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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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ESSEX INTERNATIONAL INC.
(Name of Subject Company)
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ESSEX INTERNATIONAL INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
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297025 10 8
(CUSIP Number of Class of Securities)
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STEVEN R. ABBOTT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ESSEX INTERNATIONAL INC.
1601 WALL STREET
FORT WAYNE, IN 46802
(219) 461-4000
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person filing statement)
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Copies to:
RICHARD CLIMAN, ESQ.
PAUL QUINLAN, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(650) 843-5000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Essex International Inc., a Delaware
corporation (the "Company"), and the principal executive offices of the Company
are located at 1601 Wall Street, Fort Wayne, IN 46802. The title of the class of
equity securities to which this Statement relates is the common stock, par value
$0.01 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer by SUT Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Superior
TeleCom Inc., a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated October 28, 1998 (the "Schedule 14D-1"), to
purchase up to 22,562,135 (the "Offered Number") of the outstanding Shares at a
price of $32.00 per Share, net to the seller in cash (subject to applicable
withholding of taxes), without any interest (such amount, or any greater amount
per Share paid pursuant to the Offer, the "Per Share Amount"), upon the terms
and subject to the conditions set forth in Purchaser's Offer to Purchase, dated
October 28, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments and supplements thereto,
collectively constitute the "Offer") included in the Schedule 14D-1.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 21, 1998 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will be
a wholly owned subsidiary of Parent.
Following completion of the Offer, the Merger Agreement provides that
subject to the satisfaction of certain conditions set forth therein, including
the approval of the Company's stockholders, the remaining Shares will be
converted in the Merger into shares of Series A Cumulative Convertible
Exchangeable Preferred Stock, par value $0.01 per share ("Parent Preferred
Stock"), of Parent. As more completely described below, if fewer than the
Offered Number of Shares is purchased in the Offer, the remaining Company
stockholders will receive in the Merger shares of Parent Preferred Stock and
cash for their Shares so that the aggregate cash and stock consideration paid in
the Offer and the Merger combined is the same as if the Offer had been fully
subscribed. At the effective time of the Merger (the "Effective Time"), each
remaining outstanding Share (other than Shares held in the treasury of the
Company or owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company (collectively, "Ineligible Shares") and
other than Shares held by stockholders who have demanded and perfected appraisal
rights, if any, under Delaware Law ("Dissenting Shares")) will be converted
automatically into the right to receive (i) 0.64 of a fully paid and
nonassessable share of Parent Preferred Stock (the "Exchange Ratio"); PROVIDED,
HOWEVER, that if Purchaser accepts for payment and pays for less than the
Offered Number of Shares in the Offer (the number of Shares so accepted for
payment and paid for being referred to herein as the "Accepted Share Number"),
then the Exchange Ratio will be adjusted (the "Adjusted Exchange Ratio") and the
Adjusted Exchange Ratio will be equal to the product of the Exchange Ratio and a
fraction (A) the numerator of which is equal to (x) the number of outstanding
Shares immediately prior to the Effective Time (excluding Ineligible Shares)
(the "Final Outstanding Number") plus (y) the Accepted Share Number minus (z)
the Offered Number and (B) the denominator of which is the Final Outstanding
Number and (ii) if the Exchange Ratio has been adjusted pursuant to the
immediately preceding proviso, an amount in cash equal to the product of the Per
Share Amount and a fraction (A) the numerator of which is the amount by which
the Offered Number exceeds the Accepted Share Number and (B) the denominator of
which is the Final Outstanding Number. The Merger Agreement is more fully
described in Item 3.
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The Merger Agreement provides that, promptly upon the acceptance for payment
by Purchaser of Shares purchased pursuant to the Offer, and from time to time
thereafter as Shares are acquired by Purchaser, Purchaser will be entitled to
designate such number of directors, rounded up to the next greatest whole
number, on the Board of Directors of the Company (the "Company Board") as will
give Purchaser representation on the Company Board equal to the product of the
total number of directors on the Company Board (including Purchaser's designees)
multiplied by the percentage that the aggregate number of Shares then
beneficially owned by Purchaser and its affiliates following such purchase bears
to the number of Shares then outstanding; PROVIDED, HOWEVER, that, until the
Effective Time, the Company Board will maintain at least one current director
who is not an executive officer of the Company. In the Merger Agreement, the
Company has agreed to take all actions necessary to cause Purchaser's designees
to be elected as directors of the Company, including increasing the size of the
Company Board or securing the resignations of incumbent directors.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company and the approval of the
Parent Preferred Stock Matters (as defined in Item 3 "The Merger
Agreement--Prospectus/Proxy Statement; Registration Statement; Stockholders
Meetings" below) by the requisite vote of the stockholders of Parent. See Item 3
"The Merger Agreement--Conditions to the Merger." A proxy statement (which will
also constitute a prospectus for the Parent Preferred Stock issuable in the
Merger, the Parent Common Stock (as defined below) issuable upon conversion
thereof and Parent's 8 1/2% Convertible Subordinated Exchange Debentures due
2013 (the "Exchange Debentures") issuable upon exchange of the Parent Preferred
Stock) containing detailed information concerning the Merger will be furnished
to stockholders of the Company in connection with a special meeting to be called
by the Company to vote on the Merger. Purchaser will vote all Shares acquired
pursuant to the Offer in favor of the Merger. Under Delaware Law, the
affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the Merger. Consequently,
if Purchaser acquires (pursuant to the Offer or otherwise) at least a majority
of the outstanding Shares, Purchaser will have sufficient voting power to
approve and adopt the Merger Agreement and the Merger without the vote of any
other stockholder.
In connection with the execution of the Merger Agreement, Parent and
Purchaser entered into a stockholders agreement, dated as of October 21, 1998
(the "Stockholders' Agreement"), with the Stockholders (as defined in Item
3(b)). Under the Stockholders' Agreement, each of the Stockholders has, among
other things, (i) agreed to tender pursuant to the Offer all Shares owned by him
or it, (ii) granted to Purchaser an irrevocable option, subject to the terms and
conditions of the Stockholders' Agreement, to purchase such Shares for a cash
purchase price per Share equal to the Per Share Amount, (iii) agreed to vote
such Shares in favor of the Merger and the Merger Agreement and (iv) granted to
Parent and certain officers of Parent an irrevocable proxy to vote such Shares
in favor of the transactions contemplated by the Merger Agreement. The Shares
owned by the Stockholders and subject to the Stockholders' Agreement, 13,254,187
Shares, represented approximately 47.7% of the Shares outstanding as of October
20, 1998. As a result of the Stockholders' Agreement, Purchaser, Parent and The
Alpine Group, Inc. ("Alpine"), a Delaware corporation and the 50.1% owner of
Parent, are deemed to be the beneficial owners of such Shares.
All information contained in this Statement or incorporated herein by
reference concerning Purchaser, Parent or their affiliates, or actions or events
with respect to any of them, was provided to the Company by Purchaser or Parent,
and the Company takes no responsibility for the accuracy or completeness of such
information or for any failure by such entities to disclose events or
circumstances that may have occurred and may affect the significance,
completeness or accuracy of any such information.
According to the Schedule 14D-1, the principal executive offices of Parent
and Purchaser are located at 1790 Broadway, New York, NY 10019.
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ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Except as described or referred to in the attached Annex A or set forth
below, to the knowledge of the Company, there are no material contracts,
agreements, arrangements or understandings and no actual or potential conflicts
of interest between the Company or its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) Parent or Purchaser or any
of their respective executive officers, directors or affiliates.
Essex Group, Inc. ("Essex"), a wholly owned subsidiary of the Company, and
Parent entered into a mutual confidentiality agreement (the "Confidentiality
Agreement") on April 24, 1998 that provides for, among other things, the
confidential treatment of the discussions regarding the Offer and the Merger and
the exchange of certain confidential information concerning the Company, Essex
and Parent.
The following is a summary of certain provisions of the Merger Agreement,
the Stockholders' Agreement, among Parent, Purchaser, Bessemer Holdings, L.P.
("Bessemer"), Bessec Holdings, L.P., Ward W. Woods, The Woods Foundation, Woods
1994 Family Partnership, L.P., North Hailey Corporation, Nebris Corporation,
Robert D. Lindsay, Lindsay 1994 Family Partnership, L.P., Demarest Corporation,
Old Hundred Corporation, Rodney A. Cohen and Craighall Corporation (excluding
Parent and Purchaser, the "Stockholders") and the letter dated October 21, 1998
(the "Voting Agreement"), from Alpine to the Company. Each such summary is
qualified in its entirety by reference to the full text of the Merger Agreement
and the Stockholders' Agreement, respectively, copies of which are filed as
Exhibits 1 and 2 to this Statement, respectively, and which are incorporated
herein by reference. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Merger Agreement. For the
purposes of the Merger Agreement, "Company Material Adverse Effect" means any
change or effect that, individually or when taken together with all other such
changes or effects that have occurred prior to the date of determination of the
occurrence of the Company Material Adverse Effect, is materially adverse to the
business, results of operations, or financial condition of the Company and its
subsidiaries, taken as a whole; PROVIDED, HOWEVER, that in determining whether
there has been a Company Material Adverse Effect, any adverse effect
attributable to the following shall be disregarded: (i) general economic or
business conditions; (ii) general industry conditions; (iii) the taking of any
action permitted or required by the Merger Agreement; (iv) the announcement or
pendency of the Offer, the Merger or any of the other transactions contemplated
by the Merger Agreement; (v) the breach by Parent or Purchaser of the Merger
Agreement; and (vi) a decline in the Company's stock price; in each case, to the
extent that such adverse effect is attributable to such event.
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides that Purchaser shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) the Offer as promptly as reasonably practicable
after the date of the Merger Agreement, but in no event later than five business
days after the initial public announcement on the date of the Merger Agreement
or the following day of Purchaser's intention to commence the Offer. The Merger
Agreement provides that the obligation of Purchaser to accept for payment and
pay for Shares tendered pursuant to the Offer is only subject to (i) the
condition (the "Minimum Condition") that at least the number of Shares (together
with the Shares, if any, then owned by Parent or Purchaser) constituting a
majority of the then outstanding Shares on a fully diluted basis shall have been
validly tendered and not withdrawn prior to the expiration of the Offer and (ii)
the satisfaction or waiver of the other conditions set forth in "--Conditions to
the Offer" below. As used in the Merger Agreement, "fully diluted basis" means
issued and outstanding Shares and Shares subject to issuance under vested
Options (as defined in "--Stock Options" below) and Shares subject to issuance
upon exercise of outstanding warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or securities convertible or
exchangeable for such capital stock, but does not include unvested Options.
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Purchaser expressly reserved the right in the Merger Agreement, subject to
compliance with the Exchange Act, to waive any such condition, to increase the
Per Share Amount and to make any other changes in the terms and conditions of
the Offer; PROVIDED, HOWEVER, that unless Parent and Purchaser shall have
obtained the prior written approval of the Company, no change may be made in the
Offer that (i) decreases the Per Share Amount, (ii) changes the form of
consideration to be paid in the Offer, (iii) reduces the maximum number of
Shares to be purchased in the Offer, (iv) modifies the conditions to the Offer
set forth in "--Conditions to the Offer" below or imposes conditions to the
Offer in addition to those set forth "--Conditions to the Offer" below, (v)
modifies or waives the Minimum Condition or (vi) except as provided in the
following paragraph, extends the Offer. The Merger Agreement provides that the
Per Share Amount shall, subject to applicable withholding of taxes, be net to
the seller in cash, upon the terms and subject to the conditions of the Offer.
Subject to the terms and conditions of the Offer (including, without limitation,
the Minimum Condition), the Merger Agreement provides that Purchaser shall, and
Parent shall cause Purchaser to, accept for payment and pay for, as promptly as
practicable after expiration of the Offer, all Shares validly tendered and not
withdrawn.
The Merger Agreement provides that notwithstanding the foregoing, Purchaser
may, without the consent of the Company, (A) extend the Offer in increments of
up to 10 business days each if at the scheduled or any extended expiration date
of the Offer the Minimum Condition has not been satisfied or any of the other
conditions set forth in "--Conditions to the Offer" below shall not have been
satisfied or waived, until such time as such conditions are satisfied or waived
and (B) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the
"Commission") or the staff thereof applicable to the Offer. The Merger Agreement
provides that without limiting the right of Purchaser to extend the Offer
pursuant to the immediately preceding sentence, in the event that (i) the
Minimum Condition shall not have been satisfied or (ii) the condition set forth
in paragraph (a) of "--Conditions to the Offer" below with respect to any action
or proceeding by any United States or foreign governmental, administrative or
regulatory authority, commission, body, agency or other authority (a
"Governmental Entity"), the condition set forth in paragraph (j) of
"--Conditions to the Offer" below or the HSR Condition (as defined in
"--Conditions to the Offer" below) shall not have been satisfied or waived at
the scheduled or any extended expiration date of the Offer, at the request of
the Company, Purchaser shall, and Parent shall cause Purchaser to, extend the
expiration date of the Offer in increments of five business days each until the
earliest to occur of (x) the satisfaction or waiver of the Minimum Condition or
such other condition, (y) the termination of the Merger Agreement in accordance
with its terms and (z) April 30, 1999.
CONDITIONS TO THE OFFER. The Merger Agreement provides that notwithstanding
any other provisions of the Offer, subject to the terms of the Merger Agreement,
Purchaser shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of, or payment for, Shares tendered, if, at
any scheduled or extended expiration date of the Offer, (i) the Minimum
Condition shall not have been satisfied, (ii) any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
shall not have expired or been terminated prior to the expiration of the Offer
(the "HSR Condition") or (iii) any of the following conditions shall exist:
(a) there shall have been instituted or be pending or threatened any
action or proceeding by any Governmental Entity or any other person (in the
case of any suit, action or proceeding by a person other than a Governmental
Entity, such suit, action or proceeding having a reasonable likelihood of
success in regard to the relief sought in any of clauses (i) through (v)
below): (i) challenging or seeking to make illegal, materially delay or
otherwise directly or indirectly restrain or prohibit or make materially
more costly the making of the Offer, the acceptance for payment of, or
payment for, any Shares by Parent, Purchaser or any other affiliate of
Parent, or the consummation of any other transactions contemplated by the
Merger Agreement, including the Merger (collectively, the "Transactions"),
or seeking to obtain material damages in connection with any Transaction;
(ii) seeking to prohibit or limit materially the ownership or operation by
the Company, Parent or any of their
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subsidiaries of all or any material portion of the business or assets of the
Company, Parent or any of their subsidiaries, or to compel the Company,
Parent or any of their subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company, Parent or any
of their subsidiaries, as a result of the Transactions; (iii) seeking to
impose or confirm material limitations on the ability of Parent, Purchaser
or any other affiliate of Parent to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by Purchaser pursuant to the Offer or otherwise on all
matters properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement; (iv) seeking to require
divestiture by Parent, Parent or any other affiliate of Parent of any Shares
Stock; or (v) which otherwise has a Company Material Adverse Effect;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of
Parent or the Company or (ii) the Offer, the Merger or any Transaction, by
any legislative body, court, government or Governmental Entity, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or the Merger, that is reasonably likely in the
good faith judgment of the Parent to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (v) of paragraph (a)
above;
(c) after the date of the Merger Agreement, there shall have occurred
any change, condition, event or development that has a Company Material
Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange for a period in excess of 24 hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchange not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) a commencement of a war or armed hostilities or other similar
national or international crisis directly or indirectly involving the United
States having, or that could reasonably be expected to have, a substantial
continuing general effect on business and financial conditions in the United
States or (iv) in the case of any of the foregoing existing on the date of
the Merger Agreement, in the good faith judgment of the Parent a material
acceleration or worsening thereof;
(e) (i) the Company Board or any committee thereof shall have withdrawn
or modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or approved
or recommended any takeover proposal or any other acquisition of Shares
other than the Offer and the Merger or (ii) the Company Board or any
committee thereof shall have resolved to do any of the foregoing;
(f) any representation or warranty of the Company in the Merger
Agreement shall not be true and correct as if such representation and
warranty was made as of the date of the expiration of the Offer, except for
(i) changes contemplated by the Merger Agreement, (ii) those representations
and warranties which address matters only as of a particular date (which
shall be determined as of such date) and (iii) where the failure to be true
and correct would not, together with all other such failures, have a Company
Material Adverse Effect;
(g) the Company or any other person (other than Parent and Purchaser)
shall have failed to perform in any material respect any obligation or to
comply in any material respect with any agreement or covenant of the Company
to be performed or complied with by it under the Merger Agreement;
(h) the Merger Agreement shall have been terminated in accordance with
its terms;
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(i) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment for
Shares thereunder; or
(j) the conditions set forth in the letter dated October 21, 1998 (the
"Commitment Letter") from Bankers Trust Company ("Bankers Trust") to Parent
regarding the financing of the Offer shall not have been satisfied or waived
or the financing contemplated thereby shall not have been effected;
which, in the sole judgment of Purchaser in any such case, and regardless of the
circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for the
Shares.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of Purchaser and Parent and may be asserted by Purchaser or Parent
regardless of the circumstances giving rise to any such condition or may,
subject to the provisions of the Merger Agreement set forth under "--The Offer"
above, be waived by Purchaser or Parent in whole or in part at any time and from
time to time in their sole discretion. The Merger Agreement provides that
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
THE MERGER. The Merger Agreement provides that following the completion of
the Offer, upon the terms and subject to the conditions set forth in the Merger
Agreement, and in accordance with Delaware Law, Purchaser shall be merged with
and into the Company at the Effective Time. As a result of the Merger, the
separate corporate existence of Purchaser will cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Purchaser in accordance with Delaware Law.
CONVERSION OF SECURITIES. The Merger Agreement provides that as a result of
the Merger, the remaining Shares (other than Ineligible Shares and Dissenting
Shares) will be converted into shares of Parent Preferred Stock. As more
completely described below, if fewer than the Offered Number of Shares is
purchased in the Offer, the remaining Company stockholders will receive in the
Merger shares of Parent Preferred Stock and cash for their Shares so that the
aggregate cash and stock consideration paid in the Offer and the Merger combined
is the same as if the Offer had been fully subscribed. At the Effective Time,
each remaining outstanding Share (other than Ineligible Shares and Dissenting
Shares), shall be converted into the right to receive (i) 0.64 of a fully paid
and nonassessable share of Parent Preferred Stock; PROVIDED, HOWEVER, that if
Purchaser accepts for payment and pays for less than the Offered Number of
Shares in the Offer, then the Exchange Ratio shall be adjusted and the Adjusted
Exchange Ratio shall be equal to the product of the Exchange Ratio and a
fraction where (A) the numerator of which is equal to (x) the Final Outstanding
Number plus (y) the Accepted Share Number minus (z) the Offered Number and (B)
the denominator of which is the Final Outstanding Number and (ii) if the
Exchange Ratio has been adjusted pursuant to the immediately preceding proviso,
an amount in cash equal to the product of the Per Share Amount and a fraction
where (A) the numerator of which is the amount by which the Offered Number
exceeds the Accepted Share Number and (B) the denominator of which is the Final
Outstanding Number.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
The Merger Agreement provides that notwithstanding anything therein to the
contrary, at the sole option of Parent and with the consent of the Independent
Directors, which consent shall not be unreasonably withheld, Parent may, prior
to the mailing of the Prospectus/Proxy Statement to the
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stockholders of the Company, substitute for the Parent Preferred Stock
convertible preferred securities having economic and other material terms and
conditions equivalent to the Parent Preferred Stock as determined by the board
of directors of Parent with the concurrence of a majority of the Independent
Directors, but representing undivided beneficial interests in the assets of a
statutory business trust created under the laws of the State of Delaware, of
which all of the beneficial interests in the assets of such trust represented by
common securities are owned by Parent. In the event of such substitution, all
references in the Merger Agreement to Parent Preferred Stock are deemed to refer
to such convertible preferred securities.
