PRELIMINARY COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
ARMATRON INTERNATIONAL, INC.
----------------------------
(Name of the Issuer)
ARMATRON INTERNATIONAL, INC.
ARMATRON MERGER CORPORATION
-------------------------------------
(Names of Person(s) Filing Statement)
COMMON STOCK, $1.00 PAR VALUE
------------------------------
(Title of Class of Securities)
042167106
(CUSIP Number of Class of Securities)
Charles J. Housman Anne L. Bruno, Esq.
Chairman of the Board, Mintz, Levin, Cohn, Ferris,
President and Chief Executive Officer Glovsky and Popeo, P.C.
Armatron International, Inc. One Financial Center
2 Main Street Boston, MA 02111
Melrose, MA 02176 (617) 542-6000
(781) 321-2300
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications
on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
[X] a. The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
[ ] b. The filing of a registration statement under the Securities Act
of 1933.
[ ] c. A tender offer.
[ ] d. None of the above.
[ ] Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies: [X]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee
<C> <C>
$664,132.23 $132.83
<FN>
<F*> The amount of the Transaction Valuation calculated in accordance
with Rule 0-11(b) under the Securities Exchange Act of 1934, as
amended.
</FN>
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee
was previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Statement") relates to
the Agreement and Plan of Merger dated as of ______ __, 1999 (the "Merger
Agreement") between Armatron International, Inc., a Massachusetts
corporation ("Armatron" or the "Company"), and Armatron Merger Corporation,
a Massachusetts corporation ("MergerCo"). A copy of the Merger Agreement
is attached as Appendix A to the Proxy Statement filed by the Company (the
"Proxy Statement") and is attached hereto as Exhibit (c)(1).
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company (the "Merger") with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, (i)
each outstanding share of common stock, par value $1.00 per share, of the
Company (the "Common Stock") will be converted into the right to receive
$.27 in cash (except that any shares held by MergerCo or held in the
Company's treasury will be canceled and any stockholder who properly
dissents from the Merger will be entitled to appraisal rights under
Massachusetts law); (ii) each outstanding share of common stock, $.01 par
value per share, (or fraction thereof) of MergerCo (the "MergerCo Common
Stock") will be converted into one share of common stock, $.01 par value
per share, (or fraction thereof) of the Surviving Corporation; and (iii)
each outstanding share of Series A Preferred Stock, $100 par value per
share, of the Company will be converted into one share of Series A
Preferred Stock, $.01 par value per share, of the Surviving Corporation.
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger, all
such shares of MergerCo Common Stock will be converted into common stock of
the Surviving Corporation as described above.
As a result of the Merger and these related transactions, immediately
following the Merger, it is currently expected that (x) Charles J. Housman
and Edward L. Housman together with their families and affiliates and the
families or affiliates of the late Herbert E. Housman and the late Frank M.
Housman will own 100.0% of the outstanding common stock of the Surviving
Corporation and (y) the Housman Realty Trust will own 100.0% of the
outstanding Series A Preferred Stock of the Surviving Corporation.
The following cross-reference sheet shows the location of certain
information in the Proxy Statement relating to the Merger filed by the
Company with the Securities and Exchange Commission. The information in
the Proxy Statement, including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item of this
Statement are qualified in their entirety by the provisions of the Proxy
Statement. The Proxy Statement will be completed and, if appropriate,
amended prior to the time it is first sent or given to stockholders. This
Statement will be amended to reflect such completion or amendment of the
Proxy Statement.
Cross Reference Sheet
(Pursuant to General Instruction F to Schedule 13E-3)
Schedule 13E-3
Item Number and Caption Location in the Proxy Statement
- ----------------------- -------------------------------
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) Front page of Proxy Statement.
(b) Front page of Proxy Statement, "Market
Prices of Common Stock" and "The Special
Meeting -- Record Date and Voting."
(c) and (d) "Market Prices of Common Stock."
(e) Not applicable.
(f) Not applicable.
Item 2. Identity and Background.
(a) - (d) and (g) Front page of Proxy Statement,
"Available Information," "Management of
the Company and MergerCo" and
"MergerCo."
(e) and (f) Not applicable.
Item 3. Past Contacts, Transactions or Negotiations.
(a) "Special Factors -- Background of the
Merger" and "-- Interests of Certain
Persons in the Merger."
(b) Not applicable.
Item 4. Terms of the Transaction.
(a) and (b) "Special Factors -- Background of the
Merger," "-- Interests of Certain
Persons in the Merger," "The Merger and
the Merger Agreement" and "Merger
Financings."
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a) and (b) Not applicable.
(c) "Management of the Company and MergerCo."
(d) "Unaudited Pro Forma Consolidated Financial
Data," "Pro Forma Capitalization," "Book
Value Per Share," "Security Ownership of
Certain Beneficial Owners and Management
-- Post Merger Beneficial Ownership" and
"Merger Financings."
(e) Not applicable.
(f) and (g) "Special Factors -- Certain Effects of
the Merger."
Item 6. Source and Amount of Funds or Other Consideration.
(a) "Merger Financings."
(b) "Fees and Expenses."
(c) Not applicable.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) and (c) "Summary -- Special Factors," "Special
Factors -- Background of the Merger," "-
-Recommendation of the Board; Reasons
for the Merger; Findings of Fairness"
and "-- Opinion of Financial Adviser."
(b) "Summary -- Special Factors" and
"Special Factors -- Background of the
Merger."
(d) "Special Factors -- Certain Effects of
the Merger," "-- Material Federal Income
Tax Consequences," "-- Interests of
Certain Persons in the Merger" and
"Unaudited Pro Forma Consolidated
Financial Data."
Item 8. Fairness of the Transaction.
(a), (b), (d) and (e) "Special Factors -- Background of the
Merger," "-- Recommendation of the
Board; Reasons for the Merger; Findings
of Fairness" and "-- Opinion of
Financial Adviser."
(c) "Special Factors -- Interests of Certain
Persons in the Merger" and "The Special
Meeting -- Vote Required; Revocability
of Proxies."
(f) Not applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a), (b) and (c) "Special Factors -- Background of the
Merger," "-- Opinion of Financial
Adviser" and "Appendix B -- Opinion of
Gordon Associates Inc."
Item 10. Interest in Securities of the Issuer.
(a) "Security Ownership of Certain
Beneficial Owners and Management."
(b) "Special Factors -- Interests of Certain
Persons in the Merger."
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
"Special Factors -- Interests of Certain Persons in the Merger," "The
Special Meeting -- Vote Required; Revocability of Proxies," "The Merger and
the Merger Agreement" and "Certain Relationships and Related Transactions."
Item 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
(a) and (b) "Special Factors -- Recommendation of
the Board; Reasons for the Merger,
Findings of Fairness," "-- Interests of
Certain Persons in the Merger" and "The
Special Meeting -- Vote Required;
Revocability of Proxies."
Item 13. Other Provisions of the Transaction.
(a) "Appraisal Rights."
(b) and (c) Not applicable.
Item 14. Financial Information.
(a) "Incorporation of Documents By
Reference," "Selected Historical
Consolidated Financial Data," "Book
Value Per Share" and "Ratio of Earnings
to Fixed Charges."
(b) "Unaudited Pro Forma Consolidated
Financial Data," "Pro Forma
Capitalization," "Book Value Per Share"
and "Ratio of Earnings to Fixed
Charges."
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) Not applicable.
(b) Not applicable.
Item 16. Additional Information.
The information set forth in the Proxy Statement and all annexes thereto is
incorporated herein by reference in its entirety.
Item 17. Material to be Filed as Exhibits Separately Included Herewith.
SCHEDULE 13E-3
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity securities which is the
subject of this Statement is Armatron International, Inc., whose principal
executive office is located at 2 Main Street, Melrose, MA 02176.
(b) The title of the equity securities which are the subject of the
Rule 13e-3 transaction is common stock, par value $1.00 per share, and
approximately 2,459,749 shares of such Common Stock were outstanding as of
March 31, 1999. Armatron had approximately 1077 stockholders of record as
of March 31, 1999. The information set forth in the Section "Market Prices
of Common Stock" and "The Special Meeting -- Record Date and Voting" of the
Proxy Statement is incorporated herein by reference.
(c) and (d). The information set forth in the Section "Market Prices
of Common Stock" of the Proxy Statement is incorporated herein by
reference.
(e) Not applicable.
(f) Not applicable. Neither MergerCo nor Armatron nor any affiliate
thereof have purchased any shares of Common Stock since the commencement of
Armatron's second full fiscal year preceding the date hereof.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g). This Statement is being filed jointly by (i)
Armatron International, Inc., the issuer of the class of equity securities
which is the subject of this Rule 13e-3 transaction, and (ii) MergerCo.
The information set forth in the Sections "Available Information,"
"Management of the Company and MergerCo" and "MergerCo" of the Proxy
Statement is incorporated herein by reference.
(e) and (f) Not applicable. None of the persons or entities with
respect to whom information is required by this item was, during the last
five years, convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding of any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) The information set forth in the Sections "Special Factors --
Background of the Merger" and "-- Interests of Certain Persons in the
Merger" of the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 4. TERMS OF THE TRANSACTION.
(a) and (b) The information set forth in the Sections "Special
Factors -- Background of the Merger," "-- Interests of Certain Persons in
the Merger," "The Merger and the Merger Agreement" and "Merger Financings"
of the Proxy Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) and (b) Not applicable.
(c) The information set forth in the Section "Management of the
Company and MergerCo" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in the Sections "Unaudited Pro Forma
Consolidated Financial Data," "Pro Forma Capitalization," "Book Value Per
Share," "Security Ownership of Certain Beneficial Owners and Management --
Post Merger Beneficial Ownership" and "Merger Financings" of the Proxy
Statement is incorporated herein by reference.
(e) Not applicable.
(f) and (g) The information set forth in the Section "Special
Factors -- Certain Effects of the Merger" of the Proxy Statement is
incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
(a) The information set forth in the Section "Merger Financings" of
the Proxy Statement is incorporated herein by reference.
(b) The information set forth in the Section "Fees and Expenses" of
the Proxy Statement is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) and (c) The information set forth in Sections "Summary --
Special Factors," "Special Factors -- Background of the Merger," "--
Recommendation of the Board; Reasons for the Merger; Findings of Fairness"
and "-- Opinion of Financial Adviser" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in Sections "Summary -- Special
Factors" and "Special Factors -- Background of the Merger" of the Proxy
Statement is incorporated herein by reference.
(d) The information set forth in Sections "Special Factors --
Certain Effects of the Merger," "-- Material Federal Income Tax
Consequences," "-- Interests of Certain Persons in the Merger" and
"Unaudited Pro Forma Consolidated Financial Data" of the Proxy
Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a), (b), (d) and (e) The information set forth in Sections "Special
Factors -- Background of the Merger, " "-- Recommendation of the Board;
Reasons for the Merger; Findings of Fairness" and "-- Opinion of Financial
Adviser" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in the Sections "Special Factors --
Interests of Certain Persons in the Merger" and "The Special Meeting --
Vote Required; Revocability of Proxies" of the Proxy Statement is
incorporated herein by reference.
(f) Not applicable, no such offer has been received.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) and (b) The information set forth in the Sections "Special
Factors -- Background of the Merger," "-- Opinion of Financial Adviser" and
"Appendix B -- Opinion of Gordon Associates Inc." of the Proxy Statement is
incorporated herein by reference.
(c) The Opinion of Gordon Associates Inc., dated April 21, 1999, is
included in the information to be circulated to stockholders and shall also
be made available for inspection and copying at the principal executive
offices of the Company during its regular business hours by any interested
stockholder of the Company or his or its representative who has been
designated in writing. At the written request of such stockholder, a copy
of such opinion will be sent, at the stockholder's expense, to such
stockholder or his or its representative.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the Section "Security Ownership of
Certain Beneficial Owners and Management" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in the Section "Special Factors --
Interests of Certain Persons in the Merger" of the Proxy Statement is
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in the Sections "Special Factors --
Interests of Certain Persons in the Merger," "The Special Meeting -- Vote
Required; Revocability of Proxies," "The Merger and the Merger Agreement"
and "Certain Relationships and Related Transactions" of the Proxy Statement
is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION.
(a) and (b) The information set forth in the Sections "Special Factors --
Recommendation of the Board; Reasons for the Merger; Findings of Fairness,"
"-- Interests of Certain Persons in the Merger" and "The Special Meeting --
Vote Required; Revocability of Proxies" of the Proxy Statement is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Section "Appraisal Rights" of
the Proxy Statement is incorporated herein by reference.
(b) and (c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the Sections "Incorporation of
Documents by Reference," "Selected Historical Consolidated Financial Data,"
"Book Value Per Share" and "Ratio of Earnings to Fixed Charges" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in the Sections "Unaudited Pro Forma
Consolidated Financial Data," "Pro Forma Capitalization," "Book Value Per
Share" and "Ratio of Earnings to Fixed Charges" of the Proxy Statement is
incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Not applicable.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Proxy Statement and all annexes
thereto is incorporated herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Description
(b)(1) Fairness Opinion of Gordon Associates Inc. dated April 21,
1999 is attached as Appendix B to Proxy Statement (Exhibit (d)).
(c)(1) Agreement and Plan of Merger dated as of ___________________,
1999 by and between Armatron and MergerCo is attached as Appendix A to
Proxy Statement (Exhibit (d)).
(d) Proxy Statement.
(e) Sections 85 through 98 of the Massachusetts Business Corporation
Law relating to appraisal rights is attached as Appendix C to Proxy
Statement (Exhibit (d)).
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct as of April 22, 1999.
ARMATRON INTERNATIONAL, INC.
By: /s/ Charles J. Housman
--------------------------------
Charles J. Housman
Chairman of the Board
President and Chief
Executive Officer
ARMATRON MERGER CORPORATION
By: /s/ Charles J. Housman
--------------------------------
Charles J. Housman
President
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Armatron International, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $1.00 par value
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
2,459,749
-----------------------------------------------------------------
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):
The filing fee was calculated based on $.27, the cash payment to
be made to the stockholders in connection with the merger.
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$664,132.23
-----------------------------------------------------------------
5) Total fee paid:
$132.83
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[x] 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:
$132.83
--------------------------------------------
2) Form, Schedule or Registration Statement No:
Schedule 13e-3
--------------------------------------------
3) Filing Party:
Armatron International, Inc.
--------------------------------------------
4) Date Filed:
April 22, 1999
--------------------------------------------
ARMATRON INTERNATIONAL, INC.
2 Main Street
Melrose, Massachusetts 02176
_____________, 1999
Dear Stockholders:
You are cordially invited to attend a special meeting in lieu of
annual meeting (the "Special Meeting") of the stockholders of Armatron
International, Inc. (the "Company" or "Armatron"), a Massachusetts
corporation, to be held on ____________, 1999 at 9:00 a.m., Eastern
Standard Time, at the Company's principal executive offices at 2 Main
Street, Melrose, Massachusetts 02176.
As described in the enclosed Proxy Statement (the "Proxy Statement"),
at the Special Meeting you will be asked to approve and adopt an Agreement
and Plan of Merger dated as of , 1999 (the "Merger Agreement")
between Armatron and Armatron Merger Corporation, a Massachusetts
corporation ("MergerCo"), and the Merger (as defined below) contemplated
thereby as well as vote to elect a Director of the Company and ratify the
selection of the Company's independent auditors.
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company (the "Merger") with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, (i)
each outstanding share of common stock, par value $1.00 per share of the
Company, (the "Common Stock") will be converted into the right to receive
$.27 in cash (except that any shares held by MergerCo or held in the
Company's treasury will be canceled and any stockholder who properly
dissents from the Merger will be entitled to appraisal rights under
Massachusetts law); (ii) each outstanding share of common stock, $.01 par
value per share, (or fraction thereof) of MergerCo (the "MergerCo Common
Stock") will be converted into one share of common stock, $.01 par value
per share, (or fraction thereof) of the Surviving Corporation; and (iii)
each outstanding share of Series A Preferred Stock, $100 par value per
share, of the Company will be converted into one share of Series A
Preferred Stock, $.01 par value per share, of the Surviving Corporation.
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, the deceased brothers of Charles
J. Housman and Edward L. Housman, who are stockholders of the Company will
contribute 1,384,277 shares of Common Stock to MergerCo in exchange for
13,842.77 shares of MergerCo Common Stock. In the Merger, all such shares
of MergerCo Common Stock will be converted into common stock of the
Surviving Corporation as described above.
As a result of the Merger and these related transactions, immediately
following the Merger, it is currently expected that (x) Charles J. Housman
and Edward L. Housman together with their families and affiliates and the
families or affiliates of the late Herbert E. Housman and the late Frank M.
Housman will own 100.0% of the outstanding common stock of the Surviving
Corporation and (y) the Housman Realty Trust will own 100.0% of the
outstanding Series A Preferred Stock of the Surviving Corporation.
The Company's Common Stock does not meet the listing requirements of
the National Exchanges or the Nasdaq National Market and is currently
traded on the Over the Counter Bulletin Board under the symbol, "ATRN."
Following the Merger, the Company will not list the common stock of the
Surviving Corporation on any national securities exchange or automated
quotation system and will delist the Company's Common Stock. If the Merger
is effected, it is anticipated that the Company will have fewer than 300
stockholders, and accordingly, will cease to file reports with the
Securities and Exchange Commission, as more fully described in the enclosed
Proxy Statement.
At a meeting on April 21, 1999, the Board of Directors of the Company
(the "Board") unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Board has
determined that the Merger is fair to and in the best interests of the
stockholders of the Company. The approval and determination of the Board
were based on a number of factors described in the Proxy Statement,
including the written opinion dated as of April 21, 1999 of Gordon
Associates Inc., the financial adviser engaged by the Board, to the effect
that, based upon and subject to certain factors and assumptions stated
therein, as of such date, the proposed consideration to be received in the
Merger by the stockholders (other than MergerCo and the Company with
respect to treasury stock which shares will be cancelled) is fair from a
financial point of view to such stockholders. The full text of the written
opinion of Gordon Associates Inc., which sets forth a description of the
assumptions made, factors considered, and limitations on the review
undertaken is attached as Appendix B to the enclosed Proxy Statement and
the stockholders are urged to read such opinion carefully in its entirety.
Approval and adoption of the Merger Agreement and the Merger require
the affirmative vote of the holders of two-thirds of the shares of Common
Stock and Series A Preferred Stock, voting together as a single class,
outstanding on [June 1, 1999]. Approval of the other proposals will
require the vote set forth in the Section of the Proxy Statement entitled
"The Special Meeting -- Vote Required; Revocability of Proxies."
Charles J. Housman, Edward L. Housman and Housman Realty Trust,
together with their family members or affiliates and the family members or
affiliates of the late Herbert E. Housman and the late Frank M. Housman,
who are stockholders of the Company own approximately 88% of the
outstanding shares entitled to vote. The Company has been advised that
they will vote all of their shares for the approval of and adoption of the
Merger Agreement and the transactions contemplated thereby therefore, the
Merger is assured without the vote of any other stockholders of the Company
and does not require the approval of two-thirds of holders who are not
affiliates of the Company.
You are urged to read the accompanying Proxy Statement, which
describes the terms of the Merger Agreement and the Merger as well as the
other proposals to be voted upon. A copy of the Merger Agreement is
included as Appendix A to the enclosed Proxy Statement.
We invite all stockholders to attend the Special Meeting. Whether or
not you plan to attend the Special Meeting, you are requested to complete,
date, sign and return the proxy card in the enclosed postage-paid envelope.
Failure to return a properly executed proxy card or vote at the Special
Meeting will have the same effect as a vote against approval of the Merger
Agreement, the Merger and the other proposals listed on the proxy card.
Executed proxies with no instructions indicated thereon will be voted for
approval and adoption of the Merger Agreement and the Merger, for the
election of the nominated director and for the ratification of the
selection of independent auditors by the Board. If you attend the Special
Meeting, you may vote in person even though you have sent in your proxy.
Sincerely,
Charles J. Housman, Chairman of the
Board, President and Chief Executive
Officer
ARMATRON INTERNATIONAL, INC.
2 Main Street
Melrose, Massachusetts 02176
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
To be held on __________, 1999
NOTICE IS HEREBY GIVEN that a special meeting in lieu of annual
meeting of the stockholders (including any adjournments or postponements
thereof, the "Special Meeting") of Armatron International, Inc. ("Armatron"
or the "Company") will be held on ___________, 1999 at 9:00 a.m., Eastern
Standard Time, at the Company's principal executive offices at 2 Main
Street, Melrose, Massachusetts, for the following purposes, all of which
are more fully described in the accompanying Proxy Statement (the "Proxy
Statement"):
1. To elect one nominee as director, to serve for a three-year term
as a Class A Director;
2. To ratify the selection, by the Board of Directors, of
independent auditors for the fiscal year ending September 30,
1999;
3. To consider and vote upon the proposal to approve and adopt an
Agreement and Plan of Merger dated as of _______, 1999 (the
"Merger Agreement") between Armatron and Armatron Merger
Corporation, a Massachusetts corporation ("MergerCo"), and the
Merger (as defined below) contemplated thereby; and
4. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on [June 1,
1999] (the "Record Date") as the record date for the determination of
stockholders entitled to notice of and vote at the Special Meeting. Only
holders of Common Stock and Series A Preferred Stock of record at the close
of business on the Record Date will be entitled to notice of and to vote at
the Special Meeting. Approval and adoption of the Merger Agreement and the
Merger require the vote of the holders of two-thirds of the shares of
Common Stock and Series A Preferred Stock, voting together as a single
class, outstanding on [June 1, 1999]. Approval of the other proposals set
forth above will require the vote set forth in the Section of the Proxy
Statement entitled "Special Meeting -- Vote Required; Revocability of
Proxies."
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company (the "Merger") with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, (i)
each outstanding share of common stock, par value $1.00 per share, of the
Company (the "Common Stock") will be converted into the right to receive
$.27 in cash (except that any shares held by MergerCo or in the Company's
treasury will be canceled and any stockholder who properly dissents from
the Merger will be entitled to appraisal rights under Massachusetts law);
(ii) each outstanding share of common stock, $.01 par value per share, (or
fraction thereof) of MergerCo (the "MergerCo Common Stock") will be
converted into one share of common stock, $.01 par value per share, (or
fraction thereof) of the Surviving Corporation; and (iii) each outstanding
share of Series A Preferred Stock, $100 par value per share, of the Company
will be converted into one share of Series A Preferred Stock, $.01 par
value per share, of the Surviving Corporation.
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger, all
such shares of MergerCo Common Stock will be converted into common stock of
the Surviving Corporation as described above.
As a result of the Merger and these related transactions, immediately
following the Merger, it is currently expected that (x) Charles J. Housman
and Edward L. Housman together with their families and affiliates and the
families or affiliates of the late Herbert E. Housman and the late Frank M.
Housman will own 100.0% of the outstanding common stock of the Surviving
Corporation and (y) the Housman Realty Trust will own 100.0% of the
outstanding Series A Preferred Stock of the Surviving Corporation.
The Company's Common Stock does not meet the listing requirements of
the National Exchanges or the Nasdaq National Market and is currently
traded on the Over the Counter Bulletin Board under the symbol, "ATRN."
Following the Merger, the Company will not list the common stock of the
Surviving Corporation on any national securities exchange or automated
quotation system and will delist the Company's Common Stock. If the Merger
is effected, it is anticipated that the Company will have fewer than 300
stockholders, and accordingly, will cease to file reports with the
Securities and Exchange Commission, as more fully described in the
accompanying Proxy Statement.
Charles J. Housman, Edward L. Housman and Housman Realty Trust,
together with their family members or affiliates and the family members or
affiliates of the late Herbert E. Housman and the late Frank M. Housman,
who are stockholders of the Company own approximately 88% of the
outstanding shares entitled to vote. The Company has been advised that
they will vote all of their shares for the approval of and adoption of the
Merger Agreement and the transactions contemplated thereby therefore, the
Merger is assured without the vote of any other stockholders of the Company
and does not require the approval of two-thirds of holders who are not
affiliates of the Company.
The accompanying Proxy Statement describes the Merger Agreement, the
Merger and the other actions to be voted upon. A copy of the Merger
Agreement is included in Appendix A to the Proxy Statement. To ensure that
your vote will be counted, please complete, date and sign the enclosed
proxy card and return it promptly in the enclosed postage-paid envelope,
whether or not you plan to attend the Special Meeting. Executed proxies
with no instructions indicated thereon will be voted for approval and
adoption of the Merger Agreement, the Merger and the other proposals listed
on the proxy card. You may revoke your proxy in the manner described in
the accompanying Proxy Statement at any time before it is voted at the
Special Meeting.
In accordance with Section 87, Chapter 156B of the General Laws of
Massachusetts, holders of Common Stock are advised as follows with respect
to the proposal to approve the Merger Agreement and the Merger:
If the action proposed in item 3 is approved by the stockholders at
the meeting and effected by the Company, any stockholder (a) who,
before the taking of the vote on the approval of such action, files
with the Company written objection to the proposed action stating
that he intends to demand payment for his shares if the action is
taken and (b) whose shares are not voted in favor of such action has
or may have the right to demand in writing from the Company or
MergerCo, within twenty days after the date of mailing to the
stockholder of notice in writing that the corporate action has become
effective, payment for his shares and an appraisal of the value
thereof. The Company and any such stockholder shall in such case
have the rights and duties and shall follow the procedure set forth
in Sections 88 to 98, inclusive, of Chapter 156B of the General Laws
of Massachusetts.
Reference is made to "Appraisal Rights" in the Proxy Statement and to
Sections 85 through 98 of Chapter 156B of the General Laws of
Massachusetts, copies of which are attached to the Proxy Statement as
Appendix C.
The Annual Report for the fiscal year ended September 30, 1998 has
been enclosed with the accompanying Proxy Statement, but is not a part
thereof.
By Order of the Board of Directors
Melrose, Massachusetts Malcolm D. Finks
___________, 1999 Clerk
THE BOARD OF DIRECTORS URGES YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD
AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON
THE MATTERS SET FORTH ON THE PROXY CARD.
PROXY STATEMENT
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________, 1999
This Proxy Statement (the "Proxy Statement") is being furnished to
the holders of common stock, par value $1.00 per share (the "Common
Stock"), and Series A Preferred Stock, par value $100 per share (the
"Preferred Stock"), of Armatron International, Inc. (the "Company" or
"Armatron"), a Massachusetts corporation, in connection with the
solicitation of proxies by the Board of Directors of the Company (the
"Board of Directors" or the "Board") for use at the special meeting in lieu
of annual meeting of stockholders to be held on _________, 1999 at 9:00
a.m., Eastern Standard Time, at the Company's principal executive offices
at 2 Main Street, Melrose, MA 02176 and at any adjournments or
postponements thereof (the "Special Meeting"). The Board of Directors has
fixed the close of business on [June 1, 1999] as the record date (the
"Record Date") for the Special Meeting with respect to this solicitation.
Only stockholders of record at the close of business on the Record
Date fixed by the Board of Directors for determining stockholders who are
entitled to notice of and to vote at the Special Meeting, will be entitled
to vote at the Special Meeting. As of the Record Date, there were
outstanding and entitled to vote 2,459,749 shares of Common Stock
(exclusive of 146,732 treasury shares) and 6,667 shares of Preferred Stock.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock and Preferred Stock entitled to vote, is
necessary to constitute a quorum at the Special Meeting. Each stockholder
will have one vote for each share of Common Stock and 1,000 votes for each
share of Preferred Stock held at the close of business on the Record Date.
Stockholders are urged to read and consider carefully the information
contained in this Proxy Statement and to consult with their personal legal,
financial and tax advisers.
This Proxy Statement, the accompanying Notice of Special Meeting and
the accompanying proxy card are first being mailed to stockholders on or
about ________, 1999. The Company's Annual Report to Stockholders for the
fiscal year ended September 30, 1998, while not incorporated as part of
this Proxy Statement, is also included in this mailing.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY, THEREFORE, WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR MERGERCO. THE DELIVERY OF THIS
PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
The date of this Proxy Statement is ___________, 1999.
