<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
DAYTON SUPERIOR CORPORATION
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
April 21, 2000
TO OUR SHAREHOLDERS:
Our board of directors has called a special shareholders meeting to be held
on May 23, 2000, at which you will be asked to consider and vote upon adoption
of a merger agreement between Dayton Superior Corporation and Stone Acquisition
Corp., a newly-organized subsidiary of Odyssey Investment Partners Fund, L.P.,
which provides for the recapitalization of Dayton Superior through the merger of
Stone Acquisition Corp. into Dayton Superior. In the merger, our common
shareholders will receive $27.00 in cash for each Dayton Superior common share
they own.
The board has carefully reviewed and considered the terms and conditions of
the proposed merger. The board also has received written opinions dated
January 19, 2000 from Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Robert W. Baird & Co. Incorporated, our financial advisors, that the $27.00 per
share cash merger price to be received by our common shareholders in the merger
was fair to our common shareholders from a financial point of view as of the
date of the respective opinions. Copies of those opinions are included in the
proxy statement that accompanies this letter. Based on its review, our board of
directors unanimously determined that the merger is fair to and in the best
interests of Dayton Superior and the holders of its common shares.
THE BOARD HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT AT THE SPECIAL MEETING.
Your vote is very important. For the merger to be completed, the holders of
at least a majority of our outstanding common shares must vote in favor of the
proposal. As a result, your failure to vote will have the same effect as if you
voted against the merger agreement. We urge you to complete, sign and date the
enclosed proxy card and return it in the enclosed return envelope, whether or
not you plan to attend the special meeting. If you do attend the special meeting
and wish to vote in person, you may withdraw your proxy and vote in person.
A formal notice of the special shareholders meeting, a proxy statement and a
form of proxy accompany this letter. The proxy statement provides you with
detailed information about the proposed merger. We encourage you to read the
entire proxy statement, including the appendices, completely and carefully. A
copy of the Annual Report on Form 10-K for 1999 which we filed with the SEC also
accompanies this letter.
We are mailing the proxy statement and form of proxy to our shareholders
beginning on April 21, 2000.
Please do not send us any share certificates at this time. You will receive
instructions as to how to surrender your share certificate(s) and receive
payment for your common shares after the effective time of the merger.
Sincerely,
[/S/ MATTHEW O. DIGGS, JR.]
Matthew O. Diggs, Jr.
Chairman of the Board
[/S/ JOHN A. CICCARELLI]
John A. Ciccarelli
President and Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. A FAILURE TO
VOTE EITHER AT THE SPECIAL MEETING OR BY RETURNING THE ENCLOSED PROXY CARD WILL
COUNT AS A VOTE AGAINST THE MERGER.
<PAGE>
[LOGO]
DAYTON SUPERIOR CORPORATION
7777 WASHINGTON VILLAGE DRIVE, SUITE 130
DAYTON, OHIO 45459
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2000
---------------------
TO THE SHAREHOLDERS OF
DAYTON SUPERIOR CORPORATION:
NOTICE HEREBY IS GIVEN that a special meeting of shareholders of Dayton
Superior Corporation will be held at 8:30 a.m., local time, on May 23, 2000 at
the Dayton Marriott Hotel, 1414 South Patterson Boulevard, Dayton, Ohio for the
purpose of considering and voting upon:
1. Adoption of the Agreement and Plan of Merger dated January 19, 2000
between Dayton Superior and Stone Acquisition Corp., which provides for
the recapitalization of Dayton Superior through the merger of Stone
Acquisition Corp. into Dayton Superior, and approval of the transactions
contemplated by the merger agreement. As a result of the merger, each
Dayton Superior common share outstanding immediately prior to the merger,
other than common shares held by Dayton Superior in its treasury and
common shares for which dissenter's rights are perfected in accordance
with Ohio law, will be converted into the right to receive $27.00 in
cash, and each Dayton Superior series A preferred share outstanding
immediately prior to the merger will be converted into one common share
of the surviving corporation, as described in more detail in the
accompanying proxy statement.
2. A proposal to permit the proxies, in their discretion, to adjourn the
special meeting of shareholders for the sole purpose of soliciting more
votes or proxies in favor of adoption of the merger agreement in the
event that the number obtained is insufficient to assure adoption of the
merger agreement.
3. Transaction of such other business as properly may come before the
meeting or any adjournment of the meeting.
A copy of the merger agreement is attached as Appendix A to the proxy
statement which accompanies this notice. Please review the proxy statement for
more complete information regarding the merger proposal.
Only shareholders of record at the close of business on April 10, 2000 are
entitled to receive notice of and to vote at the special meeting or any
adjournment or postponement of the special meeting and "FOR" the proposal to
permit the proxies, in their discretion, to adjourn the meeting for the sole
purpose of soliciting more votes or proxies in favor of adoption of the merger
agreement.
The proxy holders will vote common shares represented by properly executed
proxies as directed on the proxy card. If no directions are given, proxies will
be voted "FOR" adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement. To grant a proxy to vote your
<PAGE>
common shares, please complete, date and sign the enclosed proxy card and mail
it promptly in the enclosed return envelope.
By Order of the Board of Directors
[/S/ JAIME TARONJI, JR.]
Jaime Taronji, Jr.
Vice President, General Counsel
and Secretary
Dayton, Ohio
April 21, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO
NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
DAYTON SUPERIOR CORPORATION
----------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2000
---------------------
SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS
PROXY STATEMENT AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. WE URGE YOU TO READ THIS ENTIRE PROXY STATEMENT, INCLUDING THE APPENDICES,
CAREFULLY. IN THIS PROXY STATEMENT, THE TERMS "DAYTON SUPERIOR," "WE," "US,"
"OUR" AND "OUR COMPANY" REFER TO DAYTON SUPERIOR CORPORATION.
- - We are proposing to recapitalize Dayton Superior through the merger of Stone
Acquisition Corp., a newly-formed subsidiary of Odyssey Investment Partners
Fund, L.P., into Dayton Superior pursuant to the merger agreement described in
this proxy statement. (page 31)
- - We are holding a special meeting of our shareholders at 8:30 a.m. on May 23,
2000 at the Dayton Marriott Hotel, 1414 South Patterson Boulevard, Dayton,
Ohio to vote on adoption of the merger agreement and approval of the
transactions described in the merger agreement, to permit the proxies to
adjourn the meeting for the sole purpose of soliciting more votes or proxies
in favor of adoption of the merger agreement, and to act on any other matters
that properly may come before the meeting. (page 1)
- - Our board of directors has determined that the merger is fair to and in the
best interests of Dayton Superior and our shareholders. (page 7) Our board
recommends that you vote "FOR" adoption of the merger agreement and approval
of the transactions described in the merger agreement.
- - Our board of directors received opinions from our financial advisors, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Robert W. Baird & Co.
Incorporated, to the effect that, as of the date the merger agreement was
signed, the cash consideration to be received by our common shareholders in
the merger was fair from a financial point of view to our common shareholders.
(page 8)
The following are the material terms of the proposed merger:
- You will receive $27.00 in cash for each common share you hold. (page 31)
- The merger will be a taxable transaction for federal tax purposes.
(page 27)
- Stone Acquisition Corp. will be merged with and into us, and we will be the
surviving corporation after the merger. (page 31)
- Immediately following the merger, Odyssey will own approximately 93.1% of
our outstanding common shares and certain existing shareholders will own
approximately 6.9% of our outstanding common shares. (page 24)
- After the merger, you no longer will have any equity interest in our
company. (page 32)
- The merger will be completed only if a number of conditions are satisfied.
These include adoption of the merger agreement by our shareholders and
obtaining the financing needed to pay the merger consideration. (page 38)
<PAGE>
- The merger agreement can be terminated by agreement of us and Stone
Acquisition Corp. at any time or by either or both of us under specified
circumstances. (page 39) If the agreement is terminated, in some
circumstances we are obligated to pay up to $1,250,000 in out-of-pocket
expenses to Stone Acquisition Corp. and also, in some cases, a termination
fee in the amount of $6,000,000. (page 40)
- We expect to complete the merger promptly after the special shareholders
meeting and by no later than July 14, 2000. (pages 31 and 40)
The procedures relating to your vote at the meeting are as follows:
- If your shares are held directly in your name, you should mail your signed
proxy card to us in the enclosed self-addressed envelope so that we receive
your proxy prior to the May 23, 2000 special meeting. (page 2)
- If your shares are held in "street name" by your broker, your broker cannot
vote your shares without instructions from you. You should follow the
directions for giving instructions provided by your broker. (page 1)
- Under Ohio law, you have the right to be paid the fair cash value of your
shares, as determined by the Common Pleas Court of Montgomery County, Ohio,
if you do not vote for the merger, the merger is completed and you properly
follow the procedures for perfecting dissenter's rights. (page 29)
- Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding common shares. If you fail to vote,
it will have the same effect as if you voted against adoption of the merger
agreement. (page 2)
- You may revoke your proxy and change your vote in any of the following ways
(page 2):
- Send us a written notice stating that you would like to revoke your proxy.
- Complete and submit a new, later dated proxy card by mail, which will
supercede your prior vote.
- Attend the special shareholders meeting and vote in person.
- If you have instructed a broker to vote your shares, you must follow
directions from your broker to change or revoke your proxy.
- After the merger is completed, we will send you instructions explaining how
to exchange your common share certificates for cash. (page 32)
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THIS SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY
PERSON ACTING ON OUR BEHALF.
If you would like additional copies of this proxy statement or if you would
like to ask questions about the merger, you should contact:
Jaime Taronji, Jr.
Vice President, General Counsel and Secretary
Dayton Superior Corporation
7777 Washington Village Drive, Suite 130
Dayton, Ohio 45459
Telephone: (937) 428-6360
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary Term Sheet.......................................... i
The Special Shareholders Meeting............................ 1
General................................................... 1
Record Date and Vote Required............................. 1
Proxies................................................... 2
Revocation of Proxies..................................... 2
Other Matters............................................. 3
Solicitation of Proxies................................... 3
Special Factors............................................. 3
Background of the Merger.................................. 3
Reasons for the Merger; Recommendation of Our Board of
Directors............................................... 7
Opinions of Our Financial Advisors........................ 8
Certain Estimates of Future Operations and Other
Information............................................. 20
Interests of Certain Persons; Conflicts of Interest....... 21
Accounting Treatment...................................... 26
Financing................................................. 26
Effect of the Merger on Our Common Shares................. 27
Regulatory Matters........................................ 27
United States Federal Income Tax Consequences............. 27
Litigation Challenging the Merger......................... 29
Dissenter's Rights.......................................... 29
The Merger Agreement........................................ 31
The Merger................................................ 31
Consideration to be Received in the Merger................ 31
Treatment of Stock Options................................ 32
Exchange of Our Common Shares............................. 32
Representations and Warranties............................ 33
Covenants................................................. 34
Conditions to the Merger.................................. 38
Termination............................................... 40
Termination Fee and Expenses.............................. 40
Amendment and Waiver...................................... 42
Market Price Information.................................... 42
Information About Us........................................ 43
Information About Stone Acquisition Corp. and Odyssey....... 43
Ownership of Our Common Shares.............................. 44
Directors and Executive Officers.......................... 44
Principal Shareholders.................................... 45
Annual Meeting and Shareholder Proposals.................... 46
Where You Can Find More Information......................... 47
</TABLE>
APPENDICES
<TABLE>
<S> <C> <C>
Appendix A -- Agreement and Plan of Merger
Opinion of Merrill Lynch, Pierce, Fenner & Smith
Appendix B -- Incorporated
Appendix C -- Opinion of Robert W. Baird & Co. Incorporated
Dissenter's Rights Provisions under the Ohio General
Appendix D -- Corporation Law
</TABLE>
iii
<PAGE>
THE SPECIAL SHAREHOLDERS MEETING
GENERAL
We are furnishing this proxy statement to the holders of our common shares
in connection with the solicitation of proxies by our board of directors for use
at a special meeting of shareholders to be held on May 23, 2000 at 8:30 a.m.,
local time, at the Dayton Marriott Hotel, 1414 South Patterson Boulevard,
Dayton, Ohio.
The purpose of the special meeting is to consider and vote upon:
- adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement;
- a proposal to permit the proxies, in their discretion, to adjourn the
special shareholders meeting for the sole purpose of soliciting more votes
or proxies in favor of adoption of the merger agreement; and
- such other business as properly may come before the special meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF DAYTON SUPERIOR AND THE HOLDERS OF ITS COMMON
SHARES AND HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT.
THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO PERMIT THE PROXIES, IN THEIR DISCRETION, TO ADJOURN THE SPECIAL
SHAREHOLDERS MEETING FOR THE SOLE PURPOSE OF SOLICITING MORE VOTES OR PROXIES IN
FAVOR OF ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE AND VOTE REQUIRED
You may cast one vote at the special shareholders meeting for each common
share that you owned at the close of business on April 10, 2000. On that date,
we had 5,946,233 common shares outstanding and entitled to vote. None of our
proposed series A preferred shares were outstanding on that date.
The affirmative vote of the holders of a majority of the issued and
outstanding common shares is required to adopt the merger agreement and approve
the transactions contemplated by the merger agreement. In addition, the merger
agreement must be adopted by the holders of a majority of the series A preferred
shares which we will issue to some members of our management immediately prior
to the merger in exchange for some of their common shares, as described in more
detail under "Interests of Certain Persons; Conflicts of Interest." Each person
who will receive a series A preferred share has agreed to vote in favor of
adoption of the merger agreement.
The affirmative vote of the holders of a majority of the common shares
voting on the proposal at the meeting is required to approve the proposal to
permit the proxies, in their discretion, to adjourn the special shareholders
meeting for the sole purpose of soliciting more votes or proxies in favor of
adoption of the merger agreement, assuming at least a majority of the
outstanding common shares are present in person or represented by proxy at the
meeting.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for customers will not have authority to vote on adoption of the
merger agreement unless they receive special instructions from the beneficial
owners of those shares. Shares that are not voted because brokers did not
receive any instructions are referred to as "broker non-votes."
The presence, in person or represented by a proxy, of the holders of a
majority of the common shares entitled to vote at the special shareholders
meeting will constitute a quorum for the transaction of business. Abstentions
and broker non-votes will be counted as present for purposes of determining a
quorum.
<PAGE>
Any failure to be present at the special shareholders meeting, in person or
by proxy, any abstention and any broker non-vote will have the same effect as a
vote against adoption of the merger agreement. Any failure to be present at the
special shareholders meeting, in person or by proxy, will have the effect of
reducing the aggregate number of common shares voting and, therefore, the number
of votes required to approve the proposal to permit the proxies, in their
discretion, to adjourn the meeting to solicit more votes or proxies in favor of
adoption of the merger agreement, while any abstention or broker non-vote will
have the same effect as a vote against that proposal.
The persons appointed to vote as proxies are authorized to vote upon any
adjournments, postponements, continuations or reschedulings of the special
shareholders meeting and upon any other matters that properly come before the
meeting. In the event that less than a majority of our common shares are voted
in favor of adoption of the merger agreement and a majority of the common shares
present at the meeting are voted in favor of the proposal to permit the holders
of the proxies, in their discretion, to adjourn the meeting for the sole purpose
of soliciting more votes or proxies in favor of adoption of the merger
agreement, the holders of the proxies will be authorized, in their discretion,
to vote the common shares for which they hold proxies to adjourn, postpone or
continue the meeting for the purpose of allowing them to have additional time to
solicit additional votes or proxies in favor of adoption of the merger
agreement. If less than a majority of the common shares present at the meeting
are voted in favor of the proposal to permit the proxies to adjourn the meeting
to solicit more votes or proxies in favor of adoption of the merger agreement,
the proxies may not adjourn, postpone or continue the meeting for that purpose
alone.
As of April 10, 2000, our directors and executive officers owned
beneficially and had the right to vote an aggregate of 248,406 common shares, or
approximately 4.2% of the common shares outstanding on that date. Our directors
have indicated their intention to vote their common shares in favor of adoption
of the merger agreement and approval of the proposal to permit the proxies, in
their discretion, to adjourn the meeting for the sole purpose of soliciting more
votes or proxies in favor of adoption of the merger agreement. In addition, some
of our executive officers have agreed to vote their common shares in favor of
adoption of the merger agreement and approval of the proposal to permit the
proxies, in their discretion, to adjourn the meeting for the sole purpose of
soliciting more votes or proxies in favor of adoption of the merger agreement.
As of April 10, 2000, our directors and executive officers owned no common
shares of Stone Acquisition Corp., and Stone Acquisition Corp. owned none of our
common shares.
PROXIES
Each copy of this proxy statement sent to our common shareholders is
accompanied by a form of proxy for use at the special shareholders meeting.
Common shares represented by a proxy properly submitted as described below and
received at or prior to the special shareholders meeting, unless subsequently
revoked, will be voted in accordance with the instructions on the proxy.
TO SUBMIT A PROXY, HOLDERS OF COMMON SHARES SHOULD COMPLETE, SIGN, DATE AND
MAIL THE PROXY CARD PROVIDED WITH THIS PROXY STATEMENT IN ACCORDANCE WITH THE
INSTRUCTIONS SET FORTH ON THAT CARD. If a proxy card is signed and returned
without indicating any voting instructions, the common shares represented by the
proxy will be voted "FOR" adoption of the merger agreement and "FOR" permitting
the proxies, in their discretion, to adjourn the meeting for the sole purpose of
soliciting more votes or proxies in favor of adoption of the merger agreement.
REVOCATION OF PROXIES
Any shareholder who submits a proxy may revoke it at any time before it is
voted:
- by giving written notice of the revocation to us, addressed to: Dayton
Superior Corporation, 7777 Washington Village Drive, Suite 130, Dayton,
Ohio 45459, Attention: Secretary;
2
<PAGE>
- by submitting a later dated proxy by mail, if we receive the proxy prior
to the special shareholders meeting; or
- by VOTING in person at the special shareholders meeting. A proxy is not
revoked simply by ATTENDING the special shareholders meeting.
Shareholders who have instructed a broker to vote their shares must follow
directions received from their broker to change or revoke their proxy.
OTHER MATTERS
Our board of directors currently is not aware of any business to be acted
upon at the special shareholders meeting, other than as described above. If,
however, other matters properly are brought before the meeting, the persons
appointed as proxies will have discretion to vote or to act on these matters
according to their best judgment, unless otherwise indicated on any particular
proxy.
SOLICITATION OF PROXIES
In addition to solicitation by mail, our directors, officers and employees,
none of whom will be specifically compensated for those services, but may be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
those services, may solicit proxies from our shareholders personally or by
telephone, facsimile or telegram or other form of communication. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending the materials to beneficial owners.
PLEASE DO NOT SEND YOUR COMMON SHARE CERTIFICATES TO US WITH YOUR PROXY
CARDS. IF THE MERGER IS COMPLETED, WE WILL SEND YOU A TRANSMITTAL FORM WITH
INSTRUCTIONS ON HOW TO EXCHANGE YOUR STOCK CERTIFICATES FOR $27.00 PER SHARE IN
CASH.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
From time to time since our initial public offering in 1996, we have
received inquiries and expressions of interest with respect to acquiring our
company. In July 1998, we received a confidential, non-binding proposal for a
recapitalization transaction from an investment firm at a proposed price which
was less than the consideration which is payable in the proposed merger with
Stone Acquisition Corp. Although we executed a confidentiality agreement and
entered into discussions with that firm, that firm was unable to arrange
financing for a transaction at the price they had proposed. Following those
discussions, our board of directors authorized Merrill Lynch, the financial
advisor we retained to assist us with the proposal, to contact other potential
financial and strategic acquirors with respect to the possibility of an
acquisition of our company or some other strategic alternative. In
December 1998 and January 1999, Merrill Lynch contacted a number of potential
financial and strategic acquirors on a preliminary basis without obtaining
substantial interest in pursuing a transaction. Following the sale by our former
controlling shareholder of substantially all of its shares in our company in
February 1999, our board of directors instructed Merrill Lynch to terminate its
efforts.
In August 1999, John A. Ciccarelli, our President and Chief Executive
Officer, received a telephone call from Merrill Lynch indicating that they had
discussed with Odyssey Investment Partners, LLC, a New York investment firm, the
possibility of an investment in our company. Following the call from Merrill
Lynch, Mr. Ciccarelli received a telephone call from William F. Hopkins, a
managing principal of Odyssey, in which Mr. Hopkins expressed an interest in
meeting with Mr. Ciccarelli to discuss a possible investment by his firm. On
August 26, 1999, Mr. Hopkins and Paul D. Barnett, another managing principal of
Odyssey, met with Mr. Ciccarelli and Alan F. McIlroy, our Vice President and
Chief Financial Officer, at our executive offices in Dayton, Ohio. At that
meeting, Messrs. Ciccarelli and McIlroy reviewed generally with
3
<PAGE>
Messrs. Hopkins and Barnett our business and our publicly-available historical
financial results, and Messrs. Hopkins and Barnett described Odyssey and its
investment fund. Mr. Ciccarelli informed Messrs. Hopkins and Barnett that the
board of directors had no current intention to sell the company or pursue any
strategic alternatives, although he indicated that he would convey Odyssey's
interest in a transaction to our board of directors at their next regular
quarterly meeting. The Odyssey representatives made no proposal with respect to
a transaction at the August 26 meeting.
We had no further contact with Odyssey until October 6, 1999. During
September 1999, we made a public offering of $21.25 million of trust preferred
securities through the Dayton Superior Capital Trust. In addition, on
October 4, 1999, we completed the acquisition of the assets of the Southern
Construction Products business, which had been approved by our board of
directors at a special telephonic board meeting on September 29, 1999.
At our regularly scheduled quarterly board meeting in Dayton on Tuesday,
October 5, 1999, Mr. Ciccarelli briefly informed our board of his August meeting
with the Odyssey representatives. On Wednesday, October 6, 1999, the day after
the quarterly board meeting, Mr. Hopkins called Mr. Ciccarelli to inform him
that Odyssey continued to be interested in our company and, in fact, intended to
submit a non-binding, confidential proposal with respect to a possible
transaction, which he briefly described to Mr. Ciccarelli. Mr. Ciccarelli
informed Mr. Hopkins that he would not discuss a proposal by Odyssey unless it
was made in writing and submitted through Merrill Lynch. Mr. Ciccarelli then
called each of our directors and informed them of his telephone conversation
with Mr. Hopkins.
On Monday, October 11, 1999, Odyssey delivered to Merrill Lynch a
non-binding, confidential proposal to acquire control of our company pursuant to
a recapitalization transaction at a price of $25.00 to $27.00 per share.
Odyssey's proposal assumed that existing shareholders would retain common shares
to facilitate treatment of the transaction as a recapitalization for accounting
purposes. The proposed transaction would be contingent on, among other things,
obtaining an understanding of management continuity, completion of a
satisfactory business, accounting and legal due diligence review and receipt by
Odyssey of the necessary debt financing. At the same time, Odyssey proposed that
we enter into an exclusivity agreement under which we would agree not to solicit
or engage in any negotiations with respect to a possible transaction with any
person other than Odyssey for a 30-day period following the commencement of due
diligence by Odyssey.
Following receipt of the written proposal from Odyssey, Mr. Ciccarelli
called a special telephonic board meeting, which was held on Monday,
October 18, 1999, to discuss Odyssey's proposal. All of our directors were
present at the meeting, other than Timothy C. Collins, who previously had
informed Mr. Ciccarelli that he intended to resign from the board because of
business commitments which would require him to be absent from the country for
extended periods of time. Mr. Collins subsequently resigned from our board by a
letter dated November 1, 1999. Representatives of Merrill Lynch, our financial
advisor, and Thompson Hine & Flory LLP and Cravath, Swaine & Moore, our outside
legal counsel, participated in the special telephonic board meeting. The
directors discussed with the Merrill Lynch representatives that firm's initial
analysis of the proposal, the credibility of Odyssey as a financial sponsor and
the likelihood that Odyssey could obtain debt financing for a transaction within
the price range proposed. After discussing the proposal, our directors
authorized our management, subject to executing an appropriate confidentiality
agreement with Odyssey, to provide Odyssey with a limited period of time within
which to conduct business, accounting and legal due diligence in order to permit
Odyssey to indicate the price, as opposed to a price range, at which a
transaction might be completed. Our directors did not authorize our management
to enter into an exclusivity agreement with Odyssey.
Our legal representatives then negotiated a confidentiality agreement with
Odyssey's representatives. On Thursday, October 28, 1999, we signed the
confidentiality agreement with Odyssey, and several of our officers and advisors
met with representatives of Odyssey and its advisors in Thompson Hine & Flory's
offices in Dayton to permit Odyssey to commence its due diligence review.
Following this meeting, we
4
<PAGE>
continued to have contacts with Odyssey for purposes of due diligence through
mid-November. On November 22, 1999, Odyssey delivered to Merrill Lynch a revised
non-binding, confidential proposal for a recapitalization transaction at a price
of $27.00 per share. The revised proposal also included a more specific
description of the proposed financing for the transaction. Odyssey again
requested that we enter into an exclusivity agreement for the period in which
they proposed to complete their due diligence and negotiate a definitive
agreement.
Our board of directors discussed Odyssey's revised proposal at a special
telephonic board meeting on Tuesday, November 23, 1999. Representatives of
Merrill Lynch also participated in the meeting and reviewed the terms of the
revised proposal, the due diligence conducted by Odyssey and the feasibility of
the proposed debt and equity financing for the transaction. The directors
discussed the structure of the transaction and limiting the number of
shareholders who would retain an interest in the company. The directors also
discussed the other conditions to the proposal, including further due diligence
and obtaining mutually satisfactory arrangements with management, including
continuity of key employees. Mr. Ciccarelli informed the directors that, to
date, there had been no discussions with Odyssey concerning any specific
arrangements with management. After the Merrill Lynch representatives left the
meeting, the directors also discussed the desirability of engaging a second
advisory firm to review the terms of the proposed transaction because Odyssey's
proposal letter indicated that Merrill Lynch would be assisting Odyssey with the
financing for the transaction. The board of directors then authorized continued
discussions with Odyssey with respect to their proposal but did not authorize us
to enter into the proposed exclusivity agreement. The board also authorized the
engagement of Robert W. Baird & Co. Incorporated as our second financial
advisor.
Following the November 23, 1999, special board meeting, Odyssey continued to
conduct its due diligence review. On Monday, December 6, 1999, and Tuesday,
December 7, 1999, our board again met in Dayton for its regular quarterly
meeting. At the December 6th portion of the meeting, representatives of Merrill
Lynch again were present and updated the directors on the discussions with
Odyssey, including clarification with respect to the amount of our debt
outstanding following the Southern Construction Products acquisition, which
effectively increased the cost of the transaction to Odyssey over what Odyssey
initially had anticipated when it made the $27.00 per share proposal. Merrill
Lynch also presented their preliminary analysis of the ranges of our value and
the fairness of the proposed transaction price, using various methodologies. The
directors and Merrill Lynch discussed the structure of the retained equity
interest required by Odyssey and the nature of the retained equity in other
recent recapitalization transactions. Merrill Lynch also reported that Odyssey
was requesting that management continuity be demonstrated by key members of our
management agreeing to retain at least 50% of their equity interests (common
shares and options) in our company following the transaction. The directors
discussed whether such a requirement would impose an unreasonable burden on
management, particularly since a substantial portion of the value of
management's equity interests was in the form of non-qualified stock options
which would generate substantial taxable income to the holders if exercised, and
whether the condition reasonably could be expected to be satisfied.
After the Merrill Lynch representatives left the meeting, representatives of
Baird entered the meeting and made a presentation to the directors on their
preliminary analysis of the ranges of our value, using financial valuation
methodologies similar to those used by Merrill Lynch. The Baird representatives
also discussed the structure of the retained equity interest required by
Odyssey.
After the Baird representatives left the meeting, the directors discussed
the proposed transaction further. In addition to the presentations made by its
financial advisors, the directors discussed whether it would be necessary,
before proceeding with a transaction with Odyssey, to solicit other proposals
with respect to an acquisition. In this regard, the directors considered the
premium represented by the price per share offered by Odyssey over the current
and historic market price of our common shares. They also considered that
Odyssey had stated that it would not pursue a transaction with us if we began to
solicit other proposals. In addition, the directors considered that, while we
had been contacted from time to time
5
<PAGE>
in the past by third parties expressing an interest in a possible transaction
with us, all of those proposals were at a price per share (to the extent that a
price was stated) lower than that offered by Odyssey. They also considered that
our financial advisor had contacted a number of potential financial and
strategic acquirors on a preliminary basis in late 1998 and early 1999 without
obtaining substantial interest in pursuing a transaction. On the following day,
the directors continued their discussion and, in addition, our management
reviewed its expectations for our financial performance for all of 1999 and
their current forecast for 2000 and subsequent years.
The board concluded its deliberations on December 7, 1999, by instructing
Merrill Lynch to continue discussions with Odyssey and to clarify the identity
of the persons who would be asked to retain an equity interest in us and to
determine if $27.00 per share was the best price available from Odyssey. The
directors also authorized Mr. Ciccarelli and the eight other members of
management with whom Odyssey was seeking employment agreements to enter into
discussions with Odyssey concerning those agreements. The directors also
authorized the engagement of our outside accounting firm to advise management on
the tax consequences to them of Odyssey's required rollover of at least 50% of
their equity interests. In addition, the board approved severance arrangements
for key employees who would not be offered employment agreements by Odyssey, to
be effective only if a definitive agreement were reached with Odyssey and
subject to receipt of a covenant not to compete.
Following the December board meeting, our legal and financial
representatives and Odyssey's representatives began negotiating the merger
agreement and related documentation. Odyssey refused to increase its price per
share but did advise us that, because it wanted our company to be privately-held
following the recapitalization, it wanted only a limited number of existing
shareholders to retain an equity interest in our company. Members of our
management retained their own legal counsel, who represented them in negotiating
with Odyssey the employment agreements and equity rollover agreements which are
discussed below under "Interests of Certain Persons; Conflicts of Interest."
The board of directors and its legal and financial advisors met again in
Dayton on Monday, January 17, 2000, to consider the proposed transaction, with
one director participating by telephone and the remainder present in person.
Current drafts of the merger agreement and Stone Acquisition Corp.'s financing
commitments had been provided to the directors prior to the meeting. Our legal
counsel reported on the status of negotiations with respect to the merger
agreement, which were nearly complete. Our legal counsel reviewed with the
directors in detail the terms of the merger agreement and the financing
commitments. Representatives of Merrill Lynch and Baird, our financial advisors,
separately presented the analyses described below under "Opinions of Our
Financial Advisors," and each reported that, if the transaction were entered
into on substantially the terms set forth in the draft agreement reviewed at the
meeting, they were prepared to opine that, as of the date of the meeting, the
cash merger consideration to be received in the merger by our common
shareholders would be fair from a financial point of view to our common
shareholders.
The board also discussed the potential conflict of interest of
Mr. Ciccarelli, the only member of management on the board, because he would
continue as our chief executive officer following the transaction and had agreed
with Odyssey to retain a portion of his equity interests. Mr. Ciccarelli left
the meeting to permit the directors to discuss the transaction and the potential
conflict of interest. After discussion with our legal advisors, the board
concluded that it would not be necessary for Mr. Ciccarelli to abstain from
voting on the merger. The board took no formal action at this meeting, in order
to allow our representatives to complete negotiation of the merger agreement.
The board then reconvened by telephone on the morning of Wednesday,
January 19, 2000, after our representatives had completed negotiation of the
merger agreement. Our legal counsel described the changes in the merger
agreement, which were not material. Representatives of Merrill Lynch and Baird
participated in the telephone call and rendered their opinions to the effect
that, based on the terms of the transaction set forth in the draft merger
agreement dated January 18, 2000, as of January 19, 2000 the cash
6
<PAGE>
merger consideration to be received in the merger by our shareholders was fair
from a financial point of view to our common shareholders. Based on these
opinions, which subsequently were confirmed in writing, and the other factors
considered by the directors, as described below under "Reasons for the Merger;
Recommendation of Our Board of Directors," our board unanimously determined that
the transactions contemplated by the merger agreement, taken together, were fair
to, and in the best interests of, Dayton Superior and the holders of our common
shares. The board then approved the merger agreement and the transactions
contemplated thereby and authorized our officers to execute the merger
agreement. Immediately following the meeting, the merger agreement was executed
and the transaction was announced publicly.
