<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use
of the Commission Only
(as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
David White, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $3.00 per share and options to purchase shares of
Common Stock ("Options")
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
457,323 shares of Common Stock and 46,750 Options
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
<TABLE>
<CAPTION>
Title of Security Number of Shares (1) Consideration Per Share Aggregate Consideration Amount of Filing Fee
- ----------------- -------------------- ----------------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock 457,323 $ 12.00 $ 5,487,876 --
Options exercisable
at $6.50 per share 5,000 $ 5.50 $ 27,500 --
Options exercisable
at $6.875 per share 8,750 $ 5.125 $ 44,843.75 --
Options exercisable
at $7.875 per share 17,000 $ 4.125 $ 70,125 --
Options exercisable
at $10.00 per share 16,000 $ 2.00 $ 32,000 --
Total $ 5,662,344.75 $ 1,133
</TABLE>
<PAGE> 2
- -------------------------------------
(1) Based on the number of shares outstanding on April 30, 1997
- --------------------------------------------------------------------------------
(5) Total fee paid: $1,133
[ ] Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
2
<PAGE> 3
David White, Inc.
11711 River Lane
P.O. Box 1007
Germantown, Wisconsin 53022-8207
414-251-8100
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the Shareholders
of David White, Inc. (the "Company"), to be held in the Company's corporate
offices at 11711 River Lane, Germantown, Wisconsin 53022-8207, on June 30,
1997, at 10:00 a.m., local time. A notice of the Special Meeting, a proxy
statement and a proxy card are enclosed. All holders of the Company's
outstanding shares of Common Stock as of May 20, 1997 (the "Record Date"), will
be entitled to notice of and to vote at the Special Meeting.
At the Special Meeting, you will be asked to consider and to vote upon a
proposal to approve and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 30, 1997, by and among Choucroute Partners LLC
("Choucroute"), FC Sub Corporation, a wholly owned subsidiary of Choucroute
("Choucroute Sub") and the Company, pursuant to which Choucroute Sub will be
merged with and into the Company (the "Merger"). If the Merger Agreement is
approved and the Merger becomes effective, each outstanding share of Common
Stock of the Company will be converted into the right to receive $12.00 in
cash, without interest (other than shares of Common Stock, if any, held by the
Company, Choucroute or Choucroute Sub, which are to be canceled as part of the
Merger). Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of all outstanding shares of the Company's Common Stock
voting as a group.
Details of the proposed Merger and other important information are set
forth in the accompanying Proxy Statement which you are urged to read
carefully.
Your Board of Directors has carefully reviewed and considered the terms
and conditions of the proposed Merger. In addition, the Board of Directors has
received the opinion of its financial advisor, Cleary Gull Reiland & McDevitt
Inc., that the $12.00 per share consideration to be received pursuant to the
Merger Agreement by the holders of the Company's Common Stock is fair to such
shareholders from a financial point of view.
<PAGE> 4
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Whether or not you plan to attend the Special Meeting, please complete,
sign and date the accompanying proxy card and return it in the enclosed prepaid
envelope. SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. If you attend the Special Meeting, you may revoke such proxy and vote
in person if you wish, even if you have previously returned your proxy card.
Your prompt cooperation will be greatly appreciated.
Very truly yours,
Tony L. Mihalovich, President and
Chief Executive Officer
May 30, 1997
2
<PAGE> 5
DAVID WHITE, INC.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD
ON JUNE 30, 1997
To Shareholders of David White, Inc.
A special meeting of the shareholders of David White, Inc. (the
"Company"), will be held in the Company's corporate offices at 11711 River
Lane, Germantown, Wisconsin 53022-8207, on June 30, 1997, at 10:00 a.m., local
time (the "Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of April 30, 1997, by and
among Choucroute Partners LLC, a Wisconsin limited liability company
("Choucroute"), FC Sub Corporation, a Wisconsin corporation and a wholly owned
subsidiary of Choucroute ("Choucroute Sub") and the Company. Pursuant to the
Merger Agreement, among other things, Choucroute Sub will be merged with and
into the Company (the "Merger") and each outstanding share of common stock, par
value $3.00 per share, of the Company (the "Common Stock" or "Company Shares"),
will be converted into the right to receive $12.00 in cash, without interest
(other than shares of Common Stock, if any, held by the Company, Choucroute or
Choucroute Sub, which are to be canceled as part of the Merger). A copy of the
Merger Agreement is attached as Exhibit A to the accompanying Proxy Statement.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
The close of business on May 20, 1997 is the record date for the Special
Meeting and only shareholders of record at that time will be entitled to notice
of and to vote at the Special Meeting or any adjournment or adjournments
thereof.
<PAGE> 6
Your attention is called to the Proxy Statement accompanying this Notice
for a more complete statement regarding the matters to be acted upon at the
Special Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE MERGER AGREEMENT.
By Order of the Board of Directors,
James L. Younk, Secretary
Germantown, Wisconsin
May 30, 1997
YOUR VOTE IS IMPORTANT. ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE
SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
2
<PAGE> 7
PROXY STATEMENT
David White, Inc.
11711 River Lane
P.O. Box 1007
Germantown, Wisconsin 53022-8207
414-251-8100
This Proxy Statement is being furnished to the shareholders of David
White, Inc. (the "Company") in connection with the solicitation of proxies by
the Company's Board of Directors to be voted at the Special Meeting of
shareholders to be held on June 30, 1997, at 10:00 a.m., local time, in the
Company's corporate offices at 11711 River Lane, Germantown, Wisconsin
53022-8207 (the "Special Meeting") and at any adjournments or postponements
thereof. The enclosed proxy card, the accompanying Notice of Special Meeting
of Shareholders and this Proxy Statement are being first mailed to shareholders
of the Company on or about May 30, 1997. At the Special Meeting, the
shareholders of the Company will consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Merger dated as of April 30, 1997 (the
"Merger Agreement") by and among Choucroute Partners LLC, a Wisconsin limited
liability company ("Choucroute"), FC Sub Corporation, a Wisconsin corporation
and a wholly owned subsidiary of Choucroute ("Choucroute Sub"), and the
Company.
If the Merger is consummated, Choucroute Sub will be merged into the
Company, with the Company being the surviving corporation (the "Surviving
Corporation"). Pursuant to the Merger Agreement each outstanding share of the
Company's $3.00 par value common stock (the "Common Stock" or "Company
Shares"), will be converted into the right to receive $12.00 per share in cash,
without interest (other than shares of Common Stock, if any, held by the
Company, Choucroute or Choucroute Sub, which are to be canceled as part of the
Merger). Each outstanding share of Choucroute Sub common stock will be
converted into one share of Common Stock of the Surviving Corporation and the
Company will become a wholly owned subsidiary of Choucroute.
<PAGE> 8
TABLE OF CONTENTS
SUMMARY .................................................. 1
General .................................................. 1
The Special Meeting .................................... 1
Purpose of The Special Meeting; Quorum; Vote Required .. 1
The Parties to the Merger .............................. 2
The Merger ............................................. 2
Certain Effects of the Merger .......................... 3
Procedures for Exchange of Certificates ................ 3
Opinion of the Company's Financial Advisor ............. 3
Recommendation of Board of Directors ................... 4
Interests of Certain Persons in the Merger ............. 4
Accounting Treatment ................................... 4
Federal Income Tax Consequences ........................ 4
The Merger Agreement ..................................... 5
Effective Time of the Merger ........................... 5
Conditions to Consummation of the Merger ............... 5
Termination of the Merger Agreement .................... 5
Amendments to the Merger Agreement ..................... 6
Dissenters' Rights ..................................... 6
Market Price Data ........................................ 6
Selected Financial Data of the Company ................... 7
INTRODUCTION ............................................. 9
Proposal to be Considered at the Special Meeting ....... 9
Voting Rights; Vote Required for Approval .............. 9
Proxies ................................................ 10
THE MERGER ............................................... 10
Effects of the Merger .................................. 11
Effective Time ......................................... 12
Procedures for Exchange of Certificates ................ 12
Background of the Merger ............................... 13
The Company's Reasons for the Merger;
Recommendation of the Company's Board of Directors .... 16
Opinion of Financial Advisor to the Company ............ 17
Interests of Certain Persons in the Merger ............. 22
Stock Options ......................................... 22
Severance Arrangement ................................. 22
Indemnification and Insurance ......................... 23
Accounting Treatment ................................... 23
Certain Federal Income Tax Consequences of the Merger
to the Company's Shareholders ......................... 24
<PAGE> 9
Source and Amount of Funds ............................. 25
Dissenters' Rights of Appraisal ........................ 26
Regulatory Approvals ................................... 26
THE MERGER AGREEMENT ..................................... 26
General ................................................ 26
Effective Time ......................................... 26
Consideration to be Received by Shareholders
of the Company ........................................ 27
Representations and Warranties ......................... 28
Covenants .............................................. 28
Conditions to Consummation of the Merger ............... 31
Termination ............................................ 32
Termination Fee and Expenses ........................... 34
Amendments and Waivers ................................. 34
RIGHTS AGREEMENT ......................................... 34
Summary of Features ...................................... 35
Certain Effects of the Rights on the Merger .............. 37
DISSENTERS' RIGHTS ....................................... 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................... 37
DIRECTORS AND EXECUTIVE OFFICERS ......................... 40
Directors .............................................. 40
Executive Officers ..................................... 40
OTHER MATTERS ............................................ 41
SHAREHOLDER PROPOSALS .................................... 41
EXPENSES OF SOLICITATION ................................. 41
INDEPENDENT PUBLIC ACCOUNTANTS ........................... 42
AVAILABLE INFORMATION .................................... 42
INFORMATION INCORPORATED BY REFERENCE .................... 42
EXHIBITS
Exhibit A - Agreement and Plan of Merger dated as of April 30, 1997 among
Choucroute Partners LLC, FC Sub Corporation and David White,
Inc.
Exhibit B - Opinion of Cleary Gull Reiland & McDevitt Inc.
ii
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. The summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement and the exhibits hereto. Shareholders are
urged to review the entire Proxy Statement carefully.
GENERAL
The Special Meeting
The Special Meeting of shareholders of David White, Inc. (the "Company")
will be held on June 30, 1997, at 10:00 a.m., local time, in the Company's
corporate offices at 11711 River Lane, Germantown, Wisconsin 53022-8207 (the
"Special Meeting"). Only holders of record of shares of the $3.00 par value
common stock of the Company (the "Common Stock" or "Company Shares") at the
close of business on May 20, 1997 are entitled to notice of and to vote at the
Special Meeting. On that date, there were 457,323 Company Shares outstanding,
with each share entitled to cast one vote at the Special Meeting. See
"INTRODUCTION - Voting Rights; Vote Required for Approval."
Purpose of the Special Meeting; Quorum; Vote Required
At the Special Meeting, shareholders will consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
April 30, 1997, among Choucroute Partners LLC, FC Sub Corporation and the
Company, a copy of which is attached as Exhibit A to this Proxy Statement (the
"Merger Agreement"). The Merger Agreement provides for the merger of FC Sub
Corporation into the Company (the "Merger"), such that the Company, as the
surviving corporation (the "Surviving Corporation"), would become a wholly
owned subsidiary of Choucroute Partners LLC. The presence, in person or by
proxy, of the holders of a majority of the outstanding Company Shares at the
Special Meeting is necessary to constitute a quorum at the Special Meeting.
Under Wisconsin law, approval of the Merger Agreement requires the affirmative
vote of the holders of a majority of the outstanding Company Shares. All of
the Company's executive officers and directors, who collectively own 93,922
shares of Common Stock, representing approximately 20.5% of the outstanding
Common Stock, have indicated their intent to vote for approval and adoption of
the Merger Agreement. See "INTRODUCTION - Voting Rights; Vote Required for
Approval," and "THE MERGER AGREEMENT - Conditions to Consummation of the
Merger."
<PAGE> 11
The Parties to the Merger
Choucroute Partners LLC. Choucroute Partners LLC ("Choucroute") is a
Wisconsin limited liability company that was formed for the limited purpose of
acquiring the Company through the Merger and engaging in the transactions
contemplated by the Merger Agreement. Robert T. Foote, Jr. controls Choucroute
as its sole manager and by directly or indirectly controlling all of the
interests in Choucroute. Choucroute was formed with approximately $2.1 million
of equity capital contributed by Mr. Foote and certain trusts controlled by Mr.
Foote or members of his family. The principal executive offices of Choucroute
are located at 32451 Oakland Road, Nashotah, Wisconsin 53058 and the telephone
number is 414-367-3323.
David White, Inc. The Company is a manufacturer and distributor of medium
and high technology products in the specialty market of optical and laser
surveying instruments for productivity improvement in the construction
industry. The principal executive offices of the Company are located at 11711
River Lane, P.O. Box 1007, Germantown, Wisconsin 53022-8207 and the telephone
number is 414-251-8100.
FC Sub Corporation. FC Sub Corporation ("Choucroute Sub") is a wholly
owned subsidiary of Choucroute, formed solely for the purpose of the Merger.
Choucroute Sub has not engaged in any business activity unrelated to the
Merger. The principal executive offices of Choucroute Sub are located at 32451
Oakland Road, Nashotah, Wisconsin 53058 and the telephone number is
414-367-3323.
The Merger
Pursuant to the Merger Agreement, Choucroute Sub will merge into the
Company, with the Company being the Surviving Corporation. Each outstanding
share of the Company's Common Stock will be converted into the right to receive
from Choucroute $12.00 in cash, without interest (other than shares of Common
Stock, if any, held by the Company, Choucroute or Choucroute Sub, which are to
be canceled as part of the Merger). The consideration to be received by the
Company's shareholders pursuant to the Merger Agreement is sometimes referred
to herein as the "Merger Consideration." Choucroute intends to fund payment of
the Merger Consideration through existing cash and by entering into a new
credit facility. See "THE MERGER - Source and Amount of Funds." Each
outstanding share of Choucroute Sub's $.01 par value common stock (the
"Choucroute Sub Shares") will be converted into one share of common stock of
the Surviving Corporation. At the effective time of the Merger (the "Effective
Time"), Choucroute will own 100% of the outstanding Company Shares. See "THE
MERGER AGREEMENT."
2
<PAGE> 12
Certain Effects of the Merger
As a result of the Merger, Choucroute will acquire the entire equity
interest in the Company. Therefore, following the Merger the present holders
of the Company Shares will no longer have an equity interest in the Company and
will no longer share in future earnings and growth of the Company, the risks
associated with achieving such earnings and growth, or the potential to realize
greater value for their Company Shares through divestitures, strategic
acquisitions or other corporate opportunities that may be pursued by the
Company in the future. Instead, each such holder of Company Shares immediately
prior to the Effective Time will have the right to receive the Merger
Consideration to which such holder is entitled under the Merger Agreement. The
Company Shares will no longer be traded in the over-the-counter market or
quoted on Nasdaq and the registration of the Company Shares under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") will be
terminated. In addition, pursuant to the Merger Agreement, at the Effective
Time, each outstanding option to purchase shares of Common Stock will be
canceled and converted into the right to receive a cash payment equal in amount
to the difference between (i) the Merger Consideration, and (ii) the exercise
price of such option (the "Spread"). Based on 46,750 Company stock options
outstanding as of April 30, 1997, the aggregate amount of the Spread would be
approximately $174,000. See "THE MERGER - Effects of the Merger" and "-
Interests of Certain Persons in the Merger."
Procedures for Exchange of Certificates
Promptly after the Effective Time, a letter of transmittal and
instructions for surrendering stock certificates evidencing shares of the
Company's Common Stock will be mailed to each holder of the Company's Common
Stock for use in exchanging such holder's stock certificates for the Merger
Consideration to which such holder is entitled under the Merger Agreement.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "THE MERGER - Procedures for Exchange of Certificates."
Opinion of the Company's Financial Advisor
Cleary Gull Reiland & McDevitt Inc. ("Cleary Gull") has rendered its
written opinion that, subject to the assumptions set forth therein, the $12.00
per share to be received by the holders of Company Shares is fair to such
holders from a financial point of view. The full text of Cleary Gull's written
opinion, dated May 14, 1997, which sets forth the assumptions made, matters
considered and the scope and limitations of the review undertaken and
procedures followed by Cleary Gull in rendering its opinion, is attached hereto
as Exhibit B. HOLDERS OF COMPANY SHARES ARE URGED TO AND SHOULD READ SUCH
OPINION IN ITS
3
<PAGE> 13
ENTIRETY. For information relating to the opinion of Cleary Gull, see "THE
MERGER - Opinion of Financial Advisor to the Company."
Recommendation of Board of Directors
The Board of Directors has determined that the Merger and the Merger
Consideration are fair to, and in the best interests of, the Company's
shareholders. The Board of Directors has unanimously approved the Merger
Agreement and recommends that shareholders vote FOR the proposal to approve and
adopt the Merger Agreement. See "THE MERGER - The Company's Reasons for the
Merger; Recommendation of the Company's Board of Directors."
Interests of Certain Persons in the Merger
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger Agreement and the transactions contemplated thereby,
shareholders should be aware that certain members of management of the Company
and the Board of Directors of the Company have certain interests in the Merger
that are in addition to the interests of shareholders of the Company generally.
See "THE MERGER - Interests of Certain Persons in the Merger."
Accounting Treatment
The Merger will be accounted for by Choucroute under the purchase method
of accounting. See "THE MERGER - Accounting Treatment."
Federal Income Tax Consequences
The receipt of the Merger Consideration for Company Shares pursuant to the
Merger will be a taxable transaction for federal income tax purposes under the
Internal Revenue Code of 1986, as amended, and also may be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, a shareholder of the Company will realize taxable
gain or loss as a result of the Merger equal to the difference, if any, between
the amount of cash received by the shareholder in the Merger (i.e., $12.00 per
share) and the shareholder's adjusted tax basis in such stock. See "THE MERGER
- - Certain Federal Income Tax Consequences of the Merger to the Company's
Shareholders."
4
<PAGE> 14
THE MERGER AGREEMENT
Effective Time of the Merger
The Merger will become effective (the "Effective Time") on the later
of (a) the date the Department of Financial Institutions of the State of
Wisconsin receives the Articles of Merger for filing or (b) the effective
date and time specified in the Articles of Merger. The filing of the
Articles of Merger will occur after all conditions to the Merger contained
in the Merger Agreement have been satisfied or waived. The Company,
Choucroute and Choucroute Sub anticipate that the Merger will be
consummated promptly following the Special Meeting. See "THE MERGER
AGREEMENT - General" and " - Effective Time."
Conditions to Consummation of the Merger
The respective obligations of the Company, Choucroute and Choucroute
Sub to effect the Merger are subject to the satisfaction at or prior to the
Effective Time of various closing conditions. Such conditions include,
among others, the approval and adoption of the Merger Agreement by the
holders of a majority of the outstanding Company Shares, the receipt by
Choucroute of acquisition and working capital financing, and the
correctness in all material respects of the representations and warranties
of the parties to the Merger Agreement. See "THE MERGER AGREEMENT -
Conditions to Consummation of the Merger" and " - Termination."
Termination of the Merger Agreement
The Merger Agreement may, under specified circumstances, be terminated
and the Merger abandoned at any time prior to the Effective Time,
notwithstanding approval of the Merger Agreement by the shareholders of the
Company. The Merger Agreement requires the Company to reimburse Choucroute for
all expenses incurred after the date of the Merger Agreement and in addition to
pay Choucroute a termination fee (the "Termination Fee") of $200,000
(approximately $0.44 per Company Share) if (a) the Company terminates the Merger
Agreement because the Board of Directors of the Company determines, in the
exercise of its judgment as to its fiduciary duties to the Company's
shareholders after consultation with counsel, that such termination is required
by reason of any Competing Transaction (as defined in the Merger Agreement), or
(b) Choucroute terminates the Merger Agreement because (i) the Board of
Directors of the Company withdraws, modifies or changes in a manner materially
adverse to Choucroute its recommendation of the Merger Agreement or the Merger
or resolves to do any of the foregoing, (ii) the Board of Directors of the
Company
5
<PAGE> 15
recommends a Competing Transaction to the shareholders of the Company or
resolves to do so, or (iii) a tender offer or exchange offer for 50% or more of
the outstanding shares of Common Stock is commenced, and the Board of Directors
of the Company, within ten business days after such tender offer or exchange
offer is so commenced, either fails to recommend against acceptance of such
tender offer or exchange offer by the Company's shareholders or takes no
position with respect to the acceptance of such tender offer or exchange offer
by the Company's shareholders. In addition, if either party terminates the
Merger Agreement due to a material intentional breach by the other party of any
of its covenants in the Merger Agreement, the party in breach must reimburse the
other party for all expenses (whether incurred before or after the date of the
Merger Agreement) and in addition pay such party the sum of $200,000. In
addition, if the Merger Agreement is terminated by Choucroute as a result of its
inability to obtain financing, unless such inability arises as a result of the
Company's failure to accurately disclose relevant facts or circumstances to
Choucroute's financing sources, Choucroute is obligated to reimburse the Company
for up to $75,000 of expenses actually incurred by the Company subsequent to
April 15, 1997. See "THE MERGER AGREEMENT - Termination" and "- Termination Fee
and Expenses."