TABLE OF CONTENTS
-----------------
I. AVAILABLE INFORMATION
II. ADDITIONAL INFORMATION
III. INCORPORATION OF DOCUMENTS BY REFERENCE
IV. SUMMARY
A. SPECIAL FACTORS
1. Background of the Merger
a. Purpose and Structure of the Merger
b. Certain Effects of the Merger
2. Recommendation of the Board; Reasons for the Merger
3. Opinion of Financial Adviser
4. Material Federal Income Tax Consequences
5. Interests of Certain Persons in the Merger
6. The Company
B. SPECIAL MEETING
1. Time and Place; Matters to be Considered at the Special
Meeting
2. Record Date and Voting
3. Vote Required; Revocability of Proxies
4. Solicitation of Proxies
5. Security Ownership of Certain Beneficial Owners and
Management
C. THE MERGER
1. General
2. Effective Time of the Merger
3. Effect of the Merger
4. Conditions to the Merger
5. Merger Financings
6. Termination
7. MergerCo
8. Appraisal Rights
9. Market Prices of Common Stock
V. SPECIAL FACTORS
A. BACKGROUND OF THE MERGER
B. CERTAIN EFFECTS OF THE MERGER
C. RECOMMENDATION OF THE BOARD; REASONS FOR THE MERGER;
FINDINGS OF FAIRNESS
D. CONDUCT OF THE COMPANY'S BUSINESS AFTER THE MERGER
E. OPINION OF FINANCIAL ADVISER
F. MATERIAL FEDERAL INCOME TAX CONSEQUENCES
1. Federal Income Tax Consequences to Stockholders
2. Characterization of the Merger for Federal Income Tax
Purposes
G. INTERESTS OF CERTAIN PERSONS IN THE MERGER
VI. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
VII. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
VIII. PRO FORMA CAPITALIZATION
IX. BOOK VALUE PER SHARE
X. RATIO OF EARNINGS TO FIXED CHARGES
XI. MARKET PRICES OF COMMON STOCK
XII. THE SPECIAL MEETING
A. MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
1. Election of Directors
2. Ratification of Independent Auditors
3. Approval of Merger and Merger Agreement
B. RECORD DATE AND VOTING
C. VOTE REQUIRED; REVOCABILITY OF PROXIES
D. SOLICITATION OF PROXIES
E. INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
XIII. THE MERGER AND THE MERGER AGREEMENT
A. MERGER CONSIDERATION
B. EFFECTIVE TIME OF THE MERGER
C. CONVERSION OF SHARES
D. ACCOUNTING TREATMENT
E. REPRESENTATIONS AND WARRANTIES
F. CONDUCT OF BUSINESS PENDING THE MERGER
G. COOPERATION AND BEST EFFORTS; CONDUCT OF BUSINESS AFTER THE
MERGER
H. INDEMNIFICATION
I. CONDITIONS TO THE MERGER
J. TERMINATION
K. AMENDMENT; WAIVER
XIV. DESCRIPTION OF CAPITAL STOCK
A. ARMATRON CAPITAL STOCK
1. Common Stock
2. Series A Convertible Preferred Stock
B. CAPITAL STOCK OF SURVIVING CORPORATION
1. Common Stock
2. Series A Convertible Preferred Stock
XV. REGULATORY APPROVALS
XVI. MANAGEMENT OF THE COMPANY AND MERGERCO
XVII. EXECUTIVE COMPENSATION
A. SUMMARY COMPENSATION TABLE
B. STOCK OPTIONS AND RELATED SARS
C. BENEFIT PLANS
D. COMPENSATION COMMITTEE, INTERLOCKS AND RELATED PARTICIPATION
XVIII. REPORT ON EXECUTIVE COMPENSATION
XIX. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
XX. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
XXI. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN FOR THE
YEAR ENDED SEPTEMBER 30, 1998
XXII. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. PRE-MERGER BENEFICIAL OWNERSHIP
B. POST-MERGER BENEFICIAL OWNERSHIP
XXIII. FEES AND EXPENSES
XXIV. MERGER FINANCINGS
A. SOURCE AND AMOUNT OF FUNDS
B. SALE OF MERGERCO COMMON STOCK
XXV. MERGERCO
XXVI. APPRAISAL RIGHTS
XXVII. OTHER INFORMATION AND STOCKHOLDER PROPOSALS
XXVIII. EXPERTS
Appendix A - - Agreement and Plan of Merger
Appendix B - - Opinion of Gordon Associates Inc.
Appendix C - - Sections 85-98 of Chapter 156B of the General Laws of
Massachusetts
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files, reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at the
Regional Office of the Commission: Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such reports and
other information may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, DC 20549, on payment of
prescribed charges. In addition, such reports, proxy statements and other
information may be electronically accessed at the Commission's site on the
World Wide Web located at http;//www.sec.gov. Such reports, proxy
statements and other information concerning the Company may also be
inspected at the Company's principal executive offices at 2 Main Street,
Melrose, MA.
ADDITIONAL INFORMATION
This Proxy Statement includes information to be disclosed pursuant to
Rule 13e-3 under the Exchange Act, which governs so-called "going private"
transactions by certain issuers or their affiliates. The Company and
MergerCo are filing a Rule 13e-3 Transaction Statement (the "Schedule 13E-
3") to furnish information with respect to the transactions described
herein. This Proxy Statement does not contain all the information set
forth in the Schedule 13E-3, parts of which are omitted in accordance with
the regulations of the Commission. The Schedule 13E-3, and any amendments
and exhibits thereto, including exhibits filed as a part thereof, will be
available for inspection at the offices of the Commission as set forth
above, as well as at the offices of the Company at: 2 Main Street, Melrose,
MA 02176. A copy of the Schedule 13E-3, and any amendments and exhibits
thereto, will be transmitted to any stockholder of the Company upon written
request at the expense of such stockholder.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant
to the Exchange Act by the Company (File No. 1-4433) are hereby
incorporated by reference in this Proxy Statement.
(a) Annual Report on Form 10-K, as amended, for the fiscal year
ended September 30, 1998.
(b) Current Report on Form 8-K filed on April 22, 1999.
(c) Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1998.
The Company's Annual Report on Form 10-K, as amended, for the fiscal
year ended September 30, 1998 and Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1998 are being mailed to each
stockholder together with this Proxy Statement. Additional copies of the
Company's Annual Report on Form 10-K, as amended for the fiscal year ended
September 30, 1998 as filed with the Commission may be obtained free of
charge by writing to the President of the Company at its principal
executive offices.
All documents and reports filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the date on which the Special
Meeting is held shall be deemed to be incorporated by reference herein and
to be a part hereof from the respective dates of filing of such document or
reports. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a
statement contained herein, or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE RELATING TO
THE COMPANY WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES AT 2 MAIN STREET, MELROSE, MASSACHUSETTS,
ATTENTION: PRESIDENT, TELEPHONE NUMBER (781) 321-2300, EXTENSION 311. UPON
REQUEST, THESE DOCUMENTS WILL BE SENT BY FIRST CLASS MAIL WITHIN ONE
BUSINESS DAY UPON RECEIPT OF REQUEST.
SUMMARY
The following is a summary of material information contained
elsewhere in this Proxy Statement. This summary is not intended to be a
complete description and is qualified in its entirety by reference to the
more detailed information contained in this Proxy Statement or in the
documents attached as Appendices hereto. Each stockholder is urged to give
careful consideration to all the information contained in this Proxy
Statement and the Appendices before voting.
SPECIAL FACTORS
Background of the Merger
- ------------------------
For a description of the events leading to the approval and adoption
of the Agreement and Plan of Merger dated as of _____ __, 1999 (the "Merger
Agreement") between Armatron and Armatron Merger Corporation, a
Massachusetts corporation ("MergerCo"), and the Merger (as defined below)
by the Board of Directors, see "Special Factors -- Background of the
Merger."
Purpose and Structure of the Merger
The purpose of the Merger (as defined below) and the related
transactions is to reduce the number of stockholders of the Company to less
than 300 to enable the Company to cease to be subject to the reporting
requirements of the Exchange Act in order for the Company to reduce its
expenses. Savings will result from decreased legal, accounting and
printing costs.
The Board considered other means of achieving this result such as a
tender offer, open market purchase plan and reverse stock split, but
rejected these alternatives as either more costly or unlikely to achieve
the desired result.
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company (the "Merger") with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, (i)
each outstanding share of Common Stock of the Company will be converted
into the right to receive $.27 in cash (the "Merger Consideration") (except
that any shares held by MergerCo or in the Company's treasury will be
canceled and any stockholder who properly dissents from the Merger will be
entitled to appraisal rights under Massachusetts law ); (ii) each
outstanding share of common stock, $.01 par value per share, (or fraction
thereof) of MergerCo (the "MergerCo Common Stock") will be converted into
one share of common stock, $.01 par value per share, (or fraction thereof)
of the Surviving Corporation; and (iii) each outstanding share of Preferred
Stock of the Company will be converted into one share of Series A Preferred
Stock, $.01 par value per share, of the Surviving Corporation. See "The
Merger and the Merger Agreement."
Certain Effects of the Merger
On April 20, 1999, stockholders (other than the directors and
executive officers of the Company and their affiliates) owned 1,075,472
shares of Common Stock, which represent approximately 12% of the
outstanding Common Stock and Preferred Stock (on an as converted basis) of
the Company. Immediately prior to the Merger, Charles J. Housman, Chairman
of the Board, President and Chief Executive Officer and Edward L. Housman,
a Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger,
all such shares of MergerCo Common Stock will be converted into common
stock of the Surviving Corporation.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
The Company's Common Stock does not meet the listing requirements of
the National Exchanges or the Nasdaq National Market and is currently
traded on the Over the Counter Bulletin Board under the symbol, "ATRN."
Following the Merger, the Company will not list the common stock of the
Surviving Corporation on any national securities exchange or automated
quotation system and will delist the Company's Common Stock. If the Merger
is effected, it is anticipated that the Company will have fewer than 300
stockholders, and accordingly, will terminate its registration under the
Exchange Act and thereafter cease to file reports with the Commission.
Recommendation of Board; Reasons for the Merger
- -----------------------------------------------
At a meeting on April 21, 1999, the Board unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the
Merger. The Board has determined that the Merger Agreement is fair to and
in the best interests of the stockholders and recommends that the
stockholders vote FOR the approval and adoption of the Merger Agreement and
the Merger.
For a discussion of the factors considered by the Board in reaching
its recommendation and determination, see "Special Factors -- Background of
the Merger" and "-- Recommendation of the Board; Reasons for the Merger;
Findings of Fairness."
Opinion of Financial Adviser
- ----------------------------
On April 21, 1999, Gordon Associates Inc. ("Gordon Associates"),
financial adviser to the Board, delivered its oral opinion to the Board,
which was confirmed by its written opinion to the Board, dated as of April
21, 1999, to the effect that, based upon and subject to certain factors and
assumptions stated therein, as of such date, the Merger Consideration to be
received in the Merger by the stockholders (other than MergerCo and the
Company with respect to treasury stock which shares will be cancelled) is
fair from a financial point of view to such stockholders. The full text of
the written opinion of Gordon Associates which sets forth a description of
the assumptions made, factors considered and limitations on the review
undertaken, is attached hereto as Appendix B. Stockholders are urged to read
such opinion carefully in its entirety. See "Special Factors -- Opinion of
Financial Adviser."
Material Federal Income Tax Consequences
- ----------------------------------------
Cash received by holders of Common Stock in exchange therefor will be
treated as received in complete redemption of all of their shares of the
Company. The exchange will result in gain or loss to the stockholder in an
amount equal to the difference between the amount realized on such exchange
and the stockholder's tax basis in the Common Stock redeemed. Such gain or
loss generally will be capital gain or loss provided that the Common Stock
has been held as a capital asset by such stockholder. However, the tax
consequences to each stockholder may vary depending upon each stockholder's
particular circumstances and tax position. See "Special Factors --
Material Federal Income Tax Consequences."
EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISER AS
TO THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, FOREIGN, STATE,
LOCAL OR OTHER TAX LAWS.
Interests of Certain Persons in the Merger
- ------------------------------------------
In considering the recommendation of the Board with respect to the
Merger, stockholders should be aware that each member of the Board and
certain executive officers of the Company has an interest, described
herein, that presents him with a potential conflict of interest in
connection with the Merger. The Board currently has three directors:
Charles J. Housman, Edward L. Housman and Malcolm D. Finks. Both Charles
J. Housman and Edward L. Housman are executive officers of the Company and
each own greater than 5% of the shares of the Company. See "Security
Ownership of Certain Beneficial Owners and Management." The law firm of
which Malcolm D. Finks is a member, provides legal advice to the Company.
See "Certain Relationships and Related Transactions."
The Company had a $7,000,000 line of credit with Housman Realty
Trust, a trust of which Malcolm D. Finks is the sole trustee and a
beneficiary and of which Charles J. Housman and Edward L. Housman together
with certain members of their families or affiliates and the families or
affiliates of the late Herbert E. Housman and the late Frank M. Housman are
beneficiaries. On April 20, 1999, Housman Realty Trust converted
$2,000,100 of the principal amount of this line of credit into 6,667 shares
of Preferred Stock.
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, the deceased brothers of Charles
J. Housman and Edward L. Housman, who are stockholders of the Company will
contribute 1,384,277 shares of Common Stock to MergerCo in exchange for
13,842.77 shares of MergerCo Common Stock. In the Merger, all such shares
of MergerCo Common Stock will be converted into common stock of the
Surviving Corporation.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
For a list of the names of the persons expected to be directors or
executive officers of the Surviving Corporation (together with such
persons' biographies), see "Management of the Company and MergerCo."
The Company
- -----------
The Company was organized in 1920 as Automatic Radio. Until 1978,
the Company was primarily involved in the design and manufacture of
automobile radios. In 1978 the Company began to concentrate its efforts
primarily in manufacturing electronic insect killing devices. The Company
operates principally in two segments, the Consumer Products segment through
its Flowtron Outdoor Products Division and the Industrial Products segment
through its Automatic Radio Division.
The Company's main Division, Flowtron Outdoor Products, manufactures
and distributes insect control devices including electronic bugkillers and
biomisters, environmental products including mulching leaf-eaters and
compost bins, and storage and handling products including plastic yard
carts and plastic storage sheds. All products in this division distributed
in fiscal 1998 are in full production. These products undergo periodic
model changes and product improvements. See "Selected Historical
Consolidated Financial Data" and "Unaudited Pro Forma Consolidated
Financial Data."
In 1994 the Company's Automatic Radio Division completed field
testing of its ultrasonic collision avoidance/obstacle detection system for
automotive applications which is marketed under the trademark "Echovision."
Echovision devices monitor back blind spots and side blind spots to detect
objects and alert operators to potential hidden hazards and features,
intuitive audible warnings, visual warnings, automatic activation, easy
installation on any type vehicle and a continuous system self-test. The
advantage of using Echovision devices include: increased driver awareness
which is expected to result in fewer accidents, and potentially lower
damages and public liability costs and increased driver awareness. The
device generally sells in a range of $200 to $300 per system. The Company
warrants that the product is delivered defect free. Production of these
systems began in the first quarter of 1996.
The Company's research and development efforts are primarily related
to enhancements to its existing product offerings. The Company is engaged
in research and development of lawn and garden products, home electronic
devices, and automotive and transportation safety and performance products.
It is not possible at this time to assess whether any commercially
acceptable products will result from these efforts.
SPECIAL MEETING
Time and Place; Matters to be Considered at the Special Meeting
- ---------------------------------------------------------------
The Special Meeting will be held at 9:00 a.m., Eastern Standard Time,
on _________, 1999 at the Company's principal executive offices at 2 Main
Street, Melrose, Massachusetts. At the Special Meeting, stockholders will
consider and vote upon (i) the election of a Class A Director; (ii) the
ratification of the selection, by the Board, of the independent auditors
for the fiscal year ending September 30, 1999; (iii) the approval and
adoption of the Merger Agreement and the Merger; and (iv) such other
matters as may properly come before the Special Meeting. See "The Special
Meeting -- Matters To Be Considered at the Special Meeting" and "Other
Information and Stockholder Proposals."
Record Date and Voting
- ----------------------
The Record Date for the Special Meeting is the close of business on
[June 1, 1999]. At the close of business on the Record Date, there were
2,459,749 shares of Common Stock outstanding and entitled to vote and 6,667
shares of Preferred Stock outstanding and entitled to vote, held by
approximately [1,078] stockholders of record. Each holder of Common Stock
on the Record Date will be entitled to one vote for each share held of
record and each holder of Preferred Stock will be entitled to 1,000 votes
for each share held of record. The presence, either in person or by proxy,
of the holders of a majority of the issued and outstanding shares of Common
Stock and Preferred Stock entitled to vote is necessary to constitute a
quorum at the Special Meeting. Abstentions (including broker non-votes)
are included in the calculation of the number of votes represented at a
meeting for purposes of determining whether a quorum has been achieved.
See "The Special Meeting -- Record Date and Voting."
Vote Required; Revocability of Proxies
- --------------------------------------
Of the proposals stated in the accompanying Notice of Special Meeting
of Stockholders, approval of proposal 1, the election of the Class A
Director, will require the affirmative vote of the holders of a plurality
of the shares of Common Stock and Preferred Stock outstanding on the Record
Date and represented at the Special Meeting; approval of proposal 2, the
ratification of the independent auditors, will require the affirmative vote
of at least a majority of the shares of Common Stock and Preferred Stock
outstanding on the Record Date and represented at the Special Meeting voting
together as a single class; and approval of proposal 3, the approval and
adoption of the Merger Agreement and the Merger, will require the affirmative
vote of at least two-thirds of the shares of Common Stock and Preferred Stock
outstanding on the Record Date voting together as a single class.
Charles J. Housman, Edward L. Housman and Housman Realty Trust,
together with their family members or affiliates and the family members or
affiliates of the late Herbert E. Housman and the late Frank M. Housman,
who are stockholders of the Company own approximately 88% of the
outstanding shares entitled to vote. The Company has been advised that
they will vote all of their shares for the approval of and adoption of the
Merger Agreement and the transactions contemplated thereby therefore, the
Merger is assured without the vote of any other stockholders of the Company
and does not require the approval of two-thirds of holders who are not
affiliates of the Company.
With respect to tabulation of the proxies, abstentions are treated as
votes against a proposal and broker non-votes have no effect on the vote
except with respect to the adoption and approval of the Merger Agreement
and the Merger where broker non-votes will be treated as a vote against
such proposal. Proxies that do not contain any instruction to vote for or
against a particular matter will be voted in favor of such matter. See
"The Special Meeting -- Vote Required; Revocability of Proxies."
The presence of a stockholder at the Special Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may
revoke a proxy at any time prior to its exercise by (i) delivering to the
Company's Clerk at its principal place of business, a written notice of
revocation prior to the Special Meeting; (ii) delivering prior to the
Special Meeting a duly executed proxy bearing a later date; or (iii)
attending the Special Meeting and voting in person.
Solicitation of Proxies
- -----------------------
The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, solicitation of proxies may be made personally or by
telephone or FAX machine by the Company's regular employees, and
arrangements may be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxy materials to, and to obtain proxies
from the beneficial owners of shares held of record by such persons. The
Company will reimburse such parties for reasonable out-of-pocket expenses
incurred by them in connection therewith.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
As of April 21, 1999, the directors and executive officers of the
Company beneficially owned, in the aggregate, 408,579 shares of Common
Stock and 6,667 shares of Preferred Stock, representing in the aggregate
approximately 77% of the outstanding Common Stock and Preferred Stock (on
an as converted basis) of the Company. See "Security Ownership of Certain
Beneficial Owners and Management."
THE MERGER
General
- -------
Upon the consummation of the Merger, MergerCo will be merged with and
into the Company and the Company will continue as the Surviving
Corporation. The Surviving Corporation will succeed to all the rights and
obligations of the Company and MergerCo.
Effective Time of the Merger
- ----------------------------
Pursuant to the Merger Agreement, the "Effective Time" will occur
upon filing the Articles of Merger with the Massachusetts Secretary of
State.
Effect of the Merger
- --------------------
At the Effective Time, (i) each share of Common Stock outstanding
immediately prior to the Effective Time will be converted into the right to
receive $.27 in cash except that any shares held by MergerCo or in the
Company's treasury will be canceled, and any stockholder that properly
dissents from the Merger (a "Dissenting Stockholder") will be entitled to
appraisal rights under Sections 85 to 98 of Chapter 156B, the Business
Corporation Law, of the General Laws of Massachusetts (the "MBCL"); (ii)
each outstanding share of MergerCo Common Stock (or fraction thereof) will
be converted into one share of common stock, $.01 par value per share, (or
fraction thereof) of the Surviving Corporation; and (iii) each outstanding
share of Preferred Stock of the Company will be converted into one share of
Series A Preferred Stock, $.01 par value per share, of the Surviving
Corporation. The Company expects to treat the Merger as a recapitalization
for financial reporting purposes. Accordingly, the historical basis of the
Company's assets and liabilities will not be affected by the transaction.
Conditions to the Merger
- ------------------------
The obligations of the Company and MergerCo to consummate the Merger
are subject to various conditions, including the approval and adoption of
the Merger Agreement and the Merger by the requisite vote of stockholders
and the absence of any injunction or other legal restraint preventing
consummation of the Merger.
In addition, MergerCo's obligations to effect the Merger are subject
to, among other things, (i) holders of no more than 10% of the outstanding
shares of Common Stock having perfected their appraisal rights in
accordance with the requirements of the MBCL; and (ii) there being no
material adverse effect on the business, assets, liabilities, condition
(financial or other) or results of operations of the Company since
September 30, 1998. See "The Merger and the Merger Agreement -- Conditions
to the Merger" and "Merger Financings."
Merger Financings
- -----------------
The Company expects that approximately $455,000 will be required to
(i) finance the payment of the Merger Consideration and (ii) pay the fees
and expenses expected to be incurred in connection with the Merger. It is
contemplated that at the Effective Time, the Company expects to have at
least $1 million of cash on-hand to use in connection with the Merger. The
Company has such cash on hand because the Housman Realty Trust has allowed
the Company to defer the required debt service on the promissory note due
to Housman Realty Trust by the Company. The following table illustrates
the estimated sources and uses of funds necessary to consummate the Merger:
</TABLE>
<TABLE>
<S> <C>
SOURCES
-------
Cash $455,000
--------
Total Sources $455,000
========
USES
----
Purchase of Common Stock $291,000
Estimated Fees and Expenses $164,000
--------
Total Uses $455,000
========
</TABLE>
Termination
- -----------
The Merger Agreement may be terminated and the Merger abandoned prior
to the Effective Time upon certain events. See "The Merger and the Merger
Agreement -- Termination."
MergerCo
- --------
MergerCo is a newly formed Massachusetts corporation, which was
organized in connection with the transactions contemplated by the Merger
Agreement. MergerCo is a nonsubstantive transitory merger vehicle, which
will be merged out of existence at the Effective Time. Accordingly, it is
not expected to have significant assets or liabilities (other than those
arising under the Merger Agreement) or to engage in any activities (other
than those incident to its formation and the Merger.) The authorized
capital stock of MergerCo consists of 190,000 shares of common stock, par
value $.01 per share, and 10,000 shares of preferred stock, par value $.01
per share, of which no shares are currently outstanding.
Appraisal Rights
- ----------------
Holders of Common Stock have the right to dissent from approval and
adoption of the Merger Agreement and the transactions contemplated thereby,
and, subject to strict compliance with certain requirements of the MBCL, to
receive payment for the "fair value," as defined in the MBCL, of their
Common Stock ("Dissenting Shares"). These requirements are described under
"Appraisal Rights" and in the provisions of Sections 85 through 98 of the
MBCL, which are attached as Appendix C to this Proxy Statement.
Market Prices of Common Stock
- -----------------------------
The Company's Common Stock is currently traded on the Over the
Counter Bulletin Board under the symbol, "ATRN." On April 14, 1999, the
last trading day before the public announcement of the Merger and related
transactions, the reported bid price per share of Common Stock was $.15.
On ____________, 1999, the last full trading day prior to the date of this
Proxy Statement, the reported high and low bid price per share of Common
Stock was ______ and _____, respectively. For additional information
concerning historical market prices of the Common Stock, see "Market Prices
of Common Stock."
Following the Merger, the Company will not list the common stock of
the Surviving Corporation on any national securities exchange or automated
quotation system and will delist the Company's Common Stock.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Common Stock of the Company has been trading below $1.00 since
November 1997. The Company was delisted from the American Stock
Exchange on February 28, 1996. The Company's stock trades sporadically.
The Company has incurred net losses for the past seven years. The Company
has been able to continue its operations because of the personal guaranty
provided to the Company by Charles J. Housman. For the Company to continue
its operations in the future, it will need additional cash which may be
provided by certain members of the Housman family and may only be provided
to the Company for use to fund operations and not to pay for certain
expenses, including those relating to the Company's continuing obligations
as a reporting company under the Exchange Act.
In light of the Company's on-going need for additional capital
infusions to fund its losses and in order to reduce expenses, the Board of
Directors of the Company has determined to acquire through a Merger the
Common Stock held by non-affiliates of the Company. The purpose of the
Merger and the related transactions is to reduce the number of stockholders
of the Company to less than 300 to enable the Company to cease to be
subject to the reporting requirements of the Exchange Act. The Board of
Directors believes that removing the burdens on the Company of being a
public corporation subject to the reporting requirements of the Exchange
Act, and the annual shareholders meeting requirements will reduce expenses
to the benefit of the Company. These savings will result from decreased
legal, accounting and printing costs, as well as the time saved by the
Company's employees who will no longer be required to participate in the
preparation of filings required under the Exchange Act. Further, since the
Common Stock is rarely traded and the Company has not been profitable, the
Company does not believe that it can raise funds in the public market, make
acquisitions with its stock, or otherwise avail itself of the advantages of
being a public company.
In order to provide a prompt and orderly transfer of ownership of
Common Stock from the public stockholders, in light of relevant financial,
legal, tax and other considerations, the acquisition of the Company has
been structured as a merger pursuant to which, if the Merger is approved
and adopted by the requisite vote of the Company stockholders and the
remaining conditions to the consummation of the Merger are satisfied or
waived, MergerCo will be merged with and into the Company with the Company
continuing as the Surviving Corporation. In the Merger, (i) each
outstanding share of Common Stock of the Company will be converted into the
right to receive $.27 in cash (except that any shares held by MergerCo or
in the Company's treasury will be canceled and any stockholder who properly
dissents from the Merger will be entitled to appraisal rights under the
MBCL); (ii) each outstanding share of MergerCo Common Stock (or fraction
thereof) will be converted into one share of common stock, $.01 par value
per share, (or fraction thereof) of the Surviving Corporation; and (iii)
each outstanding share of Preferred Stock of the Company will be converted
into one share of Series A Preferred Stock, $.01 par value per share, of
the Surviving Corporation. See "The Merger and the Merger Agreement."
Stockholders who perfect their statutory appraisal rights under and in
accordance with Section 85 through 98 of the MBCL may seek appraisal of
their Common Stock. See "Appraisal Rights."
The Board considered other means of achieving this result such as a
tender offer, open market purchase plan and reverse stock split, but
rejected these alternatives as either more costly or unlikely to achieve
the desired result. The Company did not consider other opportunities and
the Board has not received any offers or indications of interest from
potential acquirors or offers to make an investment in the Company. The
Board believes that the likelihood of receiving such offers is low due to
the Company's consistent history of financial losses, the fact that the
Housman family owns approximately 88% of the Company and the need for a
potential acquiror to pay off the $2,715,000 debt plus $1,633,000 in
interest outstanding and owed to the Housman Realty Trust as of March 31,
1999.
In order to consummate the Merger, the Company determined that it had
to become solvent under Massachusetts law otherwise the payment of cash to
the Company's stockholders would be subject to forfeiture and would create
liability for the directors of the Company. See "-- Interests of Certain
Persons in the Merger." To make the Company solvent, Housman Realty Trust,
a trust operated for the benefit of the Company's principal stockholders,
agreed to convert $2,000,100 of debt outstanding into 6,667 shares of
Preferred Stock. On April 20, 1999, the Board of Directors of the Company
approved the conversion of debt to equity in order for the Company to
consummate the Merger and the related transactions.
The Board determined that it would be prudent to obtain the services
of a qualified financial consultant to perform an analysis on the valuation
of the Company as well as to prepare a fairness opinion on the Company's
Common Stock. The Board contacted and interviewed certain firms which
offered such consulting services. Based upon the interviews,
qualifications and costs for such services, the Board selected Gordon
Associates as the most qualified as well as the most reasonably priced.
At a meeting of the Board of Directors on January 13, 1999 the Board
determined to retain the services of Gordon Associates as the financial
adviser to the Company and asked Gordon Associates to begin its analysis of
the Company.
At a meeting on April 21, 1999, at which all of the directors were
present, the Board unanimously approved the Merger Agreement and the
transactions contemplated thereby and authorized execution of the Merger
Agreement. In determining that the Merger was fair to and in the best
interests of the Company and the stockholders, the Board considered a
number of factors including those described in " -- Recommendation of the
Board; Reasons for the Merger; Findings of Fairness."
CERTAIN EFFECTS OF THE MERGER
On April 20, 1999, stockholders (other than the directors and
executive officers of the Company and their affiliates) owned 1,075,472
shares of Common Stock, which represent approximately 12% of the
outstanding Common Stock and Preferred Stock (on an as converted basis) of
the Company. Immediately prior to the Merger, Charles J. Housman, Chairman
of the Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly owned
subsidiary of the Company, together with all members of their families or
affiliates and the families or affiliates of the late Herbert E. Housman and
the late Frank M. Housman, who are stockholders of the Company will
contribute 1,384,277 shares of Common Stock to MergerCo in exchange for
13,842.77 shares of MergerCo Common Stock. In the Merger, all such shares of
MergerCo Common Stock will be converted into common stock of the Surviving
Corporation.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
The Company's Common Stock does not meet the listing requirements of
the National Exchanges or the Nasdaq National Market and is currently
traded on the Over the Counter Bulletin Board under the symbol, "ATRN."
Following the Merger, the Company will not list the common stock of the
Surviving Corporation on any national securities exchange or automated
quotation system. If the Merger is effected, it is anticipated that the
Company will have fewer than 300 stockholders and will terminate its
listing on the Over the Counter Bulletin Board and file a certification
with the Commission that it is owned by less than 300 persons and therefore
requests termination of registration of its Common Stock. Registration
will be terminated within 90 days thereof. Accordingly, the Company will
no longer be required to file periodic reports with the Commission, be
obligated to comply with the proxy rules of Regulation 14A of the Exchange
Act, print and distribute to stockholders annual or quarterly reports or
proxy statements, maintain a transfer agent for its Common Stock or retain
counsel or accountants to assist in the preparation of such reports or
statements.
