1,029,182 $ 2.77
========= ========
</TABLE>
** On 11 December 1998, the exercise price of 784,733 outstanding options was
restated to $2.4375, the market value on such date.
<TABLE>
<CAPTION>
Weighted
Number of Average Price
Director Plan: Options Per Share
<S> <C> <C>
Options outstanding at 30 September 1996 36,000 $ 7.19
Options granted 10,000 $ 3.75
------ ---------
Options outstanding at 30 September 1997 and 1998 46,000 $ 6.59
Options terminated (2,000) $ 12.13
------ ---------
Options outstanding at 30 September 1999 44,000 $ 6.34
------ ---------
Options exercisable at 30 September 1999 44,000 $ 6.34
====== =========
</TABLE>
Other Stock Options
The Company has outstanding options for 55,000 shares at an exercise price of
$1.75 per share issued to one of the former shareholders of a subsidiary in
connection with the acquisition of such subsidiary. The options were fully
exercisable at 30 September 1999 and expire on 24 August 2000.
In August 1990 the Company issued options outside its Director Plan to its
non-employee directors to purchase an aggregate of 200,000 shares of common
stock, of which 132,000 remained outstanding on 30 September 1999. The options
have an exercise price of $1.75 per share, were fully exercisable at 30
September 1999 and expire 24 August 2000.
On 1 October 1991, the Company issued options to purchase 20,000 shares at $3.38
to an employee. On 11 December 1998 the exercise price of these options was
restated to $2.4375, the market value on such date. The options were fully
exercisable at 30 September 1999 and expire on 1 October 2001.
On 3 January 1992, the Company issued to certain of its executives and
non-employee directors options to purchase 275,000 shares at $4.88 per share. On
11 December 1998, the exercise price
50
<PAGE>
of 150,000 of these options was restated to $2.4375, the market value on such
date. The options were fully exercisable at 30 September 1999 and expire on 3
January 2002.
On 15 January 1993, the Company issued to one of its executives options to
purchase 50,000 shares of common stock at an exercise price of $5.25 per share.
On 11 December 1998, the exercise price of these options was restated to
$2.4375, the market value on such date. The options were fully exercisable at 30
September 1999. The options expire on 14 January 2003.
At various dates during fiscal 1995, the Company granted to certain new
employees options to purchase 91,000 shares of common stock at prices ranging
from $6.75 to $6.875. In most cases, one-third of the options became exercisable
on 1 October 1995, with one-third vesting on 1 October of each of the following
two years. The options expire 10 years from the grant date. On 27 October 1995,
the exercise price of these options was restated to $4.125, the market value on
such date, and on 11 December 1998, the exercise price of the remaining 53,500
shares was restated to $2.4375, the market value on such date. As of 30
September 1999, 50,000 options remained to be exercised and all options were
exercisable.
On 4 March 1996, the Company issued options to purchase 10,000 shares at $5.38
to a consultant. The options were fully exercisable at 30 September 1999 and
expire on 4 March 2006.
On 27 August 1996, the Company issued to one of its executives options to
purchase 5,000 shares of common stock at $3.75 per share. On 11 December 1998,
the exercise price of these options was restated to $2.4375, the market value on
such date. The options were fully exercisable at 30 September 1999 and expire on
26 August 2006.
On 12 March 1997, the Company issued options to purchase 20,000 shares of common
stock at $3.75 per share to new members of the Company's Board of Directors. The
options were fully exercisable at 30 September 1999 and expire on 11 March 2007.
During fiscal 1999, the Company granted to certain new employees options to
purchase 8,000 shares of common stock at prices ranging from $4.69 to $4.94. One
third of the options becomes exercisable one year after the date of grant with
one-third vesting during each of the following two years.
Transactions and related information relating to other stock options are
summarized as follows:
<TABLE>
<CAPTION>
Price Per
Options Share
<S> <C> <C>
Options outstanding at 30 September 1996 680,500 $ 3.63
Options granted 120,000 $ 3.85
------- --------
Options outstanding at 30 September 1997 800,500 $ 3.69
Options granted 18,000 $ 3.53
Options exercised (55,000) $ 1.75
Options terminated (125,000) $ 3.93
------- --------
Options outstanding at 30 September 1998 638,500 $ 3.81**
Options granted 11,000 $ 3.45
Options terminated (24,500) $ 3.00
------- --------
Options outstanding at 30 September 1999 625,000 $ 2.84
======= ========
Options exercisable at 30 September 1999 617,000 $ 2.81
======= ========
</TABLE>
** On 11 December 1998, the exercise price of 290,000 outstanding options was
restated to $2.4375, the market value on such date.
51
<PAGE>
The following table summarizes information about all stock options outstanding
at 30 September 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ --------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Exercise Options Life Exercise Options Exercise
Prices Outstanding (years) Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$1.75 to $ 2.50 1,366,068 3.34 $2.28 1,320,348 $2.29
$3.38 to $ 4.13 196,334 5.40 $3.84 140,334 $3.77
$4.69 to $ 6.63 161,000 3.24 $5.06 153,000 $5.07
$6.75 to $10.75 76,500 4.78 $7.13 76,500 $7.13
--------------- --------- ---- ----- --------- -----
$1.75 to $12.13 1,799,902 3.61 $2.91 1,690,182 $2.88
=============== ========= ==== ===== ========= =====
</TABLE>
For the purposes of the following proforma disclosures, the weighted-average
fair value of options has been estimated on the date of grant or repricing using
the Black-Scholes options- pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: no dividend
yield; expected volatility of 62 per cent., 58 per cent. and 56 per cent.;
risk-free interest rate of 5.2 per cent., 5.4 per cent. and 6.4 per cent.; and
an expected term of six and a half years for options granted and two years for
options repriced during 1999. The weighted average fair value at date of grant
of options granted during 1999, 1998 and 1997 was $1.97 ($.70 for options
repriced), $1.89 and $2.05 per option, respectively. Had the compensation cost
been determined based on the fair value at the grant or repricing date
consistent with the provisions of SFAS 123, the Company's net income (loss) and
basic and diluted earnings (loss) per share would have been reduced to the
proforma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended 30 September
1999 1998 1997
($'000) ($'000) ($'000)
<S> <C> <C> <C>
Net income (loss) -- as reported 6,489 1,102 (3,093)
Net income (loss) -- pro forma 5,978 966 (3,392)
Basic earnings (loss) per share -- as reported ($) 0.92 0.15 (0.44)
Basic earnings (loss) per share -- pro forma ($) 0.85 0.14 (0.48)
Diluted income (loss) per share -- as reported ($) 0.80 0.15 (0.44)
Diluted income (loss) per share -- pro forma ($) 0.74 0.13 (0.48)
</TABLE>
Stock Rights
On 20 November 1990, as amended on 24 January 1991 and 16 March 1992, the
Company adopted a Shareholders' Rights Plan, and 6,002,278 rights were
distributed as a dividend at the rate of one right for each share of the
Company's common stock. Each right entitles the registered holder to purchase
from the Company one share of common stock at a purchase price of $20 per share,
subject to adjustment. The rights may be exercised beginning 10 days after a
person or group acquires 21 per cent. or more of the Company's common stock or
announces a tender offer that could result in the person or group owing at least
21 per cent. of the Company's common stock. Subject to possible extensions, the
rights may be redeemed by the Company at $0.001 per right at any time until 10
days after 21 per cent. or more of Catalina's stock is acquired by a person or
group. The rights are also redeemable upon a vote by the stockholders of the
Company if the proposed purchase price for the shares is deemed
52
<PAGE>
fair by a recognized investment banker. In the event the Company is acquired in
a merger or other business combination transaction, the holder of each right
would be entitled to receive common stock of the acquiring company having a
value equal to two times the exercise price of the right. Unless redeemed
earlier, the rights expire on 30 November 2000.
Stock Warrants
In connection with the Company's initial public offering of common stock in May
1988, warrants to purchase 92,000 common shares at $4.20 per share were issued
to the underwriters. The warrants are exercisable through 31 December 2000. The
Company registered the shares underlying the warrants effective 24 May 1995. No
common stock has been issued pursuant to these warrants through 30 September
1999.
12. Commitments
The Company leases offices, warehouse facilities and equipment under
non-cancelable operating leases that expire at various dates through 2008.
Certain leases provide for increases in minimum lease payments based upon
increases in annual real estate taxes and insurance. Future minimum lease
payments under non-cancellable operating leases and minimum rentals to be
received under non-cancellable subleases as of 30 September 1999 by fiscal year,
were as follows:
Minimum Minimum
Rental Sublease
Payments Receipts Net
($'000) ($'000) ($'000)
2000 2,085 923 1,162
2001 1,077 385 692
2002 387 -- 387
2003 333 -- 333
2004 278 -- 278
Thereafter 796 796 --
------ ----- -----
4,956 1,308 3,648
====== ===== =====
Total net rental expense for all operating leases (including month-to-month
leases) amounted to approximately $1.3 million, $1.8 million and $3.1 million
for the years ended 30 September 1999, 1998 and 1997, respectively.
Shenzen Jiadianbao Electrical Products Co., Ltd. ("SJE"), a cooperative joint
venture subsidiary of Go-Gro, and the Bureau of National Land Planning Bao-An
Branch of Shenzen City entered into a Land Use Agreement covering approximately
467,300 square feet in Bao-An County, Shenzen City, People's Republic of China
on 11 April 1995. The agreement provides SJE with the right to use the above
land until 18 January 2042. The land use rights are non-transferable. Under the
terms of the SJE joint venture agreement, ownership of the land and buildings of
SJE is divided 70 per cent. to Go-Gro and 30 per cent. to the other joint
venture partner. Land costs, including the land use rights, approximated $2.6
million of which Go-Gro has paid its 70 per cent. proportionate share of $1.8
million. Under the terms of this agreement, as amended, SJE is obligated to
construct approximately 500,000 square feet of factory buildings and 211,000
square feet of dormitories and offices, of which 40 per cent. was required to be
and was completed by 1 April 1997. The remainder of the construction was to be
completed by 31 December 1999; however, the Company has exercised its rights to
extend the construction date to 31 December 2000 by incurring an extension fee.
The total cost for this project is estimated at $16.5 million (of which $10.1
million had been expended as of 30 September 1999) and includes approximately $1
million for a Municipal Coordination Facilities Fee (MCFF). The MCFF is based
upon the square footage to be constructed. The agreement calls for the MCFF to
be paid in installments beginning in January 1997 of which $441,000 had been
accrued as of 30 September 1999. A 162,000 square foot factory, 77,000 square
foot warehouse and 60,000 square foot dormitory
53
<PAGE>
became fully operational in June 1997. SJE began construction of the final phase
of this facility in December 1999.
On 26 April 1996, the Company entered into a license agreement with Westinghouse
Electric Corporation to market and distribute a full range of lighting fixtures,
lamps and other lighting products under the Westinghouse brand name in exchange
for royalty payments. The agreement terminates on 30 September 2002. The Company
has an option to extend the agreement for an additional ten years. The royalty
payments are due quarterly and are based on a per cent. of the value of the
Company's net shipments of Westinghouse branded products, subject to annual
minimum payments due. Commencing 30 September 2000 either party has the right to
terminate the agreement during fiscal years 2000 to 2002 if the Company does not
meet the minimum net shipments of $25 million for fiscal 2000, $40 million for
fiscal 2001 and $60 million for fiscal 2002. Net sales of Westinghouse branded
products amounted to $20.5 million and $10.9 million for the years ended 30
September 1999 and 1998, respectively.