REASONS FOR THE MERGER; RECOMMENDATION OF OUR BOARD OF DIRECTORS
In reaching its decision to approve the merger agreement and the
transactions contemplated by the merger agreement and to recommend that our
shareholders vote "FOR" adoption of the merger agreement, our board of directors
consulted with our financial advisors, Merrill Lynch and Baird, and outside
legal counsel, Cravath, Swaine & Moore and Thompson Hine & Flory LLP, and
considered a number of factors with respect to the merger. The following list of
factors considered by the board is not exhaustive, but includes all of the
material factors considered. The board of directors did not assign specific
weights to any of these factors, and individual directors may have given
different weights to different factors.
- - MERGER CONSIDERATION. The board of directors considered that the $27.00 per
common share cash consideration to be paid in the merger represents a premium
of approximately 46% over the closing price of the common shares on
January 18, 2000, the last trading day prior to the announcement of the
merger, and a significant premium to the average trading price of the common
shares over the preceding several months. The board of directors also
considered that the common shares traded during the 52 weeks prior to the
announcement of the merger at a range from a low of $11.75 to a high of
$23.50, which was the highest closing price of the common shares at any time
since our common shares have been publicly traded.
- - REVIEW OF PROSPECTS AND ALTERNATIVE OF REMAINING INDEPENDENT; SMALL MARKET
CAPITALIZATION. The board of directors considered our financial condition,
results of operations and business and earnings prospects, including our
prospects if we were to remain independent, our anticipated future financial
needs, including financing needed to continue to expand our business, the
amount of our debt, the historical cyclicality of our industry and the risks
of continuing to implement successfully a business strategy of growth by
acquisition. The directors also considered the disadvantages of our having a
relatively small market capitalization in light of current market conditions,
which appear to favor companies with larger market capitalization.
- - FAIRNESS OPINIONS FROM OUR FINANCIAL ADVISORS. The board of directors
considered the detailed financial and comparative analyses and presentations
made by Merrill Lynch and Baird, our financial advisors, with respect to the
merger and the consideration offered to the holders of our common shares in
the merger, which are discussed further below under "Opinions of Our Financial
Advisors," and their oral opinions, subsequently confirmed in writing, to the
effect that as of the date of their respective opinions the merger
consideration was fair, from a financial point of view, to the holders of our
common shares. The full text of these opinions are attached to this proxy
statement as Appendices B and C, respectively.
- - UNCERTAIN AVAILABILITY OF ALTERNATIVE TRANSACTIONS. The board of directors
considered that, while we had been contacted from time to time in the past by
third parties expressing an interest in a possible transaction with us, all of
those proposals were at a price per share (to the extent that a price was
stated) lower than that offered by Odyssey. They also considered that our
financial advisor had contacted a number of potential financial and strategic
acquirors on a preliminary basis in late 1998 and early 1999 without obtaining
substantial interest in pursuing a transaction.
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<PAGE>
- - TERMS OF THE MERGER. The board of directors considered the terms of the merger
agreement, which permit the board of directors to provide confidential
information to, and to negotiate with, a third party that makes an unsolicited
proposal and to terminate the merger agreement in order to accept a superior
proposal, if necessary to prevent the board of directors from breaching its
fiduciary duties. The directors also considered our obligation under the
merger agreement to pay a termination fee and out-of-pocket expenses to Stone
Acquisition Corp. if the merger agreement is terminated under some
circumstances. Based on advice from Merrill Lynch, the board of directors
believed that the amount of the fee and expenses we may be obligated to pay,
and the circumstances under which they are payable, are typical for
transactions of this size and type and are not likely to discourage another
party from proposing an alternative transaction that might be more
advantageous to our shareholders. In considering the amount of the fee and
expenses that are payable and the circumstances under which they are payable,
the board of directors also considered that, with its guidance, our legal
counsel and financial advisors had negotiated a lower termination fee, reduced
the circumstances under which the termination fee was payable and placed a cap
on the out-of-pocket expenses payable from Odyssey's initial proposal.
- - FINANCING ARRANGEMENTS. The board of directors considered the terms of the
merger agreement providing that Stone Acquisition Corp.'s obligation to
complete the merger is conditioned upon financing. The board of directors also
considered the nature and terms and conditions of the commitment letter
obtained by Stone Acquisition Corp. from Bankers Trust Company, Deutsche Bank
Securities, Inc., Merrill Lynch & Co. and Merrill Lynch Capital Corporation
with respect to senior bank financing for the merger and the commitment letter
obtained by Stone Acquisition Corp. from Bankers Trust Corporation and Merrill
Lynch Capital Corporation with respect to bridge financing for the merger, if
needed, and that the obligations of the lenders under the financing
commitments obtained by Stone Acquisition Corp. are subject to various
conditions, including, among others, the absence at the time of funding of a
material adverse change in the financial markets or in our company.
- - SHAREHOLDER APPROVAL REQUIRED. The board of directors considered that the
affirmative vote of the holders of at least a majority of the outstanding
common shares is required to adopt the merger agreement.
- - DISSENTER'S RIGHTS. The board of directors considered that dissenter's rights
are available to the shareholders under Ohio law.
- - EQUITY RETENTION AND EMPLOYMENT AGREEMENTS. The board of directors considered
that Odyssey required, as conditions to completing the merger, that our
management retain a significant amount of their equity interest in our company
and that some members of management enter into employment agreements to be
effective upon completion of the merger, which resulted in a potential
conflict of interest; however, the board also considered that our management
did not begin discussions with respect to the nature or specific amount of the
equity interest to be retained or the terms of their employment agreements
until after the principal financial terms of the merger had been negotiated.
OPINIONS OF OUR FINANCIAL ADVISORS
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
In 1998, we retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to
act as our exclusive financial advisor in connection with a possible business
combination. On January 19, 2000, Merrill Lynch rendered to our board of
directors its oral opinion (which subsequently was confirmed in writing) that,
as of such date and based upon and subject to the factors and assumptions set
forth therein, the $27.00 per common share to be received by the holders of our
common shares (other than shares held in our treasury, by Stone Acquisition
Corp. or any subsidiary of ours or of Stone Acquisition Corp. or as to which
dissenter's rights have been perfected) in the merger was fair from a financial
point of view to those shareholders.
8
<PAGE>
THE FULL TEXT OF MERRILL LYNCH'S WRITTEN OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT AND IS INCORPORATED IN THIS PROXY STATEMENT BY REFERENCE. THE SUMMARY
OF MERRILL LYNCH'S OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF MERRILL LYNCH'S OPINION. HOLDERS OF
OUR COMMON SHARES ARE URGED TO READ MERRILL LYNCH'S OPINION IN ITS ENTIRETY.
MERRILL LYNCH'S OPINION WAS PROVIDED TO OUR BOARD OF DIRECTORS FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW
OF THE $27.00 PER SHARE TO BE RECEIVED BY THE HOLDERS OF OUR COMMON SHARES IN
THE MERGER. IT DOES NOT ADDRESS THE MERITS OF OUR UNDERLYING DECISION TO ENGAGE
IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO
HOW THAT SHAREHOLDER SHOULD VOTE ON THE PROPOSED MERGER.
The $27.00 per share to be received by the holders of our common shares in
the merger was determined through negotiations between Odyssey and us. Merrill
Lynch provided advice to us during the course of those negotiations.
Merrill Lynch was advised that Odyssey intended that the merger be accounted
for as a recapitalization under generally accepted accounting principles.
Pursuant to the merger agreement, prior to the effective time of the merger,
certain members of our management will exchange some of their common shares for
our series A preferred shares, which, pursuant to the merger agreement, will
each be converted in the merger into one common share, which will be outstanding
immediately following the merger. Our board of directors did not ask Merrill
Lynch for, and Merrill Lynch did not express, any opinion with respect to the
consideration to be received by the holders of the series A preferred shares in
the merger in exchange for those shares.
The summary set forth below does not purport to be a complete description of
the analyses underlying the Merrill Lynch opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analysis, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond our control or the
control of Merrill Lynch, Odyssey and Stone Acquisition Corp. Any estimates
contained in the analyses performed by Merrill Lynch are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, estimates of
the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which those businesses or securities might actually be
sold. Accordingly, these analyses and estimates are inherently subject to
substantial uncertainty. In addition, the Merrill Lynch opinion was among
several factors taken into consideration by our board of directors in making its
determination to approve the merger agreement and the merger. Consequently, the
Merrill Lynch analyses described below should not be viewed as determinative of
the decision of our board of directors with respect to the fairness of the
$27.00 per share to be received by the holders of our common shares in the
merger.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to us that Merrill Lynch deemed to be relevant;
- reviewed certain information, including financial forecasts, relating to
our business, earnings, cash flow, assets, liabilities and prospects which
we furnished to Merrill Lynch;
9
<PAGE>
- conducted discussions with members of our senior management concerning the
matters described above;
- reviewed the market prices and valuation multiples for our common shares
and compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant;
- reviewed the results of our operations and compared them with those of
certain publicly traded companies that Merrill Lynch deemed to be
relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
- participated in certain discussions and negotiations among our
representatives and representatives of Odyssey and our and their financial
and legal advisors;
- reviewed a draft of the merger agreement dated January 18, 2000; and
- reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information or undertake an independent evaluation or appraisal
of any of our assets or liabilities and was not furnished with any such
evaluation or appraisal. In addition, Merrill Lynch did not assume any
obligation to conduct any physical inspection of our properties or facilities.
With respect to the financial forecast information which we furnished to or
discussed with Merrill Lynch, Merrill Lynch assumed that such information had
been reasonably prepared and reflected the best currently available estimates
and judgment of our management as to our expected future financial performance.
Merrill Lynch also assumed that the final form of the merger agreement would be
substantially similar to the draft dated January 18, 2000 reviewed by Merrill
Lynch.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the opinion. In connection
with the preparation of the opinion for the proposed transaction, Merrill Lynch
was not authorized by us or our board of directors to solicit, nor did Merrill
Lynch solicit, third-party indications of interest for the acquisition of all or
any part of our company. With the exception of the foregoing, we did not place
any limitations on Merrill Lynch with respect to the procedures they followed or
the factors they considered in rendering their opinion. We and Odyssey
determined the cash merger price in arm's-length negotiations.
Set forth below is a summary of the material analyses presented by Merrill
Lynch to our board of directors on January 17, 2000, in connection with their
opinion.
TRANSACTION OVERVIEW. The merger provides for the holders of our common
shares to receive $27.00 per share in the merger. Based on the $18.25 closing
price of our common shares on January 14, 2000 (the last trading day prior to
preparation of materials for Merrill Lynch's presentation to our board of
directors on January 17, 2000) and the closing price of our common shares one
week, 30 days, 90 days, 180 days and 365 days prior to Merrill Lynch's
presentation to our board of directors, $27.00 per common share payable in the
merger represented a premium of 47.9%, 58.8%, 47.4%, 57.1%, 36.3% and 42.1%,
respectively. Based on the average market price of our common shares for the one
week, 30 days, 90 days, 180 days and 365 days prior to Merrill Lynch's
presentation to our board of directors, the $27.00 per common share payable in
the merger represented a premium of 53.1%, 57.9%, 66.9%, 45.0% and 43.2%,
respectively. The $298.1 million aggregate transaction value, which Merrill
Lynch calculated by multiplying the $27.00 per common share payable in the
merger by the number of our fully diluted common shares outstanding at
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the merger price and adding net debt and liabilities, represented a multiple of
the last twelve months ended September 30, 1999 ("LTM") revenue of 0.95x, a
multiple of LTM earnings before interest and taxes ("EBIT") of 8.3x and a
multiple of LTM earnings before interest, taxes and depreciation and
amortization ("EBITDA") of 6.1x. The multiples of aggregate transaction value to
estimated 1999 revenue, estimated 1999 EBIT and estimated 1999 EBITDA, based on
management's projections, were 0.92x, 7.9x and 5.8x, respectively. Additionally,
the aggregate transaction value represented a multiple of calendar year 1999
estimated earnings (as published by First Call Consensus, an industry service
provider of global earnings information based on an average of earnings
estimates published by various investment banking firms) per share ("EPS") and
calendar year 2000 estimated EPS (as published by First Call) of 12.5x and
11.5x, respectively, and a multiple of estimated 1999 earnings per share and
projected 2000 earnings per share based on management's estimates of 11.7x and
10.8x, respectively. Merrill Lynch observed that the 52-week high and low per
share price for our common shares was $23.31 and $11.94, respectively.
COMPARABLE COMPANY ANALYSIS. Merrill Lynch concluded that there were no
publicly traded companies that were directly comparable to us. Accordingly, as a
proxy for publicly traded companies comparable to us, Merrill Lynch, using
publicly available information and estimates of future financial results
published by First Call and taken from research reports, compared certain
financial and other operating information and ratios related to us with that of
a group of companies in the construction accessories/distribution industry and a
group of companies in the rental services industry. For purposes of its
analysis, Merrill Lynch identified the following eight companies in the
construction accessories/distribution industry:
<TABLE>
<S> <C>
- - Harsco Corp. - Centex Construction Products, Inc.
- - Trinity Industries Inc. - Simpson Manufacturing Co., Inc.
- - Hughes Supply Inc. - Jannock Ltd.
- - NCI Building Systems, Inc. - Robertson-Ceco Corporation
</TABLE>
In addition, for purposes of its analysis, Merrill Lynch identified the
following two companies in the rental services industry:
<TABLE>
<S> <C>
- - National Equipment Services, Inc. - United Rentals, Inc.
</TABLE>
In comparing us to those companies, Merrill Lynch calculated certain
financial and operating statistics. Merrill Lynch's calculations resulted in the
following relevant ranges for the comparable companies in the construction
accessories/distribution industry as of January 14, 2000 (based on closing
prices on January 14, 2000) and for us at January 14, 2000:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES
MULTIPLE OF FULLY DILUTED --------------------------------- DAYTON
MARKET CAPITALIZATION TO RANGE MEDIAN MEAN SUPERIOR
- ------------------------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
Estimated Calendar Year 1999 Net
Income................................. 6.1x-13.3x 7.0x 8.9x 8.4x
Estimated Calendar Year 2000 Net
Income................................. 5.7x-11.9x 6.9x 8.2x 7.8x
LTM EBIT................................. 3.6x-9.6x 6.4x 6.2x 6.6x
LTM Sales................................ 0.27x-1.59x 0.60x 0.77x 0.76x
LTM EBITDA............................... 3.1x-6.4x 5.1x 4.8x 4.9x
Estimated 1999 EBITDA.................... 3.0x-6.3x 5.2x 5.0x 4.7x
</TABLE>
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Merrill Lynch's calculations resulted in the following relevant ranges for
the comparable companies in the rental services industry as of January 14, 2000
(based on closing prices on January 14, 2000) and for us at January 14, 2000:
<TABLE>
<CAPTION>
COMPARABLE COMPANIES
MULTIPLE OF FULLY DILUTED --------------------------------- DAYTON
MARKET CAPITALIZATION TO RANGE MEDIAN MEAN SUPERIOR
- ------------------------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
Estimated Calendar Year 1999 Net
Income................................. 8.9x-11.4x 10.1x 10.1x 8.4x
Estimated Calendar Year 2000 Net
Income................................. 6.8x-8.7x 7.8x 7.8x 7.8x
LTM EBIT................................. 10.6x-14.3x 12.4x 12.4x 6.6x
LTM Sales................................ 2.56x-3.24x 2.90x 2.90x 0.76x
LTM EBITDA............................... 5.7x-6.9x 6.3x 6.3x 4.9x
Estimated 1999 EBITDA.................... 5.2x-5.4x 5.3x 5.3x 4.7x
</TABLE>
In addition, Merrill Lynch calculated a range of five year growth rates,
based on certain information provided by IBES International, Inc. ("IBES"), of
8.0% to 15.0%, with a median estimated five year growth rate of 13.0% and a mean
estimated five year growth rate of 12.3% for the comparable companies in the
construction accessories/distribution industry, and a range of five year growth
rates, based on certain information provided by IBES, of 21.5% to 25.0%, with a
median estimated five year growth rate of 23.3% and a mean estimated five year
growth rate of 23.3% for the comparable companies in the rental services
industry (in each case as compared to us at 10.0%). Based on this information,
Merrill Lynch calculated a range of multiples derived from a fraction, the
numerator of which is a multiple of each comparable company's fully diluted
market value to estimated calendar year 2000 net income ("2000 P/E Multiple")
and the denominator of which is the IBES five-year growth rate, of 0.38x to
1.04x with a median multiple of 0.73x and a mean multiple of 0.70x for the
comparable companies in the construction accessories/ distribution industry and
a range of multiples of 0.32x to 0.35x, with a median multiple of 0.33x and a
mean multiple of 0.33x for the comparable companies in the rental services
industry (in each case as compared to us at 0.78x).
Merrill Lynch compared certain information related to us with the comparable
companies to determine implied ranges of value of our common shares. Based on
the application of the multiple analysis for the comparable companies of fully
diluted market value to LTM EBITDA and fully diluted market value to the 2000
P/E Multiple to such information for us, Merrill Lynch determined a summary
reference range of implied per share values of our common shares of $9.25 to
$26.75 and $14.00 to $23.50, respectively (as compared to the $27.00 per common
share payable in the merger).
No company in the group of comparable companies is identical to us.
Accordingly, an analysis of the results of such a comparison is not purely
mathematical; rather, it involves complex considerations and judgments
concerning differences in historical and projected financial, trading and
operating characteristics of the comparable companies and other factors that
could affect the value of such companies and our company.
COMPARABLE ACQUISITION TRANSACTION ANALYSIS. Merrill Lynch reviewed the
publicly available financial terms and financial statistics of six selected
transactions in the construction accessories/distribution industry which Merrill
Lynch deemed relevant for valuation purposes. The six selected transactions were
(target/acquiror):
- American Buildings Company/Onex Corporation
- ABT Building Products Corporation/Louisiana Pacific Corporation
- Metal Building Components, Inc. (BTR plc)/NCI Building Systems
- Fabwel, Inc./Fibreboard Corporation
- Steelcraft Division (Masotech)/Ingersoll-Rand Company
12
<PAGE>
- Symons Corporation/Dayton Superior Corporation.
For the selected transactions, Merrill Lynch calculated a range of multiples of
transaction value as follows:
- transaction value to LTM EBITDA of 5.2x to 7.0x with a mean multiple of
6.2x and a median multiple of 5.7x (as compared to 6.1x for us based on
the $27.00 per common share payable in the merger); and
- transaction value to LTM EBIT of 7.9x to 8.6x with a mean multiple of 8.1x
and a median multiple of 8.0x (as compared to 8.3x for us based on the
$27.00 per common share payable in the merger).
Based on the application of such high/low multiples for the comparable
transactions to such information for us, Merrill Lynch calculated a summary
reference range of implied per share values of our common shares of $21.00 to
$33.50 based on LTM EBITDA and $25.00 to $28.50 based on LTM EBIT (as compared
to the $27.00 per common share payable in the merger).
No company utilized in the comparable transaction analysis was identical to
us. Accordingly, an analysis of the results of this comparison is not purely
mathematical; rather, it involves complex considerations and judgments primarily
concerning differences in historical and projected financial, operating and
trading characteristics of the companies involved in such other transactions and
the circumstances surrounding such transactions. Merrill Lynch did not include
the data for our acquisition of Symons Corporation in its analysis because it
involved us and did not include the LTM EBIT multiple of 9.4x for the Metal
Building Components, Inc. (BTR plc)/NCI Building Systems transaction in its
analysis because Merrill Lynch determined that the offer value for the
transaction together with the large amount of debt involved did not create a
useful comparison with respect to the LTM EBIT multiple.
PREMIUM ANALYSIS. Merrill Lynch reviewed the premiums paid to the closing
market price one day, one week and four weeks prior to the announcement of
eleven selected transactions in the construction accessories/distribution
industry which Merrill Lynch deemed relevant for premium valuation purposes. The
eleven selected transactions were (target/acquiror):
- White Cap Industries Inc./Leonard Green & Partners, L.P.
- ABT Building Products Corporation/Louisiana Pacific Corporation
- Calmat Co./Vulcan Materials Company
- Triangle Pacific Corp./Armstrong World Industries, Inc.
- DLW Aktiengesellschaft/Armstrong World
- Zurn Industries, Inc./US Industries Inc.
- PlyGem Industries, Inc./Nortek, Inc.
- Fibreboard Corporation/Owens Corning
- Falcon Building Products, Inc./Investcorp
- Eljer Industries, Inc./Zurn Industries, Inc.
- AMTROL Inc./Cypress Group LLC
13
<PAGE>
Merrill Lynch's calculations resulted in the following relevant ranges of
premium to closing market price one day, one week and four weeks prior to
announcement for the comparable transactions.
<TABLE>
<CAPTION>
COMPARABLE TRANSACTIONS
--------------------------------
CLOSING MARKET PRICE RANGE MEDIAN MEAN
- -------------------- ---------- -------- --------
<S> <C> <C> <C>
One Day Prior to Announcement..................... 6.2%-77.8% 20.0% 32.3%
One Week Prior to Announcement.................... 14.0%-84.6% 26.5% 34.8%
Four Weeks Prior to Announcement.................. 19.1%-90.1% 47.5% 44.5%
</TABLE>
Based on its analysis, Merrill Lynch determined a range of premiums of 20%
to 55% for the comparable companies one day prior to announcement, and applying
it to the $18.25 closing price for our common shares on January 14, 2000,
derived a summary reference range of implied per share values of our common
shares of $22.00 to $28.25 (as compared to the $27.00 per common share payable
in the merger).
No company utilized in the premium analysis was identical to us.
Accordingly, an analysis of the results of this comparison is not purely
mathematical; rather, it involves complex considerations and judgments primarily
concerning differences in historical and projected financial, operating and
trading characteristics of the companies involved in such other transactions and
the circumstances surrounding such transactions.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis (i.e., an analysis of the present value of our projected unlevered
free cash flows for the periods using the discount rates indicated) of us based
upon forecasts for the 2000 through 2004 fiscal years prepared by our
management. Utilizing these forecasts, Merrill Lynch computed the present value
of the free cash flows for the five fiscal years 2000-2004 by applying a range
of discount rates of 14.0% to 16.0% per year. Merrill Lynch also computed the
present value of our terminal value at the end of the fiscal year 2004 by
applying a range of EBITDA multiples of 4.5 to 5.5 times projected fiscal year
2004 EBITDA and applying to these terminal values a range of discount rates of
14.0% to 16.0% per year. The range of terminal EBITDA multiples was determined
by analyzing our multiples and the multiples of the comparable companies and
factoring in our expected growth prospects at the end of fiscal year 2004. After
subtracting net debt at December 31, 1999, based on its analysis and assuming a
weighted average cost of capital ("WACC") for us of 15% to 16%, Merrill Lynch
derived a summary reference range of implied per share values of our common
shares, on a fully diluted basis, of $21.75 to $29.50 (as compared to the $27.00
per common share payable in the merger).
LEVERAGED BUYOUT RETURN ANALYSIS. Merrill Lynch calculated ranges of
implied five-year equity returns for our common shares for terminal EBITDA
multiples of 5.5x, 6.0x and 6.5x using a range of offer prices per share from
$22.00 to $28.00, based on our management's EBITDA forecasts for fiscal years
1999 through 2004 and base case downside forecasts prepared by Odyssey for
fiscal years 1999 through 2004, in each case assuming a minimum equity
contribution of 25% and a maximum ratio of total debt to 1999 EBITDA of 4.5x.
Merrill Lynch synthesized the information for the management case and downside
case forecasts, and based on its analysis and assuming a reasonably acceptable
minimum return to Odyssey, Merrill Lynch calculated a summary reference range of
implied per share values of our common shares of $22.00 to $27.00 (as compared
to the $27.00 per common share payable in the merger).
As described above, Merrill Lynch's opinion and presentation to our board of
directors was one of many factors taken into consideration by our board of
directors in making its determination to recommend adoption of the merger
agreement and the transactions contemplated by the merger agreement.
Consequently, the analyses described above should not be viewed as determinative
of the opinion of our board of directors with respect to our value or whether
our board of directors would have been willing to recommend a merger at a
different level of consideration.
14
<PAGE>
Pursuant to an engagement letter dated July 2, 1998, we engaged Merrill
Lynch to provide financial advisory services to us in connection with the
merger, including, among other things, rendering their opinion. We retained
Merrill Lynch to act as our financial advisor based on Merrill Lynch's
qualifications, expertise and reputation, as well as Merrill Lynch's familiarity
with us. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Pursuant to the terms of the
engagement letter, we agreed to pay Merrill Lynch a fee in an amount equal to
1.0% of the aggregate purchase price, as defined in the engagement letter (which
includes cash and non-cash consideration as well as debt assumed, acquired,
retired or defeased), paid in the merger, upon consummation of the merger. In
addition, we agreed to reimburse Merrill Lynch for its out-of-pocket expenses,
including attorney's fees, incurred in connection with its engagement, and to
indemnify Merrill Lynch and certain related persons against certain liabilities
and expenses arising out of or in conjunction with its rendering of services
under its engagement.
Merrill Lynch has in the past provided financial advisory and financing
services to us and to Odyssey and/or our and their affiliates and may continue
to do, and Merrill Lynch may receive fees for rendering such services. With the
consent of our board of directors, Merrill Lynch is working with Odyssey in
connection with the financing of the merger, pursuant to which we may enter into
certain financing arrangements for which Merrill Lynch is likely to act as a
lender and as co-lead manager, co-arranger and syndication agent, and Merrill
Lynch will receive a fee for these services. In addition, in the ordinary course
of Merrill Lynch's business, Merrill Lynch may actively trade our common shares
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in such securities.
ROBERT W. BAIRD & CO. INCORPORATED
We retained Baird to render an opinion as to the fairness, from a financial
point of view, of the cash merger price to the holders of our common shares. On
January 19, 2000, Baird rendered its opinion to our board of directors to the
effect that, as of January 19, 2000, and based upon and subject to the various
considerations described in the opinion, the cash merger price was fair, from a
financial point of view, to the holders of our common shares.
THE FULL TEXT OF BAIRD'S OPINION, DATED JANUARY 19, 2000, WHICH DESCRIBES
THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY BAIRD IN RENDERING ITS OPINION,
IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT AND IS INCORPORATED IN THIS
DOCUMENT BY REFERENCE. BAIRD'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, AS OF
THE DATE OF THE OPINION AND FROM A FINANCIAL POINT OF VIEW, OF THE CASH MERGER
PRICE TO THE HOLDERS OF OUR COMMON SHARES AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW THAT SHAREHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER. THE SUMMARY OF BAIRD'S OPINION SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED
AS APPENDIX C. YOU ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In conducting its investigation and analysis and in arriving at its opinion,
Baird reviewed information and took into account financial and economic factors
it deemed relevant under the circumstances. In that connection, Baird, among
other things:
- reviewed certain internal information, primarily financial in nature,
including projections, concerning our business and operations, which we
furnished to Baird for purposes of its analysis, as well as publicly
available information including, but not limited to, our recent filings
with the SEC;
- reviewed the draft merger agreement in the form presented to our board of
directors;
15
<PAGE>
- compared the historical market prices and trading activity of our common
shares with those of certain other publicly traded companies Baird deemed
relevant;
- compared our financial position and operating results with those of
certain other publicly traded companies Baird deemed relevant; and
- compared the proposed financial terms of the merger with the financial
terms of certain other business combinations Baird deemed relevant.
Baird held discussions with members of our senior management concerning our
historical and current financial condition and operating results, as well as our
future prospects. Baird was not requested to, and did not, solicit third party
indications of interest in acquiring all or any part of our company. Baird also
considered other information, financial studies, analysis and investigations and
financial, economic and market criteria which Baird deemed relevant for the
preparation of its opinion. We did not place any limitation upon Baird with
respect to the procedures followed or factors considered by Baird in rendering
its opinion. We and Odyssey determined the cash merger price in arms-length
negotiations.
In arriving at its opinion, Baird assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to Baird by us or on our behalf. Baird was not engaged to,
and did not assume any responsibility to, independently verify any of this
information. Baird assumed, with our consent, that:
- all of our material assets and liabilities, contingent or otherwise, known
or unknown, are as set forth in our financial statements and recent
filings with the SEC;
- the financial forecasts examined by Baird were reasonably prepared on
bases reflecting the best currently available estimates and good faith
judgments of our senior management as to our future performance;
- the representations and warranties of each party to the merger agreement
are true and correct and that each party would perform all of the
covenants and agreements to be performed by it pursuant to the merger
agreement; and
- the transaction will be consummated in accordance with the terms of the
draft merger agreement dated January 18, 2000, without any material
amendment and without waiver by any of the parties to their respective
obligations under the merger agreement.
In conducting its review, Baird did not undertake or obtain an independent
evaluation or appraisal of any of our assets or liabilities, contingent or
otherwise, nor did Baird make a physical inspection of our properties or
facilities. Baird's opinion necessarily was based upon economic, monetary and
market conditions as they existed and could be evaluated on the date of its
opinion, and did not predict or take into account any changes which may occur,
or information which may become available, after the date of Baird's opinion.
Furthermore, Baird's opinion relates to financial fairness only, and Baird did
not express an opinion as to the appropriateness of our financial structure or
the soundness of our financial condition subsequent to the consummation of the
merger.
The following is a summary of the material financial analyses performed by
Baird in connection with rendering its opinion.
ANALYSIS OF IMPLIED TRANSACTION MULTIPLES. Based on the cash merger price
of $27.00 per common share, Baird calculated the "implied equity value" and the
"implied enterprise value" as a result of the merger to be $191.7 million and
$298.1 million, respectively. The implied equity value was obtained by
multiplying $27.00 by the total number of our common shares and then subtracting
the proceeds to us from the exercise of stock options. The total number of our
common shares was calculated by adding the shares currently outstanding, the
shares issuable upon the exercise of stock options and the shares issuable upon
the conversion of the convertible trust preferred securities at a conversion
price of $24.55 per share. Baird
16
<PAGE>
calculated the implied enterprise value by adding the book value of our total
outstanding debt and other liabilities to, and subtracting our cash and cash
equivalents from, the implied equity value. Our debt and other liabilities, and
cash and cash equivalents used in the calculation of the implied enterprise
value were as of December 31, 1999 and were provided by our management.
In performing its analysis, Baird used, among other items, operating
statistics for our latest twelve months ("LTM") ended October 1, 1999 and
calendar 1999, as provided by our management, exclusive of non-recurring items
and pro forma for the full year impact of the convertible trust preferred
securities offering completed in October 1999. Baird calculated multiples of the
implied enterprise value to our LTM and calendar 1999 net sales, earnings before
interest, taxes, depreciation and amortization ("EBITDA") and earnings before
interest and taxes ("EBIT"). Baird also calculated multiples of the implied
equity value to our LTM, calendar 1999 and calendar 2000 net income. The table
below summarizes the results of this analysis and is qualified in its entirety
by reference to the other disclosures contained in this section and Appendix C
of this proxy statement.
<TABLE>
<CAPTION>
IMPLIED DAYTON SUPERIOR
TRANSACTION MULTIPLES
-----------------------
<S> <C>
Enterprise Value/LTM Net Sales.......................... 0.9x
Enterprise Value/LTM EBITDA............................. 6.1x
Enterprise Value/LTM EBIT............................... 8.3x
Enterprise Value/Calendar 1999 Net Sales................ 0.9x
Enterprise Value/Calendar 1999 EBITDA................... 5.8x
Enterprise Value/Calendar 1999 EBIT..................... 7.9x
Equity Value/LTM Net Income............................. 13.8x
Equity Value/Calendar 1999 Net Income................... 13.0x
Equity Value/Calendar 2000 Net Income................... 11.0x
</TABLE>
ANALYSIS OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES. Baird reviewed
certain publicly available financial information as of the most recently
reported period and stock market information as of January 13, 2000, for eleven
publicly traded companies that Baird deemed relevant. The group of selected
publicly traded companies is listed below:
- Centex Construction Products, Inc.
- Granite Construction Incorporated
- Harsco Corporation
- Hughes Supply Inc.
- Insteel Industries, Inc.
- Lafarge Corporation
- NCI Building Systems, Inc.
- Pitt-Des Moines, Inc.
- Quixote Corporation
- Simpson Manufacturing Co.
- Southdown, Inc.
The companies were chosen based on a review of publicly traded companies
that possessed general business, operating and financial characteristics
representative of companies in the industry in which we operate. Baird noted
that none of the companies reviewed are identical to us and that, accordingly,
the analysis of these companies necessarily involves complex considerations and
judgments concerning differences in the business, financial and operating
characteristics of each company and other factors that affect the market values
of these companies.