RECOMMENDATION OF THE BOARD; REASONS FOR THE MERGER; FINDINGS OF FAIRNESS
THE BOARD BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND THE UNAFFILIATED STOCKHOLDERS. THE BOARD
APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
In reaching its determination that the Merger Agreement and the
Merger are in the best interests of the Company and the unaffiliated
stockholders, the Board relied on its knowledge of the business,
operations, properties, assets, financial condition, operating results,
historical market prices and prospects of the Company and considered the
following factors (both positive and negative):
* the oral opinion of Gordon Associates delivered to the Board, which
was confirmed by its written opinion to the Board, dated as of April
21, 1999, which opinion has been adopted by the Board, to the effect
that, based upon and subject to certain factors and assumptions
stated therein, as of such date, the Merger Consideration to be
received in the Merger by the stockholders is fair, from a financial
point of view to such stockholders (a copy of the opinion is attached
hereto as Appendix B to this Proxy Statement). See " -- Opinion of
Financial Adviser."
* the relationship of the Merger Consideration to the historical market
prices for the Common Stock (see "Market Prices of Common Stock"),
the going concern valuation of the Company and the value to a
hypothetical strategic buyer.
* the Company's financial projections as analyzed by Gordon Associates
(see " -- Opinion of Financial Adviser" for an explanation of such
analysis) (which analysis was adopted by the Board) which, in the
Board's view supports a determination that the Merger Consideration
is fair to the Company and the unaffiliated stockholders.
In addition to the foregoing, the Board considered negative factors
of the Merger to the Company and the stockholders, including that at
certain times, the Common Stock has traded above the amount of the Merger
Consideration (see "Market Prices of Common Stock").
The foregoing discussion of the information and factors discussed by
the Board of Directors is not meant to be exhaustive but includes all
material factors considered by the Board. While the Board of Directors
considered such factors, it did not quantify or attach any particular
weight to such factors and individual members of the Board may have placed
different emphasis on particular positive or negative factors in reaching
their determination that the Merger is in the best interest of the
stockholders. The Board believes the Merger achieves enhanced value for
the unaffiliated stockholders in light of the fact that, among other things,
during 1999, the Common Stock has traded around $.25 per share on a
weighted average basis.
Because of the nature of the composition of the Board, the outside
director's affiliation with the principal stockholders of the Company and
requirement in the Company's Restated Articles of Organization, as amended,
that the Merger be approved by the unanimous consent of the Board of
Directors, the Company did not have the Merger approved solely by its non-
employee director. No unaffiliated representative was obtained to act
solely on behalf of the unaffiliated stockholders for the purpose of
negotiating this transaction and preparing a report concerning the fairness
of such transaction.
The Company has retained an independent adviser to prepare an opinion
concerning the fairness of the Merger and the Board has adopted such
opinion. See "-- Opinion of Financial Advisor."
If the holders of Common Stock and Preferred Stock do not approve and
adopt the Merger Agreement, or if the Merger is not consummated for any
other reason, the Board expects to continue to operate the Company as an
ongoing business.
The Board has determined that the Merger Agreement and the Merger are
advisable and fair to and in the best interests of the Company and the
unaffiliated stockholders and has approved the Merger Agreement and the
Merger. Accordingly, the Board recommends that the stockholders vote "FOR"
approval and adoption of the Merger Agreement and the Merger. See "--
Background of the Merger" and "-- Opinion of Financial Adviser."
CONDUCT OF THE COMPANY'S BUSINESS AFTER THE MERGER
Upon consummation of the Merger, the Company will continue its
business and operations substantially as they are currently being
conducted. It is anticipated that the Company may from time to time
evaluate and review its business and make such changes as it deems
appropriate. The Company does not intend to dispose of any assets of the
Company other than in the ordinary course of business. Except for the
Merger, and as otherwise described in this Proxy Statement, the Company has
no present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation,
relocation of operations, sale or transfer of assets involving the Company
or any other material changes in its corporate structure or the composition
of its management and has agreed not to enter into such transactions until
at least one year after the Effective Time of the Merger.
OPINION OF FINANCIAL ADVISER
On April 21, 1999, Gordon Associates delivered its oral opinion to
the Board, which was confirmed by its written opinion to the Board, dated
as of April 21, 1999, to the effect that, based upon and subject to certain
factors and assumptions stated therein, as of such date, the Merger
Consideration to be received in the Merger by the stockholders (other than
MergerCo and the Company with respect to treasury stock which shares will be
cancelled) is fair from a financial point of view to such stockholders (the
"Gordon Opinion"). The full text of the written opinion of Gordon
Associates, which sets forth a description of the assumptions made, factors
considered and limitations on the review undertaken, is attached hereto as
Appendix B and is incorporated herein by reference. The Gordon Opinion was
provided to the Board for its information and is directed only to the
fairness from a financial point of view of the Merger Consideration to be
received in the Merger by the stockholders, does not address the merits of
the underlying decision by the Board to engage in the Merger and does not
constitute a recommendation to any stockholder as to how they should vote on
the Merger or any transaction related thereto. Stockholders are urged to
read the Gordon Opinion carefully in its entirety, especially with regard to
the assumptions made and factors considered by Gordon Associates. The
summary of the Gordon Opinion set forth in this Proxy Statement is qualified
in its entirety by reference to the full text of such opinion.
The summary set forth below does not purport to be a complete
description of the analyses underlying the Gordon Opinion or the
presentation made by Gordon Associates to the Board. The preparation of a
fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications 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,
Gordon Associates considered various factors, but did not attribute any
particular weight to such factors. Accordingly, Gordon Associates believes
that its analyses must be considered as a whole and that selecting portions
of its analyses, without considering all of its analyses, would create an
incomplete view of the process underlying the Gordon 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 the
control of Gordon Associates, management, Company and the Board. Any
estimates contained in the analyses performed by Gordon Associates 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 such businesses
or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition,
as described above, the Gordon Opinion and Gordon Associates' presentation
to the Board were among several factors taken into consideration by the
Board in making its determination to approve and adopt the Merger
Agreement. Consequently, the Gordon Associates analyses described below
should not be viewed as determinative of the decision of the Board with
respect to the fairness of the Merger Consideration to be received by the
stockholders.
In arriving at its opinion, Gordon Associates, among other things:
(i) reviewed the Company's consolidated annual financial statements for the
five years ended September 30, 1998, unaudited financial statements for the
three months ended December 31, 1998 and other financial information that
Gordon Associates deemed to be relevant; (ii) reviewed certain information
from members of management regarding past history, current operations and
future prospects for the Company; (iii) visited the Company's facility in
Melrose, Massachusetts; (iv) made comparisons of the financial and
operating results of the Company with other selected publicly traded
companies that manufacture and distribute lawn and garden products; (v)
reviewed the trading history of the Company's shares; (vi) considered the
current condition of the securities market and the economic environment in
general; (vii) reviewed documents relating to a foreign arbitration award
against the Company and J.C. Carter Company, Inc., a former subsidiary of
the Company, among others, relating to certain cryogenic cargo pumps
supplied in the 1970's and a pending lawsuit in the U.S. District Court,
Central District of California, seeking payment of said award; and
(viii) performed and undertook other actions and analyses that Gordon
Associates deemed relevant.
In preparing its opinion, Gordon Associates assumed the accuracy and
completeness of all information supplied or otherwise made available to
Gordon Associates, discussed with or reviewed by or for Gordon Associates,
or publicly available, and Gordon Associates did not assume any
responsibility for independently verifying such information or undertake an
independent evaluation or appraisal of any of the assets or liabilities,
contingent or otherwise, of the Company, and was not furnished with any
such evaluation or appraisal.
With respect to the financial forecast information furnished to or
discussed with Gordon Associates by the Company, Gordon Associates assumed
that it was reasonably prepared and reflected the best currently available
estimates and judgment of management as to the expected future financial
performance of the Company, including the pro forma effects of the proposed
conversion of debt to the Preferred Stock.
The Gordon Associates 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 Gordon Associates as of, the date
of such opinion.
The following is a brief summary of the material analyses performed
by Gordon Associates in connection with the preparation of its opinion.
Historical Trading Analysis
Gordon Associates reviewed the recent historical stock market
performance of the Common Stock of the Company. This analysis indicated
that the weighted average daily average price (the average of the daily
high and low prices on the days that trading occurred) was $.24 per share
for the period from January 1999 through April 14, 1999, inclusive. Gordon
Associates noted that no trades of Common Stock occurred during February
1999, and that in the period from January 1999 through April 14, 1999 there
were more days on which the Company's Common Stock did not trade than days
on which trades were executed. On the days that the Company's Common Stock
did trade, the volume of trades was minimal.
Going Concern Valuation Analysis
Gordon Associates analyzed the Company on a going concern basis using
the following methods: (i) multiple of estimated current fiscal year
earnings; (ii) multiple of earnings before interest, taxes, depreciation
and amortization; and (iii) capitalization of cash flow. Multiples and
capitalization rates used were based on publicly available information for
companies engaged in similar business activities to the Company. Gordon
Associates adjusted the Company's financial results to include the effect
of typical industry compensation. On a going concern basis, net of debt
and/or pro forma preferred stock, Gordon Associates determined that the
Common Stock of the Company had negligible value both before the conversion
of certain debt to Preferred Stock and on a pro forma basis assuming the
conversion of certain debt to Preferred Stock.
Value to Hypothetical Strategic Buyer
Gordon Associates analyzed the Company from the perspective of a
hypothetical strategic buyer. In any analysis of the value of a business
to a strategic buyer, certain assumptions and judgment are necessary. In
the case of the Company, Gordon Associates assumed that a hypothetical
strategic buyer existed and that there also existed the potential for
certain cost savings associated with the consolidation of the Company's
product lines and production equipment into a buyer's existing
infrastructure, including cost savings from reduced rental expense and cost
savings in general and administrative expense. Gordon Associates analyzed
the Company's value to a hypothetical strategic buyer using the following
methods: (i) multiple of pro forma earnings before interest, taxes,
depreciation and amortization and (ii) capitalization of pro forma cash
flow. Multiples and capitalization rates used were based on publicly
available information for companies engaged in similar business activities
to the Company. Gordon Associates determined that the value of the Company
to a hypothetical strategic buyer, based on the assumptions described
above, net of debt and/or pro forma preferred stock, was $.10 per common
share, both before the conversion of certain debt to Preferred Stock and on
a pro forma basis assuming the conversion of certain debt to Preferred
Stock.
The Board retained Gordon Associates on the basis of its experience
and expertise in valuing small companies. Gordon Associates is a locally
based company specializing in business valuation, damage analysis and
financial consulting. Among other activities, it engages in evaluating the
financial terms of mergers and acquisitions and providing investment
analysis to clients and advising them with respect to the purchase and sale
of securities generally.
The Company has agreed to pay Gordon Associates a fee of $27,000 plus
out-of-pocket expenses for services rendered in connection with the Merger.
The Company has also agreed to indemnify and hold harmless Gordon
Associates and its officers, directors, employees and consultants from and
against any and all liabilities arising out of its engagement except where
Gordon Associates is found, pursuant to final judgment or administrative
order or finding, to have acted with bad faith or material negligence.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
the following are the material United States federal income tax
considerations generally applicable to stockholders in connection with the
Merger. The tax treatment described herein may vary depending upon each
stockholder's particular circumstances and tax position. Certain holders
of Common Stock (including MergerCo, Charles J. Housman and Edward L.
Housman and their families and affiliates and the families and affiliates
of the late Herbert E. Housman and the late Frank M. Housman, insurance
companies, tax-exempt organizations, financial institutions or broker-
dealers, foreign corporations, persons who are not citizens or residents of
the United States, holders who do not hold their shares as capital assets
and holders who have acquired their Common Stock upon the exercise of
options or otherwise as compensation) may be subject to special rules not
discussed below. No ruling from the Internal Revenue Service ("IRS") will
be applied for with respect to the federal income tax consequences
discussed herein. The discussion below is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below. This
discussion does not consider the effect of any applicable foreign, state,
local or other tax laws.
Federal Income Tax Consequences to Stockholders
- -----------------------------------------------
The receipt of Merger Consideration for Common Stock pursuant to the
Merger or cash pursuant to the exercise of appraisal rights will be a
taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a stockholder will realize a gain or loss for federal income tax
purposes equal to the difference between the amount of cash received for
the shares of Common Stock and such stockholder's adjusted tax basis in
such shares. Such gain or loss will be long-term capital gain or loss if
the Common Stock was held by the stockholder for more than one year. If a
taxpayer has both long-term and short-term transactions during the year,
each type is reported separately and gains and losses from each type are
netted separately. The net long-term capital gain or loss for the year is
then combined with the net short-term capital gain or loss for the year to
arrive at an overall (net) capital gain or loss. If capital gains exceed
capital losses, the overall gain is included with the taxpayer's other
income but is generally subject to a maximum tax rate of 20% for sales of
long-term capital assets and 35% for corporations. To determine the
deductibility of capital losses, all capital gains and losses (without
distinction between long-term and short-term) incurred during the year must
be totaled. Any capital losses are deductible only to the extent of any
capital gains plus, in the case of noncorporate taxpayers, ordinary income
of up to $3,000. Thus, both net long-term capital losses and net short-
term capital losses may be used to offset up to $3,000 of an individual's
ordinary income. A corporation can use capital losses for a tax year only
to offset capital gains in that year. There is no offset against ordinary
income for a corporation. A corporation may be allowed to carry back
unused capital losses to the three preceding tax years and to carry over
losses to the five following tax years. Individuals and other noncorporate
taxpayers may carry over a net capital loss for an unlimited time until the
loss is exhausted. A capital loss that is carried over to a later tax year
retains its long-term or short-term character for the year to which it is
carried.
Stockholders who receive common stock of the Surviving Corporation
will not recognize gain or loss on the exchange of Common Stock for common
stock of the Surviving Corporation. The basis of the common stock of the
Surviving Corporation would equal the basis such Stockholder had in the
Common Stock.
EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISER AS
TO THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, FOREIGN, STATE,
LOCAL OR OTHER TAX LAWS.
Characterization of the Merger for Federal Income Tax Purposes
- --------------------------------------------------------------
The creation of MergerCo followed by the merger of MergerCo into the
Company with certain stockholders of the Company exchanging their Common
Stock for MergerCo Common Stock, with the remaining holders of Common Stock
receiving cash from the Company in exchange therefor, and the conversion of
the MergerCo Common Stock into the Surviving Corporation's common stock will
be disregarded for federal income tax purposes. The transaction will be
treated as if the Company's stockholders never transferred any of their
shares to MergerCo, with the net effect that the holders of Common Stock
who receive cash in exchange for their shares will be treated as if their
shares had been redeemed. The Company will not realize gain or loss on the
redemption.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board with respect to the
Merger, stockholders should be aware that each member of the Board and
certain executive officers of the Company has an interest, described
herein, that presents him with a potential conflict of interest in
connection with the Merger. The Board currently has three directors:
Charles J. Housman, Edward L. Housman and Malcolm D. Finks. Both Charles
J. Housman and Edward L. Housman are executive officers of the Company, see
"Management of the Company and MergerCo." The law firm of which Malcolm D.
Finks is a member, provides legal advice to the Company. See "Certain
Relationships and Related Transactions."
Charles J. Housman, Edward L. Housman and Housman Realty Trust
together with their family members or affiliates and the family members or
affiliates of the late Herbert E. Housman and the late Frank M. Housman,
the deceased brothers of Charles J. Housman and Edward L. Housman, who are
stockholders of the Company own approximately 88% of the outstanding shares
entitled to vote. The sole trustee of the Housman Realty Trust is Malcolm
D. Finks and Malcolm D. Finks, Charles J. Housman and Edward L. Housman are
beneficiaries under the trust agreement, see "Security Ownership of Certain
Beneficial Owners and Management." The Company has been advised that they
will vote all of their shares for the approval of and adoption of the
Merger Agreement and the transactions contemplated thereby therefore, the
Merger is assured without the vote of any other stockholders of the Company
and does not require the approval of two-thirds of holders who are not
affiliates of the Company.
The Company had a $7,000,000 line of credit with Housman Realty
Trust, a trust of which Malcolm D. Finks is the sole trustee and a
beneficiary and of which Charles J. Housman and Edward L. Housman together
with certain members of their families or affiliates and the families or
affiliates of the late Herbert E. Housman and the late Frank M. Housman are
beneficiaries. On April 20, 1999, Housman Realty Trust converted
$2,000,100 of the principal amount of the debt into 6,667 shares of
Preferred Stock. The Preferred Stock is convertible into 6,667,000 shares
of Common Stock. The Preferred Stock votes on an as converted basis with
the Common Stock. See "Description of Armatron Capital Stock -- Series A
Convertible Preferred Stock."
Prior to the exchange of debt for Preferred Stock, the Company would
have been considered insolvent because its liabilities exceeded its assets.
Section 45 of the MBCL provides that a stockholder to whom a corporation
makes a distribution, if the corporation is, or is thereby rendered,
insolvent shall be liable to the corporation for the amount of such
distribution made or for the amount of such distribution which exceeds that
which could have been made without rendering the corporation insolvent but
only to the extent of the amount distributed to such stockholder. Pursuant
to Section 61 of the MBCL, the directors of a corporation who vote to
authorize such distribution shall be jointly and severally liable to the
corporation for such distribution unless it is repaid to the corporation.
Therefore, in order to make the Company solvent so that the
distribution of cash to the stockholders in the Merger would not be subject
to forfeiture, Housman Realty Trust agreed to convert a portion of its debt
into Preferred Stock. The Housman Realty Trust has the power to vote 73%
of the shares of capital stock of the Company.
Immediately prior to the Merger, Charles J. Housman and Edward L.
Housman together with all members of their families or affiliates and the
families or affiliates of the late Herbert E. Housman and the late Frank M.
Housman, who are stockholders of the Company will contribute 1,384,277
shares of Common Stock to MergerCo in exchange for 13,842.77 shares of
MergerCo Common Stock. In the Merger, all such shares of MergerCo Common
Stock will be converted into common stock of the Surviving Corporation.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
For a list of the names of the persons expected to be directors or
executive officers of the Surviving Corporation (together with such
persons' biographies), see "Management of Company and MergerCo."
Pursuant to the Merger Agreement, for a period of six years after the
Effective Time, the Surviving Corporation has agreed to indemnify officers,
directors, employees and agents of the Company and its subsidiary against
losses, claims, damages, expenses or liabilities arising out of actions or
omissions or alleged actions or omissions occurring at or prior to the
Effective Time to the same extent provided for in the Company's Restated
Articles of Organization and Bylaws, as amended (to the extent consistent
with applicable law).
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated historical
financial data relating to the Company. The data has been derived from, and
should be read in conjunction with the historical consolidated financial
statements and related notes thereto of the Company. The Company's
consolidated financial statements for the years ended September 30, 1998,
1997 and 1996 which have been audited by R.J. Gold & Company, P.C.,
independent auditors, are incorporated by reference in this Proxy Statement
from the Company's Annual Report on Form 10-K, as amended, for the year ended
September 30, 1998. The Company's unaudited financial statements for the
three months ended December 31, 1998 are incorporated by reference in this
Proxy Statement from the Company's report on Form 10-Q for the three months
ended December 31, 1998. Copies of such annual report and such quarterly
report are being mailed to each stockholder of the Company together with this
Proxy Statement.
<TABLE>
<CAPTION>
Years Ended September 30,
Three Months Ended ----------------------------------------------------
December 31, 1998 1998 1997 1996 1995 1994
------------------ ---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,458 $12,885 $13,314 $13,750 $12,017 $13,286
Operating Income (Loss) $ (599) $ 22 $ (244) $ 9 $(1,159) $ (934)
Net Loss $ (695) $ (499) $ (286) $ (495) $(1,557) $(1,212)
Earnings (Loss) Per Share
of Common Stock: Net Loss $ (.28) $ (.20) $ (.12) $ (.20) $ (.63) $ (.49)
=======================================================================
Total Assets $6,394 $ 7,330 $ 7,264 $ 7,475 $ 7,256 $ 9,599
=======================================================================
Long-Term Obligations $4,735 $ 4,743 $ 4,783 $ 4,715 $ 4,715 $ 5,140
=======================================================================
</TABLE>
There were no dividends paid on Common Stock during any of the above
years. Under the financing agreement with its commercial finance company,
Congress Financial Corporation, the Company is restricted from paying
dividends for the term of that agreement. See "Unaudited Pro Forma
Condensed Consolidated Financial Data" to see how the information set forth
above will be affected by the issuance of the Preferred Stock and the
Merger and related transactions.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial
data of the Company has been prepared to give effect to the issuance of the
Preferred Stock which occurred on April 20, 1999 and the Merger and related
transactions. The Company expects to treat the Merger as a
recapitalization for financial reporting purposes. Accordingly, the
historical basis of the Company's assets and liabilities will not be
affected by the transactions. For a discussion of the Merger and related
transactions, see "The Merger and the Merger Agreement."
The pro forma adjustments presented are based upon available
information and certain assumptions that the Company believes are
reasonable under the circumstances. The unaudited pro forma consolidated
statement of continuing operations data of the Company for the year ended
September 30, 1998 gives effect to the issuance of the Preferred Stock and
the Merger as if they had occurred on October 1, 1997. The unaudited pro
forma consolidated balance sheet data as of September 30, 1998 gives effect
to the issuance of the Preferred Stock and the Merger as if they had occurred
on October 1, 1997.
The unaudited pro forma consolidated statement of continuing operations
data of the Company for the three months ended December 31, 1998 gives effect
to the issuance of the Preferred Stock and the Merger as if they had occurred
on October 1, 1998. The unaudited pro forma consolidated balance sheet data
of the Company as of December 31, 1998 gives effect to the issuance of the
Preferred Stock and the Merger assuming that they were completed on
October 1, 1998.
The unaudited pro forma financial data should be read in conjunction
with the historical consolidated financial statements of the Company and
notes thereto, and other financial data included elsewhere in this Proxy
Statement, as well as the information concerning the Merger, including the
sources and uses therefor, see "Merger Financings."
The pro forma financial data and related notes are provided for
informational purposes only and do not necessarily reflect the results of
operations or financial position of the Company that would have actually
resulted had the events referred to above or in the notes to the unaudited
pro forma financial data been consummated as of the date and for the period
indicated and are not intended to project the Company's financial position
or results of operations for any future period.
ARMATRON INTERNATIONAL, INC.
Unaudited Pro Forma Consolidated Statement of Operations Data
for the year ended September 30, 1998
<TABLE>
<CAPTION>
For the Year Ended Pro Forma Pro Forma
September 30, 1998 Adjustments September 30, 1998
------------------ ----------- ------------------
<S> <C> <C> <C>
Net sales $12,885,000 $12,885,000
Cost of products sold 10,409,000 10,409,000
----------------------------------------------------
Gross margin 2,476,000 2,476,000
Selling, general and
administrative expenses 2,418,000 2,418,000
Provision for bad debts 36,000 36,000
----------------------------------------------------
Operating profit (loss) 22,000 22,000
----------------------------------------------------
Other income (expense):
Interest expense-third parties (30,000) (30,000)
Interest expense-related parties (478,000) 200,000 (1) (278,000)
Interest income 63,000 (23,000)(2) 40,000
----------------------------------------------------
Other income (expense) - net (445,000) 177,000 (268,000)
----------------------------------------------------
Loss before income taxes (423,000) 177,000 (246,000)
Provision for income taxes (76,000) (76,000)
----------------------------------------------------
Net loss (499,000) 177,000 (322,000)
Preferred stock dividends 0 (200,000)(3) (200,000)
----------------------------------------------------
Net loss allocable to
common stock $ (499,000) $ (23,000) $ (522,000)
====================================================
Basic and diluted earnings (loss)
per share(4) $ .(20) $ .(06)
====================================================
Weighted average number of
common shares outstanding 2,459,749 5,591,528(5) 8,051,277
====================================================
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations Data
Armatron International, Inc.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS DATA
FOR THE YEAR ENDED SEPTEMBER 30, 1998
[FN]
<F1> Reflects the expense related to the interest that would have been
incurred during the year ended September 30, 1998 had the conversion
of the principal amount of $2,000,100 pursuant to a promissory note
due to a realty trust operated for the benefit of the Company's
principal shareholders been completed at the beginning of the
reporting period.
<F2> Reflects the interest income related to cash used for Merger
Consideration and Merger expenses that would have been earned during
the year ended September 30, 1998 had the transactions been completed
at the beginning of the reporting period.
<F3> Reflects the dividends that would have been accrued during the year
ended September 30, 1998 had the conversion of the promissory note
due to a realty trust operated for the benefit of the Company's
principal shareholders of $2,000,100 been completed at the beginning
of the reporting period.
<F4> Basic earnings (loss) per share was computed by dividing net loss, after
deducting preferred stock dividends, by the weighted average number
of shares of Common Stock outstanding during this period. Diluted
earnings (loss) per share was computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding during the
period plus incremental shares that would have been outstanding upon
the assumed conversion of the Preferred Stock. A total of 6,667,000
shares of Common Stock were assumed to be outstanding upon the
assumed conversion of the 6,667 shares of Preferred Stock.
<F5> Reflects the acquisition of 1,075,472 shares of the Company's Common
Stock and a total of 6,667,000 shares of Common Stock assumed to be
outstanding upon the conversion of the 6,667 shares of Preferred Stock
pursuant to the Merger and the Merger Agreement had the transactions
been completed at the beginning of the reporting period.
</FN>
ARMATRON INTERNATIONAL, INC.
Unaudited Pro Forma Consolidated Balance Sheet Data
As of September 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $2,677,000 $ (478,000)(1) $2,199,000
Trade accounts receivable, net 1,799,000 1,799,000
Inventories 2,088,000 2,088,000
Deferred taxes 37,000 37,000
Prepaid and other current assets 141,000 141,000
----------------------------------------------
Total Current Assets 6,742,000 (478,000) 6,264,000
Property and equipment, net 449,000 449,000
Other assets 139,000 139,000
----------------------------------------------
Total Assets $7,330,000 $ (478,000) $6,852,000
==============================================
LIABILITIES AND EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 802,000 $ 802,000
Other current liabilities 925,000 925,000
Interest payable to related parties 1,395,000 (200,000)(2) 1,195,000
Dividends payable to related parties -- 200,000 (3) 200,000
Current portion under capital lease
obligations 21,000 21,000
----------------------------------------------
Total Current Liabilities 3,143,000 3,143,000
----------------------------------------------
Long-term debt, related parties 4,715,000 (2,000,000)(4) 2,715,000
----------------------------------------------
Long-term capital lease obligations,
net of current portion 10,000 10,000
----------------------------------------------
Deferred rent, net of current portion 18,000 18,000
----------------------------------------------
Stockholders' Equity (Deficiency):
Common stock 2,606,000 (1,222,000)(5) 1,384,000
Preferred stock -- 6,667,000 (4) 6,667,000
Additional paid-in capital 6,770,000 (4,286,000)(5) 2,484,000
Accumulated deficit (9,546,000) 200,000 (2)
(200,000)(3)
(23,000)(6) (9,569,000)
----------------------------------------------
(170,000) 1,136,000 966,000
Treasury stock, at cost (386,000) 386,000 (5) 0
----------------------------------------------
Total Stockholders' Equity (Deficiency): (556,000) 1,522,000 966,000
----------------------------------------------
Total Liabilities and Stockholders' Equity
(Deficiency): $7,330,000 (478,000) $6,852,000
==============================================
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet Data.
Armatron International, Inc.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA
AT SEPTEMBER 30, 1998
[FN]
<F1> Reflects the cash used for Merger Consideration and Merger expenses
had the transactions been completed at the beginning of the reporting
period.
<F2> Reflects the expense related to the interest that would have been
incurred during the year ended September 30, 1998 had the conversion
of the principal amount of $2,000,100 pursuant to a promissory note
due to a realty trust operated for the benefit of the Company's
principal shareholders been completed at the beginning of the
reporting period.
<F3> Reflects the accumulated dividends of Preferred Stock, $100 par
value, issued in exchange for the conversion of $2,000,100 of the
principal amount of a promissory note due to a realty trust operated
for the benefit of the Company's principal shareholders.
<F4> Reflects the issuance of 6,667 shares of Preferred Stock, $100 par
value, issued in exchange for the conversion of $2,000,100 of the
principal amount of a promissory note due to a realty trust operated
for the benefit of the Company's principal shareholders.
<F5> Reflects the acquisition of 1,075,472 shares of the Company's Common
Stock, $1.00 par value, and the retirement of 146,732 shares of the
Company's Common Stock held in treasury at a cost of $386,000 and the
issuance of 6,667 shares of Preferred Stock, $100 par value, pursuant
to the Merger and the Merger Agreement had the transactions been
completed at the beginning of the reporting period.
<F6> Reflects the interest income related to cash used for Merger
Consideration and Merger expenses that would have been earned during
the year ended September 30, 1998 had the transactions been completed
at the beginning of the reporting period.
</FN>
ARMATRON INTERNATIONAL, INC.