PROSPECTUS/PROXY STATEMENT; REGISTRATION STATEMENT; STOCKHOLDERS
MEETINGS. The Merger Agreement provides that Parent and the Company shall as
promptly as practicable after the date of the Merger Agreement, prepare and file
with the Commission a proxy statement relating to the meeting of the Company's
stockholders (the "Company Stockholders' Meeting") and the meeting of the
Parent's stockholders (the "Parent Stockholders' Meeting") to be held in
conjunction with the Merger (the "Prospectus/ Proxy Statement") and Parent shall
prepare and file with the Commission a Registration Statement on Form S-4 in
connection with the issuance of shares of Parent Preferred Stock in the Merger
(the "Registration Statement"). The Merger Agreement provides that Parent and
the Company each shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act of 1933, as amended (the
"Securities Act"), as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the stockholders of the
Company and of Parent.
The Merger Agreement provides that the Company will, in accordance with
Delaware Law and the Company's Certificate of Incorporation and By-Laws, take
all action necessary to convene the Company Stockholders' Meeting as promptly as
practicable but in no event more than 45 days after the Registration Statement
is declared effective, to consider and vote upon the approval of the Merger.
Subject to fiduciary obligations under applicable law, the Company Board shall
recommend such approval, shall not withdraw or modify such recommendation and
shall take all lawful action to solicit such approval. Without limiting the
generality of the foregoing, if the Company Board withdraws or modifies its
recommendation, the Company nonetheless shall cause the Company Stockholders'
Meeting to be convened and a vote taken with respect to the Merger and the
Company Board shall communicate to the Company's stockholders its basis for such
withdrawal or modification as contemplated by Section 251 of the Delaware Law.
Parent and Purchaser have agreed in the Merger Agreement to cause all Shares
purchased pursuant to the Offer and all other Shares owned by them or any of
their subsidiaries or affiliates to be voted to adopt and approve the Merger
Agreement and the Merger at the Company Stockholders' Meeting.
In addition Parent has agreed in the Merger Agreement that it will, in
accordance with Delaware Law and Parent's Certificate of Incorporation and
By-Laws, take all action necessary to convene a meeting of holders of Parent
Common Stock as promptly as practicable but in no event more than 45 days after
the Registration Statement is declared effective, to consider and vote upon the
approval of an amendment to Parent's Certificate of Incorporation to authorize
additional shares of preferred stock, par value $.01 per share, of Parent and
the issuance of Parent Preferred Stock in accordance with the terms of the
Merger Agreement (the "Parent Preferred Stock Matters"). Parent's board of
directors shall recommend such approval, shall not withdraw or modify such
recommendation and shall take all lawful action to solicit such approval.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) The Registration Statement shall have become effective under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for that purpose and no similar proceeding in respect of the
Prospectus/Proxy Statement shall have been initiated or threatened by the
Commission;
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(b) The Merger Agreement and the Transactions shall have been approved
and adopted by the requisite vote of the stockholders of the Company and the
Parent Preferred Stock Matters shall have been approved and adopted by the
requisite vote of the stockholders of Parent;
(c) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other
similar binding legal restraint or prohibition preventing the consummation
of the Merger shall be in effect, and there shall not be any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal; and
(d) Parent, Purchaser or their affiliates shall have purchased, or
caused to be purchased, Shares pursuant to the Offer or pursuant to the
Stockholders' Agreement.
In addition, the Merger Agreement provides that the obligation of the
Company to effect the Merger is also subject to the condition that the shares of
Parent Preferred Stock to be issued in the Merger and the shares of Parent
Common Stock issuable upon conversion of Parent Preferred Stock shall have been
approved for listing, subject to official notice of issuance, on the NYSE.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement provides that it
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual written consent duly authorized by the respective boards
of directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by October 31, 2000 (provided that the right to terminate the
Merger Agreement under this paragraph is not available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); or
(c) by either Parent or the Company if a court of competent jurisdiction
or Governmental Entity shall have issued a nonappealable final order, decree
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(d) by Parent or the Company, if Shares have not been purchased pursuant
to the Offer or pursuant to the Stockholders' Agreement prior to April 30,
1999 (provided that Parent or the Company, as applicable, is not then in
material breach of the Merger Agreement); or
(e) as long as Shares have not been purchased pursuant to the Offer or
pursuant to the Stockholders' Agreement, by Parent, if (i) the Company Board
shall withdraw, modify or change its recommendation of the Merger Agreement,
the Offer or the Merger in a manner adverse to Parent or shall have resolved
to do so; or (ii) the Company Board shall have recommended, taken a
"neutral" position with respect to, resolved to accept or accepted an
Acquisition Proposal (as defined in "--Takeover Proposals" below); or
(f) as long as Shares have not been purchased pursuant to the Offer or
pursuant to the Stockholders' Agreement, by Parent, upon a breach of any
representation, warranty, covenant or agreement on the part of the Company,
set forth in the Merger Agreement or if any representation or warranty of
the Company, shall have become untrue, in either case, such that the breach
would give rise to the failure of a condition set forth in "--Conditions to
the Offer" above (a "Terminating Breach"), provided that, if such
Terminating Breach is curable prior to the expiration of 30 days from its
occurrence (but in no event later than April 30, 1999) by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, Parent may not
terminate the Merger Agreement under this paragraph until the expiration of
such period without such Terminating Breach having been cured; or
(g) by the Company if, as of any scheduled or extended expiration date
of the Offer occurring later than 150 days after the commencement by
Purchaser of the Offer, all of the conditions to the
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Offer set forth in "--Conditions to the Offer" above have been satisfied or
waived except for the condition set forth in paragraph (j) of "--Conditions
to the Offer" above; provided, that the Company may not terminate the Merger
Agreement pursuant to this paragraph if the Company's failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in,
the failure to satisfy the condition set forth in paragraph (j) of
"--Conditions to the Offer" above; or
(h) by Parent if the Offer has expired or has been terminated in
accordance with the terms set forth in the Merger Agreement (including those
listed in "--Conditions to the Offer" above) without Shares having been
purchased pursuant to the Offer.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it will become void and there will be no liability
thereunder on the part of any party thereto (or any of its affiliates,
directors, officers, employees, agents, legal and financial advisors or other
representatives) except (i) under the provisions of the Merger Agreement related
to fees and expenses described in "--Fees and Expenses" below and under certain
other provisions of the Merger Agreement that survive termination and (ii)
nothing contained in the Merger Agreement will relieve any party from liability
or damages resulting from any breach of the Merger Agreement.
FEES AND EXPENSES. The Merger Agreement provides that except for certain
expenses related to the conversion of the Shares in the Merger (which shall be
paid by the Surviving Corporation) and expenses incurred in connection with the
filing fee for the Registration Statement and the printing and mailing of the
Prospectus/Proxy Statement and the Registration Statement (which shall be shared
equally by Parent and the Company) and as otherwise discussed in this section,
all fees and expenses incurred in connection with the Merger Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Notwithstanding the above, the Merger Agreement provides that the Company
shall pay Parent a fee of $25,000,000, plus actual, documented and reasonable
out-of-pocket expenses of Parent, not in excess of $5,000,000, relating to the
transactions contemplated by the Merger Agreement (including, but not limited
to, fees and expenses of Parent's counsel), upon the earliest to occur of the
following events:
(a) the termination of the Merger Agreement by Parent pursuant to
paragraph (e) of "--Termination of the Merger Agreement" above and the
Minimum Condition is not satisfied at the scheduled or any extended
expiration date of the Offer following the occurrence of the event giving
rise to Parent's right to terminate the Merger Agreement pursuant to
paragraph (e) of "--Termination of the Merger Agreement" above; or
(b) the termination of the Merger Agreement by Parent pursuant to
paragraph (h) of "--Termination of the Merger Agreement" above if any person
or "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
shall have publicly made an Acquisition Proposal, the Offer shall have
remained open until at least the scheduled or any extended expiration date
following the date such Acquisition Proposal is made and the Minimum
Condition shall not have been satisfied at the scheduled or any extended
expiration date of the Offer; or
(c) the termination of the Merger Agreement by Parent pursuant to
paragraph (f) of "--Termination of the Merger Agreement" above if any person
or "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
shall have publicly made an Acquisition Proposal and the Company enters into
a binding written agreement concerning a transaction that constitutes an
Acquisition Proposal within one year after the date of such termination;
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PROVIDED, HOWEVER, that no fee or expense reimbursement shall be payable
pursuant to this paragraph if Parent or Purchaser shall then be in willful
material breach of its obligations hereunder.
The Merger Agreement also provides that Parent shall pay the Company a fee
of $10,000,000, plus actual, documented and reasonable out-of-pocket expenses of
the Company, not in excess of $2,000,000, relating to the transactions
contemplated by the Merger Agreement (including, but not limited to, fees and
expenses of the Company's counsel), upon the termination of the Merger Agreement
by the Company pursuant to paragraph (g) of "--Termination of the Merger
Agreement" above if the condition set forth in paragraph (j) of "--Conditions to
the Offer" above has not been satisfied due solely to the failure of one or more
of the Excluded Conditions; PROVIDED, HOWEVER, that no fee or expense
reimbursement shall be payable pursuant to this paragraph if the Company shall
then be in willful material breach of its obligations hereunder. For purposes of
this paragraph, "Excluded Conditions" means the conditions precedent identified
in the following paragraphs under the heading "Conditions Precedent to the
Initial Loans" in Exhibit B to the Commitment Letter: (iii) (to the extent it
relates to the recommendation of the board of directors of Parent), (v) (change
of control of Parent), (vii) (material adverse effect to the extent it relates
to Parent), (xiii) (indebtedness of Parent) and (xiv) (material adverse effect
on markets).
The fee payable pursuant to preceding two paragraphs shall be paid within
one business day after the first to occur of the events described in the
applicable subparagraph.
The Merger Agreement provides that all transfer, documentary, sales, use,
stamp, registration and other such taxes (including, without limitation, any
penalties and interest) incurred in connection with the Merger Agreement by the
Company and its stockholders (including, without limitation, any New York States
Real Estate Transfer Tax, New York City Real Property Transfer Tax and New York
State Stock Transfer Tax and other similar taxes imposed by any other State of
the United States or other taxing jurisdiction) shall be borne and paid by
Parent, and Parent will, at its own expense, file all necessary Tax Returns with
respect to all such taxes and, if required by applicable law, the Company will,
and will cause its subsidiaries to, join in the execution of any such Tax
Returns.
TAKEOVER PROPOSALS. The Company agrees in the Merger Agreement that it will
not, and will not permit or cause any of its subsidiaries or any of the officers
and directors of it or its subsidiaries to, and shall direct its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of 15% or more of the consolidated assets or equity securities
of the Company or any of its subsidiaries, other than transfers of Shares
between and among entities associated or affiliated with the Stockholders (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"). The Company will not, and will not permit or cause any of its
subsidiaries or any of the officers and directors of it or its subsidiaries to,
and shall direct its and its subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, whether made
before or after the date of the Merger Agreement, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal; PROVIDED,
HOWEVER, that nothing contained in the Merger Agreement shall prevent the
Company or the Board from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii) at any time prior to
the earlier to occur of (x) payment for Shares pursuant to the Offer or (y) the
approval of the Merger by the requisite vote of the stockholders of the Company
(A) providing information in response to a request therefor by a person who has
made an unsolicited bona fide written Acquisition Proposal if the Board receives
from the person so requesting such information an executed confidentiality
agreement on terms substantially equivalent to those contained in the
Confidentiality Agreement; (B) engaging in any negotiations or discussions with
any person who has made an unsolicited bona fide written Acquisition Proposal;
or (C) recommending such an Acquisition
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Proposal to the stockholders of the Company, if and only to the extent that, (i)
in each such case referred to in clause (A), (B) or (C) above, the Board
determines in good faith after consultation with outside legal counsel that such
action is necessary in order for its directors to comply with their fiduciary
duties under applicable law and (ii) in each case referred to in clause (B) or
(C) above, the Board of Directors of the Company determines in good faith (after
consultation with its financial advisor) that such Acquisition Proposal is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by the Merger Agreement (any such more favorable
Acquisition Proposal being referred to in the Merger Agreement as a "Superior
Proposal"). The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company agrees that it will
take the necessary steps to promptly inform the individuals or entities referred
to in the first sentence hereof of the obligations undertaken in this paragraph
and in the Confidentiality Agreement. The Company will notify Parent immediately
if any such inquiries, proposals or offers are received by, any such information
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers and thereafter shall keep Parent informed,
on a current basis, on the status and terms of any such proposals or offers and
the status of any such negotiations or discussions. The Company also will
promptly request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal to
return all confidential information heretofore furnished to such person by or on
behalf of it or any of its subsidiaries.
CONDUCT OF THE BUSINESS BY THE COMPANY. The Merger Agreement provides that
during the period from the date of the Merger Agreement and continuing until the
earlier to occur of the termination of the Merger Agreement or the election of
Purchaser's designees representing at least a majority of the members of the
Company Board in accordance with "--Board of Directors" below, the Company
covenants and agrees that, unless Parent shall otherwise agree in writing and
unless otherwise expressly permitted hereunder, the Company shall conduct its
business and shall cause the businesses of its subsidiaries to be conducted, and
the Company and its subsidiaries shall not take any action except, in the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use reasonable commercial efforts to preserve substantially
intact the business organization of the Company and its subsidiaries, to keep
available the services of the present officers, employees and consultants of the
Company and its subsidiaries, and to preserve the present relationships of the
Company and its subsidiaries with customers, suppliers and other persons with
which the Company or any of its subsidiaries has significant business relations.
The Merger Agreement provides that by way of amplification and not limitation,
neither the Company nor any of its subsidiaries shall, during the period from
the date of the Merger Agreement and continuing until the earlier to occur of
the termination of the Merger Agreement or the election of Purchaser's designees
representing at least a majority of the members of the Company Board in
accordance with "--Board of Directors" below, directly or indirectly, do or
propose to do, any of the following without the prior written consent of Parent,
unless otherwise expressly permitted hereunder:
(a) amend or otherwise change the Company's or any of its subsidiaries'
Certificate of Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any phantom
interest) of the Company, any of its subsidiaries or affiliates (except for
the issuance of Shares issuable pursuant to the exercise of Options under
the Stock Option Plans (as defined in "--Stock Options" below), which
Options are outstanding on the date hereof);
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(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice and (ii)
dispositions of obsolete or worthless assets);
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of Options granted under the Stock Option Plans or
authorize cash payments in exchange for any such Options;
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned
subsidiary of the Company may declare and pay a dividend to its parent, (ii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (iii) amend the terms of,
repurchase, redeem or otherwise acquire, or permit any subsidiary to
repurchase, redeem or otherwise acquire, any of its securities or any
securities of its subsidiaries, or propose to do any of the foregoing;
(f) sell, transfer, license, sublicense or otherwise dispose of any
material Company intellectual property (other than in the ordinary course of
business consistent with past practice) or amend or modify any existing
agreements with respect to any material intellectual property of the Company
or any rights the Company has to the intellectual property of third parties;
(g) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money (other than
indebtedness incurred under existing credit facilities in the ordinary
course of business consistent with past practices) or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances except to employees in the ordinary course consistent with past
practice; (iii) enter into or amend any contract or agreement other than in
the ordinary course of business; (iv) authorize or make any capital
expenditures or purchase of fixed assets that are not currently budgeted and
that in the aggregate exceed $500,000; (v) terminate any material contract
or amend any of its material terms (other than amendments to existing credit
arrangements designed to remedy defaults thereunder); or (vi) enter into or
amend any contract, agreement, commitment or arrangement to effect any of
the matters prohibited by this paragraph;
(h) except as disclosed to Parent in a schedule to the Merger Agreement,
increase the compensation payable or to become payable to its officers or
directors or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director or officer of the
Company or any of its subsidiaries or establish, adopt, enter into or,
except as required by law, terminate or amend in any material respect any
employee benefit plan;
(i) take any action, other than as required by generally accepted
accounting principles, to change accounting policies or procedures or cash
maintenance policies or procedures (including, without limitation,
procedures with respect to revenue recognition, capitalization of
development costs, payments of accounts payable and collection of accounts
receivable);
(j) make any material tax election inconsistent with past practice or
settle or compromise any material tax liability, except to the extent the
amount of any such settlement or compromise has been reserved for on the
consolidated financial statements contained in the reports filed by the
Company with the Commission, or would not have a Company Material Adverse
Effect;
(k) pay, discharge, settle, or satisfy any lawsuits, claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in the financial statements of the Company or
incurred in the ordinary course of business and consistent with past
practice;
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(l) except as may be required by law, take any action to terminate or
amend any employee benefit plan;
(m) permit any material increase in the number of employees of the
Company or any of its subsidiaries employed by the Company or any of its
subsidiaries, as the case may be, on the date hereof other than pursuant to
an employee plan to be agreed to by the Company and Parent as promptly as
practicable after the date hereof acting reasonably and in good faith; or
(n) take or fail to take, or agree in writing or otherwise to take or
fail to take, any of the actions described in (a) through (m) of this
section, or any action which would make any of the representations or
warranties of the Company contained in the Merger Agreement untrue or
incorrect or prevent the Company from performing or cause the Company not to
perform its covenants under the Merger Agreement or result in any of the
conditions described in "--Conditions to the Merger" above not being
satisfied.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment by Purchaser for Shares purchased pursuant to the Offer,
and from time to time thereafter as Shares are acquired by Purchaser, Purchaser
shall be entitled, subject to compliance with Section 14(f) of the Exchange Act,
to designate such number of directors, rounded up to the next greatest whole
number, on the Company Board as will give Purchaser representation on the
Company Board equal to that number of directors which equals the product of the
total number of directors on the Company Board (giving effect to the directors
appointed or elected pursuant to this sentence and including current directors
serving as officers of the Company) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Purchaser or any affiliate of
Purchaser (including for purposes of this paragraph such Shares as are accepted
for payment pursuant to the Offer, but excluding Shares held by the Company or
any of its affiliates) bears to the number of Shares outstanding; PROVIDED,
HOWEVER, that in the event that Purchaser's designees are appointed or elected
to the Company Board, until the Effective Time the Company Board shall have at
least one director who is a director on the date of the Merger Agreement and who
is not an executive officer of the Company (the "Independent Director"). The
Company has agreed in the Merger Agreement to, upon request by Purchaser,
promptly increase the size of the Company Board or exercise its best efforts to
secure the resignations of such number of directors as is necessary to enable
Purchaser's designees to be elected to the Company Board and shall cause
Purchaser's designees to be so elected.