For each selected company, Baird calculated equity value by multiplying
closing stock prices as of January 13, 2000, by the total number of outstanding
shares on a diluted basis. In addition, Baird calculated enterprise value for
each selected company by adding the book value of outstanding total debt,
preferred stock and minority interests to, and subtracting cash and cash
equivalents from, equity value.
17
<PAGE>
Baird then calculated multiples of enterprise value to each selected company's
LTM net sales, LTM EBITDA and LTM EBIT as of the most recently reported period.
Baird also calculated multiples of each selected company's equity value to its
net income for the LTM, calendar 1999 and calendar 2000 periods. Calendar 1999
and calendar 2000 net income for the selected companies were based on median
consensus earnings per share estimates provided by First Call. Baird then
compared the transaction multiples implied in the merger with the corresponding
trading multiples for the selected companies. The table below summarizes the
results of this analysis and is qualified in its entirety by reference to the
other disclosures contained in this section and Appendix C of this proxy
statement.
<TABLE>
<CAPTION>
IMPLIED
DAYTON IMPLIED SELECTED PUBLIC COMPANY
SUPERIOR TRADING MULTIPLES
TRANSACTION -----------------------------------------
MULTIPLES LOW MEDIAN MEAN HIGH
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Enterprise Value/LTM Net Sales........................ 0.9x 0.3x 1.0x 1.0x 1.7x
Enterprise Value/LTM EBITDA........................... 6.1x 3.9x 5.2x 5.3x 7.4x
Enterprise Value/LTM EBIT............................. 8.3x 4.3x 6.9x 7.1x 9.5x
Equity Value/LTM Net Income........................... 13.8x 7.3x 9.6x 10.2x 14.8x
Equity Value/Calendar 1999 Net Income................. 13.0x 6.7x 8.6x 9.7x 14.0x
Equity Value/Calendar 2000 Net Income................. 11.0x 6.3x 7.7x 8.8x 12.1x
</TABLE>
ANALYSIS OF SELECTED COMPARABLE ACQUISITION TRANSACTIONS. Baird reviewed
fourteen completed acquisition transactions which Baird deemed relevant. The
fourteen transactions reviewed were (acquiror/target company):
- Textron Inc./
OmniQuip International, Inc.
- Avery Dennison Corporation/
Stimsonite Corporation
- JLG Industries Inc./
Gradall Industries, Inc.
- Onex Corp./
American Buildings Company
- Dura Automotive Systems, Inc./
Excel Industries, Inc.
- Louisiana-Pacific Corp./
ABT Building Products Corp.
- Dura Automotive Systems, Inc./
Trident Automotive plc
- Keystone Inc./
Grove Worldwide
- Dayton Superior Corporation/
Symons Corporation
- Federal-Mogul Corporation/
T&N plc
- OmniQuip International, Inc./
Snorkel Division of Figgie International Inc.
- Tomkins plc/
Stant Corporation
- Terex Corporation/
Simon Access
- Tower Automotive, Inc./
Automotive Products Company
18
<PAGE>
These transaction were chosen based on a review of completed acquisition
transactions involving companies that possessed general business, operating and
financial characteristics representative of companies in the industry in which
we operate. Baird noted that none of the selected transactions or target
companies reviewed was identical to the merger or us, respectively. Accordingly,
Baird noted that the analysis of selected transactions necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of us and each target company and each acquisition
transaction and other factors that would affect the acquisition value of
selected transactions including, among others, the general market conditions
prevailing in the equity capital markets at the time of that transaction.
For each of the selected transactions, Baird calculated multiples of
enterprise value to each target company's LTM net sales, LTM EBITDA and LTM EBIT
and calculated multiples of equity value to LTM net income based on financial
information available as of the respective transaction announcement dates. Baird
then compared those multiples to the relevant transaction multiples implied in
the merger based on our calendar 1999 operating results, exclusive of
non-recurring items and pro forma for the full year impact of the convertible
trust preferred securities offering completed in October 1999. The table below
summarizes the results of this analysis and is qualified in its entirety by
reference to the other disclosures contained in this section and Appendix C of
this proxy statement.
<TABLE>
<CAPTION>
IMPLIED
DAYTON IMPLIED SELECTED ACQUISITION
SUPERIOR TRANSACTION MULTIPLES
TRANSACTION -----------------------------------------
MULTIPLES LOW MEDIAN MEAN HIGH
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Enterprise Value/Calendar 1999 Net Sales.............. 0.9x 0.4x 0.8x 0.8x 1.7x
Enterprise Value/Calendar 1999 EBITDA................. 5.8x 4.8x 6.6x 6.4x 7.8x
Enterprise Value/Calendar 1999 EBIT................... 7.9x 7.0x 9.7x 9.9x 15.1x
Equity Value/Calendar 1999 Net Income................. 13.0x 9.0x 15.0x 15.8x 25.8x
</TABLE>
For the transactions involving publicly traded target companies, Baird
calculated the premiums paid for the equity in these transactions over the
public market value of the equity at various times prior to the announcement of
these transactions. Baird then compared these premiums to the acquisition
premiums implied in the merger. The table below summarizes the results of this
analysis and is qualified in its entirety by reference to the other disclosures
contained in this section and Appendix C of this proxy statement.
<TABLE>
<CAPTION>
IMPLIED
DAYTON IMPLIED SELECTED ACQUISITION
SUPERIOR TRANSACTION PREMIUMS
TRANSACTION -----------------------------------------
PREMIUM LOW MEDIAN MEAN HIGH
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1 Day Prior........................................... 50.0% 14.3% 40.5% 39.6% 64.6%
7 Days Prior.......................................... 68.8% 25.0% 47.5% 63.6% 131.7%
30 Days Prior......................................... 47.4% 53.1% 68.6% 68.3% 98.8%
90 Days Prior......................................... 57.1% 42.9% 76.8% 77.3% 104.3%
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. Baird performed a discounted cash flow
analysis using projections for calendar 2000 through 2004 as provided by our
management. In that analysis, Baird assumed terminal value multiples ranging
from 6.0x to 7.0x EBIT in calendar 2004 and discount rates ranging from 14.0% to
16.0%. That analysis produced implied per share values of our common shares
ranging from $24.45 to $32.54 per share.
19
<PAGE>
The foregoing summary does not purport to be a complete description of the
analyses performed by Baird or of its presentation to our board of directors.
The preparation of financial analyses and a fairness opinion is a complex
process and is not necessarily susceptible to partial analyses or summary
description. Baird believes that its analyses, and the summary set forth above,
must be considered as a whole, and that selecting portions of those analyses and
of the factors considered by Baird, without considering all analyses and
factors, would create an incomplete view of the processes underlying those
analyses conducted by Baird and its opinion. Baird did not attempt to assign
specific weights to particular analyses. Any estimates contained in Baird's
analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth in Baird's analysis.
Estimates of values of companies do not purport to be appraisals or necessarily
to reflect the prices at which companies may actually be sold. Because these
estimates are inherently subject to uncertainty, Baird does not assume
responsibility for their accuracy.
Baird, as part of its investment banking business, is engaged in the
evaluation 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 retained Baird because
of its experience and expertise in the valuation of businesses and their
securities in connection with mergers and acquisitions. In the ordinary course
of business, Baird from time to time may trade our securities for its own
account or for accounts of its customers and, accordingly, may at any time hold
a long or short position in these securities.
Pursuant to an engagement letter agreement dated December 2, 1999, between
us and Baird, we agreed to pay Baird a fee of $500,000, payable upon delivery of
its opinion, regardless of the conclusions reached by Baird in its opinion. In
addition, we agreed to reimburse Baird for its reasonable out-of-pocket
expenses. We also agreed to indemnify Baird, its affiliates and their respective
directors, officers, partners, employees, agents and controlling persons against
certain liabilities relating to or arising out of its engagement, including
liabilities under the federal securities laws. In the past, Baird has provided
financial advisory services to us, including serving as the lead manager of our
convertible trust preferred securities offering in 1999 and as a co-manager of
our initial public offering in 1996. Baird may provide investment banking
services to us and our affiliates in the future.
CERTAIN ESTIMATES OF FUTURE OPERATIONS AND OTHER INFORMATION
As a matter of policy, we do not make public forecasts or projections as to
our future performance or earnings. In connection with Odyssey's evaluation of
the proposed recapitalization, however, we provided Odyssey, on a confidential
basis, with some nonpublic estimates reflecting our management's view as to our
possible future financial performance for the six fiscal years ending
December 31, 2004. We also provided these estimates to Merrill Lynch and Baird,
our financial advisors. Our management based these estimates on assumptions they
believed at the time were reasonable, in light of industry data they consulted
and our past financial performance. These estimates were prepared before we had
full year 1999 results, so the amounts for 1999 were estimated.
THESE ESTIMATES WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES ESTABLISHED BY THE SEC OR THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. THESE ESTIMATES
ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE IN CONNECTION WITH MANAGEMENT
DECISIONS AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO VARIOUS
INTERPRETATIONS. IN ADDITION, BECAUSE THESE ESTIMATES INHERENTLY ARE SUBJECT TO
SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND OTHER CONTINGENCIES
BEYOND OUR CONTROL, THERE CAN BE NO ASSURANCE THAT THESE ESTIMATES WILL BE
REALIZED; OUR ACTUAL RESULTS MAY BE HIGHER OR LOWER THAN THOSE ESTIMATED.
ACCORDINGLY, WE DO NOT ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OF THIS
INFORMATION. GIVEN OUR HISTORICAL STRATEGY OF GROWTH THROUGH ACQUISITIONS AND
THE HISTORICAL CYCLICALITY OF THE CONSTRUCTION INDUSTRY, ANY YEAR TO YEAR
COMPARISON BEYOND 1999 IS NOT LIKELY TO PROVIDE A MEANINGFUL VIEW OF OUR OVERALL
PERFORMANCE. WE DO NOT GENERALLY PUBLISH OUR BUSINESS PLANS AND STRATEGIES OR
MAKE EXTERNAL DISCLOSURES OF OUR ANTICIPATED FINANCIAL POSITION OR RESULTS OF
20
<PAGE>
OPERATIONS. ACCORDINGLY, WE DO NOT INTEND TO, AND SPECIFICALLY DO NOT ASSUME ANY
OBLIGATION TO, UPDATE OR OTHERWISE REVISE THESE ESTIMATES TO REFLECT
CIRCUMSTANCES EXISTING SINCE THEY WERE PREPARED OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS, EVEN IF ANY OR ALL OF OUR UNDERLYING ASSUMPTIONS ARE SHOWN
TO BE IN ERROR. NEITHER OUR AUDITORS NOR ANY OTHER INDEPENDENT ACCOUNTANTS HAVE
COMPILED, EXAMINED OR PERFORMED ANY PROCEDURES WITH RESPECT TO THESE ESTIMATES,
NOR HAVE THEY EXPRESSED ANY OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT
TO THIS INFORMATION OR ITS ACHIEVABILITY AND THEY ASSUME NO RESPONSIBILITY FOR,
AND DISCLAIM ANY ASSOCIATION WITH, THESE ESTIMATES.
These estimates are summarized in the following table:
<TABLE>
<CAPTION>
ESTIMATES FOR THE FISCAL YEAR DECEMBER 31,
---------------------------------------------------------------
1999(1) 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Sales........................... $315,366 $351,855 $382,296 $415,093 $451,139 $488,914
% Growth........................ 11.6% 8.7% 8.6% 8.7% 8.4%
Operating Income................ $ 37,622 $ 42,115 $ 46,750 $ 54,386 $ 61,675 $ 69,525
Net Income Available to Common
Shareholders.................. $ 13,986 $ 16,331 $ 20,020 $ 25,393 $ 30,942 $ 36,861
Diluted Earnings per share...... $ 2.24 $ 2.50 $ 3.02 $ 3.78 $ 4.56 $ 5.40
</TABLE>
- ------------------------
(1) Fiscal year 1999 estimates exclude a non-recurring pension gain.
The material assumptions underlying these estimates were the following:
- we would make no new acquisitions during the periods covered by the
estimates after our acquisition of the Southern Construction Products
business in October, 1999, even though that is contrary to our historical,
and anticipated future, operating strategy,
- there would be no recession during the periods covered by the estimates in
the portions of the construction industry that we serve, even though the
overall construction industry historically has been cyclical,
- our overall annual sales would increase at a compounded annual rate of
9.2%,
- our overall cost of goods sold would increase at a compounded annual rate
of 9.1%,
- our overall selling, general and administrative expenses would increase at
a compounded annual rate of 7.4%,
- inflation would be 3.5% per year, and
- we did not take the proposed merger into account.
INTERESTS OF CERTAIN PERSONS; CONFLICTS OF INTEREST
One of our directors and some of our executive officers have interests which
may have presented, and which may now present, potential conflicts of interest
with respect to the merger. Our directors were aware of the following matters
and considered them in making their determination. The following is a summary of
the interests of those persons in the merger that may be different from yours.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Ciccarelli and eight
other of our executive officers which become effective only if the merger is
completed. In negotiating the merger agreement, Odyssey insisted that employment
agreements with these nine executive officers be a condition to Stone
Acquisition Corp.'s obligation to complete the merger. Our board of directors
was willing to approve the merger agreement only if the executives negotiated
these agreements with Odyssey and entered into them
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at the time the merger agreement was signed, in order to reduce the number of
conditions to the merger which would remain outside of our control after the
merger agreement was signed.
Generally, each employment agreement provides:
- The initial term of employment will be three years and automatically will
be extended for additional one-year periods unless either we or the
executive notifies the other of termination no later than 90 days before
the end of a term.
- The annual base salary, which may be increased by our board of directors
in its discretion, for the five most highly compensated of these executive
officers will be as follows:
<TABLE>
<CAPTION>
NAME MINIMUM ANNUAL BASE SALARY
- ---- --------------------------
<S> <C>
John A. Ciccarelli.................. $350,000
Alan F. McIlroy..................... 225,000
Raymond E. Bartholomae.............. 197,000
Michael C. Deis, Sr................. 190,000
Jaime Taronji, Jr................... 176,000
</TABLE>
- Each executive, together with approximately 45 other members of our
management, will be entitled to receive stock options under a new stock
option plan to be adopted following the merger. The new stock option plan
will provide for the grant of options to purchase up to an aggregate of
10% of the fully-diluted number of common shares outstanding immediately
following the merger to those persons who are selected from time to time
to participate in the plan. We anticipate that a portion of the options to
be granted initially under this new option plan will be fully vested at
the time the options are granted. Based on recommendations made to Odyssey
by Mr. Ciccarelli, we anticipate that the fully-vested options which will
be granted initially to all executive officers and employees under the new
plan will represent, in the aggregate, approximately 0.47% of the
outstanding shares following the merger, determined on a fully-diluted
basis, and that the fully-vested options which will be granted initially
to Mr. Ciccarelli will represent approximately 0.17% of the outstanding
shares following the merger, determined on a fully-diluted basis.
- Each executive will be entitled to participate in our executive annual
bonus plan and in our various other employee benefit plans and
arrangements which are applicable to senior officers and which, during the
first 12 months after the merger, must provide benefits substantially
equivalent to those being provided at the time of the merger, other than
stock options.
- If an executive is terminated without cause, he will be entitled to
receive a pro rata share of his bonus for the year of termination, to
continue to receive his annual base salary for 24 months and to continue
coverage under our medical and dental programs for one year on the same
basis as he was entitled to participate prior to his termination.
- Each executive is prohibited from competing with us during the term of his
employment and for two years following termination of his employment.
MR. CICCARELLI'S EMPLOYMENT AGREEMENT. Mr. Ciccarelli's employment
agreement differs from the other agreements described above in the following
respects:
- Mr. Ciccarelli will serve as Chairman of the Board as well as in his
current offices of President and Chief Executive Officer.
- At the end of the initial three year term, Mr. Ciccarelli's employment
automatically will be extended for a period of two years unless we or he
notifies the other of the termination no later than 60 days before the end
of the initial term.
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- We and Mr. Ciccarelli may agree prior to the end of the initial term that,
effective at the end of the initial term, he will retire as President and
Chief Executive Officer but will continue as non-executive Chairman of the
Board with compensation commensurate with his duties and responsibilities.
- Mr. Ciccarelli is entitled to receive an annual car allowance, payment of
annual membership fees for membership in two country, alumni, or social
clubs of his choice and payment for reasonable expenses incurred by him
for professional assistance with taxes and financial management,
consistent with our current practices.
- If Mr. Ciccarelli elects in the future to purchase common shares pursuant
to the exercise of pre-emptive rights under a management stockholders
agreement, we or one of our affiliates will lend him up to $500,000 to pay
for the shares. The loan will be secured by the shares purchased and will
be on a recourse basis with interest at the applicable federal rate,
although payment of the interest will be deferred until the shares are
sold.
- If Mr. Ciccarelli remains employed by us for the full initial three year
term of his employment agreement, he may during the following two years
require us to purchase some of his common shares at their fair market
value if our EBITDA reaches specified levels and he satisfies other
conditions. In addition, if he exercises this put right and notifies us
that he intends to exercise stock options, we or an affiliate will lend
him the amount of the exercise price plus the amount of his income tax
liability. This loan generally would be on the same terms as the loan to
purchase shares described above.
EQUITY ROLLOVER AGREEMENTS
We also have entered into option exercise, cancellation and equity rollover
agreements with Mr. Ciccarelli and seven of the eight other executive officers
with whom we entered into employment agreements. These equity rollover
agreements become effective only if the merger is completed.
Generally, these rollover agreements require each executive to retain common
shares and, in most cases, stock options, with a specified aggregate value
following the merger. In some cases, the executive has agreed to exercise stock
options in order to obtain some of the common shares which he has agreed to
retain following the merger.
Ohio law does not expressly permit holders of the same class of shares to be
treated disparately in a merger. For that reason, our board is required by the
merger agreement to adopt an amendment to our articles of incorporation prior to
completion of the merger to designate the series A preferred shares solely to
facilitate the required retention of common shares by management. The rollover
agreements provide that each executive will exchange, immediately prior to the
merger, the number of common shares he is required to retain for the same number
of newly-created series A preferred shares. The merger agreement provides that
each of these series A preferred shares then will be converted in the merger
into one common share.
These rollover agreements also provide the following:
- The executive is required to vote his common shares and series A preferred
shares in favor of the merger.
- All common shares and stock options retained by the executive following
the merger, and all common shares issued upon his exercise of retained
stock options after the merger, will be subject to a management
shareholders agreement to be entered into following the merger with rights
and obligations typical for such agreements.
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<PAGE>
- Stock options which are not to be exercised or retained by the executive
following the merger will be cancelled in exchange for a cash payment
equal to the spread between $27.00 per share and the exercise price, as
described under "The Merger Agreement--Treatment of Stock Options."
- If the executive must exercise stock options in order to obtain some of
the common shares he is required to exchange for series A preferred shares
and he so requests, we will make a non-interest bearing, recourse loan to
him in a maximum amount equal to the exercise price of the options plus
the estimated federal and state income tax liability he will incur in
connection with the exercise. These loans will be secured by a pledge of
the shares issued upon exercise of the options.
The following table shows for Mr. Ciccarelli and each of the eight other
executive officers with whom we have signed employment agreements:
- the number of common shares he ultimately will retain following the
merger, including common shares he will acquire prior to the merger by
exercising stock options or through a purchase of common shares from us;
- the number of options that he will retain following the merger; and
- the net value, based on $27.00 per share less the exercise price, for each
of his options that will be cashed out in connection with the merger.
<TABLE>
<CAPTION>
NET VALUE OF
SHARES TO BE OPTIONS TO BE OPTIONS TO BE
NAME RETAINED RETAINED CASHED OUT*
- ---- ------------ ------------- -------------
<S> <C> <C> <C>
John A. Ciccarelli....................... 37,038 -0- $3,790,410
Raymond E. Bartholomae................... 19,980 3,205 -0-
Michael C. Deis, Sr...................... 21,262 10,556 178,585
James W. Fennessy........................ 8,094 -0- 161,465
Mark K. Kaler............................ 26,611 11,696 -0-
Alan F. McIlroy.......................... 16,931 18,929 65,546
William C. Mongole....................... 25,300 -0- -0-
James C. Stewart......................... 21,123 9,695 178,585
Jaime Taronji, Jr........................ 1,852 -0- -0-
------- ------ ----------
Total.................................. 178,191 54,081 $4,374,591
</TABLE>
- ------------------------
* Number of shares covered by the options multiplied by $27.00 less the
aggregate exercise price of the options.
Included in the preceding table are 19,444 common shares that we anticipate
selling to Messrs. Bartholomae, Kaler and Taronji prior to the merger at a price
of $27.00 per share. We also anticipate making a recourse loan to each of
Messrs. Bartholomae and Taronji in the amount of the purchase price of their
shares. These loans will bear interest at the applicable federal rate, although
payment of the interest will be deferred until the loan matures.
Messrs. Bartholomae and Taronji will pledge the shares which they purchase to
secure repayment of these loans. Immediately prior to the merger, these
executive officers will exchange each share purchased for one of our series A
preferred shares.
We and Stone Acquisition Corp. may agree to amend the merger agreement to
provide for the rollover of common shares and options held by other members of
management or to modify the amounts listed above. We will not, however, amend
the merger agreement to increase the number of shares or options to be retained
by any of the nine executive officers with whom we have entered into employment
agreements from the numbers shown in the table above. Upon consummation of the
merger, the members of management listed above will hold approximately 5.7% of
our outstanding common shares following the merger.
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Approximately 28 of our employees with whom we do not have employment
agreements also have agreed to retain following the merger an aggregate of
37,438 common shares, representing approximately 1.2% of our outstanding common
shares following the merger, and options to purchase an aggregate of 49,449
common shares.
SEVERANCE AGREEMENTS
We have offered to enter into severance agreements with 29 of our
executives, not including the nine executive officers with whom we signed
employment agreements, to be effective upon completion of the merger. Generally,
the severance agreements provide that if we experience a change of control,
which would include the merger, prior to January 19, 2001 and the executive's
employment is terminated under the circumstances described in the agreements
within two years after the change of control, the executive will be entitled to
receive various benefits, including the following:
- a cash payment equal to 50% of the executive's then current base salary,
- the executive's full prior year bonus, if not already paid, and a
pro-rated portion of the executive's targeted bonus for the year in which
the termination occurs,
- a cash payment equal to the net value of all outstanding stock options,
- continuation of basic medical, dental, life and disability insurance for
six months, and
- reimbursement of legal fees and expenses reasonably incurred by the
executive in good faith as a result of the termination of employment.
As a condition to entering into a severance agreement, the executive was
required to agree not to compete with us or solicit any of our employees during
the 12-month period following a termination of the executive's employment, if it
occurs within the period during which benefits are payable under the severance
agreements. We do not expect to terminate the employment of any of these
executives in connection with the merger.
BOARD OF DIRECTORS
Odyssey has informed us that, immediately following the merger, our Board of
Directors will be comprised of four directors, including Mr. Ciccarelli and
William F. Hopkins, Muzzafar Mirza and Douglas Rotatori of Odyssey.
Messrs. Hopkins, Mirza and Rotatori currently are not affiliated with us. The
age of these individuals as of March 22, 2000 and their positions and principal
occupations during the past five years are as follows:
JOHN A. CICCARELLI, age 60, has been our President since 1989 and our Chief
Executive Officer and a director since 1994.
WILLIAM F. HOPKINS, age 36, has been a member and Managing Principal of
Odyssey Investment Partners, LLC since 1997. From 1994 to 1997, Mr. Hopkins was
a principal in the private equity investing group of Odyssey Partners, LP. Prior
to joining Odyssey, Mr. Hopkins was a member of the merchant banking group of GE
Capital Corp. Mr. Hopkins is a director of TransDigm Inc.
MUZZAFAR MIRZA, age 42, has been a member and Managing Principal of Odyssey
Investment Partners, LLC since 1997. From 1993 to 1997, Mr. Mirza was a
principal in the private equity investing group of Odyssey Partners, LP. From
1988 to 1993, Mr. Mirza was employed by the merchant banking group of GE Capital
Corp. Mr. Mirza is a director of TransDigm Inc. and PF Net Communications Inc.
DOUGLAS ROTATORI, age 39, has been a principal of Odyssey Investment
Partners, LLC since 1998. From 1995 to 1998, Mr. Rotatori was a principal with
Wellspring Capital Management, LLC. From 1987 to 1995, Mr. Rotatori was in the
Investment Banking Department of Bear, Stearns & Co., Inc.
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<PAGE>
ACCOUNTING TREATMENT
We will account for the merger as a recapitalization. As a result, the
merger will have no impact on the historical basis of our assets and
liabilities.
FINANCING
Stone Acquisition Corp.'s obligation to complete the merger is contingent
on, among other things, obtaining the financing for the merger contemplated by
commitment letters obtained by it at the time the merger agreement was signed.
Consummation of the merger will require payment to:
- holders of our common shares, excluding the common shares to be retained
by certain of our existing shareholders,
- holders of our options who receive a cash payment equal to the spread in
their options,
- holders of our trust preferred securities who convert their securities
into the right to receive the cash merger consideration as if their
securities had been converted into common shares prior to the merger plus
the premium payable under the terms of the trust preferred securities as a
result of the merger,
- holders of certain of our existing indebtedness, and
- those who are owed fees and expenses related to the merger and the
financing.
It is anticipated that the financing will be as follows:
EQUITY FINANCING
Odyssey Investment Partners Fund, L.P. has agreed to capitalize Stone
Acquisition Corp. with up to $84.0 million in cash (subject to increase by
$3.5 million if certain events happen) if the conditions to the obligation of
Stone Acquisition Corp. to complete the merger are satisfied and the debt
financings described below are fully funded. This amount will be reduced by
approximately $4 million to $5 million, which is the value of the common shares
and stock options which certain existing shareholders and holders of stock
options have agreed to retain following the merger.
DEBT FINANCING
On January 19, 2000, Stone Acquisition Corp. provided us with copies of
commitment letters it obtained with respect to the senior bank financing and, if
necessary, the senior subordinated bridge loan. The commitments are subject to
customary conditions, including, among others, negotiation and execution of
definitive documentation with respect to the financings and the condition that
nothing shall have occurred that has had, or reasonably could be expected to
have, a material adverse effect on the business, operations, assets (taken as a
whole), liabilities (taken as a whole), condition (financial or otherwise) or
results of operations of our company and our subsidiaries, taken as a whole.
At the time of the merger, we expect to enter into new debt financing
arrangements aggregating $285 million, of which approximately $230 million will
be used to fund the merger and to pay related fees and expenses. These
arrangements are expected to consist of:
- $135 million of senior bank financing; and
- $150 million of senior subordinated notes.
We will be the primary borrower under these debt financings.
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If the senior subordinated note financing, which is expected to consist of
high yield debt securities, cannot be consummated at the time of the merger, it
is expected that we will enter into a bridge loan, for which Stone Acquisition
Corp. has received a commitment, until we can replace the bridge loan with
senior subordinated notes. The bridge loan, if it is necessary, will be on terms
less favorable to us than the terms of the high yield debt securities. In
addition, we expect that the bridge loan initially would bear interest at a rate
in excess of the expected interest rate on the high yield debt securities, and
that rate would increase over time. If the bridge loan is funded, the commitment
for the senior bank financing provides that the amount of that financing will be
increased by $70 million.
Stone Acquisition Corp.'s debt financing arrangements generally assume that
all of our outstanding trust preferred securities and the associated debentures
held by the Dayton Superior Capital Trust will be converted into common shares
prior to the merger or will be converted into the amount of cash the holders
would be entitled to receive upon conversion following the merger. Holders of
the trust preferred securities may decide not to convert their securities and
may continue to hold their securities, but can elect to convert them any time
after the merger is completed. If the holders convert those securities after the
merger is completed, they will receive cash equal to the amount of cash they
would have received in the merger if they had converted their securities into
common shares prior to the merger plus a premium which will be set at the
effective time of the merger.
EFFECT OF THE MERGER ON OUR COMMON SHARES
Our common shares currently are listed on the New York Stock Exchange.
Following the merger, our common shares no longer will be traded on the New York
Stock Exchange, price quotations no longer will be available and the
registration of our common shares under the Securities Exchange Act of 1934 will
be terminated. We will remain subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act, however, with respect to the
debentures which will be distributed from the Dayton Superior Capital Trust to
the holders of our trust preferred securities when we terminate the Dayton
Superior Capital Trust at the time of the merger, as required by the merger
agreement, to the extent that any of those debentures remain outstanding.
REGULATORY MATTERS
The Hart-Scott-Rodino Antitrust Improvements Act requires that both we and
Stone Acquisition Corp. furnish information to the Antitrust Division of the
United States Department of Justice and the Federal Trade Commission in
connection with the merger. We cannot complete the merger until a waiting period
has expired or been terminated.
We and Stone Acquisition Corp. filed a notification and report form with
respect to the merger with the Antitrust Division and the Federal Trade
Commission on April 7, 2000.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the merger to the holders of our common shares. It is based upon
the Internal Revenue Code of 1986, its legislative history, existing and
proposed treasury regulations, judicial authority and current administrative
rulings and pronouncements of the Internal Revenue Service, all of which are
subject to change, possibly with retroactive effect. Any such change could
materially affect the tax consequences described in the summary. The summary
does not address any foreign, state or local tax consequences of the merger.
The summary applies to persons owning our common shares, but does not apply
to members of our management who exchange their common shares for our series A
preferred shares prior to the merger. The summary does not address all tax
consequences of the merger that may be relevant to owners of
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<PAGE>
common shares in light of their particular circumstances or to some types of
shareholders subject to special treatment under United States federal income tax
law, including:
- persons who are entitled to relief as dissenting shareholders under Ohio
law,
- persons who acquired their common shares by exercising employee or
director stock options or otherwise as compensation,
- persons who receive our common shares or options to purchase our common
shares after the merger as consideration for services,
- tax-exempt entities,
- insurance companies,
- financial institutions,
- dealers in securities or currencies,
- investors that hold common shares as part of a straddle or a hedging or
conversion transaction,
- foreign persons, and
- investors whose functional currency is not the U.S. dollar.
HOLDERS OF OUR COMMON SHARES SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE
TAX CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER THE INTERNAL REVENUE
CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION, OF THE MERGER.
THE MERGER
The merger will be a taxable transaction to you for United States federal
income tax purposes. You will be treated for United States federal income tax
purposes as if you sold a portion of your common shares to Odyssey for cash (a
sale transaction), and had a portion of your common shares redeemed by us for
cash (a redemption transaction).
The portion of your common shares that will be considered to be sold to
Odyssey for cash (the sale transaction) will be equal to the aggregate amount of
cash contributed to Stone Acquisition Corp. by Odyssey and used to pay cash to
common shareholders in the merger divided by the aggregate amount of cash paid
to all holders of our common shares in the merger. Your remaining common shares
will be treated as having been redeemed by us for cash (the redemption
transaction).
If you owned our common shares as a capital asset (generally, an asset held
for investment), you will recognize capital gain or loss on the deemed sale and
redemption at the effective time of the merger. You generally are required to
determine the amount of capital gain or loss separately with respect to each
block of shares that you own. The amount of capital gain or loss recognized PER
SHARE will equal the difference between: (i) $27.00, and (ii) your adjusted tax
basis in that share. Your gain or loss will be long-term capital gain or loss if
at the time of the sale you have held your common shares for more than one year.
If you are an individual, your net long-term capital gains currently are subject
to a maximum federal income tax rate of 20%. Your capital gain recognized in
this transaction may be reduced by your capital losses, if any.
The summary above does not apply to the portion of the transaction that
constitutes a redemption transaction if you are considered to constructively own
our shares after the merger. In general, you would constructively own our shares
in various circumstances, including the following:
- your spouse, child, grandchild or parent owns our common shares after the
merger;
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- you or your spouse, child, grandchild, or parent hold certain interests in
an entity that owns our shares after the merger, such as any interest in a
partnership, estate, or trust, and 50% or more of the value of the stock
in a corporation; or
- you or your spouse, child, grandchild, parent or entity in which you have
an interest (such as any interest in a partnership, estate or trust or 50%
or more of the value of the stock in a corporation) hold an option or
conversion right to acquire our shares after the merger.