Unaudited Pro Forma Consolidated Statement of Operations Data
for the three months ended December 31, 1998
<TABLE>
<CAPTION>
For the Three Months Pro Forma Pro Forma
Ended December 31, 1998 Adjustments December 31,1998
----------------------- ----------- ----------------
<S> <C> <C> <C>
Net sales $1,458,000 $1,458,000
Cost of products sold 1,570,000 1,570,000
----------------------------------------------------
Gross margin (112,000) (112,000)
Selling, general and
administrative expenses 487,000 487,000
----------------------------------------------------
Operating profit (loss) (599,000) (599,000)
----------------------------------------------------
Other income (expense):
Interest expense-third parties (7,000) (7,000)
Interest expense-related parties (120,000) 50,000 (1) (70,000)
Interest income 31,000 (6,000)(2) 25,000
----------------------------------------------------
Other income (expense) - net (96,000) 44,000 (52,000)
----------------------------------------------------
Loss before income taxes (695,000) 44,000 (651,000)
Provision for income taxes 0 0
----------------------------------------------------
Net loss (695,000) 44,000 (651,000)
Preferred stock dividends 0 (50,000)(3) (50,000)
----------------------------------------------------
Net loss allocable to common stock $ (695,000) $ (6,000) $ (701,000)
====================================================
Basic and diluted earnings (loss)
per share(4) $ (.28) $ (.09)
====================================================
Weighted average number of
common shares outstanding 2,459,749 5,591,528 (5) 8,051,277
====================================================
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations Data
Armatron International, Inc.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
[FN]
<F1> Reflects the expense related to the interest that would have been
incurred during the three months ended December 31, 1998 had the
conversion of the principal amount of $2,000,100 pursuant to a
promissory note due to a realty trust operated for the benefit of the
Company's principal shareholders been completed at the beginning of
the reporting period.
<F2> Reflects the interest income related to cash used for Merger
Consideration and Merger expenses that would have been earned during
the three months ended December 31, 1998 had the transactions been
completed at the beginning of the reporting period.
<F3> Reflects the dividends that would have been accrued during the three
months ended December 31, 1998 had the conversion of the promissory
note due to a realty trust operated for the benefit of the Company's
principal shareholders of $2,000,100 been completed at the beginning
of the reporting period.
<F4> Basic earnings (loss) per share was computed by dividing net loss, after
deducting preferred stock dividends, by the weighted average number
of shares of Common Stock outstanding during this period. Diluted
earnings (loss) per share was computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding during the
period plus incremental shares that would have been outstanding upon
the assumed conversion of the Preferred Stock. A total of 6,667,000
shares of Common Stock were assumed to be outstanding upon the
assumed conversion of the 6,667 shares of Preferred Stock.
<F5> Reflects the acquisition of 1,075,472 shares of the Company's Common
Stock, $1.00 par value, and a total of 6,667,000 shares of Common
Stock assumed to be outstanding upon the conversion of the 6,667
shares of Preferred Stock pursuant to the Merger and the Merger
Agreement had the transactions been completed at the beginning of the
reporting period.
</FN>
ARMATRON INTERNATIONAL, INC.
Unaudited Pro Forma Consolidated Balance Sheet Data
As of December 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,413,000 $ (461,000)(1) $ 1,952,000
Trade accounts receivable, net 963,000 963,000
Inventories 2,082,000 2,082,000
Deferred taxes 36,000 36,000
Prepaid and other current assets 343,000 343,000
-------------------------------------------------
Total Current Assets 5,837,000 (461,000) 5,376,000
Property and equipment, net 418,000 418,000
Other assets 139,000 139,000
-------------------------------------------------
Total Assets $ 6,394,000 $ (461,000) $ 5,933,000
=================================================
LIABILITIES AND EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 535,000 $ 535,000
Other current liabilities 839,000 839,000
Interest payable to related parties 1,515,000 (50,000)(2) 1,465,000
Dividends payable to related parties - 50,000(3) 50,000
Current portion under capital lease obligations 21,000 21,000
-------------------------------------------------
Total Current Liabilities 2,910,000 2,910,000
-------------------------------------------------
Long-term debt, related parties 4,715,000 (2,000,000)(4) 2,715,000
-------------------------------------------------
Long-term capital lease obligations,
net of current portion 6,000 6,000
-------------------------------------------------
Deferred rent, net of current portion 14,000 14,000
-------------------------------------------------
Stockholders' Equity (Deficiency):
Common stock 2,606,000 (1,222,000)(5) 1,384,000
Preferred stock - 6,667,000(4) 6,667,000
Additional paid-in capital 6,770,000 (4,286,000)(5) 2,484,000
Accumulated deficit (10,241,000) 50,000(2)
(50,000)(3)
(6,000)(6) (10,247,000)
-------------------------------------------------
(865,000) 1,153,000 288,000
Treasury stock, at cost (386,000) 386,000(5) 0
-------------------------------------------------
Total Stockholders' Equity (Deficiency): (1,251,000) 1,539,000 288,000
-------------------------------------------------
Total Liabilities and Stockholders' Equity
(Deficiency): $ 6,394,000 (461,000) $ 5,933,000
=================================================
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet Data.
Armatron International, Inc.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA
AS OF DECEMBER 31, 1998
[FN]
<F1> Reflects the cash used for Merger Consideration and Merger expenses
had the transactions been completed at the beginning of the reporting
period.
<F2> Reflects the expense related to the interest that would have been
incurred during the three months ended December 31, 1998 had the
conversion of the principal amount of $2,000,100 pursuant to a
promissory note due to a realty trust operated for the benefit of the
Company's principal shareholders been completed at the beginning of
the reporting period.
<F3> Reflects the accumulated dividends of Preferred Stock, $100 par
value, issued in exchange for the conversion of $2,000,100 of the
principal amount of a promissory note due to a realty trust operated
for the benefit of the Company's principal shareholders.
<F4> Reflects the issuance of 6,667 shares of Preferred Stock, $100 par
value, issued in exchange for the conversion of $2,000,100 of the
principal amount of a promissory note due to a realty trust operated
for the benefit of the Company's principal shareholders.
<F5> Reflects the acquisition of 1,075,472 shares of the Company's Common
Stock, $1.00 par value, and the retirement of 146,732 shares of the
Company's Common Stock held in treasury at a cost of $386,000 and the
issuance of 6,667 shares of Preferred Stock, $100 par value, pursuant
to the Merger and the Merger Agreement had the transactions been
completed at the beginning of the reporting period.
<F6> Reflects the interest income related to cash used for Merger
Consideration and Merger expenses that would have been earned during
the three months ended December 31, 1998 had the transactions been
completed at the beginning of the reporting period.
</FN>
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma consolidated
cash and equivalents and capitalization of the Company (i) at September 30,
1998, (ii) at December 31, 1998, (iii) after giving pro forma effect to the
issuance of the Preferred Stock and the Merger and related transactions as
if they had occurred on September 30, 1998, and (iv) after giving pro forma
effect to the issuance of the Preferred Stock and the Merger and related
transactions as if they had occurred on December 31, 1998. This table
should be read in conjunction with "Selected Historical Consolidated
Financial Data," and "Unaudited Pro Forma Consolidated Financial Data,"
appearing elsewhere in this Proxy Statement and the Consolidated
Financial Statements (including the notes thereto) of the Company.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
--------------------------------------- ---------------------------------------
September 30, 1998 December 31, 1998 September 30, 1998 December 31, 1998
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Cash and equivalents $ 2,677,000 $ 2,413,000 $ 2,199,000 $ 1,952,000
- -------------------- ============================================================================
Debt:
- -----
Long-term debt $ 4,743,000 $ 4,735,000 $ 2,743,000 $ 2,735,000
Revolving Credit Facility 0 0 0 0
----------------------------------------------------------------------------
Total Debt $ 4,743,000 $ 4,735,000 $ 2,743,000 $ 2,735,000
============================================================================
Shareholders' equity (deficit):
- -------------------------------
Company common stock, including
additional paid-in-capital $ 9,376,000 $ 9,376,000 $ 3,868,000 $ 3,868,000
Preferred stock 0 0 6,667,000 6,667,000
Retained earnings (deficit) (9,546,000) (10,241,000) (9,569,000) (10,247,000)
Treasury stock (386,000) (386,000) 0 0
----------------------------------------------------------------------------
Total Shareholders'equity (deficit) $ (556,000) $ (1,251,000) $ 966,000 $ 288,000
============================================================================
Total Capitalization $ 4,187,000 $ 3,484,000 $ 3,709,000 $ 3,023,000
==================== ============================================================================
</TABLE>
BOOK VALUE PER SHARE
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
ACTUAL Stockholders' equity (deficiency) per share $(.51) $(.23)
PRO FORMA Stockholders' equity per share $ .04 $ .12
</TABLE>
Reflects the following: (i) the conversion of $2,000,100 of debt into
Preferred Stock of the Company, and (ii) the issuance of 6,667 shares of
Preferred Stock.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998 PRO FORMA
-------------------------------------------------- -------------------
THREE THREE
MONTHS MONTHS YEAR
ENDED ENDED ENDED
1994 1995 1996 1997 1998 12/31/98 12/31/98 9/30/98
---- ---- ---- ---- ---- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA
Income (loss) before
income taxes $(1,377) $(1,557) $(460) $(269) $(423) $(695) $(651) $(246)
Add:
Interest on indebtedness 500 529 529 535 508 127 -- --
-----------------------------------------------------------------------------------
Income as adjusted $ (877) $(1,028) $ 69 $ 266 $ 85 $(568) $(651) $(246)
===================================================================================
Fixed charges:
Interest on indebtedness $ 500 $ 529 $ 529 $ 535 $ 508 $ 127 $ 77 $ 308
-----------------------------------------------------------------------------------
Fixed charges $ 500 $ 529 $ 529 $ 535 $ 508 $ 127 $ 77 $ 308
===================================================================================
Ratio of earnings to
fixed charges (1.8) (1.9) 0.1 0.5 0.2 (4.5) (8.5) (0.8)
===================================================================================
</TABLE>
MARKET PRICES OF COMMON STOCK
The Company's Common Stock is currently traded on the Over the Counter
Bulletin Board under the symbol, "ATRN." The Company went public on November
16, 1960 and its Common Stock was traded on the American Stock Exchange until
February 28, 1996. On February 29, 1996, the Company began trading its
shares on the Over the Counter Bulletin Board. On April 14, 1999, the last
trading day before the public announcement of the Merger and related
transactions, the reported bid price per share of Common Stock was $.15.
On ____________, 1999, the last full trading day prior to the date of this
Proxy Statement, the reported high and low bid price per share of Common
Stock was [___] and [____], respectively. The number of stockholders of
record at [June 1, 1999] was [1,078], which number includes certain
registered holders of Common Stock for _________ number of beneficial holders.
The following table indicates the fiscal quarterly high and low bid
prices as reported in the Over the Counter Bulletin Board for the Company's
common stock for fiscal 1997, fiscal 1998 and the first two quarters of
fiscal 1999.
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -------------
Fiscal Quarter High Low High Low High Low
- -------------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First 5/16 5/32 5/8 1/4 3/4 3/8
Second 5/32 5/32 7/16 5/16 2-7/8 1/4
Third n/a n/a 7/16 3/8 2-1/4 1/4
Fourth n/a n/a 3/8 1/4 15/16 5/16
</TABLE>
The Company currently intends to retain earnings rather than pay cash
dividends. Under its financing agreement with its commercial finance
company, Congress Financial Corporation, the Company is restricted from
paying dividends for the term of the financing agreement.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Each copy of this Proxy Statement mailed to stockholders is
accompanied by a proxy card furnished in connection with the solicitation
of proxies by the Board of Directors for use at the Special Meeting. The
Special Meeting is scheduled to be held on _________, 1999 at 9:00 a.m.,
Eastern Standard Time, at the Company's principal executive offices at 2
Main Street, Melrose, Massachusetts 02176. At the Special Meeting,
stockholders will consider and vote upon (i) the election of a Class A
Director; (ii) the ratification of the selection, by the Board, of the
independent auditors for the fiscal year ending September 30, 1999; (iii)
the approval and adoption of the Merger Agreement and the Merger; and (iv)
such other matters as may properly come before the Special Meeting.
Election of Directors
- ---------------------
The Company's Bylaws provide for a Board of Directors to consist of
not less than three or more than nine persons who are to be divided as
nearly equally in number as possible into three classes (A, B and C). Each
class of Directors is to be elected for a three-year term ending in three
successive years with the members of each class to serve until the third
succeeding annual meeting of stockholders after their election and until
their respective successors are duly elected and qualified.
The Board of Directors has determined that the term of one Director
(the "Class A" Director) expires in 1999, and has nominated Edward L.
Housman for a term to expire in January 2002 and until his successor is
duly elected and qualified. Edward L. Housman currently is a "Class A"
Director. The proposal requires the favorable vote of the holders of a
plurality of the stockholders of record represented at the meeting.
If a nominee is unable to serve, an event that management does not
anticipate, proxies not otherwise specifying will be voted for a substitute
nominee to be named by the Board of Directors. In no event will proxies be
voted for more than one nominee. If no instructions are specified on your
proxy, your shares will be voted FOR the election of the nominee to the
Board of Directors named herein.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1,
THE ELECTION OF EDWARD L. HOUSMAN AS A CLASS A DIRECTOR.
Ratification of Independent Auditors
- ------------------------------------
The Board of Directors, upon recommendation of its Audit Committee,
has selected the firm of R.J. Gold & Company, P.C. to serve as the
Company's independent auditors for the fiscal year ending September 30,
1999, a service they presently perform. Although it is not required to do
so, the Board of Directors is submitting the selection of R. J. Gold &
Company, P.C. for ratification in order to assess the views of
stockholders. If the selection is not ratified, the Board of Directors
will reconsider its selection. This proposal requires the favorable vote
of at least a majority of the shares of Common Stock and Preferred Stock,
voting as a single class, outstanding on the Record Date and represented at
the Special Meeting.
The Company's financial statements for the previous fiscal year ended
September 30, 1998 were audited by R. J. Gold & Company, P.C. In
connection with the audit function, R. J. Gold & Company, P.C. also
reviewed the Company's annual report and its filings with the Commission.
R. J. Gold & Company, P.C. provided all professional services
indicated at customary rates and terms.
The Audit Committee of the Board of Directors has established a
policy regarding services, which may be provided by the Company's
independent auditors. This policy states that the Company's independent
auditors may be engaged by management to perform any services normally
provided by accounting firms for publicly-held audit clients, provided that
the independence requirements of the American Institute of Certified Public
Accountants have been considered and that the fees for such non-audit
services do not exceed a certain level of the fees for audit services
rendered during the year. Fees for non-audit services in excess of this
level would require pre-approval by the Audit Committee.
It is expected that representatives of R. J. Gold & Company, P.C.
will be present at the Special Meeting with the opportunity to make a
statement if they so desire and to answer appropriate questions relating to
the audit performed.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2,
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS.
Approval of Merger and Merger Agreement
- ---------------------------------------
At the Special Meeting, stockholders will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement between
MergerCo and the Company and the Merger contemplated thereby. A copy of
the Merger Agreement is attached as Appendix A to this Proxy Statement.
This proposal requires the affirmative vote of at least two-thirds of the
shares of Common Stock and Preferred Stock outstanding on the Record Date.
The Merger Agreement provides, among other things, for the merger of
MergerCo into the Company with the Company continuing as the Surviving
Corporation. In the Merger, (i) each outstanding share of Common Stock of
the Company will be converted into the right to receive $.27 in cash
(except that any shares held by MergerCo or in the Company's treasury will
be canceled and any stockholder who properly dissents from the Merger will
be entitled to appraisal rights under the MBCL); (ii) each outstanding
share of MergerCo Common Stock (or fraction thereof) will be converted into
one share of common stock (or fraction thereof) of the Surviving Corporation;
and (iii) each outstanding share of Preferred Stock of the Company will be
converted into one share of Series A Preferred Stock of the Surviving
Corporation. See "The Merger and the Merger Agreement."
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger, all
such shares of MergerCo Common Stock will be converted into common stock of
the Surviving Corporation.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
The Company expects to treat the Merger as a recapitalization for
financial reporting purposes. Accordingly, the historical basis of the
Company's assets and liabilities will not be affected by the transaction.
The Board of Directors has determined that the Merger Agreement and
the Merger are advisable and fair to and in the best interests of the
Company and its stockholders, and has approved the Merger and the Merger
Agreement. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE MERGER. See "Special Factors -- Background of the Merger" and "Special
Factors -- Recommendation of the Board; Reasons for the Merger."
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO
RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT AND THE
MERGER.
RECORD DATE AND VOTING
The Record Date for the Special Meeting is the close of business on
[June 1, 1999]. Only holders of Common Stock and Preferred Stock of record
at the close of business on the Record Date will be entitled to notice of
and to vote at the Special Meeting. As of the Record Date, there were
outstanding and entitled to vote 2,459,749 shares of Common Stock
(exclusive of 146,732 treasury shares) and 6,667 shares of Preferred Stock,
held by approximately [1,078] stockholders of record. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares
of Common Stock and Preferred Stock entitled to vote, is necessary to
constitute a quorum at the Special Meeting. Abstentions (including broker
non-votes) are included in the calculation of the number of votes
represented at a meeting for purposes of determining whether a quorum has
been achieved. Each stockholder will have one vote for each share of
Common Stock and 1,000 votes for each share of Preferred Stock held at the
close of business on the Record Date. To the knowledge of the Board of
Directors, no person other than those identified below under "Security
Ownership of Certain Beneficial Owners and Management -- Pre-Merger
Beneficial Ownership" owns of record or beneficially more than five percent
of the outstanding shares of capital stock of the Company.
The Board is not aware of any matters other than those set forth in
the Notice of Special Meeting of Stockholders that may be brought before
the Special Meeting. If any other matter properly comes before the Special
Meeting, the persons named as proxy holders on your proxy will vote your
shares with respect to any such other matter in accordance with their best
judgment, except that shares represented by proxies which have been voted
"against" the Merger Agreement and the Merger will not be used to vote
"for" postponement or adjournment of the Special Meeting for the purpose of
allowing additional time for soliciting additional votes "for" the Merger
Agreement and the Merger. See "Vote Required; Revocability of Proxies" and
"Other Information and Stockholder Proposals."
VOTE REQUIRED; REVOCABILITY OF PROXIES
Of the proposals stated in the accompanying Notice of Special Meeting
of Stockholders, approval of proposal 1, the election of the Class A
Director, will require the affirmative vote of the holders of a plurality
of the shares of Common Stock and Preferred Stock outstanding on the Record
Date and represented at the Special Meeting; approval of proposal 2, the
ratification of the independent auditors, will require the affirmative vote
of at least a majority of the shares of Common Stock and Preferred Stock
outstanding on the Record Date voting together as a single class and
represented at the Special Meeting; and approval of proposal 3, the approval
and adoption of the Merger Agreement and the Merger, will require the
affirmative vote of at least two-thirds of the shares of Common Stock and
Preferred Stock outstanding on the Record Date voting together as a single
class.
Charles J. Housman, Edward L. Housman and the Housman Realty Trust,
together with their family members or affiliates and the family members or
affiliates of the late Herbert E. Housman and the late Frank M. Housman who
are stockholders of the Company, own approximately 88% of the shares
outstanding and entitled to vote. The Company has been advised that they
will vote all of their shares for the approval of and adoption of the
Merger Agreement and the transactions contemplated thereby therefore, the
Merger is assured without the vote of any other stockholders of the Company
and does not require the approval of two-thirds of holders who are not
affiliates of the Company.
Because the required vote of stockholders on the Merger Agreement and
the Merger is based upon the total number of outstanding shares of Common
Stock and Preferred Stock, the failure to submit a proxy card (or to vote
in person at the Special Meeting) or the abstention from voting by a
stockholder (including broker non-votes) will have the same effect as an
"against" vote with respect to approval and adoption of the Merger
Agreement and the Merger. With respect to the other matters to be voted
upon at the Special Meeting, abstentions will be treated as votes "against"
the proposals and non-votes will have no effect on the vote.
Proxies delivered to the Company's Clerk will be voted (unless you
otherwise instruct) on all matters that may properly come before the
meeting, except as set forth above. The proxy contains spaces in which you
may insert instructions as to how your shares are to be voted. If you
specify instructions with respect to any of the proposals, your shares will
be voted in accordance with your instructions, applicable law and the
Company's Restated Articles of Organization and Bylaws. Proxies delivered
to the Company's Clerk that do not contain any instruction to vote for or
against a particular matter will be voted in favor of such matter.
The presence of a stockholder at the Special Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may
revoke a proxy at any time prior to its exercise by (i) delivering to the
Clerk of the Company, 2 Main Street, Melrose, Massachusetts 02176, a
written notice of revocation prior to the Special Meeting, (ii) delivering
prior to the Special Meeting a duly executed proxy bearing a later date or
(iii) attending the Special Meeting and voting in person. Unless revoked
in one of the manners set forth above, proxies in the form enclosed will be
voted at the Special Meeting in accordance with stockholders' instructions.
If a quorum is not obtained, or if fewer shares of Common Stock and
Preferred Stock are voted in favor of approval and adoption of the Merger
Agreement and the Merger than the number required for approval, it is
expected that the Special Meeting will be postponed or adjourned for the
purpose of allowing additional time for soliciting and obtaining additional
proxies or votes, and, at any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as the proxies would
have been voted at the original convening of the Special Meeting, except
for any proxies which have theretofore effectively been revoked or
withdrawn.
SOLICITATION OF PROXIES
The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, solicitation of proxies may be made personally or by
telephone or FAX machine by the Company's regular employees. Such persons
will not be additionally compensated for any such solicitation but may be
reimbursed for reasonable out-of-pocket expenses incurred in connection
therewith. Arrangements may also be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxy materials to, and to
obtain proxies from, the beneficial owners of shares held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by
them in connection therewith.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
The following sets forth the ages, principal occupation and present
position of each of the Directors of the Company.
Director
--------
EDWARD L. HOUSMAN Age 77, Class A Director, principal occupation:
President of Automatic Radio International Corp.
since 1969 (a wholly-owned subsidiary of the Company
which deals with the international sales of the
Company's products). Mr. Housman has been actively
engaged in various aspects of the Company's business
for more than 30 years, and has served as a Director
of the Company continuously since 1959. Mr. Housman
is the brother of Charles J. Housman, the President
and Chairman of the Company.
CHARLES J. HOUSMAN Age 71, Class B Director, principal occupation:
President and Chairman of the Board of Armatron
since 1987. Mr. Housman has been actively engaged
in various aspects of the Company's business for
more than 30 years and has served as a Director
continuously since 1960. Mr. Housman is the brother
of Edward L. Housman, the Class A Director of the
Company.
MALCOLM D. FINKS Age 60, Class C Director, principal occupation:
member of the law firm of Bass, Doherty & Finks,
P.C., Boston, Massachusetts since April 1, 1999 and
a member of the law firm of Englander, Finks, Ross,
Cohen & Brander, P.C., Boston, Massachusetts from
1970 until 1999. On July 7, 1998 Mr. Finks was
appointed to the Board of Directors upon the death
of Mr. Englander, the former Class C Director. Mr.
Finks was also elected Clerk of the Company in July
1998. Mr. Finks is the sole member of the Company's
Audit Committee.
The Board of Directors of the Company is divided into three classes.
Each director serves for a three-year term, with one class of directors
being elected at each annual meeting of stockholders. The term of the
Class A Director expires in 1999, the term of the Class B Director expires
in 2001 and the term of the Class C Director expires in 2000.
Audit Committee. During the past year, the Audit Committee was
composed of Malcolm D. Finks, a Director who was not an employee of the
Company. The Audit Committee met once during the year. The duties of the
Audit Committee are to review and approve the scope of the annual audit of
financial statements by the independent auditors prior to public release of
the annual financial statements; consult with the independent auditors and
the accounting staff of the Company with respect to the adequacy of
internal controls; and make a recommendation to the Board as to which
public accounting firm should be engaged as independent auditors for the
forthcoming year. The Audit Committee also has the authority to review any
other financial matters that it deems appropriate to its function and to
report its findings to the Board.
Nominating Committee. The Company does not have a Nominating
Committee. The Board of Directors will consider recommendations that are
submitted to it by shareholders received within one year prior to the date
a vacancy is to be filled. In order for a recommendation by a shareholder
to be considered, it must meet the following requirements: (1) the
shareholder making the recommendation must be a registered shareholder of
record; (2) the recommendation must be submitted in writing; (3) the
recommendation must include a description of the nominees, including the
person's qualifications to serve as a Director; and (4) the recommendation
must include a statement indicating the nominee's willingness to serve.
Meetings. The Board of Directors met four times in fiscal 1998 and
all Directors attended at least 75% of the aggregate number of meetings of
the Board and the committees on which they serve.
THE MERGER AND THE MERGER AGREEMENT
The following is a summary of material terms of the Merger and the
Merger Agreement, a copy of which is attached hereto as Appendix A and
incorporated by reference herein. All references to and summaries of the
Merger Agreement in this Proxy Statement are qualified in their entirety by
reference to the Merger Agreement. Stockholders are urged to read the
Merger Agreement carefully and in its entirety.
MERGER CONSIDERATION
Subject to certain provisions as described herein with respect to
shares of Common Stock owned by the Company and MergerCo, and with respect
to Dissenting Shares, at the Effective Time each issued and outstanding
share of Common Stock will be converted into the right to receive from the
Company following the Merger $.27 in cash.
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger, all
such shares of MergerCo Common Stock will be converted into common stock of
the Surviving Corporation.
Any shares of Common Stock held by MergerCo or held in the Company's
treasury will automatically be canceled at the Effective Time and will
cease to exist and no Merger Consideration will be delivered in exchange
therefor.
Upon consummation of the Merger and these related transactions,
immediately following the Merger, it is currently expected that (x) Charles
J. Housman and Edward L. Housman together with their families and
affiliates and the families or affiliates of the late Herbert E. Housman
and the late Frank M. Housman will own 100.0% of the outstanding common
stock of the Surviving Corporation and (y) the Housman Realty Trust will
own 100.0% of the outstanding Series A Preferred Stock of the Surviving
Corporation.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of the Articles of
Merger with the Secretary of State of the Commonwealth of Massachusetts or
such later date as is specified in such Articles of Merger. The filing of
the Articles of Merger will occur as soon as practicable on or after the
satisfaction or waiver of the conditions to the Merger specified in the
Merger Agreement unless another date is agreed to by the Company and
MergerCo. Subject to certain limitations, the Merger Agreement may be
terminated by either MergerCo or the Company. See "-- Conditions to the
Merger" and "-- Termination."
CONVERSION OF SHARES
The conversion of shares of Common Stock (other than Dissenting
Shares) into the Merger Consideration will occur at the Effective Time. As
soon as practicable after the Effective Time, the Company will mail to each
holder of an outstanding certificate or certificates at such time which
prior thereto represented shares of Common Stock, a check representing the
Merger Consideration. After the Effective Time, there will be no further
transfer on the records of the Company of certificates representing shares
of Common Stock which have been converted, in whole or in part, pursuant to
the Merger Agreement into the right to receive cash. Each certificate for
shares for Common Stock will be deemed at any time after the Effective Time
to represent only the right to receive the consideration contemplated by
the Merger Agreement. No interest will be paid or will accrue on any cash
payable as consideration in the Merger.
ACCOUNTING TREATMENT
It is intended that the Merger will be treated as a recapitalization
for financial reporting purposes. Accordingly, the historical basis of the
Company's assets and liabilities will not be impacted by the transaction.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and
warranties of the Company with respect to the Company and its subsidiary
relating to, among other things, (a) organization, standing and similar
corporate matters; (b) the authorization, execution, delivery, performance
and enforceability of the Merger Agreement; (c) the Company's capital
structure; (d) documents filed by the Company with the Commission and the
accuracy of information contained therein; (e) the absence of any
violation, breach, termination, acceleration or default (i) under certain
agreements to which the Company is a party, (ii) under the Restated
Articles of Organization or Bylaws, as amended, of the Company or (iii)
under any federal, state, local or foreign order, writ, injunction,
judgment, award, decree, statue, law, rule or regulation applicable to the
Company; (f) the absence of the need for governmental approvals and
consents in connection with the Merger Agreement; (g) the accuracy of
information supplied by the Company in connection with this Proxy Statement
and any related schedules; (h) the absence of certain changes or events
since September 30, 1998, including material adverse changes with respect
to the Company; (i) the absence of undisclosed liabilities; (j) pending or
threatened material litigation, certain labor matters and compliance with
applicable laws; (k) benefit plans and other matters relating to the
Employee Retirement Income Security Act of 1974, as amended, and employment
matters; (l) title to owned personal property and valid leasehold and
subleasehold interests in leased real or personal property; (m) filing of
tax returns and payment of taxes; (n) environmental matters; (o) insurance
matters; (p) receipt of an opinion of the Company's financial adviser; (q)
brokers' fees and expenses; (r) ownership of or rights to use Company
intellectual property; (s) material contracts; (t) takeover statutes and
(u) the accuracy of information provided to MergerCo.