STOCK OPTIONS. The Merger Agreement provides that as of the date of the
consummation of the Offer, and contingent upon the Offer, all outstanding
unexercised options to purchase Shares ("Options") granted under the Company's
Amended and Restated Stock Option Plan (the "Employee Plan") and the Company's
1997 Stock Option Plan for Nonemployee Directors (the "Directors' Plan" and,
together with the Employee Plan, the "Stock Option Plans") will be canceled and
each holder of an unexercised stock option shall be entitled to receive a cash
payment equal to the product of (x) the number of Shares underlying such
unexercised stock option and (y) the excess of (1) the Per Share Amount over (2)
the per share exercise price of the unexercised stock option.
DISSENTING SHARES. Notwithstanding any provision of the Merger Agreement to
the contrary, Shares that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have available to them and
who shall have demanded properly in writing appraisal for such Shares in
accordance with Section 262 of Delaware Law (the "Dissenting Shares") shall not
represent the right to receive the consideration otherwise payable in the
Merger. Such stockholders shall be entitled to receive payment of the appraised
value of such Shares held by them in accordance with the provisions of such
Section 262, except that all Dissenting Shares held by stockholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Shares under such Section 262 shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the
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right to receive the consideration otherwise payable in the Merger, without any
interest thereon, upon surrender of the certificate or certificates that
formerly evidenced such Shares.
INDEMNIFICATION. The Merger Agreement provides that the Certificate of
Incorporation of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the Certificate of Incorporation and
By-Laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who
between the date hereof and the Effective Time were directors or officers of the
Company, unless such modification is required by law.
The Merger Agreement further provides that after the election of Purchaser's
designees representing at least a majority of the members of the Board in
accordance with "--Board of Directors" above, the Surviving Corporation shall,
and Parent shall cause the Surviving Corporation, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Certificate
of Incorporation or By-Laws, indemnify and hold harmless, each director and
officer of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to any action or omission by such director or officer by
virtue of their holding the office of director or officer occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement) for a period of six years after the
Effective Time.
The Merger Agreement provides that for a period of six years after the
Effective Time, Parent shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that Parent may substitute therefor policies with reputable
and financially sound carriers of at least the same coverage and amounts
containing terms and conditions which are no less advantageous) with respect to
claims arising from or related to facts or events that occurred at or before the
Effective Time; PROVIDED, HOWEVER, that Parent shall not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
150% of the annual premiums paid as of the date hereof by the Company for such
insurance (such 150% amount, the "Maximum Premium"). The Merger Agreement
further provides that if such insurance coverage cannot be obtained at all, or
can only be obtained at an annual premium in excess of the Maximum Premium,
Parent shall maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Premium;
PROVIDED FURTHER, if such insurance coverage cannot be obtained at all, Parent
shall purchase all available extended reporting periods with respect to
pre-existing insurance in an amount that, together with all other insurance
purchased pursuant to this paragraph, does not exceed the Maximum Premium.
Parent agrees in the Merger Agreement not to, and will cause the Company not to,
take any action that would have the effect of limiting the aggregate amount of
insurance coverage required to be maintained for the individuals referred to in
this paragraph.
BENEFIT PLANS. The Merger Agreement provides that except as contemplated by
the Merger Agreement, for not less than one year following the Effective Time,
Parent shall cause the Surviving Corporation to maintain compensation and
employee benefits plans and arrangements and perquisites for employees of the
Company and its subsidiaries that, in the aggregate, are substantially
comparable to those provided pursuant to their compensation and employee benefit
plans and arrangements and perquisites in effect on the date hereof. The Merger
Agreement provides that notwithstanding the above, Parent and Surviving
Corporation shall have the right in the good faith exercise of their managerial
discretion, to terminate or make changes or cause changes to be made in
compensation, benefits and other terms of employment of any employee and to
terminate the employment of any employee.
Parent has agreed in the Merger Agreement to cause the Surviving Corporation
to perform the Company's obligations under the Termination Benefits Agreements,
dated as of April 11, 1997, between the Company and each of its executive
officers unless any such officer agrees otherwise.
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FINANCING. Parent has agreed in the Merger Agreement to use its best
efforts to put in place the financing described in the Commitment Letter. Parent
also has agreed to use its best efforts to ensure that the conditions described
in the Commitment Letter are fulfilled in a timely manner, including, without
limitation, the condition that the recommendation of the board of directors of
Parent with respect to the transactions referred to therein shall not have been
modified in any material respect or withdrawn. The Company agrees in the Merger
Agreement to cooperate with all reasonable requests of Parent, and take all
actions as may be reasonably requested by Parent, in connection with obtaining
such financing.
LISTING. Parent agrees in the Merger Agreement to use its best efforts to
cause the shares of Parent Preferred Stock to be issued in the Merger, the
shares of Parent Common Stock issuable upon conversion of the Parent Preferred
Stock issuable in the Merger, and the Exchange Debentures prior to or upon
issuance thereof, to be approved for listing on the NYSE.
FURTHER ACTION. The Merger Agreement provides that upon the terms and
subject to the conditions hereof, each of the parties to the Merger Agreement
will in good faith shall use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by the Merger Agreement, to obtain in
a timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to otherwise satisfy or cause to be
satisfied all conditions precedent to its obligations under the Merger
Agreement.
PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger
Agreement provides that following the election or appointment of Purchaser's
designees pursuant to "--Board of Directors" above, and prior to the Effective
Time, the approval of a majority of the Independent Directors shall be required
to authorize (i) any termination of the Merger Agreement by the Company, (ii)
any amendment of the Merger Agreement requiring action by the Board (other than
an amendment to eliminate cash from the consideration to be provided in the
Merger in the event Purchaser accepts for payment and pays for the Offered
Number of Shares in the Offer), (iii) any consent by the Company to any
extension of the time for performance of any of the obligations or other acts of
Parent or Purchaser, (iv) any waiver by the Company of compliance with any of
the covenants or conditions contained in the Merger Agreement for the benefit of
the Company or any other rights of the Company under the Merger Agreement and
(v) any amendment or withdrawal by the Board of its recommendation of the Merger
pursuant to "--Takeover Proposals" above.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, its organization, subsidiaries, certificate of
incorporation and by-laws, capitalization, authority relative to the Merger
Agreement, material contracts, required filings and consents, compliance with
law and permits, filings with the Commission, financial statements, absence of
certain changes or events, undisclosed liabilities, litigation, employee benefit
plans and employment agreements, labor matters, restrictions on business
activities, taxes, environmental matters, brokers, intellectual property, vote
required to approve the Merger Agreement, the opinions of the Company's
financial advisors and Year 2000 compliance. Parent and Purchaser have also made
customary representations and warranties to the Company with respect to, among
other things, their respective organization, certificates of incorporation and
by-laws, capitalization, authority relative to the Merger Agreement, required
filings and consents, compliance with law and permits, filings with the
Commission, financial statements, absence of certain changes or events,
undisclosed liabilities, litigation, restrictions on business activities,
environmental matters and the opinion of Parent's financial advisor.
THE STOCKHOLDERS' AGREEMENT
Simultaneously with entering into the Merger Agreement, Parent, Purchaser
and the Stockholders entered into the Stockholders' Agreement. The following
summary is qualified in its entirety by reference
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to the Stockholders' Agreement, a copy of which is filed herewith as Exhibit 2
and incorporated by reference. Such agreement should be read in its entirety for
a more complete understanding of its terms and provisions.
TENDER OF SHARES. Upon the terms and subject to the conditions of the
Stockholders' Agreement, the Stockholders have agreed to validly tender (and not
withdraw) pursuant to and in accordance with the terms of the Offer, not later
than the tenth business day after the commencement of the Offer, the number of
Shares owned by the Stockholders.
STOCK OPTION. In order to induce Parent and Purchaser to enter into the
Merger Agreement, the Stockholders have granted to Purchaser an irrevocable
option (a "Stock Option") to purchase their Shares (the "Option Shares") at an
amount (the "Purchase Price") equal to $32.00 per Share. Pursuant to the
Stockholders' Agreement, if a fee is payable under (a) or (b) under "--Fees and
Expenses" above, the Stock Option shall become exercisable, in whole or in part,
upon the occurrence of such event and remain exercisable in whole or in part
until the date which is 120 days after the date of the occurrence of such event
(the "120 Day Period"), so long as (i) all waiting periods under the HSR Act
required for the purchase of the Option Shares upon such exercise shall have
expired or been waived and (ii) there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Stock Option pursuant to this stockholder agreement. The
Stockholders' Agreement provides that if (i) all HSR Act waiting periods have
not expired or been waived or (ii) there shall be in effect any such injunction
or order, in each case on the expiration of the 120 Day Period, the 120 Day
Period shall be extended until 5 business days after the later of (x) the date
of expiration or waiver of all HSR Act waiting periods and (y) the date of
removal or lifting of such injunction or order.
PROVISIONS CONCERNING THE SHARES. The Stockholders have agreed that during
the period commencing on the date of the Stockholders' Agreement and continuing
with the first to occur of the Effective Time or the termination of the Merger
Agreement in accordance with its terms, at any meeting of the holders of Shares
or in connection with any written consent of the holders of Shares, the
Stockholders will vote (or cause to be voted) the Shares held of record or of
which the Stockholders have "beneficial ownership" (as determined pursuant to
Rule 13d-3 under the Exchange Act, including pursuant to any agreement,
arrangement or understanding, whether or not in writing), (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and the Stockholders' Agreement and any actions required in
furtherance thereof and (ii) against any Acquisition Proposal or other takeover
proposal and against any action or agreement that would impede, frustrate,
prevent or nullify the Stockholders' Agreement or result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or that would result in any
of the conditions set forth under "--Conditions to the Offer" or "--Conditions
to the Merger" above not being fulfilled. In addition, the Stockholders have
appointed representatives of Parent as proxies to vote their Shares or grant a
consent or approval in respect of such Shares in favor of the various
transactions contemplated by the Merger Agreement and against any Acquisition
Proposal. The Stockholders have also agreed not to transfer their Shares except
to another Stockholder and have agreed that neither they nor any of their
subsidiaries or affiliates shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, any of its affiliates or representatives) concerning any
Acquisition Proposal.
OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. In connection with the
Stockholders' Agreement, the Stockholders have made certain customary
representations and warranties, including with respect to (i) ownership of the
Shares, (ii) the Stockholders' authority to enter into and perform its
obligations under the Stockholders' Agreement, (iii) the absence of certain
conflicts, (iv) applicable governmental consents and approvals, (v) the absence
of encumbrances on and in respect of the Stockholders' Shares, (vi) the
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absence of any finder's fees and (vii) an acknowledgment that Parent is relying
in the representations and warranties set forth in clauses (i) to (vi) above.
Parent and Purchaser have also made certain representations and warranties with
respect to Parent and Purchaser's authority to enter into the Stockholders'
Agreement and the absence of certain conflicts and applicable governmental
consents and approvals.
THE VOTING AGREEMENT
Pursuant to the Voting Agreement, Alpine has agreed that it will, at any
meeting of the stockholders of Parent, however called, or in connection with any
written consent of such stockholders, vote (or cause to be voted) all shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock") then
held of record or which it has the right to vote (A) in favor of (1) an
amendment to the certificate of incorporation of Parent to authorize additional
shares of preferred stock, par value $.01, of Parent; (2) the issuance of Parent
Preferred Stock; in the case of clauses (1) and (2) in accordance with the terms
of the Merger Agreement, Delaware Law and the certificate of incorporation and
By-Laws of Parent; and (3) any other matters submitted to the Parent
stockholders to authorize or facilitate the transactions contemplated by the
Merger Agreement; and (B) against any matters submitted to Parent stockholders
inconsistent with the transactions contemplated by the Merger Agreement. The
Voting Agreement has been filed as Exhibit 3 to this Statement and is
incorporated herein by reference.
THE CONFIDENTIALITY AGREEMENT
Pursuant to the Confidentiality Agreement, Essex and Parent agreed to
provide, among other things, for the confidential treatment of the discussions
regarding the Offer and the Merger and the exchange of certain confidential
information concerning the Company, Essex and Parent. The Confidentiality
Agreement has been filed as Exhibit 4 to this Statement and is incorporated
herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
BACKGROUND.
In March 1998, Steven S. Elbaum, Chairman of the Board of Directors,
President and Chief Executive Officer of Parent, and Robert D. Lindsay, a
representative of Bessemer, had a meeting during which Mr. Elbaum suggested a
possible transaction between Parent and the Company. Following this meeting,
representatives of Parent and the Company met to begin exploration of such a
possible transaction. While no specific terms were discussed, the general terms
of a range of possible transactions were reviewed, all involving the receipt of
a mix of Parent stock and cash by stockholders of the Company in exchange for
their shares of Company common stock. On April 24, 1998, Parent and the Company
entered into the Confidentiality Agreement. By mid-May 1998, because of a
widening disparity between the price of the stock of the Company and that of the
stock of Parent, representatives of both Parent and the Company agreed to halt
negotiations regarding a possible transaction.
In June 1998, a representative of another company ("Company A") contacted
Mr. Lindsay in order to explore Bessemer's interest in a possible transaction
between Company A and the Company. In light of the then-recent fall in the
Company's stock price, and given Bessemer's belief that the Company's stock
would increase in price in the near future, Bessemer determined that the time
was not right for such a transaction and deferred any further conversation
regarding such a transaction.
In early August 1998, Mr. Elbaum called Mr. Lindsay to request a meeting.
Messrs. Elbaum and Lindsay met on August 11, 1998, at which time Mr. Elbaum
suggested that the parties reopen negotiations regarding a possible transaction
between Parent and the Company. Messrs. Elbaum and Lindsay discussed the
increased disparity between the respective prices of the stocks of the two
companies since April. Mr. Lindsay indicated that the transaction structure
under consideration in April remained problematic in current market conditions.
It was agreed that Mr. Elbaum would consider alternative transaction structures
designed to give full value to stockholders of the Company in the then current
market environment.
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On September 15, 1998, Mr. Elbaum called Mr. Lindsay to propose a
transaction between Parent and the Company in which the stockholders of the
Company would receive consideration with a value of between $30-$35 per Share,
with a significant portion of such consideration to be paid in cash. Mr. Lindsay
informed the management of the Company of this proposal.
On September 16, 1998, representatives of Company A met with representatives
of Bessemer to discuss Bessemer's interest in a possible transaction between
Company A and the Company.
On September 25, 1998, representatives from Bessemer met with Mr. Elbaum to
discuss a possible transaction between Parent and the Company. The parties
agreed that a transaction similar to that suggested by Mr. Elbaum on September
15 was worth exploring. Over the course of the next several weeks,
representatives of the Company, Bessemer and their financial advisors met with
representatives of Parent, BT Wolfensohn (Parent's financial advisor) and
Bankers Trust (Parent's lead bank lender) to discuss the prospective transaction
between Parent and the Company and to exchange information, including a
presentation by the Company's management.
On October 7, 1998, Company A sent a letter to the Company, that reiterated
Company A's continued interest in a transaction with the Company and included
various financial analyses prepared by the financial advisor to Company A.
Although no particular structure was identified in the letter, the financial
analyses suggested a stock-for-stock transaction at the then-prevailing market
prices, implying that stockholders of the Company would receive consideration
valued in the mid-teens per Share. The financial advisor to Company A also
contacted Mr. Lindsay inquiring as to Bessemer's interest in a transaction
involving Company A and the Company.
On October 12, 1998, representatives of the Company, Bessemer, Parent and
their respective legal and financial advisors met to discuss the terms and
conditions and structure of the proposed transaction, including the terms and
conditions of the proposed non-cash consideration and the terms of any agreement
by Bessemer to commit to support the transaction.
Following the October 12, 1998 meeting, representatives of the Company and
Bessemer and the Company's financial advisors met with representatives of Parent
and Alpine, who presented an overview of Parent's business, including a
description of the lines of business, historical financial performance and
recent acquisitions.
On or around October 15, 1998, the chief executive officer of Company A
called both Steven R. Abbott, Chairman and Chief Executive Officer of the
Company, and Mr. Lindsay regarding the Company's interest in discussions
concerning a transaction between Company A and the Company.
During the period from October 12 to October 21, 1998, Parent, the Company
and their respective legal and financial advisors conducted further negotiations
of the terms of the transaction and conducted additional due diligence.
On October 19, 1998, the Company held a telephonic meeting of the Company
Board. The Company Board, with the assistance of financial advisors and legal
counsel, discussed the principal terms of the proposed transaction.
Representatives of Goldman, Sachs & Co. ("Goldman Sachs") and Chase Securities
Inc. ("Chase") (the Company's financial advisors) discussed the proposed
transaction from a financial point of view.
On October 21, 1998, the Company Board met again. The Company's legal
advisors discussed the terms of the definitive documentation for the
transaction. Representatives of Goldman Sachs and Chase made a financial
presentation and orally expressed to the Company Board their respective fairness
opinions as more fully described below in "--Reasons for the
Recommendation--Financial Advisors Presentation". Representatives of management
discussed with the Company Board their views as to the implications of the
proposed transaction on the Company. The Company Board thereafter approved,
declared advisable and adopted the Merger Agreement and the Merger and approved
the Offer. The
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Company Board determined that the Offer and the Merger, taken together as a
unitary transaction, are fair to, and in the best interests of, the Company's
stockholders.
On October 21, 1998, following the special meeting of the Company Board, the
Company and Parent executed the Merger Agreement and the Offer and the Merger
were publically announced before U.S. financial markets opened on October 22,
1998. A copy of the press release announcing the transaction is filed herewith
as Exhibit 5 and is incorporated herein by reference.
On October 28, 1998, Parent and Purchaser commenced the Offer.
RECOMMENDATION.
The Company Board has approved, declared advisable and adopted the Merger
Agreement and the Merger, approved the Offer and determined that the terms of
the Offer and the Merger, taken together as a unitary transaction, are fair to,
and in the best interests of, the stockholders of the Company.
ACCORDINGLY, THE COMPANY BOARD RECOMMENDS THAT COMPANY STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to the Company's stockholders communicating the Company
Board's recommendation is filed herewith as Exhibit 6 and is incorporated herein
by reference.
REASONS FOR THE RECOMMENDATION.
At its meeting held on October 21, 1998, as discussed above, the Company
Board approved, declared advisable and adopted the Merger Agreement and the
Merger, approved the Offer and determined that the terms of the Offer and the
Merger, taken together as a unitary transaction, were fair to and in the best
interests of the stockholders of the Company and recommended that the
stockholders of the Company accept the Offer and tender their Shares to
Purchaser pursuant to the Offer. In making its recommendations to the
stockholders of the Company with respect to the Offer and the Merger, the
Company Board considered a number of factors, the material ones being the
following:
HISTORICAL STOCK PRICE PERFORMANCE. The Company Board reviewed the
historical stock price performance of the Company relative to comparable
companies in the wire and cable business and to the broader stock market as a
whole. The Company Board noted that the Company had historically underperformed
both the comparable companies and the broader stock market as a whole, primarily
because of the perception of the financial community that the Company's earnings
had become relatively unpredictable and volatile due to its exposure to the
recent volatility in building wire prices. The Company Board did not believe
that the Company's magnet wire, industrial wire and telecommunications wire
businesses were being accorded appropriate stock trading multiples by the
financial community. In this regard, the Company Board noted that the price
being offered by Parent in the Offer and Merger represented a very attractive
blended multiple for the Company relative to comparable companies and the
Company's historical price performance.