Amendments to the Merger Agreement
The Merger Agreement may not be amended except by action of the
Company, Choucroute and Choucroute Sub set forth in an instrument in
writing signed on behalf of each of the parties. After approval of the
Merger Agreement by the shareholders of the Company and without the further
approval of such shareholders, no amendment may be made which reduces the
amount or changes the type of Merger Consideration. See "THE MERGER
AGREEMENT - Amendments and Waivers."
Dissenters' Rights
Under the Wisconsin Business Corporation Law ("WBCL"), holders of a
class of stock quoted on the National Association of Securities Dealers,
Inc. automated quotations system (such as the Company Shares) do not have
dissenters' rights except in certain circumstances, none of which are
present with respect to the Merger. See "DISSENTERS' RIGHTS."
MARKET PRICE DATA
The Company's Common Stock is traded in the over-the-counter market
and is quoted on Nasdaq under the symbol DAWH. As of April 30, 1997, there
were
6
<PAGE> 16
approximately 266 shareholders of record. The following table sets
forth the reported high and low bid prices of the Company's Common Stock
for the periods indicated. The prices represent inter-dealer quotations
and do not include adjustments for retail markups, markdowns or commissions
and do not necessarily represent actual transactions. The Company has not
paid any dividends on its Common Stock since 1990.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal Year Ended December 31, 1995
First Quarter $11-3/4 $ 8-3/4
Second Quarter 11-3/4 9-1/2
Third Quarter 11 9-3/4
Fourth Quarter 12 9-3/4
Fiscal Year Ended December 31, 1996
First Quarter 12-7/8 11-1/2
Second Quarter 11-5/8 11-1/2
Third Quarter 11-1/2 10
Fourth Quarter 11-1/4 7-1/2
Fiscal Year Ending December 31, 1997
First Quarter 8-1/4 7-1/2
Second Quarter (through
April 29, 1997) 9-1/2 7-7/8
</TABLE>
On April 29, 1997, the last full day of trading prior to the announcement
by the Company and Choucroute of the execution of the Merger Agreement, the
reported high and low bid prices per share of Common Stock were $9.50 and
$7.875, respectively. On ____________, the last full day of trading prior to
the printing of this Proxy Statement, such reported high and low bid prices per
share were $______ and $______, respectively.
SELECTED FINANCIAL DATA OF THE COMPANY
The following selected financial data for the three years ended December
31, 1996 are derived from information contained in the Company's Annual Reports
on Form 10-KSB for the fiscal years ended December 31, 1996, 1995 and 1994, and
the following selected financial data for the three months ended March 31, 1997
and 1996 are derived from information contained in the Company's Quarterly
Reports on
7
<PAGE> 17
Form 10-QSB for the quarters ended March 31, 1997 and 1996. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Securities and Exchange Commission (the
"Commission"), and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information (including any related notes) contained therein. Such reports and
other documents may be inspected and copies may be obtained from the offices of
the Commission. See "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE
THREE MONTHS FOR THE
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ----------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales .......................... $4,128 $3,953 $13,372 $15,278 $15,886
Income before other (income) expense 399 371 566 795 1,290
and income taxes
Other income (expense) ............. - - (185) (38) (12)
Loss on sale of subsidiary ......... - - - 722 200
Loss on termination of pension plan - - - 523 -
Environmental expenses ............. - - - 297 -
Interest expense ................... 42 86 284 290 264
Earnings before income taxes ....... 357 285 467 (999) 838
Income taxes ....................... 89 57 140 (147) 137
Net earnings ....................... 268 228 327 (852) 701
Net earnings per common share ...... $0.59 $0.50 $0.72 $(1.75) $1.33
Average common shares outstanding .. 457,323 457,323 457,323 486,698 52,624
Balance Sheet Data:
Current assets ..................... $7,121 $8,314 $5,185 $6,219 $5,740
Other assets ....................... 300 474 302 493 3,101
Plant, property and equipment, net 1,805 2,406 1,816 2,465 2,145
------ ------ ------ ------ ------
Total assets ....................... $9,226 $11,194 $7,303 $9,177 $10,986
Current liabilities ................ $2,923 $4,379 $1,209 $2,508 $1,487
Long-term liabilities .............. 1,032 1,955 1,091 2,037 2,721
Shareholders' investment ........... 5,271 4,860 5,003 4,632 6,778
------ ------- ------ ------ ------
Total liabilities and shareholders'
investment ......................... $9,226 $11,194 $7,303 $9,177 $10,986
</TABLE>
8
<PAGE> 18
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of David White, Inc. (the "Company") to be
voted at a Special Meeting of shareholders to be held on June 30, 1997 (the
"Special Meeting") and any adjournments or postponements thereof. Shares
represented by properly executed proxies received by the Company will be voted
at the Special Meeting or any adjournment thereof in accordance with the terms
of such proxies, unless revoked. Proxies may be revoked at any time prior to
the voting thereof either by written notice filed with the Secretary of the
meeting or by attendance and voting in person at the meeting.
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will consider and
vote upon a proposal to approve and adopt an Agreement and Plan of Merger,
dated as of April 30, 1997 (the "Merger Agreement"), among Choucroute Partners
LLC ("Choucroute"), FC Sub Corporation, a Wisconsin corporation which is a
wholly owned subsidiary of Choucroute ("Choucroute Sub") and the Company.
The Merger Agreement provides for the merger (the "Merger") of Choucroute
Sub into the Company, with the Company being the surviving corporation (the
"Surviving Corporation"). Pursuant to the Merger, each outstanding share of
the common stock, $3.00 par value, of the Company (the "Common Stock" or
"Company Shares"), will be converted into the right to receive $12.00 per share
in cash, without interest (other than shares of Common Stock, if any, held by
the Company, Choucroute or Choucroute Sub, which are to be canceled as part of
the Merger), and each outstanding share of Choucroute Sub common stock, $.01
par value per share (the "Choucroute Sub Shares"), will be converted into one
share of Common Stock of the Surviving Corporation. The consideration to be
received by the Company's shareholders pursuant to the Merger is sometimes
referred to herein as the "Merger Consideration." A copy of the Merger
Agreement is attached as Exhibit A to this Proxy Statement.
VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
The record date for the Special Meeting is the close of business on May
20, 1997. At that date, there were 457,323 Company Shares outstanding. Each
Company Share entitles its holder to one vote concerning all matters properly
coming before the Special Meeting. Any shareholder entitled to vote may vote
either in person or by duly authorized proxy. A majority of the shares
entitled to vote, represented in person or by proxy, will constitute a quorum.
Abstentions and
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<PAGE> 19
broker non-votes (i.e., shares held by brokers in street name, voting on
certain matters due to discretionary authority or instructions from the
beneficial owner but not voting on other matters due to lack of authority to
vote on such matters without instructions from the beneficial owner) are
counted for the purpose of establishing a quorum. Under the Wisconsin Business
Corporation Law ("WBCL"), for the Merger to be approved by shareholders, the
Merger Agreement must be approved and adopted by the holders of at least a
majority of the outstanding Company Shares. Accordingly, abstentions and
broker non-votes have the same effect as a vote "AGAINST" approval of the
Merger. Votes will be tabulated by Firstar Trust Company.
PROXIES
All Company Shares represented by properly executed proxies received prior
to or at the Special Meeting and not revoked will be voted in accordance with
the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED,
SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AGREEMENT AND, IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY, ON SUCH
OTHER MATTERS AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING.
A shareholder may revoke his, her or its proxy at any time prior to its
use by delivering to the Secretary of the Company a signed notice of revocation
or a later dated and signed proxy or by attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not in itself
constitute the revocation of a proxy.
Expenses in connection with the solicitation of proxies will be paid by
the Company. Upon request, the Company will reimburse brokers, dealers and
banks or their nominees, for reasonable expenses incurred in forwarding copies
of the proxy material to the beneficial owners of shares which such persons
hold of record. Solicitation of proxies will be made principally by mail.
Proxies may also be solicited in person, or by telephone or facsimile, by
officers and regular employees of the Company who will receive no additional
compensation in connection with the solicitation. The Company has also engaged
Georgeson & Company, Inc. to solicit proxy appointments on behalf of the
Company's Board of Directors in connection with the Special Meeting at an
anticipated cost of approximately $5,000 plus reasonable out-of-pocket
expenses.
THE MERGER
The following information describes the material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the exhibits hereto, including the Merger Agreement,
which is attached to this Proxy Statement as Exhibit A and is incorporated
herein by
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<PAGE> 20
reference. All shareholders are urged to read Exhibit A in its entirety. See
also "THE MERGER AGREEMENT."
The Board of Directors of the Company has unanimously approved the Merger
Agreement and recommended approval and adoption of the Merger Agreement by the
shareholders and has determined that the transactions contemplated by the
Merger Agreement are fair to, and in the best interests of, the Company's
shareholders. See "- The Company's Reasons for the Merger; Recommendation of
the Company's Board of Directors."
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
EFFECTS OF THE MERGER
Upon consummation of the Merger, (a) Choucroute Sub will merge with and
into the Company, with the Company being the Surviving Corporation; (b) the
Company will become a wholly owned subsidiary of Choucroute; (c) each Company
Share outstanding immediately prior to the Effective Time (other than shares of
Common Stock, if any, held by the Company, Choucroute or Choucroute Sub) will
be converted, in a taxable transaction, into the right to receive $12.00 in
cash, without interest; (d) each Company Share outstanding immediately prior to
the Effective Time and held by the Company as treasury shares or by Choucroute
or Choucroute Sub will be canceled and retired without consideration; and (e)
each Choucroute Sub Share will be converted into one share of Common Stock of
the Surviving Corporation.
As of the record date, there were 457,323 Company Shares outstanding and
46,750 Company Shares reserved for future issuance pursuant to currently
outstanding stock options. Assuming that no additional Company Shares or stock
options are outstanding at the Effective Time, then, upon consummation of the
Merger, holders of Company Shares and stock options would be entitled to
receive, in the aggregate, approximately $5.7 million.
Each certificate previously representing Company Shares will thereafter
represent only the right to receive the Merger Consideration to which such
certificate is entitled pursuant to the Merger Agreement. Certificates
previously representing Company Shares may be exchanged for the Merger
Consideration as provided below. Each Company Share held by Choucroute,
Choucroute Sub or the Company will be canceled and retired and no payment will
be made with respect thereto.
11
<PAGE> 21
For a description of the procedures for exchanging certificates
representing Company Shares, see " - Procedures for Exchange of Certificates."
EFFECTIVE TIME
If the Merger Agreement is adopted by the requisite vote of the Company's
shareholders and the other conditions to the Merger are satisfied (or waived to
the extent permitted), the Merger will be consummated and effective on the
later of (a) the date the Department of Financial Institutions of the State of
Wisconsin receives the Articles of Merger for filing and (b) the effective date
and time specified in the Articles of Merger. The date and time the Merger is
effective is referred to herein as the "Effective Time."
The Merger Agreement provides that the parties will cause the Effective
Time to occur as promptly as practicable after the adoption of the Merger
Agreement by the shareholders of the Company and the satisfaction (or waiver,
if permissible) of the other conditions set forth in the Merger Agreement. In
certain circumstances, Choucroute or the Company may terminate the Merger
Agreement prior to the Effective Time, whether before or after approval and
adoption of the Merger Agreement by the Company's shareholders. See "THE
MERGER AGREEMENT - Termination."
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Immediately prior to the Effective Time, Choucroute will deposit, or will
cause to be deposited, with a bank or trust company to be designated by
Choucroute (the "Exchange Agent") approximately $5.5 million (the "Exchange
Fund"), for the benefit of the holders of Company Shares for exchange in
accordance with the terms of the Merger Agreement. Pursuant to irrevocable
instructions, the Exchange Agent will deliver out of the Exchange Fund the
portion of the Merger Consideration associated with the outstanding Company
Shares pursuant to the Merger Agreement.
At or after the Effective Time there will be no transfers of Company
Shares on the stock transfer books of the Company.
Promptly after the Effective Time, Choucroute will instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Company Shares
(the "Certificates") (a) a letter of transmittal in customary form (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Exchange Agent), and
12
<PAGE> 22
(b) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with a letter of transmittal, duly
executed, and any other documents as may be required pursuant to such
instructions, the holder of a Certificate will be entitled to receive in
exchange therefor the Merger Consideration to which such Certificate is
entitled. The Certificate so surrendered will forthwith be canceled. In the
event of a transfer of ownership of Company Shares which is not registered in
the stock transfer records of the Company, it shall be a condition to such
exchange that a Certificate representing the proper number of Company Shares be
presented by a transferee to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon surrender the Merger Consideration to which such
Certificate is entitled.
SHAREHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Any portion of the Exchange Fund remaining undistributed 180 days after
the Effective Time will be returned to Choucroute, and any holders of
theretofore unsurrendered Company Shares will thereafter be able to look only
to Choucroute for any portion of the Exchange Fund to which they are entitled.
Choucroute will not be liable to any holder of Company Shares for Merger
Consideration delivered to a public official pursuant to any abandoned
property, escheat or similar law.
BACKGROUND OF THE MERGER
The terms of the Merger Agreement are the result of arms-length
negotiations between representatives of the Company and Choucroute. The
following describes the background of the discussions between the Company and
Choucroute leading up to the execution of the definitive Merger Agreement on
April 30, 1997.
For the past several years, the Company's Board of Directors has from time
to time considered various strategic alternatives as part of its ongoing effort
to enhance shareholder value. Among the alternatives explored were (i)
continuing to operate the Company, with ongoing efforts to improve operating
performance and expand the Company's business, through internal growth and/or
acquisitions;
13
<PAGE> 23
and (ii) identifying a potential strategic or financial buyer to enter into a
business combination with the Company.
As part of the Company's exploration of strategies to maximize shareholder
value, directors of the Company have had discussions from time to time with
other companies believed to be potentially interested in a business combination
or similar transaction with the Company, although in the two years prior to
1995, no such discussions advanced beyond the preliminary stage.
On November 29, 1995, Robert T. Foote, Jr. contacted the Company's
Chairman of the Board on an unsolicited basis to explore a potential
acquisition of the Company by Mr. Foote, a group of investors related to Mr.
Foote and another individual (collectively, the "Foote Group"). Accordingly,
the Foote Group, and the Company executed a confidentiality agreement (the
"Confidentiality Agreement") agreeing to maintain the secrecy of each other's
confidential information. During December 1995, representatives of the Foote
Group began a due diligence investigation of the Company to determine whether
the Foote Group was interested in pursuing an acquisition or other business
transaction with the Company.
On December 13, 1995, the Company's Board of Directors retained Cleary
Gull to assist the Board of Directors in the negotiations with the Foote Group.
Cleary Gull was selected by the Company as its financial advisor in connection
with the Merger because of Cleary Gull's reputation and expertise as an
investment banking firm experienced in transactions of this type. Cleary Gull,
as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings of equity securities, private placements and
valuations for corporate and other purposes. Cleary Gull had not previously
provided investment banking or financial advisory services to the Company.
During the period from December 1995 through March 1996 representatives of
the Foote Group engaged in further negotiations and discussions with
representatives of the Company regarding the business terms of a proposed
acquisition, but a definitive agreement was not reached.
Following the termination of negotiations with the Foote Group, the
Company's Board of Directors decided to explore other strategic alternatives
that were available to the Company to enhance shareholder value.
In May 1996, the Company authorized Cleary Gull to assist the Company in
identifying and contacting, on a confidential basis, three companies which had
14
<PAGE> 24
indicated an interest in pursuing a transaction with the Company and other
qualified companies identified by the Company and Cleary Gull to determine
their interest in acquiring the Company. During the months of June 1996
through September 1996, Cleary Gull contacted a total of 19 parties to solicit
their interest in an acquisition of the Company, including Mr. Foote. During
this period, the Company had discussions with several interested
parties, none of which developed into viable proposals.
In January 1997, Mr. Foote informed the Company that through Choucroute,
he was interested in renewing discussions regarding an acquisition of the
Company.
On February 12, 1997, Choucroute proposed a purchase price of $9.00 per
share. Following numerous negotiations and discussions with representatives of
the Company regarding the business terms of the proposal, the offer was revised
to $10.875 per share on March 12, 1997, and Choucroute circulated a draft
Merger Agreement consistent with the agreement previously negotiated by the
Company and the Foote Group. The Company rejected the $10.875 offer and
negotiations between representatives of the Company and Choucroute continued.
On April 15, 1997, Choucroute proposed a purchase price of $12.00 per
share. At a special meeting of the Board of Directors on April 16, 1997, the
Board of Directors authorized Cleary Gull and legal counsel to negotiate and
finalize a definitive Merger Agreement with Choucroute.
Representatives of Choucroute and representatives of the Company continued
their negotiations and had the final terms of the Merger Agreement ready for
approval by the Board of Directors at a meeting scheduled for April 30, 1997.
On April 29, 1997, the Company's Board of Directors received a
proposal from another party with whom the Company had discussions over the
preceding year. After review of the proposal by counsel and Cleary Gull it was
presented to the Board of Directors of the Company with the Choucroute proposal
at a meeting held on April 30, 1997. The two offers were not materially
different from a financial point of view but otherwise had materially different
terms and conditions. After considering the terms and conditions of each of
the offers, the risks involved in extending negotiations, the Board's fiduciary
responsibilities and the recommendations of Cleary Gull, legal counsel and
management of the Company, the Board of Directors selected Choucroute's offer.
The Board of Directors then unanimously
15
<PAGE> 25
determined that the Merger was in the best interests of the Company's
shareholders, unanimously approved the Merger Agreement and the transactions
contemplated by the Merger Agreement, and unanimously resolved to recommend
that the Company's shareholders vote for adoption of the Merger Agreement.
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY'S BOARD OF
DIRECTORS
At a special meeting of the Board of Directors held on April 30, 1997, at
which all directors were present, the Company's Board of Directors unanimously
determined that the Merger is in the best interests of the Company's
shareholders, unanimously approved the Merger Agreement and the transactions
contemplated by the Merger Agreement and unanimously resolved to recommend that
the Company's shareholders vote for adoption of the Merger Agreement. As
described above under "-Background of the Merger," at meetings held on April
16, 1997 and April 30, 1997, the Company's Board of Directors received advice
or presentations from, and reviewed the then-current terms of the Merger
Agreement with the Company's management and its financial and legal advisors.
The presentations by the Company's legal advisors described and explained (i)
the terms and conditions of the proposed Merger as set forth in the draft of
the Merger Agreement, and (ii) the fiduciary duties applicable to the Company's
Board of Directors in the evaluation of the proposed transaction.
In reaching its conclusion to enter into the Merger Agreement and
recommend that the Company's shareholders vote for adoption of the Merger
Agreement, the Company's Board of Directors considered a number of factors,
including, without limitation, those outlined by Cleary Gull in support of its
fairness opinion discussed below, and the Board's own analysis of the
following:
(i) The amount and type of consideration to be received in the Merger by
the shareholders of the Company and the historical trading prices of the
Company's Common Stock, including the fact that the Merger Consideration
represented a significant premium over the then-prevailing market price of the
Company Shares, and the relationship between the Merger Consideration and the
Company's reported earnings and certain other measures.
(ii) A comparison of selected acquisition transactions involving companies
of similar size or in similar industries as the Company.
(iii) Current market conditions and historical market prices, volatility
and trading information with respect to the Company Shares.
(iv) The condition, prospects and strategic direction of the Company's
business.
16
<PAGE> 26
(v) The fact that over a period of approximately one year and after
extensive contacts by Cleary Gull, there ultimately was only one competing
proposal, which was not materially different from a financial point of view and
was subject to significant conditions not present in the Merger Agreement.
(vi) The terms and conditions of the Merger and the Merger Agreement,
including the amount and the form of the consideration, as well as the parties'
mutual representations, warranties and covenants, and the conditions to their
respective obligations, and a comparison of the terms and conditions of the
Merger and the Merger Agreement with the competing proposal received by the
Company.
(vii) The terms of the Merger Agreement that permit the Company's Board of
Directors, in the exercise of their fiduciary duties and subject to certain
conditions, to respond to inquiries regarding potential business combination
transactions, to provide information to, and negotiate with, third parties
making an unsolicited proposal to acquire the Company in such a transaction and
to terminate the Merger Agreement if the Company's Board of Directors
determines in the exercise of its judgment as to its fiduciary duties to the
Company's shareholders, after consultation with counsel, that such termination
is required by reason of a subsequent Acquisition Proposal (as defined in the
Merger Agreement). In that regard, the Board of Directors specifically
considered the applicability of the Termination Fee. See "THE MERGER AGREEMENT
- - Termination Fee and Expenses." The Company's Board of Directors did not view
the Termination Fee provision of the Merger Agreement as unreasonably impeding
any interested third party from proposing a superior transaction.
(viii) The likelihood that the Merger will be consummated.
In view of the wide variety of factors considered in connection with its
evaluation of the terms of the Merger, the Company's Board of Directors did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
conclusions.
OPINION OF FINANCIAL ADVISOR TO THE COMPANY
The Company has engaged Cleary Gull to act as its financial advisor in
connection with the transactions contemplated by the Merger Agreement and to
render a fairness opinion. Cleary Gull provided a written fairness opinion to
the Company's Board of Directors on May 14, 1997, to the effect that the
consideration to be received by the holders of the Common Stock, pursuant to
the Merger Agreement, is fair, from a financial point of view, to such holders.