The Merger Agreement also contains customary representations and
warranties of MergerCo relating to, among other things, (a) organization,
standing and similar corporate matters; (b) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and
related matters; (c) the accuracy of information supplied by MergerCo in
connection with this Proxy Statement and any related schedules; (d) the
absence of the need for governmental approvals and consents in connection
with the Merger Agreement; (e) brokers' fees and expenses; and (f) the
business of MergerCo outside the consummation of the transactions
contemplated by the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company made various customary
covenants relating to the conduct of its business prior to the Merger. The
Company has agreed that, prior to the Effective Time, unless MergerCo
agrees otherwise in writing, as required by the Merger Agreement or
applicable law or as required by a material contract, it will conduct its
business and will cause its subsidiary to conduct its business in the
ordinary course of business and in a manner consistent with past practice
and, to the extent consistent therewith, will use all reasonable efforts to
preserve substantially intact its business organization, and preserve its
relationships with customers, suppliers, employees and creditors. In the
Merger Agreement, the Company has further agreed, among other things, that
prior to the Effective Time it will not and it will cause its subsidiary to
not: (a) amend its charter or bylaws or similar organizational documents;
(b) issue, sell, grant, transfer, pledge, dispose of or encumber any shares
of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock in the Company or its subsidiary; (c) sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of any assets of the
Company or its subsidiary (except in the ordinary course of business
consistent with past practice); (d) declare, set aside, make or pay any
dividend or other distribution in respect of any of its capital stock; (e)
purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its subsidiary; (f) acquire any corporation, partnership
or other business organization or division or any equity interest therein;
(g) incur any long-term indebtedness or any short-term indebtedness other
than under lines of credit existing on ______ __, 1999 (except in certain
limited circumstances in the ordinary course of business, consistent with
past practice); (h) enter into or amend any material contract or agreement
that provides for the exclusive arrangement with a third party that is
substantially more restrictive on the Company or its subsidiary or
substantially less advantageous to the Company or its subsidiary than
arrangements existing as of _____ __, 1999; (i) increase the compensation
payable or to become payable to its officers or management employees except
for increases in salary or wages consistent with past practice; (j) adopt,
enter into, or amend or increase, accelerate the payment or vesting of, the
amounts, benefits or rights under any severance, termination, bonus, profit
sharing, deferred compensation, stock option, or other equity based or
other material employee compensation or benefit plan; (k) except as may be
required as a result of a change in generally accepted accounting
principles, take any action to change accounting policies or procedures;
(l) make any material tax election inconsistent with past practice or
settle or compromise or amend any material federal, state, local or foreign
tax liability; or (m) take, or agree in writing or otherwise to take, any
of the actions described in this paragraph, or any action which would make
any of the representations or warranties of the Company contained in the
Merger Agreement untrue or incorrect or prevent the Company from performing
or cause the Company not to perform its covenants thereunder.
COOPERATION AND BEST EFFORTS; CONDUCT OF BUSINESS AFTER THE MERGER
Pursuant to the Merger Agreement and subject to certain conditions
and limitations described therein, the parties have agreed to cooperate
with each other and use their respective reasonable best efforts to take
certain specified and other actions so that the transactions contemplated
by the Merger Agreement may be consummated as soon as practicable. The
parties have also agreed that until one year after the Effective Time of
the Merger, the Surviving Corporation shall not be a party to any merger,
reorganization, liquidation, relocation of operations, sale or transfer of
assets not in the ordinary course of business, or any other material
changes in its corporate structure.
INDEMNIFICATION
The Merger Agreement provides that the Articles of Organization and
Bylaws of the Surviving Corporation will contain the provisions with
respect to indemnification set forth in the Restated Articles of
Organization and Bylaws, as amended, of the Company on the date of the
Merger Agreement, which provisions may not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who
on or prior to the Effective Time were directors, officers, employees or
agents of the Company, unless such modification is required by law.
The Merger Agreement also provides that after the Effective Time, the
Surviving Corporation will indemnify and hold harmless each present and
former director, officer or employee of the Company and its subsidiary
against any expenses, losses, claims, damages or liabilities, arising out
of acts or omissions occurring at or prior to the Effective Time, to the
same extent as provided in the Company's Restated Articles of Organization
or Bylaws, as amended, or any applicable contract or agreement as in effect
on the date of the Merger Agreement, in each case for a period of six years
after the date of the Merger Agreement.
CONDITIONS TO THE MERGER
All Parties. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the merger are subject to the
satisfaction or waiver of the following conditions at or prior to the
Effective Time; (i) no statute, rule, order, decree, regulation temporary
restraining order, preliminary or permanent injunction or other order having
been enacted, entered, promulgated, enforced or issued by any court or
governmental authority of competent jurisdiction or otherwise being in
effect which prohibits, restrains, enjoins or restricts the consummation of
the Merger; and (ii) all authentications, consents and approvals required
to be obtained prior to consummation of the merger shall have been obtained
except for such authentications, consents and approvals the failure of
which to be obtained would not have a material adverse effect on the Company.
MergerCo. MergerCo's obligation to effect the Merger is further
subject to the satisfaction or waiver of the following conditions: (i) the
representations and warranties of the Company contained in the Merger
Agreement being true and correct in all material respects at and as of the
Effective Time (except for changes contemplated by the Merger Agreement and
except to the extent such representations and warranties speak as of an
earlier date); (ii) the Company having performed or complied in all
material respects with all agreements and covenants required to be complied
with by it under the Merger Agreement at or prior to the Effective Time;
(iii) holders of no more than 10% of the outstanding shares of the Common
Stock having perfected their dissenters' rights in accordance with Sections
85-95 of the MBCL; and (iv) there being no material adverse effect on the
business, assets, condition (financial or other) or results of operations
of the Company since September 30, 1998.
The Company. The obligation of the Company to effect the Merger is
further subject to the representations and warranties of MergerCo set forth
in the Merger Agreement being true and correct in all material respects as
of the Effective Time (except for changes contemplated by the Merger
Agreement and except to the extent such representations and warranties
speak as of an earlier date), and MergerCo having performed all obligations
required to be performed by it under the Merger Agreement at or prior to
the Effective Time.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned prior
to the Effective Time: (i) upon the mutual consent of the Company and
MergerCo; (ii) by either the Company or MergerCo, if the Merger is not
completed by September 30, 1999 (provided that this right to terminate
shall not be available to a party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of such delay); (iii) by
either the Company or MergerCo if a court or other governmental body has
issued a nonappealable final statute, order, decree or regulation
permanently restraining, enjoining or otherwise legally prohibiting the
Merger; (iv) by either the Company or MergerCo, if the holders of at least
two-thirds of the Common Stock and Preferred Stock entitled to vote fail to
approve and adopt the Merger Agreement and the Merger; (v) by MergerCo, if
the Board of Directors of the Company withdraws or modifies its
recommendation of the Merger Agreement or the Merger in a manner adverse to
MergerCo; or (vi) by either the Company or MergerCo, upon 15 days' prior
written notice, if the other party breaches or fails to comply with any of
its material representations or warranties or obligations under the Merger
Agreement such that the conditions to the obligations of the terminating
party would be incapable of being satisfied by the Effective Time of the
Merger.
AMENDMENT; WAIVER
The Merger Agreement provides that it may be amended only by written
agreement of both the Company and MergerCo at any time prior to the
Effective Time; provided, however, that, after the stockholders have
approved the Merger Agreement and the Merger at the Special Meeting, no
such amendment is permitted which materially adversely affects the rights
of the stockholders, without first obtaining further approval of the
stockholders. The Merger Agreement further provides that, at any time
prior to the Effective Time, the parties to the Merger Agreement, by action
taken or authorized by their respective Boards of Directors, may, by
written agreement signed by the party to be bound, (i) extend the time for
the performance of any of the obligations or other acts of the other party
thereto, (ii) waive any inaccuracies in the representations and warranties
of any other party contained in the Merger Agreement or in any document
delivered pursuant to the Merger Agreement or (iii) waive compliance by any
other party with any of the conditions and agreements contained in the
Merger Agreement.
DESCRIPTION OF CAPITAL STOCK
The Company is currently authorized by its Restated Articles of
Organization to issue an aggregate of 6,000,000 shares of Common Stock and
100,000 shares of preferred stock. By the terms of the Restated Articles
of Organization, the Board has the authority to establish one or more
series of preferred stock and, with respect to such series, to fix the
terms of such series.
ARMATRON CAPITAL STOCK
Common Stock
- ------------
The following is a summary of certain of the rights and privileges
pertaining to the Common Stock. For a full description of Common Stock,
reference is made to the Company's Restated Articles of Organization and
Bylaws, as amended, as currently in effect, copies of which are on file
with the Commission.
Voting Rights
Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders. Approval of matters brought
before the stockholders requires the affirmative vote of a majority of
shares present and entitled to vote, except where a greater or lesser voting
percentage may otherwise be required by law or the Restated Articles of
Organization. The Restated Articles of Organization require either the
affirmative vote of at least two-thirds of the outstanding voting shares of
the Company or the affirmative vote of at least 80% of the voting shares of
the Company, depending upon the vote of the directors of the Company, to
approve certain business combinations or other transactions which would
effect a change of ownership or control of the Company.
The directors of the Company are classified into three staggered
classes. Directors may only be removed for cause and such removal,
increase in the size of the Board and filling of vacancies on the Board may
be made only by the affirmative vote of at least 80% of the directors then
in office or the affirmative vote of the holders of at least 80% of the
outstanding voting shares of the Company.
Dividend Rights
Holders of Common Stock are entitled to participate in dividends as
and when declared by the Board out of funds legally available therefor.
Liquidation Rights
Subject to the rights of creditors and holders of preferred stock,
holders of Common Stock are entitled to share ratably in a distribution of
assets of the Company upon any liquidation, dissolution or winding up of
the Company.
Series A Convertible Preferred Stock
- ------------------------------------
Pursuant to the Company's Restated Articles of Organization, the
Board created the Preferred Stock on April 20, 1999. The following is a
summary of certain of the rights and privileges pertaining to the Preferred
Stock. For a full description of the Preferred Stock, reference is made to
the Company's Restated Articles of Organization and Bylaws, as amended, as
currently in effect, copies of which are on file with the Commission.
Voting Rights
In addition to any voting rights required by law, holders of
Preferred Stock are entitled to 1,000 votes (subject to adjustment) per
share on all matters submitted to a vote of stockholders. The holders of
shares of Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters except as otherwise required by law or
in the Restated Articles of Organization. As long as any shares of
Preferred Stock are outstanding, the Company may not (i) increase or
decrease the number of shares of Preferred Stock authorized; (ii)
reclassify, authorize or issue any shares of preferred stock or other
convertible securities having any rights, preferences or privileges
superior to or on parity with the Preferred Stock; (iii) pay a dividend or
other distribution on or repurchase or acquire any Common Stock, directly
or indirectly; or (iv) liquidate, sell, consolidate or merge the Company
without first obtaining the affirmative vote or written consent of the
holders of 66 2/3% of the outstanding Preferred Stock, with certain
exceptions. The terms of Preferred Stock may be amended with the consent of
the holders of 66 2/3% of the outstanding shares of Preferred Stock.
Dividend Rights
Holders of Preferred Stock are entitled to receive, out of funds
legally available therefor, quarterly dividends payable in cash on the last
day of March, June, September and December (the "Quarterly Dividend Payment
Date"), at the rate of 10% per annum multiplied by $2,000,100. Dividends
shall accrue and compound on a daily basis and be cumulative on outstanding
shares of Preferred Stock from the date of issuance of the Preferred Stock.
Liquidation Rights
Upon any voluntary liquidation, dissolution, or winding up of the
Company, no distribution shall be made to the holders of any shares of
stock ranking junior to the Preferred Stock unless, prior to such
distribution, the holders of Preferred Stock shall have received an amount
equal to $300 plus all accrued and unpaid dividends and distributions
thereon.
Conversion Rights
Each share of Preferred Stock shall be convertible, at the option of
the holder thereof at any time. Each share of Preferred Stock shall be
converted automatically in the event of (i) the conversion of 75% of all
outstanding shares of Preferred Stock into Common Stock or (ii) the closing
of a firm commitment underwritten public offering. Each share of Preferred
Stock will be converted into 1,000 shares of Common Stock, subject to
adjustment upon certain events.
Antidilution Adjustments
The number of shares of Common Stock into which the Preferred Stock
shall be convertible shall be adjusted pursuant to a weighted average basis
in the event of a dilutive issuance of Common Stock.
CAPITAL STOCK OF SURVIVING CORPORATION
The Surviving Corporation will be authorized by its Articles of
Organization to issue an aggregate of 190,000 shares of common stock, par
value $.01 per share, and 10,000 shares of preferred stock, par value $.01
per share. By the terms of the Articles of Organization, the Board has the
authority to establish one or more series of preferred stock and, with
respect to such series, to fix the terms of such series.
Common Stock
- ------------
The following is a summary of certain of the rights and privileges
pertaining to the common stock of the Surviving Corporation.
Voting Rights
Holders of common stock of the Surviving Corporation are entitled to
one vote per share on all matters submitted to a vote of stockholders.
Approval of matters brought before the stockholders requires the
affirmative vote of a majority of shares present and entitled to vote, except
where a greater or lesser voting percentage may otherwise be required by law
or the Articles of Organization.
Dividend Rights
Holders of common stock of the Surviving Corporation are entitled to
participate in dividends as and when declared by the Board of Directors of
the Surviving Corporation out of funds legally available therefor.
Liquidation Rights
Subject to the rights of creditors and holders of preferred stock of
the Surviving Corporation, holders of common stock of the Surviving
Corporation are entitled to share ratably in a distribution of assets of
the Surviving Corporation upon any liquidation, dissolution or winding up
of the Surviving Corporation.
Series A Convertible Preferred Stock
- ------------------------------------
The following is a summary of certain of the rights and privileges
pertaining to the Series A Preferred Stock of the Surviving Corporation.
Voting Rights
In addition to any voting rights required by law, holders of Series A
Preferred Stock of the Surviving Corporation are entitled to 10 votes
(subject to adjustment) per share on all matters submitted to a vote of
stockholders. The holders of shares of Series A Preferred Stock of the
Surviving Corporation and the holders of common stock of the Surviving
Corporation shall vote together as one class on all matters except as
otherwise required by law or in the Articles of Organization. As long as
any shares of Series A Preferred Stock of the Surviving Corporation are
outstanding, the Company may not (i) increase or decrease the number of
shares of Series A Preferred Stock of the Surviving Corporation authorized;
(ii) reclassify, authorize or issue any shares of preferred stock or other
convertible securities having any rights, preferences or privileges
superior to or on parity with the Series A Preferred Stock of the Surviving
Corporation; (iii) pay a dividend or other distribution on or repurchase or
acquire any common stock, directly or indirectly; or (iv) liquidate, sell,
consolidate or merge the Surviving Corporation without first obtaining the
affirmative vote or written consent of the holders of 66 2/3% of the
outstanding Series A Preferred Stock of the Surviving Corporation, with
certain exceptions. The terms of the Series A Preferred Stock of the
Surviving Corporation may be amended with the consent of the holders of 66
2/3% of the outstanding shares of Series A Preferred Stock of the Surviving
Corporation.
Dividend Rights
Holders of Series A Preferred Stock of the Surviving Corporation are
entitled to receive, out of funds legally available therefor, quarterly
dividends payable in cash on the last day of March, June, September and
December (the "Quarterly Dividend Payment Date"), at the rate of 10% per
annum multiplied by $2,000,100. Dividends shall accrue and compound on a
daily basis and be cumulative on outstanding shares of Series A Preferred
Stock of the Surviving Corporation from the date of issuance of the Series
A Preferred Stock of the Surviving Corporation.
Liquidation Rights
Upon any voluntary liquidation, dissolution, or winding up of the
Surviving Corporation, no distribution shall be made to the holders of any
shares of stock ranking junior to the Series A Preferred Stock of the
Surviving Corporation unless, prior to such distribution, the holders of
Series A Preferred Stock of the Surviving Corporation shall have received
an amount equal to $300 plus all accrued and unpaid dividends and
distributions thereon.
Conversion Rights
Each share of Series A Preferred Stock of the Surviving Corporation
shall be convertible, at the option of the holder thereof at any time.
Each share of Series A Preferred Stock of the Surviving Corporation shall
be converted automatically in the event of (i) the conversion of 75% of all
outstanding shares of Series A Preferred Stock of the Surviving Corporation
into common stock or (ii) the closing of a firm commitment underwritten
public offering. Each share of Series A Preferred Stock of the Surviving
Corporation will be converted into 10 shares of common stock, subject to
adjustment upon certain events.
Antidilution Adjustments
The number of shares of common stock of the Surviving Corporation
into which the Series A Preferred Stock of the Surviving Corporation shall
be convertible shall be adjusted pursuant to a weighted average basis in
the event of a dilutive issuance of common stock of the Surviving
Corporation.
REGULATORY APPROVALS
The Company knows of no federal or state regulatory requirements that
must be complied with or approvals that must be obtained in order to
consummate the Merger, other than the filing of the Articles of Merger with
the Secretary of State of the Commonwealth of Massachusetts.
MANAGEMENT OF THE COMPANY AND MERGERCO
The following sets forth the ages, principal occupation and present
position of each of the directors and executive officers of the Company.
EDWARD L. HOUSMAN Age 77, Class A Director, principal occupation:
President of Automatic Radio International Corp.
since 1969 (a wholly-owned subsidiary of the Company
which deals with the international sales of the
Company's products). Mr. Housman has been actively
engaged in various aspects of the Company's business
for more than 30 years, and has served as a Director
of Armatron International, Inc. continuously since
1959. Mr. Housman is the brother of Charles J.
Housman, the President and Chairman of the Company.
CHARLES J. HOUSMAN Age 71, Class B Director, principal occupation:
President and Chairman of the Board of Armatron
International, Inc. since 1987. Mr. Housman has
been actively engaged in various aspects of the
Company's business for more than 30 years and has
served as a Director of Armatron International, Inc.
continuously since 1960. Mr. Housman is the brother
of Edward L. Housman, the Class A Director of the
Company.
MALCOLM D. FINKS Age 60, Class C Director, principal occupation:
member of the law firm of Bass, Doherty & Finks
P.C., Boston, Massachusetts, since April 1, 1999 and
a member of the law firm of Englander, Finks, Ross,
Cohen & Brander, P.C., Boston, Massachusetts from
1970 until 1999. On July 7, 1998 Mr. Finks was
appointed to the Board upon the death of Mr.
Englander, the former Class C Director. Mr. Finks
was also elected Clerk of the Company in July 1998.
Mr. Finks is the sole member of the Company's Audit
Committee.
SAL DeYOREO Age 73, joined Armatron in 1972 and has served as
Vice President since 1976. Mr. DeYoreo is
responsible for the marketing, sales, engineering
and product development of the Flowtron Outdoor
Products Division.
The following sets forth the present position of each of the
Directors and executive officers of the MergerCo.
EDWARD L. HOUSMAN Director
CHARLES J. HOUSMAN Director, President and Treasurer
MALCOLM D. FINKS Director and Clerk
The Surviving Corporation will have the same executive officers and
Board of Directors as the Company except that the Board of Directors shall
not be classified.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or accrued
by the Company to each of its three most highly compensated executive
officers for services rendered during the last three fiscal years:
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------
Name and All Other
Principal Position Year Salary($) Compensation($)(1)
- ------------------ ---- --------- ------------------
<S> <C> <C> <C>
Charles J. Housman 1998 $ -0- $7,961
CEO 1997 $ -0- $7,382
1996 $ -0- $7,112
Sal DeYoreo 1998 $107,363 $ -0-
Vice President 1997 $105,000 $ -0-
1996 $105,000 $ -0-
Edward L. Housman 1998 $ -0- $7,952
President, Automatic Radio 1997 $ -0- $7,382
International Corp. 1996 $ -0- $7,112
<FN>
<F1> Other compensation consists of automobile allowances, as well as
medical and dental benefits. The Company provides medical and dental
benefits to the executive officers that are generally available to
Company employees. The amount of perquisites, as determined in
accordance with the rules of the Commission relating to executive
compensation, did not exceed the lesser of $50,000 or 10% of salary
for fiscal 1998.
</FN>
</TABLE>
STOCK OPTIONS AND RELATED SARS
The Company's 1981 Non-Qualified Stock Option Plan which terminated
on December 1, 1990, provided for the granting of options to purchase the
Company's Common Stock and related stock appreciation rights (SARs) to the
salaried officers and other employees of the Company. No option or stock
appreciation rights were granted after the plan terminated. For the period
October 1, 1997 to September 30, 1998, no stock options were granted or
exercised. None of the options held by any named executive officer were
in-the-money as of September 30, 1998.
BENEFIT PLANS
Armatron Executive Retirement Plan
- ----------------------------------
The Armatron Executive Retirement Plan ("Retirement Plan") provides
for the payment of retirement benefits to certain senior executives of the
Company. Under the Retirement Plan, upon reaching age 65, an eligible
employee will receive an annual retirement benefit payment in an amount
equal to 1-1/2% of his final average compensation multiplied by the number
of years of benefit service (not to exceed thirty years) minus 1-2/3% of
his primary Social Security benefit, multiplied by the number of years of
benefit service (not to exceed thirty years). Final average compensation
is defined in the Retirement Plan as the average of the five highest
calendar years of salary during the ten years preceding retirement. Years
of benefit service include all years and months of service completed with
the Company after October 1, 1983. Payments under the Retirement Plan will
be made during the life of the eligible employee, provided that a minimum
of ten years of payments shall be made during the life of the eligible
employee or, in the event the employee dies, to a designated beneficiary.
In the event an employee terminates his employment prior to reaching age
65, he will be entitled to receive payments under the Retirement Plan at
age 65 if he has completed ten years of vesting service. Vesting service
is defined as all years and months of service completed with the Company
after September 30, 1978. As of March 1, 1994 the Executive Retirement
Plan was temporarily suspended. As of September 30, 1998 no date has been
established for removing the suspension.
The following table shows the estimated annual benefits payable under
the Retirement Plan to persons in specified average compensation and years
of service classifications. The amounts shown have not been reduced to
reflect the offset amounts based upon primary Social Security benefits.
Average compensation for purposes of computing benefits under the
Retirement Plan, age, years of benefit service and years of vesting service
as of September 30, 1998, for the three officers named in the compensation
table are as follows: Charles J. Housman-$115,000, age 71, 10 years and 15
years; Sal DeYoreo-$106,000, age 73, 10 years and 15 years; and Edward L.
Housman-$96,000, age 77, 10 years and 15 years.
<TABLE>
<CAPTION>
Years of Average Compensation
Benefit ----------------------------------------------
Service $75,000 $100,000 $125,000 $150,000
-------- ------- -------- -------- --------
<C> <C> <C> <C> <C>
5 $ 5,625 $ 7,500 $ 9,375 $11,250
10 11,250 15,000 18,750 22,500
15 16,875 22,500 28,125 33,750
20 22,500 30,000 37,500 45,000
30 & over 33,750 45,000 56,250 67,500
</TABLE>
Armatron International, Inc. Dreyfus 401(k) Profit Sharing Plan
- ---------------------------------------------------------------
On July 1, 1989, the Company established a 401(k) Profit Sharing Plan
and Trust (the "Profit Sharing Plan"), which plan qualifies under Section
401(k) of the Internal Revenue Code for favorable tax treatment as long as
the Profit Sharing Plan annually meets a special, non-discrimination test.
This test is designed to assure a fair mix of contributions among employees
at all income levels. In November 1994 the Company changed the plan name
to and adopted the Armatron International, Inc./Dreyfus 401(k) Profit
Sharing Plan and Trust.
COMPENSATION COMMITTEE, INTERLOCKS AND RELATED PARTICIPATION
The Company does not have a compensation committee. The Board of
Directors of the Company establishes the salary and other compensation for
the Company's executive officers. Both Edward Housman and Charles Housman
are executive officers of the Company and members of the Company's Board of
Directors. They both participated in discussions regarding executive
officer compensation, including the compensation of Sal DeYoreo. However,
neither Edward Housman nor Charles Housman received any salary in fiscal
1998.
REPORT ON EXECUTIVE COMPENSATION
The Company does not have a compensation committee, the Board of
Directors establishes the executive compensation policies of the Company
and establishes both the compensation plans and specific compensation
levels of executive officers. The executive compensation program is
comprised of base salary and various benefits, including an executive
retirement benefit plan, life insurance, health insurance and another
retirement plan generally available to employees of the Company.
Charles J. Housman was appointed Chief Executive Officer in 1987. As
of March 1, 1995, Mr. Housman has waived his base salary and has received
no bonus.
THE BOARD OF DIRECTORS
Charles J. Housman
Edward L. Housman
Malcolm D. Finks
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid to the firm of Englander, Finks, Ross, Cohen &
Brander, P.C., approximately $60,000 for legal services rendered to the
Company during each of the fiscal years ended September 30, 1998, 1997 and
1996. Malcolm D. Finks, Clerk and a director of the Company, was a member
of that firm at the time the fees were incurred. The Company paid to the
firm of Englander, Finks, Ross, Cohen & Brander, P.C. approximately $30,000
for legal services rendered to the Company during fiscal 1999. The Company
anticipates that fees to Bass, Doherty & Finks P.C. will be approximately
$30,000 during fiscal 1999.
The Company has a $7,000,000 line of credit arrangement with the
Housman Realty Trust operated for the benefit of the Company's principal
shareholders. The sole trustee of such trust and one of the beneficiaries
is Malcolm D. Finks, Clerk and a director of the Company. Charles J. Housman
and Edward L. Housman together with their families and affiliates are also
beneficiaries of such trust. This line of credit, with interest payable at
10%, requires monthly payments of interest only, is payable in full on
October 1, 1999 and is collateralized by all assets of the Company. The
Company had $4,715,000 outstanding under this line of credit at March 31,
1999 and owed interest of $1,633,000. On April 20, 1999, the Housman Realty
Trust purchased 6,667 shares of Preferred Stock in exchange for the
cancellation of $2,000,100 of the principal amount of the debt owed to it
by the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that
the Company's executive officers, directors, and persons who beneficially
own more than 10% of a registered class of the Company's equity
securities file with the Commission initial reports of ownership and
reports of any changes in ownership of common stock and other equity
securities of the Company. To the Company's knowledge, based solely on its
review of copies of reports filed by persons ("Reporting Persons") required
to file such reports pursuant to Section 16(a) of the Exchange Act, the
Company believes that all filings required to be made by Reporting Persons
of the Company were timely made in accordance with the requirements of the
Exchange Act except, through oversight, a Form 3, Initial Statement of
Beneficial Ownership of Securities, for Malcolm D. Finks, a director of the
Company, which was not filed until March 1999 and reported no beneficial
ownership of equity securities of the Company.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN FOR THE
YEAR ENDED SEPTEMBER 30, 1998
The following graph shows a five-year comparison of cumulative total
returns for the Company, The AMEX Market Index and Peer Group Index. The
Peer Group is comprised of the following securities: AXCESS Inc.;
Britesmile, Inc.; Datakey, Inc.; ECC International Corp.; Evans &
Sutherland Computer Corporation; Firearms Training Systems, Class A; Isomet
Corporation; Laser Corporation; NewCom Inc.; Philips Electronics NV; Quad
Systems Corporation; Relm Wireless Corp.; ROFIN-SINAR Technologies, Inc.;
Standard Motor Products, Inc.; United Industrial Corporation.
Comparative Five-Year Cumulative Total Return Among
Armatron International, Inc., AMEX Market Index and Six Code Index
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------------------------------
COMPANY/INDEX/MARKET 1993 1994 1995 1996 1997 1998
- -------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Armatron International, Inc. 100.00 53.59 303.12 52.39 78.68 17.46
SIC Code Index 100.00 143.30 222.34 175.11 405.37 260.18
AMEX Market Index 100.00 101.92 122.80 127.81 155.42 135.76
</TABLE>
Assumes $100 invested on October 1, 1993.
Assumes dividend reinvested fiscal year ending September 30, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRE-MERGER BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of April 15, 1999, with respect
to (i) each director and each executive officer of the Company named below;
(ii) all current directors and executive officers of the Company as a group;
and (iii) each current beneficial owner of five percent or more of Common
Stock.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name Ownership Common Stock
---- ---------- ------------
<S> <C> <C>
CHARLES J. HOUSMAN 216,931(1) 8.8%
EDWARD L. HOUSMAN 190,648(1) 7.7%
MALCOLM D. FINKS 6,667,000(2) 73%
SAL DeYOREO 1,000 *
All Executive Officers and 7,075,579 77%
Directors of the Company as
a group (4 persons)
THE HOUSMAN REALTY TRUST 6,667,000(3) 73%
<FN>
- --------------------
<F*> Less than 1% of the outstanding Common Stock.
<F1> Does not include 372,660 shares of Common Stock held by the estates
of Frank M. Housman and Herbert E. Housman. Charles J. Housman and
Edward L. Housman share voting power, but not investment power, with
respect to such shares and disclaim beneficial ownership of such
shares. Also does not include 604,048 shares of Common Stock held by
the estate of David Housman, the deceased founder of the Company, and
by relatives of Edward L. Housman and Charles J. Housman. Edward L.
Housman and Charles J. Housman share informal voting control, but not
investment power, with respect to such shares and disclaim beneficial
ownership of such shares. Does not include 6,667 shares of Preferred
Stock convertible into 6,667,000 shares of Common Stock held by the
Housman Realty Trust.
<F2> Represents 6,667,000 shares of Common Stock issuable upon conversion of
6,667 shares of Preferred Stock held by the Housman Realty Trust of
which Malcolm D. Finks is the sole trustee.
<F3> Represents 6,667,000 shares of Common Stock issuable upon conversion of
6,667 shares of Preferred Stock.
</FN>
</TABLE>
POST-MERGER BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of common stock of the Surviving Corporation that will
be outstanding immediately following the Merger.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name Ownership Common Stock
---- ----------- ------------
<S> <C> <C>
CHARLES J. HOUSMAN 216,931(1) 15.7%
EDWARD L. HOUSMAN 190,648(1) 13.7%
MALCOLM D. FINKS 6,667,000(2) 82.8%
SAL DeYOREO 0 *
All Executive Officers and 7,074,579 87.8%
Directors of the Company as
a group (4 persons)
HOUSMAN REALTY TRUST 6,667,000(3) 82.8%
<FN>
- --------------------
<F*> Less than 1% of the outstanding Common Stock.
<F1> Does not include 372,660 shares of Common Stock held by the estates
of Frank M. Housman and Herbert E. Housman. Messrs. Charles J.
Housman and Edward L. Housman share voting power, but not investment
power, with respect to such shares and disclaim beneficial ownership
of such shares. Also does not include 604,048 shares of Common Stock
held by the estate of David Housman, the deceased founder of the
Company, and by relatives of Messrs. Edward L. Housman and Charles J.