The Company Board noted that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger, taken together as a
unitary transaction, would represent a substantial premium over (i) the closing
price of the Shares on the NYSE on October 21, 1998 (the last full trading day
prior to announcement of the execution of the Merger Agreement), (ii) the
average closing price of the Shares during the week preceding October 21, 1998
and (iii) the average closing price of these Shares for the previous three
months. The Company Board did note that the Shares had traded in excess of the
price being offered in the Offer and Merger within the prior 12 month period,
but the Company Board concluded that the recent downturn in general stock market
valuation and in particular the decline in the valuations of comparable wire
companies made it unlikely that the Shares would return to those trading levels
in the near future.
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STRATEGIC FIT. The Company's long-term strategy for several years has been
based upon the development of the three principal aspects of the Company's
business: building wire, magnet wire and telecommunications wire. Over the last
several years, the Company's sales of building wire had increased to 45% of net
sales in 1997, as opposed to 24% for magnet wire and 11% for telecommunications
wire. In addition, the rapid growth of the Internet and other forms of
electronic communication had led to a growth in demand for the Company's
telecommunications wire products. For these reasons, the Company Board had
independently concluded that a significant expansion of the Company's datacom
telecommunications wire capacity was in order and had approved major capital
expenditures in this area. The combination with Parent would represent a
significant diversification of the combined company's product range and permit
the combined company to better weather volatility in any individual business
segment.
Within the telecommunications wire segment, the Company Board noted that the
Company and Parent conducted business in complementary, and not overlapping,
ways. The Company Board noted that Parent would be able to use the Company's
independent distributor channel to offer a broader range of telecommunications
wire, because Parent is not currently actively involved in that distribution
channel. The Company Board also noted that the combined operations would be able
to use efficiently the Company's telecommunications wire production capacity to
create flexibility to continue to effectively service the Company's existing
distributor customers as well as assist in managing the long-term contracts
already in existence between Parent and its principal customers.
OPERATIONAL BENEFITS FOR COMBINED COMPANIES. The Company Board noted that,
through the second-step Merger, the current stockholders of the Company would
retain an ongoing equity interest in the combined company. The Company Board
noted that there were significant opportunities for synergies between the
Company and Parent, particularly in the area of raw product purchasing savings,
production capacity, management and distributional efficiencies.
OTHER POTENTIAL TRANSACTIONS. The Company Board considered whether any
other person would be interested in an acquisition of the Company at this time
on more attractive terms. The Company Board discussed the other significant wire
and cable companies and concluded for various reasons that none of such firms
would be likely to propose an acquisition transaction more attractive than that
proposed by Parent. In this connection, the Company Board reviewed information
regarding the preliminary discussions between the Company and Company A (see
"--Background" above).
CONDITIONS TO THE OFFER. The Company Board discussed with its financial and
legal advisors the various conditions to the Offer. The Company Board noted, in
particular, the presence of the financing condition, which rendered the
confirmation of the Offer conditional on Parent's ability to obtain financing.
The Company Board discussed with its financial advisors the risks associated
with seeking financing of this kind in the current financial markets and also
discussed the terms of the commitment that had been obtained by Parent from
Bankers Trust with respect to the financing. The Company Board noted several
customary conditions to the Bankers Trust financing commitment, and further
noted Bankers Trust's reputation with respect to its ability to finance
transactions of this type. The Company Board also considered whether Parent
would have been willing to proceed with this transaction structure without a
financing condition.
FINANCIAL CONDITION, RESULTS OF OPERATIONS, BUSINESS AND PROSPECTS OF THE
COMPANY. The Company Board considered the financial condition, results of
operations, business and prospects of the Company, including its prospects if it
were to remain independent. The Company Board also discussed the Company's
current strategic plan and the competitive environment in which the Company
operates.
COMPETING OFFERS; BREAKUP FEE. The Company Board noted that if the Company
receives an offer superior in its terms to the Offer and Merger, the Company
could provide information to, and negotiate with, such competing bidder and
approve or recommend a tender offer competing with the Offer, provided that
under the circumstances described in the Merger Agreement, the Company may be
required to pay
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Parent a termination fee of $25 million, plus expenses (see "The Merger
Agreement--Fees and Expenses" in Item 3 above); although the presence of the
Stockholders' Agreement makes it significantly less likely that any third party
would make a proposal to acquire the Company as the Stockholders own in the
aggregate, approximately 47.7% of the outstanding Shares of the Company and have
agreed to tender their Shares to the Offer and otherwise support the Offer and
Merger.
FINANCIAL ADVISORS PRESENTATION. The Company Board took into account the
advice and the financial presentation of Goldman Sachs and Chase and the oral
opinions of Goldman Sachs (the "Goldman Sachs Opinion") and Chase (the "Chase
Opinion"), subsequently confirmed in writing as of October 21, 1998, to the
effect that, as of such date, and based upon and subject to the various
considerations set forth in such opinions, the consideration to be received,
pursuant to the Merger Agreement, by holders of Shares in the Offer and the
Merger, taken together as a unitary transaction, is fair from a financial point
of view to such holders. A copy of the Goldman Sachs Opinion is filed as Exhibit
7 and of the Chase Opinion is filed as Exhibit 8 to this Statement and are
incorporated herein by reference. Holders of Shares should read the opinions in
their entirety for a description of procedures followed, assumptions and
qualifications made, matters considered and limitations on the review undertaken
by Goldman Sachs and Chase.
TERMS OF THE OFFER AND THE MERGER. The Company Board also considered the
other terms and conditions of the Offer and the Merger as well as the terms of
the Stockholders' Agreement. The Company Board noted that the transaction was
being structured as a cash tender offer for approximately 81% of the outstanding
Shares, and it would permit all holders of Shares to participate on the same
basis. Equally, the consideration to be received in the Merger would be
available to holders of Shares on the same basis. The Company Board considered
that the Stockholders, as principal stockholders, were committing to the
transaction but were not being afforded any preferential treatment in connection
with the Offer or the Merger. The Company Board also considered the implications
of the Stockholders' Agreements for the minority stockholders of the Company.
The foregoing discussion of the information and factors considered and given
weight by the Company Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Company
Board may have given different weights to different factors.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION AND THE CHASE OPINION ARE
ATTACHED AS EXHIBITS 7 AND 8 HERETO. STOCKHOLDERS ARE URGED TO AND SHOULD READ
SUCH OPINIONS IN THEIR ENTIRETY. SUCH OPINIONS WERE PROVIDED FOR THE INFORMATION
AND ASSISTANCE OF THE COMPANY BOARD IN CONNECTION WITH ITS CONSIDERATION OF THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND ARE DIRECTED ONLY TO THE
FAIRNESS (FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED,
PURSUANT TO THE MERGER AGREEMENT, BY STOCKHOLDERS IN THE OFFER AND THE MERGER,
TAKEN TOGETHER AS A UNITARY TRANSACTION. SUCH OPINIONS DO NOT CONSTITUTE A
RECOMMENDATION AS TO WHETHER OR NOT ANY STOCKHOLDER SHOULD TENDER HIS, HER OR
ITS SHARES IN THE OFFER OR HOW ANY STOCKHOLDER SHOULD VOTE, OR WHETHER SUCH
STOCKHOLDER SHOULD SEEK APPRAISAL RIGHTS, IN CONNECTION WITH THE MERGER.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
THE GOLDMAN SACHS ENGAGEMENT
The Company has retained Goldman Sachs to act as financial advisor to the
Company with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated October 19, 1998 between the
Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs (i) a fee
of $250,000 upon announcement of the Offer, (ii) a fee of $3,187,500 upon the
successful completion of the Offer and (iii) a fee of $562,500 upon the
consummation of the Merger.
The Company has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including the fees and disbursements of Goldman Sachs's
attorneys; PROVIDED, HOWEVER, that upon the consummation of the Merger, the
Company shall be liable pursuant to the foregoing sentence for reimbursement of
such expenses only to the extent they exceed $50,000 in the aggregate. The
Company has also agreed to indemnify Goldman Sachs and certain related persons
against certain liabilities in connection with its engagement, including certain
liabilities under federal securities laws.
In the past, Goldman Sachs and its affiliates have provided investment
banking services to the Company and received customary compensation for the
rendering of such services. In the ordinary course of business, Goldman Sachs
and its affiliates may trade securities of the Company and Parent for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in such securities.
THE CHASE ENGAGEMENT
The Company has retained Chase to act as financial advisor to the Company
with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated October 19, 1998 between the
Company and Chase, the Company has agreed to pay Chase (i) a fee of $250,000
upon announcement of the Offer (the "Announcement Fee") and (ii) a fee of
$4,000,000 (the "Transaction Fee"), payable in two installments as set forth
below. The initial installment of the Transaction Fee, which is equal to
$3,187,500 (the "Initial Installment"), is payable upon the expiration date of a
successful Offer, and the final installment of the Transaction Fee, which is
equal to $4,000,000 less amounts paid in regard to the Announcement Fee and the
Initial Installment, is payable upon the closing of the Merger. The Transaction
Fee will also be payable by the Company to Chase if the Company decides to
pursue certain alternative transactions.
The Company has agreed to reimburse Chase for its reasonable expenses,
including the fees and disbursements of legal counsel and other professional
advisors; PROVIDED, HOWEVER, that (i) Chase shall not be entitled to
reimbursement for any legal fees or related disbursements incurred by it in
connection with the preparation or negotiation of the terms of the engagement
letter and (ii) if the Transaction Fee becomes payable to Chase, then the
Company shall be obligated to reimburse Chase only for those expenses which, in
the aggregate, exceed the amount of $50,000. The Company has also agreed to
indemnify Chase and certain related persons against certain liabilities in
connection with its engagement, including certain liabilities under federal
securities laws.
In the past, Chase and its affiliates have provided commercial banking
services and investment banking services to the Company and received customary
compensation for the rendering of such services. In the ordinary course of
business, Chase and its affiliates may trade securities of the Company and
Parent for their own accounts and the accounts of their customers and,
accordingly, may at any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders of the Company with respect to the Offer or the
Merger.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Other than as described in the next paragraph, there have been no
transactions in Shares of the Company that were effected during the past 60 days
by the Company, or, or to the best knowledge of the Company, any executive
officer, director, affiliate or subsidiary of the Company.
(a) AND (b). Pursuant to the Stockholders' Agreement, the Stockholders, each
of whom either is, or is affiliated with, a director or affiliate of the Company
and who own 13,254,187 Shares in the aggregate (representing approximately 47.7%
of the Shares outstanding on October 20, 1998) have (i) agreed to tender all
Shares covered by the Stockholders' Agreement into the Offer, (ii) vote their
Shares in favor of the Merger, and if necessary, to vote their Shares against
any competing merger or business combination proposal or any other proposal that
could impede the Merger, (iii) to not sell or transfer their Shares to anyone
other than to another Stockholder and (iv) to not solicit any Acquisition
Proposal (as defined in the Merger Agreement), (iv) granted to Purchaser an
irrevocable proxy to vote their Shares in accordance with the foregoing and (v)
granted to Purchaser an irrevocable option to purchase the Stockholders' Shares
for a cash purchase price per Share equal to the Per Share Amount, exercisable
in certain limited circumstances. See "The Stockholders' Agreement" under Item 3
above.
On October 13, 1998, Stuart S. Janney, III, a director of the Company,
exercised options to receive 843 Shares.
On October 14, 1998, Steven R. Abbott, an executive officer of the Company,
transferred by gift 45,000 Shares to his Grantor Retained Annuity Trust for
which he is the trustee.
To the knowledge of the Company, each of the Company's directors and
executive officers currently intend to tender all Shares over which they have
sole dispositive power into the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) AND (b). As described under Item 3 above, the Company has agreed in the
Merger Agreement not to engage in certain activities in connection with any
proposal to engage in a business combination with, or acquire an interest in or
assets of, the Company. See "The Merger Agreement--Takeover Proposals" in Item 3
above.
Except in accordance with the exercise of fiduciary duties as advised by
counsel as described under Item 3 hereof, the Company does not presently intend
to solicit, initiate or encourage (including by way of furnishing information),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined in "The Merger Agreement--Takeover Proposals"
in Item 3 above) or (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal. See "The Merger Agreement--Takeover
Proposals" in Item 3 above.
Except as described herein, there are no transactions, board resolutions,
agreements in principle or signed contracts in response to the Offer that relate
to or would result in one or more of the events referred to in the preceding
paragraph.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
See the Information Statement pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder, a copy of which is attached as Annex A to this
Statement.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
<TABLE>
<S> <C>
Exhibit 1: Agreement and Plan of Merger, dated as of October 21, 1998, among Superior
TeleCom Inc., SUT Acquisition Corp. and Essex International Inc.
(incorporated by reference to Exhibit (c)(1) of the Schedule 14D-1 of SUT
Acquisition Corp. and Superior TeleCom Inc. filed with the Securities and
Exchange Commission on October 28, 1998 (the "Schedule 14D-1")).
Exhibit 2: Stockholders' Agreement, dated as of October 21, 1998, among Parent and
each of the Stockholders (incorporated by reference to Exhibit (c)(2) of
the Schedule 14D-1).
Exhibit 3: Mutual Confidentiality Agreement between Essex Group, Inc. and Superior
TeleCom Inc. executed on April 24, 1998, including the extension letter
dated September 29, 1998.
Exhibit 4: Letter, dated October 21, 1998, from The Alpine Group, Inc. to Essex
International Inc.
Exhibit 5: Text of Joint Press Release, dated October 22, 1998, issued by Superior
TeleCom Inc. and Essex International Inc.
Exhibit 6: Form of letter to Stockholders of the Company, dated October 28, 1998.*
Exhibit 7: Opinion, dated October 21, 1998, of Goldman, Sachs & Co.*
Exhibit 8: Opinion, dated October 21, 1998, of Chase Securities Inc.*
</TABLE>
- ------------------------
* Included in copies of Schedule 14D-9 mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
ESSEX INTERNATIONAL INC.
By:/s/ STEVEN R. ABBOTT
------------------------------------
Name: Steven R. Abbott
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Dated: October 28, 1998
25
<PAGE>
ANNEX A
INFORMATION PROVIDED PURSUANT TO SECTION 14(f)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
GENERAL
This information is being furnished in connection with the designation by
SUT Acquisition Corp. (the "Purchaser"), pursuant to the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of October 21, 1998, by and among
Superior TeleCom Inc. ("Parent"), Purchaser and Essex International Inc. (the
"Company"), of persons to be elected to the Board of Directors of the Company
(the "Company Board") other than at a meeting of the shareholders of the
Company. The Merger Agreement is more fully described under Item 3 of the
Company's Schedule 14D-9 (the "Schedule 14D-9"), of which this Annex A is a
part. Capitalized terms used and not defined in this Annex A have the meanings
assigned to them in the Schedule 14D-9.
THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
by Purchaser for shares of common stock, par value $0.01 per share (the
"Shares"), of the Company purchased pursuant to the Offer, and from time to time
thereafter as Shares are acquired by Purchaser, Purchaser shall be entitled,
subject to compliance with Section 14(f) of the Exchange Act, to designate such
number of directors, rounded up to the next greatest whole number, on the
Company Board as will give Purchaser representation on the Company Board equal
to that number of directors that equals the product of the total number of
directors on the Company Board (giving effect to the directors appointed or
elected pursuant to this sentence and including current directors serving as
officers of the Company) multiplied by the percentage that the aggregate number
of Shares beneficially owned by Purchaser or any affiliate of Purchaser
(including such Shares as are accepted for payment pursuant to the Offer, but
excluding Shares held by the Company or any of its affiliates) bears to the
number of Shares outstanding; PROVIDED, HOWEVER, that in the event that
Purchaser's designees are appointed or elected to the Company Board, until the
Effective Time, the Company Board shall have at least one director who was a
director on October 21, 1998, and who is not an executive officer of the Company
(the "Independent Director"). At such time, the Company will also cause (i) each
committee of the Company Board, (ii) if requested by Purchaser, the board of
directors of each of the Company's subsidiaries and (iii) if requested by
Purchaser, each committee of such subsidiaries' boards to include persons
designated by Purchaser constituting the same percentage of each such committee
or board as Purchaser's designees are of the Company Board. The Merger Agreement
also provides that, subject to applicable law, the Company shall take all action
necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations described in this
paragraph, including the mailing of this information statement promptly after
commencement of the Offer. The Company has agreed in the Merger Agreement that,
upon request by Purchaser, it shall promptly increase the size of the Company
Board or exercise its best efforts to secure the resignations of such number of
directors as is necessary to enable Purchaser's designees to be elected to the
Company Board and shall cause Purchaser's designees to be so elected.
It is expected that on the date that Purchaser accepts for payment Shares
under the Offer and from time to time thereafter as Shares are acquired by
Purchaser, the Company will promptly take such other action as necessary to
enable the Purchaser Designees to be elected to the Company Board.
Set forth in the table below are the name, age, present principal occupation
or employment and business address for each of the persons who may be designated
by Purchaser as the Purchaser Designees.
A-1
<PAGE>
Unless otherwise indicated, the business address for each individual listed
below is 1790 Broadway, New York, NY 10019. Each of the individuals listed below
is a citizen of the United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME OF PURCHASER DESIGNEE AGE THE PAST FIVE YEARS
- ---------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Steven S. Elbaum........................ 49 Mr. Elbaum is the Chairman of the Board of Directors and Chief
Executive Officer of The Alpine Group, Inc. ("Alpine"), the
majority stockholder of Parent, and has been such since 1984. Mr.
Elbaum is also the Chairman of the Board of Directors, President
and Chief Executive Officer of Parent, and is the Chairman of the
Board of Directors of Cables of Zion United Works, Ltd., an
Israel-based, publicly traded wire and cable manufacturer and
Parent's 51% owned subsidiary, and PolyVision Corporation, an
information display company. Mr. Elbaum is also a director of, and
the Chairman of the Board of Directors, President and Chief
Executive Officer of Purchaser.
Bragi F. Schut.......................... 57 Mr. Schut is the Executive Vice President of Alpine and been such
since 1986. He is also a director of Alpine, Parent and Purchaser.
David S. Aldridge....................... 44 Mr. Aldridge is the Chief Financial Officer of Alpine and has been
its Chief Financial Officer since November 1993. He was appointed
Treasurer of Alpine in January 1994. Mr. Aldridge has been the
Chief Financial Officer and Treasurer of Parent since 1996. Prior
to 1994, he was Chief Financial Officer of Superior TeleTec Inc.,
until its merger with and into Alpine in November 1993. Mr.
Aldridge is also the Treasurer and a director of Purchaser.
</TABLE>
Any other officer of Parent or Purchaser listed in Schedule I to the Offer
to Purchase dated October 28, 1998, filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 of Parent and Purchaser may also be designated by
Purchaser as a Purchaser Designee. The information with respect to the Purchaser
Designees has been supplied by Purchaser for inclusion herein.