17
<PAGE> 27
The full text of Cleary Gull's fairness opinion, which sets forth the
assumptions made, general procedures followed, matters considered and limits on
the review undertaken, is attached hereto as Exhibit B to this Proxy Statement.
Cleary Gull's opinion is directed only to the fairness, from a financial point
of view, to the holders of Common Stock of the consideration to be received by
such holders pursuant to the Merger Agreement and does not constitute a
recommendation to any holder of Common Stock as to how such shareholder should
vote with respect to the Merger Agreement. The summary of Cleary Gull's
opinion set forth below is qualified in its entirety by reference to the full
text of such opinion attached hereto as Exhibit B. SHAREHOLDERS OF THE COMPANY
ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
In arriving at its opinion, Cleary Gull reviewed, analyzed and considered
such financial and other factors as it deemed appropriate under the
circumstances, including among others, the following: (i) certain publicly
available business and historical financial information relating to the
Company; (ii) certain other internal information, primarily financial in
nature, concerning the business and operations of the Company furnished to
Cleary Gull by the Company, for purposes of its analysis; (iii) the historical
and current stock market data for Common Stock and for certain other companies
that Cleary Gull believed to be generally comparable to the Company; (iv)
publicly available financial information with respect to certain other
companies that Cleary Gull believed to be generally comparable to the Company;
(v) an unleveraged after-tax discounted cash flow analysis of the Company; (vi)
an analysis of the price at which a financial buyer could purchase the business
while providing appropriate market returns for its debt and equity investors;
(vii) a comparison of the purchase price premium to be paid for the Common
Stock to certain other similar-sized mergers; (viii) certain publicly available
information concerning the nature and terms of certain other transactions that
Cleary Gull believed to be relevant on a comparative basis; (ix) reviewed
drafts of the proxy statement; and (x) the terms of the Merger Agreement.
Cleary Gull also met with certain officers of the Company to discuss the
foregoing, as well as other matters Cleary Gull believed relevant to its
inquiry.
In preparing its opinion, Cleary Gull relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to Cleary Gull by or on behalf of the Company, and
Cleary Gull did not independently verify such information. Cleary Gull also
assumed that (i) certain expense reductions contemplated by Choucroute will be
realized as a result of the Merger and (ii) all material liabilities
(contingent or otherwise, known or unknown) of the Company are as set forth in
the consolidated financial statements of the Company, or were disclosed to
Cleary Gull. Cleary Gull did not make an
18
<PAGE> 28
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of the Company. Cleary Gull did not make any physical inspection
of the properties or assets of the Company. Cleary Gull's fairness opinion is
based upon economic, monetary and market conditions existing on the date
thereof. Cleary Gull's fairness opinion does not address the relative merits of
the Merger, or the decision of the Company's Board of Directors to proceed with
the Merger. The Merger Consideration was determined by the Company and
Choucroute in arm's-length negotiations. Cleary Gull did not, and was not
requested to, make any recommendations as to the form or amount of Merger
Consideration to be paid pursuant to the Merger Agreement. The Company did not
place any limitations upon Cleary Gull with respect to the procedures followed
or factors considered in rendering its opinion.
The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant quantitative methods of financial analyses
and the application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to partial analysis or
summary description. Accordingly, Cleary Gull believes that its analyses must
be considered as a whole and that considering any portion of such analyses and
of the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying Cleary Gull's
opinion. In its analyses, Cleary Gull made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the
value of businesses do not purport to be appraisals or to reflect the prices at
which businesses may actually be sold. Cleary Gull's opinion and financial
analyses were only one of many factors considered by the Company's Board of
Directors in its evaluation of the Merger and should not be viewed as
determinative of the views of the Company's Board of Directors or management
with respect to the proposed Merger.
In evaluating the consideration to be received pursuant to the Merger
Agreement by the holders of Common Stock, Cleary Gull performed a variety of
financial analyses with respect to the Company. Certain of these financial
analyses are summarized below.
Analysis of Selected Publicly Traded Companies Comparable to the Company.
Using publicly available information, Cleary Gull reviewed and compared certain
actual and estimated financial, operating and stock market information of the
Company and a group of publicly traded construction, industrial
19
<PAGE> 29
tool or measurement instrument related companies, including Eastern Co.,
Greenfield Industries, Ingersoll-Rand, Kennametal Inc., Pentair Inc. and L.S.
Starrett (the "Public Comparables"). Cleary Gull compared equity values as a
multiple of trailing net income, projected 1997 net income, and book value as
well as the equity market capitalization plus total debt less cash and cash
equivalents (the "Adjusted Market Value") as a multiple of the latest twelve
months net revenue ("LTM"), LTM earnings before interest and taxes ("EBIT") and
LTM earnings before interest, taxes, depreciation and amortization ("EBITDA").
Net income projections for the Public Comparables were based on either
analysts' estimates or the Institutional Brokers Estimate System and future net
income for the Company was based on the Company's 1997 budget. All trading
multiples were based on closing stock prices as of April 30, 1997, the date on
which the Merger Agreement was signed (the "Announcement Date"). This analysis
resulted in a range of equity values for the Company of $11.13 to $13.74 per
fully diluted share.
Financial Buyer Analysis. Cleary Gull analyzed the price at which a
financial buyer could purchase the business while providing market returns for
its debt and equity investors based on an assumed capital structure and a
financial plan prepared by the Company's management. Based on this analysis,
Cleary Gull derived an equity value range for the Company of $11.00 to $12.50
per fully diluted share.
Discounted Cash Flow Analysis of the Company. Cleary Gull analyzed the
Company's fully diluted per share value based on an unleveraged after-tax
discounted cash flow analysis of the five-year financial performance of the
Company. The annual after-tax cash flows for the five-year period were based
on a financial plan prepared by the Company's management. The discounted cash
flow analysis determined the discounted present value of the unleveraged
after-tax cash flows generated over the five-year period and then added a
terminal value based on a range of EBITDA multiples from 5.0x to 6.0x. The
unleveraged after-tax cash flows and terminal value were discounted using a
range of discount rates from 14.0% to 18.0%. Cleary Gull derived the range of
EBITDA multiples and discount rates on the basis of multiples of EBITDA and
estimated risk adjusted costs of capital for the Public Comparables. Based on
this analysis, Cleary Gull derived an equity value range for the Company of
$10.12 to $14.15 per fully diluted share.
Analysis of Selected Comparable Transactions. Cleary Gull reviewed 18
transactions involving the acquisition or proposed acquisition of companies of
similar size or in similar industries as the Company. Cleary Gull calculated
the multiples of Adjusted Market Value to LTM net revenues, LTM EBIT and LTM
EBITDA (the "Acquisition Multiples") for each of these transactions. Cleary
Gull
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<PAGE> 30
compared the multiples based on the purchase price to the Acquisition
Multiples. This analysis resulted in an overall equity value range for each
fully-diluted share of Common Stock to $9.52 to $14.13.
Premium Analysis. Cleary Gull analyzed the closing prices of the Common
Stock over the one-day, one-month, six-month, twelve-month and 24-month periods
preceding the Announcement Date and the premiums implied by the Merger
Consideration as of such dates. This analysis resulted in a range of purchase
price premiums for the Common Stock of (i) 50.0% based upon the last trade of
the Common Stock prior to the Announcement Date ($8.00 per share on April 29,
1997); (ii) 34.5% based upon the average closing price during the one-month
period prior to the Announcement Date ($8.92); (iii) 32.8% based upon the
average closing price during the 6-month period prior to the Announcement Date
($9.03); (iv) 17.4% based upon the average closing price during the 12-month
period prior to the Announcement Date ($10.22); and (v) 11.0% based upon the
average closing price during the 24-month period prior to the Announcement Date
($10.81). Cleary Gull noted that the market for the Common Stock was highly
illiquid for a publicly traded security and that there were sustained periods
with limited trading volume of the Common Stock. Cleary Gull further noted
that the indicated purchase price premiums compared favorably with the mean
premiums on transactions between $10 million and $50 million in size between
June 1, 1996 and April 26, 1997 (25.2% premium over the price four weeks prior
to the announcement date of the transaction as calculated using publicly
available data). Premium data for transactions of less than $10 million were
not available.
These analyses resulted in an overall equity value range for each
fully-diluted share of Common Stock of $10.75 to $13.73. Cleary Gull also
noted that the Merger Consideration of $12.00 was within the indicated range of
value for each valuation analysis.
Compensation. Pursuant to an engagement letter between Cleary Gull and
the Company, the Company paid Cleary Gull a monthly non-refundable fee of
$3,000 (the "Retainer") during the period of the engagement and $50,000 (the
"Signing Fee") upon the signing of the Merger Agreement. In addition, Cleary
Gull will be paid a fee of $300,000 less the Signing Fee and the aggregate
amount of the Retainer, upon consummation of the Merger. Cleary Gull will not
be entitled to any additional fees or compensation, other than the Retainer and
Signing Fee, in the event the Merger is not approved or otherwise consummated.
The Company has also agreed to reimburse Cleary Gull for its reasonable
out-of-pocket expenses and to indemnify it against certain expenses and
liabilities in connection with its services as financial advisor, including
those arising under federal securities laws.
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Cleary Gull does not currently and has not in the past made a market in
the equity securities of the Company.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger Agreement and the transactions contemplated thereby,
shareholders should be aware that certain members of the Company's management
and the Board of Directors have certain interests in the Merger that are in
addition to the interests of shareholders of the Company generally.
Stock Options
Pursuant to the Merger Agreement, at the Effective Time, each of the
outstanding stock options of the Company will be canceled and converted into
the right to receive a cash payment equal in amount to the difference between
(i) the Merger Consideration and (ii) the exercise price of such stock option
(the "Spread"). As of April 30, 1997, stock options covering a total of 46,750
Company shares were outstanding with exercise prices between $6.50 and $10.00
per share. The aggregate Spread on all stock options payable pursuant to the
Merger is approximately $174,000. Such options include options covering a
total of 18,250 Company Shares that are not currently exercisable but which
provide for accelerated vesting in the event of a change of control, including
upon consummation of the Merger.
Severance Arrangement
Pursuant to the Employment Agreement dated as of January 1, 1997, as
amended, between the Company and Tony L. Mihalovich, President and Chief
Executive Officer of the Company, Mr. Mihalovich will be entitled to receive
from the Company, if the Company terminates his employment following the Merger
or if Mr. Mihalovich resigns after the occurrence of certain events following
the Merger, a cash payment equal to two times his base salary at the date of
termination plus a prorated share of any incentive bonus due Mr. Mihalovich and
one-year of extended benefits, provided, however, that such amount shall not
exceed the amount which would cause a penalty under section 280G of the
Internal Revenue Code. The events which would permit Mr. Mihalovich to receive
the severance payment after a resignation include any involuntary (a)
reassignment to any position, duties or responsibilities inconsistent with his
position, duties or responsibilities as of the Effective Time, (b) reduction in
his base compensation below the base compensation as of the Effective Time, or
a
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material reduction in his benefits or prerequisites, or (c) transfer to an
office location outside of the Metropolitan Milwaukee area. This payment would
equal approximately $330,000. In addition, under a deferred compensation
agreement between Mr. Mihalovich and the Company, Mr. Mihalovich has the
ability to defer up to 25% of his base compensation and 100% of any incentive
bonus and he has been participating in that arrangement. Under this
arrangement the deferred payments have been placed in a Rabbi Trust at Marshall
& Ilsley Trust Company. Such deferred payments have a current value of
approximately $120,000 and are payable to Mr. Mihalovich upon employment
termination for any reason.
Indemnification and Insurance
Pursuant to the Merger Agreement, Choucroute agreed to, and agreed to
cause the Surviving Corporation to, indemnify the present and former officers,
directors, employees, agents and representatives of the Company with respect to
events occurring at or prior to the Effective Time, including the transactions
contemplated by the Merger Agreement, to the full extent permitted or required
under the WBCL. In addition, Choucroute agreed that all rights to
indemnification as provided in the Company's Articles of Incorporation or
By-Laws or other agreements or provisions, as in effect as of the date of the
Merger Agreement, with respect to matters occurring through the Effective Time,
will survive the Merger and will continue in full force and effect. Choucroute
also agreed to cause the Surviving Corporation to use reasonable efforts to
obtain extended coverage under the fiduciary liability, professional liability
and directors and officers liability policies currently covering any of the
Company's directors, employees, agents or representatives, and, in the event
the Surviving Corporation is unable to obtain extended coverage, to use
reasonable efforts to provide similar coverage for the Company's directors,
employees, agents or representatives under policies maintained by Choucroute;
provided that such similar coverage is available to Choucroute at a cost not
substantially higher than the Company's present coverage.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the Merger will be allocated among
the Surviving Corporation's assets and liabilities based on the fair values of
the assets acquired and liabilities assumed and any amount of consideration in
excess of the total fair value of such assets and liabilities will be booked as
goodwill. At the Effective Time, the Company will become a wholly owned
subsidiary of Choucroute.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THE COMPANY'S
SHAREHOLDERS
Set forth below is a description of certain federal income tax aspects of
the Merger to holders of Company Shares disposed of in the Merger under current
law and regulations. The discussion is based on the Internal Revenue Code of
1986, as amended. The Company will not seek any rulings from the Internal
Revenue Service ("IRS") or an opinion of counsel with respect to the
transactions contemplated by the Merger Agreement.
The following discussion is limited to the material federal income tax
aspects of the Merger for a holder of Company Shares who is a citizen or
resident of the United States, and who, on the date of disposition of such
holder's Company Shares, holds such shares as capital assets. All holders are
urged to consult their own tax advisors regarding the federal, foreign, state
and local tax consequences of dispositions of Company Shares in the Merger.
The following discussion does not address potential foreign, state, local and
other tax consequences, nor does it address taxpayers subject to special
treatment under the federal income tax laws, such as life insurance companies,
tax-exempt organizations, S corporations, regulated investment companies and
taxpayers subject to alternative minimum tax.
A holder of Company Shares will recognize gain or loss upon the surrender
of such holder's Company Shares and receipt of the Merger Consideration
pursuant to the Merger in an amount equal to the difference, if any, between
(a) the amount of cash received, and (b) such holder's aggregate adjusted tax
basis in the Company Shares surrendered therefor.
In general, any gain or loss recognized by a shareholder in the Merger
will be eligible for capital gain or loss treatment. Any capital gain or loss
recognized by shareholders will be long-term capital gain or loss if the
Company Shares giving rise to such recognized gain or loss have been held for
more than one year; otherwise such capital gain or loss will be short term. An
individual's long-term capital gain is currently subject to federal income tax
at a maximum rate of 28% while any capital loss (assuming there are no capital
loss carryovers from prior years) can be offset only against other capital
gains plus $3,000 ($1,500 for married persons filing separately) of other
income in any tax year. Any unutilized capital loss will carry over as a
capital loss to succeeding years for an unlimited time until the loss is
exhausted.
For corporations, a capital gain is subject to federal income tax at a
maximum rate of 39% while any capital loss can be offset only against other
capital gains. Any unutilized capital loss generally can be carried back three
years and forward five years to be offset against net capital gains generated
in such years.
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Under the federal income tax backup withholding rules, unless an exemption
applies, the Exchange Agent will be required to withhold, and will withhold,
31% of all cash payments to which a holder of Company Shares or other payee is
entitled pursuant to the Merger Agreement, unless the shareholder or other
payee provides a tax identification number (social security number, in the case
of an individual, or employer identification number, in the case of other
Company shareholders) and certifies that such number is correct and that the
shareholder or other payee is not subject to backup withholding. Each Company
shareholder, and, if applicable, each other payee, should complete and sign the
Substitute Form W-9 included as part of the letter of transmittal to be
returned to the Exchange Agent in order to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Exchange Agent.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH HOLDER OF COMPANY SHARES IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO
SUCH SHAREHOLDER (INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE,
LOCAL AND OTHER TAX LAWS).
SOURCE AND AMOUNT OF FUNDS
Choucroute intends to fund payment of the Merger Consideration through
existing cash and a new credit facility that Choucroute expects to obtain prior
to the Effective Time. Choucroute has received a commitment letter from a bank
(the "Commitment Letter") to extend credit of up to $6.5 million, on the terms
and subject to the conditions set forth in the Commitment Letter, to fund the
Merger, transaction expenses related to the Merger and Choucroute's ongoing
working capital needs. It is a condition to Choucroute's obligations to
consummate the transactions under the Merger Agreement that Choucroute obtain
financing on substantially the terms and conditions contained in the Commitment
Letter. If the Merger Agreement is terminated by Choucroute as a result of
its inability to obtain financing (except for such inability as arises as a
result of the Company's failure to accurately disclose relevant facts or
circumstances to Choucroute, Choucroute Sub or Choucroute's financing sources),
Choucroute must reimburse the Company for up to $75,000 of expenses incurred
subsequent to April 15, 1997. See "THE MERGER AGREEMENT -- Conditions to
Consummation of the Merger" and "--Termination Fee and Expenses."
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The aggregate cost to Choucroute of acquiring all of the Company Shares in
the Merger, making required payments to holders of stock options (see "THE
MERGER - Interests of Certain Persons in the Merger") and payment of its fees
and expenses will be approximately $6.4 million.
DISSENTERS' RIGHTS OF APPRAISAL
Under the WBCL, holders of a class of stock quoted on the National
Association of Securities Dealers, Inc. automated quotations system (such as
the Company Shares) do not have dissenters' rights except in certain
circumstances, none of which are present with respect to the Merger. See
"DISSENTERS' RIGHTS."
REGULATORY APPROVALS
There are no significant regulatory approvals or governmental consents
required prior to the consummation of the Merger.
THE MERGER AGREEMENT
The following discussion of the Merger Agreement is qualified in its
entirety by reference to the complete text of the Merger Agreement, which is
included in this Proxy Statement as Exhibit A (exclusive of all exhibits and
schedules) and is incorporated herein by reference.
GENERAL
The Merger Agreement provides for the merger of Choucroute Sub into the
Company. The Company will be the Surviving Corporation of the Merger and, as a
result of the Merger, Choucroute will indirectly own all of the Surviving
Corporation's Common Stock. In the Merger, the shareholders of the Company,
other than Choucroute and Choucroute Sub, will receive the Merger Consideration
described below.
EFFECTIVE TIME
The Effective Time of the Merger will occur upon the later of (a) the date
the Department of Financial Institutions of the State of Wisconsin receives
Articles of Merger for filing and (b) the effective date and time specified in
the Articles of Merger. It is anticipated that such Articles of Merger will be
filed promptly after the approval and adoption of the Merger Agreement by the
shareholders of the Company at the Special Meeting. Such filing will be made,
however, only upon
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satisfaction or waiver of all conditions to the Merger contained in the Merger
Agreement.
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS OF THE COMPANY
In connection with the Merger, each outstanding Company Share at the
Effective Time will be converted into the right to receive $12.00 in cash,
without interest (other than shares of Common Stock, if any, held by the
Company, Choucroute or Choucroute Sub, which are to be canceled as part of the
Merger). Instructions with regard to the surrender of certificates formerly
representing Company Shares, together with the letter of transmittal to be used
for that purpose, will be mailed to shareholders as soon as practicable after
the Effective Time. The Exchange Agent as soon as practicable following
receipt from the shareholder of a duly executed letter of transmittal, together
with certificates formerly representing Company Shares and any other items
specified by the letter of transmittal, shall pay, by check or draft, to such
shareholder, the Merger Consideration to which such holder is entitled.
Each outstanding Choucroute Sub Share will automatically be converted into
one share of common stock, par value $.01 per share, of the Surviving
Corporation.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES FOR COMPANY SHARES
WITH THE ENCLOSED PROXY CARD.
After the Effective Time, the holder of a certificate formerly
representing Company Shares shall cease to have any rights as a shareholder of
the Company, and such holder's sole right will be to receive the Merger
Consideration with respect to such shares. If payment is to be made to a
person other than the person in whose name the surrendered certificate is
registered, it will be a condition of payment that the certificate so
surrendered be properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment shall pay any transfer or other taxes
required by reason of such payment or establish to the satisfaction of the
Surviving Corporation that such taxes have been paid or are not applicable. No
transfer of shares outstanding immediately prior to the Effective Time will be
made on the stock transfer books of the Surviving Corporation after the
Effective Time. Certificates formerly representing Company Shares presented to
the Surviving Corporation after the Effective Time will be canceled in exchange
for the Merger Consideration to which such shares are entitled.