If you constructively own our shares after the merger, then the amount of
cash you are deemed to receive in the redemption portion of the transaction
could be taxed as a dividend to the extent of our current or accumulated
earnings and profits, depending on your circumstances. If you are an individual,
your dividend income currently is subject to a maximum federal income tax rate
of 39.6%. If you are a corporation, you may be eligible for the
dividends-received deduction, subject to certain limitations. You can waive
application of constructive ownership rules in accordance with Section 302(c) of
the Internal Revenue Code, provided that certain requirements are satisfied. IF
YOU THINK THAT YOU MIGHT CONSTRUCTIVELY OWN SHARES AFTER THE MERGER, YOU ARE
STRONGLY ENCOURAGED TO CONSULT WITH YOUR INDIVIDUAL TAX ADVISOR TO DETERMINE THE
FEDERAL TAX CONSEQUENCES OF THE MERGER.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments made on, and proceeds from the sale of, our common shares may be
subject to a backup withholding tax of 31% if you are not an exempt recipient
and:
- fail to provide your social security or taxpayer identification number to
us or your broker;
- provide us or your broker with an incorrect social security or tax
identification number;
- fail to provide us or your broker with a certified statement that your
social security or tax identification number is correct and that you are
not subject to backup withholding; or
- improperly report interest and dividends on your tax return.
Any withheld amounts generally will be allowed as a credit or refund against
your federal income tax, provided the required information is timely filed with
the Internal Revenue Service.
LITIGATION CHALLENGING THE MERGER
A lawsuit has been filed in the Montgomery County, Ohio, Common Pleas Court
seeking to prohibit the merger or, if the merger already has happened, to undo
the merger and recover money damages. The complaint alleges, among other things,
that our directors breached their fiduciary duties and that the consideration
payable in the merger is unfair to our shareholders. We have filed with the
court a motion to dismiss the complaint. We believe this lawsuit has no merit
and are committed to vigorously defending ourselves and the other defendants.
DISSENTER'S RIGHTS
Ohio law permits holders of common shares to dissent from the merger and
have the fair cash value of their shares appraised by the Court of Common Pleas
of Montgomery County, Ohio and paid to them in cash. If you dissent from the
merger and follow the required procedure, you will not receive the $27.00 per
share price in the merger. Instead, your only right will be to receive the fair
cash value of your common shares, paid in cash.
The fair cash value of a common share is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay. Fair cash
value is determined as of the day prior to the day on which the vote of the
shareholders adopting the merger agreement is taken. When determining the fair
cash value, any
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appreciation or depreciation in market value resulting from the merger is
excluded. In no event can the fair cash value exceed the amount specified in the
demand made by the dissenting shareholder, as discussed in numbered paragraph 3
below.
The applicable provisions of Ohio law related to dissenter's rights are
attached to this proxy statement as Appendix D. The following is a description
of the principal steps you must take to perfect your rights as a dissenting
shareholder under Ohio law. You must do each of the following. If your shares
are held through a broker, bank or other nominee, you must contact the person
holding the shares and instruct it to take the following steps.
1. YOU MUST BE A SHAREHOLDER ON APRIL 10, 2000. The common shares as
to which you wish to perfect dissenter's rights must be registered in your
name with our transfer agent on April 10, 2000.
2. YOU MUST NOT VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT. Only a shareholder whose common shares are not voted in favor of
adoption of the merger agreement is entitled, if the merger is completed, to
be paid the fair cash value of the common shares which were registered in
the shareholder's name on April 10, 2000. A vote for adoption of the merger
agreement waives dissenter's rights.
3. YOU MUST GIVE US A WRITTEN DEMAND. If you wish to dissent, you must
give us a written demand for the fair cash value of the dissenting shares on
or before the tenth day following the shareholder vote adopting the merger
agreement. The written demand should be delivered to Dayton Superior
Corporation, 7777 Washington Park Drive, Suite 130, Dayton, Ohio 45459,
Attention: Secretary. The written demand must include your name and address,
the number of common shares as to which you are making the demand and the
amount in dollars and cents you are claiming is the fair cash value of the
common shares for which you are exercising dissenter's rights.
4. YOU MUST DELIVER YOUR CERTIFICATES TO US FOR LEGENDING, IF WE
REQUEST. If we so request, you must submit the certificates representing
your dissenting shares to us within 15 days after we send you our request.
We then will endorse the certificates with a legend that demand for the fair
cash value has been made and will return the certificates to you.
5. YOU MUST FILE A PETITION IN COURT, IF YOU AND WE CANNOT AGREE ON THE
FAIR CASH VALUE OF YOUR DISSENTING SHARES. If you and we cannot agree on
the fair cash value of your dissenting shares, either you or we must, within
three months after you give your written demand, file or join in a petition
in the Court of Common Pleas of Montgomery County, Ohio, for a determination
of the fair cash value of your dissenting shares. We do not intend to file
any complaint for a judicial determination of the fair cash value of any of
our common shares.
Upon motion made by a person who has filed a complaint with the Common Pleas
Court, the court will hold a hearing to determine whether you are entitled to be
paid the fair cash value of your common shares. If the court finds that you are
so entitled, it may appoint one or more appraisers to receive evidence and to
recommend the fair cash value. The court then is required to make a finding as
to the fair cash value of the common shares for which dissenter's rights have
been asserted and to render a judgment against us for the payment of that value,
with interest at a rate and from a date that the court considers equitable. The
costs of the proceedings, including reasonable compensation to the appraiser or
appraisers as fixed by the court, are to be apportioned or assessed as the court
considers equitable. We must pay the fair cash value of the dissenting shares to
you within 30 days after the date the fair cash value finally is determined or
the effective time of the merger, whichever is later. We are required to make
payment, however, only after you surrender to us the certificates representing
the common shares for which payment is being made.
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If you dissent from the merger, your right to be paid the fair cash value of
your common shares will terminate:
- if, for any reason, the merger is not completed;
- if you fail to give us a timely and appropriate written demand;
- if you do not, upon our request, timely and appropriately surrender the
certificates evidencing your dissenting shares to us so that we can
endorse the certificates with a legend stating that a demand for the fair
cash value of the common shares has been made;
- if you withdraw your demand with the consent of our board of directors;
- if we and you have not agreed upon the fair cash value of your dissenting
shares and you do not timely file or join in an appropriate petition in
the Court of Common Pleas of Montgomery County, Ohio; or
- if you otherwise fail to comply with the requirements of Section 1701.85
of the Ohio Revised Code.
THE MERGER AGREEMENT
The following describes various aspects of the proposed merger, including
the material provisions of the merger agreement. Because this is a summary, it
does not contain all information you should consider. The merger agreement is
attached to this proxy statement as Appendix A and is incorporated in this proxy
statement by reference. You should read the merger agreement for provisions that
may be important to you.
THE MERGER
The merger agreement provides for the merger of Stone Acquisition Corp. into
us, so that following the merger Stone Acquisition Corp. no longer will exist
and we will be the surviving corporation. We will continue to be governed by the
laws of Ohio after the merger.
The merger will become effective when we file a certificate of merger with
the Ohio Secretary of State or at any later date that is specified in the
certificate of merger. The merger is expected to become effective on the same
day as the closing of the merger. This will take place on the next day after the
conditions described in the merger agreement have been satisfied or waived or on
another date agreed upon by Stone and us.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time the merger becomes effective:
- Each of our common shares that is outstanding immediately prior to the
merger will be converted into the right to receive $27.00 in cash without
interest. This does not include common shares described in the following
sentence or common shares owned by any shareholder who properly exercises
his or her dissenter's rights, as described above under "Dissenter's
Rights."
- All of our common shares owned by us, by Stone Acquisition Corp., or by
any of our or Stone Acquisition Corp.'s subsidiaries automatically will be
cancelled without the payment of any consideration.
- Each of our series A preferred shares that we will issue to some members
of our management immediately prior to the merger in exchange for some of
their common shares will be converted into the right to receive one of our
common shares which will remain outstanding immediately following the
merger.
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- Each of Stone Acquisition Corp.'s common shares that is outstanding
immediately prior to the merger will be converted into the right to
receive one of our common shares which will remain outstanding immediately
following the merger.
TREATMENT OF STOCK OPTIONS
Except as we otherwise agree with Stone Acquisition Corp., all of our stock
option plans and any other plan, program or arrangement with any current or
former employee, officer, director or consultant providing for the issuance or
grant of any other interest in respect of our capital shares will terminate at
the time the merger becomes effective.
Except as set forth below, each outstanding option granted under one of our
option plans will either:
- be canceled by us immediately before the merger becomes effective, and at,
or shortly after, the effective time of the merger, the former holder of
the option will be entitled to receive from us, for each share previously
subject to the option, cash equal to the excess, if any, of $27.00 over
the exercise price per share contained in the option, subject to
withholding or other taxes required by law to be withheld; or
- represent the right to receive $27.00 per share upon the exercise of the
option after the effective time of the merger,if the option holder does
not consent to the cancellation described above.
The merger agreement provides that some options held by members of our
management will not be canceled and will continue in effect following the
merger, as described under "Special Factors--Interests of Certain Persons;
Conflicts of Interest." Otherwise, we agreed to use our reasonable best efforts
to ensure that after the effective time of the merger no current or former
employee, officer, director or consultant will have any option to purchase any
equity interest in us under any stock option plan or other employee plan
maintained by us.
EXCHANGE OF OUR COMMON SHARES
Stone Acquisition Corp. will select a paying agent, who must be acceptable
to us, to facilitate the exchange of our common shares and the payment of cash
to our former shareholders. At or promptly after the merger is effective, the
necessary funds will be deposited with the paying agent to be distributed to our
former shareholders in exchange for their common share certificates. After the
merger is completed, the paying agent will mail a letter of transmittal to you
that will contain instructions for returning your share certificates. When the
paying agent receives your certificate, you will be entitled to receive the cash
consideration payable in the merger.
PLEASE DO NOT SEND SHARE CERTIFICATES TO US OR THE PAYING AGENT UNTIL YOU
HAVE RECEIVED A TRANSMITTAL FORM. DO NOT RETURN YOUR SHARE CERTIFICATE WITH THE
ENCLOSED PROXY CARD.
At or promptly after the merger is effective, we also will deposit with the
paying agent certificates representing the common shares that are being issued
in the merger to the holders of our series A preferred shares. The paying agent
will exchange the preferred share certificates for common share certificates in
accordance with customary exchange practices.
After the merger, each certificate formerly representing our common shares,
other than those owned by dissenting shareholders, will represent only the right
to receive the cash merger consideration. If you have not complied with the
exchange procedures within one year after the merger is completed, you may look
only to us for payment of the merger consideration due to you. At that point,
you will be a general unsecured creditor of us with respect to your claim.
If your share certificate representing our common or preferred shares has
been lost, stolen or destroyed, you will only be entitled to receive the merger
consideration by making an affidavit and, if
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required by us, posting a bond in an amount sufficient to protect us against
claims related to your share certificate.
REPRESENTATIONS AND WARRANTIES
We made various representations and warranties to Stone Acquisition Corp. in
the merger agreement, some of which we qualified by materiality or by our
knowledge. These representations cover the following matters:
- our corporate existence and capitalization;
- the absence of any shareholder agreements, voting trusts or the like with
respect to the voting of our equity securities;
- our indebtedness and undisclosed liabilities;
- our corporate power and authority to enter into and perform the merger
agreement;
- the enforceability of the merger agreement against us;
- our ownership of our subsidiaries and their capitalization;
- the absence of changes or events that would be adverse to us;
- title to our assets;
- our significant contracts;
- that the merger agreement and the merger will not violate our
organizational documents, contracts or permits, or violate applicable
laws, or create any liens on our assets;
- consents and approvals needed from third parties in connection with the
merger;
- our compliance with laws, including federal securities and environmental
laws, and the absence of any applicable federal or Ohio anti-takeover laws
to the merger;
- the compliance of our financial statements with generally accepted
accounting principles;
- litigation;
- labor matters;
- the fairness opinions of our financial advisors and the fees payable to
them;
- employee benefit plans;
- tax matters;
- our customers and suppliers;
- our compliance with environmental laws; and
- the recommendation of our board of directors to you with respect to the
merger and the required vote of our shareholders to approve the merger.
Stone Acquisition Corp. also made representations and warranties to us in
the merger agreement, some of which are qualified by materiality or by Stone
Acquisition Corp.'s knowledge. These representations cover the following
matters:
- its corporate existence;
- its corporate power and authority to enter into and perform the merger
agreement;
- the enforceability of the merger agreement against Stone;
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- consents and approvals needed by third parties in connection with the
merger;
- that the merger agreement and the merger will not violate Stone
Acquisition Corp.'s organizational documents, contracts or permits, or
violate applicable laws, or create any liens on Stone Acquisition Corp.'s
assets;
- the accuracy of the information submitted by Stone for use in this proxy
statement and other SEC documents;
- the financing of the merger; and
- the absence of any payments due by Stone Acquisition Corp. to any brokers,
finders or the like.
COVENANTS
CONDUCT OF OUR BUSINESS PRIOR TO THE MERGER
We agreed that until the merger is effective, we will conduct our and our
subsidiaries' businesses in the regular and ordinary course unless we receive
Stone Acquisition Corp.'s prior consent to a deviation from past practice. We
also agreed to the following, unless we receive Stone Acquisition Corp.'s prior
consent to act otherwise:
- we will use our reasonable best efforts to preserve our and our
subsidiaries' business organizations and goodwill, retain our and our
subsidiaries' officers and employees and maintain satisfactory
relationships with persons having business relationships with us;
- we will not amend our organizational documents, except to authorize the
series A preferred shares as described in "Exchange of Our Common Shares"
and as otherwise permitted by the merger agreement;
- we will promptly notify Stone Acquisition Corp. if members of management
discover any material adverse changes with respect to us, any material
litigation or government complaints, or a material breach of any
representation or warranty made by us in the merger agreement;
- we will promptly deliver to Stone Acquisition Corp. copies of all
documents we file with the SEC after the date of the merger agreement;
- neither we nor our subsidiaries will propose to or enter into any
agreement relinquishing material contract rights or regarding any
acquisition, disposition or lease of any assets or creating any lien on
any assets, except for transactions in the ordinary course of business
related to inventory, rental equipment or obsolete assets, which are not
material to us and our subsidiaries as a whole;
- neither we nor our subsidiaries will adopt resolutions providing for
dissolution, merger or other restructuring events, other than the merger
described in the merger agreement;
- neither we nor our subsidiaries will issue equity securities or options or
securities convertible into equity securities, except for (1) common
shares issuable upon the exercise of outstanding options or upon the
conversion of the debentures now held by the Dayton Superior Capital
Trust, and (2) our series A preferred shares issuable in accordance with
the merger agreement;
- neither we nor our subsidiaries will change the terms of any outstanding
options or restricted stock awards or authorize cash payments in exchange
for any outstanding options, except as described above under "Treatment of
Stock Options;"
- neither we nor our subsidiaries will amend the terms of our employee
benefit plans, except as required by applicable law;
- neither we nor our subsidiaries will increase our respective officers'
compensation, except for increases that are consistent with past practice
and not material;
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- neither we nor our subsidiaries will enter into any collective bargaining
agreements, except for renewals of agreements in the ordinary course of
business consistent with past practice;
- neither we nor our subsidiaries will incur or guarantee any indebtedness,
except for borrowings under existing credit facilities in the ordinary
course of business or other advances consistent with past practice that
are not material;
- neither we nor our subsidiaries will materially change past practice
relating to taxes or tax elections, or settle any material dispute
involving a tax liability;
- we will not pay dividends or make other distributions with respect to our
shares, or redeem or purchase any of our shares or those of our
subsidiaries, except the exchange of the series A preferred shares
described in the merger agreement;
- neither we nor our subsidiaries will split, combine or reclassify our
capital stock or issue other securities with respect to our capital
shares;
- neither we nor our subsidiaries will make any capital expenditure, except
in accordance with our capital expenditure plan for 2000 or as otherwise
permitted by the merger agreement;
- neither we nor our subsidiaries will change any accounting practices,
except as may be required because of changes in generally accepted
accounting principles;
- neither we nor our subsidiaries will pay or settle any claims, liabilities
or obligations reflected on our most recent financial statements or
incurred by us thereafter in the ordinary course of business, except in
the ordinary course of business consistent with past practice and in
accordance with their terms;
- neither we nor our subsidiaries will pay or satisfy any claims,
liabilities or obligations, except to the extent permitted by the merger
agreement;
- we will not acquire or make a capital investment in any person, other than
our wholly-owned subsidiaries, or in any division or operating unit of any
person; and
- neither we nor our subsidiaries will enter into any (1) noncompetition or
similar agreements, except exclusive distribution agreements we enter into
in the ordinary course of business, or (2) contracts providing for
payments by us or our subsidiaries or involving revenues to us or our
subsidiaries of more than $1,000,000 over any 12-month period.
CONSENTS AND EFFORTS
The merger agreement contains additional agreements relating to actions to
be taken by us and Stone Acquisition Corp. prior to the merger, including the
following:
- each of us promptly will make our respective filings under the
Hart-Scott-Rodino Antitrust Improvements Act;
- each of us will use our respective reasonable best efforts to take
whatever action is required to expeditiously complete the merger;
- we will cooperate with Stone Acquisition Corp. and the SEC with respect to
the recording of the merger as a recapitalization for financial reporting
purposes;
- we and our subsidiaries will cooperate with Stone Acquisition Corp. in
connection with the arrangement of the financing needed to complete the
merger, including participating in meetings and road shows, preparing
offering memoranda and similar documents that are consistent with the
terms of the commitment letters given to us by Stone Acquisition Corp.,
and executing customary commitment letters, placement agreements and other
definitive financing documents, consistent with the terms of the
commitment letters previously given to us by Stone Acquisition Corp.;
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- each of us will cooperate with each other in delisting our common shares
from the New York Stock Exchange after the merger;
- we will cooperate with Stone Acquisition Corp. to cause the cancellation
or satisfaction and discharge of our trust preferred securities and the
convertible subordinated debentures issued to the Dayton Superior Capital
Trust at the time of the closing, in exchange for the amounts which the
holders of those securities would be entitled to receive after the merger;
- neither we nor our subsidiaries will pay any amount, except for reasonable
fees and expenses, with respect to litigation in which a subsidiary of
ours is involved unless we first receive Stone Acquisition Corp.'s consent
to the payment or unless our subsidiary has exhausted all appeals, has
exhausted and taken all lawful steps available to extend the time period
for payment of any judgment against our subsidiary in the matter, and has
given Stone Acquisition Corp. prior notice of its belief that our
subsidiary has no lawful option available to it other than paying the
relevant judgment by a certain date;
- each of us will notify the other if it receives notice from anyone
alleging that its consent is required in connection with the merger, or if
it receives any notice from a governmental or regulatory agency in
connection with the merger;
- each of us will notify the other of any actions that are commenced or
threatened against us or our subsidiaries that relate to the merger or
that, if pending on the date the merger agreement was signed, would have
been required to be disclosed in the disclosure letter with respect to the
merger agreement; and
- we will provide Stone Acquisition Corp. with interim financial statements
within 30 days after the end of each calendar month.
OTHER OFFERS
We agreed in the merger agreement that neither we nor any of our
subsidiaries will, directly or indirectly, solicit, encourage or take any action
knowingly to facilitate the submission of any inquiries or proposals relating to
certain acquisition transactions, agree to or endorse an acquisition proposal,
participate in any discussions or negotiations relating to those proposals or
grant any material waiver or release under any standstill, non-solicitation or
similar agreement relating to our equity securities or those of our
subsidiaries. This section of the merger agreement uses the term "significant
subsidiaries," which means Symons Corporation and those subsidiaries whose
assets constitute more than 20% of our assets. These are the acquisition
proposals covered by our agreement:
- any acquisition or purchase of 20% or more of our assets or of the assets
of any of our significant subsidiaries, except for transactions related to
inventory and rental equipment in the ordinary course of business
consistent with past practice;
- any acquisition or purchase of over 20% of any class of our equity
securities or of the equity securities of any of our significant
subsidiaries, including rights to purchase equity securities and
securities convertible into equity securities;
- any tender offer or exchange offer that if completed would result in any
person or entity beneficially owning 20% or more of any class of our
equity securities or those of any of our significant subsidiaries; or
- any merger, consolidation, recapitalization, sale of all or substantially
all of the assets, liquidation, dissolution or similar transaction
involving us or any of our significant subsidiaries, except for the merger
described in the merger agreement.
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However, if we or one of our subsidiaries receives a bona fide acquisition
proposal described above and our board of directors determines in good faith
that (1) the acquisition proposal, if accepted, is reasonably likely to be
completed, and if completed, would result in a more favorable transaction than
the merger described in the merger agreement, and (2) the failure to consider
the acquisition proposal would cause the board to breach its fiduciary duties to
our shareholders, then we or our subsidiaries can take the following actions
with the person or group making the proposal:
- furnish information about us and our businesses, properties or assets
pursuant to a customary confidentiality letter; and
- engage in discussions or negotiations.
In order to take either of the above two actions, we must first:
- notify Stone Acquisition Corp. if any offer is made, any discussions or
negotiations are sought to be initiated, or any proposal or contact is
made or any information is requested with respect to an acquisition
proposal;
- notify Stone Acquisition Corp. of the material terms of any acquisition
proposal that we may receive, including the identity of the prospective
purchaser or soliciting party;
- provide Stone Acquisition Corp. with a copy of any written offer or a
reasonably detailed written summary of any oral offer; and
- keep Stone Acquisition Corp. informed of the status of any offer and the
offeror's efforts and activities relating to the offer.
In addition, our board of directors is permitted to withdraw or modify its
approval or recommendation of the merger agreement and the merger if it receives
a bona fide acquisition proposal and determines in good faith after consultation
with outside counsel that it is necessary to do so in order to comply with the
board's fiduciary obligations. The withdrawal or modification of the board's
approval of the merger is only permitted if the acquisition proposal is made
before the meeting at which our shareholders will vote upon adoption of the
merger agreement.
None of our agreements described in this section relating to acquisition
proposals prohibits us from taking any non-appealable, final action which we or
our subsidiaries are ordered to take by a court of competent jurisdiction. The
merger agreement does not prohibit us from taking or disclosing to our
shareholders a position contemplated by the SEC's tender offer rules or from
making any disclosure to our shareholders if, in the good faith judgment of our
board of directors after consultation with outside counsel, failure to disclose
would be in violation of our obligations under applicable law.
DIRECTOR AND OFFICER LIABILITY
Stone Acquisition Corp. has agreed that, for a period of six years after the
merger, we will indemnify and hold harmless our present and former officers and
directors in respect of acts or omissions occurring before the merger to the
extent permitted by our articles of incorporation and code of regulations as in
effect today and subject to any limitations imposed by applicable law. Following
the merger, our articles and code will remain substantially the same as they are
today with respect to indemnification and insurance, and no amendments may be
made to these provisions that would adversely effect the rights of our
employees, agents, directors or officers for acts or omissions prior to the
merger, unless the amendment is required by law.
During this same six-year period, we will use our reasonable best efforts to
provide officers' and directors' liability insurance in respect of acts or
omissions occurring before the merger covering any person currently covered by
our officers' and directors' liability insurance policy on terms that are at
least
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as favorable as the insurance policy in effect today. We will not be required to
carry this insurance if the cost of the premiums is greater than 200% of the
amount that we paid for the insurance during 1999.
Our indemnification obligation in the merger agreement to our present and
former officers and directors expressly extends to any litigation commenced by
our shareholders with respect to the officers' and directors' performance of
their duties under federal or state law and the merger described in the merger
agreement. However, we will not be liable for indemnification payments relating
to settlements made without our prior consent, and if the settlement is made
before the merger, without Stone Acquisition Corp.'s prior consent.
If, after the merger is completed, we or any of our successors or assigns do
either of the following, we must make proper provisions so that our successor or
assign in that transaction assumes the indemnification and insurance obligations
described above:
- consolidate or merge into any other person and not be the continuing or
surviving corporation after that consolidation or merger, or
- transfer all or substantially all of our properties and assets to anyone.
MATERIAL ADVERSE CHANGE TO STONE ACQUISITION CORP.
Stone Acquisition Corp. has agreed to advise us promptly of any material
adverse change with respect to its business, operations, assets, liabilities,
conditions or results of operations, or its or their ability to complete the
merger.
RESIGNATION OF OUR DIRECTORS
We have agreed to deliver the resignation of all of our directors, effective
as of the time the merger occurs.
EXCHANGE OF OUR COMMON SHARES FOR SERIES A PREFERRED SHARES
We have agreed that, prior to the merger, we will issue our series A
preferred shares in exchange for some of the common shares held by some members
of our management on a share-for-share basis, as described above under "Special
Factors--Interests of Certain Persons; Conflicts of Interest." This will require
us to designate 300,000 preferred shares having the rights, preferences and
designations agreed upon between us and Stone Acquisition Corp. Each person
participating in the exchange will be required to vote his series A preferred
shares to adopt the merger agreement in accordance with Ohio law. Each of the
series A preferred shares will be converted into the right to receive one common
share in the merger, as described above under "Consideration to be Received in
the Merger" above.
BENEFIT ARRANGEMENTS
Stone Acquisition Corp. has agreed that for a period of one year after the
merger, we will maintain employee benefit plans that are no less favorable in
the aggregate than the benefit arrangements, pension plans, multiemployer plans
and welfare plans in effect on the date that the merger agreement was signed,
other than stock option, restricted stock, stock purchase or other equity based
programs, plans and arrangements.
CONDITIONS TO THE MERGER
Our and Stone Acquisition Corp.'s respective obligations to effect the
merger are subject to the satisfaction of the following conditions at or before
the closing:
- adoption of the merger agreement by our common and series A preferred
shareholders in accordance with Ohio law;
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- the obtaining of all approvals and licenses of any governmental or
regulatory body required in connection with the execution and performance
of the merger agreement and for us to conduct our business after the
merger in substantially the same manner as we now conduct it, unless the
failure to obtain any approval or license would not have a material
adverse effect on us;
- the expiration or termination of any applicable waiting period under the
Hart- Scott-Rodino Antitrust Improvements Act; and
- the absence of any applicable laws or any judgment or injunction of any
court of competent jurisdiction that prohibits or restrains the merger
from occurring or that makes the merger illegal.
ADDITIONAL CONDITIONS TO OUR OBLIGATIONS
Our obligations also are subject to the satisfaction or waiver by us of the
following conditions at or before the closing:
- the accuracy of Stone Acquisition Corp.'s representations and warranties
on the closing date, as if they were made on that date;
- the performance by Stone Acquisition Corp. in all material respects of the
actions it agreed to perform prior to the closing;
- our receipt of a certificate signed by Stone Acquisition Corp.'s president
that the two conditions set forth immediately above have been satisfied;
and
- our receipt of a solvency letter addressed to our board of directors.
ADDITIONAL CONDITIONS TO STONE'S OBLIGATIONS
Stone Acquisition Corp.'s obligations also are subject to the satisfaction
or waiver by Stone Acquisition Corp. of the following conditions at or before
the closing:
- the accuracy of our representations and warranties on the closing date, as
if they were made on that date;
- our performance in all material respects of the actions we agreed to
perform prior to the closing;
- Stone Acquisition Corp.'s receipt of a certificate signed by our president
and our chief financial officer to the effect that, to the best of their
knowledge, the two conditions set forth immediately above have been
satisfied;
- the absence of any pending or threatened actions by any governmental
entity, or by anyone else that have a reasonable likelihood of success,
which seek to (1) prohibit the merger or make it illegal, (2) prohibit or
limit Stone Acquisition Corp. or us from owning or operating a material
portion of our business, or (3) obtain from Stone Acquisition Corp. or us
damages in connection with the merger that are material to us and our
subsidiaries as a whole;
- receipt of all required third party consents;
- receipt of the funding described in the commitment letters from Stone
Acquisition Corp.'s lenders on substantially the same terms as described
in those commitment letters;
- the exchange of common shares for our series A preferred shares described
above under "Special Factors--Interests of Certain Persons; Conflicts of
Interest" and "The Merger Agreement--Exchange of our Common Shares" has
taken place;
- the liquidation of the Dayton Superior Capital Trust, so that the current
holders of the trust's preferred securities then hold our 10% convertible
subordinated debentures instead; and
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- total indebtedness of us and our subsidiaries not exceeding agreed upon
amounts.
TERMINATION
We and Stone Acquisition Corp. may terminate the merger agreement by mutual
written consent and abandon the merger at any time before it occurs. This is the
case even if our shareholders already have approved the merger. The merger
agreement also may be terminated, whether before or after our shareholders
approve the merger, as follows:
- by us or Stone Acquisition Corp., if the closing has not occurred on or
before July 14, 2000, so long as the party seeking to terminate the
agreement is not then in breach in any material respect of any of its
obligations under the agreement;
- by us or Stone Acquisition Corp., if any of the conditions to the
terminating party's obligation to complete the merger have become
impossible to satisfy, so long as the party seeking to terminate the
agreement has not caused the impossibility by breaching in any material
respect any of its obligations under the agreement;
- by us or Stone Acquisition Corp., if any law or regulation makes the
completion of the merger illegal or otherwise prohibited or if any final,
non-appealable judgment, injunction, order or decree enjoining us or Stone
Acquisition Corp. from completing the merger is entered;
- by Stone Acquisition Corp., if our board of directors has withdrawn,
amended or modified its recommendation of the merger agreement and the
merger or its recommendation that our shareholders approve the merger
agreement and the merger, in either case in a manner that is adverse to
Stone Acquisition Corp., or if our board has approved, recommended or
endorsed an acquisition proposal of the type described above under
"Covenants--Other Offers";
- by us, if
- prior to the effectiveness of the merger, our board of directors
receives a bona fide acquisition proposal, as described above under
"Covenants--Other Offers," and it has concluded in good faith, after
consultation with our outside counsel and our financial advisor, that
the proposal, if accepted, is reasonably likely to be completed, and
would, if completed, result in a more favorable transaction than the
merger described in the merger agreement;
- our board has concluded in good faith, after consultation with outside
counsel, that it must withdraw, modify or amend its approval or
recommendation of the merger agreement and the merger or its
recommendation that our shareholders approve the merger agreement and
the merger, in either case in a manner adverse to Stone Acquisition
Corp., in order for us to execute a definitive agreement with respect
to the superior proposal, and that the failure to do so would be a
breach of the board's fiduciary duties; and
- we have complied with our obligations in that event as are described
above under "Covenants--Other Offers" and "Fees and Expenses"; and
- by us or Stone Acquisition Corp., if the required vote for the adoption
of the merger agreement and the merger is not obtained by our
shareholders at a duly held meeting.
TERMINATION FEES AND EXPENSES
Except as described below, we and Stone have agreed to pay our own costs and
expenses in connection with the merger agreement. However, if one of us incurs
expenses to enforce our rights under the merger agreement against the other, the
breaching party has agreed to indemnify the other party for those expenses.
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TERMINATION FEE
We have agreed to pay Stone Acquisition Corp. $6,000,000 if a "payment
event" occurs. Payment event means any of the following:
- Stone Acquisition Corp. terminates the merger agreement because our board
of directors has withdrawn or amended or modified its recommendation of
the merger agreement and the merger in a manner that is adverse to Stone
Acquisition Corp., or because our board has approved, recommended or
endorsed an acquisition proposal that is described above under
"Covenants--Other Offers;"
- we terminate the merger agreement in connection with our receipt of a
superior proposal, as described in "Termination;"
- we or Stone Acquisition Corp. terminates the merger agreement because it
was not adopted by our shareholders in accordance with Ohio law, as
described above under "Conditions of the Merger," and
- prior to our shareholder vote, any third party has become the
beneficial owner of more than 20% of our outstanding common shares, or
any third party has made or disclosed in any manner that becomes public
a bona fide intention to make an acquisition proposal, as described in
"Covenants--Other Offers;" and
- on or prior to the 12-month anniversary of the date the merger
agreement was terminated, we complete a transaction with a third party
which otherwise would qualify as an acquisition proposal or we enter
into a definitive agreement with a third party which is completed
within six months thereafter and which would otherwise qualify as an
acquisition proposal.
For purposes of this last payment event, the third party with whom we
complete a transaction need not be the same third party who became the
beneficial owner of more than 20% of our outstanding common shares or who
made or disclosed an intention to make an acquisition proposal before our
shareholder vote. In addition, for this payment event, "50%" is substituted
for "20%" used in the description of acquisition proposals in
"Covenants--Other Offers." Additionally, in determining whether the 50%
threshold is satisfied for any acquisition proposal, our assets and equity
securities owned by the third party prior to the termination of the merger
agreement will be included.