In 1998, the Company entered into a consulting agreement with a former employee
for a two- year period ending 31 March 2000 for an annual fee of $140,000,
payable monthly.
13. Related Party Transactions
The Company leased a facility located in Massachusetts from an entity in which
an officer and a former officer had an ownership interest. The lease expired in
June 1999. Rent expense related to this lease was approximately $99,000,
$159,000 and $164,000 for the years ended 30 September 1999, 1998 and 1997,
respectively.
Notes and advances receivable from Executive Vice Presidents of the Company
aggregated approximately $284,000 at 30 September 1999. At 30 September 1999
notes and advances included $220,000 in notes bearing interest at LIBOR plus 250
basis points which were collaterized by stock option agreements to purchase
195,000 shares of the Company. A note amounting to $50,000 matures in January
2000, a $100,000 note matures in December 2000 and the remaining $70,000 note
matures in January 2001.
14. Segment Information
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
131, Disclosures about Segments of an Enterprise and Related Information
effective 1 October 1998. SFAS No. 131 supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise, replacing the "industry
segment" approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable operating segments. SFAS No. 131 also requires disclosures about
products and services, geographic areas and major customers. The adoption of
SFAS No. 131 did not affect results of operations or financial position but did
affect the disclosure of segment information.
The Company operates exclusively in the lighting industry with operations based
in the United States and China, and to a lesser extent, Canada and Mexico. The
Company considers its operating segments to be the United States and China.
These operating segments generally follow the management organizational
structure of the Company. Net sales to external customers by US-based operations
are made primarily into the United States. Net sales to external customers by
China-based operations are made primarily into Europe and net sales to external
customers by "all other segments" are made primarily into Canada and to a lesser
extent Mexico and Chile. Intersegment sales represent shipments of finished
products sold at prices determined by management. During fiscal 1998, the
Company restructured its operations which resulted in a change in the pricing of
intersegment sales between China and the other segments. Calculation of the
impact of such change on the segment contributions for fiscal years 1998 and
1999 is not practicable.
The Company evaluates the performance of its operating segments and allocates
resources to them based on net sales and segment contribution. Segment
contribution is defined as income
54
<PAGE>
before parent/holding company and certain administrative expenses, unusual items
and income taxes. Prior years' data has been restated to conform to the current
year reportable operating segments presentation. Information on operating
segments and a reconciliation to income before income taxes for the years ended
30 September 1999, 1998 and 1997 are as follows:
Net Sales:
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 1997 (i)
-------------------------------- -------------------------------- --------------------------------
External External External
customers Intersegment Total customers Intersegment Total customers Intersegment Total
($'000) ($'000) ($'000) ($'000) ($'000) ($'000) ($'000) ($'000) ($'000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States 133,749 1,559 135,308 122,286 1,099 123,385 146,601 3,197 149,798
China 19,523 117,422 136,945 21,309 90,035 111,344 33,950 75,729 109,679
Other segments 23,289 517 23,806 18,265 367 18,632 16,404 428 16,832
Elimination -- (119,498) (119,498) -- (91,501) (91,501) -- (79,354) (79,354)
------- -------- -------- ------- ------- ------- ------- ------- -------
Total 176,561 -- 176,561 161,860 -- 161,860 196,955 -- 196,955
======= ======== ======== ======= ======= ======== ======= ======= =======
</TABLE>
Net Sales by Location of External Customers:
Years ended 30 September
1999 1998 (i) 1997
($'000) ($'000) ($'000)
United States 133,974 122,509 147,519
Canada 19,938 16,538 15,545
Other 22,649 22,813 33,891
------- ------- -------
Net Sales 176,561 161,860 196,955
======= ======= =======
Segment Contribution:
<TABLE>
<CAPTION>
Years ended 30 September
1999 1998 (i) 1997
($'000) ($'000) ($'000)
<S> <C> <C> <C>
United States 6,069 3,664 3,501
China 4,535 1,406 1,942
Other segments (827) (173) (95)
------ ------ ------
Subtotal for segments 9,777 4,897 5,348
Reversal of provision for litigation 2,728 -- --
Reversal of post judgement interest related to
litigation settlement 893 -- --
Litigation charges and related professional fees -- -- (7,453)
Plant closing costs -- -- (930)
Parent/administrative expenses (3,971) (3,430) (2,792)
------ ------ ------
Income (loss) before income taxes 9,427 1,467 (5,827)
====== ====== ======
</TABLE>
55
<PAGE>
Interest Expense (ii):
Years ended 30 September
1999 1998 1997
($'000) ($'000) ($'000)
United States 947 1,569 2,382
China 970 1,176 1,370
Other segments 440 261 388
----- ----- -----
Subtotal for segments 2,357 3,006 4,140
Parent interest expense (income) 56 795 (52)
----- ----- -----
Total interest expense 2,413 3,801 4,088
===== ===== =====
Total Assets:
Year ended
30 September
1999
($'000)
United States 55,411
China 47,316
Other segments 13,776
Eliminations (14,606)
-------
Total assets 101,897
=======
Long-Lived Assets (iii):
Year ended
30 September
1999
($'000)
United States 12,634
China 11,747
Other segments 356
------
Total long-lived assets 24,737
======
Expenditures of additions to Long-Lived Assets:
Years ended 30 September
1999 1998 1997
($'000) ($'000) ($'000)
United States 672 1,138 1,487
China 1,019 247 7,214
Other segments 244 1,032 35
----- ----- -----
Total expenditures 1,935 2,417 8,736
===== ===== =====
(i) In 1997 the United States segment included Meridian Lamps, Inc., a
wholly-owned subsidiary which commenced operations in December 1994 and
terminated operations in June 1997. Net sales to external customers in
1997 amounted to $2.8 million and inter- segment sales amounted to $2.4
million. In 1997, the segment contribution for the United States reflected
a $2.6 million loss related to the Meridian operations.
(ii) Parent and inter-segment advances bear interest at the US prime rate. The
interest expense shown for each segment is net of interest earned on
inter-segment advances.
(iii) Represents property and equipment, net.
56
<PAGE>
Major Customers
During the years ended 30 September 1999, 1998 and 1997 one customer (primarily
included in US-based operations) accounted for 25.8 per cent., 27.5 per cent.
and 22.1 per cent., respectively, of the Company's net sales. One other customer
and its affiliate (also primarily included in the US segment) accounted for 14.5
per cent., 5.3 per cent. and 4.7 per cent. of the Company's net sales during the
years ended 30 September 1999, 1998 and 1997, respectively.
15. Employment, Change in Control, Consulting and Non-Compete Agreements
The Company has employment agreements with three executive officers. The
agreements expire on 30 September 2001. All such officers receive compensation
with minimum annual cost of living increases of 5 per cent. and acceleration of
payments due under the agreements should there be a change in control of the
Company. The agreements provide for severance at the end of the present three
year term ending 30 September 2001 in an amount equal to two times their base
salary and benefits. Each officer is subject to a non-compete provision through
30 September 2001. Bonuses paid to the Company's CEO and three Executive Vice
Presidents pursuant to their employment agreements totalled $674,000 and
$105,000 for fiscal years 1999 and 1998, respectively. There was no bonus for
fiscal year 1997 due to a pre-tax loss.
Pursuant to a reorganisation of the Company's executive management structure, an
Executive Vice President left the Company in December 1999. The Company agreed
to settle its contractual employment obligation to this executive for a payment
of approximately $800,000. The executive will continue to provide consulting
services under a three-year non-compete consulting agreement for annual payments
of $250,000 through December 2002.
Future commitments under employment, consulting and non-compete agreements at 30
September 1999, by fiscal year, excluding the possible effect of bonuses are as
follows:
($'000)
2000 1,911
2001 1,220
2002 1,268
2003 63
-----
4,462
=====
The Company has entered into Change in Control agreements with the Company's
Chief Financial Officer and its Treasurer. The agreements expire in September
2001. Such Agreements provide that, in the event of a change in control of the
Company, if the Company terminates the employment of either employee within
certain time periods or the Company fails to negotiate an acceptable employment
agreement with the employee, the Company shall pay the employee two times his
annual base salary. In addition, the agreements with these employees provide
that in the event they are terminated "without cause" where there has been no
change in control, they are entitled to a severance payment equal to their
annual base salary.
16. Contingencies
Litigation
On 4 June 1991, the Company was served with a copy of the Complaint in the
matter of Browder vs. Catalina Lighting, Inc., Robert Hersh, Dean S. Rappaport
and Henry Gayer, Case No 91- 23683, in the Circuit Court of the 11th Judicial
Circuit in and for Dade County, Florida. The plaintiff in the action, the former
President and Chief Executive Officer of the Company, contended that his
employment was wrongfully terminated and as such brought action for breach of
contract, defamation, slander, libel and intentional interference with business
and contractual relationships, including claims for damages in excess of $5
million against the Company and $3 million against the named directors. During
the course of the litigation the Company prevailed on its Motions for Summary
Judgement and the Court dismissed the plaintiff's claims of libel and
indemnification. On 3 February 1997, the plaintiff voluntarily
57
<PAGE>
dismissed the remaining defamation claims against the Company and directors. The
breach of contract claim was tried in February 1997 and the jury returned a
verdict against the Company for total damages of $2.4 million (including
prejudgement interest). On 14 July 1997, the Court also granted plaintiff's
motion for attorney fees and costs of $1.8 million. A provision of $4.2 million
was recorded by the Company during the quarter ended 31 March 1997 and a
$893,000 provision for post-judgement interest was recorded through 31 March
1999. On 15 June 1999 this case was settled and the Company agreed to pay Mr.
Browder $1.5 million. This settlement resulted in the reversal in the
Consolidated Statements of Operations for the year ended 30 September 1999 of
$2.7 million previously accrued for damages and attorney fees and $893,000 in
previously accrued post judgement interest.
On 17 December 1996 White Consolidated Industries, Inc. ("White"), which has
acquired certain limited trademark rights from Westinghouse Electric Corp.
("Westinghouse") to market certain household products under the
White-Westinghouse trademark, notified the Company of a lawsuit against
Westinghouse and the Company filed in the United States District Court, for the
Northern District of Ohio. The lawsuit challenged the Company's right to use the
Westinghouse trademarks on its lighting products and alleges trademark
infringement. On 24 December 1996, Westinghouse and the Company served a
Complaint and Motion for Preliminary Injunction against White, AB Electrolux,
Steel City Vacuum Co., Inc., Salton/Maxim Housewares, Inc., Newtech Electronics
Corp., and Windmere Durable Holdings, Inc. in the United States District Court,
Eastern District of Pennsylvania, Case No. 96-2294 alleging that the defendants
had violated Westinghouse's trademark rights, breached the Agreement between
Westinghouse and White and sought an injunction to enjoin White against
interference with their contractual arrangements. In October 1997, the cases
were consolidated in the Pennsylvania case and on 7 November 1997 White filed a
Counterclaim and Third Party Claims against Westinghouse, Catalina and Minami
International Corporation alleging trademark infringement, trademark dilution,
false designation of origin, false advertising and unfair competition and
seeking injunctive relief and damages. Both the Company and Westinghouse
vigorously disputed White's allegations. Pursuant to the License Agreement
between Westinghouse and the Company, Westinghouse defended and indemnified the
Company for all costs and expenses for claims, damages and losses, including the
costs of litigation. The case was settled on 30 June, 1999. Catalina made no
payments as part of the settlement. All litigation against the Company was
dismissed and Catalina's license with Westinghouse Electric Company, now CBS,
remains in full force and effect.