CERTAIN INFORMATION CONCERNING THE COMPANY
As of October 20, 1998, there were approximately 27,768,782 Shares
outstanding and approximately 29,915,710 Shares outstanding on a fully diluted
basis. Each Share that is outstanding as of the close of business on any
applicable record date for any matter to be acted upon by shareholders is
entitled to one vote on such matter. The Company Board consists of seven
members.
CURRENT MEMBERS OF THE COMPANY BOARD
To the extent that the Company Board will consist of persons who are not
among the Purchaser Designees, the Company Board is expected to consist of
persons who are currently directors of the Company who have not resigned.
A-2
<PAGE>
The following table sets forth as to each director, his age, year first
elected a director and business experience. This information was provided to the
Company by the respective director.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AGE DIRECTOR BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS
- --------------------------- --- ----------- -------------------------------------------------------------------
<S> <C> <C> <C>
Steven R. Abbott........... 51 1996 Mr. Abbott is Chairman of the Company Board. Mr. Abbott was
appointed President and Chief Executive Officer of the Company and
Essex Group, Inc. ("Essex") in February 1996. He was President of
the Wire and Cable Sector of Essex from September 1995 to February
1996 and President of the Wire and Cable Division of Essex from
September 1993 to September 1995. Mr. Abbott was President of the
Magnet Wire and Insulation Division from 1987 to 1993 and has been
employed by Essex since 1967. Mr. Abbott is a Class C director
whose term will expire at the Company's annual meeting of
stockholders to be held in the year 2000.
W.L. Lyons Brown, Jr....... 62 1997 Mr. Brown served as Chairman of the Board of Brown-Forman
Corporation ("Brown-Forman"), a diversified producer and marketer
of fine consumer products, until his retirement in 1995 and
remained a director thereof until 1996. He served as Chief
Executive Officer of Brown-Forman from 1975 until 1993. Mr. Brown
is a director of the Pennzoil Company and Westvaco Corporation. He
is also Chairman of the Board of Trustees of the Winterthur Museum
and is a member of the Board of Trustees of the World Monuments
Fund as well as the Alumni Board of Trustees of the University of
Virginia Endowment Fund. Mr. Brown from time to time consults with
the BH Group (defined below), for which he does not receive any
consideration, with respect to potential investment opportunities
and is also an investor in other companies owned by the BH Group.
Mr. Brown is a Class C director whose term will expire at the
Company's annual meeting of stockholders to be held in the year
2000.
Rodney A. Cohen............ 36 1996 Mr. Cohen is the sole shareholder and president of a corporation
that is a manager of the limited liability company that is the
general partner of Bessemer Holdings, L.P. ("BHLP") and Bessec
Holdings, L.P. ("Bessec", and together with BHLP, the "BH Group")
and certain affiliated investment partnerships. From July 1993 to
December 1997, Mr. Cohen was a principal, and since January 1998
Mr. Cohen has been the sole shareholder of a corporation that is a
general partner, of a partnership affiliated with the BH Group, to
which Essex and the Company paid the fees described in "Certain
Relationships and Related Transactions--Advisory Services." Mr.
Cohen is a director of a number of private companies. Mr. Cohen is
a Class A director whose term will expire at the Company's annual
meeting of stockholders to be held in 2001.
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AGE DIRECTOR BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS
- --------------------------- --- ----------- -------------------------------------------------------------------
<S> <C> <C> <C>
Edward O. Gaylord.......... 66 1997 Mr. Gaylord has served as the Chairman of the Board of EOTT Energy
Corp., an oil trading and transportation firm, since January 1993
and also operates Gaylord & Company, a private venture capital firm
based in Houston, Texas. Mr. Gaylord is a director of the Houston
Branch of the Federal Reserve Bank of Dallas, Imperial Holly
Corporation, Kinder Morgan G.P. Inc., Seneca Foods Corporation and
the National Museum of Natural History, Smithsonian Institution,
and a trustee of MD Anderson Hospital, Baylor College of Medicine
and the Houston Ballet. Mr. Gaylord is a Class C director whose
term will expire at the Company's annual meeting of stockholders to
be held in the year 2000.
Stuart S. Janney, III...... 50 1997 Mr. Janney was elected in January 1995 as Chairman of the Board of
Directors of Bessemer Securities Corporation ("BSC"), The Bessemer
Group Incorporated, Bessemer Trust Company, N.A. and Bessemer Trust
Company of Florida. He was elected Chairman of the Board of
Managers of Bessemer Securities LLC ("BSLLC") in June 1996. BSLLC
is a principal limited partner in one of, and BSC is a principal
limited partner in, the partnerships comprising the BH Group. Prior
to January 1995, Mr. Janney was with Alex. Brown & Sons
Incorporated, where he spent nine years, most recently as Managing
Director and head of asset management. Mr. Janney is a director of
a number of other private companies, foundations and institutions.
Mr. Janney is a Class A director whose term will expire at the
Company's annual meeting of stockholders to be held in 2001.
Robert D. Lindsay.......... 43 1992 Mr. Lindsay is the sole shareholder and president of a corporation
that is a principal manager of the limited liability company that
is the general partner of the partnerships comprising the BH Group
and certain affiliated investment partnerships. He is also the sole
shareholder of a corporation that is a managing general partner of
the partnership affiliated with BH Group to which the Company paid
the fees described in "Certain Relationships and Related
Transactions--Advisory Services." Mr. Lindsay is a director of
several private companies. Mr. Lindsay is a Class B director whose
term will expire at the Company's annual meeting of stockholders to
be held in 1999.
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AGE DIRECTOR BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS
- --------------------------- --- ----------- -------------------------------------------------------------------
<S> <C> <C> <C>
Ward W. Woods.............. 56 1992 Mr. Woods is the sole shareholder and president of a corporation
that is a principal manager of the limited liability company that
is general partner of each of the partnerships comprising the BH
Group and certain affiliated investment partnerships. He is also
the sole shareholder of a corporation that is a managing general
partner of the partnership affiliated with BH Group to which the
Company paid the fees described in "Certain Relationships and
Related Transactions--Advisory Services." Mr. Woods is President
and Chief Executive Officer of BSLLC and BSC. He is a director of
Boise Cascade Corporation, Kelley Oil & Gas Corporation and several
private companies. Mr. Woods is a Class B director whose term will
expire at the Company's annual meeting of stockholders to be held
in 1999.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes thereto set forth information regarding
the beneficial ownership of common stock of the Company ("Common Stock") as of
October 20, 1998 by (a) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Shares, (b) each of the Company's
directors, (c) each named executive officer and (d) all directors and executive
officers of the Company as a group. Unless otherwise noted in the footnotes, the
persons named in the table have sole voting and investment power with respect to
all Shares indicated as beneficially owned by them.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED(A)
--------------------------------
<S> <C> <C>
PERCENT
NAME NUMBER OF SHARES OWNERSHIP
- ---------------------------------------------------------------------------------- ----------------- -------------
Steven R. Abbott(b)(c)(d)......................................................... 491,000 1.7
W.L. Lyons Brown, Jr.(e).......................................................... 9,520 *
Rodney A. Cohen(f)(g)............................................................. 64,913 *
Robert J. Faucher(b)(c)(h)........................................................ 220,000 *
Edward O. Gaylord(i).............................................................. 2,843 *
Stuart S. Janney, III(j).......................................................... 843 *
Robert D. Lindsay(f)(k)........................................................... 622,326 2.2
Charles W. McGregor(b)(c)(l)...................................................... 73,623 *
David A. Owen(b)(c)(m)............................................................ 145,914 *
Gregory R. Schriefer(c)(n)........................................................ 69,046 *
Ward W. Woods(f)(o)............................................................... 999,746 3.6
All directors and executive officers as a group (14 persons(p))................... 14,414,440 50.5
Bessemer Holdings, L.P.(q)(r)(s).................................................. 11,547,231 41.6
</TABLE>
- ------------------------
* Represents holdings of less than one percent.
(a) At October 20, 1998 there were 27,768,782 Shares outstanding, excluding
2,146,928 Shares underlying Options (as defined in "Board and Committee
Meetings"). Percentages have been calculated assuming, in the case of each
person or group listed, the exercise of all Options owned (that are
exercisable within sixty days following October 20, 1998) by each such
person or group, respectively, but not the exercise of any Options owned by
any other person or group.
A-5
<PAGE>
(b) Pursuant to the terms of certain option agreements, the aggregate number of
shares issuable upon exercise of certain Options can be reduced. See
"Executive Compensation--Stock Option Plan".
(c) The address for each of these beneficial owners is c/o Essex International
Inc., 1601 Wall Street, Fort Wayne, IN 46802.
(d) Includes 334,000 Shares issuable upon exercise of Options held by Mr.
Abbott, 136,500 of which, pursuant to the applicable option agreement, may
be reduced to 88,076 Shares.
(e) The address of Mr. Brown is 501 Fourth Avenue, Louisville, KY 40202.
Includes 918 Shares issuable upon exercise of Options held by Mr. Brown.
(f) The address for each of these directors is c/o Bessemer Partners & Co., 630
Fifth Avenue, New York, NY 10111.
(g) All these shares are held for the benefit of Mr. Cohen and his family by
entities controlled by Mr. Cohen. Includes 843 Shares issuable upon exercise
of Options held by Mr. Cohen.
(h) Includes 185,000 Shares issuable upon exercise of Options held by Mr.
Faucher, 72,500 of which, pursuant to the applicable option agreement, may
be reduced to 45,598 Shares.
(i) The address for Mr. Gaylord is 5851 San Felipe, Suite 900, Houston, TX
77057. Includes 843 Shares issuable upon exercise of Options held by Mr.
Gaylord.
(j) The address for Mr. Janney is c/o BSLLC, 630 Fifth Avenue, New York, NY
10111.
(k) Includes 506,041 Shares held for the benefit of Mr. Lindsay and his family
by entities controlled by Mr. Lindsay. Includes 843 Shares issuable upon
exercise of Options held by Mr. Lindsay.
(l) Includes 35,250 Shares issuable upon exercise of Options held by Mr.
McGregor, 22,750 of which, pursuant to the applicable option agreement, may
be reduced to 14,438 Shares.
(m) Includes 103,500 Shares issuable upon exercise of Options held by Mr. Owen,
26,000 of which, pursuant to the applicable option agreement, may be reduced
to 16,420 Shares.
(n) Includes 31,250 Shares issuable upon exercise of Options held by Mr.
Schriefer.
(o) Includes 783,332 Shares held for the benefit of Mr. Woods and his family by
entities controlled by Mr. Woods. Includes 843 Shares issuable upon exercise
of Options held by Mr. Woods.
(p) Consists of the 11,547,231 Shares owned or controlled by the BH Group, that,
together with the shares described below, may be deemed to be beneficially
owned by Messrs. Woods, Lindsay and Cohen (which beneficial ownership is
disclaimed by Messrs. Woods, Lindsay and Cohen--see footnote (q) below),
384,318 Shares owned by the executive officers of the Company, 1,695,901
Shares owned by the directors of the Company (other than Mr. Abbott),
782,700 Shares issuable to the executive officers of the Company upon
exercise of Options that, pursuant to the applicable option agreements, may
be reduced to 681,320 Shares and 4,290 Shares issuable to the directors upon
exercise of Options.
(q) BHLP is a limited partnership the only activity of which is to make private
structured investments. The primary limited partner of BHLP is BSC. Each of
Messrs. Woods, Lindsay and Cohen, directors of the Company, and Mr. Adam P.
Godfrey, is a sole shareholder of a corporation that is a manager and
controls a family partnership or corporation that is a member of the limited
liability company that is the sole general partner of BHLP. That limited
liability company is also the sole general partner of Bessec, a limited
partnership that holds 230,328 additional Shares. Mr. Janney is Chairman of
the Board of BSC and of BSLLC. BSC is a principal limited partner of BHLP
and Bessec and is a wholly owned subsidiary of BSLLC. BSLLC is a principal
limited partner of Bessec. In addition, Messrs. Woods, Lindsay, Cohen and
Godfrey are the sole shareholders of the corporations that are the general
partners of the partnership affiliated with BHLP to which the Company paid
the fees described in "Certain Relationships and Related
Transactions--Advisory Services." Mr. Woods is the President and Chief
Executive Officer of BSLLC and BSC. Each of Messrs. Woods, Lindsay, Cohen
and Godfrey disclaims beneficial ownership of the Shares owned or controlled
by BHLP or Bessec.
(r) The share ownership figure for BHLP includes 230,328 Shares owned by Bessec.
(s) The address for BHLP and Bessec is 630 Fifth Avenue, 39th Floor, New York,
NY 10111.
A-6
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY AND OTHER BUSINESS EXPERIENCE
- --------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
Steven R. Abbott........... 51 See biography in "Current Members of the Company Board."
Robert J. Faucher.......... 54 Mr. Faucher was appointed Executive Vice President of the Company in March
1997. He was appointed Executive Vice President of Essex in September 1995. Mr.
Faucher was President of the Engineered Products Division of Essex from January
1992 to September 1995. Mr. Faucher joined Essex in 1985 as Vice President,
Planning.
Dominic A. Lucenta......... 45 Mr. Lucenta was appointed Senior Vice President of the Company in March 1997.
He was appointed Senior Vice President in charge of Human Resources of Essex in
April 1994. From October 1992 to April 1994 he was Vice President of Human
Resources. Mr. Lucenta joined Essex in 1979.
Charles W. McGregor........ 56 Mr. McGregor was appointed Executive Vice President of the Company in March
1997. He was appointed Executive Vice President of Essex in October 1996. Mr.
McGregor was President of the Magnet Wire and Insulation Sector of Essex from
September 1995 to October 1996. He was President of the Magnet Wire and
Insulation Division of Essex from September 1993 to September 1995. Mr.
McGregor joined Essex in 1970.
Debra F. Minott............ 42 Ms. Minott was appointed Senior Vice President of the Company in March 1997 and
was appointed Vice President, General Counsel and Secretary of the Company in
April 1995. She was appointed Senior Vice President and General Counsel of
Essex in October 1994 and was appointed Secretary of Essex in April 1995. Ms.
Minott joined Essex in 1994. From September 1983 to October 1994, Ms. Minott
held various legal positions at Eli Lilly & Company.
Curtis A. Norton........... 53 Mr. Norton was appointed Senior Vice President of the Company in March 1997. He
was appointed Senior Vice President in charge of Corporate Support Operations
of Essex in April 1996. Mr. Norton was Vice President of Corporate Support
Operations from September 1995 to April 1996. He was Vice President of
Purchasing from April 1994 to September 1995 and Director of Purchasing from
1989 to 1994. Mr. Norton joined Essex in 1981.
David A. Owen.............. 52 Mr. Owen was appointed Executive Vice President of the Company in March 1997.
He was appointed Vice President, Treasurer and Chief Financial Officer of the
Company in March 1993. Mr. Owen was appointed Executive Vice President and
Chief Financial Officer of Essex in March 1994. He was appointed Vice
President--Finance and Chief Financial Officer of Essex in March 1993. Mr. Owen
joined Essex in 1976.
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY AND OTHER BUSINESS EXPERIENCE
- --------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
Gregory R. Schriefer....... 46 Mr. Schriefer was appointed Executive Vice President of the Company in March
1997. He was appointed Executive Vice President of Essex in October 1996. Mr.
Schriefer was Vice President and General Manager of Building Wire Products of
Essex from September 1995 to October 1996 and was Vice President, Manufacturing
of the Wire and Cable Division from April 1994 to September 1995. Mr. Schriefer
has been employed in various positions with the Company since 1981.
</TABLE>
Each executive officer of the Company serves at the pleasure of the Company
Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADVISORY SERVICES
The Company incurred advisory fees of approximately $1.0 million for each
year during the three-year period ending December 31, 1997 and $750,000 to date
in 1998, payable to an advisory partnership that is an affiliate of the BH
Group. Pursuant to an advisory services agreement among the Company, Essex and
the advisory partnership, Essex agreed to pay such affiliate an annual advisory
fee of $1.0 million. The agreement is terminable by any party on 30 days prior
notice to the other parties. See footnote (q) of "Security Ownership of Certain
Beneficial Owners and Management" for a description of the relationship of
Messrs. Cohen, Lindsay and Woods, directors of the Company, to BH Group. By
letter dated October 21, 1998, the Company and Essex have informed the advisory
partnership that the advisory services agreement will be terminated on the date
upon which Purchaser first accepts for payment Shares pursuant to the Offer.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent (10%) of the
Shares, to file with the Commission and the New York Stock Exchange ("NYSE"),
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Shares. Such persons are required by regulations of the Exchange
Act to furnish the Company with copies of all Section 16(a) forms they file. To
the Company's knowledge, based solely on a review of the reports and
representations furnished to the Company during the last fiscal year, the
Company believes that each of the persons required to file reports under Section
16(a) of the Exchange Act is in compliance with all applicable filing
requirements, except that the Form 3, Initial Statements of Beneficial
Ownership, for the executive officers, directors, and ten percent shareholders,
filed at the time of the Company's initial public offering in April 1997, were
on average filed nine days after the effective date of the applicable
Registration Statement. Also, the Form 3's for directors W.L.L. Brown and E.O.
Gaylord, who joined the Company Board on May 22, 1997, were inadvertently not
filed. Proper disclosure was made of that fact on the Form 5's filed for Mr.
Brown and Mr. Gaylord in February 1998. All acquisitions and dispositions of
Shares and derivative securities were properly reported.
BOARD AND COMMITTEE MEETINGS
The Company Board held five meetings during 1997. There are also four
committees of the Company Board, the functions of each of which are more fully
described below.
The Executive Committee has all powers and rights necessary to exercise the
full authority of the Company Board in the management of the business and
affairs of the Company when necessary in between meetings of the Company Board.
The Executive Committee did not meet during 1997 but approved various actions
pursuant to written consents. The current members of the Executive Committee are
Messrs. Abbott, Lindsay and Woods.
A-8
<PAGE>
The Compensation Committee has the responsibility of reviewing the
performance of the executive officers of the Company (other than the Chief
Executive Officer) and approving annual salary and bonus amounts for executive
officers of the Company (other than the Chief Executive Officer), based in part
on the recommendation of the Chief Executive Officer. The Compensation Committee
may also make recommendations to the Stock Option Committee concerning awards of
options to purchase Shares ("Options") to employees of the Company, including
awards to executive officers. The Compensation Committee held two meetings
during 1997. The current members of the Compensation Committee are Messrs.
Brown, Cohen, Lindsay and Woods.
The Stock Option Committee has the responsibility of (i) reviewing
recommendations of the Compensation Committee for the award of Options and (ii)
approving the award of Options. The Stock Option Committee also reviews the
performance of the Chief Executive Officer and sets annual salary and bonus
amounts for the Chief Executive Officer. The Stock Option Committee consists of
at least two directors who are "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended. The Stock Option
Committee did not meet during 1997. The current members of the Stock Option
Committee are Messrs. Brown, Gaylord and Janney.
The Audit Committee has the responsibility of reviewing and supervising the
financial controls of the Company. The Audit Committee's responsibilities
include (i) making recommendations to the Company Board with respect to the
Company's financial statements and the appointment of independent auditors, (ii)
reviewing significant audit and accounting policies and practices of the
Company, (iii) meeting with the Company's independent auditors concerning, among
other things, the scope of audits and reports and (iv) reviewing the performance
of overall accounting and financial controls of the Company. The Audit Committee
held two meetings during 1997. The current members of the Audit Committee are
Messrs. Brown, Gaylord and Janney.