Housman. Messrs. Edward L. Housman and Charles J. Housman share
informal voting control, but not investment power, with respect to
such shares and disclaim beneficial ownership of such shares. Does
not include 6,667 shares of Preferred Stock convertible into
6,667,000 shares of Common Stock held by the Housman Realty Trust.
<F2> Represents 6,667,000 shares of Common Stock issuable upon conversion of
6,667 shares of Preferred Stock held by the Housman Realty Trust of
which Malcolm D. Finks is the sole trustee.
<F3> Represents 6,667,000 shares of Common Stock issuable upon conversion of
6,667 shares of Preferred Stock.
</FN>
</TABLE>
FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company
and MergerCo in connection with the Merger are approximately as follows:
<TABLE>
<S> <C>
Legal fees and expenses $ 80,000
SEC filing fee $ 133
Accounting fees and expenses $ 7,000
Financial Advisor Fees $ 27,000
Printing and mailing fees and expenses $ 15,000
Exchange agent fees and expenses $ 7,000
Miscellaneous expenses $ 27,867
--------
Total $164,000
</TABLE>
The Company will pay all of its expenses and the expenses of
MergerCo. To date, the Company has paid fees and expenses totaling $29,000
in connection with the Merger and related transactions.
The Company has agreed to pay Gordon Associates a fee of $27,000 plus
out-of-pocket expenses for services rendered in connection with the Merger.
The Company has also agreed to indemnify and hold harmless Gordon
Associates and its officers, directors, employees and consultants from and
against any and all liabilities arising out of its engagement, except where
Gordon Associates is found, pursuant to final judgment or administrative
order or finding, to have acted with bad faith or material negligence.
MERGER FINANCINGS
SOURCE AND AMOUNT OF FUNDS
The Company expects that approximately $455,000 will be required to
(i) finance the payment of the Merger Consideration and (ii) pay the fees
and expenses expected to be incurred in connection with the Merger. It is
contemplated that at the Effective Time, the Company expects to have at
least $1 million of cash on-hand to use in connection with the Merger. The
Company has such cash on-hand because the Housman Realty Trust has allowed
the Company to defer the required debt service on the promissory note due
to Housman Realty Trust by the Company. The following table illustrates
the estimated sources and uses of funds necessary to consummate the Merger.
<TABLE>
<S> <C>
SOURCES
-------
Cash $455,000
--------
Total Sources $455,000
========
USES
----
Purchase of Common Stock $291,000
Estimated Fees and Expenses $164,000
--------
Total Uses $455,000
========
</TABLE>
SALE OF MERGERCO COMMON STOCK
Immediately prior to the Merger, Charles J. Housman, Chairman of the
Board, President and Chief Executive Officer and Edward L. Housman, a
Director and President of Automatic Radio International Corp., a wholly
owned subsidiary of the Company, together with all members of their
families or affiliates and the families or affiliates of the late Herbert
E. Housman and the late Frank M. Housman, who are stockholders of the
Company will contribute 1,384,277 shares of Common Stock to MergerCo in
exchange for 13,842.77 shares of MergerCo Common Stock. In the Merger, all
such shares of MergerCo Common Stock will be converted into common stock of
the Surviving Corporation as described above. See "Special Factors--
Interests of Certain Persons in the Merger." Each share of MergerCo Common
Stock will be converted into one share of common stock of the Surviving
Corporation in the Merger.
MERGERCO
MergerCo is a newly formed Massachusetts corporation that was
organized in connection with the transactions contemplated by the Merger
Agreement. MergerCo is a nonsubstantive transitory merger vehicle that
will be merged out of existence at the Effective Time. Accordingly, it is
not expected to have significant assets or liabilities (other than arising
under the Merger Agreement or in connection with the Merger) or to engage
in any activities (other than those incident to its formation and the
Merger). The authorized capital stock of MergerCo consists of 190,000
shares of common stock, par value $0.01 per share, and 10,000 shares of
preferred stock, par value $0.01 per share, of which no shares are
currently outstanding.
The principal executive offices of MergerCo are 2 Main Street,
Melrose, MA 02176.
APPRAISAL RIGHTS
Set forth below is a summary of the procedure that a Dissenting
Stockholder must follow in order to seek to exercise appraisal rights. The
information contained below with respect to stockholders' appraisal rights
is qualified in its entirety by reference to the applicable sections of the
MBCL, which are attached to this Proxy Statement as Appendix C. A person
having a beneficial interest in shares of the Company that are held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have. THIS DISCUSSION AND APPENDIX C SHOULD BE
REVIEWED CAREFULLY BY ANY STOCKHOLDER WHO WISHES TO EXERCISE STATUTORY
APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO. FAILURE
STRICTLY TO COMPLY WITH ANY OF THE PROCEDURAL REQUIREMENTS OF SECTIONS 85
THROUGH 98 OF THE MBCL COULD RESULT IN A TERMINATION OR WAIVER OF APPRAISAL
RIGHTS UNDER SECTIONS 85 THROUGH 98 OF THE MBCL.
Sections 85 through 98, inclusive, of the MBCL contain provisions
which, in the case of a merger of a corporation organized under
Massachusetts law, grant to Dissenting Stockholders who comply with the
procedures specified in these sections the right to receive payment in cash
equal to the "fair value" of their shares. The principal provisions of the
statute are summarized below. This summary is qualified in its entirety by
the provisions of Sections 85 through 98 of the MBCL, which are annexed as
Appendix C to this Proxy Statement and should be carefully reviewed by
holders of Common Stock.
To claim appraisal rights, a Dissenting Stockholder must (a) file a
written objection to the Merger and the transactions contemplated thereby
prior to the stockholder vote, stating that such Dissenting Stockholder
intends to demand payment for his or her shares of Common Stock if the
Merger is consummated, (b) not vote such Dissenting Stockholder's shares in
favor of approval of the Merger and the transactions contemplated thereby,
and (c) in the event the Merger and the transactions contemplated thereby
are approved by the stockholders and consummated, demand in writing payment
for such shares of Common Stock from the Company within 20 days after the
date of mailing to the Dissenting Stockholder of a notice that the Merger
has become effective. Such notice is to be mailed by registered or
certified mail by Merger within 10 days of the Effective Time to all
Dissenting Stockholders who have complied with the requirements described
in (a) and (b) above.
A vote against the Merger and the transactions contemplated thereby
will not be deemed to satisfy the requirement that a written objection be
filed with the Company prior to the taking of the stockholder vote on the
Merger and the transactions contemplated thereby. However, a Dissenting
Stockholder who has filed a written objection to the Merger and the
transactions contemplated thereby as provided in (a) above will not be
deemed to have waived such Dissenting Stockholder's appraisal rights by
failing to vote against the Merger and the transactions contemplated
thereby so long as such Dissenting Stockholder does not actually vote in
favor of it.
The Company is required to make payment of the fair market value of
the shares of Common Stock owned by each Dissenting Stockholder within 30
days after the expiration of the 20-day period during which a demand of
payment for shares may be made. If, during such 30-day period, the Company
and a Dissenting Stockholder fail to agree as to the fair value of such
Dissenting Stockholder's shares, either the Company or the Dissenting
Stockholder may, within four months after the expiration of such 30-day
period, request a court determination of the fair value of all shares held
by the Dissenting Stockholders by filing a bill in equity in the Superior
Court of Middlesex County in the Commonwealth of Massachusetts. The cost
of such an action, other than counsel fees and fees of experts retained by
a party, will be determined by the court and apportioned in such a manner
as appears to the court to be equitable; however, all costs of giving
notice to the Dissenting Stockholders entitled to notice of the filing of
such an action will be paid by the Company. In any such action, the fair
value of the shares of Common Stock of the Dissenting Stockholder parties
to the action will be determined as of the day preceding the date that the
Merger and the transactions contemplated thereby were approved by the
stockholders of the Company, and will not include any element of value
arising from the expectation or consummation of the Merger. The Company
has not yet determined whether it will file such a bill in equity and,
therefore, any Dissenting Stockholder who desires such a bill in equity to
be filed is advised to file it on a timely basis. Unless the Company files
such a bill in equity, the failure by a Dissenting Stockholder to file such
a bill could nullify all written demands for appraisal.
Any Dissenting Stockholder contemplating the exercise of rights
summarized above is urged to consult with counsel. The failure by a
Dissenting Stockholder to follow precisely all of the steps required by
Sections 85 through 98 of the MBCL will result in the loss of those rights.
Under Section 98 of the MBCL, the enforcement by a Dissenting Stockholder
of the right to receive payment for his or her or its shares of Common
Stock is an exclusive remedy, except that such provisions do not exclude
the right of a Dissenting Stockholder to bring or maintain an appropriate
proceeding to obtain relief on the ground that the Merger will be or is
fraudulent or illegal as to him or her.
OTHER INFORMATION AND STOCKHOLDER PROPOSALS
Management of the Company knows of no other matters that may properly
be, or which are likely to be, brought before the Special Meeting.
However, if any other matters are properly brought before such Special
Meeting, the persons named in the enclosed Proxy Statement or their
substitutes intend to vote the proxies in accordance with their judgment
with respect to such matters, unless authority to do so is withheld in the
proxy.
If the Merger is not consummated and the Company is still a reporting
company under the Exchange Act in fiscal 2000, then the Company will
schedule a special meeting in lieu of annual meeting of stockholders at
approximately the same time next year. To be considered for inclusion in
the proxy statement relating to the Annual Meeting of Stockholders to be
held in 2000, stockholder proposals must be received by the Company no
later than January __, 2000. To be considered for presentation at such
meeting, although not included in the proxy statement, proposals must be
received no later than April __, 2000. All stockholder proposals should be
marked for the attention of Clerk, at the Company's principal executive
offices at 2 Main Street, Melrose, MA 02176.
EXPERTS
The consolidated balance sheets as of September 30, 1998 and 1997 and
the consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended September 30, 1998,
have been incorporated by reference in reliance of the report of R. J. Gold
& Company P.C., independent accountants, given on the authority of that
firm as experts in accounting and auditing. It is expected that
representatives of R.J. Gold & Company, P.C. will be present at the Special
Meeting with the opportunity to make a statement if they so desire and to
answer appropriate questions relating to the audit performed.
Appendix A
AGREEMENT AND PLAN OF MERGER
by and among
ARMATRON INTERNATIONAL, INC.
and
ARMATRON MERGER CORPORATION
dated as of
April __, 1999
TABLE OF CONTENTS
ARTICLE I 1
THE MERGER 1
SECTION 1.1 THE MERGER 1
SECTION 1.2 EFFECTIVE TIME 1
SECTION 1.3 CLOSING 2
SECTION 1.4 ARTICLES OF ORGANIZATION; BY-LAWS 2
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION 2
ARTICLE II 2
CONVERSION OF SHARES 2
SECTION 2.1 CONVERSION OF CAPITAL STOCK 2
SECTION 2.2 PAYMENT OF MERGER CONSIDERATION 3
SECTION 2.3 DISSENTING SHARES 4
ARTICLE III 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
SECTION 3.1 ORGANIZATION 4
SECTION 3.2 CAPITALIZATION 5
SECTION 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT 6
SECTION 3.4 NO VIOLATIONS; CONSENTS AND APPROVALS 6
SECTION 3.5 SEC REPORTS AND FINANCIAL STATEMENTS 7
SECTION 3.6 ABSENCE OF CERTAIN CHANGES 8
SECTION 3.7 ABSENCE OF UNDISCLOSED LIABILITIES 8
SECTION 3.8 PROXY STATEMENT; EXCHANGE ACT SCHEDULES 8
SECTION 3.9 EMPLOYEE BENEFIT PLANS; ERISA 9
SECTION 3.10 LITIGATION; COMPLIANCE WITH LAW 9
SECTION 3.11 INTELLECTUAL PROPERTY 10
SECTION 3.12 CONTRACTS 11
SECTION 3.13 TAXES 13
SECTION 3.14 ENVIRONMENTAL MATTERS 13
SECTION 3.15 REQUIRED VOTE BY COMPANY STOCKHOLDERS 15
SECTION 3.16 BROKERS 15
SECTION 3.17 OPINION OF FINANCIAL ADVISOR 15
SECTION 3.18 ASSETS 15
SECTION 3.19 REAL PROPERTY 16
SECTION 3.20 INSURANCE 16
SECTION 3.21 LABOR MATTERS, ETC 16
SECTION 3.22 DISCLOSURE 17
SECTION 3.23 TAKEOVER STATUTES 17
ARTICLE IV 17
REPRESENTATIONS AND WARRANTIES OF MERGERCO 17
SECTION 4.1 ORGANIZATION 17
SECTION 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT 17
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS 18
SECTION 4.4 PROXY STATEMENT; EXCHANGE ACT SCHEDULES 18
SECTION 4.5 BROKERS 19
SECTION 4.6 FORMATION OF MERGERCO; NO PRIOR ACTIVITIES 19
ARTICLE V 19
COVENANTS 19
SECTION 5.1 INTERIM OPERATIONS OF THE COMPANY 19
SECTION 5.2 ACCESS TO INFORMATION 21
SECTION 5.3 FURTHER ACTION; REASONABLE BEST EFFORTS 21
SECTION 5.4 SHAREHOLDERS' MEETING; PROXY STATEMENT 21
SECTION 5.5 NOTIFICATION OF CERTAIN MATTERS 23
SECTION 5.6 DIRECTORS' AND OFFICERS' INDEMNIFICATION 23
SECTION 5.7 RECAPITALIZATION 23
SECTION 5.8 CONVEYANCE TAXES 23
SECTION 5.9 DELISTING 24
SECTION 5.10 CONDUCT OF THE COMPANY AFTER THE MERGER 24
ARTICLE VI 24
CONDITIONS 24
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER 24
SECTION 6.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER 24
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF MERGERCO TO EFFECT
THE MERGER 25
ARTICLE VII 25
TERMINATION 25
SECTION 7.1 TERMINATION 25
SECTION 7.2 EFFECT OF TERMINATION 26
ARTICLE VIII 27
MISCELLANEOUS 27
SECTION 8.1 FEES AND EXPENSES 27
SECTION 8.2 AMENDMENT; WAIVER 27
SECTION 8.3 SURVIVAL 28
SECTION 8.4 NOTICES 28
SECTION 8.5 INTERPRETATION 29
SECTION 8.6 HEADINGS; SCHEDULES 29
SECTION 8.7 COUNTERPARTS 29
SECTION 8.8 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES 29
SECTION 8.9 SEVERABILITY 29
SECTION 8.10 GOVERNING LAW 29
SECTION 8.11 ASSIGNMENT 30
SCHEDULES
Schedule 3.1 Subsidiaries
Schedule 3.2 (a) Capitalization
Schedule 3.2 (b) Ownership
Schedule 3.4 (a) No Violations; Consents and Approvals
Schedule 3.4 (b) Filings by the Company
Schedule 3.6 Absence of Certain Changes
Schedule 3.7 Absence of Undisclosed Liabilities
Schedule 3.9 (b) Employee Benefit Plans
Schedule 3.9 (c) Severance Benefits
Schedule 3.10 (a) Litigation
Schedule 3.10 (b) Compliance with Laws
Schedule 3.11 Intellectual Property
Schedule 3.12 (a) Contracts
Schedule 3.13 Taxes
Schedule 3.14 (c) Environmental Matters
Schedule 3.18 Assets
Schedule 3.18 (b) Certain Liens
Schedule 3.19 (i) Formerly Owned Property
Schedule 3.19 (ii) Leases
Schedule 3.20 Insurance Policies
Schedule 4.3 (b) Filings by the MergerCo
Schedule 5.1 (iii) Interim Operations
EXHIBITS
Exhibit A List of Stockholders of MergerCo
TABLE OF DEFINED TERMS
----------------------
Term Section
- ---- -------
Articles of Merger 1.2
Articles of Organization 3.1
Assets 3.18(a)
Certificates 2.2(a)
Closing 1.3
Closing Date 1.3
Code 3.9(a)
Company Recitals
Company Common Stock 2.1
Company Intellectual Property 3.11
Company Preferred Stock 2.1
Company Reports 3.5
Company SEC Documents 3.5
Consolidated Group 3.13(b)
Disclosure Schedule 3.1
Dissenting Shares 2.3
Effective Time 1.2
Environmental Law 3.14(d)
Exchange Act 3.4(b)
Fairness Opinion 3.17
Financial Advisor 3.17
Formerly Owned Property 3.19
GAAP 3.5
Governmental Entity 3.4(b)
Hazardous Materials 3.14(d)
Identified Contracts 3.12(a)
Indemnified Parties 5.6(a)
Intellectual Property 3.11
Laws 3.4(a)
Leased Real Property 3.19
Leases 3.19
Lien 3.18(b)
Litigation 3.10(a)
Massachusetts Secretary of State 1.2
Material Adverse Effect 3.1
Material Contracts 3.12(a)
MBCL Recitals
Merger 1.1
MergerCo Recitals
MergerCo Common Stock 2.1
MergerCo Disclosure Schedule 4.3(b)
Merger Consideration 2.1(a)
Owned Real Property 3.19
Permits 3.10(c)
Permitted Liens 3.18(b)
Person 3.1
Plans 3.9(a)
Proxy Statement 5.4(a)
Real Property 3.19
Recapitalized Common Stock 2.1(b)
Recapitalized Preferred Stock 2.1(d)
Schedule 13E-3 5.4(c)
SEC 3.5
Securities Act 3.4(b)
September 30, 1998 Balance Sheet 3.7
Shares 2.1
Special Meeting 5.4(a)
Subsidiary 3.1
Surviving Corporation 1.1
Tax Returns 3.13(b)
Taxes 3.13(b)
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of April __, 1999, by and
between Armatron International, Inc., a Massachusetts corporation (the
"Company"), and Armatron Merger Corporation, a Massachusetts corporation
("MergerCo"), formed by certain stockholders of the Company.
WHEREAS, the Board of Directors of MergerCo has approved, and deems
it advisable and in the best interests of the stockholders of MergerCo to
participate in the recapitalization of the Company, upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, has approved, and
deems it advisable and in the best interests of the shareholders of the
Company to consummate, the recapitalization of the Company, upon the terms
and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such recapitalization, the Board of
Directors of MergerCo and the Board of Directors of the Company have each
approved this Agreement and the merger of MergerCo with and into the
Company in accordance with the terms of this Agreement and the Business
Corporation Law of the Commonwealth of Massachusetts (the "MBCL").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the applicable
provisions of the MBCL, at the Effective Time (as defined in Section 1.2
hereof), MergerCo shall be merged (the "Merger") with and into the Company
and the separate corporate existence of MergerCo shall cease. After the
Merger, the Company shall continue as the surviving corporation (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue
to be governed by the laws of the Commonwealth of Massachusetts. The
Merger shall have the effect as provided in the applicable provisions of
the MBCL. Without limiting the generality of the foregoing, upon the
Merger, all the rights, privileges, immunities, powers and franchises of
the Company and MergerCo shall vest in the Surviving Corporation and all
restrictions, obligations, duties, debts and liabilities of the Company and
MergerCo shall be the obligations, duties, debts and liabilities of the
Surviving Corporation.
SECTION 1.2 Effective Time. On or as promptly as practicable
following the Closing (as defined in Section 1.3), MergerCo and the Company
will cause the appropriate articles of merger (the "Articles of Merger") to
be executed and filed with the Secretary of State of the Commonwealth of
Massachusetts (the "Massachusetts Secretary of State") in such form and
executed as provided in Section 78 of the MBCL. The Merger shall become
effective on the date on which the Articles of Merger have been duly filed
with the Massachusetts Secretary of State, or such time as is agreed upon
by the parties and specified in the Articles of Merger, but not later than
30 days after such filing, and such time is hereinafter referred to as the
"Effective Time."
SECTION 1.3 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., Boston time, on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts,
unless another date or place is agreed to by the parties hereto.
SECTION 1.4 Articles of Organization; By-Laws. Pursuant to the
Merger, (x) the articles of organization of the Surviving Corporation shall
be amended and restated at and as of the Effective Time to read as did the
articles of organization of MergerCo immediately prior to the Effective
Time, until thereafter amended as provided by applicable law and such
articles of organization, except that the name of the Surviving Corporation
will remain unchanged and (y) the By-laws of the Surviving Corporation
shall be amended and restated, at and as of the Effective Time, to read as
did the By-laws of MergerCo immediately prior to the Effective Time, until
thereafter amended as provided by applicable law, the articles of
organization or the By-laws of the Surviving Corporation, except that the
name of the Surviving Corporation will remain unchanged.
SECTION 1.5 Directors and Officers of the Surviving Corporation.
(a) The directors of MergerCo immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors shall have been duly elected
or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's articles of
organization and By-laws.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall
hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holders
of any shares of common stock, par value $1.00 per share, of the Company
(referred to herein, as the "Shares" or "Company Common Stock"), Series A
Preferred Stock, par value $100 per share, of the Company (the "Company
Preferred Stock") or the common stock, par value $.01 per share, of
MergerCo (the "MergerCo Common Stock"):
(a) Each issued and outstanding share of Company Common Stock
(other than (i) Shares to be contributed to MergerCo in accordance with
Section 2.1(b), (ii) Shares to be canceled in accordance with Section
2.1(c) and (iii) Dissenting Shares covered by Section 2.3) shall be
converted into the right to receive $.27 in cash, payable to the holder
thereof, without interest (the "Merger Consideration"), upon surrender of
the certificate formerly representing such share of Company Common Stock in
the manner provided in and otherwise in accordance with Section 2.2. All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor in accordance with Section 2.2.
(b) Each issued and outstanding share of Company Common Stock held
by the persons and entities listed on Exhibit A attached hereto shall be
contributed to MergerCo in exchange for one hundredth of one fully paid and
nonassesable share of MergerCo Common Stock (or fraction thereof) and each
such share of MergerCo Common Stock shall then be converted into and become
one fully paid and nonassessable share of common stock, $.01 par value per
share (or fraction thereof), of the Surviving Corporation (the
"Recapitalized Common Stock").
(c) All shares of Company Common Stock that are held by the Company
as treasury stock or that are held by MergerCo shall be canceled and
retired and shall cease to exist and no Merger Consideration shall be
delivered in exchange therefor.
(d) Each issued and outstanding share of Company Preferred Stock
shall be converted into and become one fully paid and nonassessable share
of Series A Preferred Stock, $.01 par value per share, of the Surviving
Corporation (the "Recapitalized Preferred Stock").
SECTION 2.2 Payment of Merger Consideration.
(a) The Company will promptly, and in any event not later than ten
business days following the Effective Time, mail to each holder of record
of a certificate or certificates, which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the
"Certificates"), whose Shares were converted pursuant to Section 2.1(a)
into the right to receive the Merger Consideration, a check from the
Company representing the Merger Consideration for each share of Company
Common Stock formerly represented by such Certificate. Each Certificate
(other than Certificates representing Dissenting Shares) shall be deemed at
any time after the Effective Time to be canceled and represent only the
right to receive the Merger Consideration as contemplated by this Section
2.2.
(b) After the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no transfers on the stock
transfer books of the Surviving Corporation of Shares which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the Merger Consideration as
provided in this Article II. Any former shareholders of the Company shall
after the Effective Time, look only to the Surviving Corporation for
payment of any Merger Consideration that may be payable upon surrender of
any Certificates such shareholder holds, as determined pursuant to this
Agreement, without any interest thereon.
(c) None of MergerCo, the Company, the Surviving Corporation, or
any other person shall be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) Any payment made pursuant to this Section 2.2 shall be subject
to and made net of applicable withholding taxes.
SECTION 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders
who have validly demanded payment of the fair value for such shareholders'
shares as determined by appraisal in accordance with the MBCL (the
"Dissenting Shares"), shall not be converted into or be exchangeable for
the right to receive the Merger Consideration provided in Section 2.1(a) of
this Agreement, unless and until such holder shall have failed to perfect
or shall have effectively withdrawn or lost such holder's right to
appraisal and payment under the MBCL. If such holder shall have so failed
to perfect or shall have effectively withdrawn or lost such right, such
holder's Shares shall thereupon be deemed to have been converted into and
to have become exchangeable for, at the Effective Time, the right to
receive the consideration provided for in Section 2.1 of this Agreement,
without any interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to MergerCo as of the date hereof
that:
SECTION 3.1 Organization. Each of the Company and its Subsidiaries
(as hereinafter defined) is a corporation or other entity duly organized,
validly existing, and in good standing under the laws of the jurisdiction
of its incorporation or organization, and has all requisite corporate power
and authority to own, lease, use and operate its properties and to carry on
its business as it is now being conducted. Each of the Company and its
Subsidiaries (as hereinafter defined) is qualified or licensed to do
business as a foreign corporation and is in good standing in each
jurisdiction in which it owns real property or in which the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed in the aggregate
would not have or result in a Material Adverse Effect. The term "Material
Adverse Effect" shall mean any change, effect, event, occurrence or state
of facts that is, or would reasonably be expected to be, materially adverse
to the business, assets, liabilities, results of operations or financial or
other condition of the Company and its Subsidiaries taken as a whole. None
of the Company or any of its Subsidiaries is in breach or violation of any
of its articles of organization, by-laws or other organizational documents.
The Company has previously delivered to MergerCo a complete and correct
copy of each of its restated articles of organization, as amended (the
"Articles of Organization") and By-Laws, as currently in effect. Schedule
3.1 of the disclosure schedule delivered by the Company to MergerCo on or
prior to the date hereof (the "Disclosure Schedule") sets forth a complete
and correct list of the Subsidiaries of the Company and their respective
jurisdictions of incorporation or organization. "Subsidiary" shall mean
with respect to any Person, any corporation or other entity of which 50% or
more of the securities or other interests having by their terms ordinary
voting power for the election of directors or others performing similar
functions with respect to such entity is directly or indirectly owned by
such Person. "Person" shall mean any natural person, firm, individual,
partnership, joint venture, business trust, trust, association,
corporation, company, unincorporated entity or Governmental Entity (as
defined in Section 3.4(b)).
SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
6,000,000 shares of Company Common Stock and 100,000 shares of preferred
stock, of which 6,667 shares have been designated as Company Preferred
Stock. At the close of business on April 30, 1999: (i) 2,459,749 shares of
Company Common Stock were issued and outstanding; (ii) 146,732 shares of
Company Common Stock were issued and held by the Company in its treasury;
(iii) 6,667 shares of Company Preferred Stock were issued and outstanding;
(iv) no shares of Company Common Stock were reserved for issuance pursuant
to the Company Stock Plan, of which no shares are subject to outstanding
options; and (v) no shares of Company Preferred Stock have been designated
(except for the 6,667 shares of Company Preferred Stock referenced above)
or issued. All outstanding shares of capital stock of the Company are, and
all shares thereof which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as expressly provided in this Agreement or in
the Articles of Organization, (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of the Company, (B) any securities of Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (C) any warrants, calls,
options or other rights to acquire from Company or any of its Subsidiaries,
and any obligation of Company or any of its Subsidiaries to issue, any
capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company, and (y) there are no outstanding obligations of Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities, in each case. Except as set forth in Schedule
3.2(a) of the Disclosure Schedule, there are no existing or outstanding (i)
options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character
obligating the Company or any of its Subsidiaries to issue, transfer or
sell any shares of capital stock or other equity interest in, the Company
or any of its Subsidiaries or securities convertible into or exchangeable
for such shares or equity interests, (ii) contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any capital stock of the Company or any Subsidiary of the Company
or (iii) voting trusts or similar agreements to which the Company or any of
its Subsidiaries is a party with respect to the voting of the capital stock
of the Company or any of its Subsidiaries.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure
Schedule, (i) all of the outstanding shares of capital stock of each of the
Company's Subsidiaries are beneficially owned, directly or indirectly, by
the Company and (ii) neither the Company nor any of its Subsidiaries owns
any shares of capital stock or other securities of, or interest in, any
other Person (other than any Subsidiaries listed on Schedule 3.1), or is
obligated to make any capital contribution to or other investment in any
other Person, provided that Schedule 3.2(b) shall not be required to set
forth any cash equivalents held by the Company or any of its Subsidiaries
or any Person in which the Company or any of its Subsidiaries owns less
than 100 shares of publicly traded securities.
SECTION 3.3 Authorization; Validity of Agreement. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and, subject to approval of its stockholders as contemplated by
Section 5.6 hereof, to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company and, other than
approval and adoption of this Agreement by the holders of two-thirds of the
outstanding shares of Company Common Stock and Company Preferred Stock,
voting together as a single class, no other corporate proceedings on the
part of the Company are necessary to authorize the execution and delivery
of this Agreement by the Company and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery of
this Agreement by MergerCo, is a valid and binding obligation of the
Company in accordance with its terms, except that such enforcement may be
subject to or limited by (i) bankruptcy, insolvency or other similar laws,
now or hereafter in effect, affecting creditors' rights generally, and (ii)
the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
SECTION 3.4 No Violations; Consents and Approvals.
(a) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby will (i) violate any provision of the Articles of
Organization or By-Laws of the Company, (ii) except as set forth in
Schedule 3.4(a) of the Disclosure Schedule, conflict with, result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration, or to the imposition of any Lien
(as defined in Section 3.18(b))) under, or result in the acceleration or
trigger of any payment, time of payment, vesting or increase in the amount
of any compensation or benefit payable pursuant to, the terms, conditions
or provisions of any note, bond, mortgage, indenture, guarantee or other
evidence of indebtedness, or any lease, license, contract, agreement, plan
or other instrument or obligation, to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their assets may
be bound, or (iii) conflict with or violate any federal, state, local or
foreign order, writ, injunction, judgment, award, decree, statute, law,
rule or regulation (collectively, "Laws") applicable to the Company, any of
its Subsidiaries or any of their properties or assets; except in the case
of clauses (ii) or (iii) for such conflicts, violations, breaches or
defaults which in the aggregate would not have or result in a Material
Adverse Effect or materially impair or delay the consummation of the
transactions contemplated hereby.