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In no event will holders of Company Shares be entitled to receive any
interest on the Merger Consideration to be distributed to them in connection
with the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things, (a) corporate organization, existence, good
standing and power and authority to own and operate properties and carry on
business; (b) corporate power and authority to enter into, and the due, valid
and binding execution and delivery of, the Merger Agreement; (c) the absence of
any violations of applicable law by the Company; (d) consents and approvals of
public bodies; (e) the Merger not resulting in conflicts with respect to the
articles of incorporation or By-Laws, breaches of any agreements or instruments
or violations of orders relating to the Company, Choucroute or Choucroute Sub;
(f) the capital structure of the Company; (g) the fair presentation of
financial statements supplied by the Company to Choucroute; (h) the absence of
certain material adverse changes concerning the Company; (i) the absence of
certain undisclosed liabilities of the Company; (j) the absence of litigation or
product liability claims involving the Company; (k) certain matters pertaining
to federal, state and local taxes and employee benefit plans of the Company; (l)
the status of the Company's inventory; (m) the absence of defaults under or
terminations of the Company's material contracts; (n) certain matters pertaining
to the Company's intellectual property rights; (o) certain matters pertaining to
the Company's accounts receivable and major customers and suppliers; (p) certain
matters pertaining to the ownership and control of Choucroute and Choucroute Sub
by Mr. Foote and the lack of prior activities by Choucroute and Choucroute Sub;
and (q) the absence of undisclosed transactions between the Company and its
officers and directors or their relatives.
None of the representations and warranties described above survive the
Effective Time of the Merger.
COVENANTS
Each of the parties to the Merger Agreement has agreed to use its
reasonable best efforts to take all such action as may be necessary or
appropriate to effectuate the Merger under the WBCL, including cooperation in
the preparation and filing of this Proxy Statement, expiration or termination
of governmental filings and waiting period requirements, and execution of any
additional instruments reasonably necessary to effect the transactions
contemplated by the Merger Agreement.
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Pursuant to the Merger Agreement, the Company has agreed that, except as
expressly contemplated by the Merger Agreement or consented to in writing by
Choucroute, from the date of the Merger Agreement until the Effective Time, the
Company will carry on its business in the ordinary course of business
consistent with its past practice and, to the extent consistent with such
business, will use its reasonable efforts to preserve intact its present
business organization, maintain its rights and franchises, keep available the
services of its present officers and key employees, preserve its relationships
with its key customers and suppliers and keep in full force and effect
liability insurance and bonds comparable in amount and coverage to that
maintained as of the date of the Merger Agreement. In addition, the Company
has agreed that, except as contemplated by the Merger Agreement or consented to
in writing by Choucroute, from the date of the Merger Agreement until the
Effective Time, the Company shall not do any of the following:
(a) Increase the compensation payable to any director, officer or employee
of the Company; grant any severance or termination pay (other than pursuant to
the normal severance policy of the Company in effect as of the date of the
Merger Agreement) to, or enter into any severance agreement with, any director
or officer; enter into or amend any employment agreement with any director or
officer that would extend beyond the Effective Time except on an at-will basis;
or establish, adopt, enter into or amend any employee benefit plan, except as
may be required to comply with applicable law;
(b) Declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) Redeem, purchase or otherwise acquire any shares of its capital stock
or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or any options, warrants or conversion or other
rights to acquire any shares of its capital stock; effect any reorganization or
recapitalization; or split, combine or reclassify any of its capital stock
(except for the issuance of shares upon the exercise of options or warrants in
accordance with their terms);
(d) Issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security interests,
liens, claims, pledges, limitations on voting rights, charges or other
encumbrances) of, any shares of any class of its capital stock, any securities
convertible into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire any such shares (except for the issuance
of shares upon the exercise of options or warrants in accordance with their
terms), or amend or otherwise modify the terms of any such rights, warrants or
options the effect of which shall be to
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make such terms more favorable to the holders thereof, except as contemplated
by the Merger Agreement;
(e) Acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with the
Company's past practice);
(f) Sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose
of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, any material amount of any of its assets, except for dispositions
in the ordinary course of business and consistent with the Company's past
practice;
(g) Adopt any amendments to its Articles of Incorporation or By-Laws;
(h) Change any of its methods of accounting in effect at December 31, 1994
or make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of the federal income tax returns for the
taxable year ending December 31, 1994, except in either case as may be required
by law, the IRS, generally accepted accounting principals or in the ordinary
course of business consistent with past practice;
(i) Except with respect to increased bank debt pursuant to the Company's
existing revolving credit facility, incur any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a note, bond,
debenture or similar instrument, except as approved by Choucroute in advance;
or
(j) Agree in writing or otherwise to do any of the foregoing.
The Merger Agreement also provides that the Company and its officers,
directors, employees, agents and advisors will immediately cease any existing
discussions or negotiations with any parties with respect to any Acquisition
Proposal (as defined below). The Company is not prohibited from (a) furnishing
information and access in response to unsolicited requests to any person or
entity pursuant to confidentiality agreements, or (b) participating in
discussions and negotiating with any person or entity concerning any merger,
sale of assets, sale of
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shares of capital stock or similar transaction involving the Company, if such
person or entity has submitted a written proposal to the Company's Board of
Directors relating to any such transaction, and the Company's Board of Directors
determines in good faith after consultation with independent legal counsel that
the failure to provide such information or access or to engage in such
discussions or negotiations would be inconsistent with their fiduciary duties to
the Company's shareholders under applicable law. The Company is required to
notify Choucroute immediately if any such request or proposal, or any inquiry or
contact with any person with respect thereto, is made and to keep Choucroute
apprised of all developments that could reasonably be expected to culminate in
the Company's Board of Directors withdrawing, modifying or amending its
recommendation of the Merger and the other transactions contemplated by the
Merger Agreement. The Merger Agreement defines "Acquisition Proposal" as any
proposal or offer for a merger, asset acquisition or other business combination
(other than the Merger) involving the Company and any other person or entity, or
any proposal or offer to acquire a significant equity interest in, or a
significant portion of the assets of, the Company by any other person or entity.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger Agreement provides that the obligations of the parties to
effect the Merger are subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions: (a) the Company's shareholders
shall have approved the Merger Agreement and the Merger and (b) no action or
proceeding has been instituted or is pending by any governmental entity before
any court or administrative agency, and no order or decree has been entered in
any action or proceeding before any such court or agency, (i) imposing or
seeking to impose limitations on the ability of Choucroute to acquire or hold
or to exercise full rights of ownership of any of the Company Shares; (ii)
imposing or seeking to impose limitations on the ability of Choucroute to
combine and operate the business and assets of the Company with Choucroute or
Choucroute Sub; (iii) imposing or seeking to impose other sanctions, damages or
liabilities arising out of the Merger on Choucroute, Choucroute Sub, the
Company or any of their officers or directors; (iv) requiring or seeking to
require divestiture by Choucroute of all or any material portion of the
business, assets or property of the Company; or (v) restraining, enjoining or
prohibiting or seeking to restrain, enjoin or prohibit the consummation of the
Merger.
The Company's obligation to effect the Merger is also subject to the
satisfaction, at or prior to the Effective Time, of the following additional
conditions, any or all of which may be waived in whole or in part by the
Company: (a) the representations and warranties of Choucroute and Choucroute
Sub contained in the Merger Agreement shall be true and correct in all material
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respects at and as of the Effective Time; (b) Choucroute and Choucroute Sub
shall have performed in all material respects their obligations required to be
performed by them under the Merger Agreement prior to the Effective Time; and
(c) the Company shall have received an opinion of counsel to Choucroute and
Choucroute Sub in form and substance satisfactory to the Company and its
counsel.
The obligation of Choucroute and Choucroute Sub to effect the Merger is
also subject to the satisfaction, at or prior to the Effective Time, of the
following additional conditions: (a) the representations and warranties of the
Company contained in the Merger Agreement shall have been true and correct in
all material respects when made and such representations and warranties, as
updated by any update schedule delivered by the Company to Choucroute, shall be
true and correct in all material respects at and as of the Effective Time; (b)
the Company shall have performed in all material respects the obligations
required to be performed by it under the Merger Agreement at or prior to the
Effective Time; (c) the Company shall have obtained all required third-party
consents except where the failure to obtain such consents would not have a
material adverse effect on the Company or the Merger; (d) Choucroute shall have
received an opinion of counsel to the Company in form and substance satisfactory
to Choucroute, and its counsel; and (e) Choucroute shall have obtained
acquisition and working capital financing on substantially the terms and
conditions set forth in the Commitment Letter. See "-Source and Amount of
Funds."
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time, notwithstanding approval of the Merger
Agreement by the shareholders of the Company:
(a) by mutual written consent of Choucroute and the Company;
(b) by either Choucroute or the Company in the event the conditions to
such party's obligations under the Merger Agreement have not been met or waived
on or prior to July 31, 1997, but only if the party terminating has not caused
the condition giving rise to termination to be not satisfied through its own
action or inaction;
(c) by either Choucroute or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any governmental entity preventing or prohibiting consummation
of the Merger has become final and nonappealable;
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(d) by Choucroute, if (i) the Company's Board of Directors withdraws,
modifies or changes in a manner materially adverse to Choucroute its
recommendation of the Merger Agreement or the Merger or has resolved to do any
of the foregoing, (ii) the Company's Board of Directors has recommended to the
shareholders of the Company any Competing Transaction (as defined below) or
resolved to do so, or (iii) a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of the Company is commenced, and the
Board of Directors of the Company, within 10 business days after such tender
offer or exchange offer is so commenced, either fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders or takes
no position with respect to the acceptance of such tender offer or exchange
offer by its shareholders;
(e) by the Company if, in the exercise of its judgment as to its fiduciary
duties to its shareholders as imposed by applicable law and, after consultation
with and receipt of advice from outside legal counsel, the Company's Board of
Directors determines that such termination is required by reasons of any
Competing Transaction being made or proposed; or
(f) by Choucroute, if any of the Company's updated schedules contains
disclosures of any fact or condition which (i) makes untrue, or shows to have
been untrue, any representation or warranty by the Company in this Agreement
and (ii) the effect of the fact or condition so disclosed upon the
representation or warranty so affected would constitute a material adverse
effect on the Company, unless concurrently with the delivery of such updated
schedules, the Company represents and warrants that the disclosed fact or
condition can and will be corrected at the Company's expense prior to the
Effective Time.
The Merger Agreement defines a "Competing Transaction" as any proposed
acquisition of the Company by any person or entity or any "group" (as such term
is defined under section 13(d) of the Exchange Act) other than Choucroute and
its affiliates by (i) merger, consolidation, share exchange, business
combination or other similar transaction, (ii) purchase of all or a substantial
part of the assets of the Company and its subsidiaries, taken as a whole, or
(iii) the acquisition of more than 50% of the Company's outstanding equity
securities.
In the event of the termination of the Merger Agreement and the Merger for
any reason, the Merger Agreement will become void, all rights of each party
thereto shall cease and none of the Company, Choucroute, Choucroute Sub or
their respective officers, directors, shareholders, agents or advisors will
have any liability except for the provisions in the Merger Agreement with
respect to payment of the Termination Fee and expenses described below. In
addition, the
<PAGE> 43
termination of the Merger Agreement does not affect the parties' obligations
under the Confidentiality Agreement, which obligations survive such termination.
TERMINATION FEE AND EXPENSES
Pursuant to the Merger Agreement, the Company must reimburse Choucroute
for all expenses incurred after the date of the Merger Agreement and in
addition pay Choucroute a Termination Fee of $200,000 (or approximately $0.44
per Company Share outstanding on April 30, 1997) if the Merger Agreement is
terminated by the Company pursuant to the sections of the Merger Agreement
described in paragraphs (d) or (e) of the above section. If the Merger
Agreement is terminated pursuant to paragraph (b) of the above section as a
direct result of a material intentional breach by a party of any of its
covenants in the Merger Agreement, the party in breach must reimburse the other
party for all expenses (whether incurred before or after the date of the Merger
Agreement) and must in addition pay such party the sum of $200,000. If the
Merger Agreement is terminated by the Choucroute as a result of its inability to
obtain financing (except for such inability as arises as a result of the
Company's failure to accurately disclose relevant facts or circumstances to
Choucroute, Choucroute Sub or Choucroute's financing sources), Choucroute must
reimburse the Company for up to $75,000 of expenses incurred subsequent to April
15, 1997. If the Merger is not consummated and the Merger Agreement is
terminated for any other reason, each party must bear its own expenses. If the
Merger is consummated, all expenses will be paid by the Surviving Corporation.
AMENDMENTS AND WAIVERS
At any time prior to the Effective Time of the Merger (notwithstanding any
shareholder approval) if authorized by Choucroute, Choucroute Sub and the
Company and to the extent permitted by law, (a) the parties to the Merger
Agreement may, by written agreement, modify, amend or supplement any term or
provision of the Merger Agreement, and (b) any term or provision of the Merger
Agreement may be waived by any party which is entitled to the benefits thereof,
provided that after such shareholder approval, no amendment may be made which
reduces the amount or changes the type of Merger Consideration unless such
amendment is approved by shareholders.
RIGHTS AGREEMENT
On August 29, 1988, the Company's Board of Directors declared a dividend
distribution of one Common Stock Purchase Right (a "Right") for each
outstanding share of Common Stock, pursuant to a Rights Agreement, dated as of
34
<PAGE> 44
August 29, 1988, by and between the Company and Firstar Trust Company (the
"Rights Agent"). Each Right entitles the registered holder, under certain
defined circumstances, to purchase from the Company one share of Common Stock
at a price of $35 per share (the "Purchase Price"), subject to adjustment. The
features of the Rights are summarized below.
SUMMARY OF FEATURES
As soon as practicable following the earlier to occur of (i) ten days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 20% or more of the outstanding
shares of Common Stock (the "Stock Acquisition Date") or (ii) ten business
days following the commencement or announcement of an intention to make a
tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of the outstanding shares of Common Stock (the
earlier of such dates being called the "Distribution Date"), separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Company's Common Stock as of the close of business on
the Distribution Date and such separate Right Certificates alone will evidence
the Rights. Prior to the Distribution Date, the Rights are evidenced solely by
Common Stock certificates. The Rights are not exercisable until the
Distribution Date and will expire on September 9, 1998, unless earlier redeemed
by the Company as described below.
In the event that at any time following the Stock Acquisition Date (i)
the Company is acquired in a merger or other business combination transaction
or (ii) 50% or more of the assets or earning power of the Company is sold
(the events described in clauses (i) and (ii) are herein referred to as
"Flip-Over Events"), each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which
at the time of such transaction would have a market value equal to two times
the exercise price of the Right.
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and its Common Stock is not changed or exchanged, (ii)
a person becomes the beneficial owner of 20% of the then outstanding shares of
Common Stock, (iii) an Acquiring Person engages in one of a number of
self-dealing transactions specified in the Rights Agreement, or (iv) during
such time as there is an Acquiring Person, an event occurs which results in
such Acquiring Person's ownership interest being increased by more than 1%
(i.e., a reverse stock split) (the events described in clauses (i)-(iv) are
herein referred to as "Flip-In Events"), at any time following the Distribution
Date (but no earlier than the
35
<PAGE> 45
expiration of the redemption period of the Rights), each holder of a Right will
thereafter have the right to receive upon exercise that number of shares of the
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a market value of two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, or subsequently become
beneficially owned by an Acquiring Person or his transferees will be null and
void.
The Purchase Price is payable in cash or, if so provided by the Company,
the Purchase Price following the occurrence of a Flip-In Event and until the
first Flip-Over Event may be paid in shares of Common Stock of the Company
having an equivalent value.
At any time until 10 days following the Stock Acquisition Date (subject to
unlimited extension by the Company's Board of Directors made before expiration
of such 10-day period or the end of any such extended period), the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors of
the Company electing to redeem the Rights, the Company shall make an
announcement thereof and, upon such election, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date, including an
amendment to lower the threshold for exercisability of the Rights from 20% to
not less than the greater of (i) any percentage greater than the largest
percentage of the outstanding Common Stock of the Company then known to the
Company to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%. After the Distribution Date, the provisions
of the Rights Agreement may be amended by the Board in order to cure any
ambiguity, to make changes which do not adversely affect the interest of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Company's Registration Statement on
Form 8-A filed with respect to the Rights. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
36
<PAGE> 46
reference to the Rights Agreement, which is hereby incorporated herein by
reference. Terms defined in the Rights Agreement which are used herein and
are not otherwise defined shall have the meaning ascribed to them in the
Rights Agreement.
CERTAIN EFFECTS OF THE RIGHTS ON THE MERGER
Because Choucroute does not beneficially own 20% or more of the Common
Stock and has not announced a tender offer or exchange offer with respect to
the Common Stock, the consummation of the Merger and the other transactions
contemplated by the Merger Agreement will not cause a Distribution Date under
the Rights Agreement or otherwise cause the Rights to become exercisable prior
to the Effective Time.
The Rights have certain anti-takeover effects which may impede or
dissuade third parties from making bids to acquire the Company or the Company
Shares in competition with the Merger. The Rights will cause substantial
dilution to a person or group that attempts to acquire the Company without
conditioning the offer on redemption of the Rights or on a substantial number
of Rights being acquired. The Rights should not interfere with any business
combination approved by the Board of Directors of the Company prior to the
time that the Rights may not be redeemed (as described above) since the Board
of Directors may, at its option, at any time until ten days following the
Stock Acquisition Date (subject to extension) redeem all but not less than
all the then outstanding Rights at $.01 per Right.
DISSENTERS' RIGHTS
Holders of stock quoted on the National Association of Securities Dealers,
Inc. automated quotations system (such as the Company Shares) generally have no
dissenters' rights under the WBCL. See Wisconsin Statutes section 180.1302(4).
The WBCL provides an exception to this general rule where the subject
transaction constitutes a "business combination" as defined in the WBCL.
Because Choucroute is not a "significant shareholder," as defined in the WBCL,
the Merger does not constitute a "business combination" and, accordingly,
holders of the Company Shares do not have dissenters' rights.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by each director, the Chief
Executive Officer ("CEO"), each person known to own more than 5% of the
Company's
37
<PAGE> 47
Common Stock, and all directors and executive officers as a group, as of April
30, 1997. Except for the CEO, no executive officer's salary and bonus exceeded
$100,000 in 1996. Except as indicated in the footnotes such persons have sole
voting and investment power of the shares beneficially owned.
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------ ------------------------------ ----------
<S> <C> <C>
Charles D. Jacobus 11,300 2.5
Marshall A. Loewi(1) 56,445 12.3
R. Ron Heiligenstein(2) 40,000 8.5
Michael S. Ariens 1,500 *
Tony L. Mihalovich(3) 9,427 2.0
Thomas A. Harenburg(4) 81,197 17.8
Charlotte H. Simmons(5) 26,500 5.8
William D. Van Dyke III(6) 50,000 10.9
Heartland Advisors, Inc.(7) 42,000 9.2
All directors and executive officers
as a group (8 persons)(8) 121,172 25.0
</TABLE>
- -------------------
*Less than 1%.
(1) Includes 38,607 shares held in a trust pursuant to which Mr. Loewi shares
investment power but retains sole voting power.
(2) The information listed is as of January 11, 1996, as reported by Mr.
Heiligenstein in an amendment to his Schedule 13D filed with the
Commission. In addition, the number of shares shown includes 16,000
shares subject to the exercise of stock options.
(3) Includes 8,750 shares subject to the exercise of stock options.
(4) The information listed is as of December 31, 1996, as reported by Mr.
Harenburg in an amendment to his Schedule 13D filed with the Commission.
The listed shares are held in trusts pursuant to which Mr. Harenburg
shares voting power but retains sole investment power. Mr. Harenburg's
address is 6360 East Decorah, Oshkosh, Wisconsin 54901.
(5) The information listed is as of January 20, 1992, as reported by Ms.
Simmons, as executrix of the Estate of Richard W. Simmons, in her Schedule
13D filed with the Commission, except to the extent information is
otherwise known to the Company. Ms. Simmons' address is 500 Lakeland,
Lake Bluff, Illinois 60044.
(6) The information listed is as of November 20, 1990 as reported by Mr. Van
Dyke in his Schedule 13D filed with the Commission, except to the extent
information is otherwise known to the Company. Mr. Van Dyke's address is
111 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
38
<PAGE> 48
(7) The information listed is as of February 12, 1997, as reported by
Heartland Advisors, Inc. in its Schedule 13G filed with the Commission.
The address of Heartland Advisors, Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(8) Includes (a) 27,250 shares subject to exercise of stock options, and (b)
38,607 shares held in a trust pursuant to which Mr. Loewi shares
investment power but retains sole voting power.
The above beneficial ownership information is based on information
furnished, or Schedule 13G or Schedule 13D filings made, by the specified
persons and is determined in accordance with Rule 13d-3, as required for
purposes of this Proxy Statement. It is not necessarily to be construed as an
admission of beneficial ownership for other purposes.
39
<PAGE> 49
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
Information regarding the Company's directors is set forth in the
following table.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME AGE BUSINESS EXPERIENCE DIRECTOR SINCE
- -------------------- --- ------------------------------------ ---------------
<S> <C> <C> <C>
Charles D. Jacobus 70 President of Jacobus Co. 1983
(diversified company with interests
in petroleum and home security
systems).
Marshall A. Loewi 69 Chairman of the Board of the 1980
Company. President and Chief
Executive Officer of Milwaukee
Resistor Corporation (Manufacturer
of power resistors and specialized
resistance products).
R. Ron Heiligenstein 64 Business consultant to various 1988
business enterprises.
Michael S. Ariens 65 President of Ariens Company 1980
(manufacturer of outdoor power
equipment). Mr. Ariens is also a
director of Wisconsin Public
Service Corporation (public utility
company).
Tony L. Mihalovich 49 President and Chief Executive 1992
Officer of the Company since
November 1992. Interim President
and Chief Operating Officer of the
Company from October 1992 to
November 1992. Executive Vice
President and Chief Operating
Officer of the Company from October
1989 to October 1992.