PAYMENT OF STONE ACQUISITION CORP.'S EXPENSES
We also have agreed to reimburse Stone Acquisition Corp. and its affiliates
for its documented out-of-pocket fees and expenses actually incurred by any of
them or on their behalf in connection with the merger agreement, the
transactions described in the merger agreement and the arrangement of the
financing required to complete the merger, if the merger agreement is terminated
for any of the following reasons:
- by Stone Acquisition Corp., if our board of directors has withdrawn or
amended or modified its recommendation of the merger agreement and the
merger in a manner that is adverse to Stone Acquisition Corp., or if our
board has approved, recommended or endorsed an acquisition proposal that
is described in "Covenants--Other Offers;"
- by us, in connection with our receipt of a superior proposal, as described
in "Termination;"
- by us or Stone Acquisition Corp., if the required vote for adoption of the
merger agreement and the merger is not obtained by our shareholders at a
duly held shareholders' meeting; or
- by Stone Acquisition Corp., because one or more of the conditions relating
to shareholder approval, the accuracy of our representations and
warranties, the performance of our agreements, the delivery of our closing
certificate, the exchange of our common shares for series A preferred
shares,
41
<PAGE>
the liquidation of the Dayton Superior Capital Trust and the distribution
of our debentures or our total indebtedness for borrowed money is too
great, all as described in "Conditions of the Merger," is not satisfied.
The aggregate amount of any payments which we must make under this provision
will not exceed $1,250,000.
AMENDMENT AND WAIVER
We and Stone Acquisition Corp. may amend the merger agreement at any time by
a writing signed by each of us. After our shareholders have approved the merger
agreement and the merger described in the merger agreement, no amendment may be
made which by law requires further shareholder approval without obtaining that
approval.
If we or Stone Acquisition Corp. waive any of the provisions of the merger
agreement, that waiver will not be considered to be a waiver of any other
provision of the merger agreement nor will it constitute a continuing waiver
unless expressly provided.
MARKET PRICE INFORMATION
Our common shares are traded on the New York Stock Exchange under the symbol
"DSD." The following table shows the high and low closing prices for our common
shares for each fiscal quarter since our initial public offering of common
shares on June 25, 1996, in which common shares were sold at a price of $13.00
per share.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL YEAR 1996
Second Quarter.......................................... $13.750 $13.000
Third Quarter........................................... 13.625 11.750
Fourth Quarter.......................................... 13.125 9.625
FISCAL YEAR 1997
First Quarter........................................... $13.500 $11.250
Second Quarter.......................................... 13.250 9.750
Third Quarter........................................... 19.438 12.500
Fourth Quarter.......................................... 19.000 14.813
FISCAL YEAR 1998
First Quarter........................................... $20.375 $15.875
Second Quarter.......................................... 22.125 16.500
Third Quarter........................................... 21.375 16.625
Fourth Quarter.......................................... 20.875 14.375
FISCAL YEAR 1999
First Quarter........................................... $23.500 $17.313
Second Quarter.......................................... 20.125 16.750
Third Quarter........................................... 20.750 16.500
Fourth Quarter.......................................... 19.688 11.750
FISCAL YEAR 2000
First Quarter........................................... $26.063 $15.875
Second Quarter (through April 17, 2000)................. $25.500 $24.875
</TABLE>
On January 18, 2000, the last trading day before we signed the merger
agreement and announced the merger, the closing price of the common shares on
the New York Stock Exchange was $18.4375 per share. On April 17, 2000, the last
practicable trading day prior to the date of this proxy statement, the closing
price of the common shares on the New York Stock Exchange was $24.875 per share.
As of April 7, 2000, there were approximately 66 holders of record of common
shares, as shown on our transfer agent's records.
42
<PAGE>
INFORMATION ABOUT US
We are Dayton Superior Corporation, an Ohio corporation incorporated in 1959
as the successor to a business founded in 1924. We believe that we are the
largest North American manufacturer and distributor of metal accessories and
forms used in concrete construction and of metal accessories used in masonry
construction. Our products are used primarily in two segments of the
construction industry:
- non-residential building projects such as schools, stadiums, prisons,
retail sites, commercial offices and manufacturing facilities; and
- infrastructure projects such as highways, bridges, utilities, water and
waste treatment facilities and airport runways.
We have four principal operating divisions, which are organized around the
following product lines:
- CONCRETE ACCESSORIES (DAYTON/RICHMOND-REGISTERED TRADEMARK-). Concrete
accessories are used in connecting forms for poured-in-place concrete
walls, anchoring or bracing concrete walls and floors, supporting bridge
framework and positioning steel reinforcing bars, also known as rebar.
- CONCRETE FORMING SYSTEMS (SYMONS-REGISTERED TRADEMARK-). Concrete forming
systems are comprised of reusable, highly-engineered forms used in the
construction of concrete walls, columns and bridge supports to hold liquid
concrete in place while it cures.
- PAVING PRODUCTS (AMERICAN HIGHWAY
TECHNOLOGY-REGISTERED TRADEMARK-). Paving products are used to extend the
longevity of roads and runways by transferring loads between adjacent
concrete slabs.
- MASONRY PRODUCTS (DUR-O-WAL-REGISTERED TRADEMARK-). Masonry products are
placed between layers of brick and covered with mortar to provide
additional strength to walls. Masonry products also include engineered
products used to repair or restore brick and stone buildings.
Our principal executive offices are located at 7777 Washington Park Drive,
Suite 130, Dayton, Ohio 45459, and our telephone number is (937) 428-6360.
INFORMATION ABOUT STONE ACQUISITION CORP. AND ODYSSEY
Stone Acquisition Corp. recently was incorporated under the laws of the
State of Ohio for the purpose of consummating the merger. Stone Acquisition
Corp. has not conducted any business other than the transactions described in
this proxy statement. Stone Acquisition Corp. will not have any assets or
liabilities other than those arising under the merger agreement or in connection
with the merger, nor will it engage in any activities other than those incident
to its formation and capitalization and the merger. Stone Acquisition Corp. is
controlled by Odyssey Investment Partners Fund, L.P. Odyssey Investment Partners
Fund, L.P. is engaged principally in the business of investing in companies.
Odyssey Investment Partners Fund, L.P., is a Delaware limited partnership, the
general partner of which is Odyssey Capital Partners, LLC, a Delaware limited
liability company, and the manager of which is Odyssey Investment
Partners, LLC, a Delaware limited liability company. The principal business
office of each of Stone Acquisition Corp. and Odyssey is c/o Odyssey Investment
Partners, LLC, 280 Park Avenue, 38(th) Floor, New York, New York 10017.
The managing principals of Odyssey Investment Partners Fund, L.P.'s general
partner and manager are Stephen Berger, the senior managing principal, Brian
Kwait, Muzzafar Mirza, Paul D. Barnett and William F. Hopkins. The officers of
Stone Acquisition Corp. as of the date of this proxy statement are:
Mr. Hopkins, President, and Douglas Rotatori, Vice President and Secretary.
Mr. Hopkins and Mr. Rotatori also are the current directors of Stone Acquisition
Corp.
The principal occupation of each of Messrs. Berger, Kwait, Mirza, Barnett
and Hopkins is to act as a managing principal of Odyssey Investment Partners
Fund, L.P.'s general partner and manager. From 1992 to 1998, Mr. Berger served
as a general partner of Odyssey Partners, L.P., where he headed the private
43
<PAGE>
equity investment business. From 1993 to 1997, each of Messrs. Kwait, Mirza and
Barnett served as a principal in the private equity investment group at Odyssey
Partners, L.P. From 1994 to 1997, Mr. Hopkins served as a principal in the
private equity investment group at Odyssey Partners, L.P. and prior to that, he
was a member of GE Capital's merchant banking group.
OWNERSHIP OF OUR COMMON SHARES
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the common shares beneficially owned by each
director, each executive officer and all directors and executive officers as a
group as of March 3, 2000:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES BENEFICIALLY
OWNED AS OF % OF COMMON
INDIVIDUAL OR GROUP 2000(1) SHARES(1)
- ------------------- ------------------- -----------
<S> <C> <C>
William F. Andrews(2)....................................... 16,834 *
Raymond E. Bartholomae(3)................................... 14,800 *
John A. Ciccarelli(4)....................................... 211,500 3.5%
Michael C. Deis, Sr.(5)..................................... 38,950 *
Matthew O. Diggs, Jr.(6).................................... 139,260 2.3%
Daniel W. Duval(7).......................................... 5,013 *
James W. Fennessy(8)........................................ 14,650 *
Matthew M. Guerreiro(9)..................................... 8,095 *
Robert B. Holmes(10)........................................ 14,437 *
Mark K. Kaler(11)........................................... 30,900 *
Alan F. McIlroy(12)......................................... 40,400 *
William C. Mongole(13)...................................... 30,300 *
John R. Paine, Jr.(14)...................................... 24,400 *
Thomas W. Roehrig(15)....................................... 3,800 *
John M. Rutherford(16)...................................... 3,050 *
James C. Stewart(17)........................................ 37,950 *
Jaime Taronji, Jr........................................... -- --
Directors and Executive Officers As a Group
(17 persons)(18).......................................... 634,339 10.0%
</TABLE>
- ------------------------
* Signifies less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes sole or shared voting or investment power with
respect to the shares. Includes the number of common shares subject to all
outstanding options, including those that will become exercisable as a
result of the merger and those that are to be cashed out in the merger.
Unless otherwise indicated, voting and investment power are exercised
solely by each individual and/or a member of his household. Based on a
total of 5,946,233 common shares outstanding on March 3, 2000.
(2) Includes 6,000 common shares which may be acquired upon the exercise of
stock options.
(3) Includes 12,000 common shares which may be acquired upon the exercise of
stock options.
(4) Includes 174,000 common shares which may be acquired upon the exercise of
stock options.
(5) Includes 32,600 common shares which may be acquired upon the exercise of
stock options.
(6) Includes 125,000 common shares owned by EJJM, an Ohio limited partnership,
a family limited partnership of which Mr. Diggs is a general partner. Also
includes 6,000 common shares which may be acquired upon the exercise of
stock options.
44
<PAGE>
(7) Includes 2,000 common shares which may be acquired upon the exercise of
stock options.
(8) Includes 11,700 common shares which may be acquired upon the exercise of
stock options.
(9) Includes 5,333 common shares which may be acquired upon the exercise of
stock options.
(10) Includes 6,000 common shares which may be acquired upon the exercise of
stock options.
(11) Includes 26,900 common shares which may be acquired upon the exercise of
stock options.
(12) Includes 39,000 common shares which may be acquired upon the exercise of
stock options.
(13) Includes 2,800 common shares which may be acquired upon the exercise of
stock options.
(14) Consists only of common shares which may be acquired upon the exercise of
stock options.
(15) Includes 2,800 common shares which may be acquired upon the exercise of
stock options.
(16) Includes 2,800 common shares which may be acquired upon the exercise of
stock options.
(17) Includes 31,600 common shares which may be acquired upon the exercise of
stock options.
(18) Includes 385,933 common shares which may be acquired by directors and
executive officers upon the exercise of stock options.
PRINCIPAL SHAREHOLDERS
The following table shows information about the only shareholders known by
us to be the beneficial owner of more than 5% of the outstanding common shares:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES
NAME AND ADDRESS BENEFICIALLY OWNED % OF COMMON SHARES(1)
- ---------------- ------------------ ---------------------
<S> <C> <C>
Brinson Partners, Inc.(2) ............................. 511,628 8.6%
UBS AG
209 South LaSalle
Chicago, Illinois 60604-1295
David L. Babson and Company Incorporated(3) ........... 449,600 7.6%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
Fleet Boston Corporation(4) ........................... 435,000 7.3%
One Federal Street
Boston, Massachusetts 02110
Skyline Asset Management, L.P.(5) ..................... 383,600 6.5%
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
Dimensional Fund Advisors, Inc.(6) .................... 374,000 6.3%
1299 Ocean Ave., 11th Floor
Santa Monica, California 90401
Dalton, Greiner, Hartman, Maher & Co.(7) .............. 325,600 5.5%
1100 Fifth Ave. South, Suite 301
Naples, Florida 34102
</TABLE>
- ------------------------
(1) Based on a total of 5,946,233 common shares outstanding on March 3, 2000.
45
<PAGE>
(2) As reported in Amendment No. 3 to Schedule 13G dated February 4, 2000 filed
with the SEC jointly by Brinson Partners, Inc. and UBS AG (Bahnhofstrasse
45, 8021, Zurich, Switzerland) with respect to 511,628 common shares held by
Brinson Partners, Inc., a registered investment advisor. Brinson
Partners, Inc. is an indirect wholly-owned subsidiary of UBS AG, a bank.
They reported shared voting and dispositive power with respect to all
511,628 common shares.
(3) As reported in Schedule 13G dated February 9, 2000 filed with the SEC by
David L. Babson and Company Incorporated, a registered investment adviser,
with respect to common shares held by its clients. David L. Babson and
Company Incorporated reported sole voting and dispositive power with respect
to all 449,600 common shares.
(4) As reported in Schedule 13G dated February 14, 2000 filed with the SEC by
Fleet Boston Corporation, a parent holding company of Fleet National Bank,
Fleet Trust & Investment Services Company and Fleet Investment Advisors.
Fleet Boston Corporation reported sole voting power with respect to 293,800
common shares beneficially owned by its subsidiaries and sole dispositive
power with respect to 435,000 common shares beneficially owned by its
subsidiaries.
(5) As reported in an Amendment to Schedule 13G dated February 16, 2000 filed
with the SEC by Skyline Asset Management, L.P., a registered investment
adviser, with respect to common shares held by its clients. Skyline Asset
Management, L.P. reported shared voting and dispositive power with respect
to 383,600 common shares.
(6) As reported in Schedule 13G dated February 4, 2000 filed with the SEC by
Dimensional Fund Advisors, Inc., a registered investment advisor, with
respect to common shares held by investment companies, commingled group
trusts and separate accounts. In this role, Dimensional Fund Advisors, Inc.
reported sole voting and dispositive power with respect to all 374,000
common shares.
(7) As reported in Amendment No. 1 to Schedule 13G dated February 10, 2000 filed
with the SEC by Dalton, Greiner, Hartman, Maher & Co., a registered
investment adviser. It reported sole voting and dispositive power with
respect to all 325,600 common shares.
ANNUAL MEETING AND SHAREHOLDER PROPOSALS
We intend to postpone our 2000 annual meeting of shareholders, which was
scheduled for May 11, 2000. If the merger agreement is adopted by the
shareholders at the special meeting and the merger is completed prior to
June 30, 2000, we do not intend to hold the 2000 annual meeting prior to
completion of the merger. If the merger agreement is not adopted by the
shareholders at the special meeting or if the merger agreement is adopted by the
shareholders, but the merger is not completed prior to June 30, 2000, we intend
to reschedule the 2000 annual meeting of shareholders. If we reschedule the 2000
annual meeting of shareholders, we will, in a timely manner, inform our
shareholders of the new date on which the 2000 annual meeting of shareholders
will be held by including a notice in the earliest possible Quarterly Report on
Form 10-Q we file with the SEC or, if impracticable, by another means reasonably
calculated to inform our shareholders. At that time, we also will inform you of
the following:
- the date by which shareholder proposals must be received for inclusion in
our proxy statement and form of proxy for the rescheduled annual meeting
of shareholders; and
- the date after which a notice from a shareholder as to a proposal the
shareholder intends to propose at the 2000 annual meeting of shareholders
will be considered untimely and, as a result, with respect to which the
proxies for the meeting will have discretionary authority to vote on the
proposal without discussion of the proposal in the proxy statement for the
meeting.
46
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statement and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http.//www.sec.gov. You also may read and copy
any documents we file at the SEC's public reference rooms in Washington, D.C.,
New York, and Chicago, as well as at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York. 10005, where the common shares are listed
under the symbol "DSD." You can call the SEC at 1-800-732-0330 for further
information about the public reference rooms.
You should rely only on the information provided (and not later changed) in
this proxy statement. We have not authorized anyone else to provide you with
additional or different information.
You should not assume that the information in this proxy statement is
accurate as of any date other than the date on the front of this document.
By Order of the Board of Directors,
[/S/ JAIME TARONJI, JR.]
Jaime Taronji, Jr.
Vice President, General Counsel
and Secretary
47
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and between
DAYTON SUPERIOR CORPORATION,
an Ohio corporation
and
STONE ACQUISITION CORP.,
an Ohio corporation
Dated: January 19, 2000
- --------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I. DEFINITIONS................................................. A-4
1.1 Defined Terms............................................... A-4
1.2 Other Defined Terms......................................... A-9
ARTICLE II. THE MERGER.................................................. A-10
2.1 The Merger.................................................. A-10
2.2 Effective Time.............................................. A-10
2.3 Closing..................................................... A-10
2.4 Articles of Incorporation and Code of Regulations........... A-10
2.5 Directors................................................... A-10
2.6 Officers.................................................... A-10
ARTICLE III. EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY....... A-10
3.1 Conversion of Sub Common Shares............................. A-10
3.2 Conversion of Company Common Shares......................... A-11
3.3 Options..................................................... A-11
3.4 Exchange of Certificates; Payment of Cash Merger
Consideration............................................. A-12
3.5 Dissenting Shares........................................... A-13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-13
4.1 Organization and Capitalization............................. A-14
4.2 Authorization............................................... A-14
4.3 Subsidiaries................................................ A-15
4.4 Absence of Certain Changes or Events........................ A-15
4.5 Title to Assets; Absence of Liens and Encumbrances.......... A-15
4.6 Contracts................................................... A-15
4.7 No Conflict or Violation.................................... A-16
4.8 Consents and Approvals...................................... A-16
4.9 SEC Documents; Financial Statements, etc.................... A-16
4.10 Undisclosed Liabilities..................................... A-17
4.11 Litigation.................................................. A-17
4.12 Labor Matters............................................... A-17
4.13 Compliance with Law......................................... A-17
4.14 No Brokers.................................................. A-18
4.15 Employee Plans.............................................. A-18
4.16 Tax Matters................................................. A-21
4.17 Customers and Suppliers..................................... A-22
4.18 Compliance with Environmental Laws.......................... A-22
4.19 Opinion of Financial Advisors............................... A-23
4.20 Board Recommendation........................................ A-23
4.21 Required Company Vote....................................... A-24
4.22 Proxy Statement............................................. A-24
4.23 Takeover Laws............................................... A-24
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SUB....................... A-24
5.1 Organization................................................ A-24
5.2 Authorization............................................... A-24
5.3 Consents and Approvals...................................... A-24
</TABLE>
A-2
<PAGE>
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
5.4 No Conflict or Violation.................................... A-24
5.5 Proxy Statement............................................. A-25
5.6 Financing................................................... A-25
5.7 No Broker Payments by Company............................... A-25
ARTICLE VI. COVENANTS OF THE COMPANY AND SUB............................ A-25
6.1 Maintenance of Business Prior to Closing.................... A-25
6.2 Investigation by Sub........................................ A-27
6.3 Consents and Efforts........................................ A-28
6.4 Other Offers................................................ A-29
6.5 Meeting of Shareholders..................................... A-31
6.6 Proxy Statement............................................. A-31
6.7 Director and Officer Liability.............................. A-32
6.8 Notices of Certain Events................................... A-33
6.9 Sub Notice.................................................. A-33
6.10 Resignation of Directors.................................... A-33
6.11 Financial Statements, Etc................................... A-33
6.12 Exchange of Company Common Shares........................... A-33
6.13 Benefit Arrangements........................................ A-33
ARTICLE VII. CONDITIONS TO THE MERGER.................................... A-34
7.1 Conditions to the Obligations of Each Party................. A-34
7.2 Conditions to the Obligations of the Company................ A-34
7.3 Conditions to the Obligations of Sub........................ A-34
ARTICLE VIII. MISCELLANEOUS............................................... A-35
8.1 Termination................................................. A-35
8.2 Assignment.................................................. A-36
8.3 Notices..................................................... A-37
8.4 Entire Agreement; Waivers................................... A-37
8.5 Multiple Counterparts....................................... A-38
8.6 Invalidity.................................................. A-38
8.7 Titles...................................................... A-38
8.8 Fees and Expenses........................................... A-38
8.9 Cumulative Remedies......................................... A-38
8.10 GOVERNING LAW............................................... A-38
8.11 Amendment................................................... A-38
8.12 Public Announcements........................................ A-38
8.13 Enforcement of Agreement.................................... A-38
8.14 Non-survival of Representations, Warranties................. A-39
8.15 Interpretive Provisions..................................... A-39
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Articles of Incorporation
Schedule A Preferred Shareholders
Schedule 3.3 Option Retention
Schedule 6.1(c) Preferred Share Designation
Schedule 7.3(f) Indebtedness
</TABLE>
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT"), dated January 19,
2000, is by and between DAYTON SUPERIOR CORPORATION, an Ohio corporation (the
"COMPANY"), and STONE ACQUISITION CORP., an Ohio corporation ("SUB").
RECITALS
A. This Agreement provides for the merger (the "MERGER") of Sub with and
into the Company, with the Company as the surviving corporation in such merger,
all in accordance with the provisions of this Agreement.
B. The respective Boards of Directors of Sub and the Company have approved
this Agreement, and deemed it advisable and in the best interests of their
respective companies and shareholders to consummate the Merger. The Company
intends promptly to submit to its Shareholders the approval of the Merger and
the approval and adoption of this Agreement.
C. The parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
D. It is intended that the Merger be recorded as a recapitalization for
financial reporting purposes.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"AFFILIATE" shall mean, with respect to any Person (the "REFERENT PERSON"),
any Person which controls the referent person, any Person which the referent
person controls, or any Person which is under common control with the referent
person. For purposes of the preceding sentence, the term "control" shall mean
the power, direct or indirect, to direct or cause the direction of the
management and policies of a Person through voting securities, by contract or
otherwise.
"ASSETS" shall mean all of the Company's and its Subsidiaries' right, title
and interest in and to all properties, assets and rights of any kind, whether
tangible or intangible, real or personal, owned by the Company or its
Subsidiaries or in which the Company or any of its Subsidiaries has any interest
whatsoever.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance or
other similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company, its
A-4
<PAGE>
Subsidiaries or any ERISA Affiliate or under which the Company, its Subsidiaries
or any ERISA Affiliate may incur any liability, and (c) covers any current or
former employee, director, officer or consultant of the Company, its
Subsidiaries or any ERISA Affiliate (with respect to their relationship with
such an entity).
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMPANY COMMON SHARES" shall mean the Class A Common Shares, without par
value, of the Company.
"COMPANY REPORTS" shall mean (a) the Company's annual report on Form 10-K of
the SEC for the fiscal year ended December 31, 1998 and (b) the Company's
quarterly reports on Form 10-Q of the SEC for the quarters ended April 2, 1999,
July 2, 1999, and October 1, 1999.
"CONTRACT" shall mean any agreement, contract, lease, note, loan, evidence
of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license and
instrument to which the Company or its Subsidiaries is a party or to which the
Company or its Subsidiaries or any of their respective Assets are subject, and
which pursuant to its terms has not expired, terminated or been fully performed
by the parties thereto.
"DEBENTURES" shall mean the 10% Convertible Subordinated Debentures, Due
September 30, 2029, of the Company.
"DISSENTING SHAREHOLDERS" shall mean those Shareholders who hold Dissenting
Shares.
"DISSENTING SHARES" shall mean any Company Common Shares as to which a
Shareholder is entitled to relief as a dissenting shareholder under
Sections 1701.84 and 1701.85 of the OCL, to the extent that such Shareholder has
properly exercised, perfected and not subsequently withdrawn or lost such
Shareholder's dissenting shareholder rights in accordance with the OCL.
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans, and Welfare Plans.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction or encumbrance, whether voluntarily incurred or arising by
operation of law, and includes, without limitation, any agreement to give any of
the foregoing in the future, and any contingent or conditional sale agreement or
other title retention agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" shall mean all notices of violation, liens, claims,
demands, suits, or causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values), lost use of property or
consequential damages, arising directly or indirectly out of Environmental
Conditions or Environmental Laws. By way of example only (and not by way of
limitation), Environmental Claims include (i) violations of or obligations under
any contract related to Environmental Laws or Environmental Conditions between
the Company or its Subsidiaries and any other Person, (ii) actual or threatened
damages to natural resources, (iii) claims for nuisance or its statutory
equivalent, (iv) claims for the recovery of response costs, or administrative or
judicial orders directing the performance of investigations, responses or
remedial actions under any Environmental Laws, (v) requirements to implement
"corrective action" pursuant to any order or permit issued pursuant to the
Resource Conservation and Recovery Act, as amended, or similar provisions of
applicable state law, (vi) claims related to Environmental Laws or Environmental
Conditions for restitution, contribution, or indemnity, (vii) fines, penalties
or liens of any kind against property related to Environmental Laws or
Environmental Conditions, (viii) claims related to Environmental Laws or
Environmental Conditions for injunctive relief or other orders or notices of
violation from federal, state or local agencies or courts, and (ix) with regard
to any present or former employees, claims relating to exposure to or injury
from Environmental Conditions.
A-5
<PAGE>
"ENVIRONMENTAL CONDITIONS" shall mean the state of the environment,
including natural resources (E.G., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air.
"ENVIRONMENTAL LAWS" shall mean all applicable foreign, federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices or permits issued, promulgated or
entered pursuant thereto, relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface, or subsurface strata), including, without limitation, (i) laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other substances into
the environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances. Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Occupational Safety and Health Act, as amended, and all
analogous laws promulgated or issued by any state or other governmental
authority.
"ENVIRONMENTAL REPORTS" shall mean any and all material written analyses,
summaries or explanations, in the possession of the Company or its Subsidiaries,
of (a) any Environmental Conditions in, on or about the properties of the
Company or its Subsidiaries or (b) the Company's or its Subsidiaries' compliance
with Environmental Laws.
"EQUITY SECURITIES" shall mean (i) shares of capital stock or other equity
securities, (ii) subscriptions, calls, warrants, options or commitments of any
kind or character relating to, or entitling any Person to purchase or otherwise
acquire, any capital stock or other equity securities and (iii) securities
convertible into or exercisable or exchangeable for shares of capital stock or
other equity securities.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company or its Subsidiaries as set forth in
Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FACILITIES" shall mean all plants, offices, manufacturing facilities,
warehouses, administration buildings and all real property and related
facilities owned or leased by the Company or its Subsidiaries.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, equipment, spare parts, appliances and vehicles owned by
the Company or its Subsidiaries, wherever located.
"GAAP" shall mean, with respect to any Person, generally accepted accounting
principles in the United States of America, as in effect from time to time.
"HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
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"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar phrase
shall mean, with respect to any Person, any material adverse effect on or change
with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise) or results of
operations of such Person and its Subsidiaries, taken as a whole or (ii) the
right or ability of such Person or its Subsidiaries to consummate any of the
transactions contemplated hereby, except any change, effect, event, occurrence
or state of facts resulting from adverse changes in economic or financial market
conditions generally.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company, its Subsidiaries or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which the Company, its
Subsidiaries or any ERISA Affiliate may incur any liability and (b) covers any
current or former employee of the Company, its Subsidiaries or any ERISA
Affiliate (with respect to their relationship with any such entity).
"NYSE" shall mean the New York Stock Exchange, Inc.
"OCL" shall mean Chapters 1701 and 1704 of the Ohio Revised Code of the
State of Ohio.
"OPTIONS" shall mean the options to purchase in the aggregate 442,283
Company Common Shares issued to certain employees and non-employee directors of
the Company pursuant to the Stock Option Plans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the Company,
its Subsidiaries or any ERISA Affiliate maintains, administers, contributes to
or is required to contribute to, or, within the five years prior to the Closing
Date, maintained, administered, contributed to or was required to contribute to,
or under which the Company, its Subsidiaries or any ERISA Affiliate may incur
any liability (including, without limitation, any contingent liability) and
(b) which covers any current or former employee, director, officer or consultant
of the Company, its Subsidiaries or any ERISA Affiliate (with respect to their
relationship with any such entity).
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of any governmental or regulatory authority
or body, whether foreign, federal, state or local, necessary for the present or
currently anticipated conduct of, or relating to the operation of the business
of, the Company or its Subsidiaries.
"PERMITTED ENCUMBRANCES" shall mean (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor, (b) statutory liens of landlords, liens
of carriers, warehouse persons, mechanics and material persons and other liens
imposed by law incurred in the ordinary course of business for sums (i) not yet
due and payable or (ii) being contested in good faith, if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (d) purchase money liens incurred in
the ordinary course of business, consistent with past practice,
(e) Encumbrances which do not interfere with the ordinary conduct of business of
the Company
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or its Subsidiaries and do not materially detract from the value of the property
to which such Encumbrance relates and (f) liens arising under existing credit
facilities.
"PERSON" shall mean any person or entity, whether an individual, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority, or any other form of entity.
"PERSONNEL" shall mean all officers and employees of the Company or its
Subsidiaries.
"RETURNS" shall mean any and all returns, reports, declarations and
information statements with respect to Taxes required to be filed by or on
behalf of the Company or its Subsidiaries with any governmental authority or Tax
authority or agency, whether domestic or foreign, including, without limitation,
consolidated, combined and unitary returns and all amendments thereto or
thereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A SHARES" shall mean the Series A Preferred Shares, without par
value, of the Company to be issued to the Persons identified on SCHEDULE A.
"SHAREHOLDER VOTE" shall mean the meeting of the Shareholders or any
adjourned meeting thereof at which this Agreement and the Merger are voted upon.
"SHAREHOLDERS" shall mean the record holders of Company Common Shares.
"STOCK OPTION PLANS" shall mean the 1994 Stock Option Plan, 1995 Stock
Option Plan, 1996 Stock Option Plan, 1997 Stock Option and Restricted Stock
Plan, and 1997 Non-Employee Director Stock Option Plan.
"SUBSIDIARY" shall mean, with respect to any of the parties to this
Agreement, any corporation or other business entity, whether or not
incorporated, of which at least a majority of the securities or interests
having, by their terms, ordinary voting power to elect members of the board of
directors, or other persons performing similar functions with respect to such
entity, are held, directly or indirectly, by such party.
"TAX(ES)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including, without
limitation, any interest, penalties, additions to tax or additional amounts that
may become payable in respect thereof, imposed by any foreign, federal, state or
local government or taxing authority, which taxes shall include, without
limitation, all income taxes, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, value-added taxes,
excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation and
other obligations of the same or of a similar nature.
"TREASURY SECURITIES" shall mean Company Common Shares owned by Sub, the
Company and/or any Subsidiary of Sub or the Company.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, (a) which the Company, its Subsidiaries or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or under which the Company, its Subsidiaries or any ERISA Affiliate may
incur any liability and (b) which covers any current or former employee,
officer, director or consultant of the Company, its Subsidiaries or any ERISA
Affiliate (with respect to their relationship with any such entity).
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1.2 OTHER DEFINED TERMS. In addition to the terms defined in the Recitals
to this Agreement and Section 1.1, the following terms shall have the meanings
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
"Acquisition Proposal"...................................... 6.4(a)
"Actions"................................................... 4.11
"Applicable Law"............................................ 4.13
"Cash Merger Consideration"................................. 3.2(a)
"Closing"................................................... 2.3
"Closing Date".............................................. 2.3
"Confidentiality Letter".................................... 6.2
"Disclosure Letter"......................................... Article IV Preamble
"Effective Time"............................................ 2.2
"Exchange Fund"............................................. 3.4(e)
"Exchange Agent............................................. 3.4(a)
"Exclusive Distribution Agreement".......................... 4.6(a)
"Financial Statements"...................................... 4.9
"Financing"................................................. 5.6
"Financing Letters"......................................... 5.6
"Foreign Plans"............................................. 4.15(b)(vi)
"Identified Matter"......................................... 6.3(f)
"Material Contract"......................................... 4.6
"Merger".................................................... Recitals
"Net Value"................................................. 3.3(a)
"Other Contracts"........................................... 4.6(a)
"Payment Event"............................................. 6.4(b)
"Preferred Shares".......................................... 4.1(b)
"Proxy Statement"........................................... 6.6(a)
"Regulatory Filings"........................................ 4.8
"SEC Documents"............................................. 4.9(b)
"Series A Share Consideration".............................. 3.2(b)
"Significant Contract"...................................... 4.6(a)
"Significant Subsidiary".................................... 6.4(a)
"Special Meeting"........................................... 4.22
"Subject Litigation"........................................ 6.7(b)
"Superior Proposal"......................................... 8.1(a)(vi)
"Surviving Corporation"..................................... 2.1
"Surviving Corporation Common Shares"....................... 3.1
"Trust"..................................................... 7.3(e)(ii)
"Trust Preferred Securities"................................ 7.3(e)(ii)
"Third Party"............................................... 6.4(a)
</TABLE>
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ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the OCL, at the Effective Time, Sub shall be
merged with and into the Company. Upon the effectiveness of the Merger, the
separate corporate existence of Sub shall cease and the Company, under the name
"Dayton Superior Corporation", shall continue as the surviving corporation (the
"SURVIVING CORPORATION"). The Merger shall have the effects specified under the
OCL.