The Company has no standing Nomination Committee.
During 1997, each member of the Company Board attended at least 75% of the
meetings of the Company Board and any committees on which he served that were
held during the time he served.
EXECUTIVE COMPENSATION
The Company, as a holding company with no business operations of its own,
conducts its business through Essex. The executive officers of the Company
receive no compensation for their services to the Company. Accordingly, the
following tables present certain information concerning compensation paid or
accrued for services rendered to the Company and to Essex in all capacities
during the three years ended December 31, 1997 for the Chief Executive Officer
and the four other most highly compensated executive officers of Essex.
A-9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
----------------------------
ANNUAL COMPENSATION NUMBER OF
SECURITIES
-------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(A)
- ----------------------------------------------------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Steven R. Abbott(b).................................. 1997 519,830 780,000 50,000 44,930
President and Chief 1996 287,993 600,000 125,000 27,531
Executive Officer 1995 193,757 250,000 37,500 12,999
Charles W. McGregor.................................. 1997 212,366 325,000 15,000 17,642
Executive Vice President 1996 167,001 275,000 40,000 11,356
1995 157,503 210,000 32,500 9,684
David A. Owen........................................ 1997 212,116 325,000 15,000 12,008
Executive Vice President and 1996 167,001 250,000 37,500 9,195
Chief Financial Officer 1995 157,503 185,000 25,000 8,120
Robert J. Faucher.................................... 1997 212,116 325,000 15,000 16,522
Executive Vice President 1996 167,001 250,000 50,000 11,972
1995 157,503 175,000 25,000 11,356
Gregory R. Schriefer................................. 1997 190,696 325,000 15,000 16,622
Executive Vice President 1996 129,510 225,000 57,500 11,062
</TABLE>
- ------------------------
(a) All Other Compensation in fiscal 1997 consists of Essex contributions to the
defined contribution and deferred compensation plans on behalf of the named
executive officer and imputed income on excess Essex-paid life insurance
premiums. The following table identifies and quantifies these amounts for
the named executive officers:
<TABLE>
<CAPTION>
S.R. C.W. D.A. R.J. G.R.
ABBOTT MCGREGOR OWEN FAUCHER SCHRIEFER
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Company matching under the defined contribution and
deferred compensation plans............................. $ 38,995 $ 13,895 $ 9,753 $ 14,368 $ 15,471
Imputed income on excess life insurance premiums.......... 5,935 3,747 2,255 2,154 1,151
--------- ----------- --------- --------- ---------
Total..................................................... $ 44,930 $ 17,642 $ 12,008 $ 16,522 $ 16,622
--------- ----------- --------- --------- ---------
--------- ----------- --------- --------- ---------
</TABLE>
- ------------------------
(b) Mr. Abbott was appointed Chief Executive Officer of the Company and of Essex
in February 1996.
A-10
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/SARS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS/SARS EMPLOYEES OR BASE OPTION TERM(B)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#)(A) YEAR 1997 ($/SH) DATE 5% ($) 10%($)
- --------------------------------------------- ------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven R. Abbott............................. 50,000 16.0 32.21 1/20/08 1,013,000 2,566,500
Charles W. McGregor.......................... 15,000 4.8 32.21 1/20/08 303,900 769,950
David A. Owen................................ 15,000 4.8 32.21 1/20/08 303,900 769,950
Robert J. Faucher............................ 15,000 4.8 32.21 1/20/08 303,900 769,950
Gregory R. Schriefer......................... 15,000 4.8 32.21 1/20/08 303,900 769,950
</TABLE>
- ------------------------
(a) The Options were granted on January 20, 1998 with one-third of the grant
becoming exercisable each year on January 20 for three years.
(b) The potential realizable value assumes a per-share market price at the time
of the grant to be approximately $32.21 with an assumed rate of appreciation
of 5% and 10%, respectively, compounded annually for 10 years. These values
are provided pursuant to the rules and regulations of the Commission. No
assurance can be given as to the appreciation, if any, of the Shares.
The following table details the December 31, 1997, year-end estimated value
of each named executive officer's unexercised Options. All unexercised Options
are to purchase the number of Shares indicated, although the Company Board may
require that, in lieu of the exercise of any Roll-over Options (as defined under
"--Stock Option Plan"), such Options be surrendered without payment of the
exercise price, in which case the number of shares issuable upon exercise of
such Roll-over Options shall be reduced by the quotient of (A) the aggregate
exercise price otherwise payable upon such exercise and (B) the amount paid for
each Share in the 1992 acquisition of the Company by the BH Group, certain of
its affiliates and certain other parties (the "Acquisition"), in each case as
adjusted for any stock splits or other similar corporate transactions. See
"--Stock Option Plan".
A-11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT YEAR-END ($)
YEAR-END (#) EXERCISABLE
SHARES EXERCISABLE (E)/ (E)/
ACQUIRED ON VALUE UNEXERCISABLE UNEXCERCISABLE
NAME EXERCISE(#) REALIZED($) (U)(A) (U)(B)
- -------------------------------------------------------- ------------- ----------- ------------------- ---------------
<S> <C> <C> <C> <C>
Steven R. Abbott........................................ -- -- 334,000(E) 37,500(U)
7,995,050(E) 901,125(U)
Charles W. McGregor..................................... -- -- 125,250(E) 32,500(U)
2,921,188(E) 780,975(U)
David A. Owen........................................... -- -- 126,000(E) 25,000(U)
2,961,250(E) 600,750(U)
Robert J. Faucher....................................... -- -- 185,000(E) 25,000(U)
4,492,500(E) 600,750(U)
Gregory R. Schriefer.................................... 6,428 $ 64,280 36,250(E) 31,250(U)
731,988(E) 643,938(U)
</TABLE>
- ------------------------
(a) The Options granted in 1997 became exercisable on January 30, 1998. The
Options granted in 1996 become exercisable three years from the date of
grant. All other Options granted prior to those issued in 1996 are currently
exercisable.
(b) The estimated value of in-the-money stock options held at the end of 1997 is
based on the closing price of $29.75 of the Common Stock on December 31,
1997.
PENSION PLANS
Essex provides benefits under a defined benefit pension plan (the "Pension
Plan") and a supplemental executive retirement plan (the "SERP"). The following
table illustrates the estimated annual normal retirement benefits at age 65 that
will be payable under the Pension Plan and SERP.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
125,000.............................................. $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000.............................................. 33,750 45,000 56,250 67,500 78,750
175,000.............................................. 39,375 52,500 65,625 78,750 91,875
200,000.............................................. 45,000 60,000 75,000 90,000 105,000
225,000.............................................. 50,625 67,500 84,375 101,250 118,125
250,000.............................................. 56,250 75,000 93,750 112,500 131,250
300,000.............................................. 87,500 90,000 112,500 135,000 157,500
400,000.............................................. 90,000 120,000 150,000 180,000 210,000
450,000.............................................. 101,250 135,000 168,750 202,500 236,250
500,000.............................................. 112,500 150,000 187,500 225,000 262,500
</TABLE>
A-12
<PAGE>
The remuneration utilized in calculating the benefits payable under the
Pension Plan and the SERP is the compensation reported in the Summary
Compensation Table under the captions Salary and Bonus. The formula utilizes the
remuneration for the five consecutive plan years within the ten completed
calendar years preceding the participant's retirement date that produces the
highest final average earnings.
As of December 31, 1997, the years of credited service under the Pension
Plan for each of the executive officers named in the Summary Compensation Table
were as follows: Mr. Abbott, twenty-eight years and seven months; Mr. Owen,
twenty-one years and nine months; Mr. McGregor, twenty-seven years and eleven
months; Mr. Faucher, twenty-five years and six months; and Mr. Schriefer,
sixteen years and three months.
The benefits listed in the Pension Plan Table are based on the formula in
the Pension Plan using a straight-life annuity and are subject to an offset of
50% of the participant's annual unreduced Primary Insurance Amount under Social
Security. In addition, benefits for credited service for years prior to 1974 are
calculated using the formula in effect at that time and would reflect a lesser
benefit than outlined in the Pension Plan Table for those years. Benefits under
the Pension Plan are also offset by benefits to which the participant is
entitled under any defined benefit plan of United Technologies Corporation (a
predecessor corporation of Essex) (other than accrued benefits transferred to
the Pension Plan).
STOCK OPTION PLAN
Grants of Options have been made to management and employees of the Company
(including executive officers) pursuant to, and are subject to the provisions
of, the Company's Amended and Restated Stock Option Plan (the "Stock Option
Plan"), and individual stock option agreements. Options granted pursuant to the
Stock Option Plan prior to January 1, 1997 are exercisable: (i) in full, upon
the third anniversary of the grant of the Options; (ii) in full, upon the death,
retirement or disability of the optionee; (iii) in part, upon the occurrence of
a Company Sale (as defined below), in which case the Option becomes exercisable
in a portion equal to the percentage of the Company's then outstanding voting
stock transferred pursuant to the transactions constituting the Company Sale;
and (iv) in part, upon the sale by the BH Group or its affiliates of 25% or more
of the then outstanding Shares, in which case the Option becomes exercisable in
a portion equal to the percentage of the then outstanding Shares sold by the BH
Group or its affiliates pursuant to the sale. Options granted on January 30,
1997 pursuant to the Stock Option Plan are exercisable: (i) in full, upon the
first anniversary of the grant of the Options and (ii) in full or in part, as
described in clauses (ii), (iii) and (iv) of the prior sentence. Options granted
after January 30, 1997 pursuant to the Stock Option Plan will be exercisable:
(i) in full, upon the third anniversary of the grant of the Options, provided
that during the second year the Option is outstanding it may be exercised as to
not more than one- third ( 1/3) of the total number of shares covered by the
Option and during the third year the Option is outstanding it may be exercised
as to, cumulatively, not more than two-thirds ( 2/3) of the total number of
shares covered by the Option, (ii) in full, upon the death, retirement or
disability of the optionee and (iii) in full upon the occurrence of a
Change-in-Control (as defined below).
Options granted pursuant to the Stock Option Plan are generally not
transferable. For the purposes of the Stock Option Plan, a "Company Sale" is
deemed to have occurred if any person (other than the BH Group and its
affiliates) becomes the beneficial owner of 50% or more of the combined voting
power of the Company's securities or acquires substantially all the assets of
the Company or Essex. For the purposes of the Stock Option Plan,
"Change-in-Control" has the same meaning as under the Termination Benefits
Agreements (as defined under "--Termination Benefits Agreements").
The Company Board may require that upon presentment for exercise, certain
Options granted pursuant to the Stock Option Plan in connection with the
Acquisition (the "Roll-over Options") be surrendered and canceled without
payment of the exercise price. In this event, the optionee is entitled to
receive a number of Shares equal to the number specified in the grant, reduced
by the quotient of (A) the aggregate exercise price otherwise payable upon such
exercise divided by (B) the amount paid for each
A-13
<PAGE>
Share in the Acquisition, in each case as adjusted for any stock splits or other
similar corporate transactions (the "Cut Back").
In the event of a reorganization, recapitalization, merger, consolidation,
acquisition of property or stock, or any other event similarly affecting the
Company, the Company Board may, but is not obligated to, provide that
outstanding Options granted under the Stock Option Plan shall be canceled in
respect of a cash payment or the payment of securities or property, or any
combination thereof, with a per Share value determined by the Company Board in
good faith equal to the value received by the stockholders of the Company in
such event in respect of each Share, with appropriate deductions of exercise
prices. In the case of Roll-over Options, cancellation and calculation of per
Share value in accordance with the preceding sentence is determined without
taking into account any Cut Back that would have occurred if the Roll-over
Option had been presented for exercise rather than canceled as described in the
preceding sentence.
As a result of the Offer and in accordance with the Merger Agreement, the
Company Board will cancel, as of and contingent upon, the consummation of the
Offer, all outstanding Options granted under the Stock Option Plan and each
holder of an Option granted under such plan shall be entitled to receive in
respect of each Option, a cash payment equal to the product of (x) the number of
Shares underlying such Option and (y) the excess of (1) the Per Share Amount
over (2) the per share exercise price of the Option.
TERMINATION BENEFITS AGREEMENTS
The Company has entered into agreements dated as of April 11, 1997 (each a
"Termination Benefits Agreement"), with each of Messrs. Abbott, Faucher,
Lucenta, McGregor, Norton, Owen and Schriefer and with Ms. Minott (each an
"Executive") providing for certain benefits (the "Termination Benefits") if the
Executive's employment is terminated by the Company or by the Company's
successor following a Change-in-Control (as defined below) other than
termination (a) by reason of the Executive's death, (b) by reason of the
Executive's "disability" (as defined therein), (c) as a result of reaching the
retirement age of 65 or (d) for "cause" (as defined therein).
The Company is also obligated to pay Termination Benefits if, following a
Change-in-Control during the term of the agreement, the Executive terminates his
or her employment for "good reason." Good reason includes: (i) the assignment of
duties that are materially inconsistent with the Executive's duties prior to the
Change-in-Control; (ii) a reduction in the Executive's annual salary from that
in effect immediately prior to the Change-in-Control; (iii) failure to maintain
incentive compensation programs for such Executive; (iv) failure to maintain
benefit programs for such Executive; (v) the relocation of the Executive's place
of employment to a place other than the metropolitan area of the Company office
where the Executive was located immediately prior to the Change-in-Control,
except for required travel on the Company's business in accordance with past
practice; (vi) the failure by the Company to obtain an agreement from any
successor to assume and agree to perform the Company's obligations under the
applicable Termination Benefits Agreement; (vii) failure to reappoint the
Executive to the corporate offices held immediately prior to the
Change-in-Control; (viii) a request by the Company, or the person obtaining
control of the Company in a Change-in- Control, for the resignation of the
Executive; (ix) if terminated, failure to terminate the Executive's employment
in accordance with the applicable Termination Benefits Agreement; and (x) breach
by the Company of any provision of the applicable Termination Benefits
Agreement.
The Termination Benefits consist of a payment from the Company to the
Executive of a multiple of the Executive's annual base salary and incentive
compensation bonus paid within the 12 months preceding the Change-in-Control.
The multiples are as follows: Mr. Abbott three times; and for the remaining
named Executives, two times. Each Termination Benefits Agreement runs for a
two-year term that automatically extends for one additional year prior to the
start of the second year of the term until notice that the term will not be
extended is provided to the other party prior to the start of the second year.
Notwithstanding
A-14
<PAGE>
the prior sentence, the term of each Termination Benefits Agreement will run for
two years from the time of any Change-in-Control during the term of the
Agreement.
The Termination Benefits Agreements provide that the applicable Executive
will keep confidential all confidential information of the Company and will not,
during the two years following the Executive's termination, solicit any employee
of the Company to leave the Company's employment.
For the purposes of the Termination Benefits Agreements, "Change-in-Control"
means the occurrence of any of the following during the term of the agreement;
(a) any person other than the BH Group and its affiliates acquires 35% or more
of the voting power or common stock of the Company (other than by an acquisition
from or by the Company or any employee benefit plan sponsored by the Company or
any Permitted Reorganization (as defined below)) and owns a greater percentage
of the voting power or Common Stock of the Company than does the BH Group and
its affiliates; (b) a change in the Company Board occurs with the result that
the members of the Company Board on April 11, 1997 (the "Incumbent Directors")
no longer constitute a majority of the Company Board, provided that any person
becoming a director (other than a director whose initial assumption of office
occurs as a result of either an actual or threatened election contest or other
threatened solicitation of proxies or consents by or on behalf of a person other
than the Company Board) whose election or nomination for election was supported
by a majority of the then Incumbent Directors shall be considered an Incumbent
Director for purposes hereof; (c) the stockholders of the Company approve a
reorganization, merger or consolidation of the Company, unless following such
transaction, (i) more than 50% of the voting power and common stock of the
surviving entity is beneficially owned by the prior stockholders of the Company,
in substantially the same proportions as before the transaction, (ii) at least a
majority of the Board of Directors of the surviving entity were members of the
Incumbent Board prior to such transaction and (iii) no person other than the BH
Group and its affiliates acquires 35% or more of the voting power or Shares of
the Company and a greater percentage of the voting power or Shares of the
Company than has the BH Group and its affiliates (a transaction complying with
the requirements of this clause (c) is referred to herein as a "Permitted
Reorganization"); or (d) the stockholders of the Company approve the sale of all
or substantially all of the property or assets of the Company other than in a
Permitted Reorganization.
Upon successful completion of the Offer, a Change-in-Control will have
occurred.
COMPENSATION OF DIRECTORS
Nonemployee directors are paid an annual stipend of $25,000 per director per
year plus $1,000 for attendance at each meeting of the Company Board or any
committee thereof, plus reimbursement of reasonable out-of-pocket expenses
("Expenses") incidental to attendance at such meetings. Nonemployee directors
can elect to receive up to all of their yearly director's compensation
(excluding reimbursement of Expenses) in the form of Options. See "--Directors'
Stock Option Plan."
DIRECTORS' STOCK OPTION PLAN
On July 22, 1997, the Company Board approved, and on April 29, 1998 the
Company's stockholders approved, the 1997 Stock Option Plan for Nonemployee
Directors (the "Directors' Stock Option Plan"), and the issuance of up to
100,000 Shares pursuant to grants thereunder.
The purpose of the Directors' Stock Option Plan is to encourage ownership of
Company Common Stock by Company directors who are not employees of the Company.
The Directors' Stock Option Plan is administered by the Compensation
Committee of the Company Board (the "Compensation Committee"). Participation is
limited to Company Board members who are not employees of the Company or any of
its subsidiaries. The maximum number of Shares that may be issued pursuant to
Options granted under the Directors' Stock Option Plan is 100,000, subject to
adjustment for any stock splits or other similar corporate transactions. If
Options granted pursuant to the Directors' Stock
A-15
<PAGE>
Option Plan expire or are terminated without having been exercised in full,
shares underlying such Options will be available for future grants under the
Directors' Stock Option Plan. Options are granted to each participating director
on December 31 of each year.
The number of Shares subject to an individual Option granted under the
Directors' Stock Option Plan is equal to the Elected Portion of Directors
Compensation (as defined below) divided by the Fair Market Value Spread (as
defined below), rounded to the nearest share. "Elected Portion of Directors'
Compensation" means the portion up to one hundred percent of yearly directors'
compensation (annual retainer and meeting fees, in each case exclusive of
reimbursement of expenses) elected to be received by such director in the form
of Options. "Fair Market Value Spread" means (i) the average of the high and low
price for a Share on February 14, May 15, August 15 and November 15 for each
applicable year (or for 1997, on October 31, as reported on the NYSE Composite
Transaction Tape, or if no trading occurs on any such date, on the immediately
preceding date when trading is reported), minus (ii) the exercise price.
The Options granted under the Directors' Stock Option Plan are governed by
individual stock option agreements and the terms set forth in the Directors'
Stock Option Plan. Options are exercisable for 10 years from their grant date;
PROVIDED, HOWEVER, that no Option may be exercised after expiration of three
years from the date upon which the director terminates his/her position as a
director. Options are generally not transferable and are not entitled to special
tax treatment under Section 422 of the Internal Revenue Code.