</TABLE>
EXECUTIVE OFFICERS
Information concerning those executive officers of the Company who are not
directors is set forth in the following table:
40
<PAGE> 50
<TABLE>
<CAPTION>
NAME AGE POSITION AND EXPERIENCE
- ---------------- --- ---------------------------------------------------------
<S> <C> <C>
James L. Younk 54 Chief Financial Officer (since December 1992), Vice
President - Finance (since February 1995), Secretary
(since May 1993), and Treasurer (since January 1988).
Larry P. Hutzler 55 Vice President - Manufacturing (since May 1994). Plant
Manager of the Company (from October 1992 to May 1994)
and Director -- Labor Relations and Human Resources of
the Company (from August 1973 to May 1994).
Stephen M. Smith 47 Vice President - Sales and Marketing (since February
1995). National Sales Manager of the Company (from
November 1991 to February 1995) and Director -- Sales
and Marketing of the Company (from January 1993 to
February 1995).
</TABLE>
OTHER MATTERS
The Board of Directors of the Company is not aware of any matters to be
presented for action at the Special Meeting other than those described herein
and does not intend to bring any other matters before the Special Meeting.
However, if other matters should come before the Special Meeting, it is
intended that the holders of proxies solicited hereby will vote thereon in
their discretion, unless such authority is withheld.
SHAREHOLDER PROPOSALS
As described in the Company's Proxy Statement relating to its 1997 Annual
Meeting (in the event the Merger is not consummated for any reason), proposals
of shareholders intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Company at its principal executive offices
not later than November 26, 1997, for inclusion in the Company's proxy
statement and form of proxy relating to that meeting. Shareholders should mail
any proposals by certified mail-return receipt requested.
EXPENSES OF SOLICITATION
The expenses in connection with solicitation of the enclosed form of
proxy, will be borne by the Company. In addition to solicitation by mail,
officers or regular employees of the Company, who will receive no compensation
for such
41
<PAGE> 51
services other than their regular salaries, may solicit proxies personally or
by telephone or facsimile. The Company has also engaged Georgeson & Company,
Inc. to solicit proxy appointments on behalf of the Company's Board of
Directors in connection with the Special Meeting at an anticipated cost of
approximately $5,000 plus reasonable out-of-pocket expenses. Arrangements will
be made with brokerage houses, nominees, participants in central certificate
depository systems and other custodians and fiduciaries to supply them with
solicitation material for forwarding to their principals, and arrangements may
be made with such persons to obtain authority to sign proxies. The Company may
reimburse such persons for reasonable out-of-pocket expenses incurred by them
in connection therewith.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company as of December 31, 1996 and 1995,
and for each of the years in the two-year period ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent public accountants, as
stated in their report.
A representative of Deloitte & Touche LLP will be at the Special Meeting
to answer questions by shareholders and will have the opportunity to make a
statement if so desired.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information are available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the Commission's
regional office located at 7 World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can also be obtained from the
Public Reference Section of the Commission at its Washington address at
prescribed rates. Such reports and other information filed with the Commission
may also be available at the Commission's site on the World Wide Web at
http:\\www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission
(Commission File No. 0-3555) are hereby incorporated by reference into this
Proxy Statement:
42
<PAGE> 52
1. The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996; and
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1997.
All documents filed by the Company pursuant to sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Proxy Statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Copies (without exhibits) of the Company's 1996 Annual Report to
Shareholders and the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997 accompany this Proxy Statement. Copies of the other
documents (without exhibits) incorporated by reference in this Proxy Statement
are available without charge upon written or oral request, from James L. Younk,
Secretary, David White, Inc., 11711 River Lane, P.O. Box 1007, Germantown,
Wisconsin 53022-8207, telephone 414-251-8100.
By order of the Board of Directors
Tony L. Mihalovich, President and Chief
Executive Officer
Germantown, Wisconsin
May 30, 1997
43
<PAGE> 53
Exhibit A
AGREEMENT AND PLAN OF MERGER
By and Among
CHOUCROUTE PARTNERS LLC,
FC SUB CORPORATION
and
DAVID WHITE, INC.
April 30, 1997
<PAGE> 54
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.01 The Merger 1
1.02 Effective Time 1
1.03 Effect of the Merger 2
1.04 Articles of Incorporation; By-Laws 2
1.05 Directors and Officers 2
1.06 Taking Necessary Action; Further Action 2
1.07 The Closing 2
ARTICLE II
CONVERSION OF SECURITIES
2.01 Conversion of Securities 3
2.02 Dissenting Shares 3
2.03 Exchange of Certificates 4
2.04 Stock Options 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 Organization and Qualification; Subsidiaries 6
3.02 Articles of Incorporation; By-Laws 7
3.03 Capitalization 7
3.04 Authority; Vote Required 8
3.05 No Conflict; Required Filings and Consents 8
3.06 Permits; Compliance 9
3.07 Reports; Financial Statements 9
3.08 Absence of Certain Changes or Events 10
3.09 Absence of Litigation 11
3.10 Contracts; No Default 12
3.11 Employee Benefit Plans 13
3.12 Taxes 15
<PAGE> 55
Page
3.13 Intellectual Property Rights 16
3.14 Certain Business Practices and Regulations 16
3.15 Insurance 16
3.16 Brokers 16
3.17 Title to Properties 16
3.18 Inventory 18
3.19 Title to Personal Property 18
3.20 Product Liability 18
3.21 Compliance with Environmental Laws 18
3.22 Labor Matters 20
3.23 Compliance with Law 21
3.24 Accounts Receivable 21
3.25 Major Customers and Suppliers 21
3.26 Product Warranty 22
3.27 Disclosure 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR SUB
4.01 Organization and Qualification; Subsidiaries 22
4.02 Authority 22
4.03 No Conflict; Required Filings and Consents 23
4.04 Ownership of Acquiror and Acquiror Sub;
No Prior Activities 23
4.05 Brokers 24
ARTICLE V
COVENANTS
5.01 Affirmative Covenants of the Company 24
5.02 Negative Covenants of the Company 25
5.03 Acquisition Proposals 26
ii
<PAGE> 56
Page
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Proxy Statement 27
6.02 Meeting of Shareholders 28
6.03 Appropriate Action; Consents; Filings 29
6.04 Update Disclosure; Breaches 30
6.05 Public Announcements 30
6.06 Indemnification 31
6.07 Obligations of Acquiror Sub 32
6.08 Employee Benefits and Compensation 32
ARTICLE VII
CLOSING CONDITIONS
7.01 Conditions to Obligations of Each Party
Under This Agreement 32
7.02 Additional Conditions to Obligations
of Acquiror and Acquiror Sub 34
7.03 Additional Conditions to Obligations of the Company 36
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination 38
8.02 Effect of Termination 39
8.03 Expenses 39
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations and Warranties 40
9.02 Notices 41
9.03 Amendment 42
9.04 Waiver 42
9.05 Headings 42
9.06 Severability 42
9.07 Entire Agreement 42
iii
<PAGE> 57
Page
9.08 Assignment 43
9.09 Parties in Interest 43
9.10 Governing Law 43
9.11 Counterparts 43
iv
<PAGE> 58
THIS AGREEMENT AND PLAN OF MERGER dated as of April 30, 1997 (the
"Agreement"), is made and entered into among CHOUCROUTE PARTNERS LLC, a
Wisconsin limited liability company ("Acquiror"), FC SUB CORPORATION, a
Wisconsin corporation and a wholly owned subsidiary of Acquiror ("Acquiror
Sub"), and DAVID WHITE, INC., a Wisconsin corporation (the "Company").
RECITAL
The Manager of Acquiror and the respective Boards of Directors of Acquiror
Sub and the Company have determined that it is advisable and in the best
interests of the respective corporations and their shareholders that Acquiror
Sub be merged with and into the Company in accordance with the Wisconsin
Business Corporation Law (the "Wisconsin Law") and the terms of this Agreement,
pursuant to which the Company will be the surviving corporation and will become
a wholly owned subsidiary of Acquiror (the "Merger").
AGREEMENTS
In consideration of the representations, warranties, covenants and
agreements set forth in this Agreement, the parties agree:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Wisconsin Law, at the Effective
Time, Acquiror Sub shall be merged with and into the Company. As a result of
the Merger, the separate corporate existence of Acquiror Sub shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). Acquiror Sub and the Company are sometimes
collectively referred to in this Agreement as the "Constituent Corporations."
1.02 Effective Time. As promptly as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VII, the
parties shall cause the Merger to be consummated by filing articles of merger
(the "Articles of Merger") with the Department of Financial Institutions of the
State of Wisconsin in such form as required by, and executed in accordance
with, the relevant provisions of the Wisconsin Law and shall take all such
further actions as may be required by law to make the Merger effective upon the
issuance of a certificate of merger by the Department of Financial Institutions
of the State of Wisconsin (the date and time of such issuance being the
"Effective Time").
<PAGE> 59
1.03 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Wisconsin Law.
Without limiting the generality of, and subject to the provisions of, the
Wisconsin Law, at the Effective Time, except as otherwise provided in this
Agreement, all the property, interests, assets, rights, privileges, immunities,
powers and franchises of Acquiror Sub and the Company shall vest in the
Surviving Corporation, and all debts, liabilities, duties and obligations of
Acquiror Sub and the Company shall become the debts, liabilities, duties and
obligations of the Surviving Corporation.
1.04 Articles of Incorporation; By-Laws. At the Effective Time, the
Articles of Incorporation, as amended by the amendments thereto set forth in
Exhibit 1.04 (which amendments shall become effective only at the Effective
Time), and the By-Laws of Acquiror Sub shall be the Articles of Incorporation
and the By-Laws of the Surviving Corporation. The name of the Surviving
Corporation shall be David White, Inc.
1.05 Directors and Officers. The directors of Acquiror Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquiror Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.06 Taking Necessary Action; Further Action. Acquiror, Acquiror Sub and
the Company, respectively, shall each use its reasonable efforts to take all
such action as may be necessary or appropriate to effectuate the Merger under
the Wisconsin Law at the time specified in section 1.02. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, interests, assets, rights,
privileges, immunities, powers and franchises of either of the Constituent
Corporations, the officers of the Surviving Corporation are fully authorized in
the name of each Constituent Corporation or otherwise to take, and shall take,
all such lawful and necessary action.
1.07 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Reinhart, Boerner,
Van Deuren, Norris & Rieselbach, s.c., 1000 North Water Street, Milwaukee,
Wisconsin 53202, within ten business days after the satisfaction or waiver of
the conditions set forth in Article VII, or at such other time or place as the
parties hereto shall mutually agree, and will be effective at the Effective
Time.
2
<PAGE> 60
ARTICLE II
CONVERSION OF SECURITIES
2.01 Conversion of Securities. At the Effective Time by virtue of the
Merger and without any further action on the part of Acquiror, Acquiror Sub,
the Company, the Surviving Corporation or the holders of any of the following
securities:
(a) each share of the $3.00 par value common stock, of the Company
("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than (i) shares of Company Common Stock owned by
Acquiror, Acquiror Sub or the Company or any direct or indirect subsidiary of
Acquiror, Acquiror Sub or the Company and (ii) any Dissenting Shares (as
defined in section 2.02)) shall be canceled and extinguished and be converted
into and become a right to receive a cash payment of $12.00 per share, without
interest (the "Merger Consideration");
(b) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Acquiror, Acquiror Sub or
the Company or any direct or indirect subsidiary of Acquiror, Acquiror Sub or
the Company shall be canceled and extinguished and no payment shall be made
with respect thereto; and
(c) each share of common stock, $.01 par value, of Acquiror Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, $.01 par value, of the
Surviving Corporation ("Surviving Corporation Common Stock").
2.02 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if
sections 180.1301 through 180.1331 of the Wisconsin Law ("Subchapter XIII")
shall be applicable to the Merger, shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time and which are
held by shareholders who have not voted such shares in favor of the Merger, who
shall have delivered, prior to any vote on the merger, a written objection to
the Merger in the manner provided in Subchapter XIII and who as of the
Effective Time, shall not have effectively withdrawn or lost such right to
dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to section 2.01,
but the holders thereof shall be entitled only to such rights as are granted by
Subchapter XIII. Each holder of Dissenting Shares who becomes entitled to
payment for such shares pursuant to Subchapter XIII shall receive payment
therefor from the Surviving
3
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Corporation in accordance with the Subchapter XIII; provided, however, that
if any such holder of Dissenting Shares shall have effectively withdrawn such
holder's demand for appraisal of such shares or lost such holder's right to
appraisal and payment of such shares under Subchapter XIII, such holder or
holders (as the case may be) shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed, as of the Effective Time,
to have been canceled, extinguished and converted into and represent the right
to receive payment from the Surviving Corporation of the Merger Consideration
as provided in section 2.01.
(b) The Company shall give Acquiror (i) prompt notice of any written
demand for fair value, any withdrawal of a demand for fair value and any other
instrument served pursuant to Subchapter XIII received by the Company, and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for fair value under such Subchapter XIII. The Company shall not,
except with the prior written consent of Acquiror, voluntarily make any payment
with respect to any demand for fair value or offer to settle or settle any such
demand.
2.03 Exchange of Certificates.
(a) Prior to the Effective Time, Acquiror shall designate a bank or
trust company (the "Exchange Agent") to act as exchange agent in effecting the
exchange of the Merger Consideration for certificates representing shares of
Company Common Stock entitled to payment pursuant to section 2.01 (the
"Certificates"). Immediately prior to the Effective Time, Acquiror shall
deposit with the Exchange Agent an amount equal to the aggregate Merger
Consideration (assuming there are no Dissenting Shares). The Exchange Agent
shall hold such sums in escrow for the purposes set forth in section 2.01(b).
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of Certificates a letter of transmittal and instructions for
use in surrendering Certificates and receiving the applicable Merger
Consideration therefor. The form of the transmittal letter shall have been
prepared by Acquiror, subject to the approval of the Company, prior to the
Effective Time. Upon the surrender of each Certificate, together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor an amount equal to the applicable Merger
Consideration multiplied by the number of shares of Company Common Stock
represented by such Certificate, and such Certificate shall be canceled. Until
so surrendered and exchanged, each such Certificate shall represent solely the
right to receive an amount equal to the Merger Consideration multiplied by the
number of shares of Company Common Stock
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represented by such Certificate. No interest shall be paid or accrued on the
Merger Consideration upon the surrender of the Certificates. If any Merger
Consideration is to be paid to a person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the person requesting such exchange shall pay
to the Exchange Agent any transfer or other similar taxes required by reason of
the payment of such Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or such person shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
(c) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent's duties shall terminate and any portion of the sum
not disbursed pursuant to section 2.01(b) shall be released to the Surviving
Corporation. Thereafter, each holder of a Certificate may surrender
Certificates to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor an amount
equal to the Merger Consideration multiplied by the number of shares of Company
Common Stock represented by such Certificate, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation.
(d) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Company Common
Stock. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent, they shall be canceled and
exchanged for the Merger Consideration, as provided in this Article II, subject
to applicable law in the case of Dissenting Shares.
2.04 Stock Options. At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (a "Company Stock Option") issued
pursuant to any stock option plan of the Company (together, the
Company Common Stock "Company Stock Plans") shall be canceled and extinguished
and be converted into and become the right to receive a cash payment equal in
amount to the difference between (i) the Merger Consideration and (ii) the
exercise price of such Company Stock Option. At Closing, the Surviving
Corporation shall pay out such amount, without interest, on each Company Stock
Option to the extent vested at the Effective Time (including those that vest
solely as a result of the Merger).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The term "Company Material Adverse Effect" as used in this Agreement shall
mean any change or effect that, individually or when taken together with all
other such changes or effects, is materially adverse to the condition
(financial or otherwise), results of operations, businesses, properties, assets
or liabilities of the Company, taken as a whole.
The term "Affiliate" as used in this Agreement shall mean, with respect to
any Person, a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
first mentioned Person. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a Person whether through the
ownership of stock or as trustee or executor, by contract or credit arrangement
or otherwise.
The term "knowledge of the Company" as used in this Agreement shall mean
the collective actual knowledge of the members of the senior management of the
Company based upon reasonable inquiry of those employees of the Company
responsible for the relevant area.
The term "Person" as used in this Agreement shall mean an individual,
corporation, partnership, association, trust, unincorporated organization,
other entity or group (as defined in section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the "Exchange Act")).
The Company makes the following representations and warranties to Acquiror
and Acquiror Sub.
3.01 Organization and Qualification; Subsidiaries. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Wisconsin incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, except such jurisdictions if any, where the failure to be so
qualified would not have a Company Material Adverse Effect. The Company has no
subsidiaries and does not own any equity interests of any other business
entity.
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3.02 Articles of Incorporation; By-Laws. The Company has furnished to
Acquiror complete and correct copies of the Articles of Incorporation and the
By-Laws, as amended or restated, of the Company. The Company is not in
violation of any of the provisions of its Articles of Incorporation or By-Laws,
as amended or restated.
3.03 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 5,000,000 shares of Company Common Stock and 1,000,000
shares of Preferred Stock, of which 457,323 shares of Common Stock were issued
and outstanding, 46,750 shares of Common Stock were reserved for issuance
pursuant to the Company Stock Plans and 46,750 Company Stock Options are
outstanding (excluding Company Stock Options granted to Acquiror in connection
with this Agreement).
(b) Except as described in this section 3.03, no shares of Company
Common Stock are reserved for any other purpose. Since December 31, 1996, no
shares of Company Common Stock have been issued by the Company, except pursuant
to the exercise of outstanding Company Stock Options in accordance with their
terms. Except as contemplated by this Agreement or as described on Schedule
3.03(c), there have been no changes in the terms of any outstanding Company
Stock Options or the grant of any additional Company Stock Options since
December 31, 1996. All outstanding shares of Company Common Stock have been
duly authorized and are validly issued, fully paid and nonassessable (except as
provided in section 180.0622(2)(b) of the Wisconsin Law, as interpreted) and
are not subject to preemptive rights under the Wisconsin Law, the Company's
Articles of Incorporation or By-Laws or any agreement to which the Company is a
party. Except as contemplated by this Agreement or described in section 3.03(a)
there are no options, warrants or other rights, agreements, arrangements or
commitments to which the Company is a party of any character relating to the
issued or unissued capital stock of, or other equity interests in, the Company
or obligating the Company to grant, issue, sell or register for sale any shares
of the capital stock of, or other equity interests in, the Company. Except as
set forth on Schedule 3.03(c), as of the date of this Agreement, there are no
obligations, contingent or otherwise, of the Company to repurchase, redeem or
otherwise acquire any shares of Company Common Stock. The transactions
contemplated by this Agreement will not cause the Company's Common Stock
Repurchase Rights to become exercisable.
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3.04 Authority; Vote Required.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated by this Agreement,
subject to required shareholder approval. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action, including such corporate action as may be required
by section 180.1140 et seq. of the Wisconsin Law, and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement
(other than with respect to the approval of this Agreement by the holders of
Company Common Stock in accordance with the Wisconsin Law and the Company's
Articles of Incorporation and By-Laws). This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws relating to or affecting the rights and remedies of creditors
generally and by general principles of equity including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether enforceability is considered in a
proceeding in equity or at law.
(b) The affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock is the only vote of the holders of
any class or series of capital stock of the Company necessary to approve the
Merger.
3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not: (i) violate the
Articles of Incorporation or By-Laws of the Company; (ii) subject to (x)
obtaining the requisite approval of this Agreement by the holders of at least a
majority of the outstanding shares of Company Common Stock in accordance with
the Wisconsin Law and the Company's Articles of Incorporation and By-Laws, (y)
obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to, any governmental or regulatory authority,
domestic or foreign ("Governmental Entities"), pursuant to the applicable
requirements, if any, of the Exchange Act, the requirements of the National
Association of Securities Dealers, Inc. ("NASD") or the NASDAQ Small
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Cap Market System, and the filing and recordation of appropriate merger
documents as required by the Wisconsin Law, and (z) giving the notices and
obtaining the consents, approvals, authorizations or permits described on
Schedule 3.05(a), violate any laws applicable to the Company or by which any of
their respective properties is bound, other than a potential violation under
any federal or state antitrust or similar laws, rules or regulations; or (iii),
except as set forth on Schedule 3.05(a) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any of the Company's properties is bound except for
such breaches or defaults described in clause (iii) as would not have a Company
Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entities, except for applicable requirements, if any, of
(i) the Exchange Act, and the requirements of the NASD and the NASDAQ Small Cap
Market System, (ii) the consents, approvals, authorizations or permits
described on Schedule 3.05(a) and (iii) the filing and recordation of
appropriate merger documents as required by the Wisconsin Law.
3.06 Permits; Compliance. Except as set forth on Schedule 3.06, the
Company is in possession of all franchises, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary for the Company to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Company Permits''). To the
knowledge of the Company, no suspension, revocation or cancellation of any of
the Company Permits is pending or threatened. The Company is not operating in
default under or violation of (i) any law applicable to the Company or by which
any of the Company's properties is bound or (ii) any of the Company Permits.