(b) Except as disclosed in Schedule 3.4(b) of the Disclosure
Schedule, no filing or registration with, declaration or notification to,
or order, authorization, consent or approval of, any federal, state, local
or foreign court, legislative, executive or regulatory authority or agency
(a "Governmental Entity") or any other Person is required in connection
with the execution, delivery and performance of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, except (i) applicable requirements under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ii) applicable requirements
under the Securities Act of 1933, as amended (the "Securities Act"), (iii)
the filing of the Articles
of Merger with the Massachusetts Secretary of State, (iv) applicable
requirements under "blue sky" laws of various states, (v) such other
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings the failure of which to be obtained or made in the
aggregate would not have or result in a Material Adverse Effect or
materially impair or delay the consummation of the transactions
contemplated hereby.
SECTION 3.5 SEC Reports and Financial Statements. The Company has
timely filed with the Securities and Exchange Commission (the "SEC"), any
applicable state securities authorities and any other Governmental Entity
all forms and documents required to be filed by it since October 1, 1993
(collectively, the "Company Reports") and has heretofore made available to
the MergerCo (i) its Annual Reports on Form 10-K, as amended, for the
fiscal years ended September 30, 1994, September 30, 1995, September 30,
1996, September 30, 1997 and September 30, 1998, respectively, (ii) its
Quarterly Report on Form 10-Q for the period ended December 30, 1998, (iii)
all proxy statements relating to meetings of stockholders of the Company
since October 1, 1993 (in the form mailed to stockholders) and (iv) all
other forms, reports and registration statements filed by the Company with
the SEC since October 1, 1993 (other than registration statements on Form
S-8 or Form 8-A or preliminary materials and registration statements in
forms not declared effective). The documents described in clauses (i)-(iv)
above (whether filed before, on or after the date hereof) are referred to
in this Agreement collectively as the "Company SEC Documents". As of their
respective dates, the Company Reports (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable requirements of
Law, including in the case of SEC filings, the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. The consolidated financial statements
included in the Company SEC Documents have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as otherwise noted
therein and except that the quarterly financial statements are subject to
year end adjustment and do not contain all footnote disclosures required by
GAAP) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and cash
flows of the Company and its consolidated Subsidiaries as at the dates
thereof or for the periods presented therein.
SECTION 3.6 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents filed prior to the date hereof or as disclosed in
Schedule 3.6 of the Disclosure Schedule, since September 30, 1998, (i) the
Company and its Subsidiaries have conducted their respective operations
only in the ordinary course consistent with past practice, (ii) there has
not been a Material Adverse Effect and (iii) the Company and the
Subsidiaries have not taken action that if taken after the date hereof
would constitute a violation of Section 5.1 (other than clause (a)
thereof).
SECTION 3.7 Absence of Undisclosed Liabilities. Except as and to
the extent disclosed (a) in the Company's Annual Report on Form 10-K, as
amended, for the period ended September 30, 1998, including as reflected or
reserved against in the balance sheet dated as of and as at September 30,
1998 constituting a portion of the financial statements included therein
(the "September 30, 1998 Balance Sheet") or in the notes thereto, (b) in
the Company SEC Documents filed prior to the date hereof or (c) in Schedule
3.7 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries had as of that date any liabilities or obligations (accrued,
contingent or otherwise) which would be material to the Company and its
Subsidiaries taken as a whole or which would be required to be set forth in
an audited consolidated balance sheet of the Company and its Subsidiaries
as of that date or the notes thereto prepared in accordance with GAAP.
SECTION 3.8 Proxy Statement; Exchange Act Schedules.
(a) The Proxy Statement (as defined in Section 5.4(a)) (and any
amendment thereof or supplement thereto) at the date mailed to Company
stockholders and at the time of the Special Meeting (as defined in Section
5.4(b)), (i) will 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 are made, not misleading and (ii) will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder; except that no representation is made by the
Company with respect to statements made in the Proxy Statement based on
information supplied by MergerCo specifically for inclusion in the Proxy
Statement.
(b) Any Schedule 13E-3 (as defined in Section 5.4(c)) and any
related schedules (and any amendment or supplement to any of the foregoing)
filed with the SEC at the date so filed (i) will 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 are made, not misleading and
(ii) will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder; except that no
representation is made by the Company with respect to statements made in
any such document based on information supplied by MergerCo specifically
for inclusion therein.
SECTION 3.9 Employee Benefit Plans; ERISA.
(a) No material liability under Title I or IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the penalty
or excise tax provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to employee plans has been incurred by the Company
or any of its Subsidiaries and, to the Company's best knowledge, no
condition exists or event has occurred that presents a risk to the Company
or any of its Subsidiaries of incurring any such material liability.
(b) Each bonus, incentive or deferred compensation, stock option or
other equity based, severance, termination, change in control, retention,
employment, medical, life, disability, other welfare, profit-sharing,
retirement or other material compensation or benefit plan, agreement or
policy in respect of which the Company or any of its Subsidiaries has any
material liability has been filed with the Company SEC Documents or is
listed on Schedule 3.9(b) of the Disclosure Schedule (collectively, the
"Plans"). No such Plan is subject to Section 302 of ERISA or section 412
of the Code and no such Plan has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived. Each such Plan that is intended to be
"qualified" within the meaning of section 401(a) of the Code has received a
determination letter from the Internal Revenue Service confirming its
qualified status and no condition exists or event has occurred since the
date of such determination letter that would adversely affect the qualified
status of any such Plan. Each Plan has been operated and administered in
all respects in substantial compliance with its terms and applicable Law,
including but not limited to ERISA and the Code. There are no pending, or
to the best knowledge of the Company, threatened claims by or on behalf of
any Plan, by any employee or beneficiary or otherwise involving any such
Plan or the assets thereof, except for claims the resolution of which would
not individually or in the aggregate have or result in a material liability
to the Company or a Subsidiary.
(c) Assuming that no amount is paid to any employee listed on
Schedule 3.9(c)(i) as a severance benefit with respect to a termination of
employment, no payment, benefit or other amount paid, payable or required
to be paid in respect of any employee will fail to be deductible under
Section 280G of the Code. Except as set forth on Schedule 3.9(c)(ii) of the
Disclosure Schedule, (i) no current or former employee or director of the
Company or any Subsidiary is or will become entitled to any additional or
new compensation, benefits or other compensatory payment or an increase in
the amount of any compensation, benefits or other compensatory payment in
connection with or as a result of the consummation of the transactions
contemplated by this Agreement and (ii) neither the vesting nor the timing
of the payment of any such compensation, benefit or other compensatory
payment in respect of any such employee or director has been or will be
accelerated in connection with or as a result of the consummation of the
transactions contemplated by this Agreement.
SECTION 3.10 Litigation; Compliance with Law.
(a) Except as disclosed in the Company SEC Documents filed prior to
the date hereof or in Schedule 3.10(a) of the Disclosure Schedule, (i)
there is no suit, claim, action, arbitration, proceeding or investigation
or other Litigation (as defined below) pending or, to the knowledge of the
Company, threatened, against the Company or any of its Subsidiaries or any
of their properties or assets which, individually or in the aggregate, if
determined adversely to the Company or any such Subsidiary, would have or
result in a Material Adverse Effect, and (ii) neither the Company nor any
of its Subsidiaries is subject to any settlement or similar agreement with
any Governmental Entity, or to any order, judgment, decree, injunction or
award of any Governmental Entity or arbitrator, that individually or in the
aggregate, would have or result in a Material Adverse Effect. "Litigation"
means any action, cause of action, claim, demand, suit, proceeding,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in law or in equity, by or before any
court, tribunal, arbitrator or other Governmental Entity.
(b) Except as disclosed in the Company SEC Documents filed prior to
the date hereof, the operations of the Company and its Subsidiaries have
not been and are not being conducted, and no Real Property (as defined in
Section 3.19) is, in violation of any law, statute or regulation, any
judgment, decree, order or injunction of any Governmental Entity, any other
Law, or any Permit (as defined below), except where such violations in the
aggregate would not have or result in a Material Adverse Effect. Except as
set forth in Schedule 3.10(b) of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has received any notice, or has
knowledge of any claim, alleging any such violation.
(c) The Company and its Subsidiaries hold all licenses, permits,
variances, consents, authorizations, waivers, grants, franchises,
concessions, exemptions, orders, registrations and approvals of
Governmental Entities or other Persons necessary for the ownership,
leasing, operation, occupancy and use of the Real Property and the conduct
of their respective businesses as currently conducted ("Permits"), except
where the failure to hold such Permits in the aggregate would not have or
result in a Material Adverse Effect. There is no Litigation pending or, to
the knowledge of the Company, threatened, that would result in the
termination, modification or nonrenewal of any Permit, and neither the
Company nor any of its Subsidiaries has received notice that any Permit
will be terminated or modified or cannot be renewed in the ordinary course
of business, and there is no reasonable basis for any such termination,
modification or nonrenewal, except for such terminations, modifications or
nonrenewals as in the aggregate would not have or result in a Material
Adverse Effect. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby do not and
will not violate any Permit, or result in any termination, modification or
nonrenewal thereof, except for such violations terminations, modifications
or nonrenewals thereof as in the aggregate would not have or result in a
Material Adverse Effect.
SECTION 3.11 Intellectual Property. The Company and its
Subsidiaries own (beneficially and as of record), or possess valid and
legally enforceable licenses or rights to use, any and all United States
and foreign patents, patent applications, patent disclosures, mask works,
software, trademarks, trade names, copyrights and service marks, including
applications to register and registrations for any of the foregoing, as
well as trade secrets, know-how and other proprietary rights and
information (collectively, "Intellectual Property") necessary for the
conduct of, or otherwise material to, their business and operations as
currently conducted or as proposed to be conducted (the "Company
Intellectual Property"), free and clear of any Liens (except for any
Permitted Liens, as defined in Section 3.18(b)). Except as disclosed in
Schedule 3.11 of the Disclosure Schedule, the conduct of the business of
the Company and its Subsidiaries as currently conducted does not infringe
or conflict with any Intellectual Property of any Person; and neither the
Company nor any of its Subsidiaries has received notice or has actual
knowledge of any such current infringement or conflict except where such
infringements and conflicts as in the aggregate would not have or result in
a Material Adverse Effect. All of the patents, patent applications and
patent disclosures included in Company Intellectual Property are valid,
subsisting and enforceable. To the knowledge of the Company, no Person is
infringing or allegedly infringing any Intellectual Property of the Company
or its Subsidiaries except where such actual and alleged infringements as
in the aggregate would not have or result in a Material Adverse Effect.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the loss of, or
creation of any Lien on, the rights of the Company or any Subsidiary with
respect to the Intellectual Property owned or used by them, except where
such losses and such Liens as in the aggregate would not have or result in
a Material Adverse Effect. Schedule 3.11 of the Disclosure Schedule
contains a complete and correct list of all patents, patent applications,
patent disclosures, mask works, software (other than any software that is
commercially available for an amount less than $10,000), trademarks, trade
names, registered copyrights and service marks, including applications to
register and registrations for any of the foregoing, included in Company
Intellectual Property except that Schedule 3.11 need not disclose any
trademarks, trade names or service marks that are not (a) registered or
applied for and (b) not material to the business of the Company or any of
its Subsidiaries as currently conducted. Except as disclosed in Schedule
3.11 of the Disclosure Schedule, all software used by the Company or any of
its Subsidiaries, or sold, licensed or otherwise made available to any
other Person by the Company or any of its Subsidiaries, that in each case,
contains or calls on a calendar function, including but not limited to any
function that is indexed to a computer processing unit clock, provides
specific dates or calculates spans of dates, is and will be able to record,
store, process and provide true and accurate dates and calculations for
dates and spans of dates including and following January 1, 2000.
SECTION 3.12 Contracts.
(a) Other than the contracts or agreements of the Company listed as
exhibits to the Company's Annual Report on Form 10-K, as amended, for the
year ended September 30, 1998 (the "Material Contracts"), Schedule 3.12(a)
of the Disclosure Schedule sets forth a complete and correct list of each
of the following contracts, commitments and agreements to which the Company
or any of its Subsidiaries is a party or by which any of them is bound (the
contracts, commitments and agreements of the types described below that are
scheduled or required to be scheduled, collectively, the "Identified
Contracts"), in each case, as such Identified Contract is in effect on the
date hereof:
(i) contracts, commitments and agreements governing the
terms of indebtedness for borrowed money, or guarantees of
indebtedness, of, or secured by assets of, the Company or any of its
Subsidiaries;
(ii) shareholder, voting trust or similar contracts and
agreements relating to the voting of shares or other equity or debt
interests of the Company or any of its Subsidiaries;
(iii) contracts, commitments and agreements entered into since
1995 providing for the acquisition or disposition of assets having a
value in excess of $500,000, other than sales of inventories in the
ordinary course of business and sales of obsolete equipment;
(iv) leases, subleases and licenses or real property,
occupancy, use and other agreements relating to or constituting real
property, each with a term of one year or more and an annual payment
obligation in excess of $500,000;
(v) (a) joint venture agreements, partnership agreements and
other similar contracts, commitments and agreements involving a
sharing of profits and expenses; contracts, commitments and
agreements providing for a "strategic alliance" or "preferred vendor"
relationship; or (b) contracts, commitments or agreements with
distributors, brokers or sales agents except, in the case of (b),
only to the extent that any such distributors, brokers or sales
agents are responsible for revenues to the Company or any of its
Subsidiaries in excess of $500,000 per year;
(vi) contracts, commitments and agreements governing the
terms of indebtedness (other than trade payables in the ordinary
course of business) of third parties to the Company or by any of its
Subsidiaries, or guarantees by the Company or any of its Subsidiaries
of indebtedness of third parties;
(vii) contracts, commitments and agreements prohibiting or
materially restricting the ability of the Company or any of its
Subsidiaries to conduct its business, to engage in any business or
operate in any geographical area or to compete with any Person;
(viii) contracts, commitments and agreements with "change of
control" provisions except to the extent that if a "change of
control" event occurred, it would not result in a termination or
other alteration of such contract, commitment or agreement that would
have or would reasonably be expected to have a material adverse effect
on the business of the Company or its Subsidiary that is a party
thereto;
(ix) contracts, commitments, and agreements with any federal
or state Governmental Entity;
(x) licenses, licensing arrangements and other contracts and
agreements either (x) providing, in whole or in part, for the use of,
or limiting the use of, any Intellectual Property or (y) relating to
the development, support or maintenance of any Intellectual Property
(in each case, that is material to the business of the Company or any
of its Subsidiaries that is a party thereto and other than relating
to software that is commercially available for less than $10,000);
and
(xi) contracts and agreements that are or will be material to
the business, operations, results of operations, condition (financial
or otherwise), assets or properties of the Company and its
Subsidiaries involving amounts in excess of $250,000.
(b) Each of the Identified Contracts and Material Contracts is in
full force and effect, and neither the Company nor any of its Subsidiaries,
nor, to the knowledge of the Company, any other Person, is in breach of, or
default under, any such contract, commitment or agreement, and no event has
occurred that with notice or passage of time or both would constitute such
a breach or default thereunder by the Company or any of its Subsidiaries,
or, to the knowledge of the Company, any other Person, except for such
failures to be in full force and effect and such conflicts, violations,
breaches or defaults as in the aggregate would not have or result in a
Material Adverse Effect or materially delay the consummation of the
transactions contemplated hereby.
SECTION 3.13 Taxes.
(a) Except as disclosed in Schedule 3.13 of the Disclosure Schedule:
(i) each of the Company, its Subsidiaries, and any Consolidated Group (as
defined below) has timely filed all material Tax Returns (as defined below)
required to be filed by it and has paid all Taxes (as defined below) shown
thereon to be owing, and each of the Company and its Subsidiaries has
provided reserves in accordance with GAAP in its most recent financial
statements included in the Company SEC Documents for any Taxes (as defined
below) that have not been paid for the periods covered by such financial
statements; (ii) none of the Company or its Subsidiaries has granted any
extension or waiver of the statute of limitations period applicable to any
material Tax Return, which period (after giving effect to such extension or
waiver) has not expired; (iii) no audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Return of any of the Company, its Subsidiaries or any
Consolidated Group as to which any taxing authority has asserted in writing
any claim which, if adversely determined, individually or in the aggregate
would have or result in a Material Adverse Effect; and (iv) none of the
Company or any of its Subsidiaries has received any notice of deficiency or
assessment from any taxing authority with respect to liabilities for income
or any material other Taxes which has not been fully paid or finally
settled.
(b) "Consolidated Group" shall mean any consolidated, combined,
unitary or aggregate group for Tax purposes of which the Company or any of
its Subsidiaries is a member. "Taxes" shall mean all federal, state, local
and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including interest and penalties,
and additions thereto. "Tax Returns" shall mean all federal, state, local
and foreign tax returns, declarations, statements, reports, schedules,
forms and information returns, and any amendments to any of the foregoing,
relating to Taxes.
SECTION 3.14 Environmental Matters.
Except as disclosed in Schedule 3.14 of the Disclosure Schedule:
(a) Each of the Company and its Subsidiaries has complied and is in
compliance in all respects with all applicable Environmental Laws (as
defined below) pertaining to any of the properties and assets of the
Company or any of its Subsidiaries (including the Real Property and the
properties currently or formerly owned or leased) and the use and ownership
thereof, and to their businesses and operations. No violation by the
Company or any of its Subsidiaries is being alleged or has been alleged of
any applicable Environmental Law relating to any of their respective
properties and assets including (the Real Property and the properties
currently or formerly owned or leased) or the use or ownership thereof, or
to their respective businesses and operations.
(b) Neither the Company nor any of its Subsidiaries nor any other
Person (including any tenant or subtenant) has caused or taken any action
that will result in, and neither the Company nor any of its Subsidiaries is
subject to, any liability or obligation on the part of the Company or any
of its Subsidiaries relating to (x) the environmental conditions on, under,
or about the Real Property or other properties or assets currently or
formerly owned, leased, operated or used by the Company or any of its
Subsidiaries or any predecessor thereto at the present time or in the past,
including without limitation, the air, soil and groundwater conditions at
such properties or (y) the past or present use, management, handling,
transport, treatment, generation, storage, disposal, discharge, leak,
emission, or other manner of release of any Hazardous Materials (as defined
below).
(c) The Company has disclosed and made available to MergerCo all
information, including, without limitation, all studies, analyses and test
results, in the possession, custody or control of or otherwise known to the
Company or any of its Subsidiaries relating to (x) the environmental
conditions on, under or about the Real Property or other properties or
assets currently or formerly owned, leased, operated or used by the Company
or any of its Subsidiaries or any predecessor in interest thereto at the
present time or in the past, and (y) any Hazardous Materials used, managed,
handled, transported, treated, generated, stored, discharged, leaked,
emitted, or otherwise released by the Company or any of its Subsidiaries or
any other Person on, under, about or from any of the Real Property and the
properties currently or formerly owned or leased, or otherwise in
connection with the use or operation of any of the properties and assets of
the Company or any of its Subsidiaries, or their respective businesses and
operations. Except as disclosed in Schedule 3.14(c), none of the current or
past operations of the Company or any of its Subsidiaries, or any by-
product thereof, and none of the currently or formerly owned or leased
property or assets of the Company or any of its Subsidiaries, including
without limitation the Real Property, is related to or subject to any
Litigation related to any Environmental Law.
(d) "Environmental Law" means any foreign, federal, state or local
law, regulation, rule, ordinance or case law relating to pollution or
protection of human health and safety or the environment, including, but
not limited to, laws relating to releases or threatened releases of
Hazardous Materials into the environment and including laws pertaining to
the protection of the health and safety of employees. "Hazardous
Materials" means any substance or material that is classified or regulated
as "hazardous" or "toxic" pursuant to any Environmental Law, including
without limitation, asbestos, polychlorinated biphenyls and petroleum.
SECTION 3.15 Required Vote by Company Stockholders. The affirmative
vote of the holders of two-thirds of the outstanding shares of Company
Common Stock and Company Preferred Stock is the only vote of any class of
capital stock of the Company required by the MBCL, the Articles of
Organization or the By-Laws of the Company to adopt this Agreement and
approve the transactions contemplated hereby.
SECTION 3.16 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its
Subsidiaries, that is or will be payable by the Company or any of its
Subsidiaries.
SECTION 3.17 Opinion of Financial Advisor. The Company has received
from Gordon Associates Inc. (the "Financial Advisor"), and provided to
MergerCo on or prior to the date hereof, an executed copy of its opinion
that the Merger Consideration to be received by the holders of Shares in
the Merger is fair, from a financial point of view, to such holders (the
"Fairness Opinion"). The Company has been authorized by the Financial
Advisor to include the Fairness Opinion in the Proxy Statement and has not
been notified by the Financial Advisor that the Fairness Opinion has been
withdrawn or modified.
SECTION 3.18 Assets.
(a) The Company and its Subsidiaries own, or otherwise have
sufficient and legally enforceable rights to use, all of the properties and
assets (real, personal or mixed, tangible or intangible), reasonably
necessary for the conduct of, or otherwise material to, their business and
operations (the "Assets"). The Company and its Subsidiaries have good,
valid and marketable title to, or in the case of leased property have good
and valid leasehold interests in, all Assets, including but not limited to
all such Assets reflected in the September 30, 1998 Balance Sheet or
acquired since the date thereof (except as may have been disposed of in the
ordinary course of business consistent with past practices prior to the
date hereof or in accordance herewith), in each case free and clear of any
Lien (as defined below), except Permitted Liens (as defined below). All
tangible Assets are reasonably adequate and suitable for the purposes for
which they are presently being used.
(b) "Lien" means any mortgage, pledge, deed of trust,
hypothecation, right of others, claim, security interest, encumbrance,
burden, title defect, title retention agreement, lease, sublease, license,
occupancy agreement, easement, covenant, condition, encroachment, voting
trust agreement, interest, option, right of first offer, negotiation or
refusal, proxy, lien, charge or other restrictions of any nature
whatsoever. "Permitted Liens" means (a) Liens reserved against in the
September 30, 1998 Balance Sheet, to the extent so reserved, (b) Liens for
Taxes not yet due and payable or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided
in accordance with GAAP or that are statutory Liens for Taxes not yet
delinquent, (c) those Liens that are set forth in Schedule 3.18(b) of the
Disclosure Schedule and (d) those Liens that, in the aggregate with all
other Permitted Liens, do not and will not materially detract from the
value of the properties and assets of any of the Company and its
Subsidiaries, materially interfere with the present use of any thereof or
otherwise have a Material Adverse Effect.
SECTION 3.19 Real Property. There is no Owned Real Property (as
defined below). Schedule 3.19(i) contains a complete and correct list of
each parcel of Formerly Owned Property (as defined below) setting forth the
street address, current owner and date of disposition to the current owner
of Formerly Owned Property. Schedule 3.19(ii) of the Disclosure Schedule
contains a complete and correct list of all Leases (as defined below)
setting forth the address, tenant for each Lease and the documents of which
each Lease is comprised. No material damage or destruction has occurred
since December 31, 1998 with respect to any of the Leased Real Property.
"Formerly Owned Property" means any Real Property previously owned by the
Company or any of its Subsidiaries since 1990, but not owned by the Company
or any of its Subsidiaries as of the date of this Agreement. "Leases"
means the leases, subleases, licenses and use or occupancy agreements
pursuant to which the Company or any of its Subsidiaries is the lessee,
sublessee, licensee, user or occupant of Real Property. "Leased Real
Property" means all interests in Real Property pursuant to the Leases.
"Owned Real Property" means the real property owned by the Company and its
Subsidiaries. "Real Property" means real property and structures,
facilities and improvements located thereon or attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating to
the foregoing.
SECTION 3.20 Insurance. Schedule 3.20 of the Disclosure Schedule
contains a complete and correct list and summary description of all
insurance policies maintained at present or at any time during the past
three calendar years by or on behalf of any of the Company and its
Subsidiaries. Such policies are in full force and effect, and all premiums
due thereon have been paid. The Company and its Subsidiaries have complied
in all material respects with the terms and provisions of such policies.
The insurance coverage provided by such policies is adequate and suitable
for the business and operations of the Company and its Subsidiaries, and is
on such terms (including without limitation as to deductibles and self-
insured retentions), covers such risks, contains such deductibles and
retentions, and is in such amounts, as the insurance customarily carried by
comparable companies of established reputation similarly situated and
carrying on the same or similar business and operations.
SECTION 3.21 Labor Matters, etc. Neither the Company nor any of its
Subsidiaries is a party to or bound by and none of their respective
employees is subject to any collective bargaining agreement, memorandum of
understanding or other written document relating to the terms and
conditions of employment for any group of employees, and there are no labor
unions or other organizations representing or purporting or attempting to
represent any employees employed by any of the Company and its
Subsidiaries. The Company and its Subsidiaries have complied with all
applicable Laws pertaining to the employment or termination of employment
of their respective employees, including, without limitation, all such Laws
relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination or distinction and other
similar employment activities, except for any failures so to comply that
individually or in the aggregate would not have or result in a Material
Adverse Effect.
SECTION 3.22 Disclosure. To the actual knowledge of the Company,
this Agreement and each certificate or other instrument or document
furnished by or on behalf of the Company to MergerCo pursuant hereto, taken
as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein in light of
the circumstances under which they were made, not misleading.
SECTION 3.23 Takeover Statutes. No "Fair price," "Moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation enacted under state or federal laws in the United States
including, without limitation, Chapters 110C, 110D and 110F of the
Massachusetts General Laws, applicable to the Company or any of its
Subsidiaries is applicable to the execution, delivery and performance of
this Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO
MergerCo represents and warrants to the Company as of the date hereof
and as of the Closing Date as follows:
SECTION 4.1 Organization. MergerCo is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. MergerCo has all requisite corporate power and authority to
own, lease, operate or use its properties and to carry on its business as
now being conducted and is qualified or licensed to do business and is in
good standing in each jurisdiction in which it owns real property or in
which the nature of the business conducted by it makes such qualification
or licensing necessary. MergerCo is not in breach of its articles of
organization or by-laws. MergerCo has previously delivered to the Company
complete and correct copies of the articles of organization and by-laws of
MergerCo, as currently in effect.
SECTION 4.2 Authorization; Validity of Agreement. MergerCo has the
requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by MergerCo of this Agreement and the
consummation by MergerCo of the transactions contemplated hereby have been
duly authorized by its Board of Directors and, other than the approval and
adoption of this Agreement by the stockholders of MergerCo, no other
corporate proceedings on the part of MergerCo are necessary to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by MergerCo and, assuming due authorization, execution and
delivery of this Agreement by the Company, is a valid and binding
obligation of MergerCo enforceable against it in accordance with its terms,
except that such enforcement may be subject to or limited by (i)
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors rights generally, and (ii) the effect of general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
SECTION 4.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement by
MergerCo nor the consummation by MergerCo of the transactions contemplated
hereby will (i) violate any provision of the articles of organization or
by-laws of MergerCo, (ii) conflict with, result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation
or acceleration) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, guarantee, other evidence of indebtedness,
license, or any material lease, contract, agreement or other instrument or
obligation, to which MergerCo is a party or by which any of them or any of
their assets may be bound or (iii) conflict with or violate any Laws
applicable to MergerCo, any of its Subsidiaries or any of their properties
or assets; except in the case of clauses (ii) and (iii) for such conflicts,
violations, breaches or defaults which in the aggregate would not have a
material adverse effect on the business, assets, liabilities, results of
operations or financial or other condition of MergerCo, or materially
impair or delay the consummation of the transactions contemplated by this
Agreement.
(b) Except as set forth in Schedule 4.3(b) of the disclosure
schedule delivered by MergerCo to the Company on or prior to the date
hereof (the "MergerCo Disclosure Schedule") and assuming that the
representation and warranty of the Company set forth in Section 3.4(b) is
true and correct, no filing or registration with, declaration or
notification to, or order, authorization, consent or approval of, any
Governmental Entity is required in connection with the execution and
delivery of this Agreement by MergerCo or the consummation by MergerCo of
the transactions contemplated hereby, except (i) applicable requirements
under the Exchange Act, (ii) applicable requirements under the Securities
Act, (iii) the filing of the Articles of Merger with the Massachusetts
Secretary of State, (iv) applicable requirements under "blue sky" laws of
various states, and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings (x)
required to be obtained or made by the Company or any of its Subsidiaries
or (y) the failure of which to be obtained or made would not have a
material adverse effect on the business, assets, liabilities, results of
operations or financial or other condition of MergerCo and its
Subsidiaries, taken as a whole, or materially impair or delay the
consummation of the transactions contemplated by this Agreement.
SECTION 4.4 Proxy Statement; Exchange Act Schedules.
(a) None of the information supplied in writing by MergerCo
specifically for inclusion in the Proxy Statement (including any amendments
or supplements thereto) will, at the date mailed to stockholders and at the
time of the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) None of the information supplied in writing by MergerCo
specifically for inclusion in the Schedule 13E-3 (and any amendment or
supplement to any of the foregoing) will, at the date such document is
filed with the SEC, 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.
SECTION 4.5 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of MergerCo, that is or will be payable
by the Company or any of its Subsidiaries.