During fiscal years 1998 and 1999 the Company received a number of claims
relating to halogen torchieres sold by the Company to various retailers.
Management does not currently believe these claims will result in a material
uninsured liability to the Company. The Company experienced an increase in its
liability insurance premiums effective for the 1999 calendar year and has been
self-insuring up to a maximum of $10,000 for each incident occurring after 1
January, 1999. Based on its experience, the Company does not believe that this
self-insurance provision will have a material adverse impact on the Company's
financial position or annual results of operations. However, no assurance can be
given that the number of claims will not exceed historical experience or that
claims will not exceed available insurance coverage or that the Company will be
able to maintain the same level of insurance.
The Company is also a defendant in other legal proceedings arising in the course
of business. In the opinion of management, the ultimate resolution of these
other legal proceedings will not have a material adverse effect on the Company's
financial position or annual results of operations.
On 9 August 1999 the New York Stock Exchange ("NYSE") notified the Company that
it had changed its rules regarding listing criteria for companies which have
shares traded on the NYSE. The new rules change and increase the requirements to
maintain a NYSE listing. As of 30 September 1999, the Company does not meet one
of the new rules, which requires that any NYSE listed company which has a total
market capitalization of less than $50 million, maintain minimum total
stockholders' equity of $50 million. The Company's stockholders' equity as of
58
<PAGE>
30 September 1999 was $48.1 million. The Company believes it can meet the new
listing rules and, as requested by the NYSE, has provided the NYSE with its plan
to meet the new standard by February, 2001 and the Company's plan was accepted
by the NYSE in October 1999. However, no assurances can be given that the
objectives of the plan will be accomplished by February, 2001. If the Company is
unable to achieve the plan's objectives, the Company's shares could be delisted
from the NYSE, however the Company believes other trading venues are available
for its stock.
17. Disclosure about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and cash equivalents, restricted cash equivalents and short-term
investments, accounts receivable and accounts and letters of credit payable:
The carrying amount approximates fair value due to the short maturity of those
instruments.
Bonds payable and other long-term debt:
The fair value of the Company's bonds payable and other long-term debt is
estimated based on the current rates offered to the Company for borrowings with
similar terms and maturities.
Estimated fair values of the Company's financial instruments are as follows:
At
30 September 1999
Carrying Fair
Amount Value
($'000) ($'000)
Cash and cash equivalents 7,253 7,253
Accounts receivable, net 20,150 20,150
Restricted cash equivalents and
short-term investments 1,721 1,721
Accounts and letters of credit payable 14,939 14,939
Bonds payable 8,210 8,160
Other long-term debt 2,011 2,002
It is not practicable to estimate the fair value of the Company's $7.6 million
in convertible subordinated notes.
59
<PAGE>
APPENDIX III
CATALINA'S UNAUDITED RESULTS FOR THE THREE MONTHS AND
SIX MONTHS ENDED 31 MARCH 2000
The following text has been extracted from the announcement by Catalina of its
unaudited results for the three months and six months ended 31 March 2000, which
was released on 5 May 2000.
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
31 March 31 March
2000 1999 2000 1999
($'000) ($'000) ($'000) ($'000)
<S> <C> <C> <C> <C>
Net sales 42,033 42,128 85,241 84,931
Cost of sales 34,032 32,947 68,345 67,621
------ ------ ------ ------
Gross profit 8,001 9,181 16,896 17,310
Selling, general and administrative
expenses 6,696 7,089 13,477 13,900
Executive management
reorganization -- -- 788 --
------ ------ ------ ------
Operating income 1,305 2,092 2,631 3,410
====== ====== ====== ======
Other income (expenses):
Interest expense (564) (671) (1,108) (1,400)
Other income 365 186 372 298
------ ------ ------ ------
Total other expenses (199) (485) (736) (1,102)
------ ------ ------ ------
Income before income taxes 1,106 1,607 1,895 2,308
Income tax provision 354 448 606 646
------ ------ ------ ------
Net income 752 1,159 1,289 1,662
====== ====== ====== ======
Weighted average number of
shares outstanding
Basic ('000) 6,931 7,080 6,962 7,127
Diluted ('000) 8,761 8,561 8,830 8,454
Earnings per share
Basic ($) 0.11 0.16 0.19 0.23
Diluted ($) 0.10 0.15 0.17 0.22
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
60
<PAGE>
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
31 March *30 September
2000 1999
($'000) ($'000)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 8,609 7,253
Restricted cash equivalents and short-term investments 2,327 1,721
Accounts receivable, net of allowances of $7,562 and $8,591,
respectively 17,770 20,150
Inventories 26,319 28,668
Other current assets 5,129 6,435
------ -------
Total current assets 60,154 64,227
Property and equipment, net 24,234 24,737
Goodwill, net 10,333 10,561
Other assets 2,936 2,372
------ -------
97,657 101,897
====== =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts and letters of credit payable 12,549 14,939
Notes payable -- credit lines 1,932 2,200
Note payable -- other 1,404 --
Current maturities of subordinated notes 2,500 2,500
Current maturities of bonds payable-real estate related 900 2,210
Current maturities of other long-term debt 483 487
Other current liabilities 3,766 6,437
------ -------
Total current liabilities 23,534 28,773
Notes payable -- credit lines 14,400 12,150
Convertible subordinated notes 2,566 5,100
Bonds payable -- real estate related 6,000 6,000
Other long-term debt 1,274 1,524
Other liabilities 734 293
------ -------
Total liabilities 48,508 53,840
Commitments and contingencies
Stockholders' equity
Common stock, issued and outstanding 7,712 shares and
7,373 shares, respectively 77 74
Additional paid-in capital 27,729 26,927
Retained earnings 23,555 22,266
Treasury stock, 580 shares and 378 shares, respectively (2,212) (1,210)
------ -------
Total stockholders' equity 49,149 48,057
------ -------
97,657 101,897
====== =======
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed consolidated
financial statements.
61
<PAGE>
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
31 March
2000 1999
($'000) ($'000)
<S> <C> <C>
Cash flows from operating activities
Net income 1,289 1,662
Adjustments for non-cash items 2,749 2,487
Change in assets and liabilities 541 614
------- -------
Net cash provided by operating activities 4,579 4,763
------- -------
Cash flows from investing activities
Capital expenditures, net (1,597) (815)
Decrease (increase) in restricted cash equivalents
and short-term investments (156) 105
------- -------
Net cash used in investing activities (1,753) (710)
------- -------
Cash flows from financing activities
Proceeds from issuance of common stock 805 143
Payments to repurchase common stock (1,002) (495)
Payments on other long term debt and other liabilities (365) (379)
Payments on bonds payable (1,310) (80)
Payment on convertible subordinated notes (2,534) --
Proceeds from notes payable -- credit lines 23,800 17,900
Payments on notes payable -- credit lines (21,550) (18,100)
Proceeds from note payable -- other 1,404 --
Net payments on notes payable -- credit lines due on demand (268) (1,528)
Sinking fund redemption payments on bonds (450) (450)
------- -------
Net cash used in financing activities (1,470) (2,989)
------- -------
Net increase in cash and cash equivalents 1,356 1,064
Cash and cash equivalents at beginning of period 7,253 1,790
------- -------
Cash and cash equivalents at end of period 8,609 2,854
======= =======
</TABLE>
Six months ended
31 March
2000 1999
Cash paid for: ($'000) ($'000)
Interest 1,146 1,206
Income taxes (473) 1,635
The accompanying notes are an integral part of these condensed consolidated
financial statements.
62
<PAGE>
Notes to Condensed Consolidated Financial Statements
1. Summary of significant accounting policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in the Company's
Annual Report on Form 10-K for the fiscal year ended 30 September 1999 and
should be read in conjunction with the consolidated financial statements and
notes which appear in that report. These statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the condensed consolidated financial statements
include all adjustments (which consist mostly of normal, recurring accruals)
considered necessary for a fair presentation. The results of operations for the
three and six months ended 31 March 2000 may not necessarily be indicative of
operating results to be expected for the full fiscal year due to seasonal
fluctuations in the Company's business, changes in economic conditions and other
factors.
Certain amounts previously presented in the financial statements of prior
periods have been reclassified to conform to the current period's presentation.
Comprehensive Income
Comprehensive Income Effective 1 October 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components. The Company's net income for the three and six months
ended 31 March 2000 equals comprehensive income for the same periods.
2. Inventories
Inventories consisted of the following:
31 March 30 September
2000 1999
($'000) ($'000)
Raw materials 4,522 4,050
Work-in-progress 920 932
Finished goods 20,877 23,686
------ ------
Total inventories 26,319 28,668
====== ======
Costs capitalized in finished goods associated with acquiring, storing and
preparing inventory for distribution amounted to approximately $1.9 million and
$2.2 million at 31 March 2000 and 30 September 1999, respectively.
3. Property and equipment
Shenzhen Jiadianbao Electrical Products Co., Ltd. ("SJE"), a cooperative joint
venture subsidiary of Go-Gro, and the Bureau of National Land Planning Bao-An
Branch of Shenzhen City entered into a Land Use Agreement covering approximately
467,300 square feet in Bao-An County, Shenzhen City, People's Republic of China
on 11 April 1995. The agreement provides SJE with the right to use the above
land until 18 January 2042. The land use rights are non-transferable. Under the
terms of the SJE joint venture agreement, ownership of the land and buildings of
SJE is divided 70 per cent. to Go-Cro and 30 per cent. to the other joint
venture partner. Land costs, including the land use rights, approximated $2.6
million of which Go-Gro has paid its 70 per cent. proportionate share of $1.8
million. Under the terms of this agreement, as amended, SJE is obligated to
construct approximately 500,000 square feet of factory buildings and 211,000
square feet of dormitories and offices, of which 40 per cent. was required to be
and was
63
<PAGE>
completed by 1 April 1997. The remainder of the construction was to be completed
by 31 December 1999; however, the Company has exercised its rights to extend the
construction date to 31 December 2000 by incurring an extension fee. The total
cost for this project is estimated at $16.5 million (of which $10.6 million had
been expended as of 31 March 2000) and includes approximately $1 million for a
Municipal Coordination Facilities Fee (MCFF). The MCFF is based upon the square
footage to be constructed. The agreement calls for the MCFF to be paid in
instalments beginning in January 1997 of which $589,000 had been accrued as of
31 March 2000. A 162,000 square foot factory, 77,000 square foot warehouse and
60,000 square foot dormitory became fully operational in June 1997. SJE began
construction of the final phase of this facility in December 1999.
4. Note payable -- other
In October 1999, the Company borrowed 11.7 million in Chinese Renminbi
(approximately US $1.4 million) from a Chinese Bank. The loan bears interest at
5.85 per cent. payable monthly, and repayment is due in October 2000. The
agreement requires the Company to maintain US $1.5 million in collateral.
5. Commitment
In January 2000, the Company renewed a consulting agreement for a two-year
period beginning 1 April 2000, for an annual fee of $140,000 payable monthly.