2.2 EFFECTIVE TIME. On the Closing Date, the parties shall cause the
Merger to be consummated by causing a certificate of merger with respect to the
Merger to be executed and filed in accordance with the relevant provisions of
the OCL and shall make all other filings or recordings required under the OCL.
The Merger shall become effective at the time of filing of the certificate of
merger or at such later time as is specified therein (the "EFFECTIVE TIME").
2.3 CLOSING. Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "CLOSING") shall take place (a) at the
offices of Latham & Watkins, 885 Third Avenue, New York, New York at
10:00 a.m., local time, on the first business day immediately following the day
on which the last to be satisfied or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived in accordance herewith or (b) at such
other time, date or place as Sub and the Company may agree. The date on which
the Closing occurs is herein referred to as the "CLOSING DATE."
2.4 ARTICLES OF INCORPORATION AND CODE OF REGULATIONS.
(a) At the Effective Time, and without any further action on the part of the
Company or Sub, the articles of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended so as to read in its
entirety in the form set forth as EXHIBIT A hereto, and, as so amended, until
thereafter further amended as provided therein and under the OCL, shall be the
articles of incorporation of the Surviving Corporation following the Merger.
(b) At the Effective Time, and without any further action on the part of the
Company or Sub, the code of regulations of Sub as in effect immediately prior to
the Effective Time shall be the code of regulations of the Surviving Corporation
following the Merger until thereafter changed or amended as provided therein or
by Applicable Law.
2.5 DIRECTORS. At the Effective Time, the directors of the Company shall
be changed so that they are the same as the directors of Sub immediately prior
to the Effective Time.
2.6 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall remain as the officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected, or their
earlier death, resignation or removal.
ARTICLE III.
EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY
3.1 CONVERSION OF SUB COMMON SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, each common
share, without par value, of Sub issued and outstanding immediately prior to the
Effective Time shall automatically be converted into and thereafter represent
one validly issued, fully paid and non-assessable common shares, without par
value, of the Surviving Corporation (the "SURVIVING CORPORATION COMMON SHARES").
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3.2 CONVERSION OF COMPANY COMMON SHARES. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Each Company Common Share outstanding immediately prior to the Effective
Time (other than Treasury Securities and Dissenting Shares, if any) shall
automatically be converted into the right to receive, and each certificate which
immediately prior to the Effective Time represented such Company Common Shares
shall evidence solely the right to receive, $27.00 in cash (the "CASH MERGER
CONSIDERATION") upon surrender of the certificate formerly representing such
Company Common Shares as provided in SECTION 3.4.
(b) Each Series A Share outstanding immediately prior to the Effective Time
shall automatically be converted into the right to receive one Surviving
Corporation Common Share (the "SERIES A SHARE CONSIDERATION") upon surrender of
the certificate formerly representing Series A Shares as provided in SECTION
3.4.
(c) All Treasury Securities shall automatically be canceled and cease to
exist at and after the Effective Time and no consideration shall be paid with
respect thereto.
3.3 OPTIONS.
(a) Except as otherwise agreed to in writing between the Company and the
holder of any Option, and as consented to by Sub, immediately prior to the
Effective Time, each outstanding Option granted under the Stock Option Plans
whether or not then exercisable, either (i) shall be canceled by the Company,
and at the Effective Time, or as soon as practicable thereafter, the former
holder thereof shall be entitled to receive from the Company in consideration
for such cancellation an amount in cash equal to the product of (x) the number
of Company Common Shares previously subject to such Option and (y) the excess,
if any, of the Cash Merger Consideration per share over the exercise price per
share, if any, previously subject to such Option (the "NET VALUE"), subject to
withholding or other taxes required by law to be withheld or (ii) in the event
the holder thereof does not consent to such cancellation, shall after the
Effective Time represent solely the right to receive the Cash Merger
Consideration per share upon exercise thereof; PROVIDED, HOWEVER, that with
respect to the individuals listed on SCHEDULE 3.3 (as such schedule may be
amended by the mutual consent of Sub and the Company (such consent not to be
unreasonably withheld by Sub or the Company) from time to time prior to the
Effective Time; it being understood that it is contemplated that additional
employees of the Company and its Subsidiaries may be added to such schedule and
the aggregate Net Value set forth opposite the name of any Person set forth on
such schedule may be modified as agreed with such Person), Options held by each
such individual representing an aggregate Net Value not less than the amount set
forth opposite such person's name on SCHEDULE 3.3 shall be retained and shall
not be cancelled.
(b) Except as provided herein or as otherwise agreed by the parties, the
Stock Option Plans and any other plan, program or arrangement with any current
or former employee, officer, director or consultant providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any Subsidiary, including the 1996 Non-Employee Director Compensation Program,
shall terminate as of the Effective Time, and the Company shall exercise its
reasonable best efforts to ensure that following the Effective Time, no current
or former employee, officer, director or consultant shall have any Option to
purchase Company Common Shares or any other equity interest in the Company under
any Stock Option Plan or any other Employee Plan maintained by the Company.
(c) Prior to the Effective Time, the Board of Directors (or, if appropriate,
any committee administering the Stock Option Plans) shall adopt such resolutions
or take such actions as are necessary, subject, if necessary, to obtaining
consents of the holders of Options to the cancellation thereof in exchange for
the consideration set forth in Section 3.3(a)(i), to carry out the terms of this
SECTION 3.3.
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3.4 EXCHANGE OF CERTIFICATES; PAYMENT OF CASH MERGER CONSIDERATION.
(a) As of or promptly after the Effective Time, Sub will cause the Surviving
Corporation to deposit with a paying agent to be selected by Sub and reasonably
acceptable to the Company (the "EXCHANGE AGENT") for the benefit of the holders
of Company Common Shares, for payment in accordance with this Article III, the
funds necessary to pay the Cash Merger Consideration for each share and
certificates for Surviving Corporation Common Shares.
(b) As soon as practicable after the Effective Time, (i) each holder of an
outstanding certificate or certificates which pursuant to SECTION 3.2(B)
represents the right to receive Surviving Corporation Common Shares, upon
surrender to the Exchange Agent of such certificate or certificates and
acceptance thereof by the Exchange Agent, shall be entitled to a certificate or
certificates representing the Series A Share Consideration, into which the
number of Series A Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement
and (ii) each holder of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Company Common Shares, upon
surrender to the Exchange Agent of such certificate or certificates and
acceptance thereof by the Exchange Agent, shall be entitled to receive in
exchange therefor the Cash Merger Consideration multiplied by the number of
Company Common Shares formerly represented by such certificate. No interest will
be paid on or accrue on the Cash Merger Consideration or Series A Share
Consideration. The Exchange Agent shall accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose (with
the consent of the Company not to be unreasonably withheld) to effect an orderly
exchange thereof in accordance with customary exchange practices. After the
Effective Time, there shall be no further transfer on the records of the Company
or its transfer agent of certificates formerly representing Company Common
Shares which have been converted, in whole or in part, pursuant to this
Agreement, into the right to receive cash, and if such certificates are
presented to the Company for transfer, they shall be canceled against delivery
of such cash. Until surrendered as contemplated by this SECTION 3.4(B),
(i) each certificate formerly representing Series A Shares shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender a new certificate or certificates representing Surviving
Corporation Common Shares, as contemplated by SECTION 3.2(B), and (ii) each
certificate formerly representing Company Common Shares (other than the
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Cash Merger
Consideration for each Company Common Share.
(c) No dividends or other distributions with respect to Surviving
Corporation Common Shares with a record date after the Effective Time shall be
paid to the holder of any certificate formerly representing Series A Shares not
surrendered with respect to the Merger. Subject to applicable law, following
surrender of any such certificate, there shall be paid to the holder of such
certificate or certificates, without interest, at the appropriate payment date,
the proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares.
(d) All cash paid upon the surrender for exchange of certificates formerly
representing Company Common Shares in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares exchanged for cash theretofore represented by such
certificates.
(e) Any cash or Series A Share Consideration deposited with the Exchange
Agent pursuant to this SECTION 3.4 (the "EXCHANGE FUND") which remains
undistributed to the holders of the certificates formerly representing Company
Common Shares or Series A Shares one year after the Effective Time shall be
delivered to the Surviving Corporation at such time and any former holders of
Company Common Shares or Series A Shares prior to the Merger who have not
theretofore complied with this Article III shall
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<PAGE>
thereafter look only to the Surviving Corporation and only as general unsecured
creditors thereof for payment of their claim for Cash Merger Consideration or
Series A Share Consideration, if any.
(f) None of Sub, the Company or the Exchange Agent shall be liable to any
Person in respect of any cash from the Exchange Fund delivered to a public
office pursuant to any applicable abandoned property, escheat or similar law. If
any certificates representing Company Common Shares shall not have been
surrendered prior to two years after the Effective Time (or immediately prior to
such earlier date on which any cash in respect of such certificate would
otherwise escheat to or become the property of any federal, state, local, or
municipal, foreign or other government or subdivision, branch, department or
agency thereof and any governmental or quasi-governmental authority of any
nature, including any court or other tribunal), any such cash in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
(g) In the event any certificate formerly representing Company Common Shares
or Series A Shares shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such Person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue or pay, as the case
may be, in exchange for such lost, stolen or destroyed certificate the shares
representing the Series A Share Consideration, and unpaid dividends and
distributions on shares representing the Series A Share Consideration
deliverable in respect thereof pursuant to this Agreement, or the Cash Merger
Consideration, as applicable.
3.5 DISSENTING SHARES. Notwithstanding SECTION 3.2 hereof, Dissenting
Shares shall not be converted into a right to receive the Cash Merger
Consideration. The holders thereof shall be entitled only to such rights as are
granted by Sections 1701.84 and 1701.85 of the OCL. Each holder of Dissenting
Shares who becomes entitled to payment for such shares pursuant to
Section 1701.85 of the OCL shall receive payment therefor from the Surviving
Corporation in accordance with the OCL; PROVIDED, HOWEVER, that (i) if any such
holder of Dissenting Shares shall have failed to establish his entitlement to
relief as a dissenting shareholder as provided in Section 1701.85 of the OCL,
(ii) if any such holder of Dissenting Shares shall have effectively withdrawn
his demand for relief as a dissenting shareholder with respect to such shares or
lost his right to relief as a dissenting shareholder and payment for his shares
under Section 1701.85 of the OCL, or (iii) if neither any holder of Dissenting
Shares nor the Surviving Corporation shall have filed a complaint demanding a
determination of the value of all Dissenting Shares within the time provided in
Section 1701.85 of the OCL, such holder shall forfeit the right to relief as a
dissenting shareholder with respect to such shares and each such share shall be
treated as if it had been converted, as of the Effective Time, into the right to
receive the Cash Merger Consideration, without interest thereon, from the
Surviving Corporation as provided in SECTION 3.2. The Company shall give Sub
prompt notice of any demands received by the Company for relief as a dissenting
shareholder, and Sub shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Sub, make any payment with respect to, or settle or
offer to settle, any such demands.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Sub to enter into this Agreement, the Company hereby
makes the following representations and warranties to Sub, except as otherwise
set forth in the letter dated as of the date of this Agreement (the "DISCLOSURE
LETTER") delivered by the Company to Sub and with cross-references to this
Agreement as indicated herein.
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4.1 ORGANIZATION AND CAPITALIZATION.
(a) ORGANIZATION. The Company is duly organized, validly existing and in
good standing under the laws of the State of Ohio and has full corporate power
and authority to conduct its business as it is presently being conducted and to
own and lease its Assets. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under Applicable Law except where the failure to be
so qualified and in good standing would not reasonably be expected to have a
Material Adverse Effect on the Company. The Company has delivered to Sub true,
correct and complete copies of its articles of incorporation and code of
regulations (in each case, as amended to date).
(b) CAPITALIZATION. The authorized capital stock of the Company consists
of 22,005,850 Company Common Shares and 5,000,000 preferred shares, without par
value, of the Company (the "PREFERRED SHARES"). As of January 19, 2000,
(i) 5,943,183 Company Common Shares were issued and outstanding, (ii) no
Preferred Shares were issued and outstanding, (iii) Options to acquire 442,283
Company Common Shares pursuant to the Stock Option Plans were outstanding, (iv)
850,000 Company Common Shares were reserved for issuance upon conversion of the
Debentures and (v) 25,473 Company Common Shares were held by the Company in
treasury. SECTION 4.1(B) of the Disclosure Letter includes a complete and
correct list of outstanding Options under the Stock Option Plans (including the
number of Options, the exercise price of each such Option and the vesting
schedule for each such Option). Except for the Options and Debentures and except
as set forth in SECTION 4.1(B) of the Disclosure Letter, the Company has no
outstanding subscriptions for Company Common Shares and no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter. All issued
and outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. The
Company and Sub acknowledge and agree that 300,000 Preferred Shares will be
designated by the Company as the Series A Shares prior to the Closing Date and
up to such amount will be issued to the Persons listed on SCHEDULE A prior to
the Closing Date in accordance with SECTION 6.12 hereof. The Series A Shares,
when issued, will be duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except as set forth in this SECTION 4.1(B), there
are no (i) outstanding Equity Securities of the Company or (ii) commitments or
obligations of any kind or character for the repurchase, redemption or other
acquisition of any Equity Securities of the Company.
(c) VOTING TRUSTS, PROXIES, ETC. To the knowledge of the Company, there
are no shareholder agreements, voting trusts, proxies or other agreements with
respect to or concerning the voting of the Equity Securities of the Company.
(d) INDEBTEDNESS. SECTION 4.1(D) of the Disclosure Letter contains a list
of (i) all Contracts pursuant to which any indebtedness for borrowed money of
the Company or any of its Subsidiaries is outstanding or may be incurred and
(ii) the respective principal amounts outstanding thereunder as of the date of
this Agreement.
4.2 AUTHORIZATION. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and all agreements and documents
contemplated to be executed by it by this Agreement. Subject only to the
adoption of this Agreement and the transactions contemplated hereby by the
affirmative vote of the holders of a majority of the Company Common Shares and
the affirmative vote of the holders of a majority of the outstanding Series A
Shares, the consummation by the Company of the transactions contemplated hereby
has been duly authorized by all requisite corporate action. This Agreement has
been duly authorized, executed and delivered by the Company and is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be limited
by (a) applicable bankruptcy, insolvency, moratorium,
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reorganization, fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (b) general principles of equity,
whether considered in a proceeding at law or in equity.
4.3 SUBSIDIARIES.
(a) OWNERSHIP; CAPITALIZATION. Each of the Company's Subsidiaries are set
forth in SECTION 4.3(A) of the Disclosure Letter. The Company is the beneficial
and record owner of all of the outstanding shares of capital stock of each
Subsidiary of the Company, free and clear of any and all Encumbrances. All of
the shares of capital stock of each Subsidiary of the Company have been duly
authorized and validly issued and are fully paid and non-assessable, and were
not issued in violation of any preemptive or other similar rights. No Subsidiary
of the Company has any outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter. Except as set forth in this SECTION 4.3(A), there are
no (i) outstanding Equity Securities of any of the Company's Subsidiaries or
(ii) commitments or obligations of any kind or character for the repurchase,
redemption or other acquisition of any Equity Securities of any of the Company's
Subsidiaries. There are no shareholder agreements, voting trusts, proxies or
other agreements or understandings with respect to or concerning the purchase,
sale or voting of the Equity Securities of the Company's Subsidiaries.
(b) ORGANIZATION. Each of the Company's Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to conduct its business
as it is presently being conducted and to own and lease its Assets. Each of the
Company's Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
necessary under Applicable Law except whether the failure to be so qualified and
in good standing would not reasonably be expected to have a Material Adverse
Effect on the Company. The Company has made available to Sub true, correct and
complete copies of each of its Subsidiaries' certificate of incorporation and
by-laws or other similar organization documents (in each case, as amended to
date).
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SECTION 4.4 of the Disclosure Letter and for the negotiation of this Agreement,
since December 31, 1998, (x) the Company and its Subsidiaries (1) have been
operated in the ordinary course of business, consistent with past practice,
(2) have not declared or set aside or paid any dividend or other distribution
with respect to the Company Common Shares and (3) except as set forth in the
Company Reports, have not changed the Company's accounting principles or methods
and (y) there has been no Material Adverse Change with respect to the Company.
4.5 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES. The Company and
its Subsidiaries own, or have valid leasehold or license interests in, all
Assets used in the conduct of their business except where the absence of such
ownership, leasehold or license interests would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
4.6 CONTRACTS.
(a) SECTION 4.6(A) of the Disclosure Letter sets forth a list of all
Contracts of the Company and its Subsidiaries that are material to the business,
operation, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole (the "MATERIAL CONTRACTS" and,
together with the Other Contracts (as defined herein), the "SIGNIFICANT
CONTRACTS"), and, prior to the date hereof, the Company has made available to
Sub true copies of each Significant Contract. For purposes of this Agreement,
the term "OTHER CONTRACTS" shall mean (a) each Contract required to be disclosed
pursuant to Item 401 of Regulation S-K of the SEC, (b) each Contract for the
future lease or purchase of materials, supplies, merchandise or equipment
providing for payments in excess of $500,000 during fiscal year 2000, (c) each
Contract for the sale or lease of any of the Assets involving revenues to the
Company and its Subsidiaries or lease payments to the Company or its
Subsidiaries of more than $500,000 during fiscal year 2000, other than sales or
leases of inventory and rental equipment in the ordinary course of business
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consistent with past practice, and (d) except exclusive distributor agreements
providing for the right of a Person to sell the products of the Company and its
Subsidiaries on an exclusive basis within a defined territory ("EXCLUSIVE
DISTRIBUTION AGREEMENT") entered into in the ordinary course of business
consistent with past practices, each non-competition or similar Contract which
materially restricts the geographic or operational scope of the Company's or its
Subsidiaries' business or the ability of the Company or its Subsidiaries to
enter into new lines of business.
(b) ABSENCE OF BREACHES OR DEFAULTS IN GENERAL. Except as set forth in
SECTION 4.6(B) of the Disclosure Letter, with respect to each Significant
Contract, (i) there is no default by the Company or its Subsidiaries or, to the
knowledge of the Company, any other party to any Significant Contract, and
(ii) such Significant Contract is a legal, valid and binding obligation of the
Company or its Subsidiaries party thereto, is in full force and effect and is
enforceable against the Company or its Subsidiaries and, to the knowledge of the
Company, against each other party thereto in accordance with its terms, except
as the enforceability thereof may be limited by (A) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in
effect which affect the enforcement of creditors' rights generally or (B)
general principles of equity, whether considered in a proceeding at law or in
equity, except in the case of clauses (i) and (ii), where the default or failure
to be so valid and binding, in full force and effect, or enforceable, could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
4.7 NO CONFLICT OR VIOLATION. Except as set forth in SECTION 4.7 of the
Disclosure Letter, neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby, by the
Company will result in (a) a violation of or a conflict with any provision of
the charter documents or other organizational documents of the Company or its
Subsidiaries, (b) a breach of, or a default under, or the creation of any right
of any party to accelerate, terminate or cancel pursuant to (including, without
limitation, by reason of the failure to obtain a consent or approval under any
such Contract), any term or provision of any Contract or Permit to which the
Company or its Subsidiaries is a party or by which any of the Assets are bound,
(c) a violation by the Company or its Subsidiaries of any Applicable Law, or
(d) an imposition of any Encumbrance (other than Permitted Encumbrances) on any
of the Assets, except in the case of clauses (b), (c) and (d), where such
breach, default, creation of any such right, violation or imposition would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
4.8 CONSENTS AND APPROVALS. Except as set forth in SECTION 4.8 of the
Disclosure Letter, no Permit of or declaration, filing, notice or registration
to or with, any federal, state, local or foreign governmental or regulatory
authority or body is required to be made or obtained by the Company or its
Subsidiaries in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby other
than (a) filings required in connection with or in compliance with the
provisions of the HSR Act, the Securities Act, the Exchange Act or applicable
state securities and "Blue Sky" laws (collectively, the "REGULATORY FILINGS"),
(b) the filing of the certificate of merger under the OCL, or (c) those Permits,
declarations, filings, notices or registrations that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
4.9 SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC.
(a) The Company has filed all forms, reports and documents required to be
filed by it with the SEC since December 31, 1998, pursuant to the Exchange Act.
(b) The Company has made available to Sub (i) the Company Reports, (ii) the
Company's proxy or information statements relating to meetings of, or actions
taken without a meeting by, the shareholders of the Company held since
December 31, 1998, and (iii) all of the Company's other reports, statements,
schedules and registration statements filed with the SEC since December 31, 1998
(collectively, the "SEC DOCUMENTS").
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(c) Each SEC Document filed pursuant to the Exchange Act, as of its filing
date, (i) complied in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations thereunder applicable to such SEC
Document and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each SEC Document, as amended or supplemented, if applicable, filed
pursuant to the Securities Act, as of the date such SEC Document or amendment or
supplement became effective, (i) complied in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder applicable to such SEC Document and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(e) The consolidated financial statements of the Company included in or
incorporated by reference in the SEC Documents (the "FINANCIAL STATEMENTS")
(i) comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto; (ii) have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), consistently
applied throughout the periods covered thereby (except as may be indicated in
the notes thereto) and (iii) present fairly in all material respects in
accordance with GAAP, consistently applied throughout the periods covered
thereby (except as may be indicated in the notes thereto), the consolidated
financial condition of the Company and its Subsidiaries as of the respective
dates thereof and the consolidated results of operations, shareholders' equity
and cash flows for the periods covered thereby (subject, in the case of
unaudited statements, to normal year-end adjustments which would not be material
in amount or effect).
4.10 UNDISCLOSED LIABILITIES. Except (a) as set forth in the Company
Reports, (b) for liabilities and obligations incurred since October 1, 1999, in
the ordinary course of business consistent with past practice and (c) as set
forth in SECTION 4.10 of the Disclosure Letter, neither the Company nor its
Subsidiaries has any liabilities, obligations or commitments of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP or the
rules and regulations of the SEC to be discussed in or set forth on the
consolidated balance sheet of the Company and its Subsidiaries or in the notes
thereto that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
4.11 LITIGATION. Except as set forth in SECTION 4.11 of the Disclosure
Letter, there are no outstanding actions, orders, writs, injunctions, judgments
or decrees or any claims, suits, charges, or proceedings, or arbitrations,
governmental audits or investigations (collectively, "ACTIONS") pending or
threatened that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
4.12 LABOR MATTERS. As of the date of this Agreement, there is no labor
strike or material slow-down, work stoppage or labor disturbance pending or, to
the knowledge of the Company, threatened, against the Company or its
Subsidiaries.
4.13 COMPLIANCE WITH LAW.
(a) Except as disclosed in SECTION 4.13 of the Disclosure Letter, the
Company and its Subsidiaries are in compliance in all respects with all
statutes, laws, ordinances, rules, orders or regulations ("APPLICABLE LAW")
applicable to the Company or any of its Subsidiaries, except for instances of
noncompliance that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Except as set forth in SECTION 4.13 of the Disclosure Letter, neither
the Company nor any of its Subsidiaries has received any written communication
from any federal, state, local or foreign governmental or regulatory authority
or body during the past three years that alleges that the Company or any of its
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Subsidiaries is not in compliance in any material respect with any Applicable
Law. No representation or warranty is made in this SECTION 4.13(B) with respect
to the receipt of written communications to the extent such matters are covered
in SECTIONS 4.15 (Employee Plans), 4.16 (Tax Matters) and 4.18 (Compliance with
Environmental Laws).
4.14 NO BROKERS. Other than Merrill Lynch & Co. and Robert W. Baird & Co.,
the arrangements with which have been disclosed in writing to Sub prior to the
date hereof, none of the Company, its Subsidiaries or any of their officers,
directors, employees or other Affiliates has employed or made any agreement with
any broker, finder or similar agent or any other Person to pay any finder's fee,
brokerage fee or commission or similar payment in connection with the
transactions contemplated hereby.
4.15 EMPLOYEE PLANS.
(a) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. SECTION 4.15 of the Disclosure Letter contains a complete list of
Employee Plans (other than immaterial Benefit Arrangements) which cover or, with
respect to any Pension Plan or Multiemployer Plan subject to Title IV of ERISA,
within the past six years, has covered current or former employees, directors,
officers or consultants of the Company or its Subsidiaries. True and complete
copies of each of the following documents have been made available to Sub:
(i) each Welfare Plan and Pension Plan (and, if applicable, related trust
agreements) which covers or has covered current or former employees, directors,
officers or consultants of the Company or its Subsidiaries and all amendments
thereto, all written descriptions thereof which have been distributed to the
Company's employees, directors, officers or consultants and all annuity
con-tracts or other funding instruments, (ii) each material Benefit Arrangement
which covers current or former employees, directors, officers or consultants of
the Company or its Subsidiaries including the most recent written descriptions
thereof which have been distributed to the Company's employees (including
descriptions of the number and level of employees covered by any Benefit
Arrangements providing severance benefits or bonus payments) and a complete
description of any material Benefit Arrangement which is not in writing,
(iii) the most recent determination or opinion letter issued by the Internal
Revenue Service or analogous ruling under foreign law with respect to each
Pension Plan and each applicable Welfare Plan (other than a Multiemployer Plan)
which covers current or former employees, directors, officers or consultants of
the Company or its Subsidiaries, (iv) for the three most recent plan years prior
to the date of this Agreement, Annual Reports on Form 5500 Series required to be
filed with any governmental agency for each Pension Plan and each Welfare Plan
(other than a Multiemployer Plan) which covers or, with respect to any Pension
Plan subject to Title IV of ERISA, within the past six years, has covered
current or former employees, directors, officers or consultants of the Company
or its Subsidiaries, (v) all actuarial reports prepared for the last three plan
years for each Pension Plan which covers or has covered current or former
employees, directors, officers or consultants of the Company or its
Subsidiaries, and (vi) nondiscrimination tests performed under the Code
(including, without limitation, 401(k) and 401(m) tests) for each Pension Plan
which covers or, with respect to any Pension Plan subject to Title IV of ERISA,
within the past six years, has covered current or former employees, directors,
officers or consultants of the Company or its Subsidiaries.
(b) REPRESENTATIONS.
(i) PENSION PLANS
(A) The Company has hired an enrolled actuary in order to evaluate
the funded status of the Pension Plans subject to Title IV of ERISA and, to the
knowledge of the Company, the funding method used by such actuary in connection
with each Pension Plan which is subject to the minimum funding requirements of
ERISA is acceptable and the actuarial assumptions used by such actuary in
connection with funding each such plan are reasonable. As of the last day of the
last plan year of each Pension Plan and as of the Closing Date, there are (and
were) no material "unfunded benefit liabilities" as defined in Section
4001(a)(18) of ERISA (but excluding from the definition of "current value" of
"assets" of such Pension Plan, accrued but unpaid contributions) with respect to
any Pension Plan. Within the six
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years immediately preceding the Closing Date, no "accumulated funding
deficiency" (for which an excise tax is due or would be due in the absence of a
waiver) as defined in Section 412 of the Code or as defined in Section
302(a)(2) of ERISA, whichever may apply, has been incurred with respect to any
Pension Plan with respect to any plan year, whether or not waived. Neither the
Company nor any ERISA Affiliate has failed to pay when due any "required
installment," within the meaning of Section 412(m) of the Code and Section
302(e) of ERISA, whichever may apply, with respect to any Pension Plan. Neither
Company nor any ERISA Affiliate is subject to any lien imposed under Section
412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with respect
to any Pension Plan.
(B) Neither the Company nor any ERISA Affiliate is required to
provide security to a Pension Plan under Section 401(a)(29) of the Code.
(C) Each Pension Plan and each related trust agreement, annuity
contract or other funding instrument which covers or, with respect to any
Pension Plan subject to Title IV of ERISA, within the past six years, has
covered current or former employees, directors, officers or consultants of
Company is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and nothing has occurred
during the period from its adoption to date that could materially affect such
qualification.
(D) The Company has paid all premiums (and interest charges and
penalties for late payment, if applicable) due the PBGC with respect to each
Pension Plan for each plan year thereof for which such premiums are required.
Neither Company nor any ERISA Affiliate has engaged in, or is a successor or
parent corporation to an entity that has engaged in, a transaction described in
Section 4069 of ERISA. Within the six years ending on the date of this
Agreement, (1) there has been no "reportable event" (as defined in Section
4043(c) of ERISA and the PBGC regulations under such Section) with respect to
any Pension Plan and neither Company nor any ERISA Affiliate is subject to
Section 4043(b) of ERISA and no analogous event under applicable foreign law and
(2) except as set forth on SECTION 4.15 of the Disclosure Letter, no filing has
been made by the Company or any ERISA Affiliate with the PBGC, and no proceeding
has been commenced by the PBGC, to terminate any Pension Plan. No condition
exists and no event has occurred that could constitute grounds for the
termination of any Pension Plan by the PBGC. Within the six years ending on the
date of this Agreement, neither the Company nor any ERISA Affiliate has, at any
time, (1) ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA or analogous foreign law, (2) withdrawn
as a substantial employer so as to become subject to the provisions of Section
4063 of ERISA or analogous foreign law, or (3) ceased making contributions to
any Pension Plan subject to Section 4064(a) of ERISA or analogous foreign law to
which Company or any ERISA Affiliate made contributions during the six years
prior to the Closing Date.
(ii) MULTIEMPLOYER PLANS
(A) Within the six years ending on the date of this Agreement,
neither the Company nor any ERISA Affiliate has, at any time, withdrawn from a
Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205 of ERISA, respectively, so as to result in a
liability, contingent or otherwise (including without limitation the obligations
pursuant to an agreement entered into in accordance with Section 4204 of ERISA),
of the Company or any ERISA Affiliate. Neither the Company nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity
that has engaged in, a transaction described in Section 4212(c) of ERISA.
(B) All contributions required to be made by Company or any ERISA
Affiliate to each Multiemployer Plan have been made when due.
(C) If, as of the Closing Date, Company (and all ERISA Affiliates)
were to withdraw from all Multiemployer Plans to which it (or any of them) has
contributed or been obligated to contribute, it (and they) would incur no
material liabilities to such plans under Title IV of ERISA or analogous foreign
law.
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(D) As of the date of this Agreement, to the best of the Company's
knowledge, with respect to each Multiemployer Plan: (1) no such Multiemployer
Plan has been terminated or has been in reorganization under ERISA so as to
result, directly or indirectly, in any liability, contingent or otherwise, of
the Company or any ERISA Affiliate under Title IV of ERISA; (2) no proceeding
has been initiated by any person (including the PBGC) to terminate such
Multiemployer Plan; (3) a "mass withdrawal," as defined in PBGC Reg.
Section 2640.7, with respect to such Multiemployer Plan has not occurred; (4)
the Company and the ERISA Affiliates have no reason to believe that such
Multiemployer Plan will be terminated or will be reorganized under ERISA or that
a "mass withdrawal," as defined in PBGC Reg. Section 2640.7, will occur with
respect to such Multiemployer Plan; and (5) the Company and the ERISA Affiliates
do not expect to withdraw in a "complete withdrawal" or "partial withdrawal"
from such Multiemployer Plan.
(iii) WELFARE PLANS
(A) Except as set forth in SECTION 4.15(B)(III)(A) of the Disclosure
Letter, none of the Company, any ERISA Affiliate or any Welfare Plan has any
present or future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate pursuant to,
any retiree medical benefit plan, or other retiree Welfare Plan, and, to the
knowledge of the Company, no condition exists which would prevent Company from
amending or terminating any such benefit plan or Welfare Plan.
(B) Each Welfare Plan which covers current or former employees,
directors, officers or consultants of the Company or an ERISA Affiliate and
which is a "group health plan," as defined in Section 607(1) of ERISA, has been
operated, in all material respects, in compliance with provisions of Part 6 of
Title I, Subtitle B of ERISA and Section 4980B of the Code at all times.
(C) Neither the Company nor any ERISA Affiliate has incurred any
liability with respect to any Welfare Plan that is a "multiemployer plan," as
defined in Section 3(37) of ERISA, under the terms of such Welfare Plan, any
collective bargaining agreement or otherwise resulting from any cessation of
contributions, cessation of obligation to make contributions or other form of
withdrawal from such Welfare Plan.
(iv) COMPLIANCE WITH LAW. Each Employee Plan presently complies and
has been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan, including without limitation, ERISA and the
Code, and by its terms can be amended or terminated at any time. Through the
date of this Agreement, the Company has made all contributions and payments
required to be made by it with respect to each Employee Plan, including any
Foreign Plan (as defined below), or adequate accruals therefor have been
provided for and will be reflected in accordance with GAAP on the Financial
Statements provided to the Sub by the Company.