SECTION 4.6 Formation of MergerCo; No Prior Activities. MergerCo
was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement. As of the date hereof and the Effective
Time, except for (i) obligations or liabilities incurred in connection with
its incorporation or organization and the transactions contemplated by this
Agreement, (ii) this Agreement and any other agreements or arrangements
contemplated by this Agreement or in furtherance of the transactions
contemplated hereby and (iii) the contribution by the individuals and
entities listed on Exhibit A attached hereto of the shares of Company
Common Stock owned by them in exchange for shares of MergerCo Common Stock,
MergerCo has not incurred, directly or indirectly, through any subsidiary
or affiliate, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person.
ARTICLE V
COVENANTS
SECTION 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except as (i) required by this Agreement, (ii) required by
applicable law, (iii) required by any Material Contract or Identified
Contract or by any Plan disclosed on Schedule 3.9(b), in each case to the
extent such requirement is specifically described on Schedule 5.1(iii) or
(iv) agreed to in writing by MergerCo, after the date hereof and prior to
the Effective Time:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course consistent with past practice and, to
the extent consistent therewith, each of the Company and its Subsidiaries
shall use its reasonable efforts to preserve its business organization and
the business organization of its Subsidiaries intact and maintain existing
relations with customers, suppliers, employees and creditors;
(b) the Company shall not amend its Articles of Organization or By-
Laws;
(c) the Company shall not declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock (except for cash dividends on Company Common Stock in the
ordinary course of business consistent with past practice); and neither the
Company nor any of its Subsidiaries shall (i) issue, sell, grant, transfer,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or any of its Subsidiaries (except pursuant to
the exercise of stock options outstanding on the date hereof to the extent
contemplated by this Agreement); (ii) incur any long term indebtedness
(whether evidenced by a note or other instrument, pursuant to a financing
lease, sale-leaseback transaction, or otherwise) or incur short-term
indebtedness other than under lines of credit existing on the date hereof,
except for borrowings under existing credit facilities or lines of credit
in the ordinary course of business consistent with past practice; (iii)
redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock or other securities; or (iv) enter into or amend in any
material respect any Lease, Material Contract or Identified Contract;
(d) neither the Company nor any of its Subsidiaries shall (i)
except for normal salary increases in the ordinary course of business
consistent with past practice, grant any increase in the compensation or
benefits payable or to become payable by the Company or any of its
Subsidiaries to any officer or other management employee of the Company or
any Subsidiary; (ii) adopt, enter into or amend or increase, or accelerate
the payment or vesting of the amounts, benefits or rights payable or
accrued or to become payable or accrued under, any bonus, incentive or
deferred compensation, severance, termination, change in control,
retention, stock option or other equity based or other material employee
compensation or benefit plan, agreement or policy; or (iii) enter into or
amend in any material respect any employment, severance, retention or
collective bargaining agreement or, except in accordance with the existing
written policies of the Company or existing contracts or agreements, grant
any severance or termination pay to any officer, director or employee of
the Company or any of its Subsidiaries;
(e) neither the Company nor its Subsidiaries shall change the
accounting principles used by it unless required by GAAP;
(f) neither the Company nor any of its Subsidiaries shall acquire
or agree to acquire, by merging or consolidating with, by purchasing an
equity interest in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets of any other Person (other than the purchase of assets in the
ordinary course of business consistent with past practice);
(g) neither the Company nor any of its Subsidiaries shall sell,
lease, exchange, mortgage, pledge, transfer or otherwise dispose of, or
agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, any of its Assets, except in the ordinary course of business
consistent with past practice;
(h) neither the Company nor its Subsidiaries shall enter into any
material arrangement, agreement or contract, or any material amendment,
supplement, waiver or other modification in respect of any existing
arrangement, agreement or contract, with any third party (other than
customers in the ordinary course of business) that provides for an
exclusive arrangement with that third party or is substantially more
restrictive on the Company or its Subsidiaries or substantially less
advantageous to the Company or its Subsidiaries than arrangements,
agreements or contracts existing on the date hereof; and
(i) neither the Company nor any of its Subsidiaries shall make any
material Tax election, amend any Tax Return or settle or compromise any
material federal, state, local or foreign Tax liability; and
(j) neither the Company nor any of its Subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing.
SECTION 5.2 Access to Information. From the date of this Agreement
until the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, afford to MergerCo and its authorized representatives
reasonable access during normal business hours upon reasonable prior notice
to all of its books and records, including but not limited to tax,
financial and accounting books and records. In addition, during such
period, the Company shall, and shall cause each of its Subsidiaries to,
furnish promptly to MergerCo (a) a copy of each report, schedule,
registration statement and other document filed or received by it during
such period pursuant to the requirements of the Exchange Act or other
applicable Law and (b) such other information concerning its business,
properties and personnel as MergerCo may reasonably request. MergerCo and
its authorized representatives will use all reasonable efforts to conduct
all such inspections in a manner which will minimize any material
disruptions of the business and operations of the Company and its
Subsidiaries.
SECTION 5.3 Further Action; Reasonable Best Efforts. Upon the terms
and subject to the conditions herein provided, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using
reasonable best efforts to satisfy the conditions precedent to the
obligations of any of the parties hereto, to obtain all necessary
authorizations, consents and approvals, and to effect all necessary
registrations and filings. Each of the parties hereto will furnish to the
other parties such necessary information and reasonable assistance as such
other parties may reasonably request in connection with the foregoing and
will provide the other parties with copies of all filings made by such
party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
SECTION 5.4 Shareholders' Meeting; Proxy Statement.
(a) As promptly as practicable after the date hereof, the Company
shall prepare the Proxy Statement (as defined below). The Company will use
its best efforts, after consultation with MergerCo, to respond promptly to
any comments made by the SEC with respect to the Proxy Statement. The
Company will use its best efforts to cause a definitive proxy statement
(the "Proxy Statement") to be mailed to its stockholders as promptly as
practicable after it has been approved by the SEC. The Company shall
include in the Proxy Statement the recommendation of the Board of Directors
that shareholders of the Company approve and adopt this Agreement and the
transactions contemplated hereby.
(b) The Company shall in accordance with applicable law and the
Articles of Organization and By-laws of the Company, duly call, set a
record date for, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") as promptly as practicable for the
purpose of considering and taking action upon this Agreement and such other
matters as may be appropriate at the Special Meeting. The Company shall,
through its Board of Directors, recommend that its shareholders approve the
Merger and shall use all reasonable efforts to solicit from shareholders of
the Company proxies in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby.
(c) The Company and MergerCo shall together prepare and file a
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") under the
Exchange Act. Each of MergerCo and the Company shall furnish all
information concerning it, its affiliates and the holders of its capital
stock required to be included in the Schedule 13E-3 and, after consultation
with each other, shall respond promptly to any comments made by the SEC
with respect to the Schedule 13E-3.
(d) The information supplied by the Company for inclusion in the
Proxy Statement or the Schedule 13E-3 shall not, at the time the Proxy
Statement is mailed, 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 or, at the time of the Special
Meeting, as then amended or supplemented, or at the Effective Time, omit to
state any material fact necessary to correct any statement originally
supplied by the Company for inclusion in the Proxy Statement or the
Schedule 13E-3 which has become false or misleading. If at any time prior
to the Effective Time any event relating to the Company or any of its
affiliates, or its, or its affiliates', respective officers, directors or
shareholders, should be discovered which should be set forth in an
amendment of, or a supplement to such Proxy Statement or Schedule 13E-3,
the Company shall promptly so inform MergerCo and will furnish all
necessary information to MergerCo relating to such event and an appropriate
amendment or supplement to such Proxy Statement or Schedule 13E-3 will
thereafter be filed with the SEC by the Company. All documents that the
Company is responsible for filing with the SEC in connection with the
transactions contemplated by this Agreement shall comply in all material
respects, both as to form and otherwise, with the Exchange Act and/or the
Securities Act, as the case may be, and the rules and regulations
thereunder.
(e) The information supplied or to be supplied by MergerCo for
inclusion in the Proxy Statement or the Schedule 13E-3 shall not at the
time the Proxy Statement is mailed 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 or, at the
time of the Special Meeting, as then amended or supplemented, or at the
Effective Time, omit to state any material fact necessary to correct any
statement originally supplied by MergerCo for inclusion in the Proxy
Statement or the Schedule 13E-3 which has become false or misleading. If at
any time prior to the Effective Time any event relating to MergerCo or any
of its affiliates, or its affiliates' respective officers, directors or
shareholders should be discovered which should be set forth in an amendment
of, or a supplement to, such Proxy Statement or Schedule 13E-3, MergerCo
shall promptly so inform the Company and will furnish all necessary
information to the Company relating to such event and an appropriate
amendment or supplement to such Proxy Statement or Schedule 13E-3 will
thereafter be filed with the SEC by the Company. All documents that
MergerCo is responsible for filing with the SEC in connection with the
transactions contemplated by this Agreement shall comply in all material
respects, both as to form and otherwise, with the Exchange Act and the
rules and regulations thereunder.
SECTION 5.5 Notification of Certain Matters. The Company shall give
prompt notice to MergerCo, and MergerCo shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or
warranty of the Company, or of MergerCo, as the case may be, contained in
this Agreement to be untrue or inaccurate in any material respect at the
Effective Time, (ii) any material failure of the Company, or MergerCo, as
the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder and (iii) any
event, occurrence, fact, condition, change, development or effect that,
individually or in the aggregate, would have or result in a Material
Adverse Effect or a breach of Section 5.1.
SECTION 5.6 Directors' and Officers' Indemnification.
(a) For a period of six years after the Effective Time, the
Surviving Corporation shall indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of the Company and its
Subsidiaries in such capacities ("Indemnified Parties") against all losses,
claims, damages, expenses or liabilities arising out of actions or
omissions or alleged actions or omissions occurring at or prior to the
Effective Time to the same extent and on the same terms and conditions
(including with respect to advancement of expenses) provided for in the
Company's Articles of Organization and By-Laws in effect at the date hereof
(to the extent consistent with applicable law).
(b) The provisions of this Section 5.6 are intended for the benefit
of, and shall be enforceable by, the respective Indemnified Parties.
Nothing in this Section 5.6 shall limit or restrict the right or ability of
the Surviving Corporation to change its state of domicile.
SECTION 5.7 Recapitalization. Each of the Company and MergerCo
shall use its best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a recapitalization
and such accounting treatment to be accepted by their respective
accountants and by the SEC, and each of the Company and MergerCo agrees
that it shall take no action that would cause such accounting treatment not
to be obtained.
SECTION 5.8 Conveyance Taxes. MergerCo and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp taxes, any transfer, recording, registration and other fees or any
similar taxes which become payable by the Company or any of its
Subsidiaries in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time.
SECTION 5.9 Delisting. Each of the parties agrees to cooperate with
each other in taking, or causing to be taken, all actions necessary to
delist the Company Common Stock from the Over the Counter Bulletin Board,
provided that such delisting shall not be effective until after the
Effective Time of the Merger.
SECTION 5.10 Conduct of the Company After the Merger. Each of the
parties agree that until one year after the Effective Time of the Merger,
the Surviving Corporation shall not be a party to any merger,
reorganization, liquidation, relocation of operations, sale or transfer of
assets not in the ordinary course of business, or any other material
changes in its corporate structure.
ARTICLE VI
CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions (any or all of which may be waived by the parties
hereto in writing, in whole or in part, to the extent permitted by
applicable law):
(a) No statute, rule, order, decree or regulation shall have been
enacted or promulgated by any Governmental Entity of competent jurisdiction
(whether temporary, liminary or permanent) which is in effect and has the
effect of prohibiting the consummation of the Merger or making the Merger
illegal.
(b) There shall be no order or injunction of a Governmental Entity
of competent jurisdiction (whether temporary, preliminary or permanent) in
effect precluding, restraining, enjoining or prohibiting consummation of
the Merger.
(c) Other than filing the Articles of Merger in accordance with the
MBCL, all authorizations, consents and approvals of all Governmental
Entities required to be obtained prior to consummation of the Merger shall
have been obtained, except for such authorizations, consents, and approvals
the failure of which to be obtained would not have a Material Adverse
Effect.
SECTION 6.2 Conditions to the Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger is further
subject to the satisfaction or waiver at or prior to the Effective Time of
the following conditions:
(a) The representations and warranties of MergerCo contained in
this Agreement shall be true and correct at and as of the date hereof, and
true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without any
materiality qualification) at and as of the Effective Time as if made at
and as of such time; and
(b) MergerCo shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time pursuant to the terms hereof.
SECTION 6.3 Conditions to Obligations of MergerCo to Effect the
Merger. The obligations of MergerCo to effect the Merger are further
subject to the satisfaction or waiver at or prior to the Effective Time of
the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct at and as of the date hereof, and
true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without any
materiality qualification) at and as of the Effective Time as if made at
and as such time;
(b) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time pursuant to the terms hereof;
(c) The number of Dissenting Shares shall not exceed 10% of the
issued and outstanding shares of Company Common Stock; and
(d) No event, occurrence, fact, condition, change, development or
effect shall exist or have occurred or come to exist or been threatened
since September 30, 1998 that, individually or in the aggregate, has had or
resulted in, or could reasonably be expected to become or result in, a
Material Adverse Effect.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. Notwithstanding any thing herein to the
contrary, this Agreement may be terminated and the Merger may be abandoned
at anytime prior to the Effective Time, whether before or after shareholder
approval thereof:
(a) By the mutual consent of the Boards of Directors of MergerCo
and the Company.
(b) By either the Company, on the one hand, or MergerCo, on the
other hand, if: (i) the Merger has not been consummated on or prior to
September 30, 1999 or such other date, if any, as MergerCo and the Company
shall agree upon (provided that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to a party whose failure to
fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such
date); or (ii) any Governmental Entity shall have issued a statute, order,
decree or regulation or taken any other action (which statute, order,
decree, regulation or other action the parties hereto shall use their best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the Merger or making the Merger illegal and such
statute, order, decree, regulation or other action shall have become final
and non-appealable.
(c) By the Company, (i) if holders of two-thirds of the outstanding
Company Common Stock and Company Preferred Stock, voting as a single class,
fail to approve and adopt this Agreement and the transactions contemplated
hereby at the Special Meeting (including any postponement or adjournment
thereof).
(d) By the Company, upon 15 days' prior written notice, in the
event of a material breach of any representation, warranty, covenant or
agreement on the part of MergerCo such that the condition set forth in
Section 6.2(a) or 6.2(b) would not be satisfied as of the Effective Time,
which breach is not cured prior to the expiration of such 15 day period
(provided that if such breach is not curable, the Company may terminate
this Agreement immediately under this Section 7.1(d)); except where the
Company is in material breach of any representation, warranty, covenant or
agreement as provided in Section 7.1(e).
(e) By MergerCo, upon 15 days' prior written notice, in the event
of a material breach of any representation, warranty, covenant or agreement
on the part of the Company such that the condition set forth in Section
6.3(a) or 6.3(b) would not be satisfied as of the Effective Time, which
breach is not cured prior to the expiration of such 15 day period (provided
that if such breach is not curable, MergerCo may terminate this Agreement
immediately under this Section 7.1(e)); except where MergerCo is in
material breach of any representation, warranty, covenant or agreement as
provided in Section 7.1(d).
(f) By MergerCo, if (i) holders of at least two-thirds of the
outstanding Company Common Stock and Company Preferred Stock, voting as a
single class, fail to approve and adopt this Agreement and the transactions
contemplated hereby at the Special Meeting (including any postponement or
adjournment thereof); or (ii) the Board of Directors of the Company
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to MergerCo or shall have resolved to do any of
the foregoing.
SECTION 7.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be given by the terminating party or parties to the other party
or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and
void, and there shall be no liability on the part of MergerCo or the
Company, except as set forth in Section 8.1 hereof; provided that nothing
herein shall relieve any party from any liability or obligation with
respect to any willful breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Fees and Expenses. (a) Except as contemplated by this
Agreement, all costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses except that the Company
shall bear and pay the costs and expenses incurred in connection with (i)
the preparation, filing, printing and mailing of the Proxy Statement
(including SEC filing fees) and (ii) the filing of the Schedule 13E-3.
(b) This Section 8.1 shall survive any termination of this
Agreement.
SECTION 8.2 Amendment; Waiver.
(a) This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time
before or after approval by the shareholders of the Company of the matters
presented in connection with the Merger, but after any such approval no
amendment shall be made without the approval of such shareholders if such
amendment changes the Merger Consideration or alters or changes any of the
other terms or conditions of this Agreement if such alteration or change
would materially adversely affect the rights of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties may (i)
extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in
any document, certificate or writing delivered pursuant hereto or (iii)
waive compliance with any of the agreements or conditions of the other
parties hereto contained herein. Any such extension or waiver by the
Company shall require the consent of the Board of Directors of the Company.
Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Any such waiver shall constitute a waiver only with
respect to the specific matter described in such writing and shall in no
way impair the rights of the party granting such waiver in any other
respect or at any other time. Neither the waiver by any of the parties
hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right
or privilege hereunder, shall be construed as a waiver of any other breach
or default of a similar nature, or as a waiver of any of such provisions,
rights or privileges hereunder. The rights and remedies herein provided
are cumulative and none is exclusive of any other, or of any rights or
remedies that any party may otherwise have at law or in equity. The rights
and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy or breach of any representation, warranty,
covenant or agreement or failure to fulfill any condition shall in no way
be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may
also be the subject matter of any other representation, warranty, covenant
or agreement as to which there is no inaccuracy or breach. The
representations and warranties of the Company shall not be affected or
deemed waived by reason of any investigation made by or on behalf of
MergerCo (including but not limited to any of its advisors, counsel,
consultants or representatives) or by reason of the fact that MergerCo or
any of such advisors, counsel, consultants or representatives knew or
should have known that any such representation or warranty is or might be
inaccurate.
SECTION 8.3 Survival. The respective representations and warranties
of MergerCo and the Company contained herein or in any certificates or
other documents delivered prior to or as of the Effective Time shall not
survive beyond the Effective Time. The covenants and agreements of the
parties hereto (including the Surviving Corporation after the Merger) shall
survive the Effective Time without limitation (except for those which, by
their terms, contemplate a shorter survival period).
SECTION 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed
delivery by a standard overnight carrier or when delivered by hand or (c)
the expiration of five business days after the day when mailed in the
United States by certified or registered mail, postage prepaid, addressed
at the following addresses (or at such other address for a party as shall
be specified by like notice):
(a) if to the Company, to: Armatron International, Inc.
2 Main Street
Melrose, Massachusetts 02176
Facsimile: (781) 321-2309
Telephone: (781) 321-2300
Attention: President
with a copy to: Bass, Doherty & Finks, P.C.
40 Soldiers Field Place
Boston, Massachusetts 02135
Facsimile: (617) 787-4969
Telephone: (617) 787-5551
Attention: Malcolm D. Finks, Esquire
(b) if to MergerCo, to: Armatron Merger Corporation
2 Main Street
Melrose, Massachusetts 02176
Facsimile: (781) 321-2309
Telephone: (781) 321-2300
Attention: President
with a copy to Mintz, Levin, Cohn, Ferris
Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Facsimile: (617) 542-2241
Telephone: (617) 542-6000
Attention: Anne L. Bruno, Esquire
SECTION 8.5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed
to be followed by the words "without limitation". The phrase "made
available" when used in this Agreement shall mean that the information
referred to has been made available to the party to whom such information
is to be made available. The words "affiliates" and "associates" when used
in this Agreement shall have the respective meanings ascribed to them in
Rule 12b-2 under the Exchange Act. The phrase "beneficial ownership" and
words of similar import when used in this Agreement shall have the meaning
ascribed to it in Rule 13d-3 under the Exchange Act.
SECTION 8.6 Headings; Schedules. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Disclosure of any matter
pursuant to any Schedule to the Disclosure Schedule shall not be deemed to
be an admission or representation as to the materiality of the item so
disclosed.
SECTION 8.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of
which shall be considered one and the same agreement.
SECTION 8.8 Entire Agreement; Third Party Beneficiaries. This
Agreement (a) constitutes the entire agreement, and supersedes all prior
agreements and understandings (written and oral), among the parties with
respect to the subject matter hereof and (b) except for the provisions of
Sections 5.6 and 5.9, are not intended to confer upon any person other than
the parties any rights or remedies.
SECTION 8.9 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
SECTION 8.10 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of Massachusetts.
SECTION 8.11 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. This Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, MergerCo and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ARMATRON INTERNATIONAL, INC.
By:___________________________________
Name: Charles J. Housman
Title: President and Chief Executive
Officer
[Seal]
ARMATRON MERGER CORPORATION
By:___________________________________
Name: Charles J. Housman
Title: President
[Seal]
Appendix B
OPINION LETTER
April 21, 1999
The Board of Directors
Armatron International, Inc.
2 Main Street
Melrose, Massachusetts 02176
Gentlemen:
Armatron International, Inc. ("Armatron" or the "Company") has
engaged Gordon Associates, Inc. ("GA") to render an opinion (the "Opinion")
as to the fairness, from a financial point of view, to certain shareholders
or Armatron (the "Selling Shareholders") of the per share cash
consideration to be paid by Armatron for the purchase of the shares of
common stock held by the Selling Shareholders. The Opinion contemplates a
transaction (the "Merger") pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") between Armatron and Armatron Merger Corporation
("MergerCo"). In the Merger, each outstanding share of common stock of
Armatron will be converted into the right to receive $0.27 in cash.
GA is a business valuation and related consulting firm which among
other activities is engaged in evaluating the financial terms of mergers
and acquisitions and providing investment analysis to clients and advising
them with respect to the purchase and sale of securities generally. There
are no relationships between GA and Armatron or any of its subsidiaries
including, without limitation any of the Company's respective directors,
officers or employees or Armatron's principal shareholders which might
affect the objectivity of the advise to be rendered hereunder.
In formulating the Opinion, we have done and considered, among other
things, the following:
1. We reviewed Armatron's consolidated annual financial statements
for the five years ended September 30, 1998, unaudited
financial statements for the three months ended December 31,
1998, and other relevant financial information.
2. We obtained information from members of management regarding
past history, current operations and future prospects for
Armatron.
3. We visited Armatron's facility in Melrose, Massachusetts.
4. We made comparisons of the financial and operating results of
Armatron with other selected publicly traded companies that
manufacture and distribute lawn and garden products.
5. We reviewed the trading history of Armatron's shares.
6. We considered the current condition of the securities market
and the economic environment in general.
7. We reviewed the Stock Subscription Agreement concerning the
conversion of debt owed by the Company pursuant to a certain
Promissory Note dated January 11, 1990, as amended, into the
Company's Series A preferred stock.
8. We reviewed documents relating to a foreign arbitration award
against the Company and J.C. Carter Company, Inc., a former
subsidiary of the Company, among others. The arbitration
related to certain cryogenic cargo pumps supplied in the 1970's
and a pending lawsuit in the U.S. District Court of Southern
California seeking payment of said award.
9. We performed and undertook other actions and analyses which we
deemed to be relevant.
We have assumed the accuracy and completeness of the information
supplied to us, and we have not independently verified this information. We
did not review Armatron's corporate charter, by-laws, records, books,
minutes of directors' or stockholders' meetings nor did we make inquiries
of Armatron's customers, lenders, general creditors or other.
Based on our analysis of the foregoing, it is our opinion that as of
the date hereof, the purchase by Armatron of certain shares of its common
stock at a price of $0.27 per share is fair to the Selling Shareholders,
from a financial point of view.
Very truly yours,
Gordon Associates, Inc.
By: /s/ Howard J. Gordon
--------------------------------
Howard J. Gordon
President
Appendix C
MASSACHUSETTS APPRAISAL STATUTE
Chapter 156B of the General Laws of
the Commonwealth of Massachusetts
(S) 85. Dissenting stockholder; right to demand payment for stock;
exception
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation
or corporations under the provisions of sections seventy-eight or seventy-
nine who objects to such consolidation or merger may demand payment for his
stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eighty-six to ninety-eight,
inclusive, and such stockholder and the resulting or surviving corporation
shall have the rights and duties and follow the procedure set forth in those
sections. This section shall not apply to the holders of any shares of stock
of a constituent corporation surviving a merger if, as permitted by
subsection (c) of section seventy-eight, the merger did not require for its
approval a vote of the stockholders of the surviving corporation.
(S) 86. Selections applicable to appraisal; prerequisites
If a corporation proposes to take a corporate action as to which any section
of this chapter provides that a stockholder who objects to such action shall
have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have
such right unless (1) he files with the corporation before the taking of the
vote of the shareholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if
the action is taken and (2) his shares are not voted in favor of the
proposed action.
(S) 87. Statement of rights of objecting stockholders in notice of meeting;
form
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights
of objecting stockholders. The giving of such notice shall not be deemed to
create any rights in any stockholder receiving the same to demand payment
for his stock, and the directors may authorize the inclusion in any such
notice of a statement of opinion by the management as to the existence or
non-existence of the right of the stockholders to demand payment for their
stock on account of the proposed corporate action. The notice may be in
such form as the directors or officers calling the meeting deem advisable,
but the following form of notice shall be sufficient to comply with this
section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in writing
from the corporation (or, in the case of a consolidation or merger, the name
of the resulting or surviving corporation shall be inserted), within twenty
days after the date of mailing to him of notice in writing that the
corporate action has become effective, payment for his shares and an
appraisal of the value thereof. Such corporation and any such stockholder
shall in such cases have the rights and duties and shall follow the
procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
(S) 88. Notice of effectiveness of action objected to
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of
section eighty-six and whose shares were not voted in favor of the approval
of such action, that the action approved at the meeting of the corporation
of which he is a stockholder has become effective. The giving of such notice
shall not be deemed to create any rights in any stockholder receiving the
same to demand payment for his stock. The notice shall be sent by registered
or certified mail, addressed to the stockholder at his last known address as
it appears in the records of the corporation.
(S) 89. Demand for payment; time for payment
If within twenty days after the date of mailing of a notice under subsection
(e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required
to give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which
such demand is made shall pay to him the fair value of his stock within
thirty days after the expiration of the period during which such demand may
be made.
(S) 90. Demand for determination of value; bill in equity; venue
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting
stockholder fail to agree as to the value of such stock, such corporation or
any such stockholder may within four months after the expiration of such
thirty-day period demand a determination of the value of the stock of all
such objecting stockholders by a bill in equity filed in the superior court
in the county where the corporation in which such objecting stockholder held
stock had or has its principal office in the commonwealth.
(S) 91. Parties to suit to determine value; service
If the bill is filed by the corporation, it shall name as parties respondent
all stockholders who have demanded payment for their shares and with whom
the corporation has not reached agreement as to the value thereof. If the
bill if filed by a stockholder, he shall bring the bill in his own behalf
and in behalf of all other stockholders who have demanded payment for their
shares and with whom the corporation has not reached agreement as to the
value thereof, and service of the bill shall be made upon the corporation by
subpoena with a copy of the bill annexed. The corporation shall file with
its answer a duly verified list of all such other stockholders, and such
stockholders shall thereupon be deemed to have been added as parties to the
bill. The corporation shall give notice in such form and returnable on such
date as the court shall order to each stockholder party to the bill by
registered or certified mail, addressed to the last known address of such
stockholder as shown in the records of the corporation, and the court may
order such additional notice by publication or otherwise as it deems
advisable. Each stockholder who makes demand as provided in section eighty-
nine shall be deemed to have consented to the provisions of this section
relating to notice, and the giving of notice by the corporation to any such
stockholder in compliance with the order of the court shall be a sufficient
service of process on him. Failure to give notice to any stockholder making
demand shall not invalidate the proceedings as to other stockholders to whom
notice was properly given, and the court may at any time before the entry of
a final decree make supplementary orders of notice.
(S) 92. Decree determining value and ordering payment; valuation date
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of
and payment for their shares, and shall order the corporation to make
payment of such value, together with interest, if any, as hereinafter
provided, to the stockholders entitled thereto upon the transfer by them to
the corporation of the certificates representing such stock if certificated
or, if uncertificated, upon receipt of an instruction transferring such
stock to the corporation. For this purpose, the value of the shares shall be
determined as of the day preceding the date of the vote approving the
proposed corporate action and shall be exclusive of any element of value
arising from the expectation or accomplishment of the proposed corporate
action.
(S) 93. Reference to special master
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report
the same to the court, all in accordance with the usual practice in suits in
equity in the superior court.
(S) 94. Notation on stock certificates of pendency of bill
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of
the pendency of the bill and may order the corporation to note such pendency
in its records with respect to any uncertificated shares held by such
stockholder parties, and may on motion dismiss the bill as to any
stockholder who fails to comply with such order.
(S) 95. Costs; interest
The costs of the bill, including the reasonable compensation and expenses of
any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed
upon the parties to the bill, or any of them, in such manner as appears to
be equitable, except that all costs of giving notice to stockholders as
provided in this chapter shall be paid by the corporation. Interest shall
be paid upon any award from the date of the vote approving the proposed
corporate action, and the court may on application of any interested party
determine the amount of interest to be paid in the case of any stockholder.
(S) 96. Dividends and voting rights after demand for payment
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled
to the payment of dividends or other distribution on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the date of the vote approving the proposed corporate
action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the
resulting or surviving corporation, deliver to it a written withdrawal
of his objections to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so
demand payment for his stock as provided in this chapter.
(S) 97. Status of shares paid for
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such
consolidation or merger shall have the status of treasury stock or
securities.
(S) 98. Exclusive remedy; exception
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground
that such corporate action will be or is illegal or fraudulent as to him.