6. Segment Information
Information on operating segments and a reconciliation to income before income
taxes for the three and six months ended 31 March 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three months ended 31 March
2000 1999
External External
Net Sales: Customers Intersegment Total Customers Intersegment Total
($'000) ($'000) ($'000) ($'000) ($'000) ($'000)
<S> <C> <C> <C> <C> <C> <C>
United States 27,256 276 27,532 32,147 301 32,448
China 6,735 23,150 29,885 4,722 26,865 31,587
Other segments 8,042 -- 8,042 5,259 161 5,420
Elimination -- (23,426) (23,426) -- (27,327) (27,327)
------ ------- ------- ------ ------- -------
Total 42,033 -- 42,033 42,128 -- 42,128
====== ======= ======= ====== ======= =======
<CAPTION>
Six months ended 31 March
2000 1999
External External
Net Sales: Customers Intersegment Total Customers Intersegment Total
($'000) ($'000) ($'000) ($'000) ($'000) ($'000)
<S> <C> <C> <C> <C> <C> <C>
United States 56,633 550 57,183 64,415 760 65,175
China 12,402 52,016 64,418 10,004 55,086 65,090
Other segments 16,206 121 16,327 10,512 161 10,673
Elimination -- (52,687) (52,687) -- (56,007) (56,007)
------ ------- ------- ------ ------- -------
Total 85,241 -- 85,241 84,931 -- 84,931
====== ======= ======= ====== ======= =======
</TABLE>
64
<PAGE>
Net sales by location of external customers:
Three months ended Six months ended
31 March 31 March
2000 1999 2000 1999
($'000) ($'000) ($'000) ($'000)
United States 27,319 32,264 56,739 64,640
Canada 6,732 4,585 13,692 8,979
Other Countries 7,982 5,279 14,810 11,312
------ ------ ------ ------
Net Sales 42,033 42,128 85,241 84,931
====== ====== ====== ======
Segment Contribution:
Three months ended Six months ended
31 March 31 March
2000 1999 2000 1999
($'000) ($'000) ($'000) ($'000)
United States 771 1,495 1,075 2,126
China 996 1,755 2,804 3,035
Other segments 210 (536) 583 (1,106)
----- ----- ----- ------
Subtotal for segments 1,977 2,714 4,462 4,055
Executive management
reorganization -- -- (788) --
Parent/administrative expenses (871) (1,607) (1,779) (1,747)
----- ----- ----- ------
Income (loss) before income
taxes 1,106 1,607 1,895 2,308
===== ===== ===== =====
Interest Expense (i):
Three months ended Six months ended
31 March 31 March
2000 1999 2000 1999
($'000) ($'000) ($'000) ($'000)
United States 115 219 272 534
China 224 239 458 499
Other segments 123 108 269 215
--- --- ----- -----
Subtotal for segments 462 566 999 1,248
Parent/interest expense 102 105 109 152
--- --- ----- -----
Total interest expense 564 671 1,108 1,400
=== === ===== =====
65
<PAGE>
Total Assets:
31 March 30 September
2000 1999
------- -------
($'000) ($'000)
United States 47,874 55,411
China 48,327 47,316
Other segments 12,426 13,776
Eliminations (10,970) (14,606)
------- -------
Total assets 97,657 101,897
======= =======
Long-lived assets (ii):
31 March 30 September
2000 1999
------- -------
($'000) ($'000)
United States 12,300 12,634
China 11,626 11,747
Other segments 308 356
------- -------
Total long-lived assets 24,234 24,737
======= =======
Expenditures for additions to long-lived assets:
Six Months ended 31 March
------- -------
2000 1999
------- -------
($'000) ($'000)
United States 388 355
China 1,159 390
Other segments 50 70
------- -------
Total expenditures 1,597 815
======= =======
(i) Parent and inter-segment advances bear interest at the US prime rate. The
interest expense shown for each segment is net of interest earned on
inter-segment advances.
(ii) Represents property and equipment, net.
Major Customers
During the three months ended 31 March 2000 and 1999 one customer (with sales
included in United States and other segments) accounted for 33.3 per cent. and
28.6 per cent., respectively, of the Company's net sales and during the six
months ended 31 March 2000 and 1999, accounted for 28.9 per cent. and 24.1 per
cent. respectively, of the Company's net sales. One other customer and an
affiliate (with sales included in United States and other segments) accounted
for 8.9 per cent. and 15.9 per cent., respectively, of net sales for the three
months ended 31 March 2000 and 1999 and for 7.8 per cent. and 10.4 per cent.,
respectively, for the six months ended 31 March 2000 and 1999.
66
<PAGE>
7. Contingencies
Legal
During fiscal years 1998 and 1999 the Company received a number of claims
relating to halogen torchieres sold by the Company to various retailers.
Management does not currently believe these claims will result in a material
uninsured liability to the Company. The Company experienced an increase in its
liability insurance premiums effective for the 1999 calendar year and is
required to self-insure up to $10,000 per incident occurring after 1 January
1999. Based upon its experience, the Company is presently accruing $120,000
annually for this self- insurance provision and has accrued $150,000 for this
contingency as of 31 March 2000. Management does not believe that this
self-insurance provision will have a material adverse impact on the Company's
financial position or annual results of operations. However, no assurance can be
given that the number of claims will not exceed historical experience or that
claims will not exceed available insurance coverage or that the Company will be
able to maintain the same level of insurance.
The Company is also a defendant in other legal proceedings arising in the course
of business. In the opinion of management, the ultimate resolution of these
other legal proceedings will not have a material adverse effect on the Company's
financial position or annual results of operations.
Other
As a result of recent Internal Revenue Service rulings and proposed and
temporary regulations, the Company has restructured its international operations
in order to retain favorable US tax treatment of foreign source income. Should
this restructuring ultimately prove unsuccessful, the Company will likely
experience an increase in its consolidated effective income tax rate for its
1999 fiscal year and subsequent years.
On 9 August 1999 the New York Stock Exchange ("NYSE") notified the Company that
it had changed its rules regarding listing criteria for companies which have
shares traded on the NYSE. The new rules change and increase the requirements to
maintain a NYSE listing. As of 31 March 2000, the Company did not meet one of
the new rules, which requires that any NYSE listed company, which has a total
market capitalization of less than $50 million, maintain minimum total
stockholders' equity of $50 million. The Company's stockholders' equity as of 31
March 2000 was $49.1 million. The Company believes it can meet the new listing
rules and, as requested by the NYSE, has provided the NYSE with its plan to meet
the new standard by February 2001. The Company's plan was accepted by the NYSE
in October 1999. However, no assurances can be given that the objectives of the
plan will be accomplished by February 2001. If the Company is unable to achieve
the plan's objectives, the Company's shares could be delisted from the NYSE,
however the Company believes other trading venues are available for its stock.
8. New Accounting Pronouncement
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
was issued in June 1998. SFAS 133 establishes standards for the accounting and
reporting of derivative instruments embedded in other contracts (collectively
referred to as derivatives) and of hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This statement is effective
for fiscal years beginning after 15 June 2000. The Company has not determined
the effects, if any, that SFAS No. 133 will have on the Company's financial
position or results of operations.
67
<PAGE>
APPENDIX IV
FINANCIAL INFORMATION RELATING TO RING
Basis of presentation
The financial information contained in this Appendix IV does not constitute
statutory accounts within the meaning of section 240(5) of the Act, but has been
extracted without material adjustment from the audited statutory consolidated
accounts of Ring for the three financial years ended 30 June 1999. Statutory
accounts have been delivered to the Registrar of Companies in England and Wales
in respect of each of the years ended 30 June 1997, 30 June 1998 and 30 June
1999 pursuant to section 242 of the Act.
KPMG Audit Plc acted as Ring's auditors in respect of each of the years ended 30
June 1998 and 30 June 1999; Ernst & Young acted as Ring's auditors for the year
ended 30 June 1997. For each of these respective periods, KPMG Audit Plc and
Ernst & Young have made reports under section 235 of the Act which were not
qualified within the meaning of section 262(1) of the Act and contained no
statements under section 237(2) or (3) of the Act in respect of the financial
statements for the three financial years ended 30 June 1999.
68
<PAGE>
1. Consolidated profit and loss accounts
The consolidated profit and loss accounts of Ring for the financial years ended
30 June 1997, 30 June 1998 and 30 June 1999 were as follows:
<TABLE>
<CAPTION>
Notes 1999 1998 1997
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C> <C>
Turnover (i)
Continuing operations 73,389 69,143 58,172
Acquisitions 1,223 -- 2,378
------- ------- -------
74,612 69,143 60,550
Discontinued operations -- 8,714 28,955
------- ------- -------
74,612 77,857 89,505
Cost of sales (52,182) (53,452) (59,038)
------- ------- -------
Gross profit 22,430 24,405 30,467
Operating costs
Pre-exceptional items (18,963) (21,045) (25,071)
Exceptional items -- (310) (1,284)
------- ------- -------
Operating profit/(loss) (i)
Continued operations 3,467 3,326 1,943
Discontinued operations -- (276) 2,169
------- ------- -------
3,467 3,050 4,112
Profit on sale of discontinued activity -- -- 220
Loss on sale of discontinued activities (20) (18,159) (275)
(1998 includes goodwill reinstated of [pounds]23,514,000)
Provisions for loss on sale of prior year
discontinued activities -- -- (60)
Provisions for loss on sale of activities to be
discontinued -- -- (432)
------- ------- -------
Profit/(loss) on ordinary activities before
interest 3,447 (15,109) 3,565
Interest receivable 40 4 527
Interest payable and similar charges (265) (757) (1,823)
------- ------- -------
Profit/(loss) on ordinary activities before
taxation 3,222 (15,862) 2,269
Tax on profit/(loss) on ordinary activities (ii) (1,037) (438) (764)
------- ------- -------
Profit /(loss) on ordinary activities after
taxation 2,185 (16,300) 1,505
Minority interest -- (12) (19)
------- ------- -------
Profit/(loss) for the financial year 2,185 (16,312) 1,486
Dividends -- non equity shares (iii) (543) (509) (517)
Dividends -- equity shares (iii) (696) (634) (883)
------- ------- -------
Retained profit/(accumulated deficit) for the
financial year 946 (17,455) 86
======= ======= =======
Earnings/(loss) per ordinary share -- basic (iv) 4.2p (42.6)p 2.4p
-- diluted (iv) 4.2p (42.6)p 2.4p
</TABLE>
A reconciliation of the movement on equity shareholders' funds is shown in note
(viii) of paragraph 4 of this Appendix IV.