(v) DEDUCTIBILITY OF PAYMENTS. There is no contract, agreement, plan
or arrangement covering any current or former employee, director, officer or
consultant of the Company (with respect to its relationship with such entities)
that, individually or collectively, provides for the payment by the Company of
any amount that is not deductible under Section 162(m) or 404 of the Code.
(vi) FOREIGN PLANS. Each Employee Plan that covers any current or
former employee, director, officer or consultant of any Foreign Subsidiary or is
otherwise not subject to ERISA or the Code (each, a "FOREIGN PLAN") has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations
(including without limitation any special provisions relating to the tax status
of contributions to, earnings of or distributions from such Plans where each
such Plan was intended to have such tax status) and has been maintained in good
standing with applicable regulatory authorities.
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(vii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Neither Company
nor any plan fiduciary of any Welfare Plan or Pension Plan which covers or, with
respect to any Pension Plan subject to Title IV of ERISA, within the past six
years, has covered current or former employees, directors, officers or
consultants of the Company or any ERISA Affiliate, has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any "prohibited
transaction," as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Code, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B
of ERISA. The Company has not knowingly participated in a violation of Part 4 of
Title I, Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or
Pension Plan (or other employee benefit plan subject to ERISA) and has not been
assessed any civil penalty under Section 502(l) of ERISA.
(viii) LITIGATION. As of the date of this Agreement, there is no
action, order, writ, injunction, judgment or decree outstanding or claim, suit,
litigation, proceeding, arbitral action, governmental audit or investigation
relating to or seeking benefits under any Employee Plan that is pending,
threatened or anticipated against the Company, any ERISA Affiliate or any
Employee Plan, other than routine claims of participants.
(ix) NO AMENDMENTS. As of the date of this Agreement, neither the
Company nor any ERISA Affiliate has any announced plan or legally binding
commitment to create any additional Employee Plans which are intended to cover
current or former employees, directors, officers or consultants of the Company
or to amend or modify any existing Employee Plan which covers or has covered
current or former employees, directors, officers or consultants of the Company.
(x) INSURANCE CONTRACTS. To the best of the Company's knowledge,
neither the Company nor any Employee Plan (other than a Multiemployer Plan)
holds as an asset of any Employee Plan any interest in any annuity contract,
guaranteed investment contract or any other investment or insurance contract
issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings, the consequence of which would be
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
(xi) NO ACCELERATION OR CREATION OF RIGHTS. Except as set forth in
SECTION 4.15 of the Disclosure Letter, neither the execution and delivery of
this Agreement or other related agreements by the Company nor the consummation
of the transactions contemplated hereby or the related transactions will result
in the acceleration or creation of any rights of any person to benefits under
any Employee Plan (including, without limitation, the acceleration of the
vesting or exercisability of any stock options, the acceleration of the vesting
of any restricted stock, the acceleration of the accrual or vesting of any
benefits under any Pension Plan or the acceleration or creation of any rights
under any severance, parachute or change in control agreement).
4.16 TAX MATTERS.
(a) FILING OF TAX RETURNS. The Company and its Subsidiaries have timely
filed with the appropriate taxing authorities all material Returns (including,
without limitation, information returns and other material information) in
respect of Taxes required to be filed through the date hereof and will timely
file any such returns required to be filed on or prior to the Closing Date. All
Returns and other information filed are complete and accurate in all material
respects. Except as disclosed in SECTION 4.16(A) of the Disclosure Letter, no
extension of time within which to file Returns (including, without limitation,
information Returns) relating to Taxes currently is in effect. The Company and
its Subsidiaries have made available to Sub complete and accurate copies of the
federal, state and local income tax Returns for the years 1996, 1997 and 1998.
(b) PAYMENT OF TAXES. All Taxes for which the Company and its Subsidiaries
are or may be liable, in respect of periods (or portions thereof) ending on or
before the Closing Date, have been timely paid, or an adequate reserve or
accrual (in conformity with GAAP) has been established therefor.
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(c) AUDITS, INVESTIGATIONS OR CLAIMS. No material deficiencies for Taxes
have been claimed, proposed or assessed in writing by any taxing or other
governmental authority against the Company or its Subsidiaries which have not
been paid or reserved on the Financial Statements. There are no pending or, to
the Company's knowledge, threatened audits, investigations or claims for or
relating to any liability in respect of Taxes that in the reasonable judgment of
the Company or its counsel are likely to result in a material additional amount
of Taxes. Outstanding audits of federal, state, and local returns for Taxes by
the relevant taxing or other governmental authorities as of the date of this
Agreement are listed in SECTION 4.16(C) of the Disclosure Letter. No extension
of any statute of limitations relating to Taxes is in effect with respect to the
Company or its Subsidiaries. Except as disclosed in SECTION 4.16(C) of the
Disclosure Letter, no power of attorney has been executed by the Company or its
Subsidiaries with respect to any matters relating to Taxes which is currently in
force.
(d) LIENS. Except as set forth in SECTION 4.16(D) of the Disclosure
Letter, there are no liens for Taxes (other than for current Taxes not yet due
and payable) on the Assets.
(e) SAFE HARBOR LEASE PROPERTY. None of the Assets is property that is
required to be treated as being owned by any other Person pursuant to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code.
(f) TAX ELECTION. Neither the Company nor its Subsidiaries has consented
at any time under Section 341(f)(1) of the Code to have the provisions of
Section 341(f)(2) of the Code (or similar provisions under state or local law)
apply to any disposition of the Assets. The Company and its Subsidiaries have
not agreed to make, or are not required to make, any adjustment under
Section 481(a) of the Code (or similar provisions under state or local law) by
reason of a change in accounting method or otherwise.
(g) TAX SHARING AGREEMENTS. Except as set forth in SECTION 4.16(G) of the
Disclosure Letter, there are no tax sharing agreements or similar arrangements
(whether written or unwritten) with respect to or involving the Company or its
Subsidiaries.
(h) PARTNERSHIPS. The Company and its Subsidiaries are not a party to any
joint venture, partnership or other arrangement or contract which is treated as
a partnership for federal income tax purposes.
(i) PARACHUTE PAYMENTS. The Company and its Subsidiaries are not a party
to any agreement or arrangement that could reasonably be expected to result,
individually or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code, including, without
limitation, as a result of any event connected with the Merger or any other
transaction contemplated herein.
(j) AFFILIATED GROUP. Except as set forth in SECTION 4.16(J) of the
Disclosure Letter, since July 1, 1990, the Company and its Subsidiaries have not
been a member of an affiliated group that has filed a consolidated return or any
group that has filed a combined, consolidated or unitary state or local return,
other than the group of which the Company is currently the parent.
4.17 CUSTOMERS AND SUPPLIERS. SECTION 4.17 of the Disclosure Letter sets
forth a true and correct list of (a) the 10 largest customers of the Company and
its Subsidiaries, on a consolidated basis, in terms of sales during the twelve
months ended December 31, 1999, (b) the 10 largest customers of each business
platform of the Company and its Subsidiaries, in terms of sales during the
twelve months ended December 31, 1999, and (c) the 10 largest suppliers of the
Company and its Subsidiaries, on a consolidated basis, in terms of purchases in
the twelve months ended December 31, 1999.
4.18 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
SECTION 4.18 of the Disclosure Letter:
(a) The Company and its Subsidiaries are in compliance with all
Environmental Laws, including, without limitation, all Permits required
thereunder to conduct their business as currently being conducted, except for
instances of noncompliance that have not had and would not reasonably be
expected to have,
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individually or in the aggregate, a Material Adverse Effect on the Company. In
addition, as of the date of this Agreement, to the knowledge of the Company, the
Company and its Subsidiaries are in material compliance with all Environmental
Laws, including, without limitation, all Permits required thereunder to conduct
their business as currently being conducted.
(b) As of the date of this Agreement, there are no existing Environmental
Claims against the Company or its Subsidiaries, nor have any of them received
any written notification of any allegation of any actual, or potential
responsibility for, or any inquiry or investigation regarding, any disposal,
release or threatened release at any location of any Hazardous Substance
generated or transported by the Company or its Subsidiaries. There are no
existing Environmental Claims against the Company or its Subsidiaries, nor have
any of them received any written notification of any allegation of any actual,
or potential responsibility for, or any inquiry or investigation regarding, any
disposal, release or threatened release at any location of any Hazardous
Substance generated or transported by the Company or its Subsidiaries, except as
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(c) There have been no releases (I.E., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances on, upon or
into the Facilities other than those authorized by Environmental Laws including,
without limitation, the Permits required thereunder, the consequences of which
would be a Material Adverse Effect on the Company.
(d) Except as would not have a Material Adverse Effect on the Company, there
are no PCBs or asbestos-containing materials located at or on the Facilities.
(e) Except as set forth in SECTION 4.18(E) of the Disclosure Letter and
except with respect to the Facilities, the Company and its Subsidiaries are not
a party to any contract and are not obligated by any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions or compliance with Environmental Laws.
(f) As of the date of this Agreement, there are no currently effective
consent decrees, consent orders, judgments, judicial or administrative orders or
agreements (other than Permits) with or liens by, any governmental authority or
quasi-governmental entity relating to any Environmental Law which regulate,
obligate or bind the Company or its Subsidiaries. There are no currently
effective consent decrees, consent orders, judgments, judicial or administrative
orders or agreements (other than Permits) with or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate or bind the Company or its Subsidiaries, except as could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(g) True and correct copies of the Environmental Reports have been made
available to Sub.
4.19 OPINION OF FINANCIAL ADVISORS. The Company has received the opinion
of each of Merrill Lynch & Co. and Robert W. Baird & Co., dated the date of this
Agreement, to the effect that, as of such date, the consideration to be received
in the Merger by the holders of Company Common Shares is fair to such holders
from a financial point of view, a signed copy of each such opinion has been
delivered to Sub.
4.20 BOARD RECOMMENDATION. The Board of Directors of the Company, at a
meeting duly called and held, has by unanimous vote (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, taken
together are fair to and in the best interests of the Shareholders,
(ii) approved this Agreement and the transactions contemplated hereby, including
the Merger, which approval satisfies the requirements of the OCL for action by
the Board of Directors to approve this Agreement and (iii) resolved to recommend
that the holders of the Company Common Shares adopt this Agreement and approve
the transactions contemplated by this Agreement, including the Merger.
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4.21 REQUIRED COMPANY VOTE. The affirmative vote of a majority of the
outstanding Company Common Shares and the affirmative vote of a majority of the
outstanding Series A Shares are the only votes of the holders of any class or
series of the Company's securities necessary to adopt this Agreement and approve
the Merger and the other transactions contemplated by this Agreement. The
Company's articles of incorporation contain a provision in which the Company
expressly elects not to be governed by Section 1701.831 of the OCL, and therefor
SECTION 1701.831 does not restrict the consummation of the Merger or the other
transactions contemplated by this Agreement.
4.22 PROXY STATEMENT. The Proxy Statement to be mailed to the Shareholders
in connection with the special meeting of the Shareholders (the "SPECIAL
MEETING") and any amendment thereof or supplement thereto (excluding any
information supplied in writing by Sub specifically for inclusion therein), when
mailed to the Shareholders and at the time of the Special Meeting, and any
schedules required to be filed with the SEC as a result of the Merger or the
transactions contemplated by this Agreement, when filed, shall not contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and shall comply
as to form with all requirements of the Exchange Act. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information furnished in writing by Sub or its representatives specifically for
inclusion in any of the foregoing documents.
4.23 TAKEOVER LAWS. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
the laws of the State of Ohio or, to the knowledge of the Company, the Federal
laws of the United States or the laws of any other state, applicable to the
Company or its Subsidiaries is applicable to the execution, delivery and
performance of this Agreement or the consummation of the Merger or the
transactions relating to the Merger.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF SUB
As an inducement to the Company to enter into this Agreement, Sub hereby
makes the following representations and warranties to the Company:
5.1 ORGANIZATION. Sub is duly organized, validly existing and in good
standing under the laws of the State of Ohio.
5.2 AUTHORIZATION. Sub has all necessary corporate power and authority to,
and has taken all corporate action necessary on its part to, execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Sub and is a legal, valid and
binding obligation of Sub, enforceable against Sub in accordance with its terms,
except as the enforceability thereof may be limited by (a) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (b) general principles of equity, whether considered in a
proceeding at law or in equity.
5.3 CONSENTS AND APPROVALS. No consent, waiver, agreement, approval,
permit or declaration, filing, notice or registration to or with, any federal,
state, local or foreign governmental or regulatory authority or body is required
to be made or obtained by Sub in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby other than any Regulatory Filings and the filing of the
certificate of merger under the OCL.
5.4 NO CONFLICT OR VIOLATION. Neither the execution, delivery and
performance of this Agreement, nor the consummation of the transactions
contemplated hereby, by Sub will result in (a) a violation of or a conflict with
any provision of the articles of incorporation or code of regulations of Sub,
(b) a breach of, or a default under, or the creation of any right of any party
to accelerate, terminate or cancel pursuant to (including, without limitation,
by reason of the failure to obtain a consent or approval under any such
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contract, encumbrance or permit), any term or provision of any contract,
encumbrance or permit to which Sub is a party or by which any of its assets are
bound, a violation by Sub of any Applicable Law, or an imposition of any
Encumbrance on the business of Sub or on any of its assets, except where such
breach, default, violation, imposition or creation of any such right would not
reasonably be expected to have a Material Adverse Effect on Sub.
5.5 PROXY STATEMENT. The information furnished in writing to the Company
by Sub specifically for use in the Proxy Statement and any amendment or
supplement thereto, when mailed to the Shareholders or at the time of the
Shareholders Meeting, and any schedules required to be filed with the SEC as a
result of the Merger or the transactions contemplated by this Agreement, when
filed, shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, Sub makes no representation
or warranty with respect to any information supplied by the Company or any of
its representatives which is contained in or incorporated by reference in any of
the foregoing documents.
5.6 FINANCING. Sub has delivered to the Company complete and correct
executed copies of letters (the "FINANCING LETTERS") related to the commitment
of the lenders to provide the financing in connection with the Merger and other
transactions contemplated hereby and to refinance existing indebtedness of Sub
and the Company and to pay related fees and expenses (the "FINANCING"). As of
the date of this Agreement, Sub has no reason to believe that any of the
conditions to the Financing will not be satisfied or that the funds for the
Financing will not be available on a timely basis for the transactions
contemplated by this Agreement. Assuming satisfaction of all conditions set
forth in SECTIONS 7.1 and 7.3 and full funding of all the amounts contemplated
by the Financing Letters, Sub at Closing shall be capitalized with an equity
contribution in an amount of $84.0 million, less (a) the aggregate value of all
Equity Securities of the Company retained and/or rolled-over by certain existing
holders of Equity Securities of the Company (currently contemplated to be
approximately $4.0 to $5.0 million), plus (b) if a payment is made with respect
to the Identified Matter in accordance with Section 6.3(f), an amount up to
$3.5 million to the extent, and only to the extent, required by the Financing
Letters as a result of Incremental Existing Indebtedness (as defined in the
Financing Letters) being greater that $25.0 million, and such funds, together
with the proceeds from the Financing, will provide sufficient funds to
consummate the transactions contemplated hereby.
5.7 NO BROKER PAYMENTS BY COMPANY. Unless the Merger is consummated, the
Company will not be responsible for any finder's fee, brokerage fee or
commission or similar payment in connection with the transactions contemplated
hereby due to any arrangement between any broker, finder or similar agent and
Sub or any of its Affiliates, except as otherwise contemplated by this Agreement
or agreed to by the Company.
ARTICLE VI.
COVENANTS OF THE COMPANY AND SUB
The Company and Sub covenant and agree with each other that from the date
hereof through the Closing:
6.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING. Prior to the Effective Time,
except as set forth in SECTION 6.1 of the Disclosure Letter or as contemplated
by any other provision of this Agreement, unless Sub has consented in writing
thereto (such consent not to unreasonably withheld), the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations and business according to their usual, regular and ordinary course
consistent with past practice;
(b) to the extent consistent with SECTION 6.1(A), shall use its reasonable
best efforts, and shall cause each of its Subsidiaries to use its reasonable
best efforts, to preserve intact their business organizations and
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goodwill, keep available the services of their respective officers and employees
and maintain satisfactory relationships with those persons having business
relationships with them;
(c) shall not, and shall cause its Subsidiaries not to, amend their
respective articles of incorporation or code of regulations or comparable
governing instruments, other than to authorize the Series A Shares with rights,
preferences and designations set forth on SCHEDULE 6.1(C) and as expressly
provided by the terms of this Agreement;
(d) upon the discovery by any of the Persons set forth on SECTION 6.1(D) of
the Disclosure Letter, shall promptly notify Sub of (i) any Material Adverse
Change with respect to the Company, (ii) any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or (iii) the breach in any
material respect of any representation or warranty contained herein;
(e) shall promptly deliver to Sub correct and complete copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(f) shall not, and shall not permit any of its Subsidiaries to, (A)
authorize, propose or announce an intention to authorize or propose, or enter
into an agreement with respect to, (1) any release or relinquishment of any
material contract rights, or (2) any acquisition, disposition, lease or license
of, or mortgage, pledge or other encumbrance or lien on, any Assets (including
Equity Securities of any Subsidiary), except the purchase or sale of inventory,
the sale or lease of rental equipment and the sale of excess or obsolete assets,
each in the ordinary course of business consistent with past practice, or the
purchase, lease, license or sale of Assets in the ordinary course of business
consistent with past practice which, individually or in the aggregate, are not
material to the Company and its Subsidiaries taken as a whole (or the placement
of liens pursuant to the existing credit facility or purchase money liens, in
each case, on Assets acquired after the date of this Agreement in accordance
with the terms hereof and in the ordinary course of business, consistent with
past practice), or (B) adopt a plan of complete or partial liquidation or adopt
resolutions providing for complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization, other than the Merger;
(g) shall not, and shall not permit any of its Subsidiaries to, (i) grant,
confer or award any options, warrants, conversion rights or other rights or
Equity Securities (other than (x) Company Common Shares issued upon exercise of
Options or conversion of the Debentures in accordance with their present terms
and (y) the issuance of the Series A Shares to the Persons listed on SCHEDULE A
in accordance with SECTION 6.12) not existing on the date hereof, to acquire any
shares of its capital stock or other securities of the Company or its
Subsidiaries or (ii) except as contemplated by SECTION 3.3, accelerate, amend or
change the period of exercisability of options or restricted stock granted under
any employee stock plan or authorize cash payments in exchange for any options
granted under any of such plans;
(h) except as required by Applicable Law, shall not, and shall not permit
any of its Subsidiaries to, amend the terms of the Employee Plans, including,
without limitation, any employment, severance or similar agreements or
arrangements in existence on the date hereof, or adopt any new employee benefit
plans, programs or arrangements or any employment, severance or similar
agreements or arrangements;
(i) shall not, and shall not permit any of its Subsidiaries to, (i) increase
or agree to increase the compensation payable or to become payable to its
officers or, other than increases in accordance with past practice which are not
material, to its employees or (ii) enter into any collective bargaining
agreement other than renewals in the ordinary course of business consistent with
past practice;
(j) shall not, and shall not permit any of its Subsidiaries to, (i) incur,
create, assume or otherwise become liable for borrowed money or assume,
guarantee, endorse or otherwise become responsible or liable for the obligations
of any other individual, corporation or other entity or (ii) make any loans or
advances to any other Person, except in the case of clause (i) for borrowings
under existing credit facilities
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as of the date of this Agreement in the ordinary course of business and, except
in the case of clause (ii) for advances consistent with past practice which are
not material;
(k) shall not, and shall not permit any of its Subsidiaries to, (i)
materially change any practice with respect to Taxes, (ii) make, change or
revoke any material Tax election, or (iii) settle or compromise any material
dispute involving a Tax liability;
(l) shall not, and shall not permit any of its Subsidiaries to, (i) declare,
set aside or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock or other ownership interests other
than dividends and distributions by a direct or indirect wholly owned Subsidiary
of the Company to its parent or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any of its
Subsidiaries, or make any commitment for any such action or (iii) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for share of its
capital stock, except, in the case of clause (ii), the acquisition of the
Company Common Shares in exchange for the Series A Shares as set forth in
SECTION 6.12;
(m) shall not, and shall not permit any of its Subsidiaries to, issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock or
any Equity Security (other than (i) the issuance of Company Common Shares upon
the exercise of Options or the conversion of the Debentures, outstanding on the
date of this Agreement, in accordance with their present terms or (ii) the
issuance of the Series A Shares as set forth in SECTION 6.12);
(n) shall not, and shall not permit any of its Subsidiaries to, make or
agree to make any capital expenditure except in accordance with the Company's
capital expenditure plan for fiscal year 2000, a true, correct and complete copy
of which has been delivered to Sub;
(o) shall not, and shall not permit any of its Subsidiaries to, change any
accounting principles or practices, except insofar as may be required by a
change in GAAP;
(p) shall not, and shall not permit any of its Subsidiaries to, pay,
discharge, settle or satisfy any 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
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the Company Reports or incurred thereafter in the ordinary course of business
consistent with past practice; provided that in no event shall any of the
liabilities and obligations set forth in SECTION 6.1(P) of the Disclosure Letter
be paid, discharged or satisfied without the prior written consent of Sub;
(q) shall not (i) acquire (by merger, consolidation, acquisition of stock,
other securities or assets or otherwise) or (ii) make a capital investment in
(whether through the acquisition of an equity interest, the making of a loan or
advance or otherwise) (A) any Person, other than a wholly-owned subsidiary of
the Company, or (B) any portion of the assets of any Person that constitutes a
division or operating unit of such Person;
(r) shall not, and shall not permit any of its Subsidiaries to, (A) enter
into any non-competition or similar Contracts, except Exclusive Distribution
Agreements entered into in the ordinary course of business consistent with past
practice or (B) enter into any Contract providing for payments by the Company or
its Subsidiaries or involving revenues to the Company and its Subsidiaries of
more than $1,000,000 over any twelve-month period during the life of such
Contract; and
(s) shall not, and shall not permit any of its Subsidiaries to take, or
agree (in writing or otherwise) or resolve to take, any of the foregoing
actions.
6.2 INVESTIGATION BY SUB. The Company shall allow Sub, its counsel,
accountants and other representatives and the financial institutions (and their
counsel and representatives) providing Financing in
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connection with this Agreement and the transactions contemplated hereby, during
regular business hours upon reasonable notice, to make such reasonable
inspection of the Assets, Facilities, business and operations of the Company and
its Subsidiaries and to inspect and make copies of Contracts, books and records
and all other documents and information reasonably requested by Sub and related
to the operations and business of the Company and its Subsidiaries including,
without limitation, historical financial information concerning the business of
the Company and its Subsidiaries and to meet with designated Personnel of the
Company or its Subsidiaries and/or their representatives. The Company and its
Subsidiaries shall furnish to Sub promptly upon request (a) all additional
documents and information with respect to the affairs of the Company and its
Subsidiaries relating to their businesses and (b) access to the Personnel and to
the Company's and its Subsidiaries' accountants and counsel as Sub, or its
counsel or accountants, may from time to time reasonably request and the Company
and its Subsidiaries shall instruct their Personnel, accountants and counsel to
cooperate with Sub, and to provide such documents and information as Sub and its
representatives may reasonably request. Sub will hold, and will use its
reasonable best efforts to cause its counsel, accountants and other
representatives and the financial institutions (and their counsel and
representatives) providing Financing in connection herewith, any nonpublic
information in confidence to the extent required by, and in accordance with,
that certain confidentiality letter, dated October 27, 1999, between Dayton
Superior Corporation and Odyssey Investment Partners, LLC (the "CONFIDENTIALITY
LETTER"). In addition, Sub will use its reasonable best efforts to obtain the
Financing contemplated by the Financing Letters.
6.3 CONSENTS AND EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to (A) promptly make its respective
filings under the HSR Act with respect to the Merger and (B) use its reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement. Sub and the
Company will use their reasonable best efforts and cooperate with one another
(i) in promptly determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Merger, and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, waivers, licenses, permits or
authorizations.
(b) The Company shall cooperate with any reasonable requests of Sub or the
SEC related to the recording of the Merger as a recapitalization for financial
reporting purposes, including, without limitation, to assist Sub and its
Affiliates with any presentation to the SEC with regard to such recording and to
include appropriate disclosure with regard to such recording in all filings with
the SEC and all mailings to shareholders made in connection with the Merger.
(c) The Company will provide, and will cause its Subsidiaries and its and
their respective officers, employees and advisors to provide, all reasonable
cooperation in connection with the arrangement of the Financing to be
consummated contemporaneous with or at or after the Closing in respect of the
transactions contemplated by this Agreement, including without limitation,
(x) participation in meetings, due diligence sessions and road shows, (y) the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, and (z) the execution and delivery of any customary
commitment letters, underwriting or placement agreements, pledge and security
documents, other definitive financing documents, or other requested certificates
or documents, including comfort letters of accountants and legal opinions, in
each case as may be reasonably requested by Sub; provided that the
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form and substance of any of the documents referred to in clause (y), and the
terms and conditions of any of the agreements and other documents referred to in
clause (z), shall be substantially consistent with the terms and conditions of
the Financing required to satisfy the condition precedent set forth in
SECTION 7.3(F). In addition, in conjunction with the obtaining the Financing,
the Company agrees, at the request of Sub, to call for prepayment or redemption,
as the case may be, any then existing indebtedness of the Company (other than
the Debentures) which by its terms permits prepayment or redemption; PROVIDED
that such prepayment or redemption shall only be made contemporaneously with or
after the Effective Time.
(d) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the Common Shares from the
NYSE, PROVIDED, that such delisting shall not be effective until after the
Effective Time.
(e) The Company agrees to cooperate with Sub and to take such actions as may
be reasonably requested by Sub to cause or permit the cancellation or
satisfaction and discharge of the Trust Preferred Securities and/or Debentures
as of the Closing Date, in exchange for the amounts to which the holders of the
Trust Preferred Securities and/or Debentures would be entitled to receive after
the consummation of the transactions contemplated by this Agreement.
(f) With respect to the matter set forth in SECTION 6.3(P) of the Disclosure
Letter (the "IDENTIFIED MATTER"), neither the Company or any of its Subsidiaries
shall pay any amount (other than reasonable costs, filing fees, and reasonable
legal fees and expenses) with respect to the Identified Matter unless and until
(i) Sub consents in writing to the Company's or any of its Subsidiaries' payment
of any such amount or (ii) Symons Corporation:
(A) has exhausted all appeals, including, but not limited to, requests for
reconsideration or re-argument or other similar requests, lawfully available to
it, which in the good faith opinion of Symons Corporation's outside counsel are
appropriate in the circumstances (the Company agrees to give Sub as much advance
notice as possible prior to determining any such appeal is not lawfully
available to it or any of its Subsidiaries or is not appropriate in the
circumstances);
(B) has taken all lawful steps available to extend, where possible, and in
any event exhaust any time period allowed for payment of any judgment issued
against Symons Corporation and upheld by the applicable appellate court (the
"relevant judgment"); and
(C) has given Sub prior notice of its belief that it has no lawful option
available to it (which in the good faith opinion of Symons Corporation's outside
counsel is appropriate in the circumstances) other than paying the relevant
judgment by a certain date (the Company agrees to give as much advance notice as
is possible to Sub of its determination and to consult with Sub concerning
whether any other lawful option is available to Symons Corporation or whether
any such lawful option is appropriate in the circumstances).
The Company agrees to notify Sub of all material developments with respect
to the Identified Matter, including, without limitation, with respect to the
matters described above in clauses (A), (B) and (C) of this Section 6.3(f).
6.4 OTHER OFFERS.
(a) The Company shall not, nor shall it authorize or permit any of its
Subsidiaries to (whether directly or indirectly through advisors, agents or
other intermediaries), nor shall the Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, agents,
representatives or advisors to, (x) solicit, initiate, encourage or take any
action knowingly to facilitate the submission of inquiries, proposals or offers
from any Person or group, other than Sub and its representatives and Affiliates,
relating to (i) any acquisition or purchase of 20% or more of the Assets (other
than purchases and sales or leases of inventory and rental equipment in the
ordinary course of business consistent with past practice) or of over 20% of any
class of Equity Securities of (A) the Company or (B) any of the Company's
Subsidiaries whose
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Assets constitute more than 20% of the Assets (a "SIGNIFICANT SUBSIDIARY" (it
being understood and agreed that in any event Symons Corporation shall be deemed
to be a Significant Subsidiary)), (ii) any tender offer (including a self tender
offer) or exchange offer that if consummated would result in any Person
beneficially owning 20% or more of any class of Equity Securities of the Company
or any of its Significant Subsidiaries, or (iii) any merger, consolidation,
recapitalization, sale of all or substantially all of the assets, liquidation,
dissolution or similar transaction involving the Company or any of its
Significant Subsidiaries other than the transactions contemplated by this
Agreement (each such transaction being referred to herein as an "ACQUISITION
PROPOSAL"), or agree to or endorse any Acquisition Proposal, (y) enter into or
participate in any discussions or negotiations regarding any of the foregoing or
(z) grant any material waiver or release under any standstill, non-solicitation
or similar agreement with respect to any Equity Securities of the Company or any
of its Subsidiaries; PROVIDED, HOWEVER, that the foregoing shall not prohibit
the Company or its Subsidiaries (either directly or indirectly through advisors,
agents or other intermediaries) from (i) furnishing information pursuant to a
customary confidentiality letter concerning the Company and its businesses,
properties or Assets to any Person or "group," as defined in Section 13(d) of
the Exchange Act, other than Sub or any of its Affiliates (a "THIRD PARTY") who
has made a bona fide Acquisition Proposal, (ii) engaging in discussions or
negotiations with such a Third Party who has made a bona fide Acquisition
Proposal and/or (iii) taking any non-appealable, final action ordered to be
taken by the Company or its Subsidiaries by any court of competent jurisdiction,
but in each case referred to in the foregoing clauses (i) and (ii), only to the
extent that, in response to a bona fide Acquisition Proposal that the Board of
Directors of the Company shall have determined in good faith is reasonably
likely to result in a Superior Proposal (as defined in SECTION 8.1(A)(VI), the
Board of Directors of the Company shall have concluded in good faith after
consultation with outside counsel that such action is required to prevent the
Board of Directors of the Company from breaching its fiduciary duties to the
shareholders of the Company under applicable law; PROVIDED, FURTHER, that the
Board of Directors of the Company shall not take any of the foregoing actions
referred to in clauses (i) and (ii) until after the Company has given Sub notice
thereof as contemplated by SECTION 6.4(D). Notwithstanding the foregoing, if,
prior to the Shareholder Vote, the Board of Directors of the Company receives a
bona fide Acquisition Proposal and as a result thereof the Board of Directors
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with their fiduciary obligations, the
Board of Directors of the Company may withdraw or modify its approval or
recommendation of the Merger and this Agreement. The Company shall immediately
cease and order its advisors, agents and other intermediaries to cease any and
all existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing; PROVIDED that the Company shall
be responsible for any such advisor, agent or other intermediary failing to
cease such activities, discussions and negotiations. Nothing contained in this
SECTION 6.4 shall prohibit the Company from taking or disclosing to its
shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act or
from making any disclosure to its shareholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure to so disclose would be in violation of its obligations under Applicable
Law.
(b) If a Payment Event (as hereinafter defined) occurs, the Company shall
pay to Sub, within one business day following such Payment Event, a fee of
$6,000,000. "PAYMENT EVENT" means (1) the termination of this Agreement pursuant
to SECTION 8.1(A)(V); (2) the termination of this Agreement pursuant to
SECTION 8.1(A)(VI); or (3) the occurrence of any of the following events if this
Agreement shall have been terminated (i) by Sub pursuant to SECTION 8.1(A)(III)
due to a failure of the condition set forth in SECTION 7.1(A) to be satisfied or
(ii) by the Company pursuant to SECTION 8.1(A)(III) due to a failure of the
condition set forth in SECTION 7.1(A) to be satisfied: (A) prior to the
Shareholder Vote, (x) any Third Party shall have become the beneficial owner of
more than 20% of the outstanding Company Common Shares or (y) any Third Party
shall have made, or proposed, communicated or disclosed in a manner which is or
otherwise becomes public a bona fide intention to make an Acquisition Proposal
(including by making such an Acquisition Proposal) and (B) on or prior to the
date that is within 12 months of the termination of this
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Agreement, the Company either consummates with a Third Party a transaction the
proposal of which would otherwise qualify as an Acquisition Proposal under
SECTION 6.4(A) or enters into a definitive agreement with a Third Party with
respect to a transaction the proposal of which would otherwise qualify as an
Acquisition Proposal under SECTION 6.4(A) and such transaction is consummated
within six months of the date of such definitive agreement (whether or not such
Third Party is the Third Party referred to in clause (x) above) (it being
understood that for purposes of this clause (B) the phrase "50%" is substituted
for the phrase "20%" in the definition of Acquisition Proposal and that in
determining whether such 50% threshold shall have been satisfied, all Assets and
Equity Securities acquired by the Third Party that consummates the Acquisition
Proposal prior to the termination of this Agreement shall be included).