3.07 Reports; Financial Statements.
(a) Since December 31, 1996, (x) the Company has filed all forms,
reports, statements and other documents required to be filed with (i) the
Securities and Exchange Commission (the "SEC") including, without limitation,
(A) all Annual Reports on Form 10-KSB, (B) all Quarterly Reports on Form
10-QSB, (C) all proxy statements relating to meetings of shareholders (whether
annual or special), (D) all required Current Reports on Form 8-K, (E) all other
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reports or registration statements and (F) all amendments and supplements to
all such reports and registration statements, which amendments and supplements
have been, to the knowledge of the Company, required to be filed (collectively,
as amended or supplemented, the "Company SEC Reports"), and (ii) any applicable
state securities authorities; and (y) the Company has filed all forms, reports,
statements and other documents required to be filed with any other applicable
federal or state regulatory authorities, except as set forth on Schedule
3.07(a) (all such forms, reports, statements and other documents in clauses (x)
and (y) of this section 3.07(a) being collectively referred to as the "Company
Reports"). Such Company SEC Reports and Company Reports do not contain any
untrue statement of a material fact or omit any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes to such statements) contained in the Company SEC
Reports (i) have been prepared in all material respects in accordance with the
published rules and regulations of the SEC and generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except (x) to the extent required by changes in GAAP and (y) as may
be indicated in the notes thereto) and (ii) fairly represent the consolidated
financial position of the Company as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements).
(c) Except as and to the extent reflected on, or reserved against in, the
consolidated balance sheet of the Company at December 31, 1996, including all
notes thereto (the "Company Balance Sheet"), or as set forth on Schedule
3.07(c), the Company does not have any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of the Company or in the
notes thereto, prepared in accordance with the published rules and regulations
of the SEC and GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1996, consistent with the
Company's past practice, that, individually or in the aggregate, would not have
a Company Material Adverse Effect.
3.08 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports (or the notes thereto) or as contemplated by this
Agreement, since December 31, 1996:
(a) the Company has conducted its business in the ordinary course and
consistent with the Company's past practice;
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(b) there has not been any Company Material Adverse Effect;
(c) the Company has not made any material increase in compensation to
officers or key employees or any material increase in any or created any new
bonus, insurance, pension or other employee benefit plan, payment or
arrangement (including, but not limited to, the granting of stock options)
other than in the ordinary course of business and consistent with the Company's
past practice;
(d) the Company has not made any loans or advances to any officer,
director, shareholder or Affiliate of the Company (except for travel and
business expenses payments);
(e) there has not been any change in the accounting methods or
practices followed by the Company, except as required by GAAP;
(f) the Company has not entered into any commitment or other agreement
to do any of the foregoing;
(g) there has not been any notice or indication to the Company (i) that
any customer of the Company which accounted for 2% or more of the Company's
total net sales for the 12 months ended December 31, 1996 may terminate or
significantly reduce its relationship with the Company or (ii) of termination
or potential termination of any other material contract, lease or relationship,
including relationships with suppliers, which, in any case or in the aggregate,
has or may have a Company Material Adverse Effect;
(h) there has not been any (i) failure by the Company to replenish its
inventories and supplies in a normal and customary manner consistent with its
prior practice; or (ii) other change in the selling, pricing, advertising or
personnel practices inconsistent with the Company's prior practice; and
(i) there has not been any labor union organizing activity, any actual
or threatened employee strikes, work stoppages, slow-downs or lockouts or any
material adverse change in the Company's relations with its employees, agents,
customers or suppliers.
3.09 Absence of Litigation.
(a) Schedule 3.09(a) lists all claims, actions, suits, litigations, or
arbitrations or, to the knowledge of the Company, investigations or proceedings
affecting the Company, at law or in equity, which are pending or, to
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the knowledge of the Company, threatened. There is no action pending
seeking to enjoin or restrain the Merger.
(b) Except as set forth on Schedule 3.09(b), the Company is not subject
to any continuing order of, consent decree, settlement agreement or other
similar written agreement with or, to the knowledge of the Company, continuing
investigation by, any Governmental Entity.
3.10 Contracts; No Default.
(a) Schedule 3.10(a) sets forth as of the date of this Agreement a list
of each contract or agreement of the Company:
(i) concerning a partnership or joint venture with another
Person; or
(ii) which is material to the Company.
(b) Schedule 3.10(b) lists each contract or agreement to which the
Company is a party materially limiting the right of the Company prior to the
Effective Time, or Acquiror or any of its Subsidiaries at or after the
Effective Time, to engage in, or to compete with any Person in, any business
including each contract or agreement containing exclusivity provisions
restricting the geographical area in which, or the method by which, any
business may be conducted by the Company prior to the Effective Time, or by the
Acquiror after the Effective Time. For the purpose of this Agreement "Company
Contract" means the contracts and agreements listed on Schedules 3.10(a) and
3.10(b). Correct and complete copies of all written Company Contracts have
been made available to Acquiror.
(c) Each Company Contract is in full force and effect, each is a valid
and binding contract or agreement enforceable against the Company in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, moratorium and
other similar laws relating to or affecting the rights and remedies of
creditors generally and by general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law, and there is no default by the
Company in the performance of any obligation to be performed or paid under any
such contract or agreement.
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3.11 Employee Benefit Plans.
(a) Schedule 3.11 lists all "employee pension benefit plans," as such
term is defined in section 3(2) of the Employee Retirement Income Security Act
of 1974 ("ERISA") without regard to any exemptions from any requirements
thereunder issued by the United States Department of Labor in regulations or
otherwise, maintained, sponsored or contributed to by the Company (the "Pension
Plans"). The term "Pension Plan" shall also include any terminated "employee
pension benefit plan" previously maintained, sponsored or contributed to by the
Company which, as of the Closing Date, has not distributed all of its assets in
full satisfaction of accrued benefits.
(b) The Company has made available to Acquiror true and complete copies
of (i) the documents governing each of the Pension Plans as in effect on the
Closing Date; (ii) the most recent annual report prepared on the appropriate
Internal Revenue Service Form 5500 series, including all required attachments,
for each of the Pension Plans subject to such reporting requirements; and (iii)
the most recent determination letter issued by the Internal Revenue Service
concerning the qualification of any Pension Plan pursuant to section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
(c) None of the assets of the Company are subject to any lien,
constructive or otherwise, arising under ERISA section 4068.
(d) The Company maintains a Savings Plan (the "Profit Sharing Plan").
The Profit Sharing Plan is subject to a favorable determination letter issued
by the Internal Revenue Service, dated April 26, 1995 relating to the tax
qualification of the Profit Sharing Plan under Code section 401(a). There are
no amendments necessary to maintain the Profit Sharing Plan as a qualified plan
under Code section 401(a). The Profit Sharing Plan has operated in accordance
with the requirements of the Code in all material respects, including but not
limited to, compliance with Code sections 401(k)(3) and 401(m).
(e) Schedule 3.11 lists all "employee welfare benefit plans," as
defined in ERISA section 3(1) without regard to any exemptions from any
requirements thereunder issued by the United States Department of Labor in
regulations or otherwise, maintained, sponsored or contributed to by the
Company (the "Welfare Plans"). The term "Welfare Plans" shall also include any
terminated employee welfare benefit plan previously maintained, sponsored or
contributed to by the Company which, as of the Closing Date, has not
a distributed all of its assets.
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(f) The Company has made available to Acquiror true and complete copies
of the documents governing or relating to each of the Welfare Plans as in
effect on the Closing Date.
(g) The schedule to this section lists all plans, agreements or
programs to provide fringe or other benefits to the Company's employees (other
than Pension Plans, Profit Sharing Plan and Welfare Plans) including, but not
limited to, vacation, holiday, sick leave, disability, retirement, stock bonus,
savings, thrift, bonus, stock appreciation, deferred compensation, severance,
employment, consulting, medical, hospitalization, welfare, life insurance and
other insurance plans, group insurance or other benefit plans, agreements or
programs (the "Fringe Benefit Plans").
(h) The Company has made available to Acquiror true and complete copies
of the documents governing or affecting each Fringe Benefit Plan together with
any summary plan description or other document describing such Fringe Benefit
Plan.
(i) Except as described in Schedule 3.11, the Company has no direct or
indirect, formal or informal, plan, fund or program to change any Pension Plan,
Profit Sharing Plan, Welfare Plan or Fringe Benefit Plan (collectively, the
"Plans") that would affect any of the Company employees to be hired by
Acquiror. The Company has made no material modification, within the meaning of
ERISA section 102 and the regulations thereunder, to any existing Plans.
(j) Except as disclosed on the schedule to this section, the Company
has never been obligated to contribute to any multi-employer plan within the
meaning of ERISA section 3(37).
(k) Except as set forth on Schedule 3.11, neither the Company nor any
employee benefit Plan maintained or contributed to by the Company provides or
has any obligation to provide (or contribute towards the cost of)
post-retirement, welfare benefits with respect to current or former employees
of the Company or any other entity, including, without limitation,
post-retirement, medical, dental, life insurance, severance, or any other
similar benefit, whether provided on an insured or self insured basis.
(l) Except as disclosed on Schedule 3.11, with respect to each of the
Plans (i) all payments due from any such Plan (or from the Company with respect
to any such Plan) have been made, and all amounts properly accrued to date as
liabilities of the Company which have not been paid have been properly
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recorded on the books of the Company; (ii) the Company has complied
with, and each such Plan conforms in form and operation to, all applicable laws
and regulations, including, but not limited to, ERISA and the Code in all
material respects, and all reports and information relating to such Plans
required to be filed with any governmental entity have been timely filed; (iii)
all reports and information required to be disclosed or provided to
participants or the beneficiaries have been timely disclosed or provided; (iv)
there have been no prohibited transactions within the meaning of sections 406
and 407 of ERISA or section 4975 of the Code with respect to any Plan resulting
from actions or omissions of the Company or any of its employees; (v) no event
or omission has occurred in connection with any Plan that would subject the
Company or the Plan to a fine, penalty, tax or liability, whether pursuant to
any agreement, instrument, indemnification obligation, or statute regulation or
rule of law; and (vi) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, threatened
with respect to any Plan or against the assets of any Plan.
(m) Except as set forth in Schedule 3.11, the consummation of the
transactions contemplated by this Agreement will not entitle any current or
former employee of the Company to severance pay, unemployment compensation or
any other payment, or accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee or former employee. Except
as set forth in Schedule 3.11, the Company has not announced any new type of
plan or binding commitment to create any additional employee benefit or fringe
benefit or to amend or modify any existing Plan.
3.12 Taxes. The Company has filed or caused to be filed with the
appropriate Governmental Entities, all federal, state, municipal, and local
income, franchise, excise, real and personal property, and other tax returns
and reports that are required to be filed and the Company is not delinquent in
the payment of any material taxes shown on such returns or response or on any
material assessments for any such taxes received by it and has otherwise
complied in all material respects with all legal requirements applicable to the
Company with respect to all income, sales, use, real or personal property,
excise or other taxes. The Company Balance Sheet includes adequate reserves
for the payment of all accrued but unpaid federal, state, municipal and local
taxes of the Company, including, without limitation, interest and penalties,
whether or not disputed, for the year ended December 31, 1996 and for all
fiscal years prior thereto. The Company has not executed or filed with the
Internal Revenue Service any agreement extending the period for assessment and
collection of any federal tax. The Company is not a party to any pending
action or proceeding, nor, to the knowledge of the Company, has any action or
proceeding been threatened, by any Governmental Entity for
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assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against the Company.
3.13 Intellectual Property Rights. The Company owns or possesses the
right to use (in the manner and the geographic areas in which they are
currently used) all patents, patents pending, trademarks, service marks, trade
names, service names, slogans, registered copyrights, trade secrets and other
intellectual property rights it currently uses, without any conflict or alleged
conflict with the rights of others.
3.14 Certain Business Practices and Regulations. Neither the Company, nor
any of its or their respective executive officers or directors has (i) made or
agreed to make any contribution, payment or gift to any customer, supplier,
governmental official, employee or agent where either the contribution, payment
or gift or the purpose thereof was illegal under any law; (ii) established or
maintained any material unrecorded fund or asset of the Company for any
improper purpose or made any material false entries on its books and records
for any reason; or (iii) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other Person, to any candidate
for federal, state or local public office in violation of any law.
3.15 Insurance. All policies and binders of insurance for professional
liability, directors and officers, property and casualty, fire, liability,
worker's compensation and other customary matters held by or on behalf of the
Company (''Insurance Policies") have been made available to Acquiror. The
Insurance Policies are in full force and effect. To the knowledge of the
Company, the Company has not failed to give any notice of any claim under any
Insurance Policy in due and timely fashion, nor to the knowledge of the
Company, has any coverage for claims been denied, which failure or denial has
had or would have a Company Material Adverse Effect.
3.16 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon any arrangements made by
or on behalf of the Company, with the exception of advisory fees and expenses
in the amount payable to Cleary, Gull, Reiland & McDevitt, Inc. pursuant to the
engagement letter, a copy of which is attached as Schedule 3.16.
3.17 Title to Properties.
(a) Schedule 3.17 sets forth a true and complete list and description of
all real property owned, used or occupied by the Company (the "Real Property")
including a description of all land, and all encumbrances, easements, or rights
of way of record (or, if not of record, of which the Company
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has notice or knowledge) granted on or otherwise affecting such real
property. Except as set forth on Schedule 3.17, there are no leases,
contracts, options, agreements or enforceable rights or obligations relating to
or affecting the Real Property to which the Company is a party or by which the
Real Property is otherwise bound or affected. There are no material structural
or nonstructural defects (including, without limitation, inadequacy for normal
use of mechanical systems and fixtures) in any building or its systems or
fixtures (including, without limitation, the HVAC system, plumbing system,
electrical system, sprinkler system and sewer and water systems) or other
improvements situated on the Real Property and all building systems, fixtures,
structures, fixtures and improvements, owned, leased or used by the Company,
are in all material respects in good condition and working order (reasonable
wear and tear excepted) and are adequate in quality and quantity for the normal
operation of the Company's business and the Real Property. None of the Real
Property is located in a recognized wetland, flood prone area, flood risk area,
flood plain or similarly restricted area or is subject to any shoreland
regulations. The Company has no notice or knowledge of capital expenditures on
the Real Property (excluding only normal repair made consistently with past
practice and which are required to be expensed for federal income tax purposes)
that would be necessary to conduct the Company's business as presently
conducted nor are any such expenditures planned by the Company. The Company
has all easements and rights, including without limitation, easements for all
utilities, services, roadways, and other ways on ingress and egress, adequate
and sufficient to conduct the Company's business. Neither the whole or any
portion of the Real Property has been condemned, requisitioned or otherwise
taken by any public authority, no notice of such condemnation, requisition or
taking has been served upon the Company and to the Company's knowledge, no such
condemnation, requisition or taking is threatened or contemplated. No public
improvements have been commenced and to the Company's knowledge there are no
public improvements planned which may reasonably be expected to result in
special assessments against or otherwise adversely affect any of the Real
Property. Except for increases consistent with past experience, the Company has
no notice or knowledge of any proposed increases in any real estate taxes or
assessed valuations applicable to the Real Property, and there are no
challenges or appeals pending regarding the amount and/or payments of such real
estate taxes or assessed valuations. No governmental agency has issued any
work order, and there have been no court orders requiring repairs, alterations
or corrections of any condition on the Real Property. As of the date of
Closing, all work performed or materials furnished for the Real Property shall
have been fully paid for, the Company shall deliver an affidavit to that effect
to Acquiror's title insurance company at Closing, and the Company shall provide
Acquiror with appropriate lien waivers from any and all contractors,
subcontractors, laborers or material men
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furnishing labor or material for the improvement of the Real Property during
the six months preceding the date of Closing.
3.18 Inventory. The Company's inventory is of a quality and quantity
usable and salable in the ordinary course of business consistent with the
Company's past practice without discount for obsolescence. The value at which
the Company carried its inventory on the Company Balance Sheet reflects its
customary inventory valuation policy of stating inventory on the FIFO method at
the lesser of cost or market all in accordance with generally accepted
accounting principles. No inventory has been consigned to others. The
quantity of inventory is sufficient and adequate for, but is not materially in
excess of the level appropriate to, the conduct of the Company's business as it
previously has been conducted. The Company has not made any purchase
commitments in excess of normal, ordinary and usual requirements.
3.19 Title to Personal Property. The Company has good and marketable
title to all personal property shown on the Company Balance Sheet, free and
clear of all mortgages, security interests, title retention agreements, options
to purchase, rights of first refusal, liens, easements, encumbrances and other
restrictions of any nature whatsoever ("Liens"), except for those Liens
described on Schedule 3.19.
3.20 Product Liability. There have been no product liability Claims
relating to products manufactured or sold by the Company, or services rendered
by the Company which are presently pending or which, to the Company's
knowledge, are threatened, or which have been asserted or commenced against the
Company within the five years prior to the date hereof, in which a party
thereto either requested injunctive relief (whether temporary or permanent) or
alleged damages in excess of $25,000 (whether or not covered by insurance).
The Company's products have been designed and manufactured so as to meet and
comply with all applicable governmental standards and specifications currently
in effect.
3.21 Compliance with Environmental Laws.
(a) The term "Environmental Laws" shall mean all federal, state and
local laws including statutes, regulations and other governmental restrictions
and requirements relating to the discharge of air pollutants, water pollutants
or process wastewater or the disposal of solid or hazardous waste or otherwise
relating to the environment or hazardous substances or employee health and
safety.
(b) The term "Hazardous Substances" shall mean all hazardous and toxic
substances, wastes and materials; any pollutants or
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contaminants (including, without limitation, petroleum products,
asbestos and raw materials which include hazardous constituents); and any other
similar substances or materials which are regulated under Environmental Laws.
(c) Schedule 3.21 describes:
(i) With expiration dates, all permits, licenses, approvals and
consents issued by or received from government agencies (including local
sewerage districts) relating to Environmental Laws or Hazardous Substances
which are held by the Company (the "Environmental Permits").
(ii) In general terms, the storage, use or generation of
Hazardous Substances by the Company at the Real Property during the period the
Company has owned or occupied the Real Property or of which the Company has
notice or knowledge.
(iii) All above- and below-ground storage tanks on the Real
Property and identifies all products and materials ever to have been stored in
such tanks.
(d) The Environmental Permits are in full force and effect and
constitute all permits, licenses, approvals and consents relating to
Environmental Laws or Hazardous Substances required of the Company for the
conduct of the Business and the use of the Real Property (as presently
conducted and used). No applications for permits or reports filed by the
Company in connection with any Environmental Law or Environmental Permit
contained any untrue statement of material fact or omitted any statement of
material fact necessary to make the statements made not misleading.
(e) The Company has filed all reports, returns and other filings
required to be filed with respect to the Real Property and the Company's
business under Environmental Laws and the Environmental Permits. The Company
has furnished Acquiror complete copies of all environmental filings made by the
Company since January 1, 1992.
(f) Except as disclosed on Schedule 3.21: (i) the Company's business
and the Real Property have been and are being operated by the Company in
accordance with all Environmental Laws and Environmental Permits; and (ii) the
Company has not received any notice nor does the Company have any knowledge
that the Company's business or the Real Property are not in compliance with all
Environmental Laws and Environmental Permits and no proceeding for the
suspension, revocation or cancellation of any Environmental Permit is pending
or, to the Company's knowledge, threatened.
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(g) Except as disclosed on Schedule 3.21, there are no actions pending,
or to the Company's knowledge, actions, claims or investigations threatened
against the Company, the business or the Real Property, which in any case
asserts or alleges (i) the Company or the Real Property violated any
Environmental Law or Environmental Permit or is in default with respect to any
Environmental Permit or any order, writ, judgment, variance, award or decree of
any government authority; (ii) the Company is required to clean up or take
remedial or other responsive action due to the disposal, discharge or other
release of any Hazardous Substance on the Real Property or elsewhere; (iii) the
Company is required to contribute to the cost of any past, present or future
cleanup or remedial or other response action which arises out of or is related
to the disposal, discharge or other release of any Hazardous Substance by the
Company; or (iv) the Company and the Real Property are not subject to any
judgment, stipulation, order, decree or other agreement arising under any
Environmental Laws.
(h) Except as disclosed on Schedule 3.21: (i) no Hazardous Substances
have been treated, recycled or disposed of (intentionally or unintentionally)
on, under or at the Real Property; (ii) there has been no release or threatened
release of any Hazardous Substance from the Real Property; (iii) there have not
been nor are there now any materials containing asbestos or PCBs on the Real
Property; and (iv) there have been no activities on the Real Property which
would subject the Company or any subsequent owner or lessee of the Real
Property to damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or common law theory of liability. Except as disclosed on
Schedule 3.21, to the Company's knowledge, no property adjacent to the Real
Property has ever been used for the treatment, recycling or disposal
(intentional or unintentional) of Hazardous Substances nor has there been a
release or threatened release of any Hazardous Substances from such adjacent
property.