69
<PAGE>
Statement of total recognised gains and losses
<TABLE>
<CAPTION>
1999 1998 1997
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Profit/(loss) for the financial year 2,185 (16,312) 1,486
Exchange differences -- overseas subsidiaries -- (6) (370)
Write off of revaluation reserve for hotel property -- -- (30)
----- ------- -----
Total recognised gains and losses relating to the
financial year 2,185 (16,318) 1,086
===== ======= =====
</TABLE>
2. Consolidated balance sheet
The consolidated balance sheet for Ring as at 30 June 1999 was as follows:
<TABLE>
<CAPTION>
Notes 1999
[pounds]'000
<S> <C>
Fixed assets
Intangible assets 2,258
Tangible assets 3,225
Investments 299
-------
5,782
-------
Current assets
Stocks 11,838
Debtors -- amounts falling due within one year 14,965
-- amounts falling due after one year 140
Cash at bank and in hand 2,338
-------
29,281
Creditors: amounts falling due within one year (21,769)
-------
Net current assets 7,512
-------
Total assets less current liabilities 13,294
Creditors: amounts falling due after more than one year (546)
Minority interests -- non-equity shares (743)
-------
12,005
-------
Capital and reserves
Called-up share capital -- equity shares 19,823
-- non-equity shares (viii) 2,386
-------
22,209
Share premium account (v) 10,405
Other reserves (v) 1,050
Profit and loss account (v) (21,659)
-------
Total shareholders' funds (viii) 12,005
=======
</TABLE>
70
<PAGE>
3. Consolidated cash flow statement
The consolidated cash flow statement of Ring for the financial year ended 30
June 1999 was as follows:
<TABLE>
<CAPTION>
Notes 1999
---------------------
[pounds]'000 [pounds]'000
<S> <C> <C> <C>
Cash flow from operating activities (vi) 3,858
Returns on investments and servicing of finance
Interest received 43
Interest paid (165)
Dividends paid on non-equity shares (543)
Interest element of finance lease rental payments (77)
------
(742)
Taxation (663)
Capital expenditure and financial investment
Purchase of tangible fixed assets, net of leasing finance (436)
Sale of tangible fixed assets 234
Purchase of investments (239)
------
(441)
Acquisitions and disposals
Purchase of subsidiary undertakings (2,406)
Net cash balances acquired with subsidiary undertakings 212
Sale of subsidiary undertakings and deferred consideration
from prior year disposals 47
Release of warranty retention from prior year disposals 500
------
(1,647)
Equity dividends paid (634)
------
Cash outflow before financing (269)
Financing
Repayment of loans (1,233)
Capital element of finance lease rental payments (508)
(1,741)
------
Decrease in cash in the year (2,010)
======
Reconciliation of net cash flow to movement in net funds (note vi)
1999
[pounds]'000
Decrease in cash in the year (2,010)
Cash outflow from decrease in debt and lease financing 1,741
------
Change in net debt resulting from cash flows (269)
Loans and finance leases acquired with subsidiary undertakings (4)
New finance leases (880)
------
Movement in net debt in the year (1,153)
Net funds at 1 July 1998 2,237
------
Net funds at 30 June 1999 1,084
======
</TABLE>
71
<PAGE>
4. Notes to the accounts
Accounting policies
Basis of preparation
The accounts have been prepared in accordance with the Act and with applicable
accounting standards. The accounts are prepared on the historical cost basis.
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to Ring Group's financial
statements.
Basis of consolidation
The consolidated accounts incorporate the accounts of Ring and each of its
subsidiary undertakings for the year ended 30 June. The results of subsidiary
undertakings acquired or disposed of during the year, and requiring to be
acquisition accounted, are included in the consolidated profit and loss account
from or up to the effective date of acquisition or disposal.
Turnover
Turnover comprises the invoiced value of goods and services supplied by the Ring
Group exclusive of VAT and intra-group transactions.
Leased assets
Assets held under leasing arrangements that give rights approximating to
ownership are capitalised as finance leases. The amount capitalised is the
present value of the minimum payments payable during the term of each lease. The
corresponding leasing commitments are included in creditors. The interest
element of the rental obligations is charged to the profit and loss account
using the annuity method.
Rentals in respect of all other leases are charged to the profit and loss
account on a straight line basis over the lease term.
Depreciation
Freehold and long leasehold land is not depreciated. Depreciation on other
assets is calculated to write off the cost on a straight line basis over the
estimated useful lives, at the following rates:
Freehold buildings -- 50 years
Short leasehold property -- over period of lease
Plant and equipment -- 3-5 years
Motor vehicles -- 4-5 years
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets.
Stocks
Stocks are valued at the lower of cost, on a first-in first-out basis, and net
realisable value after making due allowance for any obsolete or slow moving
items. In the case of finished goods, cost comprises direct materials, direct
labour and an appropriate proportion of production overheads.
Deferred taxation
Provision is made for deferred taxation, using the liability method, on all
timing differences to the extent that it is probable that the liability or asset
will crystallise.
Pension benefits
Pension benefits are funded over the employee's period of service. Contributions
to certain personal pension policies are charged to the profit and loss account
as incurred.
72
<PAGE>
Goodwill
Following the issuance of FRS 10 "Goodwill and Intangible Assets", goodwill,
being the excess of the fair value of the purchase consideration over the fair
value of the net assets at the time of the purchase of business, is capitalised
and amortised over a maximum estimated useful life of 20 years on a straight
basis. Goodwill written off in prior years will not be re-stated except in the
event of a business with related goodwill being sold, where goodwill is written
back in calculating the profit or loss on disposal. In the event of a business
being sold when goodwill has been capitalised, the associated goodwill is
written off in the profit and loss account. The directors of Ring consider
annually whether a provision against the value of goodwill on an individual
investment basis is required.
Foreign currency translation
Transactions denominated in foreign currency are translated into sterling at
either the rate of exchange ruling on the date of the transaction or at the
exchange rate of a forward foreign currency contract taken out to cover that
transaction. On consolidation, foreign currency values in the profit and loss
accounts of overseas subsidiaries are translated into sterling at the average
rate of exchange ruling throughout the year. Foreign currency values in the
balance sheets of overseas subsidiary companies are translated at the rates of
exchange ruling at the balance sheet date. The difference between the average
rate and closing rate for the profit and loss account is taken to reserves.
(i) Segmental analysis
An analysis of turnover and operating profit (net of allocation of head office
costs) by segment and by geographical location is :
<TABLE>
<CAPTION>
1999 1998 1997
Operating Operating Operating
Turnover profit Turnover profit Turnover profit
[pounds]'000 [pounds]'000 [pounds]'000 [pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C> <C> <C> <C>
Continuing
operations
Distribution 74,612 3,467 69,143 3,326 60,550 2,741
Exceptional items -- -- -- -- -- (798)
------ ----- ------ ----- ------ -----
74,612 3,467 69,143 3,326 60,550 1,943
------ ----- ------ ----- ------ -----
Discontinued
operations
Engineering -- -- 8,119 259 27,118 3,001
Distribution -- -- -- -- 1,196 93
Other -- -- 595 (225) 641 (439)
------ ----- ------ ----- ------ -----
-- -- 8,714 34 28,955 2,655
Exceptional item -- -- -- (310) -- (486)
------ ----- ------ ----- ------ -----
-- -- 8,714 (276) 28,955 2,169
------ ----- ------ ----- ------ -----
Total 74,612 3,467 77,857 3,050 89,505 4,112
====== ===== ====== ===== ====== =====
</TABLE>
73
<PAGE>
(ii) Taxation
<TABLE>
<CAPTION>
1999 1998 1997
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
The charge based on the profit/(loss) for the year
comprises:
Current year
Corporation tax at 30.75% (1998: 31.0%, 1997: 32.5%) 1,162 530 1,207
Overseas tax -- (42) 319
Deferred tax (118) 49 (107)
----- --- -----
1,044 537 1,419
Adjustments relating to prior years (7) (99) (655)
----- --- -----
1,037 438 764
===== === =====
</TABLE>
(iii) Dividends
<TABLE>
<CAPTION>
1999 1998 1997
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Preference -- non-equity shares 543 509 517
Ordinary -- equity shares
-- Interim dividend 0.6p per share (1998: nil, 1997: 2.2p) 232 -- 883
-- Final dividend proposed 1.2p per share (1998: 1.6p,
1997: nil) 464 634 --
----- ----- ----
1,239 1,143 1,400
===== ===== ====
</TABLE>
Dividends on shares held by the Ring ESOP are waived except for 0.01 per share.
At 30 June 1999 the Ring ESOP held 987,180 ordinary shares.
(iv) Earnings/(loss) per ordinary share
Basic earnings per share of 4.2p (1998: loss 42.6p, 1997: 2.4p) is calculated by
dividing the profit attributable to ordinary shareholders of [pounds]1,642,000
(1998: loss [pounds]16,821,000, 1997: profit [pounds]969,000) by the weighted
average number of shares in issue during the year of 39,231,666 (1998:
39,459,796, 1997: 39,609,829). The ordinary shares held by the Ring ESOP are
excluded from the calculation in accordance with FRS 14 "Earnings per Share".
Diluted earnings per ordinary share of 4.2p (1998: loss 42.6p; 1997: 2.4p) is
basic earnings per ordinary share recalculated to allow the effect of all
outstanding dilutive share options.
(v) Reserves
Share Other non Profit and loss
premium distributable account
[pounds]'000 [pounds]'000 [pounds]'000
As at 1 July 1998 10,405 1,050 (22,605)
Retained profit for the year -- -- 946
------ ----- -------
As at 30 June 1999 10,405 1,050 (21,659)
====== ===== =======
The cumulative amount of goodwill written off directly against reserves in
relation to acquisitions, net of goodwill relating to businesses disposed of, is
[pounds]27,277,000.
74
<PAGE>
(vi) Reconciliation of operating profit to operating cash flow
1999
[pounds]'000
Operating profit
Depreciation charges 3,467
Amortisation of goodwill 1,040
Profit on disposal of fixed assets 65
Decrease in stocks (70)
Increase in debtors 133
Increase in creditors (3,152)
2,375
------
Net cash inflow from operating activities 3,858
======
(vii) Analysis of net funds
1999
[pounds]'000
Net funds is comprised of:
Bank overdraft and short term loans net of cash at bank 2,268
Other secured bank loans (142)
Other loans (4)
Obligations under finance leases (1,038)
------
Net funds at 30 June 1999 1,084
======
(viii) Reconciliation of movements in shareholders' funds
1999
[pounds]'000
Profit for the financial year 2,185
Dividends (1,239)
------
Net increase in shareholders' funds 946
Shareholders' funds as at 1 July 1998 11,059
------
Shareholders' funds as at 30 June 1999 12,005
------
Attributable to:
Equity share interests 9,619
Non-equity share interests 2,386
------
12,005
======
75
<PAGE>
APPENDIX V
RING'S UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 1999
The following is the full text of the announcement by Ring of its unaudited
interim results for the six months ended 31 December 1999, which was released on
1 March 2000.
"Chairman's Statement
I am pleased to report increased sales and operating profit for the first six
months.
Disposal
On 29 November 1999 M&F Components Ltd, which supplies replacement parts for
motor vehicles, was sold for approximately [pounds]1.0m, including repayment of
their overdraft and intercompany loan. This company operates in an oversupplied
market where Ring can no longer generate its required margin.
Results and Earnings
Sales increased by 11% to [pounds]41.9m (1998: [pounds]37.9m), including sales
of [pounds]1.8m relating to the discontinued operation, M&F Components Ltd.
Continued growth of the Lighting Division was again the main contributory
factor. Arctic Products Ltd, acquired in April 1999, contributed sales of
[pounds]774,000 in the period.
Operating profit increased by 14% to [pounds]2.3m (1998: [pounds]2.0m) and,
after adjusting for goodwill of [pounds]393,000 relating to the sale of M&F
Components Ltd, the profit before taxation was [pounds]1.8m (1998: [pounds]1.8m)
and basic earnings per ordinary share were 2.2p (1998: 2.4p).