(c) Upon termination of this Agreement (1) pursuant to SECTION 8.1(A)(V),
8.1(A)(VI) OR 8.1(A)(VII), (2) by Sub pursuant to SECTION 8.1(A)(III) due to a
failure of a condition set forth in SECTION 7.1(A) or SECTIONS 7.3(A), (E) or
(F) to be satisfied or (3) by the Company pursuant to SECTION 8.1(A)(III) due to
a failure of the condition set forth in SECTION 7.1(A) to be satisfied, the
Company shall reimburse Sub and its Affiliates not later than two business days
after submission of reasonable documentation thereof for all of their documented
out-of-pocket fees and expenses (including, without limitation, the reasonable
fees and expenses for their counsel and investment banking fees), actually
incurred by any of them or on their behalf in connection with this Agreement and
the transactions contemplated hereby and the arrangement of, obtaining the
commitment to provide or obtaining the Financing for transactions contemplated
by this Agreement (including any reasonable fees payable to the entities
providing for Financing and their respective counsel); PROVIDED that the
aggregate amount payable pursuant to this SECTION 6.4(D) shall not exceed
$1,250,000.
(d) The Company shall (i) promptly notify Sub (orally and in writing) if any
offer is made, any discussions or negotiations are sought to be initiated, any
inquiry, proposal or contact is made or any information is requested with
respect to any Acquisition Proposal, (ii) promptly notify Sub of the material
terms of any proposal which it may receive in respect of any such Acquisition
Proposal, including, without limitation, the identity of the prospective
purchaser or soliciting party, (iii) promptly provide Sub with a copy of any
such offer, if written, or a written summary (in reasonable detail) of such
offer, if not in writing, and (iv) keep Sub informed of the status of such offer
and the offeror's efforts and activities with respect thereto (including,
without limitation, the response of the Board of Directors with respect
thereto).
6.5 MEETING OF SHAREHOLDERS. The Company shall take all action necessary
in accordance with applicable law and its articles of incorporation and code of
regulations, including the timely mailing of the Proxy Statement, to convene the
Special Meeting of its Shareholders as promptly as practicable to consider and
vote upon the adoption of this Agreement and the approval of the transactions
contemplated hereby. The Board of Directors of the Company shall recommend such
adoption and approval, shall not withdraw or modify such recommendation and
shall take all lawful action to solicit such adoption and approval; provided
that the Board of Directors of the Company may fail to make or withdraw or
modify such recommendation, but only to the extent that the Board of Directors
of the Company shall have concluded in good faith after consultation with
outside counsel that such action is required to prevent the Board of Directors
of the Company from breaching its fiduciary duties to the shareholders of the
Company under applicable law. The Company will use its reasonable best efforts
to hold such meeting as soon as reasonably practicable after the date hereof.
6.6 PROXY STATEMENT.
(a) Sub and the Company shall cooperate and prepare, and the Company shall
file with the SEC as soon as reasonably practicable, a proxy statement with
respect to the Special Meeting of the Shareholders in connection with the Merger
(the "PROXY STATEMENT"), respond to comments of the staff of the SEC, clear the
Proxy Statement with the staff of the SEC and promptly thereafter mail the Proxy
Statement to all holders of record of Company Common Shares. The Company shall
comply in all material respects with the requirements of the Exchange Act and
the Securities Act and the rules and regulations of the SEC
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thereunder applicable to the Proxy Statement and the solicitation of proxies for
the Special Meeting (including any requirement to amend or supplement the Proxy
Statement) and each party shall furnish to the other such information relating
to it and its Affiliates and the transactions contemplated by this Agreement and
such further and supplemental information as may be reasonably requested by the
other party. The Proxy Statement shall include the recommendation of the
Company's Board of Directors in favor of the Merger, unless otherwise required
by the fiduciary duties of the directors under applicable law as contemplated
hereby.
(b) No amendment or supplement to the Proxy Statement shall be made by the
Company to which Sub reasonably objects. Prior to filing any amendment or
supplement to the Proxy Statement, the Company shall give Sub reasonable advance
notice and a copy of the proposed amendment or supplement. The Company shall
advise Sub of any request by the SEC for amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
6.7 DIRECTOR AND OFFICER LIABILITY.
(a) For a period of six years after the Effective Time, Sub will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the Company's articles
of incorporation and code of regulations in effect on the date hereof; PROVIDED
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law. To the maximum extent permitted by the OCL, such
indemnification shall be mandatory rather than permissive and the Surviving
Corporation shall advance expenses in connection with such indemnification. The
articles of incorporation and the code of regulations of the Surviving
Corporation shall contain provisions substantially similar in terms of the
rights granted to the provisions with respect to indemnification and insurance
set forth in the Company's articles of incorporation, which provisions shall not
be amended in any manner that would adversely affect the rights under those code
of regulations of the Company's employees, agents, directors or officers for
acts or omissions on or prior to the Effective Time, except if such amendment is
required by law. For a period of six years after the Effective Time, Sub will
cause the Surviving Corporation to use its reasonable best efforts to provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to the Effective Time covering each such Person currently
covered by the Company's officers' and directors' liability insurance policy on
terms with respect to coverage and amount no less favorable than those of such
policy in effect on the date hereof, PROVIDED that in satisfying its obligation
under this SECTION 6.7, Sub shall not be obligated to cause the Surviving
Corporation to pay premiums in excess of 200% of the amount per annum the
Company paid in its last full fiscal year, which amount has been disclosed to
Sub.
(b) In furtherance of and not in limitation of the preceding paragraph, Sub
agrees that the officers and directors of the Company that are defendants in all
litigation commenced by shareholders of the Company with respect to (x) the
performance of their duties as such officers and/or directors under federal or
state law (including litigation under federal and state securities laws) and (y)
the Merger, including, without limitation, any and all such litigation commenced
on or after the date of this Agreement (the "SUBJECT LITIGATION") shall be
entitled to be represented, at the reasonable expense of the Company, in the
Subject Litigation by one counsel (and Ohio counsel if appropriate and one local
counsel in each jurisdiction in which a case is pending) each of which such
counsel shall be selected by a plurality of such director defendants; PROVIDED
that the Company shall not be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld) and
that a condition to the indemnification payments provided in
SECTION 6.8(A)shall be that such officer/director defendant not have settled any
Subject Litigation without the consent of the Company (such consent not to be
unreasonably withheld) and, prior to the Closing, Sub; and PROVIDED FURTHER,
that neither Sub nor the Company shall have any obligation hereunder to any
officer/director defendant when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that
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indemnification of such officer/director defendant in the manner contemplated
hereby is prohibited by applicable law.
(c) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation shall assume its
obligations set forth in this SECTION 6.7.
6.8 NOTICES OF CERTAIN EVENTS. Each of the Company and Sub shall promptly
notify the other of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any Actions commenced or, to its knowledge, threatened, against the
Company or any of its Subsidiaries which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to SECTION
4.11 or against the Company or any of its Subsidiaries or Sub which relate to
the consummation of the transactions contemplated by this Agreement.
6.9 SUB NOTICE. Sub shall promptly advise the Company of any Material
Adverse Change with respect to Sub.
6.10 RESIGNATION OF DIRECTORS. At the Closing, the Company shall deliver
to Sub the resignation of all directors of the Company, effective at the
Effective Time.
6.11 FINANCIAL STATEMENTS, ETC. Within 30 days after the end of each
calendar month, the Company and its Subsidiaries shall provide Sub with the
following interim financial statements covering: (a) such calendar month,
(b) the prior calendar month, (c) the year to date and (d) a month to month
comparison from the prior fiscal year. Such interim financial statements shall
include a balance sheet, statement of operations and a statement of cash flows
and (i) be in accordance with the books and records of the Company and its
Subsidiaries and (ii) be prepared in accordance with GAAP consistently applied
throughout the periods covered thereby (except for the absence of footnotes).
6.12 EXCHANGE OF COMPANY COMMON SHARES. Prior to the Effective Time, the
Company shall (i) designate 300,000 Preferred Shares of the Company as the
Series A Shares having rights, preferences and designations set forth on
SCHEDULE 6.1(C) and (ii) take all such actions as may be necessary to exchange
each Company Common Share held by the Persons listed on SCHEDULE A that is set
forth opposite their respective names in SCHEDULE A (as such schedule may be
amended by the mutual consent of Sub and the Company (such consent not to be
unreasonably withheld by Sub or the Company) from time to time prior to the
Effective Time; it being understood that it is contemplated that additional
employees of the Company and its Subsidiaries may be added to such schedule and
the number of Preferred Shares set forth opposite the name of any Person set
forth on such schedule may be modified as agreed with such Person), for one
Series A Share and complete such exchange, in each case, pursuant to
documentation reasonably acceptable in form and substance to Sub, which
documentation shall provide, in any event, for adoption of this Agreement by
each such Person to the extent required by, and in accordance with, the OCL.
6.13 BENEFIT ARRANGEMENTS. For a period of one year following the
Effective Time, Sub shall cause the Surviving Corporation (or in the case of
transfer of all the assets and business of the Surviving Corporation, its
successors and assigns) to maintain employee benefit plans (except stock option,
restricted stock, stock purchase or other equity based programs, plans and
arrangements) that are no less favorable in the aggregate than the Benefit
Arrangements, Pension Plans, Multiemployer Plans and Welfare Plans (except stock
option, restricted stock, stock purchase or other equity based programs, plans
and arrangements) in effect on the date of this Agreement.
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ARTICLE VII.
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company and Sub to consummate the transactions contemplated hereby on the
Closing Date are subject to the satisfaction, on or prior to the Closing Date,
of each of the following conditions:
(a) This Agreement shall have been adopted by the Shareholders and the
holders of outstanding Series A Shares in accordance with the OCL;
(b) All consents, approvals and licenses of any governmental or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement and for the Surviving Corporation to conduct the
business of the Company in substantially the manner now conducted, shall have
been obtained, unless the failure to obtain such consents, approvals and
licenses would not, individually or in the aggregate, have a Material Adverse
Effect on the Company after giving effect to the transactions contemplated by
this Agreement.
(c) Any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated;
(d) No provision of any Applicable Law and no judgment, order, decree or
injunction of any court of competent jurisdiction shall prohibit or restrain the
consummation of the Merger or make such consummation illegal.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the transactions contemplated hereby on the Closing Date
are subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, which may be waived by the Company in accordance with
SECTION 8.4: (a) all representations and warranties of Sub contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date, as if such representations and warranties were made at and as of
the Closing Date (except to the extent that any such representations and
warranties were made as of a specified date, which representations and
warranties shall continue on the Closing Date to be true as of such specified
date), (b) Sub shall have performed in all material respects all obligations
arising under the agreements and covenants required hereby to be performed by it
prior to or on the Closing Date, (c) the Company shall have received, at or
prior to the Closing, a certificate executed by the President of Sub certifying
that, as of the Closing Date, the conditions set forth in SECTION 7.2(A) and
(B) have been satisfied and (d) the Company shall have received a copy of the
solvency letter (which letter shall be addressed to the Board of Directors of
the Company) delivered to the senior lenders in connection with the Financing;
PROVIDED that in the event that the senior lenders elect not to receive a
solvency letter, the Company in any event shall have received a customary
solvency letter (which letter shall be addressed to the Board of Directors of
the Company).
7.3 CONDITIONS TO THE OBLIGATIONS OF SUB. The obligations of Sub to
consummate the transactions contemplated hereby on the Closing Date are subject
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Sub in accordance with SECTION 8.4:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) Each of the representations and warranties of the Company contained
in this Agreement that is qualified as to materiality or Material Adverse Effect
shall have been true and correct when made and as of the Closing Date as if made
on such date, and each of the other representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects when made and as of the Closing Date as if made on such date, except in
each case to the extent such representations and warranties expressly relate to
an earlier date (in which case such representations and warranties qualified as
to materiality or Material Adverse Effect shall be true and correct, and those
not so qualified shall be true and correct in all material respects, on and as
of such earlier date);
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(ii) The Company shall have performed in all material respects all
obligations arising under the agreements and covenants required hereby to be
performed by it prior to or on the Closing Date.
(iii) Sub shall have received, at or prior to the Closing, a certificate
executed by the President and the Chief Financial Officer of the Company
certifying that, to the best of their knowledge as of the Closing Date, the
conditions set forth in SECTIONS 7.3(A) and (B) have been satisfied.
(b) NO PROCEEDINGS OR LITIGATION. There shall not be (a) any pending or
threatened Actions by any governmental entity or (b) any pending Actions by any
other Person that have a reasonable likelihood of success, in either case
(i) seeking to prohibit the consummation of the Merger or make such consummation
illegal, (ii) seeking to prohibit or limit the ownership or operation by Sub (or
the Surviving Corporation) of any material portion of the business or Assets of
the Company and its Subsidiaries, taken as a whole, or (iii) seeking to obtain
from Sub or the Company in connection with the consummation of the Merger any
damages that are material in relation to the Company and its Subsidiaries, taken
as a whole.
(c) CONSENTS. All consents listed in SECTION 7.3(C) of the Disclosure
Letter shall have been obtained.
(d) FINANCING. The funding contemplated by the Financing Letters shall
have been obtained on substantially the same terms as contemplated by the
Financing Letters.
(e) EXCHANGE COMPLETE; TRUST PREFERRED.
(i) The exchange contemplated by SECTION 6.12 hereof shall have been
completed in accordance with SECTION 6.12.
(ii) The Company shall have liquidated Dayton Superior Capital Trust, a
Delaware business trust (the "TRUST"), or otherwise caused the Trust to cease to
exist, such that the holders of the 10% Convertible Trust Preferred Securities
issued by the Trust (the "TRUST PREFERRED SECURITIES") shall cease to hold such
securities and shall hold the Debentures directly.
(f) INDEBTEDNESS. Total indebtedness for borrowed money (long and short
term) of the Company and its Subsidiaries as of the Effective Time shall not
exceed the amount determined in accordance with Schedule 7.3(f).
ARTICLE VIII.
MISCELLANEOUS
8.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated prior to the Effective
Time as follows (notwithstanding any approval of the Merger by the shareholders
of the Company):
(i) by mutual written consent of Sub and the Company at any time;
(ii) by Sub or the Company if the Closing shall not have occurred on or
before July 14, 2000, provided that the party seeking to exercise such right is
not then in breach in any material respect of any of its obligations under this
Agreement;
(iii) by either the Company or Sub, if any of the conditions to such
party's obligation to consummate the transactions contemplated in this Agreement
shall have become impossible to satisfy; PROVIDED that such party wishing to
terminate this Agreement has not caused such impossibility by breaching in any
material respect any of its obligations under this Agreement;
(iv) by either the Company or Sub, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Sub or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and non-appealable;
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(v) by Sub if the Board of Directors of the Company shall have
(A) withdrawn or amended or modified (including, without limitation, by failing
to recommend the rejection of an Acquisition Proposal made by a Third Party
promptly following the period during which it is undertaking its good faith
consideration of such Acquisition Proposal), in a manner adverse to Sub, its
approval or recommendation of this Agreement and the Merger or its
recommendation that shareholders of the Company adopt and approve this Agreement
and the Merger or (B) approved, recommended or endorsed an Acquisition Proposal
(including a tender or exchange offer for Company Common Shares);
(vi) by the Company if prior to the Effective Time a bona fide
Acquisition Proposal has been received by the Board of Directors of the Company
and the Board of Directors has concluded in good faith, after consultation with
outside counsel and its financial advisor, that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all legal,
financial and regulatory aspects of the proposal and the Person or group making
the proposal and would, if consummated, result in a more favorable transaction
than the transaction contemplated by this Agreement (a "SUPERIOR PROPOSAL") and
the Board of Directors has concluded in good faith, after consultation with
outside counsel, that such action is required to prevent the Board of Directors
from breaching its fiduciary duty, the Board of Directors of the Company shall
have withdrawn or modified or amended, in a manner adverse to Sub, its approval
or recommendation of this Agreement and the Merger or its recommendation that
shareholders of the Company adopt and approve this Agreement and the Merger in
order to permit the Company to execute a definitive agreement with respect to
such Superior Proposal; PROVIDED that the Company shall be in compliance with
SECTION 6.4; or
(vii) by either the Company or Sub if, at a duly held shareholders
meeting of the Company or any adjournment thereof at which this Agreement and
the Merger is voted upon, the requisite shareholder adoption and approval shall
not have been obtained.
The party desiring to terminate this Agreement pursuant to
SECTIONS 8.1(A)(II)-(VII) shall give written notice of such termination to the
other party in accordance with SECTION 8.3.
(b) EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
SECTION 8.1, this Agreement shall become void and of no effect with no liability
on the part of any party hereto or such party's officers, directors, employees
or representatives, except (i) that the agreements contained in SECTIONS 6.4(B)
and (C), 8.1(C), 8.8 and 8.13 hereof shall survive the termination hereof and
(ii) nothing herein shall relieve any party from liability for any breach of
this Agreement.
(c) PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement pursuant to SECTION 8.1:
(i) Each party shall redeliver all documents, work papers and other
material of any other party and any and all copies thereof relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same;
(ii) No confidential information received by any party with respect to
the business of any other party or its Affiliates shall be disclosed to any
third party, unless required by law; and
(iii) The Confidentiality Letter shall survive in accordance with its
terms.
8.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned, in whole or in part, by operation of law
or otherwise by any party without the prior written consent of all other parties
to this Agreement. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and, with respect to the provisions of SECTION 6.8
hereof, shall inure to the benefit of the persons or entities benefiting from
the provisions thereof who are intended to be third-party beneficiaries thereof,
"and no other Person shall have any right, benefit or obligation hereunder.
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8.3 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received, if personally delivered;
when transmitted, if transmitted by telecopy, upon receipt of telephonic or
electronic confirmation; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
If to the Company, addressed to:
Dayton Superior Corporation
7777 Washington Village Drive, Suite 130
Dayton, Ohio 45459
Attention: President
Facsimile: (937) 428-9115
With a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Peter S. Wilson, Esq.
Facsimile: (212) 474-3700
and a copy to:
Thompson, Hine & Flory LLP
2000 Couthouse Plaza N.E.
P.O. Box 8801
Dayton, Ohio 45401
Attention: David Neuhardt, Esq.
Facsimile: (937) 443-6635
If to Sub, addressed to:
Stone Acquisition Corp.
c/o Odyssey Investment Partners, LLC
280 Park Avenue, 38th Floor
New York, NY 10017
Attention: Bill Hopkins
Facsimile: (212) 351-7925
With a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Attention: Richard Trobman, Esq.
Facsimile: (212) 751-4864
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
8.4 ENTIRE AGREEMENT; WAIVERS. This Agreement, together with all exhibits
and schedules hereto (including, without limitation, the Disclosure Letter), and
the other agreements referred to herein, constitute the entire agreement among
the parties pertaining to the subject matter hereof and supersedes
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all prior agreements, understandings, negotiations and discussions, whether oral
or written, of the parties, other than the Confidentiality Letter. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided. The
Confidentiality Letter shall terminate at the Effective Time.
8.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
8.7 TITLES. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
8.8 FEES AND EXPENSES. Except as provided in SECTION 6.4 hereof, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense. Notwithstanding the foregoing, a party in
breach of this Agreement shall, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees, incurred by such other party by reason of the enforcement and protection
of its rights under this Agreement. The payment of such expenses is in addition
to any other relief to which such other party may be entitled.
8.9 CUMULATIVE REMEDIES. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
8.11 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval of matters presented in connection with the Merger
by the shareholders of the Company, but after any such shareholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.12 PUBLIC ANNOUNCEMENTS. Neither Sub or its Affiliates, on the one hand,
nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement,
including the Merger, without the other party's prior consent (such consent not
to be unreasonably withheld), except as may be required by Applicable Law, court
process or the requirements of the NYSE. In addition to the foregoing, Sub or
its Affiliates and the Company will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any such press
release or other public statements with respect to such transactions. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
A-38
<PAGE>
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.14 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate at the Effective Time.
8.15 INTERPRETIVE PROVISIONS.
(a) The words "hereof," "herein," "hereby" and "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision hereof.
(b) Accounting terms used but not otherwise defined herein shall have the
meanings given to such terms under GAAP.
[Signature Page Follows]
A-39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
<TABLE>
<S> <C> <C>
DAYTON SUPERIOR CORPORATION,
an Ohio corporation
By: /s/ JOHN A. CICCARELLI
-----------------------------------------
Name: John A. Ciccarelli
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
STONE ACQUISITION CORP.,
an Ohio corporation
By: /s/ WILLIAM HOPKINS
-----------------------------------------
Name: William Hopkins
Title: PRESIDENT
</TABLE>
A-40
<PAGE>
Appendix B
[LOGO]
January 19, 2000
Board of Directors
Dayton Superior Corporation
7777 Washington Village Drive
Suite 130
Dayton, Ohio 45459
Members of the Board of Directors:
Dayton Superior Corporation (the "Company") and Stone Acquisition Corp. (the
"Acquisition Sub"), a newly formed, wholly owned subsidiary of Odyssey
Investment Partners Fund, L.P. (the "Acquiror"), propose to enter into an
Agreement and Plan of Merger, dated January 19, 2000 (the "Agreement"), pursuant
to which the Acquisition Sub would be merged with and into the Company in a
merger transaction (the "Merger") in which each outstanding Class A common
share, without par value, of the Company (each a "Company Share"), other than
Company Shares held in treasury, by the Acquisition Sub or by any subsidiary of
the Acquisition Sub or the Company or as to which dissenter's rights have been
perfected, would be converted into the right to receive $27.00 per share in cash
(the "Cash Consideration"). We have been advised that the surviving corporation
in the Merger plans to account for the Merger as a recapitalization under
generally accepted accounting principles. Pursuant to the Agreement, prior to
the effective time of the Merger, certain members of management of the Company
will exchange a portion of their Company Shares (the "Roll-Over Shares") for
Series A preferred shares, without par value, of the Company, which, pursuant to
the Agreement, will each be converted into one common share, without par value,
of the surviving corporation in the Merger.
You have asked us whether, in our opinion, the Cash Consideration to be
received by the holders of the Company Shares in the Merger is fair from a
financial point of view to such holders. You have not asked us for, and we are
not expressing, any opinion with respect to the consideration to be received by
the holders of the Roll-Over Shares in exchange for such Roll-Over Shares.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to us by the Company;
(3) Conducted discussions with members of senior management of the Company
concerning the matters described in clauses 1 and 2 above;
B-1
<PAGE>
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed a draft dated January 18, 2000 of the Agreement; and
(9) Reviewed such other financial studies and analyses and took into account
such other matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With respect
to the financial forecast information furnished to or discussed with us by the
Company, we have assumed that such information has been reasonably prepared and
reflects the best currently available estimates and judgment of the Company's
management as to the expected future financial performance of the Company. We
have also assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, which is
contingent upon the consummation of the Merger. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financial advisory and financing services to the
Company and the Acquiror and/ or its affiliates and may continue to do so and we
may receive fees for the rendering of such services.
With your consent, we are currently working with the Acquiror in connection
with the financing of the Merger, pursuant to which the Company will enter into
certain financing arrangements for which we are likely to act as a lender and as
co-lead manager, co-arranger and syndication agent, and we will receive a fee
for our services.
In addition, in the ordinary course of our business, we may actively trade
the Company Shares and other securities of the Company for our own account and
for the accounts of customers, and accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
B-2
<PAGE>
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Cash Consideration to be received by the holders of the
Company Shares in the Merger is fair from a financial point of view to the
holders of such shares.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-3
<PAGE>
APPENDIX C
[LOGO]
January 19, 2000
Board of Directors
Dayton Superior Corporation
7777 Washington Village Drive
Suite 130
Dayton, OH 45459
Members of the Board:
Dayton Superior Corporation (the "Company") proposes to enter into an
Agreement and Plan of Merger (the "Agreement") with Stone Acquisition Corp.
("Sub"), an affiliate of Odyssey Investment Partners, LLC. All capitalized terms
used herein and not otherwise defined shall have the same meaning ascribed to
such terms in the Agreement. Pursuant to the Agreement, at the Effective Time,
Sub will merge with and into the Company with the Company being the surviving
corporation (the "Merger"). Pursuant to the Merger, each Company Common Share
outstanding immediately prior to the Effective Time (other than Treasury
Securities and Dissenting Shares, if any) shall automatically be converted into
the right to receive $27.00 in cash (the "Cash Merger Consideration").
You have requested our opinion as to the fairness, from a financial point of
view, of the Cash Merger Consideration to the holders of the Company Common
Shares.
Robert W. Baird & Co. Incorporated ("Baird"), as part of its investment
banking business, is engaged in the evaluation 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.
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of the Company furnished to us for purposes of our
analysis, as well as publicly available information including, but not limited
to, the Company's recent filings with the Securities and Exchange Commission;
(ii) reviewed the draft Agreement in the form presented to the Company's Board
of Directors; (iii) compared the historical market prices and trading activity
of the Company's common shares with those of certain other publicly traded
companies we deemed relevant; (iv) compared the financial position and operating
results of the Company with those of certain other publicly traded companies we
deemed relevant; and (v) compared the proposed financial terms of the Merger
with the financial terms of certain other business combinations we deemed
relevant. We have held discussions with members of the Company's senior
management concerning the Company's historical and current financial condition
and operating results, as well as the future prospects of the Company. We have
not been requested to, and did not, solicit third party indications of interest
in acquiring all or any part of the Company. We have also considered such other
information, financial studies, analysis and investigations and financial,
economic and market criteria which we deemed relevant for the preparation of
this opinion.
C-1
<PAGE>
Board of Directors
Dayton Superior Corporation
January 19, 2000
Page 2
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided us by or on behalf of the Company, and have not been
engaged to, and have assumed no responsibility to, independently verify any such
information. We have assumed, with your consent, that all material assets and
liabilities (contingent or otherwise, known or unknown) of the Company are as
set forth in the Company's financial statements and recent filings with the
Securities and Exchange Commission. We have also assumed, with your consent,
that the financial forecasts examined by us were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
the Company's senior management as to the future performance of the Company. We
assume no responsibility for and express no view as to such forecasts or the
assumptions on which they are based. We have also assumed, with your consent,
that the representations and warranties of each party to the Agreement are true
and correct and that each party would perform all of the covenants and
agreements to be performed by it pursuant to the Agreement. In addition, we have
assumed, with your consent, that the Merger will be consummated in accordance
with the terms of the draft Agreement in the form presented to the Company's
Board of Directors, without any material amendment and without waiver by any of
the parties to their respective obligations under the Agreement. In conducting
our review, we have not undertaken nor obtained an independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company nor have we made a physical inspection of the properties or facilities
of the Company. Our opinion necessarily is based upon economic, monetary and
market conditions as they exist and can be evaluated on the date hereof, and
does not predict or take into account any changes which may occur, or
information which may become available, after the date hereof. Furthermore, our
opinion relates to financial fairness only, and we express no opinion as to the
appropriateness of the financial structure or the soundness of the financial
condition of the Company subsequent to the consummation of the Merger.
Our opinion has been prepared at the request and for the information of the
Board of Directors of the Company, and shall not be used for any other purpose
or disclosed to any other party without the prior written consent of Baird;
provided, however, that this letter may be reproduced in full in the Proxy
Statement or other required Securities and Exchange Commission filings, to be
provided to the Company's shareholders in connection with the Merger. This
opinion does not address the relative merits of the Merger and any other
potential transactions or business strategies considered by the Company's Board
of Directors, and does not constitute a recommendation to any shareholder of the
Company as to how any such shareholder should vote with respect to the Merger.
Baird will receive a fee for rendering this opinion. In the past, we have
provided investment banking services to the Company, including serving as the
lead manager of the Company's convertible trust preferred securities offering
and as a co-manager of the Company's initial public offering, for which we
received our customary compensation. In addition, the Company has agreed to
indemnify Baird, its affiliates and their respective directors, officers,
partners, employees, agents and controlling persons against certain liabilities
relating to or arising out of its engagement, including liabilities under
federal securities laws.
In the ordinary course of our business, we may from time to time trade the
securities of the Company for our own account or the accounts of our customers
and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Cash Merger Consideration is fair, from a financial point
of view, to the holders of the Company Common Shares.
Very truly yours,
ROBERT W. BAIRD & CO. INCORPORATED
C-2
<PAGE>
APPENDIX D
DISSENTER'S RIGHTS PROVISIONS
UNDER THE
OHIO GENERAL CORPORATION LAW
(A)(1)A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the corporation
involved, the dissenting shareholder shall be a record holder of the shares of
the corporation as to which he seeks relief as of the date fixed for the
determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled to
relief under division (E) of section 1701.84 of the Revised Code in the case of
a merger pursuant to section 1701.801 of the Revised Code shall be a record
holder of the shares of the corporation as to which he seeks relief as of the
date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 of the Revised Code, the dissenting shareholder
shall deliver to the corporation a written demand for payment with the same
information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
D-1
<PAGE>
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
D-2
<PAGE>
(D)(1)The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their
adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent of
the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division
(B) of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from such
shares, including voting and dividend or distribution rights, are suspended. If
during the suspension, any dividend or distribution is paid in money upon shares
of such class or any dividend, distribution, or interest is paid in money upon
any securities issued in extinguishment of or in substitution for such shares,
an amount equal to the dividend, distribution, or interest which, except for the
suspension, would have been payable upon such shares or securities, shall be
paid to the holder of record as a credit upon the fair cash value of the shares.
If the right to receive fair cash value is terminated other than by the purchase
of the shares by the corporation, all rights of the holder shall be restored and
all distributions which, except for the suspension, would have been made shall
be made to the holder of record of the shares at the time of termination.
D-3
<PAGE>
DAYTON SUPERIOR CORPORATION
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON MAY 23, 2000
The undersigned hereby appoints John A. Ciccarelli, Matthew O. Diggs,
Jr. and Robert B. Holmes, and each of them, with power of substitution,
attorneys and proxies to represent and vote all common shares of Dayton
Superior Corporation, an Ohio corporation (the "Company"), held of record by
the undersigned at the Special Meeting of Shareholders to be held on Tuesday,
May 23, 2000 at 8:30 a.m. local time, and at any adjournments and
postponements of the Special Meeting. The undersigned hereby revokes any
previous proxies with respect to the matters covered in this proxy.
This proxy, when properly executed, will be voted in the manner
specified below. IF THIS CARD IS PROPERLY EXECUTED BUT NO VOTE IS SPECIFIED,
THIS PROXY WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" BOTH PROPOSAL 1 AND 2.
(TO BE VOTED AND SIGNED ON REVERSE)
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
Please date, sign and mail your proxy card back as soon as possible!
Special Meeting of Shareholders
May 23, 2000
1. PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER DATED AS OF JANUARY
19, 2000 BETWEEN DAYTON SUPERIOR CORPORATION AND STONE ACQUISITION CORP. AND
APPROVE THE TRANSACTIONS CONTEMPLATED THEREBY, AS DESCRIBED IN THE PROXY
STATEMENT FOR THE SPECIAL MEETING.
FOR AGAINST ABSTAIN
/ / / / / /
2. PROPOSAL TO PERMIT THE PROXIES, IN THEIR DISCRETION, TO ADJOURN THE
MEETING FOR THE SOLE PURPOSE OF SOLICITING MORE VOTES OR PROXIES IN FAVOR OF
ADOPTION OF THE MERGER AGREEMENT.
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement of the meeting.
_______________________________________ Date _______________ , 2000
Signature(s)
_______________________________________ Date _______________ , 2000
Signature(s)
Please complete, sign, date and return this proxy promptly in the envelope
provided, which requires no postage if mailed in the United States.
NOTE: Shareholders should date this proxy and sign here exactly as name
appears above. If shares are held jointly, both owners should sign this
proxy. Executors, administrators, trustees, guardians and others signing in a
representative capacity should indicate the capacity in which they sign.