Upon a Change-in-Control (as defined in "Executive Compensation--Termination
Benefits Agreements"), the Elected Portion of Directors' Compensation earned for
the year in which such event occurs, which would otherwise have been paid in the
form of Options, shall be promptly paid to each director in cash.
In the event of a reorganization, recapitalization, merger, consolidation,
acquisition of property or stock, or any other event similarly affecting the
Company, the Company Board may, but is not obligated to, provide that
outstanding Options granted under the Directors' Stock Option Plan shall be
canceled in respect of a cash payment or the payment of securities or property,
or any combination thereof, with a per share value determined by the Company
Board in good faith equal to the value received by the stockholders of the
Company in such event in respect of each Share, with appropriate deductions of
exercise prices.
As a result of the Offer and in accordance with the Merger Agreement, the
Company Board will cancel, as of and contingent upon, the consummation of the
Offer, all outstanding Options granted under the Directors' Stock Option Plan
and each holder of an Option granted under such plan shall be entitled to
receive in respect of each Option, a cash payment equal to the product of (x)
the number of Shares underlying such Option and (y) the excess of (1) the Per
Share Amount over (2) the per share exercise price of the Option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cohen, Lindsay and Woods are each members of Compensation Committee
and are affiliated with the partnership to which Essex and the Company paid the
fees described in "Certain Relationships and Related Transactions--Advisory
Services." See footnote (q) of "Security Ownership and Certain Beneficial Owners
and Management" for a description of the relationship among such partnership, BH
Group and Messrs. Cohen, Lindsay and Woods.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is made up of Messrs. Brown, Cohen, Lindsay and
Woods. The principal function of the Compensation Committee, on behalf of the
Company Board, is to review current and proposed employment arrangements with
existing and prospective senior management employees.
A-16
<PAGE>
The Stock Option Committee of the Company Board (the "Stock Option Committee")
reviews the performance and compensation arrangements of the Chief Executive
Officer.
Since the Company only recently became a public company, the Compensation
Committee recognizes that a transition period is necessary to establish fully
its long-range compensation objectives and complete its assessment of how the
deductibility limit of Section 162(m) of the Internal Revenue Code can serve the
best interests of the Company and the shareholders. The Compensation Committee
is responsible for the general oversight of the Company's executive compensation
philosophy. The following is a general framework within which the Compensation
Committee expects to operate.
The general philosophy of the Compensation Committee is to link overall
executive compensation with the performance of the Company and the individual
executive. The focus is on both annual and long-term incentives. By providing a
combination of incentives to the key employees of the Company, upon whose
efforts and commitment depend the continued success and growth of the Company,
the Committee intends not only to reward those efforts, but provide a means by
which those employees can share in the growth of the Company.
The executive compensation policy is designed to attract and retain highly
qualified executive officers, to reinforce strategic performance objectives
through the use of incentive compensation programs, and to create a mutuality of
interest between executive officers and stockholders through compensation
structures that share the rewards and risks of strategic business planning and
implementation. Total compensation is intended to be competitive with that paid
to qualified executives of similar companies.
The foregoing report is submitted by the members of the Compensation
Committee.
W.L. Lyons Brown, Jr.
Rodney A. Cohen
Robert D. Lindsay
Ward W. Woods
A-17
<PAGE>
STOCK OPTION COMMITTEE REPORT ON COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Stock Option Committee is made up of Messrs. Brown, Gaylord and Janney,
all of whom are independent outside directors who are neither officers nor
employees of the Company, its subsidiaries or of BH Group. The principal
functions of the Stock Option Committee are to administer the Company's Stock
Option Plan and, on behalf of the Company Board, to review the performance of
the Chief Executive Officer and set annual salary and bonus amounts for the
Chief Executive Officer. During fiscal 1997, the Chief Executive Officer of the
Company received $1,344,760.
In reviewing the compensation paid to Mr. Abbott for fiscal 1997, the Stock
Option Committee considered the fact that Mr. Abbott had significant
responsibilities as chief executive officer of the Company, Essex and Essex's
subsidiaries. The Stock Option Committee believes Mr. Abbott's total
compensation from Essex for fiscal 1997 was appropriate and reasonable. This
judgment is based on the Committee's conclusion that Mr. Abbott has fully and
effectively discharged the responsibilities of his position with the Company to
the Company's substantial benefit, particularly with respect to the Company's
operating and financial performance and integration of acquisitions. Moreover,
the Stock Option Committee believes that Mr. Abbott's strong leadership,
guidance and direction to the Company as President and Chief Executive Officer
during fiscal 1997 and through its recent public offerings have contributed to
the Company's success during this period. In reviewing the appropriateness of
the compensation of Mr. Abbott, the Stock Option Committee considered (i) data
regarding compensation of chief executive officers at companies with comparable
organization structures, and (ii) the input of other directors regarding the
performance of Mr. Abbott.
Overall, the Stock Option Committee believes that Mr. Abbott is being
appropriately compensated in a manner that is consistent with the long-term
interests of stockholders.
The foregoing report is submitted by the members of the Stock Option
Committee.
W.L. Lyons Brown, Jr.
Edward O. Gaylord
Stuart S. Janney, III
A-18
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return (assuming reinvestment of
dividends) of (i) the Standard & Poor's ("S&P") 500 Stock Index and (ii) the S&P
Electrical Equipment Index from April 18, 1997, the date the Company's Common
Stock began to trade on the NYSE, through December 31, 1997, the last trading
date of fiscal 1997. The cumulative total stockholder return is based on $100
invested in Common Stock of the Company and the respective indices on April 18,
1997 (including reinvestment of dividends).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ESSEX INTERNATIONAL
INC. S&P 500 EQUIPMENT INDEX
<S> <C> <C> <C>
04/18/97 $100.00 $100.00 $100.00
12/97 175.00 128.93 136.82
</TABLE>
The stock prices on the Performance Graph are not necessarily indicative of
future stock price performance.
A-19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------
<S> <C>
Exhibit 1: Agreement and Plan of Merger, dated as of October 21, 1998, among Superior TeleCom Inc., SUT
Acquisition Corp. and Essex International Inc. (incorporated by reference to Exhibit (c)(1) of
the Schedule 14D-1 of SUT Acquisition Corp. and Superior TeleCom Inc. filed with the Securities
and Exchange Commission on October 28, 1998 (the "Schedule 14D-1")).
Exhibit 2: Stockholders' Agreement, dated as of October 21, 1998, among Parent and each of the
Stockholders (incorporated by reference to Exhibit (c)(2) of the Schedule 14D-1).
Exhibit 3: Mutual Confidentiality Agreement between Essex Group, Inc. and Superior TeleCom Inc. executed
on April 24, 1998, including the extension letter dated September 29, 1998.
Exhibit 4: Letter, dated October 21, 1998, from The Alpine Group, Inc. to Essex International Inc.
Exhibit 5: Text of Joint Press Release, dated October 22, 1998, issued by Superior TeleCom Inc. and Essex
International Inc.
Exhibit 6: Form of letter to Stockholders of the Company, dated October 28, 1998.*
Exhibit 7: Opinion, dated October 21, 1998, of Goldman, Sachs & Co.*
Exhibit 8: Opinion, dated October 21, 1998, of Chase Securities Inc.*
</TABLE>
- ------------------------
* Included in copies of Schedule 14D-9 mailed to stockholders.
<PAGE>
EXHIBIT 3
MUTUAL CONFIDENTIALITY AGREEMENT
This mutual confidentiality agreement ("Agreement") is between Essex
Group, Inc., with offices in Ft. Wayne, Indiana, and Superior TeleCom Inc.,
with offices at 1790 Broadway, New York, NY 10019.
WHEREAS, the parties desire to share certain information regarding their
operations to determine the synergies that may exist ("Evaluation"); and
WHEREAS, in connection with any discussions or negotiations between the parties,
either party ("Owner") may disclose to the other party ("Recipient") certain
information, as defined below, either orally, in writing, or through tangible
goods:
NOW, THEREFORE, the parties agree:
1. "INFORMATION" shall mean any and all information that Owner or any of
its representatives or affiliates furnish or have previously furnished to
Recipient whether furnished by any means including orally or in writing or
gathered by inspection and regardless of whether the same is specifically marked
or designated as "confidential" or "proprietary," together with any and all
notes, memoranda, analyses, compilations, studies or other documents prepared by
Recipient, its directors, officers, employees, agents, or representatives
(including attorneys, accountants, and financial advisors) (the
"Representatives") which contain or otherwise reflect Recipient's review of the
Information, together with any an all copies, extracts, or other reproductions
of any of the same; provided, however, that the term "Information" does not
include information that:
(a) is or becomes publicly known through no wrongful act of Recipient
or its Representatives; or
(b) was available in writing to Recipient on a non-confidential basis
prior to its disclosure to Recipient by Owner; or
(c) is compelled to be disclosed by court process without a
protective order; provided that Recipient immediately notify Owner of any such
request to produce Confidential Information, consult with Owner, and assist
Owner in seeking a protective order.
2. The Recipient acknowledges the proprietary nature of the Information
and agrees to use appropriate security measures to safeguard Information
disclosed by the Owner, including the obligation (i) to use at least the same
measures to protect the Information of the Owner as Recipient uses to protect
its own Information against misuse, (ii) to use the Information only for the
purposes for which it was disclosed (i.e., only in connection with the business
negotiations and any resulting business matters between the parties), (iii) to
not disclose Information to third parties, except its Representatives who need
to know such Information to third parties, except its Representatives who need
to know such Information in order to assist Recipient in its
1.
<PAGE>
Evaluation, who are informed by Recipient of the confidential nature of the
Information and who agree in writing to be bound by this Confidentiality
Agreement, (iv) upon request to return Information supplied by Owner and to
destroy and certify in writing to said destruction all notes, memoranda,
analyses, compilation studies or other documents containing Information,
which were prepared by Recipient or its Representatives, and (v) to disclose
Information in order to assist the parties in connection with their
Evaluation. Recipient shall be responsible for any breach of this
Confidentiality Agreement by its Representatives.
3. The fact that the Information was disclosed and the fact that
discussions are taking place relative to the Evaluation, including the status
thereof, will not be disclosed to any person or entity without the written
consent of the other or except as required by applicable law, regulation or
NYSE rule.
4. Without the prior written consent of the other, neither party nor any
of its Representatives will, for a period of two year(s) after the date hereof,
directly solicit for hire any employee of the other.
5. No license or conveyance of any rights under any discoveries,
inventions, patents, trade secrets, proprietary information, copyrights, trade
names or trademarks, or applications therefore, or any other form of
intellectual property is granted or implied with respect to any information
disclosed pursuant to the terms of this Confidentiality Agreement.
6. Neither party makes any representation or warranty (whether express or
implied) with respect to Information supplied under this Agreement, about the
accuracy or completeness of the Information and neither party nor any of its
affiliates, directors, officers, employees, representatives, or agents will have
any liability to the other party or any other person or entity resulting from
the Information or any use thereof.
7. Recipient agrees that money damages will not be a sufficient remedy
for any breach of this Confidentiality Agreement by it or its Representatives
and that Owner is entitled to specified performance and injunctive relief as
remedies for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach of this Confidentiality Agreement but shall be
in addition to all other remedies available at law or equity. Owner shall be
entitled to recover costs and attorney's fees in any action to enforce the terms
of this Confidentiality Agreement.
8. This Confidentiality Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana. This Agreement cannot be
modified except in writing signed by both parties.
ESSEX GROUP, INC. SUPERIOR TELECOM INC.
By: /s/ Steven R. Abbott By: /s/ Justin F. Deedy, Jr.
---------------------- -------------------------
Its: CEO Its: Sr. V.P.
--------------------- ------------------------
2.
<PAGE>
[Letterhead of Essex Group, Inc.]
September 29, 1998
MR. STEVEN S. ELBAUM
Chairman, President and
Chief Executive Officer
SUPERIOR TELECOM INC.
1790 Broadway, 15th Floor
New York, NY 10019
Dear Steve:
On April 24, 1998, SUPERIOR TELECOM and ESSEX entered into a MUTUAL
CONFIDENTIALITY AGREEMENT. That agreement has never been terminated by either
party. It is our understanding that the Agreement remains in effect and will
continue to apply to our exchanges of information. Further, for purposes of the
two-year no solicitation of employees clause in Paragraph 4, I propose that we
start the clock over as of today's date. In other words, both parties agree not
to solicit each other's employees for a period of two years commencing
September 29, 1998.
Please indicate your acceptance and acknowledgement of the above by signing
below and returning by fax a copy of your signed acknowledgement.
Very truly yours,
/s/ Steven R. Abbott
--------------------
ACCEPTED AND ACKNOWLEDGED:
/S/ STEVEN S. ELBAUM
- --------------------------
STEVEN S. ELBAUM
9/29/98
- --------------------------
DATE
<PAGE>
Exhibit 4
VOTING AGREEMENT
October 21, 1998
Essex International Inc.
1601 Wall Street
Fort Wayne, Indiana 46802
Dear Sirs:
The undersigned, The Alpine Group, Inc., is the beneficial owner of
8,092,560 shares (the "SHARES") of common stock, par value $.01 per share, of
Superior TeleCom Inc. (the "COMPANY"). All terms used but not defined herein
shall have the meanings assigned to such terms in that certain Agreement and
Plan of Merger (the "MERGER AGREEMENT"), dated of even date hereof by and among
Essex International Inc., SUT Acquisition Corp. ("MERGER SUB") and the Company.
The undersigned agrees that it will, at any meeting of the stockholders of
the Company, however called, or in connection with any written consent of such
stockholders, vote (or cause to be voted) the Shares then held of record by the
undersigned or which the undersigned has the right to vote (A) in favor of (1)
an amendment to the Certificate of Incorporation of the Company to authorize
additional shares of Preferred Stock, par value $.01 per share, of the Company;
(2) the issuance of Series A Convertible Preferred Stock, par value $.01 per
share, of the Company, in the case of clauses (1) and (2) hereof in accordance
with the terms of the Merger Agreement, Delaware Law and the Certificate of
Incorporation and By-Laws of the Company; and (3) any other matters submitted to
the stockholders of the Company to authorize or facilitate the transactions
contemplated by the Merger Agreement; and (B) against any matters submitted to
stockholders of the Company inconsistent with the transactions contemplated by
the Merger Agreement.
The undersigned hereby permits the Company and Merger Sub to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the S-4 Registration Statement (including the
Prospectus/Proxy Statement constituting a part thereof and all documents and
schedules filed with the SEC) its identity and ownership of the Shares and the
nature of its commitments, arrangements and understandings under this letter
agreement.
The undersigned agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and to make
effective the agreements contemplated by this letter agreement.
This letter agreement and the covenants hereunder shall attach to the
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall
1.
<PAGE>
pass, whether by operation of law or otherwise. This letter agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
Sincerely,
THE ALPINE GROUP, INC.
By: /s/ Bragi F. Schut
--------------------------------
Name: Bragi F. Schut
Title: Executive Vice President
2.
<PAGE>
Exhibit 5
[Letterhead of Superior TeleCom Inc.]
FINANCIAL COMMUNICATIONS CONTACT: COMPANY CONTACT:
John G. Nesbett Suzanne D. Fernandez
LIPPERT/HEILSHORN & ASSOCIATES, INC. Corporate Communications
212-838-3777, ext. 121 212-757-333
SUPERIOR TELECOM TO ACQUIRE ESSEX INTERNATIONAL INC.
FOR $32 PER SHARE IN A $1.4 BILLION TRANSACTION
NEW YORK, NY, October 21, 1998 -- Superior TeleCom Inc. (NYSE: SUT) and
Essex International Inc. (NYSE: SXC) today announced that they have entered
into, and their respective Boards of Directors have approved, a definitive
merger agreement pursuant to which Superior will acquire all of the outstanding
shares and options of Essex for an aggregate consideration of $936 million,
consisting of $769 million in cash and $167 million in liquidation value of new
8-1/2% convertible exchangeable preferred stock of Superior plus assumed debt of
Essex of $419 million. Under the terms of the merger agreement, Superior will
make a first-step cash tender offer at $32 per share for up to a maximum of
22,562,135, or approximately 81%, of the outstanding Essex common shares. The
tender is expected to commence next week. The offer is subject to the tender of
at least a majority of Essex's shares, to completion of financing, which has
been committed to by Bankers Trust Company, and to customary conditions,
including required governmental approvals. Following completion of the offer,
the remaining shares of Essex are expected to be converted into the right to
receive 0.64 of a share of new series Superior convertible exchangeable
preferred stock with a per share liquidation value of $50. This preferred stock
is convertible into Superior common stock at $56 per share. If fewer than the
maximum number of shares are purchased through the tender offer, the remaining
Essex shareholders will receive both preferred stock and cash for their shares
so that the aggregate cash and stock consideration paid in the merger is the
same as if the offer had been fully subscribed. The merger is expected to be
closed in the first calendar quarter of 1999.
Bessemer Holdings LP and certain of its affiliates, holding approximately
48% of the outstanding Essex common stock, have agreed to tender their shares in
the transaction and have granted a purchase option to Superior under certain
circumstances.
The closing prices of Superior and Essex common stock on October 21, 1998,
the last trading day prior to execution of the merger agreement were $46.00 and
$23.19, respectively.
Steven S. Elbaum, Chairman and Chief Executive Officer of Superior, stated
that "the acquisition of Essex International by Superior TeleCom is a
strategically sound transaction that
1.
<PAGE>
merges two world class wire and cable businesses known for quality, customer
service and delivering value to customers, shareholders and employees. The
combination will greatly benefit our customers and will significantly expand
Superior's operations and establish Superior as the premier producer of wire
and cable in North America and fourth largest in the world.
"Assuming the consummation of the acquisition in the first calendar quarter
of 1999, we expect Superior's calendar 1999 revenues to be approximately $2.4
billion, of which approximately $850 million or 35% of projected 1999 revenues
will be communications cable products spanning copper, fiber and composite cable
based products for voice and data communications in residential and commercial
networks and other communications markets. We believe that Superior will be the
world's largest producer of copper cable for telephone networks. Given the
complementary product lines of Superior and Essex and little overlap in our
customer base, the combined company will have a broader product line and service
capability to more customers than either company would have alone. In addition,
customer service and deliveries will be enhanced by the additional flexibility
and capacity of our combined North American and Israeli manufacturing
operations.
"Approximately $850 million or 35% of anticipated calendar 1999 revenues is
expected to be generated from the sale of magnet wire, primary wire and
electrical insulation materials for use in motors, transformers, electrical
controls and automotive applications produced by the world's leading
manufacturers of these end products and the sale of high, low and medium voltage
power cables to utilities and others. Essex is the largest producer of magnet
wire products in North America and has been serving this market for over fifty
years. Essex's operations in the magnet wire and electrical insulation business
are based on a model of long-term understandings and relationships with leading
original equipment manufacturers and significant earnings and cash flow
visibility, which parallels Superior's operations in its communications cable
business.
"Essex's electrical and specialty wire and cable segment (building and
industrial cable), with approximately $750 million in anticipated 1999 revenues,
is highly profitable and has grown significantly over the last five years. This
segment is one of the top three participants in the U.S. market and sells its
products through large retailers, buying co-ops and electrical distributors for
resale into the commercial, industrial and residential markets. Approximately
60% of this unit's net sales are attributable to remodeling and repair activity
and the balance to new construction and other markets.