At 31 December 1999 net borrowings were [pounds]2.5m (1998: [pounds]1.6m)
representing 20% gearing (1998: 13%). In addition to the normal seasonal
increase in working capital requirement during the first six months, the level
of debtors at the end of the half year reflected the higher level of sales and a
short delay in the payment date of a major customer, following their move to
BACS.
Dividend
The Board has declared an interim dividend of 0.65p (1998: 0.6p) per ordinary
share, which will be paid on 14 July 2000 to shareholders on the register at the
close of business on 9 June 2000.
Operational and Trading Review
Divisional Turnover Analysis for the half year to 31 December 1999, excluding
discontinued operations.
Increase/
1999 1998 (decrease)
Division [pounds]m [pounds]m %
Lighting 24.4 21.0 16
Automotive 12.0 12.3 (2)
Consumables 3.7 2.4 54
---- ----
Total 40.1 35.7 12
==== ====
Lighting
The Lighting Division's sales increased by 16%.
Consumer lighting maintained its growth in the highly competitive retail sector
through the introduction of new products and growth of existing customers.
76
<PAGE>
The commercial lighting business, which operates in the industrial market,
increased sales by almost 20% through new product introductions and improved
service.
Automotive
The Automotive Division's sales decreased slightly, reflecting pressure from a
decline in the market. The previous year had benefited from the launch of new
ranges of premium automotive lamps.
In the export market, despite the strength of sterling against the Euro, sales
were slightly up on last year through improved trading in Scandinavia.
Sales by BMAC, the train and bus lighting business, were 13% below last year.
There are signs of recovery in the train industry but it will be some time
before this is reflected in orders. The company has a reputation for quality
products and new ranges of light units for both trains and buses are being
developed. The company has received a good reaction from its customers to the
launch of a new range of LED exterior lights for buses.
Grove Products, the caravan parts and accessory business, increased sales in a
static market by 8%, mainly from new products.
Lighten Point, the vehicle electrics division, and Lancer Products, the
replacement vehicle parts division, both operate in very competitive markets.
Whilst they maintained the same level of sales they suffered margin pressure.
Action is being taken to contain costs and to develop new higher value products.
Consumables Division
The prior year acquisitions, Arctic Products and PH Products, together with an
excellent performance by Van-Line increased sales of the Consumables Division by
54% in the first half.
PH Products is being relocated to the same site as Arctic Products as part of
the continuing close co-operation between these two companies.
Operational Issues
To date no significant millennium problems have arisen but it will be a few
months before we can be certain that no other problems will arise.
The additional 58,000 sq.ft leased warehouse on the main Gelderd Road site at
Leeds was completed in January 2000 and is fully operational. As previously
reported, the group will benefit from improved rental terms for the site as a
whole, operational efficiency and reduced off-site warehousing costs.
The number of orders received by electronic transmission is increasing and the
200,000 sq. ft. Leeds distribution centre now receives over half its daily
orders in this manner. These orders are controlled through to despatch
electronically, only needing paperwork for transport purposes.
By the end of the calendar year the majority of our group companies should have
their own websites to provide enhanced customer support.
Prospects
The group's investment in new products, information technology and distribution
facilities should enable us to meet the demands of a competitive market and
consolidating customer base.
We will continue to look selectively for further suitable acquisition
opportunities.
K. Jackson
Chairman
1 March 2000
77
<PAGE>
Consolidated profit & loss account
for the six months ended 31 December 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Turnover
Continuing operations 40,111 35,753 70,387
Discontinued operations 1,816 2,098 4,225
------ ------ ------
41,927 37,851 74,612
------ ------ ------
Operating profit/(loss)
Continuing operations 2,266 2,147 3,735
Discontinued operations 2 (163) (268)
------ ------ ------
2,268 1,984 3,467
Loss on sale of discontinued operations (including
goodwill reinstated of [pounds]393,000 in the six
months ended 31 December 1999) (366) -- (20)
------ ------ ------
Profit on ordinary activities before interest 1,902 1,984 3,447
Interest receivable 4 7 40
Interest payable (98) (157) (265)
------ ------ ------
Profit on ordinary activities before taxation 1,808 1,834 3,222
Tax on profit on ordinary activities (685) (589) (1,037)
------ ------ ------
Profit for the period 1,123 1,245 2,185
Dividends -- non-equity shares (256) (286) (543)
Dividends -- equity shares (251) (238) (696)
------ ------ ------
Retained profit for the period 616 721 946
====== ====== ======
Earnings per ordinary share -- basic 2.2p 2.4p 4.2p
-- diluted 2.2p 2.4p 4.2p
</TABLE>
78
<PAGE>
Consolidated balance sheet
at 31 December 1999
<TABLE>
<CAPTION>
Unaudited Unaudited Audited
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Fixed assets
Intangible assets 2,200 1,070 2,258
Tangible assets 3,464 3,273 3,225
Investments 299 92 299
------- ------- -------
5,963 4,435 5,782
------- ------- -------
Current assets
Stocks 13,218 13,432 11,838
Debtors: amounts falling due within one year 20,484 16,848 14,965
amounts falling due after more than one year 201 163 140
Cash at bank and in hand 273 2,745 2,338
------- ------- -------
34,176 33,188 29,281
Creditors: amounts falling due within one year (25,808) (24,580) (21,769)
------- ------- -------
Net current assets 8,368 8,608 7,512
------- ------- -------
Total assets less current liabilities 14,331 13,043 13,294
Creditors: amounts falling due after more than one year (574) (520) (546)
Minority interests -- non-equity shares (743) (743) (743)
------- ------- -------
13,014 11,780 12,005
======= ======= =======
Capital and reserves
Called-up share capital -- equity shares 19,823 19,823 19,823
-- non-equity shares 2,386 2,386 2,386
------- ------- -------
22,209 22,209 22,209
Share premium account 10,405 10,405 10,405
Other reserves 1,050 1,050 1,050
Profit and loss account (20,650) (21,884) (21,659)
------- ------- -------
Total shareholders' funds 13,014 11,780 12,005
======= ======= =======
</TABLE>
79
<PAGE>
Other primary statements
for the six months ended 31 December 1999
Statement of total recognised gains and losses
There are no recognised gains and losses other than the retained profit for the
period stated in the consolidated profit and loss account.
Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Profit for the period 1,123 1,245 2,185
Dividends (507) (524) (1,239)
------ ------ ------
616 721 946
Goodwill reinstated on disposals 393 -- --
------ ------ ------
1,009 721 946
Opening shareholders' funds 12,005 11,059 11,059
------ ------ ------
Closing shareholders' funds 13,014 11,780 12,005
====== ====== ======
</TABLE>
Consolidated cash flow statement
for the six months ended 31 December 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Cash flow from operating activities (note 1) (2,980) (534) 3,858
Returns on investments and servicing of finance (note 2) (333) (365) (742)
Taxation 18 (318) (663)
Capital expenditure and financial investment (note 2) (383) (184) (441)
Acquisitions and disposals (note 2) 639 (1,274) (1,647)
Equity dividends paid (232) (634) (634)
------ ------ ------
Cash outflow before financing (3,271) (3,309) (269)
Financing -- decrease in debt (note 2) (384) (1,236) (1,741)
------ ------ ------
Decrease in cash in the period (3,655) (4,545) (2,010)
====== ====== ======
</TABLE>
80
<PAGE>
Reconciliation of net cash flow to movement in net (debt)/funds
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Decrease in cash in the period (3,655) (4,545) (2,010)
Cash outflow from decrease in debt and finance leasing 384 1,236 1,741
------ ------ ------
Change in debt resulting from cash flow (3,271) (3,309) (269)
Loans and finance leases acquired with subsidiary
undertakings -- -- (4)
New finance leases (358) (495) (880)
------ ------ ------
(3,629) (3,804) (1,153)
Net funds at 1 July 1,084 2,237 2,237
------ ------ ------
(2,545) (1,567) 1,084
------ ------ ------
Net (debt) / funds is comprised of:
Bank overdraft and short term loans net of cash at bank (1,387) (267) 2,268
Other secured bank loans -- (375) (142)
Other loans -- (4) (4)
Obligations under finance leases (1,158) (921) (1,038)
------ ------ ------
(2,545) (1,567) 1,084
====== ====== ======
</TABLE>
Notes to the consolidated cash flow statement
for the six months ended 31 December 1999
1. Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Operating profit 2,268 1,984 3,467
Depreciation charges 480 469 1,040
Amortisation of goodwill 58 23 65
Profit on disposal of fixed assets (15) (46) (70)
(Increase)/decrease in stocks (2,069) (1,520) 133
Increase in debtors (6,779) (5,168) (3,152)
Increase in creditors 3,077 3,724 2,375
------ ------ -----
Net cash (outflow)/inflow from operating activities (2,980) (534) 3,858
====== ====== =====
</TABLE>
81
<PAGE>
2. Analysis of cash flows for headings netted in the cash flow statement
<TABLE>
<CAPTION>
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
1999 1998 1999
[pounds]'000 [pounds]'000 [pounds]'000
<S> <C> <C> <C>
Returns on investments and servicing of finance
Interest received 4 4 43
Interest paid (50) (76) (165)
Preference dividends paid (255) (256) (543)
Interest element of finance lease rental payments (32) (37) (77)
---- ------ ------
Net cash outflow from returns on investments and
servicing of finance (333) (365) (742)
---- ------ ------
Capital expenditure and financial investment
Purchase of tangible fixed assets net of leasing finance (424) (256) (436)
Sale of tangible fixed assets 41 104 234
Purchase of investments -- (32) (239)
---- ------ ------
Net cash outflow from capital expenditure and
financial investment (383) (184) (441)
---- ------ ------
Acquisitions and disposals
Purchase of subsidiary undertakings -- (1,310) (2,406)
Net cash balances acquired with subsidiary undertakings -- -- 212
Net cash balances transferred on sale of subsidiary
undertaking 839 -- --
Sale of subsidiary undertaking and deferred consideration
from prior year disposals 28 36 47
Release of warranty retention from prior year disposals -- -- 500
Deferred consideration paid for prior year acquisitions (228) -- --
---- ------ ------
Net cash inflow/(outflow) from acquisitions and
disposals 639 (1,274) (1,647)
---- ------ ------
Financing
Debt due within one year -- repayment of loans (146) (480) (713)
Debt due beyond one year -- repayment of loans -- (520) (520)
Capital element of finance lease rental payments (238) (236) (508)
---- ------ ------
Net cash outflow from financing (384) (1,236) (1,741)
==== ====== ======
</TABLE>
82
<PAGE>
Notes to the Interim Report
for the six months ended 31 December 1999
1. The results for the six months to 31 December are unaudited and do not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
2. The figures for the year ended 30 June 1999 are an abridged version of the
full accounts for that year which received an unqualified audit opinion
and which have been filed with the Registrar of Companies.
3. The interim information has been prepared on the basis of the accounting
policies set out in the group's statutory accounts for the year ended 30
June 1999.
4. The taxation provision for the six months ended 31 December 1999 has been
calculated at 31.5%.
5. The Interim Report will be distributed to shareholders and is available to
the general public at the Company's registered office at Gelderd Road,
Leeds, LS12 6NB."