3.22 Labor Matters.
(a) Except as set forth on Schedule 3.22, the Company is not a party to
or bound by any union collective bargaining agreements or other labor
contracts. The Company is not a party to any pending arbitration or grievance
proceeding or other claim relating to any labor contract nor, to the Company's
knowledge, is any such action threatened and no set of facts would reasonably
be expected to constitute a basis for any such action. Within the last five
years, the Company has not experienced any labor disputes, union organization
attempts or any work stoppage due to labor disagreements in connection with its
business, and there is currently no labor strike, dispute, request for
representation, slow down or stoppage actually pending, or to the Company's
knowledge, threatened against or affecting the Company nor a secondary boycott
with respect to the products of the Company.
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(b) The Company is not bound by any court, administrative agency,
tribunal, commission or board decree, judgment, decision, arbitration agreement
or settlement relating to collective bargaining agreements, conditions of
employment, employment discrimination or attempts to organize a collective
bargaining unit. The Company has no notice or knowledge of any employment
discrimination, safety or unfair labor practice or other employment-related
investigation, claim or allegation against the Company or any set of facts
which would reasonably be expected to constitute a basis for such an action.
(c) The Company has provided Acquiror all of the Company's written
employment policies presently in effect.
3.23 Compliance with Law. To the knowledge of the Company, the Company is
in substantial compliance with all applicable federal, state, local and
international laws or ordinances and any other rule or regulation of any
international federal, state or local agency or body, including, without
limitation, all energy, safety, environmental, zoning, health, export, import,
trade practice, antidiscrimination, antitrust, wage, hour and price control
laws, orders, rules or regulations. Schedule 3.23 lists all citations issued
to the Company in the three years prior to the date hereof from any city, state
or federal agency. All citations that have been issued have been properly
remedied. No notice from any governmental body or other person has been served
upon the Company claiming any violation or alleged violation of any law,
ordinance, code, rule or regulation with which the Company has not complied.
3.24 Accounts Receivable. All accounts receivable reflected on the
Company Balance Sheet and those existing as of the Closing Date represent valid
claims for bona fide, arms length sales of goods and services actually made by
the Company in the ordinary course of its business and none of such accounts or
notes receivable is subject to any set off or counterclaim or is in dispute.
Schedule 3.24 sets forth an aging schedule of the accounts and notes receivable
of the Company as of March 31, 1997, and such schedule is correct and complete
in all material respects.
3.25 Major Customers and Suppliers. Schedule 3.25 sets forth a true and
correct list of the ten largest customers of the Company for each of the fiscal
years ended December 31, 1996 and December 31, 1995 (determined on the basis of
the total dollar amount of net revenues) showing the dollar amount of net
revenues from each such customer during each such year. Schedule 3.25 also
sets forth a true and correct list of the ten largest suppliers of the Company
in terms of dollar volume of purchases during such fiscal years.
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3.26 Product Warranty. Section 3.26 sets forth a description of all
warranties provided by the Company with respect to its products.
3.27 Disclosure. To the knowledge of the Company, no warranty or
representation by the Company contained, or deemed to be made by the Company,
in this Agreement or in any writing to be furnished pursuant hereto or
previously furnished to Acquiror contains or will contain any untrue statement
of fact or omits or will omit to state any fact required to make the statements
therein contained not misleading. All statements and information contained in
any certificate, instrument, disclosure schedule or documents delivered by or
on behalf of the Company to Acquiror or its representatives pursuant hereto
shall be deemed representations and warranties by the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
The term "Acquiror Material Adverse Effect" as used in this Agreement
shall mean any change or effect that, individually or when taken together with
all such other changes or effects, is materially adverse to the condition
(financial or otherwise), results of operations business, properties, assets or
liabilities of Acquiror and its Subsidiaries, taken as a whole.
Acquiror and Acquiror Sub jointly and severally represent and warrant to
the Company that:
4.01 Organization and Qualification; Subsidiaries. Acquiror is a limited
liability company, duly organized and validly existing under the laws of the
State of Wisconsin, with all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Acquiror Sub is a corporation, duly incorporated,
validly existing and in good standing under the laws of Wisconsin, and Acquiror
Sub has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted.
4.02 Authority. Each of Acquiror and Acquiror Sub has the requisite
limited liability company or corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Acquiror and Acquiror Sub, and the consummation by
Acquiror and Acquiror Sub of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action and no other limited
liability company
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or corporate proceedings on the part of Acquiror or Acquiror Sub are necessary
to authorize this Agreement or to consummate the transactions contemplated by
this Agreement. This Agreement has been duly executed and delivered by
Acquiror and Acquiror Sub and constitutes a legal, valid and binding obligation
of Acquiror and Acquiror Sub enforceable against Acquiror and Acquiror Sub in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws relating to or affecting the rights and
remedies of creditors generally and by general principles of equity including,
without limitation, concepts of materiality, reasonableness, good faith and
fair dealing and the possible unavailability of specific performance,
injunctive relief or other equitable remedies, regardless of whether
enforceability is considered in a proceeding in equity or at law.
4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror Sub does
not, and the performance of this Agreement by Acquiror Sub will not, (i)
violate the Articles of Organization or Operating Agreement of Acquiror or the
Articles of Incorporation or By-Laws of Acquiror Sub, (ii) subject to the
filing and recordation of appropriate merger documents as required by the
Wisconsin Law, conflict with or violate any laws applicable to Acquiror or
Acquiror Sub or by which any of their respective properties is bound or
affected, except such as would not have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entities, except as
described in section 4.03(a) above.
4.04 Ownership of Acquiror and Acquiror Sub; No Prior Activities.
(a) Each of Acquiror and Acquiror Sub was formed for the purpose of
engaging in the transactions contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock of
Acquiror Sub will be owned directly by Acquiror. All of the outstanding member
interests of Acquiror are owned by entities controlled by or affiliated with
Robert T. Foote, Jr. As of the Effective Time, there will be no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments to which Acquiror or Acquiror Sub is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Acquiror or Acquiror Sub or obligating Acquiror or Acquiror Sub
to grant, issue or
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sell any shares of the capital stock of, or other equity
interests in, Acquiror or Acquiror Sub, by sale, lease, license or otherwise.
There are no obligations, contingent or otherwise, of Acquiror or Acquiror Sub
to repurchase, redeem or otherwise acquire any shares of the capital stock of
Acquiror or Acquiror Sub.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, neither
Acquiror nor Acquiror Sub has incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreement or arrangements with any Person.
4.05 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror.
ARTICLE V
COVENANTS
5.01 Affirmative Covenants of the Company. The Company covenants and
agrees that prior to the Effective Time, unless otherwise contemplated by this
Agreement or consented to in writing by Acquiror, the Company will:
(a) operate its business in the ordinary course of business and
consistent with its past practice;
(b) use reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of its
respective officers and key employees and maintain the relationships with its
respective key customers and suppliers;
(c) use reasonable efforts to keep in full force and effect liability
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(d) confer with Acquiror at its reasonable request to report
operational matters of a material nature and to report the general status of
the ongoing operations of the business of the Company; and
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(e) From the date hereof until the Closing Date, the Company (i) will
give Acquiror, its counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
of the Company, (ii) will furnish to Acquiror, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information relating to the Company as such persons may reasonably
request, and (iii) will instruct the employees, counsel and financial advisors
of the Company to cooperate in all reasonable respects with Acquiror in its
investigation of the Company; provided that no investigation pursuant to this
subsection shall affect any representation or warranty given by the Company
hereunder.
5.02 Negative Covenants of the Company. Except as contemplated by this
Agreement or consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time, the Company shall not do any of the
following:
(a) (i) increase the compensation payable to any director, officer or
employee of the Company; (ii) grant any severance or termination pay (other
than pursuant to the normal severance policy of the Company currently in
effect) to, or enter into any severance agreement with, any director or
officer; (iii) subject to clause (i), enter into or amend any employment
agreement with any director or officer that would extend beyond the Effective
Time except on an at-will basis; or (iv) establish, adopt, enter into or amend
any Employee Benefit Plan, except as may be required to comply with applicable
law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or any options, warrants or conversion or other
rights to acquire any shares of its capital stock; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify any
of its capital stock (except for the issuance of shares upon the exercise of
options or warrants in accordance with their terms);
(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security interests,
liens, claims, pledges, limitations on voting rights, charges or other
encumbrances) of, any shares of any class of its capital stock, any securities
convertible into or exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire any such shares (except for the issuance
of shares
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upon the exercise of options or warrants in accordance with their
terms), or amend or otherwise modify the terms of any such rights, warrants or
options the effect of which shall be to make such terms more favorable to the
holders thereof, except as contemplated by this Agreement;
(e) to the extent material, acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any other Person (other
than the purchase of assets from suppliers or vendors in the ordinary course of
business and consistent with the Company's past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any material amount of any of its assets, except for
dispositions in the ordinary course of business and consistent with the
Company's past practice;
(g) adopt any amendments to its Articles of Incorporation or By-Laws;
(h) except as set forth in Schedule 5.02(h); (A) change any of its
methods of accounting in effect at December 31, 1994 or (B) make or rescind any
express or deemed election relating to taxes, settle or compromise any claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes, or change any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1994, except in either case as may be required by law, the IRS, or
GAAP or in the ordinary course of business consistent with past practice;
(i) except with respect to increased bank debt pursuant to the
Company's existing revolving credit facility, incur any obligation for borrowed
money or purchase money indebtedness, whether or not evidenced by a note, bond,
debenture or similar instrument, except as approved by Acquiror in advance; or
(j) agree in writing or otherwise to do any of the foregoing.
5.03 Acquisition Proposals. Upon execution of this Agreement, the Company
and its officers, directors, employees, agents and advisors will immediately
cease any existing discussions or negotiations with any parties
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conducted heretofore with respect to any Acquisition Proposal (as
hereinafter defined). The Company may, directly or indirectly, furnish
information and access, in each case only in response to requests that were not
solicited by the Company (or any officer, director, employee, agent or advisor
on its behalf) after the date of this Agreement, to any corporation,
partnership, person or other entity or group (each, a "Potential Acquiror")
pursuant to confidentiality agreements, and may participate in discussions and
negotiate with a Potential Acquiror concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company, if
such Potential Acquiror has submitted a written proposal to the Board of
Directors relating to any such transaction, and the Board of Directors
determines in good faith after consultation with independent legal counsel that
the failure to provide such information or access or to engage in such
discussions or negotiations would be inconsistent with their fiduciary duties
to the Company's shareholders under applicable law. The Company shall notify
Acquiror immediately if any such request or proposal, or any inquiry or contact
with any Person with respect thereto, is made and shall keep Acquiror apprised
of all developments that could reasonably be expected to culminate in the Board
withdrawing, modifying or amending its recommendation of the Merger and the
other transactions contemplated by this Agreement. For purposes of this
section 5.03, the term "Acquisition Proposal" means any proposal or offer for a
merger, asset acquisition or other business combination (other than the Merger
contemplated by this Agreement) involving the Company and any Potential
Acquiror, or any proposal or offer to acquire a significant equity interest in,
or a significant portion of the assets of, the Company by a Potential Acquiror.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC a proxy statement and a form of
proxy to be sent to the shareholders of the Company in connection with the
meeting of the Company's shareholders to consider the Merger (the
"Shareholders' Meeting") (such proxy statement, together with any amendments
thereof or supplements thereto, in each case in the form or forms mailed to the
Company's shareholders, being the "Proxy Statement"). The Proxy Statement
shall include the recommendation of the Company's Board of Directors in favor
of the Merger and approval of this Agreement, unless outside legal counsel to
the Company advise the Company's Board of Directors that the directors'
fiduciary duties under applicable law require them not to do so.
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(b) The information included in the Proxy Statement shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to shareholders or at the time of the Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements, therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Shareholders' Meeting, any event
or circumstance relating to the Company, or its officers or directors, is
discovered by the Company which should be set forth in a supplement to the
Proxy Statement, the Company shall promptly inform Acquiror. All documents
that the Company is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Exchange Act.
(c) Acquiror and Acquiror Sub each consents to the use of its name and
to the inclusion of business information relating to such party (in each case,
to the extent required by applicable securities laws) in the Proxy Statement.
The Company, Acquiror and Acquiror Sub each hereby agrees to (i) use its
reasonable efforts to obtain the written consent of any Person retained by it
which may be required to be named (as an expert or otherwise) in the Proxy
Statement; provided, that such party shall not be required to make any material
payment to such Person in connection with such party's efforts to obtain any
such consent, and (ii) cooperate, and agrees to use its reasonable efforts to
cause its Affiliates to cooperate, with any legal counsel, investment banker,
accountant or other agent or representative retained by any of the parties in
connection with the preparation of any and all information required as
determined after consultation with each party's counsel, by applicable
securities laws to be disclosed in the Proxy Statement.
6.02 Meeting of Shareholders. The Company shall take all action necessary
in accordance with the Wisconsin Law and its Articles of Incorporation and
By-Laws to convene the Shareholders' Meeting, and the Company shall consult
with Acquiror in connection therewith. The Company shall use reasonable
efforts to solicit from the shareholders of the Company proxies in favor of the
Merger and shall take all other actions necessary or advisable to secure the
vote or consent of shareholders required by the Wisconsin Law to approve this
Agreement, including the retention of proxy solicitation agents if requested by
Acquiror, unless otherwise required by the applicable fiduciary duties of
directors or officers of the Company.
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6.03 Appropriate Action; Consents; Filings.
(a) Subject to the terms and conditions herein provided, the Company,
Acquiror and Acquiror Sub shall use all reasonable efforts to (i) take, or
cause to be taken, all appropriate action, and do or cause to be done, all
things necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses or orders required to be obtained by Acquiror or the Company
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement,
including, without limitation, the Merger, and (iii) make all necessary
notifications and filings and thereafter make any other required submissions
with respect to this Agreement and the Merger required under (A) the Exchange
Act and any other applicable federal or state securities laws, and (B) any
other applicable law; provided that Acquiror and the Company shall cooperate
with each other in connection with the making of all such filings. The Company
and Acquiror shall furnish to each other all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable law (including all information required to be included in the
Proxy Statement) in connection with the transactions contemplated by this
Agreement.
(b) (i) The Company and Acquiror shall give any notices to third
parties, and use all reasonable efforts to obtain any third-party consents, (A)
necessary to consummate the transactions contemplated in this Agreement, (B)
disclosed or required to be disclosed in the disclosure schedules to this
Agreement, or (c) required to prevent a Company Material Adverse Effect from
occurring prior to the Effective Time.
(ii) In the event that any party shall fail to obtain any third-party
consent described in subsection (b)(i) above, such party shall use reasonable
efforts, and shall take any such actions reasonably requested by the Company
and Acquiror to minimize any adverse effect upon the Company and its businesses
resulting, or which could reasonably be expected to result after the Effective
Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the
Company shall promptly notify Acquiror in writing of any pending or, to the
knowledge of the Company, threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking material
damages in connection with the Merger, (ii) alleging that the consent of such
Governmental Entity or Person may be required in connection with the Merger or
this Agreement or (iii) seeking to restrain or prohibit the consummation of the
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Merger or otherwise limit the right of Acquiror or, to the knowledge of the
Company, to own or operate all or any portion of the businesses or assets of
the Company.
(d) From the date of this Agreement until the Effective Time, Acquiror
shall promptly notify the Company in writing of any pending or, to the
knowledge of Acquiror, threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking material
damages in connection with the Merger or (ii) seeking to restrain or prohibit
the consummation of the Merger or otherwise limit the right of Acquiror to own
or operate all or any portion of the business or assets of the Company.
6.04 Update Disclosure; Breaches. From and after the date of this
Agreement until the Effective Time, each party shall promptly notify the other
parties hereto by written update to its disclosure schedules ("Update
Schedule") of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be reasonably likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, (ii) the failure of the
Company or Acquiror, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
pursuant to this Agreement which would be reasonably likely to result in any
condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied, or (iii) of
any changes to the information contained in its disclosure schedule (including
any change to any representations or warranties herein as to which no schedule
has been created as of the date hereof but as to which a schedule would have
been required hereunder to have been created on or before the date hereof if
such change had existed on the date hereof); provided, however, that the
delivery of any Update Schedule pursuant to this section 6.04 shall not cure
any breach of any representation or warranty requiring disclosure of such
matter prior to the date of this Agreement or otherwise limit or affect the
remedies available to the party receiving such notice.
6.05 Public Announcements. The parties to this Agreement shall consult in
good faith with each other before issuing any press release or otherwise making
any public statements with respect to the Merger and shall not issue any such
press release or make any such public statement without the prior written
agreement of the other party, except as may be required by law or the
requirements of the NASDAQ market.
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6.06 Indemnification.
(a) From and after the Effective Time, Acquiror shall, and shall cause
the Surviving Corporation to, indemnify, defend and hold harmless the present
and former officers, directors, employees, agents and representatives of the
Company (collectively, the "Indemnified Parties") against all losses, expenses,
claims, damages or liabilities arising out of actions or omissions occurring at
or prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the full extent permitted or required under
the Wisconsin Law or other applicable state law (and shall also advance
reasonable expenses as incurred to the fullest extent permitted under the
Wisconsin Law or other applicable state law, provided that the persons to whom
expenses are advanced provides an undertaking to repay such advances
contemplated by the Wisconsin Law). Acquiror and Acquiror Sub agree that all
rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any claim, action, suit, proceeding or
investigation (a "Claim") existing in favor of the Indemnified Parties as
provided in the Company's Articles of Incorporation or By-Laws or other
agreement or provisions, as in effect as of the date hereof, with respect to
matters occurring through the Effective Time, shall survive the Merger and
shall continue in full force and effect.
(b) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain counsel
satisfactory to them (subject to approval by Acquiror and the Surviving
Corporation, which approval will not be unreasonably withheld or delayed),
(ii) Acquiror and the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received subject to the ability of Acquiror and the Surviving
Corporation to receive such information relative to the legal services provided
as is customarily provided and reasonably requested by Acquiror and the
Surviving Corporation, and (iii) Acquiror and the Surviving Corporation will
use all reasonable efforts to assist in the vigorous defense of any such
matter, provided that neither Acquiror nor the Surviving Corporation shall be
liable for any settlement of any Claim effected without its written consent,
which consent, however, shall not be unreasonably withheld or delayed. Any
Indemnified Party wishing to claim indemnification under this section 6.06,
upon learning of any such Claim, shall notify Acquiror (but the failure so to
notify Acquiror shall not relieve it from any liability which it may have under
this section 6.06 except to the extent such failure materially prejudices
Acquiror). The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, as evidenced
by the written opinion of counsel reasonably
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acceptable to Acquiror and the Surviving Corporation, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) The Surviving Corporation shall use reasonable efforts to obtain
extended reporting endorsements on the fiduciary liability, professional
liability and directors and officers liability policies currently covering the
Company or any of the Indemnified Parties, and will submit to the applicable
insurer a full and complete list of any potential claims under the policy
issued by such insurer. In the event the Surviving Corporation is unable to
obtain extended coverage under its existing directors and officers liability
insurance policies, Acquiror shall use reasonable efforts to provide similar
coverage for the Indemnified Parties under policies then maintained by
Acquiror; provided that such similar coverage is available to Acquiror at a
cost not substantially higher than the Company's present coverage.
(d) This section 6.06 is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of Acquiror, Acquiror Sub,
the Company and the Surviving Corporation.
6.07 Obligations of Acquiror and Acquiror Sub. Acquiror shall take all
action necessary to cause Acquiror Sub to perform its obligations under this
Agreement and the bank commitment letter referred to below and to consummate
the Merger on the terms and conditions set forth in this Agreement. Upon the
execution of this Agreement, Acquiror has delivered to the Company a letter, in
a form typical to such a transaction, from a financial institution
evidencing such institution's commitment to provide acquisition and working
capital financing sufficient to allow Acquiror and Acquiror Sub to consummate
the Merger.
6.08 Employee Benefits and Compensation. After the Effective Time, the
employee benefit plans of the Surviving Corporation shall recognize for
eligibility, vesting, accrual and all other purposes the credited service of
employees of the Company and its Subsidiaries credited as of the Effective Time
under the Company's Employee Benefit Plans on a basis that is consistent with
the manner in which the Employee Benefit Plans of the Company recognized such
employment for similar purposes.
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ARTICLE VII
CLOSING CONDITIONS
7.01 Conditions to Obligations of Each Party Under This Agreement. The
respective obligations of each party to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved by the requisite vote of the shareholders of the Company.
(b) No Action or Proceeding. There shall not have been instituted and
there shall not be pending any action or proceeding by a Governmental Entity,
and no such action or proceeding shall have been approved by a Governmental
Entity with authority to institute such an action or proceeding, before any
court of competent jurisdiction or governmental agency or regulatory or
administrative body, and no order or decree shall have been entered in any
action or proceeding before such court, agency or body of competent
jurisdiction: (i) imposing or seeking to impose limitations on the ability of
Acquiror to acquire or hold or to exercise full rights of ownership of any
securities of the Company; (ii) imposing or seeking to impose limitations on
the ability of Acquiror to combine and operate the business and assets of the
Company with Acquiror or Acquiror Sub; (iii) imposing or seeking to impose
other sanctions, damages or liabilities arising out of the Merger on Acquiror,
Acquiror Sub, the Company or any of their officers or directors; (iv) requiring
or seeking to require divestiture by Acquiror of all or any material portion of
the business, assets or property of the Company; or (v) restraining, enjoining
or prohibiting or seeking to restrain, enjoin or prohibit the consummation of
the Merger, in each case, with respect to clauses (i) through (iv) above, which
would or is reasonably likely to result in a Company Material Adverse Effect at
or prior to or after the Effective Time or, with respect to clauses (i) through
(v) above, which would or is reasonably likely to subject any of their
respective officers or directors to any penalty or criminal liability.