"Following the acquisition, we believe that Superior will become the best
and strongest wire and cable company in North America. The Company will derive
approximately 35% of revenues and 50% of earnings and cash flow from its
communications cable business, approximately 35% of revenues and 25% of earnings
and cash flow from its magnet wire business and approximately 30% of revenues
and 25% of earnings and cash flow from its electrical and specialty wire and
cable business.
"Operationally, all of Superior's cable businesses will draw upon and
benefit from shared manufacturing practices, materials and processing know-how,
productivity improvements, scrap reclamation and other improvements, all of
which will be leveraged upon Superior's larger base of operations. As an
example, Superior's purchases of copper will rise from approximately 150
2.
<PAGE>
million to approximately 1 billion pounds annually, creating opportunities
for achievement of cost, freight and processing improvements. Incremental
material procurement, which would span all cable segments, will provide
similar opportunities to work effectively with our supply chain in a mutually
beneficial manner.
"Financially, we believe this acquisition will create the basis for
substantial growth in earnings, cash flow and Superior shareholder value. Our
financing structure for the purchase is based entirely on long-term bank debt
and approximately $167 million in Superior 8-1/2% convertible exchangeable
preferred stock to be issued to Essex shareholders, convertible into Superior
common stock at $56 per share. The purchase is expected to be highly accretive
to Superior in calendar 1999 with accretion of 15-25% (before one-time charges)
in excess of Superior's expected calendar 1999 earnings growth of 15-20%. Our
accretion expectations are based upon the realization of very conservative
synergies, although we anticipate significant synergies and savings through the
substantial increase in Superior's purchasing power, savings in freight and
logistical expenses, cross selling opportunities and elimination of duplicative
public company expenses. We expect these savings and synergies to be further
additive to earnings and shareholder value in 2000 and beyond.
"Approximately 50% of our revenues and more than half of earnings will be
generated by long-term contracts or seasoned relationships with financially
strong market leaders whose products and services depend on our products and
service.
"In addition to the earnings accretion, the significant cash flow generated
by the combined company's operations should result in more than 50% accretion to
Superior's cash flow per share beginning in calendar 1999, which should allow
for a rapid deleveraging of the balance sheet. EBITDA to interest coverage
should approximate 3.0x in calendar 1999, and will quickly improve in future
years through our focused effort on cash flow growth, working capital management
and debt reductions.
"We enthusiastically welcome Steven R. Abbott, President and Chief
Executive Officer of Essex, who will be named President and Chief Operating
Officer of Superior. We look forward to a smooth and seamless change in the
ownership of Essex and a continuation of Essex and its strong brand and quality
reputation as part of Superior's ongoing operations. Justin Deedy, Senior Vice
President of Superior and President of Superior Telecommunications, Inc., will
be named President of Superior's Communications Cable Group. Charles McGregor,
currently Executive Vice President of Essex, will be named President of the OEM
Group and Dennis Kuss, currently Vice President-General Manager of the Building
Wire Unit at Essex will be named President of the Electrical Group."
Steven R. Abbott stated ``when merged, the company will have one of the
broadest communications product lines in the industry. Combined with the strong
Essex position in OEM products and electrical and specialty wire products, this
new company will be a truly full line supplier to all its customers, especially
those in distribution. I am truly excited for the prospects for the combined
company, both to build on our respective strengths and to create new
opportunities for our customers, business partners and employees."
3.
<PAGE>
Bankers Trust Corporation has committed to fully underwrite credit
facilities totaling $1.45 billion to finance the cash portion of the purchase
price for the outstanding Essex common stock and options, to refinance certain
existing indebtedness at Superior and Essex and to meet working capital and
other corporate needs of the combined company. BT Alex. Brown, the securities
affiliate of Bankers Trust, will act as the sole arranger for the credit
facilities. BT Wolfensohn, the mergers and acquisitions group of BT Alex. Brown,
acted as financial advisor to Superior TeleCom Inc. Superior in connection with
the acquisition. Superior has had a long-standing relationship with Bankers
Trust and its affiliates extending over a number of prior transactions. Essex
International was advised jointly by Chase Securities Inc. and Goldman, Sachs &
Co.
Superior TeleCom Inc. is a leading manufacturer and supplier of
telecommunications cable and wire products to telephone companies, distributors
and system integrators. It also develops and manufactures voice and data
multiplexers and other electronics and signal processing components and systems.
Except for the historical information herein, the matters discussed in this
news release include forward-looking statements that may involve a number of
risks and uncertainties. Actual results may vary significantly based on a number
of factors, including, but not limited to, risks relating to the acquisition and
the ability to integrate Essex into Superior's operations, risks in product and
technology development, market acceptance of new products and continuing product
demand, the impact of competitive products and pricing, changing economic
conditions, including changes in short term interest rates, foreign currency
fluctuation and other risk factors detailed in Superior's and Essex
International Inc.'s most recent annual report and other filings with the
Securities and Exchange Commission.
4.
<PAGE>
Exhibit 6
[LETTERHEAD OF ESSEX INTERNATIONAL INC.]
October 28, 1998
Dear Stockholder:
I am pleased to inform you that on October 21, 1998, the Company entered
into an agreement and plan of merger (the "Merger Agreement") providing for the
acquisition of the Company by Superior TeleCom Inc. ("Superior"). Pursuant to
the Merger Agreement, Superior, through a wholly owned subsidiary, has commenced
a tender offer (the "Offer") for up to 22,562,135 shares of the Company's common
stock at the offer price of $32.00 in cash per share. The Merger Agreement
provides that, subject to satisfaction of certain conditions, the tender offer
is to be followed by a merger (the "Merger") in which the holders of any
remaining Company shares (other than dissenting shares) will receive the right
to receive Series A Cumulative Convertible Exchangeable Preferred Stock of
Superior, and in certain circumstances cash in an amount as calculated in the
Merger Agreement. The tender offer is currently scheduled to expire at 12:00
midnight, New York City time, on Wednesday, November 25, 1998.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE
MERGER AGREEMENT WITH SUPERIOR, HAS APPROVED THE OFFER AND HAS DETERMINED THAT
THE OFFER AND THE MERGER, TAKEN TOGETHER AS A UNITARY TRANSACTION, ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
TENDER OFFER.
In determining to approve the Merger Agreement and the transactions
contemplated thereby, your Board gave careful consideration to a number of
factors described in the attached Schedule 14D-9 that has been filed with the
Securities and Exchange Commission. Among other things, your Board considered
the opinions of Goldman, Sachs & Co. and Chase Securities Inc., each dated
October 21, 1998 (copies of which are included with the Schedule 14D-9), to the
effect that, as of such date, and based upon and subject to the various
considerations set forth in such opinions, the consideration to be received,
pursuant to the Merger Agreement, by holders of common stock of the Company in
the Offer and the Merger, taken together as a unitary transaction, is fair from
a financial point of view to such holders.
The attached Schedule 14D-9 describes the Board's decision and contains
other important information relating to such decision. We urge you to read it
carefully.
In a separate arrangement, Bessemer Holdings L.P. ("Bessemer"), the
Company's largest stockholder, and certain of Bessemer's affiliates have agreed
with Superior to tender their shares into the tender offer and otherwise to
support the transaction with Superior. Bessemer and its affiliates own
approximately 48% of the outstanding common stock of the Company.
Accompanying this letter and the Schedule 14D-9 is the Offer to Purchase and
related materials, including a Letter of Transmittal to be used for tendering
your shares. These documents describe the terms and conditions of the tender
offer and provide instructions regarding how to tender your shares. We urge you
to read the enclosed material carefully.
The Board of Directors and management of the Company thank you for your
loyalty and support over the years.
Very truly yours,
/s/ STEVEN R. ABBOTT
--------------------------------------
President and Chief Executive Officer
<PAGE>
Exhibit 7
- --------------------------------------------------------------------------------
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
- --------------------------------------------------------------------------------
October 21, 1998
Board of Directors
Essex International Inc.
1601 Wall Street
Fort Wayne, IN 46802
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of common stock, par value $0.01 per
share (the "Shares"), of Essex International Inc. (the "Company") of the
consideration proposed to be paid by Superior TeleCom Inc. ("Buyer") in the
Tender Offer and the Merger (each as defined below) pursuant to the Agreement
and Plan of Merger, dated as of October 21, 1998, by and among Buyer, SUT
Acquisition Corp. ("Merger Sub"), a wholly-owned subsidiary of Buyer, and the
Company (the "Agreement"), taken together as a unitary transaction. The
Agreement provides for a tender offer for up to 22,562,135 Shares (the "Tender
Offer") pursuant to which Merger Sub will pay $32.00 per Share in cash for each
Share accepted. The Agreement further provides that following completion of the
Tender Offer, Merger Sub will be merged with and into the Company (the "Merger")
and each outstanding Share (other than Shares already owned by Buyer and Merger
Sub and Shares owned by holders who have properly exercised their appraisal
rights) will be exchanged for 0.64 of a share of Series A Cumulative Convertible
Exchangeable Preferred Stock, par value $0.01 per share, of Buyer (the
"Convertible Preferred Stock"), or a combination of cash and Convertible
Preferred Stock, as provided in the Agreement in the event that the Tender Offer
is not fully subscribed.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as managing underwriter of public
offerings of Shares in April 1997 and September 1997 (in which certain
affiliates of Goldman, Sachs & Co., having previously owned approximately 14.5%
of the then outstanding Shares, sold all of their ownership interest in the
Company), and having acted as its financial advisor in connection with the
Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement, including the form of Certificate of Designation of the Convertible
Preferred Stock and the form of the Stockholders
[LOGO]
<PAGE>
Essex International Inc.
October 21, 1998
Page Two
Agreement among Buyer, Merger Sub and certain stockholders of the Company
attached as exhibits thereto; the form of Buyer's Indenture for the 8.5%
Subordinated Convertible Exchange Debentures due 2013; the Company's Prospectus
for the initial public offering of Shares dated April 17, 1997; the Company's
Prospectus for the secondary offering of Shares dated September 17, 1997;
Buyer's Prospectus for the initial public offering of Buyer's common stock dated
October 11, 1996; Annual Report to Stockholders of the Company for the year
ended December 31, 1997 and Annual Reports on Form 10-K of the Company and its
predecessor for the five years ended December 31, 1997; Annual Reports to
Stockholders and Annual Reports on Form 10-K of Buyer for the two fiscal years
ended April 30, 1998; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company and Buyer; certain other communications from
the Company and Buyer to their respective stockholders; and certain internal
financial analyses and forecasts for the Company through the calendar year ended
December 31, 1999, and for Buyer through the calendar year ended December 31,
2002 prepared by their respective managements. We also have held discussions
with members of the senior management of the Company and Buyer regarding the
past and current business operations, financial condition and future prospects
of their respective companies and the companies combined pursuant to the
Agreement. In addition, we have reviewed the reported price and trading activity
of Shares, the common stock of Buyer and convertible securities generally,
compared certain financial and stock market information for the Company and
Buyer with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain business
combinations in the cable and wire industry specifically and in other industries
generally, and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. We have not made an independent
evaluation or appraisal of the assets and liabilities of the Company, Buyer or
any of their respective subsidiaries and we have not been furnished with any
such evaluation or appraisal. In addition, we were not requested to solicit, and
did not solicit, interest from other parties with respect to an acquisition of
or other business combination with the Company. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transactions contemplated by the Agreement and such opinion does not constitute
a recommendation as to whether or not any holder of Shares should tender such
Shares in connection with the Tender Offer or how any holder of Shares should
vote, or whether such holder should seek appraisal rights, in connection with
the Merger.
We note that under current market conditions, there may be a limited trading
market for the
Convertible Preferred Stock. Any estimate of the future trading value of the
Convertible Preferred Stock would be speculative and subject to substantial
uncertainties and contingencies. We are not
<PAGE>
Essex International Inc.
October 21, 1998
Page Three
expressing a view as to the actual trading price of the Convertible Preferred
Stock, which will be dependent upon and fluctuate with dividend rates generally,
the market price of the common stock of Buyer into which the Convertible
Preferred Stock is convertible, market conditions, general economic conditions,
the financial condition and prospects of Buyer after the Merger and other
factors which generally influence the price of similar securities.
We are not opining on the fairness from a financial point of view of the
Convertible Preferred Stock to be received by holders of Shares pursuant to the
Merger if viewed as a separate and distinct transaction from the Tender Offer.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
consideration to be received pursuant to the Agreement by the holders of Shares
in the Tender Offer and the Merger, taken together as a unitary transaction, is
fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
GOLDMAN, SACHS & CO.
<PAGE>
Exhibit 8
[LOGO]
CHASE SECURITIES INC.
270 Park Avenue
New York, NY 10017-2070
PERSONAL AND CONFIDENTIAL
October 21,1998
Board of Directors
Essex International Inc.
1601 Wall Street
Fort Wayne, IN 46802
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock, par value $0.01
per share (the "Shares"), of Essex International Inc. (the "Company") of the
consideration proposed to be paid by Superior TeleCom Inc. ("Buyer") in the
Tender Offer (as defined below) and the Merger (as defined below) pursuant to
the Agreement and Plan of Merger, dated as of October 21, 1998, by and among
Buyer, SUT Acquisition Corp. ("Merger Sub"), a wholly owned subsidiary of Buyer,
and the Company (the "Agreement"), taken together as a unitary transaction. The
Agreement provides for a tender offer for up to 22,562,135 Shares (the "Tender
Offer") pursuant to which Merger Sub will pay $32.00 per Share in cash for each
Share accepted. The Agreement further provides that following completion of the
Tender Offer, Merger Sub will be merged with and into the Company (the "Merger")
and each outstanding Share (other than Shares already owned by Buyer and Merger
Sub and Shares owned by holders who have properly exercised their appraisal
rights) will be exchanged for 0.64 of a share of Series A Cumulative Convertible
Exchangeable Preferred Stock, par value $0.01 per share (the "Convertible
Preferred Stock"), of Buyer, or a combination of cash and Convertible Preferred
Stock, as provided in the Agreement in the event that the Tender Offer is not
fully subscribed.
In connection with this opinion, we have reviewed, among other things, the
Agreement, including the form of Certificate of Designation of the Convertible
Preferred Stock and the form of Stockholders Agreement among Buyer, Merger Sub
and certain stockholders of the Company attached as exhibits thereto; the form
of Indenture for the 8 1/2% Subordinated Convertible Exchange Debentures due
2013; the Company's Prospectus for the initial public offering of the Company's
Shares dated April 17, 1997; the Company's Prospectus for the secondary offering
of the Shares dated September
Chase Securities Inc. is a member NASD/SIPC, and is a wholly-owned subsidiry of
The Chase Manhattan Corporation.
<PAGE>
17, 1997; Buyer's Prospectus for the initial public offering of Buyer's common
stock dated October 11, 1996; Annual Report to Stockholders of the Company for
the year ended December 31, 1997 and Annual Reports on Form 10-K of the Company
and its predecessor for the five fiscal years ended December 31, 1997; Annual
Reports to Stockholders and Annual Reports on Form 10K of Buyer for the two
fiscal years ended April 30, 1998; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company and Buyer; certain other
communications from the Company and Buyer to their respective stockholders; and
certain internal financial analyses and forecasts for the Company through the
calendar year ended December 31, 1999 and for Buyer through December 31, 2002
prepared by their respective managements. We also have held discussions with
members of the senior management of the Company and Buyer regarding the past and
current business operations, financial condition and future prospects of their
respective companies and the combined company. In addition, we have reviewed the
reported price and trading activity of the Shares, the common stock of Buyer and
convertible securities generally, compared certain financial and stock market
information for the Company and Buyer with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain business combinations in the cable and wire industry
specifically, and in other industries generally, and reviewed such other
information and performed such other studies and analyses as we considered
appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available, for purposes of this opinion. We have neither made nor obtained any
independent evaluations or appraisals of the assets or liabilities of the
Company or Buyer or any of their subsidiaries, nor have we conducted a physical
inspection of the properties and facilities of the Company or Buyer or any of
their subsidiaries. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transactions contemplated by
the Agreement and such opinion does not constitute a recommendation as to
whether or not any holder of Shares should tender such Shares in connection with
the Tender Offer or how any holder of Shares should vote, or whether such holder
should seek appraisal rights, in connection with the Merger.
For purposes of rendering our opinion, we have assumed that, in all respects
material to our analysis, the representations and warranties of each party
contained in the Agreement are true and correct, that each party will perform
all of the covenants and agreements required to be performed by it under the
Agreement and that all material conditions to the consummation of the Merger
will be satisfied without waiver thereof. We have further assumed that in the
course of obtaining any necessary governmental, regulatory or other consents and
approvals, including any necessary amendments, modifications or waivers to any
documents to which any of the Company or Buyer are a party, as contemplated by
the Agreement, no restrictions will be imposed or amendments, modifications or
waivers made that would have any material adverse
<PAGE>
effect on the contemplated benefits to the Company or Buyer of the Merger. We
have further assumed that the Merger will be accounted for as a purchase under
generally accepted accounting principles.
We note that under current market conditions, there may be a limited trading
market for the Convertible Preferred Stock. Any estimate of the future trading
value of the Convertible Preferred Stock would be speculative and subject to
substantial uncertainties and contingencies. We are not expressing a view as to
the actual trading price of the Convertible Preferred Stock, which will be
dependent upon and fluctuate with dividend rates generally, the market price of
the common stock of Buyer into which the Convertible Preferred Stock is
convertible, market conditions, general economic conditions, the financial
condition and prospects of Buyer after the Merger and other factors which
generally influence the price of similar securities.
Our opinion herein is necessarily based on market, economic and other conditions
as they exist and can be evaluated on the date of this letter. We are not
opining on the fairness from a financial point of view of the consideration to
be received by holders of Shares pursuant to the Merger if viewed as a separate
and distinct transaction from the Tender Offer.
Chase Securities Inc. ("CSI"), as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain banking services to the
Company including having acted as administrative agent for various debt
financings, having acted as an underwriter of public offerings of the Shares in
April 1997 and September 1997 (in which certain affiliates of CSI, having
previously owned approximately 6.78% of the then outstanding Shares, sold all of
their ownership interest in the Company) and having acted as its financial
advisor in connection with the Agreement. CSI was not requested to solicit, and
did not solicit, interest from other parties with respect to an acquisition of
or other business combination with the Company.
CSI provides a full range of financial advisory and securities services and, in
the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or Buyer for its own account and for the accounts of customers and at
any time may have a long or short position in such securities. CSI may provide
investment banking services to the Company, Buyer or any of their respective
subsidiaries in the future.
Based upon and subject to the foregoing and based upon such matters as we
consider relevant, it is our opinion that as of the date hereof the
consideration to be received pursuant to the Agreement by holders of Shares in
the Tender Offer and the Merger,
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taken together as a unitary transaction, is fair from a financial point of view
to such holders.
This opinion has been provided at the request of and is for the use and benefit
of the Board of Directors of the Company in its evaluation of the consideration
to be received by holders of Shares in the Tender Offer and the Merger, taken
together as a unitary transaction, and shall not be used for any other purpose
without the prior written consent of CSI.
Very truly yours,
/s/ CHASE SECURITIES INC.
Chase Securities Inc.