83
<PAGE>
APPENDIX VI
ADDITIONAL INFORMATION
1. Responsibility
The executive director and senior officers of Catalina, whose names are set out
in paragraph 2(a) below, accept responsibility for the information contained in
this document, other than that relating to the Ring Group, the directors of Ring
and members of their immediate families. To the best of the knowledge and belief
of the executive director and senior officers of Catalina (who have taken all
reasonable care to ensure that such is the case), the information contained
herein for which they are responsible is in accordance with the facts and does
not omit anything likely to affect the import of such information.
The directors of Ring, whose names are listed in paragraph 2(d) below, accept
responsibility for the information contained in this document relating to the
Ring Group, the directors of Ring and members of their immediate families. To
the best of the knowledge and belief of the directors of Ring (who have taken
all reasonable care to ensure that such is the case), such information is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
2. Directors
(a) The executive director and senior officers of Catalina are:
Robert Hersh Chairman, Chief Executive Officer and President
Dean S. Rappaport Executive Vice President
Nathan Katz Executive Vice President
David W. Sasnett Senior Vice President, Chief Financial Officer and
Chief Accounting Officer
Thomas M. Bluth Senior Vice President, Secretary and Treasurer
(b) The non-executive directors of Catalina are:
Ryan Burrow Director
Henry Latimer Director
Jesse Luxton Director
Robert Lanzillotti Director
Howard Steinberg Director
Brion G. Wise Director
(c) The directors of Catalina (UK) are:
Robert Hersh
Dean S. Rappaport
Thomas M. Bluth
(d) The directors of Ring are:
Kenneth Jackson Non-executive Chairman
John Maddison Hall Chief Executive
Anthony Frederick Welham Group Finance Director
Brian Pearce Doe Non-executive Director
Reginald George Hardie Non-executive Director
3. Holdings and dealings
In this paragraph 3, "disclosure period" means the period commencing 13 March
1999 (the date twelve months prior to the commencement of the Offer Period) and
ending on 31 May 2000 (the latest practicable date prior to the publication of
this document).
(a) None of Catalina or Catalina (UK) or any directors of Catalina or Catalina
(UK), members of their immediate families or persons deemed to be acting
in concert with Catalina or Catalina (UK) for the purposes of the Offers
owns or controls or (in the case of the directors of Catalina (UK)) is
interested in any Ring Shares, or any securities convertible into, rights
to subscribe for, options (including trade options) in respect of, or
derivatives referenced to, Ring Shares ("relevant securities"), nor has
any such person dealt for value therein during the disclosure period.
84
<PAGE>
(b) (i) The interests of the directors of Ring and their immediate families,
all of which are beneficial unless otherwise stated, in the ordinary
share capital of Ring as at 31 May 2000 (the latest practicable date
prior to the publication of this document) which have been notified
to Ring pursuant to Section 324 or 328 of the Act or which were
required to be entered in the register maintained under the
provisions of section 325 of the Act, are set out below:
Number of
Ring Ordinary
Shares
K Jackson --
J M Hall 501,703
A F Welham 70,690
B P Doe --
R G Hardie 30,000
No director of Ring has any interest in Ring Convertible Preference Shares
or in Ring Preference Shares.
(ii) As at 31 May 2000 (the latest practicable date prior to the
publication of this document) the following options over Ring
Ordinary Shares had been granted to the directors of Ring and
remained outstanding:
Number of Exercise price
options (pence) Exercise date/period
J M Hall 30,000 127.5 8 December 1998 to
8 December 2005
150,000 27.5 10 December 2001 to
10 December 2008
2,421 32.0 29 March 2002
A F Welham 4,000 127.5 8 December 1998 to
8 December 2000
100,000 27.5 10 December 2001 to
10 December 2008
2,421 32.0 29 March 2002
(iii) As at 31 May 2000 (the latest practicable date prior to the
publication of this document) the number of Ring Shares owned or
controlled and committed (unless otherwise indicated) by those
persons who have given undertakings to accept one or more of the
Offers were as follows:
Number of Ring
Number of Ring Convertible
Ordinary Shares Preference Shares
Mr N R Puri and associated parties (1) 11,855,000 (4) 2,373,927 (2)
Mr D R Rivlin 4,925,778 (4) --
BFS Small Companies Dividend Trust PLC 1,990,000 (5) --
Ring ESOP 986,680 (3) --
Micro Quoted Growth Trust PLC 985,000 (5) --
Rodo Nominees 748,642 6,165,291
Mr J M Hall 501,703 --
Mr A F Welham 70,690 --
Britannia Limited 51,643 425,301
Mr R G Hardie 30,000 --
(1) Mr N R Puri is the beneficial owner of these holdings although they are
held through a number of different registered holders.
(2) Owned or controlled but not committed, details of the undertakings given
in regard to such holdings are given in paragraph 9 below.
(3) Irrevocable undertakings have been given in respect of 362,842 Ordinary
Shares controlled by the Ring ESOP.
(4) Such irrevocable undertakings may lapse in the event that a competing
offer is made for the Ring Ordinary Shares at 54 pence or above.
(5) Such irrevocable undertakings may lapse in the event that a competing
offer is made for the Ring Ordinary Shares at 55 pence or above.
85
<PAGE>
(iv) The following dealings for value in Ring Ordinary Shares by certain
of the persons referred to in paragraph (b)(i) and (b)(iii) have
taken place during the disclosure period:
<TABLE>
<CAPTION>
Number of
Ring Price per
Ordinary share
Name Date Transaction Shares (pence)
<S> <C> <C> <C> <C>
Micro Quoted Growth Trust
PLC 13 March 2000 Disposal 300,000 48.0
BFS Small Companies
Dividend Trust PLC 30 November 1999 Purchase 190,000 33.0
Micro Quoted Growth Trust
PLC 30 November 1999 Purchase 15,000 33.0
BFS Small Companies
Dividend Trust PLC 14 September 1999 Purchase 300,000 30.0
Mr D R Rivlin 15 September 1999 Purchase 175,000 30.0
Mr N R Puri and associated
parties 24 August 1999 Purchase 200,000 31.0
Mr N R Puri and associated
parties 3 August 1999 Purchase 100,000 32.0
Micro Quoted Growth Trust
PLC 13 July 1999 Purchase 300,000 32.0
Mr N R Puri and associated
parties 16 July 1999 Purchase 100,000 31.0
BFS Small Companies
Dividend Trust PLC 21 June 1999 Purchase 500,000 31.0
BFS Small Companies
Dividend Trust PLC 14 June 1999 Purchase 1,000,000 30.0
Mr N R Puri and associated
parties 8 June 1999 Purchase 1,607,356 30.0
Mr N R Puri and associated
parties 3 June 1999 Purchase 1,392,644 30.0
Mr N R Puri and associated
parties 7 May 1999 Purchase 500,000 30.0
Ring ESOP 6 May 1999 Purchase 411,559 29.25
</TABLE>
(v) Henry Cooke, which is a trading name of Brown, Shipley & Co.
Limited, acts as stockbroker to Ring. As at 31 May 2000, the latest
practicable date prior to the posting of this document,
discretionary clients of Henry Cooke were interested in 119,726 Ring
Shares. Henry Cooke has dealt for value in Ring Shares (all of which
were managed by Henry Cooke on a discretionary basis) during the
disclosure period as follows:
Number of Ring Price per share
Date Transaction Ordinary Shares (pence)
27 March 2000 Disposal 4,500 42.0
19 January 2000 Disposal 10,000 31.0
5 July 1999 Disposal 4,000 33.0
8 June 1999 Purchase 50,000 30.0
18 May 1999 Disposal 3,000 28.0
4 May 1999 Disposal 250 28.0
22 April 1999 Disposal 2,700 27.0
22 April 1999 Disposal 2,000 27.0
26 March 1999 Disposal 1,600 30.0
23 March 1999 Disposal 1,700 31.0
(c) As at 31 May 2000, the latest practicable date prior to the posting of
this document, neither Ring nor any of the directors of Ring nor any
member of their immediate families or related trusts owns, controls or is
interested in, directly or indirectly, any shares in either Catalina or
Catalina (UK) nor has any such person dealt for value in any shares in
either Catalina or Catalina (UK) during the disclosure period.
86
<PAGE>
4. Market quotations
The following table shows the closing middle-market quotations for Ring Ordinary
Shares as derived from the Daily Official List on the first dealing day of each
of the six months immediately prior to the date of this document, 10 March 2000
(the last dealing day prior to the announcement by Ring that discussions were
taking place which may or may not lead to an offer being made), and on 31 May
2000 (the last dealing day prior to the publication of this document).
Price per Ring
Ordinary Share
Date (pence)
1 December 1999 33.0
4 January 2000 31.5
1 February 2000 36.5
1 March 2000 34.0
10 March 2000 32.5
3 April 2000 40.0
2 May 2000 36.5
31 May 2000 35.0
5. Basis of calculation and sources of information
(a) Unless otherwise stated, the information concerning Catalina is extracted
from Catalina's 1999 Annual Report and the Form 10-K for the year ended 30
September 1999, and Catalina's unaudited results for the three months and
six months ended 31 March 2000 or has been supplied by Catalina.
(b) Unless otherwise stated, the information concerning Ring is extracted from
Ring's audited consolidated accounts for the two years ended 30 June 1999,
and Ring's unaudited interim results for the six months ended 31 December
1999, or has been supplied by Ring.
(c) The value of the Offers is based on 39,645,923 Ring Ordinary Shares and
9,492,295 Ring Convertible Preference Shares.
(d) The closing middle-market prices of Ring Ordinary Shares are derived from
the Daily Official List on the relevant dates.
(e) The market capitalisation of Catalina is calculated based on 7,192,412
shares being in issue and the closing mid-market price of $3.8125 per
Catalina ordinary share on 30 May 2000.
6. Financing arrangements
The amount required to implement the Offers will be provided to Catalina (UK)
pursuant to a credit facility agreement dated 31 May 2000 made between Catalina
(UK), Catalina, Rothschild and SunTrust Bank.
Neither the payment of interest on, nor repayment of, nor security for any
liability (contingent or otherwise) of the Catalina Group will depend to any
significant extent on the business of the Ring Group.
Rothschild is satisfied that the financial resources necessary to implement the
Offers in full are available to Catalina (UK).
7. Material contracts
(a) The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by the Catalina Group since 13
March 1998, being two years prior to the commencement of the Offer Period
and are or may be material:
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(i) an agreement dated 22 October 1999 between (1) Catalina and (2)
China Construction Fifth Engineering Bureau, Schenzen Company
relating to the construction of a manufacturing facility in
Shenzhen, China for $1.64 million; and
(ii) a letter agreement dated 25 May 2000 from Ring to Catalina pursuant
to which Ring has agreed to pay to Catalina a termination fee of
[pounds]198,200 in the event that a third party makes a successful
higher offer for Ring, as described in paragraph 7(b)(v) below.