Notwithstanding the foregoing, prior to invoking the condition set forth in
this section 7.01(b), the party seeking to invoke it shall have used its
reasonable efforts to have any pending or approved such action or proceeding
withdrawn or dismissed or such order or decree vacated.
(c) Other Approvals or Notices. All other consents, waivers, approvals
and authorizations required to be obtained from, and all filings
or notices required to be made with, any Government Entity by Acquiror or the
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Company prior to consummation of the transactions contemplated in this
Agreement (other than the filing and recordation of Merger documents in
accordance with the Wisconsin Law) shall have been obtained from and made with
all required Governmental Entities, except for such consents, waivers,
approvals or authorizations which the failure to obtain, or such filings or
notices which the failure to make, would not have a Company Material Adverse
Effect prior to or after the Effective Time or an Acquiror Material Adverse
Effect before or after the Effective Time or be reasonably likely to subject
the Company, Acquiror or Acquiror Sub or any of their respective officers,
directors, employees, agents or representatives to substantial penalty or
criminal liability.
7.02 Additional Conditions to Obligations of Acquiror and Acquiror Sub.
The obligations of Acquiror and Acquiror Sub to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived, in whole or in part:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects when made and the information contained
therein, as updated by any Update Schedule, taken as a whole, shall not have
materially adversely changed; each of the representations and warranties
contained in this Agreement shall be true and correct in all material respects
as of the Effective Time. Acquiror shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company to that
effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, except to the extent failure to perform is caused by or is
consented to by Acquiror or Acquiror Sub. Any breach by the Company of its
obligations under section 5.02(d) shall be deemed to be material noncompliance
for purposes of this section 7.02(b). Acquiror shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company to that effect.
(c) Consents Under Agreements. The Company shall have obtained the
third-party consents described in subsection 6.03(b)(i), except those for which
the failure to obtain such consents and approvals would not have a Company
Material Adverse Effect prior to or after the Effective Time or an
Acquiror Material Adverse Effect before or after the Effective Time, other than
as contemplated by subsection 6.03(b)(ii).
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(d) Opinion of Counsel. The Acquiror and the Acquiror Sub shall have
received an opinion of von Briesen, Purtell & Roper, s.c. counsel to the
Company, addressed to Acquiror and Acquiror Sub, dated as of the Effective
Time, and satisfactory in form and substance to Acquiror, Acquiror Sub and its
counsel, to the following effect:
(i) The Company is a corporation existing under the laws of
the State of Wisconsin and, based solely on a certificate of the Secretary of
State of Wisconsin, (a) has filed with the Secretary of State during its most
recently completed report year the required annual report; (b) is not the
subject of a proceeding under Wisconsin Statutes section 180.1421, to cause its
administrative dissolution; (c) no determination has been made by the Secretary
of State that grounds exist for such action with respect to the Company; (d) no
filing has been made with the Secretary of State of a decree of dissolution
with respect to the Company; and (e) Articles of Dissolution of the Company
have not been filed with the Secretary of State. The Company has the corporate
power to carry on their respective businesses as currently being conducted.
(ii) The Agreement and Plan of Merger (the "Agreement") is a
legal, valid and binding obligation of the Company (a) except as the Agreement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally; (b) subject to general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether considered in a
proceeding in equity or at law. The execution, delivery and performance by
the Company of the Agreement have been duly authorized by all necessary
corporation action, including the requisite approval of the shareholders of
the Company. Under the Wisconsin Business Corporation Law and the Company's
Articles of Incorporation and By-Laws, the Company's shareholders and Board of
Directors properly approved the Merger in accordance with the terms of the
Agreement. Upon filing the Articles of Merger as contemplated by the
Agreement, the Merger shall be effective under Wisconsin law.
(iii) The execution and delivery of the Agreement and the
performance by the Company of its terms do not [a] contravene or conflict with
any provision of the Articles of Incorporation or By-Laws of the Company; or
[b] violate any order, judgment or decree of any Wisconsin or federal court or
governmental instrumentality to which the Company is subject and of which such
counsel has knowledge.
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(iv) The authorized capital stock of the Company consists of
6,000,000 shares of capital stock which are comprised of 1,000,000 shares of
preferred stock, par value $1.00 per share, none of which are issued and
outstanding, and 5,000,000 authorized shares of Company Common Stock, par
value $3.00 per share, of which 457,323 shares are issued and outstanding,
fully paid and nonassessable except as set forth in Wisconsin Statutes section
180.0622(2)(b), as interpreted. To the knowledge of such counsel, the Company
does not have outstanding any stock or securities convertible into or
exchangeable for any shares of capital stock or any preemptive rights or other
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments, rights or claims of any other character relating to the
issuance of, any capital stock or any stock or securities convertible into or
exchangeable for any capital stock other than as set forth in [a] the Articles
of Incorporation and [b] the Agreement or the Disclosure Schedules. To the
knowledge of such counsel, except as set forth in the Articles of Incorporation
and as set forth in the Agreement or the Disclosure Schedules, the Company is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of capital stock of the Company. The
transactions contemplated by this Agreement will not cause the Company's Common
Stock Repurchase Rights to become exercisable.
(v) There are no preemptive rights of stockholders under the
Articles of Incorporation of the Company or as a matter of law under the
Business Corporation Law of Wisconsin with respect to the Agreement or the
Merger.
(vi) To the knowledge of such counsel, there is no action, suit,
investigation or proceeding pending or threatened against the Company or any
properties or rights of the Company by or before any court, arbitrator or
administrative or governmental body which questions the validity of the
Agreement or any action which has been or is to be taken by the Company
thereunder.
(e) Financing. Acquiror shall have obtained acquisition and working
capital financing on substantially the terms and conditions contained in the
bank commitment letter described in section 6.07 of this Agreement.
7.03 Additional Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger and the other transactions contemplated in
this Agreement is also subject to the satisfaction at or prior to the Effective
Time of the following conditions, any or all of which may be waived, in whole
or in part;
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(a) Representations and Warranties. Each of the representations and
warranties of Acquiror contained in this Agreement: (A) with respect to those
representations and warranties that are qualified by reference to "materiality"
or "Acquiror Material Adverse Effect," shall be true and correct in all
respects as of the Effective Time, as though made on and as of the Effective
Time and (B) with respect to all other representations and warranties, shall be
true and correct in all material respects as of the Effective Time, as though
made on and as of the Effective Time. The Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of
Acquiror to that effect.
(b) Agreements and Covenants. Acquiror and Acquiror Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by each
of them on or prior to the Effective Time. The Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of
Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have received an opinion of
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c., counsel to Acquiror
and Acquiror Sub, addressed to the Company, dated as of the Effective Time, and
satisfactory in form and substance to the Company and its counsel, to the
following effect:
(i) Acquiror is a corporation existing under the laws of the State of
Wisconsin and, based solely on a certificate of the Secretary of State of
Wisconsin, (a) has filed with the Secretary of State during its most recently
completed report year the required annual report; (b) is not the subject of a
proceeding under Wisconsin Statutes section 180.1421, to cause its
administrative dissolution; (c) no determination has been made by the Secretary
of State that grounds exist for such action with respect to Acquiror; (d) no
filing has been made with the Secretary of State of a decree of dissolution
with respect to Acquiror; and (e) Articles of Dissolution of Acquiror have not
been filed with the Secretary of State. Acquiror has the corporate power to
carry on their respective businesses as currently being conducted.
(ii) The execution, delivery and performance of the Agreement and
Plan of Merger (the "Agreement") has been duly authorized by all requisite
corporate action on the part of Acquiror and Acquiror Sub. The Agreement
constitutes the legally valid and binding obligations of Acquiror and Acquiror
Sub, enforceable in accordance with its terms, subject to the following
qualifications: [a] the enforceability against Acquiror or Acquiror Sub of
the Agreement in accordance with its terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally;
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[b] the enforceability of the Agreement is subject to the effect of general
principles of equity and the possible unavailability of specific performance or
injunctive relief regardless of whether considered in a proceeding in equity or
at law; and [c] no opinion is expressed as to any provision of the Agreement
providing for the indemnification of persons for liability under federal or
other securities laws.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
Merger by the shareholders of the Company:
(a) by mutual written consent of Acquiror and the Company;
(b) by either Acquiror or the Company in the event the conditions to
such party's (the "Nonfailing Party") obligations under Article VII shall not
have been met or waived by the Nonfailing Party on or prior to July 31, 1997
(provided, however, that this date may be extended by any party by written
notice to the other parties for not more than 60 days thereafter if the Merger
shall not have been consummated as a direct result of such party's (the
"Failing Party") having failed (i) to satisfy the conditions in subsection
7.01(c), (ii) to resolve any action or proceeding as required by subsection
7.01(b) or (iii) to cure any failure by the Failing Party to perform in all
material respects any other covenant or agreement required by this Agreement to
be performed or complied with by the Failing Party prior to the Effective Time
which is capable of being cured), but only if the party terminating has not
caused the condition giving rise to termination to be not satisfied through its
own action or inaction;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and nonappealable;
(d) by Acquiror, if (A) the Board of Directors of the Company
withdraws, modifies or changes in a manner materially adverse to Acquiror its
recommendation of this Agreement or Merger or shall have resolved to do any of
the foregoing, or (B) the Board of Directors of the Company shall have
recommended to the shareholders of the Company any proposed acquisition of the
Company by any Person or any "group" (as such term is defined under section
13(d) of the Exchange Act) other than Acquiror and its Affiliates by
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(i)merger, consolidation, share exchange, business combination or other
similar transaction, (ii) purchase of all or a substantial part of the assets
of the Company and its Subsidiaries, taken as a whole, or (iii) the acquisition
of more than 50% of the Company's outstanding equity securities (a "Competing
Transaction") or resolved to do so, or (C) a tender offer or exchange offer for
50% or more of the outstanding shares of capital stock of the Company is
commenced, the Board of Directors of the Company, within 10 business days after
such tender offer or exchange offer is so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its shareholders
or takes no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders;
(e) by the Company if, in the exercise of its judgment as to its
fiduciary duties to its shareholders as imposed by applicable law and, after
consultation with and receipt of advice from outside legal counsel, the
Company's Board of Directors determines that such termination is required by
reasons of any Competing Transaction being made or proposed.
(f) by Acquiror, if any Update Schedule contains disclosures of any
fact or condition which makes untrue, or shows to have been untrue, any
representation or warranty by the Company in this Agreement, unless
concurrently with the delivery of the Update Schedule, the Company represents
and warrants that the disclosed fact or condition can and will be corrected at
the Company's expense prior to the Effective Time; provided that the effect of
the fact or condition so disclosed upon the representation or warranty so
affected constitutes a Company Material Adverse Effect.
8.02 Effect of Termination. Subject to the remedies of the parties set
forth in section 8.03(c), in the event of the termination of this Agreement
pursuant to section 8.01, this Agreement shall forthwith become void, and,
subject to sections 8.03(c) and (d), there shall be no liability under this
Agreement on the part of Acquiror, Acquiror Sub or the Company or any of their
respective officers or directors and all rights and obligations of each party
hereto shall cease. The Acquiror's Confidentiality Agreement shall survive any
termination of this Agreement.
8.03 Expenses.
(a) If the Merger is consummated, all Expenses will be paid by the
Surviving Corporation. If the Merger is not consummated and this Agreement is
terminated, all Expenses incurred by the parties shall be borne solely and
entirely by the party which has incurred the same, except as provided in
section 8.03(d).
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(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, experts and consultants to a party and its Affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement, the preparation, printing, filing and mailing of the Proxy
Statement, the solicitation of shareholder approvals and all other matters
related to the closing of the transactions contemplated by this Agreement.
(c) If all conditions to the obligations of a party at Closing
contained in Article VII of this Agreement have been satisfied (or waived by
the party entitled to waive such conditions), and the other party does not
proceed with the Closing, the right to seek specific performance of this
Agreement shall be preserved and shall survive any termination of this
Agreement.
(d) The Company agrees that if this Agreement is terminated pursuant to
section 8.01(d) or section 8.01(e), the Company shall reimburse Acquiror for
all Expenses incurred subsequent to the date of this Agreement and shall in
addition pay to Acquiror the sum of $200,000. If the Agreement is terminated
pursuant to section 8.01(b) as a direct result of a material intentional breach
by a party of any of its covenants or agreement contained in this Agreement,
the party in breach shall reimburse the other party for all Expenses (whether
incurred before or after the date of this Agreement) and shall in addition pay
such party the sum of $200,000. If the Agreement is terminated by the Acquiror
as a result of its inability to obtain financing (except for such inability as
arises as a result of the Company's failure to accurately disclose relevant
facts or circumstances to Acquiror, Acquiror Sub or Acquiror's financing
sources), the Acquiror shall reimburse the Company for all Expenses incurred
subsequent to April 15, 1997, but such Expenses shall not exceed $75,000, in
any event.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations and Warranties. The respective
representations and warranties of the parties in this Agreement shall expire
with, and be terminated and extinguished upon, consummation of the Merger or
termination of this Agreement, and thereafter neither the Company, Acquiror nor
any of their respective officers, directors or employees shall have any
liability whatsoever with respect to any such representation or warranty. This
section 9.01 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after consummation of the Merger.
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9.02 Notices. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made upon receipt, if delivered personally, on the third business day
following deposit in the U.S. mail if mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or when sent by electronic transmission to the telecopier
number specified below with receipt acknowledged:
(a) If to Acquiror or Acquiror Sub:
Choucroute Partners LLC
32451 Oakland Road
Nashotah, WI 53058
Telecopier No.: 414-367-3323
Attention: Robert T. Foote, Jr.
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street
Suite 2100
Milwaukee, WI 53202
Telecopier No.: 414-298-8097
Attention: Michael T. Pepke, Esq.
(b) If to the Company:
David White, Inc.
11711 River Lane
Germantown, WI 53022
Telecopier No.: 414-251-5696
With a copy to:
von Briesen, Purtell & Roper, s.c.
411 East Wisconsin Avenue, Suite 700
Milwaukee, WI 53202
Telecopier No.: 414-273-7897
Attention: Robert J. Loots, Esq.
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9.03 Amendment. This Agreement may be amended by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Effective Time; provided, however, that after approval of this Agreement
by the shareholders of the Company, no amendment may be made without further
approval of such shareholders, which amendment would reduce the amount or
change the type of consideration into which each share of Company Common Stock
shall be converted pursuant to this Agreement upon consummation of the Merger.
This Agreement may not be amended except by an instrument in writing signed by
each of the parties hereto.
9.04 Waiver. At any time prior to the Effective Time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
any other party, (b) waive any inaccuracies in the representations and
warranties of any other party contained in this Agreement or in any document
delivered pursuant to this Agreement and (c) waive compliance by any other
party with any of the agreements or conditions contained in this Agreement.
Notwithstanding the foregoing, no failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by a party or parties to be bound
thereby.
9.05 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.06 Severability. If any term or other provision of this Agreement is
finally adjudicated by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.07 Entire Agreement. This Agreement (together with the disclosure
schedules to this Agreement and the other documents delivered pursuant hereto),
constitutes the entire agreement of the parties and supersedes all prior
42
<PAGE> 100
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. The parties hereby
acknowledge that, no party shall have the right to acquire or shall be deemed
to have acquired shares of common stock of the other party pursuant to the
Merger until the consummation thereof.
9.08 Assignment. This Agreement shall not be assigned, whether by
operation of law or otherwise.
9.09 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of and be enforceable by each party and its respective
successors, and nothing in this Agreement, express or implied, other than
pursuant to section 2.04 and sections 6.06 and 6.08 or the right to receive the
consideration payable in the Merger pursuant to Article II, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Wisconsin, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
9.11 Counterparts. This Agreement may be executed by facsimile and in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
CHOUCROUTE PARTNERS LLC
BY /s/ Robert T. Foote, Jr.
------------------------
Robert T. Foote, Jr., Manager
FC SUB CORPORATION
BY /s/ Robert T. Foote, Jr.
------------------------
Robert T. Foote, Jr., President
DAVID WHITE, INC.
BY /s/ Tony L. Mihalovich
------------------------
Tony L. Mihalovich, President
43
<PAGE> 101
EXHIBIT B
[Letterhead of Cleary Gull Reiland & McDevitt Inc.]
May 14, 1997
The Board of Directors
David White, Inc.
11711 River Lane
Germantown, WI 53022
Dear Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders (the "Stockholders") of the outstanding shares of
common stock, par value $3.00 per share (the "Common Stock"), of David White,
Inc. ("David White" or the "Company") of the consideration to be received by
the Stockholders pursuant to the terms of the Merger Agreement dated as of
April 30, 1997 (the "Merger Agreement") by and among Choucroute Partners LLC
("Choucroute"), FC Sub Corporation, a wholly owned subsidiary of Choucroute
("Choucroute Sub") and David White, pursuant to which Choucroute Sub will be
merged with and into the Company (the "Merger").
Under the Merger Agreement, each issued and outstanding share of Common
Stock (other than (i) shares owned by Choucroute, Choucroute Sub, the Company
or any of their direct or indirect subsidiaries or (ii) any "Dissenting Shares"
(as defined in the Merger Agreement)) will be canceled and converted into the
right to receive $12.00 per share in cash. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
In arriving at our opinion, we have, among other things: (i) reviewed the
financial terms and conditions of the Merger Agreement; (ii) analyzed certain
historical business and financial information relating to the Company; (iii)
reviewed various financial budgets and schedules and other data provided to us
by the Company; (iv) held discussions with the President and Chief Financial
Officer with respect to the business and prospects of the Company; (v) reviewed
public information with respect to certain other companies in lines of business
we believed to be generally comparable to the business of the Company; (vi)
reviewed the historical prices and trading volumes of the Common Stock; (vii)
calculated the unleveraged after-tax discounted cash flow of the Company;
(viii) compared the purchase price premium to be paid for the Common Stock to
premiums paid in certain other mergers in lines of business we believe to be
generally comparable to the business of the Company, and the premiums to be
paid for similar-sized mergers, and in other industries generally; and (ix)
conducted such other financial studies, analyses and investigations as we
deemed relevant and appropriate.
<PAGE> 102
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. We have not made an independent evaluation or appraisal
of any assets or liabilities (contingent or otherwise) of David White. With
respect to the financial plans, estimates and analyses provided to us by David
White, we have assumed, with your permission, that all such information was
reasonably prepared on bases reflecting the best currently available estimates
and judgment of management of David White as to future financial performance
and was based upon the historical performance of David White and certain
estimates and assumptions which were reasonable at the time made. Our opinion
is based on economic, monetary and market conditions existing on the date
hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the Stockholders pursuant to
the Merger Agreement is fair, from a financial point of view, to the
Stockholders.
We are acting as financial advisor to the Board of Directors of David
White in this transaction and will receive a fee for our services, a
significant portion of which is contingent upon the approval and consummation
of the Merger. In addition, David White has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion.
This opinion is for the use and benefit of the Board of Directors of David
White and is rendered to the Board of Directors of David White in connection
with its consideration of the Merger. We are not making any recommendation
regarding whether or not it is advisable for Stockholders to vote in favor of
the Merger. We have not been requested to opine as to, and our opinion does
not in any manner address, David White's underlying business decision to
proceed with or effect the Merger.
Very truly yours,
CLEARY GULL REILAND & McDEVITT INC.
<PAGE> 103
PROXY
DAVID WHITE, INC.
SPECIAL MEETING OF SHAREHOLDERS -- JUNE 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Tony L. Mihalovich and Marshall A. Loewi, or
either one of them, with full power of substitution and resubstitution, as
proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of David White, Inc. (the "Company") to be held on June 30, 1997
at 10:00 a.m., local time, at the Company's corporate offices at 11711 River
Lane, Germantown, Wisconsin, 53022, and any adjournment thereof, there to vote
all shares of Common Stock of the Company that the undersigned would be entitled
to vote if personally present as specified below upon the following matter, and
in their discretion upon such other matters as may properly come before the
meeting.
1. APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER, DATED AS
OF APRIL 30, 1997, BY AND AMONG CHOUCROUTE PARTNERS LLC, FC SUB
CORPORATION AND DAVID WHITE, INC.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders and the accompanying Proxy Statement, and ratifies all
that said proxies or their substitutes may lawfully do by virtue hereof.
Please sign exactly as your name appears hereon, date and return this Proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE APPROVAL AND
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER, IF OTHER MATTERS PROPERLY COME
BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST
JUDGMENT OF THE PROXIES APPOINTED.
Dated:_____________________________,1997
_______________________________________
(SIGNATURE OF SHAREHOLDER)
_______________________________________
(SIGNATURE IF JOINTLY HELD)
If signing for a corporation or
partnership or as an attorney, executor,
adminisrator, trustee or guardian, please add
your full title as such. If shares are held
by two or more persons, all holders must sign
the Proxy.
PLEASE MARK, SIGN AND RETURN PROMPTLY IN ACCOMPANYING ENVELOPE