(b) The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by the Ring Group since 13
March 1998, being two years prior to the commencement of the Offer Period
and are or may be material:
(i) an agreement dated 26 June 1998 between (1) Ring and another and (2)
Tradeway Consultants Limited under which Ring disposed of Ptarmigan
Hotels Limited for a cash consideration of [pounds]336,000;
(ii) an agreement dated 7 August 1998 between (1) Donald Brian Lupton and
(2) Ring under which Ring acquired the entire issued share capital
of PH Products Limited for a cash consideration of
[pounds]1,385,000;
(iii) an agreement dated 22 April 1999 between (1) T D Freimuth and others
and (2) Ring under which Ring acquired the entire issued share
capital of Arctic Products Limited for an initial cash consideration
of [pounds]1,028,000 and a further deferred payment of
[pounds]227,500;
(iv) an agreement dated 26 November 1999 between (1) Ring, (2) M&F
(Holdings) Limited and (3) Ring Lamp Company Limited under which
Ring sold the entire issued share capital of M&F Components Limited
for a consideration comprising [pounds]150,000 in cash to be
satisfied over a period of 32 months and approximately
[pounds]850,000 in repayment by the purchaser of overdraft and
inter-company balances; and
(v) a letter agreement dated 25 May 2000 between (1) Ring and (2)
Catalina under which Ring agreed to pay Catalina a fee of
[pounds]198,200 in the event that the Offers fail to become or be
declared unconditional in all respects, lapse or are withdrawn in
circumstances where a recommended higher competing offer is made by
a third party and such competing offer subsequently becomes or is
declared unconditional in all respects.
8. Service contracts of the directors of Ring
Save as disclosed below, there is no service contract between any director of
Ring and Ring or any of its subsidiaries having more than 12 months to run and
no such contract has been entered into or amended within the six months
preceding the date of this document.
(a) Mr. J M Hall is employed by Ring under a service agreement dated 25 July
1995 which may be terminated on 24 months' notice given by either party
and under which he is currently paid an annual salary of [pounds]155,000,
provided with a company car and entitled to life insurance cover of four
times salary, permanent health and medical insurance cover and a
contribution by Ring of 10% of salary to his pension plan; and
(b) Mr A F Welham is employed by Ring under an undated service agreement which
may be terminated on 24 months' notice given by either party and under
which he is currently paid an annual salary of [pounds]100,000, provided
with a company car and entitled to life insurance cover of four times
salary, permanent health and medical insurance cover and a contribution by
Ring of 10% of salary to his pension plan.
9. Other information
(a) Save as disclosed in this document, there is no agreement, arrangement or
understanding, (including any compensation arrangement) between Catalina
(UK) or any person acting in concert with it for the purposes of the
Offers and any of the directors, recent directors, shareholders or recent
shareholders of Ring having any connection with or dependence upon, or
which is conditional on, the outcome of the Offers.
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(b) There is no agreement, arrangement or understanding whereby the beneficial
ownership of any of the Ring Ordinary Shares or Ring Convertible
Preference Shares to be acquired pursuant to the Offers will be
transferred to any other person, save that Catalina (UK) reserves the
right to transfer any such shares to any other member of the Catalina
Group.
(c) No proposal exists in connection with the Offers that any payment be made
to any person in compensation for loss of office or as consideration for,
or in connection with, his retirement from office other than compensation
for loss of office to the non-executive directors of Ring which amount, in
aggregate, to [pounds]26,625.
(d) The registered office of Catalina (UK) is 100 Barbirolli Square,
Manchester M2 3AB. Catalina (UK) is a wholly owned subsidiary of Catalina.
Catalina (UK) was incorporated in England and Wales on 13 March 2000. The
principal and registered offices of Catalina are located at 18191 NW 68th
Avenue, Miami, Florida 33015, US.
(e) The registered office of Ring is at Gelderd Road, Leeds LS12 6NB.
(f) Rothschild and Arthur Andersen Corporate Finance have each given and not
withdrawn their respective written consents to the issue of this document
with inclusion herein to the references to their names in the form and
context in which they appear.
(g) Save as disclosed in this document, there has been no material change in
the financial or trading position of Ring since 30 June 1999 (the date to
which the last audited accounts of Ring were prepared).
(h) Save as disclosed in this document, there has been no material change in
the financial or trading position of Catalina since 30 September 1999 (the
date to which the last audited accounts of Catalina were prepared).
(i) Mr N R Puri and associated parties have given undertakings to Catalina
(UK) in respect of their entire holdings of, in aggregate, 2,373,927
Convertible Preference Shares to vote in favour of certain resolutions
including, inter alia, a resolution for Ring to apply for the Ring
Ordinary Shares to be de-listed and re-register as a private company, to
be proposed by Ring in the event that the Offers become or are declared
unconditional in all respects.
10. Documents available for inspection
Copies of the following documents will be available for inspection, during
normal business hours, on any weekday (public holidays excepted) at the offices
of Addleshaw Booth & Co, 60 Cannon Street, London EC4N 6NP whilst the Offers
remain open for acceptance:
(a) the memorandum and articles of association of Catalina (UK) and Ring and
the articles of incorporation and by-laws of Catalina;
(b) the audited consolidated accounts of Catalina for the financial years
ended 30 September 1998 and 30 September 1999;
(c) the unaudited results of Catalina for the three months and six months
ended 31 March 2000;
(d) the audited consolidated accounts of Ring for the financial years ended 30
June 1998 and 30 June 1999;
(e) the unaudited interim results of Ring for the six months ended 31 December
1999;
(f) the material contracts referred to in paragraph 7 above;
(g) the service contracts of the directors of Ring referred to in paragraph 8
above;
(h) the letters of consent referred to in paragraph 9(f) above;
(i) this offer document and the Forms of Acceptance;
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(j) the irrevocable undertakings to accept the Offers given by the persons
referred to in paragraph 3(b)(iii) above; and
(k) the credit facility agreement dated 31 May 2000 referred to in paragraph 6
above; and
Dated 1 June 2000
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APPENDIX VII
DEFINITIONS
The following definitions apply throughout this document and the accompanying
Form(s) of Acceptance, unless the context otherwise requires:
"Acquisition" the proposed acquisition by Catalina (UK) of
Ring pursuant to the Offers
"Arthur Andersen Arthur Andersen Corporate Finance, a
Corporate Finance " division of Arthur Andersen
"Catalina" or "Company" Catalina Lighting, Inc.
"Catalina (UK)" Catalina International PLC, a wholly owned
subsidiary of Catalina
"Catalina Group" or "Group" Catalina and its subsidiary undertakings
"certificated" or a Ring Share which is not in uncertificated
"in certificated form" form (that is, not in CREST)
"City Code" the City Code on Takeovers and Mergers
"Companies Act" or "Act" the Companies Act 1985 (as amended)
"Convertible Preference Offer" the recommended cash offer made by
Rothschild on behalf of Catalina (UK),
contained in this document, to acquire the
Ring Convertible Preference Shares on the
terms and subject to the conditions set out
in this document and in the blue Form of
Acceptance
"CREST" the relevant system (as defined in the
Regulations) in respect of which CRESTCo is
the Operator (as defined in the Regulations)
"CRESTCo" CRESTCo Limited
"CREST member" a person who has been admitted by CRESTCo as
a system- member (as defined in the
Regulations)
"CREST participant" a person who is, in relation to CREST, a
system- participant (as defined in the
Regulations)
"CREST sponsor" a CREST participant admitted to CREST as a
CREST sponsor
"CREST sponsored member" a CREST member admitted to CREST as a
sponsored member
"Daily Official List" the Daily Official List of the London Stock
Exchange
"First Closing Date" the first closing date of the Offers, being
22 June 2000
"Forms of Acceptance" the white Form of Acceptance relating to the
Ordinary Offer and/or the blue Form of
Acceptance relating to the Convertible
Preference Offer, as the context may require
"IRG plc" IRG plc, 34 Beckenham Road, Beckenham, Kent
BR3 4TU
"ISIN" the international stock identification
number
"London Stock Exchange" The London Stock Exchange Limited
"Member account ID" the identification code or number attached
to any member account in CREST
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"Offer" the Ordinary Offer and/or the Convertible
Preference Offer as the context may require
"Offers" the Ordinary Offer and the Convertible
Preference Offer
"Offer Period" the period commencing on 13 March 2000 (the
date of the announcement by Ring that it was
in discussions which may or may not lead to
an offer being made for Ring) and ending on
the later of (i) the First Closing Date;
(ii) the date when the Offers become or are
declared unconditional as to acceptances;
and (iii) the date when the Offers lapse
"Offeror" Catalina (UK)
"Official List" the Official List of the London Stock
Exchange
"Ordinary Offer" the recommended cash offer made by
Rothschild on behalf of Catalina (UK),
contained in this document, to acquire the
Ring Ordinary Shares on the terms and
subject to the conditions set out in this
document and in the white Form of Acceptance
"Panel" the Panel on Takeovers and Mergers
"participant ID" the identification code or membership number
used in CREST to identify a particular CREST
member or other CREST participant
"Receiving Agent" IRG plc
"Regulations" the Uncertificated Securities Regulations
1995 (SI 1995 No 95/3272)
"Ring" Ring PLC
"Ring Convertible the existing issued fully paid 19.2 per
Preference Shares" or cent. convertible preference shares of 25
"Convertible Preference pence each in the capital of Ring
Shares"
"Ring ESOP" the Ring Employee Share Ownership Plan
"Ring Group" Ring and its subsidiary undertakings
"Ring Ordinary Shares" or the existing issued fully paid ordinary
"Ordinary Shares" shares of 50 pence each in the capital of
Ring and any further such shares which are
unconditionally allotted or issued and fully
paid after the date hereof and before the
Ordinary Offer closes (or by such earlier
date as Catalina (UK) may, subject to the
City Code, decide) in accordance with the
terms of the Ordinary Offer
"Ring Preference Shares" or the existing issued fully paid 3.5 per cent.
"Preference Shares" cumulative non- convertible preference
shares of 62.5 pence each in the capital of
Ring
"Ring Shareholders" the holders of Ring Shares
"Ring Share Option the Ring 1998 Approved Company Share Option
Schemes" Plan, the Ring 1998 Sharesave Scheme, the
Ring 1998 Unapproved Share Option Plan, the
Ring 1995 Executive Share Option Scheme and
the Ring Executive Share Option Scheme
"Ring Shares" the Ring Ordinary Shares and/or the Ring
Convertible Preference Shares
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"Rothschild" N M Rothschild & Sons Limited
"TFE instruction" a Transfer from Escrow instruction (as
defined by the CREST manual issued by
CRESTCo)
"TTE instruction" a Transfer to Escrow instruction (as defined
by the CREST manual issued by CRESTCo)
"uncertificated" or "in a Ring share which is for the time being
uncertificated form" recorded on the register of members of Ring
as being held in uncertificated form in
CREST, and title to which, by virtue of the
Regulations, may be transferred by means of
CREST
"United Kingdom" or "UK" the United Kingdom of Great Britain and
Northern Ireland
"US" or "USA" the United States of America its territories
and furthermore, any state of the United
States of America and the District of
Columbia and all other areas subject to its
jurisdiction
"wider Catalina Group" Catalina together with its subsidiaries,
subsidiary undertakings and associated
undertakings and any other body corporate,
partnership, joint venture or person in
which Catalina and such undertakings have an
interest in more than 20 per cent of the
voting or equity capital (or the equivalent)
"wider Ring Group" Ring together with its subsidiaries,
subsidiary undertakings and associated
undertakings and any other body corporate,
partnership, joint venture or person in
which Ring and such undertakings have an
interest in more than 20 per cent of the
voting or equity capital (or the equivalent)
Terms defined in the CREST manual shall, unless the context otherwise requires,
bear the same meanings where used herein.
All references in this document to "[pounds]" are to pounds sterling and all
references to "$" are to US dollars.
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